Remember | Register | Forgot Password?
Bookmark This Page   RSS Feeds  Follow On Twitter

 

Search for Lawyers          
    

Home > Category > Business Law



Please Wait ..


News & Updates

MCA: Clarification of Sec. 180 of the Companies Act, 2013


Ministry of Corporate Affairs, Government of India has published a circular with clarification with regard to Section 180 of the Companies Act, 2013. T he MCA acknowledged of receiving many representations regarding various difficulties arising out


Full Story



Others


More News

Forum Discussions


More Messages



Share Files


More Files


Experts Exchange

Legal action for recovery before filing claims with ecgc

Posted by Meha Harish



Bank had whole turnover ECGC cover on Pre shipment Packing Credit and Post shipment FBD advances. Exporter also had ECGC policy covering his buyers for default in export payments. One buyer defaulted for 50% payment. Exporter filed claim with ECGC through the bank under his policy with instructions to pay claim amount to bank since the bills were discounted.

Next week bank classified the accounts as NPA and one week thereafter issued Sarfaesi act 13(2) demand notice and 80 days thereafter issued 13(4) notice for possession of secured flats.

After NPA and Sarfaesi act notices, the exporter regularly kept on paying the interest and principal dues and requested revival of accounts. However, the bank adjusted all payments towards principal and interest was not adjusted.

1. RBI directives state that 'The credit facilities backed by guarantee of the Central Government though overdue may be treated as NPA only when the Government repudiates its guarantee when invoked.'
'Credit protection given by the following entities will be recognised:
Sovereigns, sovereign entities (including BIS, IMF, European Central Bank and European Community as well as those MDBs referred to in paragraph 5.5, ECGC and CGTSI), banks and primary dealers with a lower risk weight than the counterparty;'

Can the bank classify account as NPA till ECGC claims are settled or declined. Our claim was paid in full after one year by ECGC - to the bank.

2. RBI circular states 'In respect of post-shipment credit extended by the banks covering export of goods to countries for which the ECGC-s cover is available, EXIM Bank has introduced a guarantee-cum-refinance programme whereby, in the event of default, EXIM Bank will pay the guaranteed amount to the bank within a period of 30 days from the day the bank invokes the guarantee after the exporter has filed claim with ECGC.

ii. Accordingly, to the extent payment has been received from the EXIM Bank, the advance may not be treated as a nonperforming asset for asset classification and provisioning purposes.

Can the account remain classified as NPA after claims are received from ECGC???

3. After issuing Sarfaesi act 13(2) and 13(4) notice, bank filed claims with ECGC on both - pre and post shipment advances. ECGC paid both the bank's claim at a reckless speed of 10 days.

4. Bank sold the mortgaged flat under Sarfaesi act and adjusted the proceeds to wipe out the outstanding in Cash Credit & Mach Term Loan accounts. It lodged OA with DRT for recovery of outstanding in Packing Credit a/c for which ECGC claim was received and parked in Suspense a/c at branch.

5. Concerning ECGC's cover to banks, there various circulars in public domain which state:

ECGC gives cover to bank's for reducing their NPA's.
Claim shall be paid in case of protracted default by exporter
legal action for recovery after claims are paid
rehabilitation measures can be taken by bank for viable / potentially viable units after claims are paid with permission from ECGC.
ECGC's claim paid NPA accounts cannot be sold to ARC's.

In view of these,
a. was the bank legally correct in classifying the accounts as NPA before filing claims with ECGC.

b. Was the bank legally correct when it issued Sarfaesi act 13(2) & 13(4) notices before filing claims with ECGC.

c. Was the bank legally correct in maintaining the accounts as NPA after ECGC paid the banks claim - even though it had issued Sarfaesi act demand & possession notices.

d. Was the bank legally correct in pursuing recoevry action under sarfaesi act after ECGC paid claims for Pre & post shipment cover to Bank.

e. If ECGC claim paid accounts cannot be sold to ARC's, can the bank take legal action under Sarfaesi act at all.

f. Can the bank recover the ECGC claim paid amounts from Personal guarantors and continuous security given by directors by filing OA at DRT.

Please guide. Thanking all in advance.







Read Expert Opinion



More Experts Queries



Articles

Appointment of Women Director - A move to Women Empowerment


The society in our county is male inclined from the very inception. Women were always seen as lower to men. But now, the time has drastically chang


Full Article



Presumption under Sec.27 of the General Clauses Act, 1897 - is not available to secured creditor


 Sec.27 of General clauses Act 1897 lays down as under.-   Where any Central Act or Regulation made after the commencement of thi


Full Article



Security Creation a tool of recourse lending: Project Finance


A. INTRODUCTION   Being a law student you must have come across the articles stating that XYZ law firm advised ABC Company for setting


Full Article




More Articles




Also see

Updated on : 23/04/2014 20:36:24