Bombay High Court
Swiss Bank Corporation vs Jai Hind Oil Mills Company And Others on 15 September, 1989
Equivalent citations: [1989]66COMPCAS241(BOM)
Author: S.P. Kurdukar
Bench: S.P. Kurdukar
JUDGMENT Pendse, J.
1. This is an appeal preferred by original defendant No. 2 against an interlocutory order dated April 28, 1987 passed by the learned single judge granting certain injunction against the defendants in terms of prayer (a) of Notice of Motion No, 728 of 1986. Respondent No. 2 - original defendant No. 1 has filed cross-objections challenging the grant of injunction against defendant No. 1. As the appeal is preferred against the interlocutory order, we wish to make it clear even at the outset that the observations made by us should be considered only as prima facie observations and the conclusions recorded by us should not be treated as final conclusion at time of hearing of the suit. The facts which gave rise to filing of these proceedings are as follows.
2. The plaintiffs (Jai Hind Oil Mills Company) are a partnership firm carrying on business in dealing in the manufacture of various types of edible oils, and is also engaged in the business of importing and exporting diverse goods into and from India. On August 3, 1985, the plaintiffs agreed to purchase diverse quantities of Turkish Chick Peas 1985 crop from defendant No. 4 under the terms and conditions incorporated in three confirmation notices, copies of which are annexed as exhibits A to C to the plaint. The commodity to be purchased was Turkish Chick Peas and the quantity was 1500 metric tons, 300 metric tons and 1000 metric tons respectively. The terms and conditions under the three confirmation notes are identical, save and except that the size and the price were different. The confirmation notes provides that payment was to be made by confirmed, irrevocable, unrestricted, trasferable was to be made by confirmed, irrevocable, unrestricted, transferable letter of credit to be established by the buyer in favour of the seller, on their bankers, for 105 of contract value. In further provides that payment was to be made by the buyer within 120 days from the bill of lading date, interest on seller's account, with terms 5% more or less in quantity and value proportionately acceptable. It further provides that a letter of credit was to be confirmed by any prime corresponding bank in Switzerland with confirmation charges to the account of the buyer. The draft drawn on the confirming bank was acceptable. The other terms and conditions of the confirmation note provide that a letter of credit to be established by the buyer shall reach the seller on or before August 9, 1985, permitting shipment upto September 7, 1985, and further 21 days for nogotiation of documents from the bill of lading date. The goods were to be shipped at the Turkish port and the letter of credit was to be made available for negotiation with the seller's bank. the bank of defendant No. 4 was Swiss Credit Bank, Luzena, Switzerland (hereinafter referred to as "Credit Bank").
3. In accordance with the confirmation note, the plaintiffs applied on August 7, 1985, to defendant No. 1 (Canara Bank) for opening of an irrevocable letter of credit for the total value of United States $10,12,775, which is equivalent to approximately Rs.1,60,00,000. The application recites that the letter of credit was to be established through the Credit Bank. On August 9, 1985, Canara Bank opened the letter of credit in favour of defendant No. 4, and on the same date a telex message was sent by Canara Bank to Swiss Bank Corporation-defendant No. 2 (hereinafter referred to as "Swiss Bank"), which was a negotiating bank or confirming bank. By the telex message, Swiss Bank was informed that the letter of credit is available for the aggregate sum of United States $13, 12, 775 and it is open for the Swiss Bank to accept the draft payable at 120 days from the date of bill of lading provided the following documents are presented by defendant No. 4 or their bankers:
(a) Signed commercial invoices;
(b) Certificates of origin certifying that the goods are of Turkish origin;
(B) Certificate of origin certifying that the goods are of Turkish origin;
(c) Bill of lading showing freight prepaid made out to the order of Canara Bank or to order;
(d) Insurance policy in a negotiable form;
(e) Combined certificate of Phytosanitary and fumigation certificate issued by authorised institution;
(f) Certificate of weight and quality issued by S.G.S. (Merein) or their correspondent in Turkey at the port of loading; and
(g) Packing list in triplicate.
4. The letter of credit also provided for additional conditions and the two relevant conditions are:
(1) Documents must be presented for negotiation within 21 days from the date of shipment; and (2) Latest date for negotiation is September 29, 1985.
