IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. C.W.P. No.11835 of 2008 Date of decision: 15.12.2008 Nandan Auto Tech Limited. -----Petitioner Vs. State Bank of Patiala and others. -----Respondents CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL HON'BLE MR JUSTICE L.N. MITTAL Present:- Mr. Rajesh Garg, Advocate for the petitioner. Mr. H.N. Mehtani, Advocate for respondent Nos.1 and 2. Mr. S.M. Puri, Advocate for respondents No.3 and 4. ----- ORDER: 1. This petition seeks quashing of letter dated 16.6.2008, Annexure P-17, issued by Export Credit Guarantee Corporation of India Limited (ECGC) (a Government of India Enterprise) to the State Bank of Patiala, informing the said bank that no fresh exposure could be taken in support of the petitioner unless the entire claim amount was received by the Corporation. 2. Case set out in the petition is that the petitioner took credit facility from the bank for the year 1997 to the extent of Rs.3.95 crores. C.W.P. No.11835 of 2008 There was a default in payment. The amount was settled under the One Time Settlement scheme. One of the credit facilities availed by the petitioner was called Export Credit Guarantee Corporation of India Limited facility under an arrangement between the Bank and ECGC. On account of the said facility, the name of the petitioner was placed on the ECGC Specific Approval List (SAL). After payment of dues, the petitioner represented that its name be removed from the SAL of ECGC. The petitioner also sent a similar representation to the ECGC, but the ECGC replied that the same could not be done. 3. Contention raised in the petition is that ECGC was bound to remove the petitioner’s name from the SAL, as not doing so affects the prospects of the petitioner for taking credit facilities from the bank. 4. In the reply filed by the ECGC, impugned action has been defended by stating that under its policy, it offers credit risk insurance cover to the banks, one of which is ‘Whole Turnover Packing Credit Guarantee’, under which the insured Bank is indemnified to the extent of loss suffered from the loan advanced to an exporter. In such a case, the exporter on account of whom loss is suffered, is placed on SAL. Though there is no privity of contract between the debtor and the ECGC, the arrangement is reached between the ECGC and the Bank. 5. Learned counsel for the ECGC submits that in para 9 of the manual of instructions for SAL of the ECGC, it is stated that where the ECGC has paid a claim, the entire amount of claim payment shall be refunded to the Corporation before any request for delisting can be examined and thus, the ECGC has no objection to remove the name of 2 C.W.P. No.11835 of 2008 the petitioner from the SAL if the petitioner pays the amount. As per Annexure R-3/3, the said claim is to the extent of Rs.1,12,33,621/- which is 75% of the advance. 6. It is further explained that keeping the name of the petitioner in the SAL does not adversely affect the petitioner from obtaining export related advances after approval of the ECGC or from any other financial institutions which are not covered by the schemes of the ECGC. Thus, the petitioner has option either to compensate the ECGC for the loss suffered or to take advances after the approval of the ECGC or from financial institutions not covered by the ECGC. 7. Learned counsel for the Bank points out that in para 8 of the General Terms and Conditions for Export Packing Credit Limit which was extended to the petitioner (Annexure R-1), which document was signed by the petitioner, it was made clear that advance is covered under the whole Turnover Packing Credit Guarantee of ECGC and thus, it cannot be held that the petitioner was not party to any contract under which the ECGC compensated the bank. Reference has also been made to terms and conditions for foreign bills/purchase/discounting limit, wherein it has been provided that the bank finance will be covered under the whole Turnover Post Shipment Guarantee taken by the bank with ECGC and for which monthly premium was to be charged from the bank. 8. In view of above, question is whether merely in absence of a statutory provision or privity of contract between the petitioner and the ECGC, the petitioner can object to its name being placed on the SAL. 3 C.W.P. No.11835 of 2008 9. It is clear from the stand of the respondents that the ECGC indemnified the bank to the extent of more than Rs.1 crore on account of default of the petitioner and the petitioner had signed documents indicating that the advance to the petitioner was covered under the Credit guarantee of the ECGC. The petitioner having thus taken the benefit of the advance covered under the guarantee of the ECGC, cannot have objection to the Scheme of the ECGC placing the petitioner on SAL, which does not directly affect any right of the petitioner except to debar taking further advances from the Bank, which was indemnified by the ECGC, till the petitioner compensates the ECGC for the loss suffered. The petitioner being aware of the arrangement between the Bank and the ECGC cannot complain of ECGC protecting its interests for indemnifying the Bank on account of default of the petitioner. 10. We, thus, do not find any ground for interference under Article 226 of the Constitution. 11. The petition is dismissed. ( ADARSH KUMAR GOEL ) JUDGE December 15, 2008 ( L. N. MITTAL ) ashwani JUDGE 4