Delay in Filing Export Documents Does Not Disqualify Export Credit: Bombay HC

The Hon’ble High Court of Bombay, in a recent ruling in the case of Jindal Cocoa LLP vs. Reserve Bank of India (2025 SCC OnLine Bom 21) dated January 3, 2025, held that credit extended to exporters cannot be disqualified as “export credit” solely due to a delay in submitting export documents that otherwise prove timely materialisation of exports. This ruling challenged the interpretation of the Reserve Bank of India’s Master Circular on Rupee/Foreign Currency Export Credit & Customer Service to Exporters, dated July 1, 2015 (the “Master Circular”), by the Banking Ombudsman. The court also addressed the subvention provided by the Government under an Interest Equalization Scheme notified by the Ministry of Commerce and Industry, Government of India vide Trade Notice dated December 8, 2015 (the “Subvention Scheme”).

Jindal Cocoa LLP (the “Borrower”), engaged in exporting cocoa products, challenged the reversal of subvention benefits by HDFC Bank (the “HDFC Bank”) for two sets of export orders. For the first lot of 4 orders, exports materialised within the permissible 450 days, but submission of documents was delayed by a few days. HDFC Bank argued that such delays rendered the advances ineligible for subvention benefits under the Subvention Scheme, asserting that strict compliance with the timeline was essential. For the second lot of 11 orders, exports occurred well beyond 450 days, with the advances foreclosed before the export took place. The Borrower contended that the benefits should apply to advances for 450 days irrespective of when exports materialised.

The court observed that if exports are completed within the stipulated period and the documents confirm this, the delay in submitting those documents does not strip the credit of its status as “export credit.” The Master Circular aims to provide exporters with competitively priced working capital to enhance their competitiveness globally. The court disagreed with the banking ombudsman and HDFC Bank’s rigid interpretation regarding the first lot and found the Borrower’s stance unreasonable for the second lot.

The court emphasized that the Master Circular and the Subvention Scheme must be interpreted purposefully and contextually to further their policy objectives, avoiding a literal interpretation that undermines their intent. It held that the instruments aim to assist exporters by offering short-term credit at competitive rates and that strict adherence to document submission timelines, despite timely exports, would be unreasonable and counterproductive. The court found that advances could not cease to qualify as “export credit” due to minor delays in submitting export documents, provided the documents confirmed that exports occurred within the stipulated period. However, for advances where exports did not materialise within 450 days, the credit would not qualify as export credit. The court highlighted the need to interpret such regulatory instruments with due regard to their objectives and to suppress misuse while promoting their beneficial intent.