Summary
The Supreme Court held that the collecting bank’s release of export documents without acceptance attracted the shipments policy’s bank-default exclusion. Payment under ECGC’s separate guarantee to the exporter’s bank was no admission under the exporter’s policy. Although the appeal succeeded, Article 142 protected the innocent exporter from recovery of sums already paid.
Issues
- Whether loss caused by the collecting bank’s release of documents fell within the policy exclusion.
- Whether payment under a separate bank guarantee admitted liability to the exporter.
- Whether amounts already paid should be recovered.
Provisions considered
- Article 142, Constitution of IndiaSince the award had been executed and the exporter was itself a victim without alleged complicity, the Court prohibited recovery despite correcting the legal position. (¶ 27–29)
Held
- Releasing original documents to the buyer’s representative without acceptance was a collecting-bank default within the express exclusion. The exporter had not furnished documents showing the acceptance required by the approved transaction. (¶ 18–25)
- The bank’s WTPSG cover protected its lending exposure and was distinct from the exporter’s shipments policy. Honouring the former did not determine liability under the latter. (¶ 26)
- The exporter had already received payment under the executed consumer award and no complicity with the foreign buyer was alleged. In these circumstances the loss was left where it fell and recovery was barred under Article 142. (¶ 27–29)
Result
Appeal allowed and National Commission judgment set aside, subject to the Article 142 direction prohibiting recovery from the exporter. No order as to costs.