5. The shipment was to be made not later than September 7, 1985. It is an accepted position that the date of shipment was subsequently modified as September 30, 1985, while the latest date for negoitation was advanced to October 21, 1985. The letter of credit specifically recited that Swiss Bank should accept the documents provided that all the terms and conditions of the credit are strictly complied with and then to accept the draft and reimburse from the account of Canara Bank available with defendant No. 3, that is Bankers Trust Company, International Division, a banking company carrying on business in the United States of America. It was made very clear that the letter of credit is subject to Uniform Customs and Practice for Documentary Credits (1983 Revision) International Chamber of Commerce Publication No. 400.
6. After Canara Bank opened the letter of credit in favour of defendant No. 4 and the telex message was sent to Swiss Bank, defendant No. 4 obtained a marine insurance policy on September 13, 1985. On September 14, 1985, the letter of credit was amended in respect of S.G.S. Certificate and fumigation and phytosanitary certificate. On September 20, 1985, defendant No. 4 entered into a Charter Party agreement with the owners of the vessel, which was to carry the goods to Bombay. On September 28, 1985 defendant No. 4 secured a phytosanitary certificate and the bills of lading were issued by the shippers on September 30, 1985. The S.G.S. certificate was also issued on September 30, 1985. A certificate was also issued by the shipping agency at Port Merein, Turkey certifying that the vessel is classified 100- A-1 in Lloyds Register of Shipping as required by the terms of letter of credit. On October 2, 1985 commercial invoices were issued by defendant No. 4 and on October 4, 1985, certificates of origin and packing lists were issued.
7. On October 21, 1985, Credit Bank forwarded documents and remittance advice to Swiss Bank, and the Swiss Bank accepted the draft or bill of exchange payable to the Credit Bank 120 days from the date of bill of lading, that is on January 28, 1986. The bill of exchange was drawn by defendant No. 4 and was payable to Credit Bank and was accepted by the Swiss Bank. The commercial as well as the shipping documents were forwarded by the Swiss Bank to Canara Bank on October 23, 1985 and were received by the Foreign Department of Canara Bank on October 25, 1985. It appears that till November 14, 1985, the Foreign Department did not take any action in respect of the documents and only thereafter forwarded it to the Mandvi Branch of Canara Bank for acceptance. On November 15, 1985 Canara Bank despatched a telex message to Swiss Bank informing the letter that the documents are not accepted on account of discrepancy in the S.G.S. certificate as the certificate did not describe the merchandise specifications as per item 3 of the letter of credit. The Swiss Bank rejected the objection raised by Canara Bank and thereupon Canara Bank on November 19, 1985 forwarded the documents to the plaintiffs requesting acceptance of the same. On November 20, 1985, the plaintiffs informed Canara Bank that the documents should be rejected as there are several discrepancies and thereupon Canara Bank sent another telex message to Swiss Bank reiterating that there were discrepancies in the documents. The Swiss bank insisted that the documents were free of any discrepancies and Canara Bank thereupon informed the plaintiffs on November 28, 1985 that the documents were verified and found to be in compliance with the terms of letter of credit and prevailing Uniform Customs and Practice for Documentary Credits.
8. Though as per the bill of lading, the goods were loaded on the ship on September 30, 1985 and in formed circumstances, the goods should have reached Bombay port within about three weeks, the vessel did not arrive till end of December, 1985 and thereupon the plaintiffs became frantic and contacted defendant No. 4, the shippers and other concerned authorities. Defendant No. 4 was advised to extend the date of payment of draft accepted by Swiss Bank as the goods did not arrive in Bombay port. Defendant No. 4, bankers, that is Credit Bank, informed the Swiss Bank that the plaintiffs wish to extend the draft by a further 60 days with interest to opener's account. Swiss Bank informed Canara Bank that there was no objection to do so provided defendant No. 4 consented to the course suggested. It was also suggested by Swiss Bank that an advance could be given by Swiss Bank to defendant No. 4 and in case Canara Bank is willing to pay interest, then the amount would be debited against the Canara Bank only on April 1, 1986. The plaintiffs informed Canara Bank that defendant No. 4 beneficiary is willing to extend the date of payment of the bill of exchange and make it payable 180 days instead of 120 days from the date of bill of lading. Canara Bank, accordingly, informed Swiss Bank on January 24, 1986, and on the same date received a telex message from Swiss Bank accepting the suggestion for extension of date. Canara Bank thereupon informed Swiss Bank that Bankers Trust Company would honour the claim of Swiss Bank on April 1, 1986.
