Opportunity should be provided to be heard prior to blacklisting the name of credit seeker

Opportunity should be provided to be heard prior to blacklisting the name of credit seeker in the list maintained by Export Credit Guarantee Corporation of India

In a writ petition filed before the Calcutta High Court to adjudicate whether by including the name of a Company in a Special Approval List (SAL) maintained by Export Credit Guarantee Corporation of India Limited (ECGC) amounted to blacklisting.

SAL is a list that contains names of the borrowers i.e. Companies and their Partners, Directors, Guarantors, Associate, maintained by the Corporation. Whenever any borrower fails to repay export credit finances availed from Bank(s), the concerned bank having ECGC’s export credit insurance cover submits report of default or/and lodges claim with ECGC. On receipt of such default/ claim to avoid further exposure of the defaulted borrower, the Corporation includes name of such borrower in the SAL after completion of due procedure and formalities. All the Banks, having ECGC’s whole turnover ECIB cover are expected to take Specific Approval from the Corporation before lending export credit finances to the company whose name or the names of its partners/directors/guarantors/associates are appearing in SAL.

It was contended by the Petitioner Company in the instant matter that since ECGC’s SAL is a document which is circulated to all banks and even it’s an advisory piece of document as contended by Corporation, it cannot be ruled out that Banks form their opinion on grant of credit facility by ignoring the SAL. More so, when the Reserve Bank of India has vide its circular dated January 21, 2009 advised banks to not to grant credit facilities to concerns who are defaulters and whose names appear in the SAL.

Application for credit facilities or risk cover by a person whose name figures in the SAL is dealt with more strictly in view of the RBI guidelines of 2009 and also circular issued by the corporation. Even the standardised bank forms relating to applications for credit facilities requires applicant to declare whether his/ its name appears in the SAL. Thus, moment name is entered in the SAL, its consequences i.e. denial of facility becomes certain and anticipating these circumstances it becomes all the more important that before any name is included due and proper opportunity is given to the one relevant to put forward his/ its submission or reasons against proposed inclusion of name in the SAL.

It is accordingly needs to be ensured by the Corporation or the State or any of its agencies concerned that:

•   A fair and reasonable opportunity is afforded to concerned person/ entity to avoid any decision which is prejudice to the rights of such person/ entity.
•   Procedure or the decision-making process to include name in SAL has to be fair, equitable and in consonance with the principles of natural justice.
•   The Corporation as a credit risk insurer have legal right to assess the credit risks offered to it for cover, however, while forming any opinion on the same it is expected to act fairly and not arbitrarily.

BMW Ventures Ltd. vs. ECGC of India Ltd.
(Calcutta HC, 08.08.2013)