Madras High Court
State Bank Of India vs Aruna Exports
Author: N.Sathish Kumar
Bench: N. Sathish Kumar
RESERVED ON : 27..04..2017
DELIVERED ON : 01..06..2017
IN THE HIGH COURT OF JUDICATURE AT MADRAS
CORAM
THE HONOURABLE MR. JUSTICE N. SATHISH KUMAR
A.S.No.541 of 2006
and CMP.No.1336 of 2017
(reception of additional document)
State Bank of India,
City Branch
Regional Office
State Bank Road
Coimbatore- 18 ... Appellants/1st defendant
Vs.
1.Aruna Exports
represented by partner
C.R.Jaikumar
45, Oppanakara Street
Coimbatore ... 1st respondent/plaintiff
2. M/s. Continental Exports (p) ltd.,
Baneshwar, Kathmandu, Nepal
3. M/s. Binitta Fashion Ind (p) ltd.,
Kathmandu, Nepal
4. Classic Casual (p) ltd.,
Old. Baneshwar, Katmandu, Nepal
5. Prakash Transport,
Moosikirangal Street,
Indira Nagar, Erode
6. Prakash Transport
Erode.
7. Rashtriya Banjaya Bank Ltd.,
Main Branch Office,
New Road, Kathmandu,
Nepal ... 2 to 7 Respondents /
defendants
Prayer:- This Appeal suit has been filed under Section 96 of CPC, against the judgment and decree of the 1st Additional District Judge, Coimbatore (Fast Track Court No.1, Coimbatore) dated 25.04.2006 and made in O.S.No.237 of 2004.
For Appellant : Mr.K.Sankaran
For R1 : Mr.M.K.Kabir
Senior Counsel for
Mr. H.S.Mohamed Rafi
For R5 and r6 : No Appearance
J U D G M E N T
Aggrieved over the judgment and decree of the trial Court decreeing the suit for recovery of money, the present appeal came to be filed by the 1st defendant, namely, the State Bank of India.
2. For the sake of convenience, the parties are referred to, as per their ranking before the trial Court.
3. Facts and circumstances giving rise to this appeal are:
(i) The plaintiff a registered Firm, has account with the 1st defendant Bank and had bill discount facility. The defendants 2 to 4 are the dealers in handloom and textile goods having business transaction with the plaintiff while the defendants 5 and 6 are the public carrier. The 7th defendant is the Bank in Nepal, negotiated by the 1st defendant bank for collection in respect of Letter of Credit (L/C) amount due from the customer of the plaintiff. The plaintiff supplies goods to defendants 2 to 4 against irrevocable L/C issued by 7th defendant. The plaintiff negotiated with the 1st defendant bank for collection of bill under various invoices raised against the defendants 2 to 4. The plaintiff despatched goods through public career, the 6th defendant and entrusted the goods at Coimbatore for transport via Madras to Kathmandu, Nepal, under various invoices. The documents were sent through 1st defendant for collection and in turn, the 1st defendant negotiated the bills through the 7th defendant and Letter of Credit for realisation of the amount while the defendants 2 to 4 have to realise the bills on payments, the 7th defendant has to deliver the invoices against payments.
(ii) Though the 1st defendant realised the amount and credited to the account of plaintiff, the part of amount due under invoice No.2/95-96 and the full amounts under invoices 10/95-96 and 14/95-96 were not credited by 1st defendant in the account of plaintiff. But as the bills are discounted the 1st defendant bank adjusted the sum collected under invoice No.12/96-97 towards bill discounted amount due under other invoices without authorisation. The 1st defendant collected a sum of Rs.1,33,649/- from the plaintiff towards interest for delayed realisation of LC amount. Since, the plaintiff kept his account with 1st defendant bank, the defendants under letter dated 17-10-1996, directed the plaintiff to pay the interest amount and keep the account in good outstanding for bank for proceeding against the 7th defendant by exercising coercion. It is stated that the plaintiff, hoping that the 1st defendant will file a suit, agreed to adjust interest out of current account. According to the plaintiff, the 1st defendant has to realise the account from the 7th defendant and credit account of the plaintiff for the invoice amount with interest.
(iii) The 1st defendant, admitting his liability to collect the amount and to credit the account of the plaintiff, also took steps to realise the amount by causing lawyer's notice to the 7th defendant. According to the plaintiff, a total sum of Rs.6,04,480/- is due under invoice Nos.12/95-96, 14/95-96 along with interest for delayed payment and in spite of several demands made, the 1st defendant has not paid the amount.
(iv) The case of the plaintiff is that since he was deprived of money for business, the 1st defendant is liable to pay the amount with interest at 21% per annum. Finally, the plaintiff issued a legal notice to the defendants on 02.4.1999 for which the 1st defendant caused a reply notice dated 28.5.1999 admitting the claim but advised the plaintiff to seek remedy from the importer. The 1st defendant also stated that the third defendant had delivered the documents to defendants 2 to 4 without collecting the payment. Since the consignees are stated to have taken delivery of goods and as the fraud committed by the 7th defendant was brought to light in the reply notice dated 28.5.1999, the defendants are estopped from denying the liability from the plaintiff and hence, the plaintiff has impleaded all the parties. As the 1st defendant has admitted the liability and since the fraud committed by the 7th defendant in collusion with defendants 2 to 4, was brought to light on 28.5.1999, the suit claim is not barred by time. Hence, the plaintiff filed the instant suit for recovery of a sum of Rs. 6,04,480/- with future interest at 21% p.a.
