AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2020 (9) TMI 1031
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....ers submit that the "Trade Credit Policy - Revised Framework" formulated by the Reserve Bank of India (RBI) on March, 13, 2019 superseded Clause B.5.1 of the Master Direction for Import of Goods and Services issued on January 1, 2016 and updated on February 2, 2018. 5. Learned counsel for the petitioners submits that the Policy of the RBI dated March 13, 2019 is based on the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018. Regulation 2(xvii) of the 2018 Regulations provides that the term "Trade Credit" refers to the credits extended by the overseas supplier, banks/financial institutions for imports into India in accordance with the Trade Credit Framework decided by the RBI in consultation with the Government of India. The explanation to the said Regulation clarifies that "suppliers' credit" relates to the credit for imports into India extended by the overseas suppliers, while "buyers' credit" refers to loan for payment for imports into India arranged by the importer from an overseas bank or institution. 6. The petitioners seek to draw a distinction between the usance period of a Letter of Credit and the period of a Trade Credit. Learned counsel for the petit....
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....bitrarily reduced the time to 180 days, thereby allegedly creating huge financial difficulties for the petitioners. 13. Two letters containing instructions from the RBI, respectively dated May 21, 2018 and August 27, 2018, relied on by the State Bank, are argued to be negated by the 2018 Regulations, which came into effect on and from December 17, 2018. The Regulations of 2018, according to the petitioners, superseded the said two letters of instructions, the former having greater statutory force compared to mere instructions of the RBI. It is argued that the respondent-bank has sought to make out a new case in the rejoinder to the banks' supplementary affidavit, alleging that usance period under Letter of Credit and period of Trade Credit are not the same. However, the petitioners refute such difference and argue that the usance period under Letter of Credit (L/C) and Trade Credit (TC) are, in effect, the same. The former refers to the actual credit period which an importer can enjoy and the period within which payment obligations arising out of import under L/C have to be discharged and, for all effective purposes, the period of credit which importer enjoys is equivalent to the ....
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....lation 7A and Schedule-II of the 2018 Regulations corroborate the same proposition. 20. As discussed above, the buyers' credit and suppliers' credit pertain respectively to banks located outside India and financial institutions in International Financial Services Centres located in India and goods located outside India. 21. Since the respondent-bank is not an overseas bank but situated in India, the above concept of Trade Credit is inapplicable to the present case, as the petitioners/importers/borrowers are also situated in India. 22. The respondents argue that since Indian importers like the writ petitioners can avail credit facilities from overseas banks at cheaper rates, such importers usually attempt to avail such credit facilities from outside India and foreign banks would not grant credit facilities to persons, who are not citizens of the countries where the said banks are situated, unless the person gets repayment of the credit facilities guaranteed by a bank of his own country having credibility. In such situation, Indian importers approach Indian banks for facilitation of availing buyers' credit by the importer from an overseas bank. The Indian bank facilitates such pro....
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....her, including the operating cycle and its maximum limit, were set in terms of the Master Direction - Import of Goods and Services, issued on January 1, 2016 (lastly updated on April 1, 2019). 27. Clause B.5 of the Master Direction - Import of Goods and Services, insofar as it relates to extension of the period of settlement of import dues up to three years, is an exception to the Rule that such payment has to be timely, not less than six months from the date of shipment as mentioned in the said clause itself. As such, the respondent pray that the writ petition may be dismissed with exemplary costs. 28. Upon considering the verbal submissions, written notes of arguments and materials on record produced by both sides, it is evident that the petitioners sought to equate Trade Credit with usance period, which are different concepts. 29. The Trade Credit Policy - Revised Framework of the RBI dated March 13, 2019 is based on the Foreign Exchange Management (Borrowings and Lending), Regulations, 2018. By definition, the same relates to Foreign Exchange Management. That apart, Regulation 2(xvii), as rightly pointed out by the petitioners, defines "Trade Credit" as Credits extended by t....
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....xed by the terms of contract between the parties, found from the Sanction Letters dated March 15, 2018 and January 22, 2019, which were duly accepted by the writ petitioners. The period of 180 days was reiterated by the RBI Directions to the respondent-bank dated May 21, 2018 and August 27, 2018, which are binding on the respondent-bank in terms of Section 35A of the Banking Regulation Act, 1949. The instruction letters by the RBI were, thus, of mandatory nature as far as the respondent-bank was concerned. 35. The argument that the 2018 Regulations brought about a change in policy regarding the usance period for credit does not hold water, since the said Regulations and the Master Direction on External Commercial Borrowings and Trade Credits dated July 1, 2015, updated up to October 6, 2015, relate to loans extended by overseas banks. The germane consideration in the present case is, rather, the Master Direction - Import of Goods and Services dated January 1, 2016 (updated lastly on April 1, 2019). 36. Hence, the Trade Credit Policy - Revised Framework formulated by the RBI on March 13, 2019 does not alter the position as far as the usance period available to the petitioners was ....