Conversion rate on date of shipment applicable for claim

Meenakshi Saxena, proprietor of M/s Creations, used to export handloom goods. The Export Credit Guarantee Corporation of India (ECGC) had accorded approval for export of these goods to the Society Ivoirienne de Commerce et de Representation (SICOREP) up to a sum of Rs 64.86 lakh ($135,125).

Saxena despatched two consignments and declarations of these shipments to ECGC. The letter of credit and other documents were routed through Punjab National Bank (PNB). The contract provided that the foreign importer would get the goods released after making payment through his banker within 60 days. Surprisingly, a third party who was unconnected with the transactions, procured the documents from the bank without making payment and got the goods released. So, the genuine overseas importer, SICOREP, did not make payment.

When the issue was not resolved after four months, Saxena lodged a claim with ECGC. As it was not settled, she filed a complaint before the Panipat District Forum, which directed ECGC to pay 90 per cent of the value of ^11,876 along with 12 per cent interest and Rs 3,300 as litigation expenses. ECGC challenged this order, but its appeal was dismissed by the Haryana State Commission. ECGC's revision to the National Commission was also rejected by its order of December 13, 2013.

Since the claim was not paid despite the order, Saxena initiated execution proceedings. ECGC paid Rs 11,23,906, calculating the amount of ^11,875.75 on conversion to rupee at the exchange rate prevalent on 24 April, 2002 along with 12 per cent interest. Saxena accepted it, but demanded that the rate should the one prevailing on the date of payment. The forum agreed. The matter again went to the National Commission. Bharat Sangal, who argued for ECGC, pointed out the terms of the policy said that the claim would be paid at the exchange rate prevalent on the date of the shipment of the goods.

The Commission observed the crux of the dispute was whether the exchange rate applicable in 2002 when the claim was lodged would be applicable, or whether the conversion rate on the date of payment would apply. The Commission held that this would have to be determined in accordance with the terms of the contract of insurance. The policy provides that claim would be on the basis of the gross invoice value of the consignment converted into rupee at the buying rate of exchange on the date of the shipment; but in case of devaluation of the foreign currency, the conversion would be calculated at the devalued rate.

Accordingly, by its order of October 20, 2016, delivered by Justice Ajit Bharihoke for the Bench along with S M Kantikar, the Commission held the order of the forum directing payment at the current conversion rate was not justified, as it was inconsistent with the terms of the insurance policy. The Commission upheld the ECGC's contention and held that the payment of Rs 11,23,906 had been correctly computed by converting Euros into rupee at the rate prevalent at the time of shipment of the goods.

If there is an appreciation, the claim will be paid according to the rate on the date of shipment. However, if there is a devaluation of the foreign currency, the insurance company making payment at the devalued rate.

The author is a consumer activist