(v) Except defendants 1 and 6, others remained ex parte. The 1st defendant filed written statement admitting the fact that the plaintiff has account with them and had bill discount facility, and the 7th defendant is a bank in Nepal, negotiated by the 1st defendant bank for collection of bills, L/C amount due from customer of plaintiff but denied the invoices, way bill, value, name of the importer and consignment numbers are all untrue. It is also denied by the 1st defendant that they realised the amounts and credited the same to the account of the plaintiff. It is stated by the 1st defendant that they had only discounted the amounts with respect to L.C. Nos.30/491 and 30/579 and credited the same to the account of the plaintiff. The L.C.No.30/460 was sent by the 1st defendant for collection and it was not discounted by them. The various invoices and amounts as if realised and credited by the 1st defendant in the account of the plaintiff as stated in the plaint, is not true. It is also stated by the 1st defendant that invoice Nos.2/95-96, 10/95-96 and 14/95-96 were not credited by them in the account of the plaintiff. The case of the 1st defendant is that the documents under various invoices were sent to them by the plaintiff and the goods were sent separately through the defendants 5 and 6 to the 7th defendant, who, in turn, will discount the invoices and handover the original title to the importers, viz., defendants 2 to 4 on receipt of the entire invoice amounts. The discounted amounts under the invoices would then be transferred by the 7th defendant to the 1st defendant, who, in turn, would credit the same in the account of the plaintiff.
(vi) The further case of the 1st defendant is that it is the duty of the 7th defendant to handover the original title of the goods to the importers viz., 2 to 4 on receipt of the entire invoice amounts from them. It is stated that the goods under various invoices on various dates were sent to the 7th defendant through 5th and 6th defendants and that the 7th defendant appeared to have handed over the documents without receiving the amounts from the importers, viz., the defendants 2 to 4, and thereby acted negligently and they are only liable to pay the amount to the plaintiff. The 1st defendant further states that 7th defendant did not transfer the discounted invoice amount to them within the specified time limit as per the normal procedure contemplated in the banking industry and therefore, the 1st defendant had caused telex message to the 7th defendant, requiring them to transfer the discounted invoice amounts so as to enable them to credit the same in the account of the plaintiff. Though they have sent telex messages to the 7th defendant on 08.5.1995, 18.5.1995, 13.7.1995, 23.08.1995, 09.9.1995, 26.10.1995, 27.11.1995, 25.01.1996, the 7th defendant had not responded to any of their telex messages and the same went in vein. Thus, the 1st defendant had bonafidely taken care of the interest of their customer, viz., the plaintiff. The 1st defendant even referred the matter to foreign Department, viz., S.B.I, Calcutta, in order to pursuade the 7th defendant to act deligently. They, in turn, had sent letters dated 18.11.1995 and 07.2.1996 requiring the 7th defendant to remit the proceeds to the 1st defendant. According to the 1st defendant, the 7th defendant did not move their little finger even to the above said letters. The 1st defendant thereafter tried to realise the amounts through their branch at Nepal, who , in turn, had sent letter dated 08.3.1996 to the Executive Chairman of the 7th defendant and even then, there was no reply from the 7th defendant.
(vii) The 1st defendant being frustrated by the prolonged silence of the 7th defendant, had written a letter dated 24.2.1996 to the Deputy Governor and a letter dated 09.4.1996 to the Chief Manager of Nepal Rashtria Banjaya Bank, Kathmandu, Nepal. But there was no response from the 7th defendant. Thereafter, the 7th defendant sent a letter dated 06.06.1996 to the 1st defendant enclosing a Demand Draft of Rs.05,08,843/- stating that the importers were ready to pay only the above sum out of the total amount of Rs.9,78,331.10. The 1st defendant had received the above sum only in protest and credited the same in the account of the plaintiff. Thus, the 1st defendant had acted deligently to recover the amount and hence, they are not liable to pay the amount as demanded by the plaintiff. It is the duty of the 7th defendant to collect the entire invoice amounts by way of discounting and then hand over the original title of the goods to the importers. Since the 7th defendant had acted negligently, carelessly and in collusion with the importers, they along with the importers, viz., defendants 2 to 4 are only liable to pay the balance amount to the plaintiff and the defendant is in no way liable to pay any amount to the plaintiff.
(viii) It is also the case of the 1st defendant that they had, in fact, acted deligently by causing a legal notice dated 13.8.1996 to the 7th defendant for the payment of the balance amount. It is also stated that the 1st defendant, subsequently, by letter dated 17.10.1996, had stated the above facts and had claimed the interest amount for the delay which they are lawfully entitled to claim from the plaintiff. The plaintiff had given letters dated 18.4.1995 and 04.5.1995 undertaking to bear any interest that may become payable in the bank on account of delayed reimbursement of bill for any reason whatsoever. Thus, the 1st defendant is entitled to charge interest from the plaintiff for the amounts, which is not realised within the stipulated time. Despite the efforts taken by the 1st defendant for recovery of the balance amount from the 7th defendant, the plaintiff caused to issue a legal notice dated 02.4.1999 on them stating untenable grounds, which has been replied. The 1st defendant further states that they had not admitted any claim or liability in their reply letter dated 28.5.1999. Hence, the 1st defendant prayed for dismissal of the suit.
