1. Export Credit Guarantee Corporation of India faces zooms
Sunk loans to Zoom Developers, a Mumbai-based engineering and
construction company that bagged several overseas projects, could boil over into
an extraordinary court battle between state-run institutions. Even as banks try to
salvage close to Rs. 2,600 crore, lead lender Punjab National Bank has obtained
the consent of other banks in the consortium to move a winding up petition
against Export Credit Guarantee Corporation of India (ECGC) — the 55-year-old
financial institution that has insured a substantial part of banks’ exposure to
Zoom.
The banking consortium may simultaneously file a performance obligation
suit against ECGC, which has insured close to Rs. 1,900 crore of banks’ credit. Till
now, ECGC has refused to pay the bank’s claim on the ground that there have
been irregularities and allegations of fraud that the Central Bureau of
Investigation is examining.
“The banks will first send a legal notice. If no positive response is received,
they will approach the court,”.
The banks, it is understood, had discussed the subject with the ministry of
finance, which in turn had taken it up with the ministry of commerce and
industry. State-Run Cos Rarely Go to Court Against Each Other.
The ministry of commerce, which has administrative control over ECGC,
recently referred the matter to the institution. “We have no comments to offer
on what you have stated. ECGC will initiate appropriate action as and when any
situation arises,” said ECGC Chairman N Shankar. In an earlier communication, the
institution had spelt out to PNB the reasons why the claim could not be met. But
banks — as many as 26 of them in the consortium — think they have enough
ground to move court. The lenders are also upset that ECGC is reluctant to refund
the premium paid to the institution for covering the exposure. If indeed ECGC has
to pay the amount, the outgo would almost wipe out its net worth of around Rs
2,300 crore and force the government to infuse capital to keep it afloat.
Differences between stateowned entities rarely reach courts of law. But,
such a possibility cannot be ruled out in a market where all institutions are under
pressure to protect their books. All the more because the earlier mechanism of a

2. high-powered committee of senior bureaucrats sorting out a dispute between
two public sector organisations no longer exists.
Banks, which had sensed sometime in early 2009 that they could take a hit, have
separately filed cases in the debt recovery tribunal to recover their money. The
tribunal hearing is expected to begin in month or two.
CREATED BY TEAM PGC
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