9. The vessel, on which the goods were loaded never reached Bombay port, and the plaintiffs on making inquires learnt that the owners of the ship had withdrawn the vessel from the charter and the ship was lying in international waters somewhere off Port Said in Egypt. The representative of the plaintiffs then proceeded to Holland and through their solicitors inquired from defendant No. 4 as well as the owners of the ship about the late of the transaction. The representative of the plaintiffs on inquires learnt that defendant No. 4 had played a fraud by presenting documents which were not genuine. It was noticed that though the bill of lading evidenced shipment on September 30, 1985, the bill were obviously fraudulent as the loading of the vessel started at Port Merein only on October 1, 1985. The representative of the plaintiffs also noticed that the S.G.S. certificate certifying of having inspected the loading of the cargo on September 30, 1985 was also fraudulent. It was also noticed that the phytosantiary certificate was tampered with so as to alter the date of October, 1985 to September, 1985. The plaintiffs representative Sishnani returned to Bombay in March, 1986 and thereafter informed Canara Bank about the fraud noticed. The plaintiffs apprehended that on April 1, 1986, Swiss Bank would pay the amount of bill of exchange to defendant No. 4 or their bankers, Credit Bank and Swiss Bank in its turn would debit the account of the Canara Bank with defendant No. 3. The plaintiffs apprehended that Canara Bank thereafter would debit the plaintiffs khata and would appropriate the amount of approximately Rs.1,60,000 from the securities available in the hands of Canara Bank. The plaintiffs, realising that without receipt of goods the plaintiffs would be required to pay a huge amount, instituted Suit No. 807 of 1986 on the Original Side of this Court on March 20, 1986 claiming a declaration that Canara Bank acted negligently in the matter relating to opening of letter of credit and examination of documents and, therefore, are not entitled to claim or recover any amount from the plaintiffs. A further declaration was sought that defendant No. 2, Swiss Bank, failed to properly examine the documents and reject them having regard to the discrepancies and, therefore, are not entitled to make any claim for reimbursement. A permanent injunction was sought restraining Canara Bank from, in any manner, making payment to Swiss Bank and Swiss Bank from demanding or recovering or debiting the amount from the account of the Canara Bank with defendant No. 3, the bank in New York. Injunction was also sought against defendant No. 4, the seller, from realising the amount from Swiss Bank.
10. The plaintiffs took out Notice of Motion No. 728 of 1986 seeking interim reliefs pending hearing of the suit and on March 24, 1986 an ad interim injunction was granted by the learned single judge restraining Canara Bank from making payment to Swiss Bank and debiting the Khata of the plaintiffs and the Swiss Bank from relising the amount from Canara Bank. the ad interim relief was granted after notice to Canara Bank and the grant of ad interim relief was communicated to Swiss Bank within a day or two.
11. In answer to the interim relief sought by the plaintiffs, on May 13, 1986, on behalf of Canara Bank, Shri Shenoy, Manager, filed a reply pleading that injunction cannot be granted against Canara Bank as Canara Bank was duty bound to pay the amount to Swiss Bank in accordance with the documents. It was denied that the documents received by Swiss Bank were not in accordance with the terms of the letters of credit. Several other affidavits were filed on behalf of the plaintiffs and on behalf of Canara Bank, but the Swiss Bank appeared on the scene only on December 15, 1986 by filing an affidavit from Shri Tejeena, constituted attorney of Swiss Bank. Swiss Bank, for the first time, came out with a claim that payment under bill of exchange was already made on January 28, 1986, that is 120 days after the date of bill of lading. Swiss Bank claimed that Canara Bank cannot be restrained from paying the amount to Swiss Bank nor can Swiss Bank be restrained from realising the amount from the bank in New York and such an injunction would completely upset the international transaction between bank and bank. Swiss Bank denied that documents were accepted in violation of terms of the letters of credit or that the documents did not conform to the requirement of the letters of credit.