(ix) The 6th defendant admitted that the plaintiff has entrusted goods through the 6th defendant for transport via, Chennai to Kathmandu, Nepal. It is stated that the 6th defendant has done their service properly and the goods have reached kathmandu in a good condition. The defendants 1 and 7 are Bank and defendants 2 to 4 are the purchaser of the goods. The 6th defendant, Transport Company, has in no way connected with the money transactions and that they are not necessary party in the suit. Hence, prayed for dismissal of the suit.
4. In view of the above pleadings, the following issues were framed by the trial Court:
1. Whether the suit is filed in time?
2.Whether the plaintiff is entitled to recover the suit amount?
3.Whether all the defendants are liable to pay the suit claim?
4.To what other reliefs?
5. On the side of the plaintiff, P.W.1 was examined and Exs.A1 to A33 were marked. On the side of the defendants, D.W.1 and D.W.2 were examined and Exs. D1 to D4 were marked.
6. After appreciating the oral and documentary evidence available on record, the trial Court decreed the suit as against the defendants 1 to 3, 4 and 7 and dismissed the suit as against the defendants 5 and 6 and also observed that the 1st defendant is entitled to recover the amount from the 7th defendant. Aggrieved over the same, the present appeal came to be filed by the 1st defendant.
7. During the pendency of appeal, Civil Miscellaneous Petition No.6072 of 2017 has been filed to receive the additional document, namely, copy of the certificate of registration of Firm.
8. It is the contention of the petitioner in the above petition that the plaintiff Firm was formed in the year 1986 vide registration No.576 of 1987. Though Exs.P1 and P29 were filed to prove the factum of registration, certificate of Registration of Firm could not be filed. The plaintiff is a registered firm and the defendant bank has been dealing with the plaintiff only as a registered Firm from day one. However, the defendant Bank, taking an unsustainable and vexatious plea as if the Firm is not a registered Firm, contended that the suit is barred under Section 69 of the Partnership Act. It is the case of the petitioner that since the defendant Bank is trying to mislead the Court, it has become necessary for the petitioner to file a copy of the registration certificate of the Firm. According to the petitioner, the aforesaid document could not be filed before the trial Court due to certain reasons that are beyond the control of the plaintiff and that it has been obtained with great difficulties. Hence, he prayed for allowing the application.
9. No counter affidavit has been filed disputing the petition.
10. The document now sought to be filed is a copy of Firm Registration Certificate to prove the fact that one of the partners has filed the suit and his name also appears in the registration of the Firm at the time of filing the suit.
11. It is the first and foremost contention of the learned counsel for the appellant / 1st defendant that the suit is not maintainable since the name of the person, who filed the suit, is not found in the Register of Firm at the relevant point of time. The second ground taken by the learned counsel for the appellant/1st defendant is that at the time of filing the suit, the Court fee has not been paid. It is submitted that despite the time granted by this Court to deposit the Court fee, he has not paid the same in time. According to him, the appellant /1st defendant Bank is only a negotiating bank and letter of credit issued by the 7th defendant proves the fact that goods supplied by the plaintiff were defective in nature. Therefore, the 1st defendant, being negotiating bank, cannot be made liable for the non payment of money by the 7th defendant which only issued a letter of credit. The learned counsel by placing reliance on the Uniform Customs and Practice for Documentary Credit (1974), (in short UCP) and relying on certain communication of the 7th defendant to pay the amount which has not been credited to the 1st defendant, submitted that the 1st defendant cannot liable to pay the amount.
12. In support of his arguments, the learned counsel has relied upon the judgments reported in AIR 1959 SCC 1041 (Ujagar Singh v. Mst. Jeo); 1999 (II) CTC 540 (M/s. K.R.M. Money Lenders rep.by its Power Agent Karuppiah v. Mr.A.Manoharan @ Doss); 2011- 2- L.W. 167 (Nippon Impex Corporation v. M/s. Nestor Granite Handel GmbH & Co); 1989 2 LW 542 (M/s.Shreeram Finance Corporation v. Yasin Khan and Others); AIR 1998 MP 93 (State Bank of India v. Madhya Pradesh Iron and Steel Works Pvt.Ltd., Raipur and Other); 2005 (5) CTC 401 (S.V.Arjunaraja v. P.Vasantha); 2017 (2) CTC 372 (Seeyan Associates v. B.M.F. Bletings Limited, Chennai).
13. On the contrary, it is the vehement contention of the learned Senior counsel for the 1st respondent/plaintiff that the suit has been filed by one of the partners, whose name appears in the Register of Firm and though the Firm certificate has not been filed before the Trial Court, now, in the appeal, permission has been sought for filing the same as additional document. It is the case of the plaintiff that partnership itself has been registered and in fact, the partnership was in existence from the very beginning. According to the learned counsel since the suit has been filed by one of the partners, whose name is also found in the Register of Firm, there is no question of curing the defect arising in this case. Hence, it is submitted that additional document, namely, the copy of the Certificate of Registration of Firm has to be received as evidence.
14. It is the contention of the learned Senior counsel that 7th defendant Bank is the issuing Bank at Nepal and the 1st defendant Bank is negotiating Bank on behalf of the seller. It is contended that having agreed to pay the amount, the 1st defendant has failed to honour the commitment as per the contract. The goods have been properly delivered to the purchaser which is not in dispute. The Letter of Credit is in order and it does not suffer any infirmities. The purchaser has not rejected or complained of any fraud or defect of goods. Therefore, it is the contention of the learned Senior counsel that the ingredients for honouring the LOC are satisfied and that, as per the LOC, the 1st defendant is also bound to clear the amount. As such, according to the learned Senior counsel for the plaintiff the judgment of the Trial Court decreeing the suit is based on proper appreciation of evidence and law and he prayed for dismissal of the appeal.
