Interest Equalisation Scheme cannot justify retrospective clawback of subvention already passed on to eligible exporters.

The Interest Equalisation Scheme required banks to pass on the full interest subvention benefit upfront to eligible exporters while the scheme was in force. A later RBI circular extending the scheme from 1 October 2021 and reducing the rate to 3% did not permit retrospective clawback of benefits already granted for export credits disbursed before 30 September 2021. The DGFT clarification was read to preserve the exporter's entitlement where disbursement had occurred earlier, even if the credit tenor continued beyond that date. The bank's failure to seek timely reimbursement from RBI could not be shifted to the exporter, and recovery of the differential amount was wrongful.

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Issues: Whether the defendant bank was entitled to recover the differential 2% interest equalisation amount from the plaintiff under the RBI and DGFT circulars governing the Interest Equalisation Scheme, or whether the plaintiff was entitled to retain the 5% subvention for the entire tenor of the export credit.

Analysis: The scheme required banks to pass on the interest equalisation benefit completely and upfront to eligible exporters during the period when the scheme was in force. The later RBI circular extending the scheme from 1 October 2021 and reducing the rate to 3% was held not to authorise retrospective clawback of benefits already passed on for credits disbursed before 30 September 2021. The DGFT clarification was read to mean that the tenor of the advance beyond 30 September 2021 did not defeat the exporter's entitlement where disbursement had occurred earlier, and the bank's failure to seek timely reimbursement from the RBI could not be shifted onto the plaintiff.

Conclusion: The recovery of Rs. 3,45,37,097/- from the plaintiff was held to be wrongful, and the plaintiff was held entitled to refund of that amount with interest and costs.

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