12. The motion came up for hearing before Mr. Justice Bharucha on January 8, 1987 and the learned judge after perusing the affidavit of Shri Tejeena on behalf of Swiss Bank, directed that Swiss Bank should disclose, by filing an affidavit, the manner and mode of payment of defendant No. 4 bankers, that is Credit Bank, on January 28, 1986. In pursuance of the directions, three affidavits were filed of Shri Dolder sworn on January 30, 1987 and of Shri Portman and Shri Ochen sworn on February 9, 1987. The plaintiffs took out Chamber Summons No. 219 of 1987 seeking particulars from Swiss Bank and in answer to the Chamber Summons, Shri Tejeena again filed an affidavit declining to give particulars, but more about it at a later stage. The learned singe judge, after considering the affidavit and arguments advanced at the bar by the impugned order, granted the injunction sought for, holding that the plaintiffs have made out a prima facie case of fraud against defendant No. 4. The learned judge also held that Swiss Bank had knowledge of the fraud at the time of accepting the documents and also at the time of making the payment. The knowledge of the Swiss Bank was held established on the ground that there were discrepancies in the documents tendered by defendant No. 4, and the payment was made by Swiss Bank in spite of the parties agreeing for extension of time to make payment and the fact of alleged payment was withheld from Canara Bank and from all the concerned parties till December 13, 1986. The learned judge also held that the documents were negotiated beyond the stipulated date under the letter of credit and, therefore, the action of Swiss Bank was of grave suspicion. The order of the learned single judge is under challenge at the instance of Swiss Bank.
13. Shri Cooper, learned counsel appearing on behalf of Swiss Bank extensively argued the appeal submitting that the trial judge was in error in granting injunction against Swiss Bank. Learned counsel urged that the letter of credit is an autonomous independent transaction, independent of the underlying transaction, and therefore, must be honoured irrespective of what happens in respect of underlying transactions. The submission was that Canara Bank is liable to honour letter of credit and pay the amount to Swiss Bank irrespective of the fact that the vessel carrying the goods never reached Bombay port and the plaintiffs were left high and dry. It was urged by learned counsel that between Canara Bank and Swiss Bank relationship is of principal to agent and there is no privity whatsoever between the plaintiffs and Swiss Bank and therefore, Swiss Bank was not liable to the plaintiffs. The remedy of the plaintiffs, if any, says learned counsel, is against Canara Bank and, therefore, injunction could not be granted restraining Canara Bank from making payment to Swiss Bank. Learned counsel urged that injunctions are not granted by courts of law in respect of enforcement of rights arising under letters of credit except in cases of fraud and further where such fraud perpetrated by the seller is brought to the attention of the negotiating bank before making payment. Shri Cooper submitted that the claim made by the plaintiffs that defendant No. 4 had tendered a forged document is not established and even otherwise, there is nothing on record to warrant a conclusion that Swiss Bank had knowledge of fraud at the time of acceptance of documents or at the time of making payment. Learned counsel urged that the alleged discrepancies in the documents are not discrepancies at all and, in any event, Canara Bank had accepted the documents and, therefore, condoned the discrepancies.
14. Shri Jethmalani, learned counsel appearing on behalf of the plaintiffs, on the other hand, submitted that the order passed by the learned single judge is an interlocutory order and such order should not be disturbed in appeal unless there are compelling reasons to do so. Shri Jethmalani did not dispute the accuracy of the statement of law propounded by Shri Cooper, but submitted that on the material available on record, it is clear that the documents were negotiated beyond the stipulated date by Swiss Bank and, therefore, the acceptance of the bill of exchange by Swiss Bank and even the subsequent alleged payment is no answer to the claim of the plaintiffs. Shri Jethmalani also urged that defendant No. 4 has not cared to appear at the hearing, both before the learned single judge and in appeal court, and therefore, from the material available, the conclusion is inescapable that defendant No. 4 had tendered forged documents. Shri Jethmalani submitted that the knowledge of that fact can be attributed to Swiss Bank the circumstances, both at the time of acceptance of documents and the conduct of the Swiss Bank subsequent to that date. It was also contended that the alleged payment to the bankers of defendant No. 4 on January 28, 1986, even if accepted, cannot be considered as a payment under the bill of exchange.
