Authority: High Court of Karnataka at Bengaluru

Order Date: 25 June 2026

Case Overview

  • Parties: Appellant – Prakruthi Products Pvt. Ltd (private limited company engaged in manufacturing and export of herbal extracts and nutraceutical ingredients); Respondent – Export Credit Guarantee Corporation of India Ltd (ECGC), a wholly‑owned Government of India enterprise providing export credit insurance.
  • Background: The parties entered into a Shipment Comprehensive Risk (SCR) Policy No. 0090003412 covering 01‑05‑2018 to 30‑04‑2019 with a maximum liability of Rs 5 crore. ECGC approved a buyer‑specific credit limit of Rs 10 lakh for “The Herbs in a Bottle Company” (UK buyer).
  • Transaction: Prakruthi exported organic curcumin extract valued at Rs 42.14 lakh on 06‑09‑2018 with a 45‑day credit term. The shipment was declared at full value in Form 203 on 15‑10‑2018; ECGC debited a premium of Rs 18,267.69 based on the full invoice amount.
  • Dispute: The buyer defaulted. Prakruthi claimed the full Rs 42.14 lakh (plus 18% interest from 15‑10‑2019) from ECGC. ECGC accepted liability only up to the approved credit limit of Rs 10 lakh, citing Clause 20 of the SCR Policy that limits liability per buyer to the credit limit.
  • Procedural History: Prakruthi filed suit on 30‑09‑2023 in the Commercial Court seeking recovery of Rs 32.14 lakh (the balance over the credit limit). The Commercial Court dismissed the suit, holding that no enhancement of the credit limit had been applied for or approved. ECGC consistently rejected the claim at multiple levels, including the Apex Customer Grievance Committee.
  • Legal Issues Presented to the High Court:

1. Whether Prakruthi proved an approved credit‑limit/enhancement of Rs 42.14 lakh for the buyer under the SCR policy.

2. Appropriate order/decree.

  • Court Findings: The High Court affirmed the Commercial Court’s findings. It held that the approved credit limit of Rs 10 lakh was undisputed and that Clause 21(a) requires a formal application and written approval for any enhancement, which Prakruthi failed to obtain. Payment of premium on the full shipment value does not constitute an implicit enhancement, as clarified by Clauses 10(h) and 30 of the policy.
  • The Court referenced Supreme Court precedents (Vikram Greentech India Ltd. v. New India Assurance, Bajaj Allianz General Insurance Ltd. v. State of Madhya Pradesh, and M/s BHS Industries v. ECGC) to support the view that premium payment alone does not create insurer liability beyond contractual limits.

Final Outcome

  • The appeal is dismissed. ECGC’s liability remains confined to the Rs 10 lakh credit limit for the buyer. No amount beyond this limit is payable to Prakruthi.
  • Both parties are ordered to bear their own costs.

Topics: Export Credit Insurance, Credit‑Limit Dispute