15. To substantiate the above contentions, the learned Senior Counsel has placed reliance on the judgments reported in 1969 (1) SCC 233 (Tarapore & Co, v. V.O. Tractors Export); (1981) 2 SCC 766 (United Commercial Bank v. Bank of India) and also unreported judgment of the High Court of Delhi dated 03.8.2015 [FAO (OS) 283 of 2015].
16. In the light of the above submissions, now the points that arise for consideration in this appeal are:
1.Whether the plaintiff /1st respondent is entitled to file additional document, namely, copy of the Firm Registration Certificate?
2.Whether the Court fee has been paid by the plaintiff to maintain the suit?
3.Whether the suit is barred under Section 69 of the Partnership Act?
4.Whether the 1st defendant / appellant, being negotiating Bank, is liable to pay the amount in view of the Letter of Credit issued by the 7th defendant?
5. To what relief?
Point No:1
17. During the pendency of the appeal, Miscellaneous Petition being C.M.P.No.6072 of 2017 has been filed to receive the additional document, namely, copy of the Firm Registration Certificate, to show that the name of the person, who filed the plaint, is also found place in the Register of Registration of Firms. Of course, unless and until the conditions set out in Order 41 Rule 27, more particularly, clause (aa) and (b) are fulfilled, one cannot file an application, qua reception of document, as a matter of right. But at the same time, this Court is of the view that if any document is produced as necessary to enable the Court to pronounce judgment or for other substantial cause, such document can be received as additional document in the appeal stage.
18. In this regard, it is the contention of the learned counsel for the appellant / 1st defendant that the name of the person, who filed the instant suit, does not find place in the Register of Registration of Firms and, therefore, the suit is not maintainable as per Section 69 of the Partnership Act.
19. In support of such contention, the learned counsel has placed reliance on the judgment in Shreeram finance Corporation v. Yasin Khan and Others (cited supra) to show that subsequent amendment of the plaintiff is not a curable defect to maintain the suit by partner. From the aforesaid judgment, it is clear that the person suing, namely, the partners therein, as on the date of the suit, were not shown as partners in the Register of Registration of Firms. Considering the above aspect, the Hon`ble Supreme Court has held that the suit is clearly hit by the provisions of Sub Section 2 of Section 68 of the Partnership Act.
20. In (K.R.M.Money Lenders rep.by its Power Agent Karuppiah) cited supra, this Court has held that subsequent registration of Firm does not cure the defect of non - registration before the presentation of the suit.
21. Likewise, in Seeyan Associates v. B.M.F. Bletings Limited, Chennai, this Court has held that the suit is not maintainable since the name of the partner representing the Firm was not reflected in the Register of Registration of Firms.
22. Absolutely, there is no dispute with regard to the above proposition of law. But the fact remains in this case is that the partnership Firm was registered in the year 1987. It is not the case of the plaintiff that as on the date of filing of the suit, the partnership was not in existence and the partnership was registered subsequently. It is the case of the plaintiff that even on the date of filing of the suit, the Firm was very much in existence and the name of one of the partners Jayakumar, who has filed the instant suit was also very much available in the Register of Registration of Firms. Only to prove the above facts, the certified copy of the Firm Registration Certificate was sought to be filed as additional document and as such, there is no question of curing any defect in this case. Therefore, it is clear that the 1st defendant, taking advantage of the fact that Firm Registration Certificate has not been filed before the Trial Court, argued the case before this Court that the suit itself is not maintainable under Section 69 of the Partnership Act.
23. In the above background, on a perusal of the document sought to be filed, it is seen that the same is only a copy of Certificate of Registration issued by the Registrar of Firm (vide No.576 of 1987) in the year 1987, in which the name of Jayakumar, who has filed the instant suit, was very much found. Hence, this Court is of the view that the Firm was already in existence and continued to exist even on the date of the suit. In such circumstances, receiving the above document in the appeal stage will not cause any prejudice to the other side. In fact, it would enable this Court to arrive a just conclusion with regard to the maintainability of the suit. Hence, this Court is inclined to receive the additional document, namely, Firm Registration Certificate wherein the name of the partner, who has filed the suit is very much available. Accordingly, the CMP.No.6072 of 2017 is allowed and the additional document sought to be filed is ordered to be marked as Ex.A32 on the side of the plaintiff. Since the document is a certified copy of public documents, no oral evidence is required in this regard.
Point No.2:
24. As regards the payment of Court Fee, it is the contention of learned counsel for the 1st defendant that inspite of the time granted to deposit the Court fee, the plaintiff has not deposited the same at the time of filing the suit. Hence, according to the learned counsel, the suit itself is not maintainable.
25. It appears that on the date of filing of the suit, the application under Section 149 CPC was filed for extension of time and two weeks time was granted. Thereafter, the plaint was re-presented with 16 days delay along with application under Sections 148 and 151 of CPC. The above application has been allowed by the Court below and the plaint has been taken on file. Once the Court has condoned the delay accepting the Court fee, now, in the appeal stage, the 1st defendant/appellant herein, cannot attack the finding of the Trial Court on that aspect.