15. Shri Cooper referred to a passage on page 369 of Commercial Banking Law by Pennigton and Hudson and to certain passages from Chapter IX dealing with the "Position of Correspondent and Negotiating Bankers-Negotiability and Assignability of letter of Credit" from Davis on "Commercial Letters of Credit". Reference was also made to various articles of Uniform Customs and Practice for Documentary Credits (1983 revision), International Chamber of Commerce Publication No. 400. There cannot be any debate about the accuracy of the statement set out in these authorities. Letters of credit are the most frequent methods of payment for goods in the export trade and have been described as the life blood of international commerce. Where payment under a letter of credit is arranged, four stages can normally be distinguished (a) the exporter and the overseas buyer agree in the contract of sale that payment shall be made under a letter of credit; (b) the overseas buyer instructs the bank at its place of business (known as the issuing bank) to open a letter of credit on the terms specified by the buyer in its instructions to the issuing bank; (c) the issuing bank arranges with the bank at the locality of the exporter to negotiate, accept or pay the exporter's draft upon delivery of the transport documents by the seller; and (d) the advising bank informs the exporter that it will negotiate, accept or pay the draft upon delivery of the transport documents. The advising bank may do so either without its own engagement or it may confirm the credit opened by the issuing bank. The two fundamental principles relating to letters of credit are (i) the autonomy of the credit; and (ii) the doctrine of strict performance. The credit is separate from the independent of the underlying contract of sale or other transaction and the bank which operates the credit is only concerned in ascertaining whether the documents tendered by the seller correspond to those specified in the instructions under the letter of credit. The principle of autonomy of credit is set out in articles 3 and 4 of "Uniform Customs and Practice for Documentary Credits" and the principle is well accepted by the decision of the Supreme Court in United Commercial Bank v. Bank of India [1982] 52 Comp Cas 186 (SC). It is also well settled that the relationship between the issuing bank and the confirming bank is principal to agent and there is no privity between the purchaser or opener of the letter of credit and the confirming bank. Reference can be usefully made in this connection to the decision in Equitable Trust Co. of New York v. Dawson Partners Ltd. [1927] 27 Lloyds LR 49. Lord Chancellor, in his speech, approved this principle and various articles in the Uni-form Policy also set out the same principles. The doctrine of strict compliance in respect of letters of credit is also well accepted. The bank is entitled to reject documents which do not strictly conform to the terms of the credit conveniently referred to as the doctrine of strict compliance. The reason underlying the rule is that the advising bank is a special agent of the issuing bank and the latter is a special agent of the buyer; if such agent who had a limited authority acts outside his authority, the principal is entitled to disown the act of the agent, who cannot recover from him and has to bear the commercial risk of the transaction. The rule was referred to by Justice McNair in Bank Mellin Iran v. Barclays Bank [1951] 2 Lloyds LR 367. Article 15 of Uniform Customs and Practice sets out that bankers must examine all documents with reasonable care to ascertain that they appear on their face to be in accordance with the terms and conditions of the credit. Though one of the maxims on which the letter of credit system is founded is the autonomy of the institution, one exception is admitted to the rule and that is the fraud exception. The issuing bank under the irrevocable credit and the advising bank, if it has added its confirmation, should refuse to honour the absolute undertaking which it has given to the beneficiary to pay, accept or negotiate according to the terms of the credit, if the documents tendered are found to be forged or the beneficiary has committed fraud. The bank is not obliged actively to ascertain whether the alleged fraud can be proved. In cases where the "fraud" exception is pleaded, it is necessary to establish the fraud clearly and unambiguously. But Lord Justice Ackner pointed out in the case in United Trading Corporation S.A. v. Allied Arab Bank Ltd. [1985] 2 Lloyds LR 554, that the requirement of excessive strictness with respect to the proof of fraud would make it impossible for the courts to apply this exception to the principle of autonomy of the credit at all. The learned judge gave the following guide to the degree of proof required for establishing fraud:
"We would except court to require strong corroborative evidence of the allegations, usually in the form of contemporary documents, particularly emanating from the beneficiary...If the court considers that, on the material before it, the only realistic inference to draw is that of fraud, then the complainant would have made out a sufficient case for fraud."
