ECGC LIMITED Vs. BACO METALLIC INDUSTRIES

JUDGEMENT

(1.) This Petition is a challenge mounted under Sec. 34 of the Arbitration and Conciliation Act, 1996 ("the Act") challenging an arbitral award dated March 28, 2023 ("Impugned Award") on the premise that the findings in the Impugned Award are contrary to the terms of the contract; contrary to the fundamental principles of evidence; and contrary to fundamental principles of insurance law.

(2.) The Petitioner, ECGC Ltd. ("ECGC") issued a shipment comprehensive risk policy ("SCR Policy") to the Respondent, Baco Metallic Industries ("Baco") for the period from October 14, 2016 to October 13, 2017 ("Policy Period"). In terms of the policy, Baco was to apply for a "credit limit" approval before making a shipment of leather footwear manufactured by Baco, to an Italian buyer PM Trade SRL ("Buyer"). Baco effected shipments during the Policy Period. The Buyer raised disputes over quality of the products supplied. Baco engaged with the Buyer and provided discounts on the amounts payable by the Buyer and agreed to pay for the leather that was supplied by an affiliate of the Buyer for Baco to make shoe products. A credit collection agency was engaged to pursue recovery of amounts from the Buyer.

(3.) Baco lodged an insurance claim on ECGC for Rs.75.77 lakhs, which was 90% of a loss of USD 127,904, valued at Rs.84.19 lakhs (value of goods exported and not paid for by the Buyer). ECGC approved a sum of Rs.16.71 lakhs, which was 90% of the loss assessed by ECGC at Rs.18.57 lakhs (EUR 25,513.44) and stated that this was being paid as a special case condoning several lapses and deficiencies. Baco accepted this sum but represented repeatedly against this assessment. When the third representation for claim amount of Rs.45.43 lakhs was being considered, arbitration was invoked. ECGC offered a further sum of Rs.12.59 lakhs, which was also offered in the arbitration proceedings.