Export credit insurer asked to meet liability

The Supreme Court has asked Export Credit Guarantee Corporation of India Ltd to pay the insured amount to ABL International Ltd on the export of 3,000 metric tonnes of tea executed 10 years ago.

The court said the private company could not be asked after so many years to file a suit for the recovery of the amount.

Since the corporation was a government entity, the Calcutta High Court was right in ordering it to fulfil its insurance liability, the Supr-eme Court said.

In this case, Rassik Woodworth Ltd entered into a contract with RVO Kazpishepromsyrio, a state-owned corporation of Kazakhstan, for the supply of tea in 1993.

According to the original pact, the payment was to be made by the Kazak Corporation by barter of goods mentioned in the schedule to the agreement.

The payment was also guaranteed by the Kazakhstan government. If the contract of barter could not be finalised for any reason, the Kazak Corporation was to pay the exporter for the goods received by it in US dollars. After the contract was signed, Rassik assigned part of the export contract to ABL International.

On a direction by the Reserve Bank of India, ABL International approached the Export Credit Guarantee Corporation to insure the risk of payment.

The state corporation issued a comprehensive risk policy for a premium of Rs 16 lakh. Later, the payment of barter could not be finalised and the Kazak Corporation agreed to make the payment for the tea consignment in dollars.

But it defaulted in this payment. The Kazakhstan government also failed to fulfil its counter-guarantee.

Then ABL International approached the Credit Guarantee Corporation. It repudiated the claim, saying it covered only the barter agreement and the dollar payment agreement was made without consulting it.

ABL International moved the Calcutta High Court to enforce the insurance contract. The corporation resisted the writ petition, saying the company should file a suit in a civil court and could not move the high court for settling disputes over contracts.

The single-judge Bench allowed the writ petition of the private company. But a Division Bench allowed the appeal of the government corporation. Then the company moved the Supreme Court. It upheld the order of the single-judge Bench.

"When an instrumentality of the state acts contrary to the public good and public interest, unfairly, unjustly and unreasonably, in its contractual obligations, it really acts contrary to the constitutional guarantee," the apex court said.

In this case, the private company had to compulsorily approach the government monopoly corporation for insurance to cover the export risk.

Therefore, it was liable to fulfil the terms of the contract, the court said.