16. We are conscious that injunctions are not readily granted to restrain bankers from carrying out the obligation under an irrevocable letter of credit unless a strong case is made out. We are also conscious that grant of an injunction would interfere with the machinery of irrevocable obligation assumed by Canara Bank and Swiss Bank in the present case, and unless a strong case is made out, the plaintiffs would not be entitled to the injunction sought. Bearing this principle in mind, we proceed to examine whether the learned single judge was right in granting injunction in the present case.
17. On a careful scrutiny of the arguments advanced at the Bar, in our judgment, two questions fall for determination-(a) whether Swiss Bank negotiated the documents in accordance with the terms of letter of credit; and (b) whether the documents tendered were fraudulent and whether Swiss Bank had knowledge of that fraud at the time of acceptance of documents or at the time of payment. The plaintiffs would be entitled to grant of injunction if the finding on either of these questions is in the affirmative. In case it is established that Swiss Bank negotiated the documents in violation of the clear terms of the letters of credit, then the acceptance of bill of exchange by Swiss Bank and the payment thereof would be entirely at the risk of Swiss Bank and Swiss Bank cannot claim reimbursement as a matter of course under the letter of credit. The question as to whether the negotiation of documents by Swiss Bank was in violation of the terms of the letter of credit is required to be considered from two different aspects, but before we do so, it is necessary to set out certain relevant facts.
18. A letter of credit was opened by Canara Bank on August 9, 1985, and intimation of that fact was given to Swiss Bank by telex message. Additional conditions (c) and (f) of this letter of credit read as under:
(c) Documents must be presented for negotiation within 21 days from the date of shipment; and
(f) Latest date for negotiation September 29, 1985.
19. The shipment was to be effected not later than September 7, 1985. It is not in dispute that this letter of credit was amended on September 9, 1985 and the last date of shipment was settled as September 30, 1985 and latest date for negotiation under condition (f) was fixed on October 21, 1985.
20. The question which falls for determination in whether these two condition were strictly complied with in the present case. As regards presentment of document within 21 days from the date of shipment, the advice for awarded by Credit Bank to Swiss Bank indicates that the documents forwarded on October 21, 1985 were (a) draft receipt or bill of exchange, (b) invoice, (c) certificate of origin, (d) insurance certificate, (e) bill of lading, (f) packing list, and (g) phytosanitary certificate, S.G.S. certificate, certificate of shippers and certificate of beneficiary. From this advice and from the affidavit of Shri Jejeena on behalf of Swiss Bank that the documents were presented by Credit Bank on October 21, 1985, at 15.40 hours, it was not seriously disputed that requirement of condition (c) was satisfied. Shri Dolder, Assistant Vice President of Credit Bank, in his affidavit dated February 9, 1987, also stated that the documents were forwarded by messenger on October 21, 1985 and Shri Ochen, Vice President of Swiss Bank, in his affidavit, stated that the documents were received on the same day. The principal challenge is to the satisfaction of the requirement of condition (f) which demands that the latest date for negotiation was October 21, 1985. It was urged on behalf of the plaintiffs that the documents were not negotiated on October 21, 1985, but some time on October 23, 1985. Reliance is placed on the fact that Swiss Bank air- mailed these documents to Canara Bank only on October 23, 1985. Reliance was also placed on the affidavit of Shri Jejeena, sworn on December 15, 1986, where it was claimed in paragraph 7 as follows:
"These defendants immediately replied to the said telex on November 18, 1985, pointing out that, apart from the fact that the 1st defendant's objection was not acceptable considering the long time gap since negotiation as early as October 23rd, 1985, in terms of article 16(d) of the Uniform Customs Publication..."