26. Admittedly, the suit was filed in August 1999 and entire Court fee has been paid in the month of September 1999 itself, that too, with the permission of the Court. Though there was a delay of 16 days, the same was condoned and the Trial Court has accepted the Court fee. Therefore, now the 1st defendant/appellant cannot canvass the case on the ground that the suit is not maintainable.
27. In S.V.Arjunaraja v. P.Vasantha (cited supra) the Division Bench of this Court, taking into consideration the fact that at the time of re-presenting the plaint, no application filed either under Sections 148 or 149 CPC for payment of deficit Court fee, held that numbering the suit by the trial Court without an application is not in accordance with law. Whereas in this case, the application has been filed under Section 148 of CPC and that Court fee has also been paid within a period of one month. Therefore, the above judgment is not applicable to the facts of the present case. Accordingly this point is answered against the appellant/1st defendant.
Point No:3
28. With regard to the maintainability of the suit under Section 69 of the Partnership Act, now additional document was received by this Court, as held in point No.1 and the certified copy of the Firm Registration clearly shows that the name of the person, who filed the suit, is very much found in the Register of Registrar of Firms. Therefore, the contention of the learned counsel for the appellant that the suit is not maintainable under Section 69 (ii) of the Partnership Act has no legs to stand.
Point No:4:
29. Coming to the question of liability by the appellant/1st defendant, it is not disputed that the plaintiff had account with the 1st defendant Bank and had a bill discount facility. The plaintiff has also exported textile goods to the defendant Nos. 2 and 4 through defendant Nos. 5 and 6, who was a public career. The 7th defendant is a Bank in Nepal, who is the issuing Bank and the 1st defendant, in fact, is a Negotiating Bank. The 7th defendant has issued Letter of Credit on the 1st defendant Bank at Coimabore, negotiating Bank, for the goods supplied by the plaintiff. It is also undisputed fact that the plaintiff has raised invoices dated 13.4.1995; 27.4.1995; 08.06.1995 and 30.10.1996 for various amounts and Exs.A2, A5 and A8 are invoices raised by the plaintiff and the same has been filed to prove the transaction. Exs.A4, A7 and A10 dated 17.4.1995, 02.5.1995 and 13.06.1995 respectively were the letters submitted by the plaintiff to the 1st defendant for negotiation of the document with reference to the irrevocable letter of Credit issued by the 7th defendant. Indisputably, under these three letters, necessary documents were submitted by the 1st defendant for negotiation with the 7th defendant. Likewise, it is also not in dispute that Ex.B12 is the letter of Credit issued by the 7th defendant Bank.
30. It is admitted by the 1st defendant in the written statement that the documents under various invoices were sent by the plaintiff through the 1st defendant and the goods were also supplied through the 5th and 6th defendants to the 7th defendant. It is also admitted by the 1st defendant that the goods for the various invoices on various dates were sent to the 7th defendant, through the 5th and 6th defendants and the 7th defendant appears to have handed over the documents without receiving the amounts from the importers, i.e., the defendants 2 to 4, thereby acting negligently and as such, they are only liable to pay the amount to the plaintiff. The 7th defendant has not transferred the discount invoice amounts to the 1st defendant within the specified time limit as per the normal procedure contemplated in the banking industry. Therefore, the defendant has sent Telex messages to the 7th defendant requiring them to transfer the discounted invoice amounts so as to enable them to credit the same in the account of the plaintiff. Accordingly, they have sent Telex messages to the 7th defendant on various dates i.e., 08.5.1995, 18.5.1995, 13.07.1995, 23.08.1995, 09.09.1995, 26.10.1995, 27.11.1995, 25.01.1996. According to the defendant, they had acted bonafidely taking care of the interest of their customer viz., the plaintiff. Hence, it is the contention of the 1st defendant that the 7th defendant alone is liable to pay the amount.
31. According to the 1st defendant, the 7th defendant has sent a draft for Rs.5,08,843/- only out of total amount of Rs.9,78,331.10 and they received the above sum only after protest and credited the same in the account of the plaintiff. From the admitted facts, it can be seen that the 1st defendant, being negotiating bank, has undertaken to pay the amount to the plaintiff.
32. In the aforesaid background, when Ex. A16 letter addressed by the 1st defendant is carefully analysed, it clearly shows that, in fact, the 1st defendant, at that point of time, has arranged to issue a legal notice on the Bank through lawyer and also seeking permission from the Central Office, Bombay. Thereafter, only on instructions from the Central Office, they requested the plaintiff to pay the bill amount with interest and also by making such request, they assured the plaintiff that they will follow-up with Central Office and Bank Advocates for speedy filing of suit and recovery of bill amounts.
33. The aforesaid Ex.A16 makes it clear that the 1st defendant was responsible to recover the amount from the issuing bank. Ex.A17, is the legal notice issued to the 7th defendant by the 1st defendant requesting them to pay the balance amount, failing which the 1st defendant shall institute a suit against the 7th defendant for recovery of the amount. Thereafter, under Ex.A20, the 1st defendant also sent telex message to the 7th defendant to pay the balance amount stating that two bills aggregating a sum of Rs.7,78,035.00 were not paid till date despite repeated reminders. It is also stated in the said telex that the 7th defendant did not point out any discrepancy and did not also return the bills to the 1st defendant. It is also stated by the 1st defendant that the 7th defendant has delivered the documents to the importers without getting payment and enabled them to use the goods. Therefore, they advised Nepal SBI Bank Ltd to serve legal notice on 7th defendant on 13.8.1996. In spite of the same, the 7th defendant has not paid any amount. They also sought opinion to file the suit against 7th defendant by letter dated 08.11.1996, which is marked as Ex.A20.
