The Hindu Business Line : `Inclusion of exporters in Specific Approval List by ECGC legal'

The Madras High Court has described as legal the inclusion of exporters in the `Specific Approval List' by the Export Credit Guarantee Corporation (ECGC) to assess the credit risks that were offered to them for insurance cover. And where it was prima facie a bad risk, it would not be proper for them to accept such risk. The precautions and arrangements made by ECGC could not be termed as arbitrary action.

A Division Bench, which disposed of a writ appeal by the ECGC challenging the order dated March 10, 1999 by a single judge quashing a circular dated May 6, 1994 including the petitioners' names in the Specific Approval List, held that the inclusion of these names in the list did not amount to blacklisting, and it was neither arbitrary, nor illegal and there was no violation of the principles of natural justice.

The case

The second respondent, State Bank of India, Marthandam, Kanyakumari District, had sought necessary guarantee of the ECGC for extending export credit facilities to the petitioner - Jaya Cashew Industries, a sister unit of Annai Cashew Industries, Kanyakumarai district - and the ECGC had said that it had included the firm in the Specific Approval List. Since Annai Cashew Industries committed default in repaying the debt, the petitioner being the sister concern of the said industry, had been placed in the Specific Approval List. The implication of the circular dated May 6, 1994 of the ECGC was that no bank could grant export credit to the petitioner without approval of ECGC. The petitioner filed the writ petition challenging the ECGC's decision.

The single judge, after finding that inclusion of the petitioner's name in the list amounted to blacklisting, said that since the petitioner was not given opportunity before issuing the circular, quashed the same and allowed the writ petition. The present appeal was against the said order.

Within ECGC's rights

The Bench, comprising Mr Justice P. Sathasivam and Mr Justice J.A.K. Sampathkumar, said the purpose of including the petitioner's name in the list was to include the names of persons about whom extreme care and caution had to be taken for a variety of reasons. The right of the ECGC to issue instructions to the bank could not be disputed, and hence the petitioner could not complain that the principles of natural justice had been violated.

The Bench was satisfied that by putting the petitioners on the list, the ECGC had not disentitled them from obtaining export credit from their bankers. The ECGC had to necessarily have a system to assess credit risks that were offered to them for cover.

The precautions made by ECGC could not be termed as arbitrary action. The common order of the single judge was set aside.

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