ECGC claim amount recoverable??

pls adv what happens in these cases when the exporters pays the premium and bank receive the claim amount from ECGC.

our is the similar case where we have file case against bank at drt where bank want to recover the amount by selling our only residential property where as they have receive 75% of the claim amount.

pls adv and help us out

t

hanks & Regards

kantilal sadh

Bank had whole turnover policy with ECGC towards pre shipment packing credit advances to us for Rs.40 Lakhs. The monthly premium for this ECGC guarantee was charged to our account each month by the bank.Answer:The bank is duty bound to recover the amount of claim received from ECGC alongwith its own remaining dues from the borrower by all legal means.

Bank’s action in  keeping this claim amount in some suspense account and keeping the Packing credit amount as outstanding overdue is perfectly legal and as per the banking law/practice. In case bank credits the amount of ECGC claim to your account, how will the bank claim this amount from you for sending back to ECGC

After illegal NPA classification and Sarfaesi invocation 13(2) notice immediately therafter, Bank lodged claim with ECGC and got paid within 15 days. ECGC claim settlement letter to bank states that the claim settled amount should be recovered and paid back to ECGC by dissolving securities, if any.

Bank keeps this claim amount in some suspense account and keeps the Packing credit amount as outstanding overdue.

1. Since we paid the monthly premium, can the bank recover this amount from us?? Answer yes

2.bank is charging interest even after this claim amount is received. Is the bank right?? Answer: bank is right

3. ECGC reduced the claim amount from Rs. 40 Lakhs to Rs.29 Lakhs becuse 3 export payments totalling Rs. 11 Lakhs were not credited to packing credit a/c but credited to our current account. This way the claim amount was reduced and ECGC paid 75% of Rs. 29 Lakhs instead of 75% of Rs. 40 lakhs. The loss amount is about Rs. 8 lakhs. Can we contest with the bank that this Rs. 8 lakhs will not be paid by us because there has been errors by bank in accounting?? Are we liable to pay this amount?? Answer: Yes you are liable to pay this amount because you must have withdrawn the amount from the Current account. Instead of withdrawing, you should have requested the bank to credit the same to your packing credit account. Obviously, you cannot have the cake and eat it too

4. We have paid to bank Rs. 10 Lakhs being 25% of Rs. 40 Lakhs. Are we liable to pay this amount?? Answer: You are liable to pay to the bank all bank’s dues.

5. Bank has filed recovery suit at DRT to recover this ECGC claim received amount from us and our guarantors. There are no other dues to the bank except uncharged interest after NPA. Can the bank file recovery suit at DRT even though the claim amount is received from ECGC?? Does this become a case of debt due??Answer: Yes bank is entitled to recover its dues from the borrower and guarantor(s) and after adjusting its dues, to pay back to ECGC.

6. Bank delayed filing claim with ECGC by 9 months after NPA. Bank is charging interest for this period. We have contested that we are not liable for interest for this period because of delay on part of bank and further the bank should have added this amount to the claim lodged with ECGC since ECGC website says that "ECGC would settle all losses due to the bank". Is our stand correct?? Answer: bank is entitled to recover its dues including the interest from the available securities. You can however, request the bank/court not to charge interest from you on the amount of ECGC Claim lying with the bank at the time of settlement of final dues.

Bank is justified in proceeding under SARFAESI Act and also under DRT Act to recover all the dues including the claim amount received from ECGC, since the percentage of claim amount received has to be returned to ECGC on recovery.

“Debt” is defined in Sec. 2(g) of RDDB & FI Act. [Same definition is assigned to SARFAESI Act vide Sec. 2(ha)]. The definition reads thus:

“2(g) ‘debt’ means any liability (inclusive of interest) which is claimed as due from any person by a bank of a financial institution or by a consortium of banks or financial institutions during the course of any business activity undertaken by the bank or the financial institution or the consortium under any law for the time being in force, in cash or otherwise, whether secured or unsecured, or assigned, or whether payable under a decree or order of any civil court or any arbitration award or otherwise or under a mortgage and subsisting on, and legally recoverable on, the date of the application.”

In case of Export Credit Guarantee (ECG) Scheme, the Supreme Court in State Bank of Bikaner & Jaipur Vs. M/s Ballabh Das & Co. & Ors. (AIR 1999 SC 3408 = 1999 (98) Comp. Cas. 219 SC) held that the contract of insurance / guarantee is between the Export Credit and Guarantee Corporation of India Ltd. and the bank and prima facie the term / condition in the said insurance cover / guarantee referred to above is for the benefit of the insurer and not for the benefit of the exporter, i.e. the borrower. It does not absolve the borrower of the liability to repay the amounts borrowed for the purpose of making exports if the foreign buyer of those goods does not make payment to the bank of the amounts payable in respect of those goods. Though the insurer / guarantor under the insurance / guarantee possibly would stand discharged from its liability to the insured on the exporters delivering the documents of export of goods to the insured, prima facie, the liability of principal debtor would still remain subsisting. Thus, the ECGC (settled / paid) amount should not be construed as debt. Further the amount paid by ECGC is refundable by the bank in certain proportion to ECGC on recovery from the borrower in legal action taken by the bank and for that reason undertaking is obtained from the bank (that the bank should take legal action against the borrower) as a condition precedent before settling the amount. If the bank does not take legal action for recovery of the debt from the borrower, then, the ECGC may recover the entire amount paid by it to the bank. Hence it is evident from this arrangement and understanding that, the amount of claim paid by ECGC is not a debt.