34. Again, the 1st defendant has addressed a letter to the General Manager, State Bank of India, Foreign Department, under Ex.A21 requesting them to impress upon the 7th defendant the necessity to pay their pending claims without further delay to avoid litigation. The tenor of the letter Ex.A21 addressed by the 1st defendant also clearly shows that they treated the pending bills as their own pending claims. Thereafter, they sent telex under Ex.A23. As no amount is forthcoming, the plaintiff has issued a legal notice under Ex.A24. The 1st defendant also sent a reply admitting that they negotiated the bills in invoice No.2/95-96 and 10/95-96 with the 7th defendant under the irrevocable Letter of Credit with recourse to the plaintiff, the beneficiary. However, it is stated by the defendants that negotiation under the Letter of Credit was done with recourse to the exporter and hence, it is within their right to debit the exporter's account, in case the bill negotiated, is not honoured for any reason. Having been negotiating Bank for the first time in the reply notice, they have stated that they have right to debit the exporter's account, in case the bill negotiated is not honoured for any reason.
35. In these scenario, a perusal of Exs.B1, B2, B3, letters of negotiation issued by the 1st defendant to 7th defendant clearly show that the documents drawn under Credit Nos.KTM/IND/30/491 dated 21.2.1995, KTM/IND/30/579 dated 19.4.1995 and KTM/IND/30/460 dated 05.02.1995 were negotiated by the 1st defendant and also certified to the effect that all the documents were in order and were presented to them within credit validity and requested the 7th defendant to remit the proceeds by way of draft in favour of the 1st defendant. The aforesaid letters of negotiation issued by the 1st defendant Bank, which are marked as Exs.B1 to B3 do not contain clause stating that the negotiations were done under the Letter of Credit with recourse to the exporters. Therefore, the 1st defendant has right to debit exporter's account.
36. Similarly, the Letters of Credit issued by the 7th defendant are also marked as Exs.B6, B8 and B12, wherein instruction was given to the 1st defendant by the 7th defendant that upon presentation of the documents drawn in strict conformity with terms and conditions of Letter of Credit, they shall remit the proceeds according to the 1st defendant instructions. Only on the basis of the Letter of Credit, the 1st defendant has in fact, agreed to be negotiating bank and negotiated with the 7th defendant and they also certified the letter of negotiation that documents are honoured. It is also admitted by the 1st defendant that goods were also delivered by the 7th defendant without even receipt of the actual value. In the entire written statement, it is not the case of the 1st defendant that the goods were defective in nature. The documents filed on both sides would clearly show that the goods were exported by the plaintiff only on the basis of Letter of Credit issued by the 7th defendant and the 1st defendant is the negotiating bank.
37. Of course, Exs. B.15 to B17 would show that they also issued telex message for payment of the remaining amount by the 7th defendant. Ex.B18 was also addressed to the 1st defendant by the 7th defendant that if the payment is not paid within 15 days, they will be compelled to take legal action against 7th defendant. Exs.B19 and B20 are also similar letters sent by the 1st defendant. In fact, they requested them to pay the amount as otherwise, they will be forced to take legal action. Under Ex.B21 to B26, the 1st defendant addressed a similar letter. B27 is the copy of the letter addressed to the Chief Manager, Nepal Rashtra Bank, Kathmandu and B.28 is the copy of the letter addressed to the Embassy of India. Under Ex.B29,7th defendant has sent only Rs.5,08,843.10. The above amount has been received by the 1st defendant without prejudice to their rights to seek remedy against the 7th defendant, as could be seen under Ex.B30. Thereafter, on 12.3.1998, communication was sent by the Head Office of the 1st defendant wherein, they enclosed some photocopy of the letters stating that certain parts of the goods have been rejected. This aspect has not even been pleaded in the written statement.
38. The above documents and pleadings of both sides, makes it clear that at no fault of the plaintiff, the amount has not been paid to him. On the contrary, a sum of Rs. 1,33,649/- was collected towards interest from the plaintiff.
39. Having admitted to realise the amount as negotiating bank, collecting such huge interest from the plaintiff for no default at him is also contrary to the agreement between negotiating bank and issuing bank. In fact, there is a contractual duty on the part of a negotiating bank to honour the credit invited by them, on presentation of documents by the seller. No doubt, in this case, the documents show that the 1st defendant, being negotiating Bank, has also issued notices and communications to 7th defendant for settlement of the entire amount. In such circumstance, they ought to have filed necessary suit to recover the amount payable by the 7th defendant, who has issued a Letter of Credit for negotiation by the 1st defendant. The plaintiff could not have entered into the contract to export his goods to the persons, who were residing in a foreign country. The purpose of entering such contract itself is to give assurance to the persons living in one country to realise their money without any problem from the other country. Therefore, by merely sending some communications, to the issuing Bank, the 1st defendant cannot shift or shirk their responsibility and contend that only 7th defendant is liable to pay the amount.
