Legal Question in Banking Law in India

My Company is classified as NPA by the natoinalized bank on account of my company not being able to pay the debts due to bank. According to me, my Company is wrongly declared as NPA by the Bank. My company was enjoying Pre-Shipment (Packing Credit) Advances with the bank. The bank had covered insurance with the Export Credit Guarantee Corporation of India Ltd., (ECGC) on the monies advanced to my company. The premium paid by the bank to ECGC on pre-shipment advances from time to time is/are debited to my Company's account. My company has already filed Securitization Application (SA) with the Debt Recovery Tribunal (DRT), Mumbai, Maharashtra (India) challenging the Bank's action initiated under the SARFAESI Act. The aforesaid SA is still pending with DRT for its final disposal. In common parlance it is understood that the benefit of insurance claim has to go to the borrower if the premium is borne by the borrower. Since the bank has not absolved the premium they are not entitled to refund of claim from ECGC. Please let us know if my Company's contention of asking credit of refund of claim from ECGC is correct or no. If not so why? Also please let me know if there are any Court Judgements on this issue and how do my Company justify its claim.


Asked on 2/17/11, 10:09 pm

1 Answer from Attorneys
J. Radhakrishnan independent Practice

The ECGC cover is for the protection of the Bank. It is not a guarantor for the borrower. In terms of the Bank's agreement wt ECGC, notwithstanding their reimibursing the bank a portion of the defaulted amount, the Bank is bound to continue with recovery from borrower and out of the recoveries from him, the same has to be shared with ECGC. There are number of rulings of various High Courts to support the above position. The Bank people will cite the same. Your claim for credit for reimbursement from ECGC won't suceed. Better settle with the Bank seeing waiver of interest rather than fighting to the end.

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Answered on 2/18/11, 6:43 am


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