Mrs. Rajyalakshmi Rao, Member—The complainant in this case M/s. Rane Apparels of Tirupur, Tamil Nadu, is a exporter of cotton knitted hosiery garments. The opposite party Export Credit Guarantee Corporation of India Ltd. (hereinafter called ECGC is a body set up by the Government of India to help export, trade by providing guarantee for export credit against political and commercial risks.

2. The issue involved in this case is whether the Export Credit Guarantee Corporation which issued a shipment comprehensive risk policy committed a deficiency in service in refusing to reimburse the loss suffered by an exporter, due to a fraud committed by the buyer in collusion with the Bank employee. The facts are as follows:

“In 1993, the World Trade as well as the Indian Trade in South Africa which were still then banned, opened up and Government of India was keen that the exporters explore this new market.”

3. The partner of Rane Apparels Mr. N. Prakash visited South Africa in July, 1994 and was there till at least the 1st August, 1994 to explore export possibilities and it appears that he got in touch with certain parties allegedly representing a Company known as M/s. Afro Asian Commodity. The said M/s. Afro Asian Commodity (hereinafter referred to as AAC) gave two letters dated 1.8.1994 to N. Prakash indicating that they are willing to purchase upto 3 million pieces of T. Shirts worth US $ 4.20 million. The terms of payment were “‘D.P. 90 days after Bill of Lading date” signifying documents against payment.

4. Before this, on 30.5.1994, the Complainant obtained a “shipment comprehensive risks policy” (also known as standard policy) from Export Credit Guarantee Corporation. The policy is meant to cover all shipments that may be made by the complainant from 1.4.1994 to 31.6.1996. The maximum liability of the Corporation was Rs. 2 crores. This limit was subsequently got increased to Rs. 20 crores on 22nd September, 1994 but w.e.f. 24.8.1994.

5. After obtaining the purchase order from M/s. AAC as stated above, the complainant on 5.9.1994 applied to ECGC for sanction of credit limit of Rs. 13.50 crores on the buyer M/s. AAC. In this application the complainant indicated that bankers of M/s. AAC are the Standard Bank of South Africa ECGC, however, sanctioned a credit limit of Rs. 3 crores on 30.9.1994 which was subsequently enhanced to Rs. 7 crores on 8.11.1994.

6. In fulfilment of the above purchase order of M/s. AAC the complainant made certain shipments of T. Shirts worth US $ 2.3 million (Rs. 7.35 crores) to South Africa during the period of 6.9.1994 to 24.10.1994. The Complainant’s local Banker is a State Bank of Travancore. The complainant inter alia produced a copy of a Fax message dated 13.10.1994 from one S. Makaketa of the Standard Bank of South Africa to the authorities of the State Bank of Travancore confirming the above terms of payment. The State Bank of Travancore, however, sent a SWIFT message to the Standard Bank of South Africa on 18.10.1994 asking them to confirm the contents of the Fax message. The State Bank of Travancore’s SWIFT message reads as follows:

“Please confirm that you are guaranteeing to honour the bills drawn on M/s. Afro Asia Commodities valued overall US $ 4.20 million under D.P. 90 days, on the 90th day if otherwise in order. Please reply by return tested fax message. Quote a reference. Rane.”

7. On receipt of the State Bank’s message of 19th October, 1994, the Standard Bank of South Africa started immediate inquiry since it had no employee by the name S. Mataketa. Inquiries revealed that there is no company known as M/s. Afro Asia Commodities nor its alleged partner/Director G.J. Bentley. Their inquiries revealed that on August 10, 1994, a bank account , was opened in their bank by one Syed Alamdur Hussain Shah in the name of M/s. Afro Asia Commodities. The Bank’s inquiries also revealed that the shipping documents sent by the State Bank of Travancore were unauthorizedly got released from the Standard Bank