40. In this context, it is useful to extract Article 9 of UCP, which reads as follows:
Liability of Issuing and Confirming Banks An irrevocable Credit constitutes a definite undertaking of the Issuing Bank, provided that the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and that the terms and conditions of the Credit are complied with:
i.If the Credit provides for sight payment to pay at sight' ii.If the Credit provides for deferred payment - to pay on the maturity date (s) determinable in accordance with the stipulations of the Credit;
iii.If the Credit provides fro acceptance:
a. by the issuing Bank to accept Draft(s) drawn by the Beneficiary on the Issuing Bank and pay them at maturity.
b. by another drawee bank to accept and pay at maturity Draft(s) drawn by the Beneficiary on the Issuing Bank in the event the drawee bank stipulated in the Credit does not accept Draft(s) drawn on it, or to pay Draft(s) accepted but not paid by such drawee bank at maturity;
iv.If the Credit provides for negotiation to pay without recourse to drawers and/or bona fide holders, Draft(s) drawn by the Beneficiary and /or document(s) prsented under the Credit. A Credit should not be issued available by Draft(s) on the Applicant. If the Credit nevertheless calls for Draft(s) on the Applicant, banks will consider such Draft(s) as an additional document(s).
b. A confirmation of an irrevocable Credit by another bank ( the Confirmation Bank) upon the authorisation or request of the Issuing Bank, constitutes a definite undertaking of the Confirming Bank, in addition to that of the Issuing Bank, provided that the stipulated documents are presented to the Confirming Bank or to any other Nominated Bank .. .. ..
A reading of the above article makes it clear that a confirmation of the irrevocable credit by another bank (i.e.confirming bank) upon the authorisation or request of the issuing Bank constitutes a definite undertaking of the confirming Bank, in addition to that of the issuing Bank provided that the stipulated documents are presented to the confirming Bank or to any other nominated bank. Suffice to state that in the settled position of law (Article 9 of UPC) that the 1st defendant is liable to pay the amount. Admittedly, there was no discrepancy in the documents presented by the plaintiff herein. Similarly, the goods were also delivered to customers at Nepal, as admitted by the 1st defendant in the written statement. Therefore, they cannot contend that they are not liable to pay the amount.
41. In this context, it is useful to refer to the judgment in Ujagar Singh v. Mst.Jeo, (cited supra) wherein it has been held that the Court can take judicial notice of a custom. Absolutely, there is no dispute with regard to the proposition laid down in the above judgment. The said judgment pertains to the custom which prevailed in Punjab. The question before the Hon`ble Supreme Court was whether the appellant therein as agnatic relation or collateral was entitled to the properties under the general custom of the Punjab in preference to the respondent. The facts of the said case are not applicable to decide the issue involved in this appeal as the entire issue involved in the instant case devolves upon the banking contract between the parties.
42. In the unreported judgment in Anil Timber Private Limited v. ING Vyasa Bank Limited and others (cited supra), in paragraph 7 the Division Bench of the High Court of Delhi has held as follows:
.. .. 7. The law with regard to letters of credit is quite well settled. The bank negotiating the documents is not concerned with the underlying contract between the seller and the purchaser nor is it concerned with the goods. The bank only has to see whether the documents presented to it are in terms of the letters of credit or not. Once the bank finds that the documents are not discrepant, it is bound to release the payment to the beneficiary. .. ..
43. In National Bank Ltd., v. Ghanshavm Das Agarwal (2015) 4 SCC 228, the Hon`ble Supreme Court has held as follows:
"7. As we see it, therefore, keeping in perspective that the Importer's Bank i.e. the appellant before us, should not have certified the documentation, reasonably anticipating or being aware of the possibility that this certification could be abused. Law assures the exporter and its Bank to repose in the expectation, nay, certainty, that the consignment, which is the subject-matter of the letter of credit, is not usurped by the importer/consignee or its agents, without remitting payment to the consignor's Bank. This is a strict liability cast on the bank which opens the letter of credit, since otherwise international trade and commerce will virtually and indubitably come to a standstill. It is only when irretrievable injury is bound to result and it is plainly evident that there is egregious fraud strictly ascribable to the beneficiary of the LC, that a reason to insulate a party before it against liability and that too, comes about only through the prompt intervention and interdiction of a Court of law. This Court has consistently adhered to this position of law even through the passage of several decades. The LC has the effect of creating a bargain between the banker and the vendor of goods, a deemed nexus between the seller and the issuing Bank, rendering the latter liable to the seller to pay the purchase price or to accept a bill of exchange upon tender of the documents envisaged and stipulated in the LC (See Tarapore and Co. vs. V.O. Tractors Export, [(1969) 1 SCC 233 : AIR 1970 SC 891] where Halsbury's Law of England have been relied upon). These observations have been repeated in United Commercial Bank vs. Bank of India [(1981) (2) SCC 766] , U.P. Coop. Federation Ltd. vs. Singh Consultants & Engineers (P)Ltd. [(1988) 1 SCC 174], Federal Bank Ltd. vs. V.M. Jog Engg. Ltd. [(2001) 1 SCC 663], Himadri Chemicals Industries Ltd. vs. Coal Tar Refining Co. [(2007) 8 SCC 110]. The opening bank must only look to assure itself that the invocation is in terms of the LC, and the completion of this exercise has consistently been circumscribed to a short period, which in the case in hand is one week as per Article 13-B of UCP, 500."
44. In Tarapore & Co., v. V.O. Tractors Export [(1969) 1 SCC 233,] the Hon`ble Supreme Court noted scope of an irrevocable letter of credit as explained in Halsbury's Laws of England and Chalmers on Bills of Exchange and the same is extracted hereunder:
"12. The scope of an irrevocable letter of credit is explained thus in Halsbury's Laws of England (Vol. 34), para 319 at p.185):
"It is often made a condition of a mercantile contract that the buyer shall pay for the goods by means of a confirmed credit, and it is then the duty of the buyer to procure his bank, known as the issuing or originating bank, to issue an irrevocable credit in favour of the seller by which the bank undertakes to the seller, either directly or through another bank in the seller's country known as the correspondent or negotiating bank, to accept drafts drawn upon it for the price of the goods, against tender by the seller of the shipping documents. The contractual relationship between the issuing bank and the buyer is defined by the terms of the agreement between them under which the letter opening the credit is issued; and as between the seller and the bank, the issue of the credit duly notified to the seller creates a new contractual nexus and renders the bank directly liable to the seller to pay the purchase price or to accept the bill of exchange upon tender of the documents. The contract thus created between the seller and the bank is separate from, although ancillary to, the original contract between the buyer and the seller, by reason of the bank's undertaking to the seller, which is absolute. Thus the bank is not entitled to rely upon terms of the contract between the buyer and the seller which might permit the buyer to reject the goods and to refuse payment therefor; and, conversely the buyer is not entitled to an injunction restraining the seller from dealing with the letter of credit if the goods are defective."
"13. Chalmers on "Bills of Exchange" explains the legal position in these words:
"The modern commercial credit serves to interpose between a buyer and seller a third person of unquestioned solvency, almost invariably a banker of international repute; the banker on the instructions of the buyer issues the letter of credit and thereby undertakes to act as paymaster upon the seller performing the conditions set out in it. A letter of credit may be in any one of a number of specified forms and contains the undertaking of the banker to honour all bills of exchange drawn thereunder. It can hardly be overemphasised that the banker is not bound or entitled to honour such bills of exchange unless they, and such accompanying documents as may be required thereunder, are in exact compliance with the terms of the credit. Such documents must be scrutinised with meticulous care, the maxim de minimis non curat lex cannot be invoked where payment is made by letter of credit. If the seller has complied with the terms of the letter of credit, however, there is an absolute obligation upon the banker to pay irrespective of any disputes there may be between the buyer and the seller as to whether the goods are up to contract or not."
45. The Supreme Court in Tarapore & Co. (cited supra) further observed that:-
"There is this to be remembered, too. A vendor of goods selling against a confirmed letter of credit is selling under the assurance that nothing will prevent him from receiving the price. That is of no mean advantage when goods manufactured in one country are being sold in another. It is, further more, to be observed that vendors are often reselling goods brought from third parties. When they are doing that, and when they are being paid by a confirmed letter of credit, their practice is - and I think it was followed by the defendants in this case - to finance the payments necessary to be made to their suppliers against the letter of credit. That system of financing these operations, as I see it, would break down completely if a dispute as between the vendor and the purchaser was to have effect of "freezing", if I may use that expression, the sum in respect of which the letter of credit was opened."
46. In United Commercial Bank v. Bank of India (1981) 2 SCC 766, the Hon`ble Supreme Court has held as follows:
"32. Banker's commercial credits are almost without exception everywhere made subject to the code entitled the "Uniform Customs and Practices for Documentary Credits", by which the General Provisions and Definitions and the Articles following are to "apply to all documentary credit and binding upon all parties thereto unless expressly agreed". A banker issuing or confirming an irrevocable credit usually undertakes to honour drafts negotiated, or to reimburse in respect of drafts paid, by the paying or negotiating intermediate banker and the credit is thus in the hands of the beneficiary binding against the banker. The credit contract is independent of the sales contract on which it is based, unless the sales contract is in some measure incorporated. Unless documents tendered under a credit are in accordance with those for which the credit calls and which are embodied in the terms of the paying or negotiating bank, the beneficiary cannot claim against the paying bank and it is the paying bank's duty to refuse payment."
47. In United Commercial Bank (cited supra), it was also held as under:-
"34. The authorities are uniform to the effect that a letter of credit constitutes the sole contract with the banker, and the bank issuing the letter of credit has no concern with any question that may arise between the seller and the purchaser of the goods, for the purchase price of which the letter of credit was issued. There is also no lack of judicial authority which lay down the necessity of strict compliance both by the seller with the letter of credit and by the banker with his customer's instructions."
48. From the above judgments, it is clear that issuing or confirming bank shall undertake to honour drafts negotiated or to reimburse in respect of drafts paid, by the paying or negotiating intermediate banker and the credit is thus in the hands of the beneficiary. It is also very clear that once the documents are not discrepant, it is bound to release the payment to the beneficiary.
49. In view of the aforesaid case laws and on perusal of the factual matrix of the instant case, it is clear that the 1st defendant, being negotiating Bank, failed to recover the amount from the 7th defendant. That apart, they also collected interest for the delayed payment. Article 9 of the UCP also makes definite undertaking on the part of the 1st defendant to pay the amount. Therefore, this Court does not find any infirmities in the judgment of the trial Court decreeing the suit against the defendants except 5 and 6. It is for the 1st defendant to work out as against the defendants. These points are answered accordingly. In the result, the appeal is dismissed. No costs.
ga 01..06..2017 Additional documents:
Ex.32 Copy of Certificate of Registration issued by the Registration of Firms vide No.576 of 1987. Index: Yes/No Internet: Yes Speaking order/non speaking order To The 1st Additional District Judge, Fast Track Court No. 1, Coimbatore.
N.SATHISH KUMAR, J ga Pre-delivery judgment in A.S.No.541 of 2006
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