21. The documents which were air-mailed by Swiss Bank to Canara Bank were objected to by Canara Bank on November 15, 1985, but Swiss Bank rejected the objection on November 18, 1985 by a telex message and that telex message also sets out that the documents were negotiated on October 23, 1985. The relevant sentence is "your objection was not acceptable considering long time lapse since negotiation 23rd October, 1985 referring article 16(d) general rules which require immediate notices". Canara Bank thereupon forwarded the documents to the plaintiffs advising acceptance and immediately the plaintiffs informed Canara Bank on November 20, 1985 to reject the documents. In the letter addressed by the plaintiffs advising rejection, the first ground mentioned is that the documents were presented and negotiated later than 21 days from the date of bill of lading (article 47A of Uniform Customs Practice). It appears that Canara Bank did not take any notice of this objection and in the plaint instituted by the plaintiffs on March 20, 1986 in paragraph 12, the objection on this count was specifically raised. In spite of the specific objection raised by the plaintiffs, Swiss Bank did not care to file an affidavit in reply to the motion till December 15, 1986, that is almost nine months after the date of institution of the plaint. In the affidavit sworn by Jejeena on December 15, 1986, as mentioned hereinabove, it was claimed that negotiation of the documents was on October 23, 1985, which was clearly in conflict with the requirement of condition (f) of the letter of credit. The motion was heard by Justice Bharucha and Swiss Bank was called upon to disclose the mode and manner of payment under the bill of exchange on January 28, 1986. Taking advantage of this direction, Swiss Bank tried to improve upon what was claimed by Jejeena as regards negotiation of documents. In the affidavit filed by Shri Ochen of Swiss Bank on February 9, 1987 it is claimed that the documents were negotiated and the bill of exchange was handed over immediately to Credit Bank. Realising that Swiss Bank was trying to improve its case so as to avoid the admission given by Jejeena, the plaintiffs took out Chamber Summons No. 219 of 1987 seeking particulars and as to when the bill of exchange was accepted. This was necessary because the bill of exchange could have been accepted by Swiss Bank only after being satisfied that the documents tendered on behalf of defendant No.4 were in accordance with the letter of credit. Shri Jejeena filed an affidavit in answer to the claim made in the Chamber Summons and in paragraph 5(b) of this affidavit, it was submitted that Swiss Bank would not disclose the date of acceptance of the bill of exchange as this is not a stage of cross-examination and the demand for particulars is in the nature of a fishing inquiry. It was further claimed that the plaintiffs have taken inspection of the original draft or bill of exchange from which all relevant particulars can be gathered and the demand speaks volumes of the dilatory tactics adopted by the plaintiffs. A perusal of the bill of exchange clearly establishes that the date of acceptance is not stated any where on the bill. It is obvious that Shri Jejeena was not willing to specifically states as to when the documents were accepted and when the documents were negotiated and when the bill of exchange was accepted.
22. Relying on this set of facts, Shri Jethmalani submitted that Swiss Bank contravened the mandatory requirement of the letter of credit by not negotiating the documents before October 21, 1985. Learned counsel submitted that the documents were received by Swiss Bank from the Credit Bank at 15.40 hours on October 21, 1985, and the closing hours of the bank are 16.30 hours and therefore it is impossible that in fifty minutes time, Swiss Bank could have perused and examined the documents and negotiated the same. Learned counsel urged that the expression "negotiation of documents" means acceptance of documents by Swiss Bank to which it was tendered. Shri Cooper, on the other hand, submitted that conditions (c) and (f) should be read together and the expression "negotiation" does not connote acceptance of documents before October 21, 1985. It was contended that, in the first instance, the documents were indeed accepted on October 21, 1985, but in the alternative, in case it is found that the documents were not accepted on October 21, 1985, but on a subsequent date, still the acceptance would not be in violation of condition (f). In view of these rival submissions, it is necessary to ascertain whether the documents were in fact accepted on October 21, 1985. Article 15 of the Uniform Customs and Practice for Documentary Credit issued by the International Chamber of Commerce clearly demands that banks must examine all documents with reasonable care to ascertain that they appear on the face of it to be in accordance with the terms and conditions of the credit. In normal circumstances, examination of several documents to ascertain whether they are in accordance with the letter of credit would require at least a couple of days. In case documents were tendered at 15.40 hours on October 21, 1985, then it is difficult to hold that Swiss Bank was so efficient as to peruse and inspect and satisfy itself about the genuineness of the documents before the closing hours, which was 16.30 hours. The telex message sent by Swiss Bank on November 18, 1985 and the affidavit of Shri Jejeena filed on December 15, 1986 do indicate that the documents were negotiated on October 23, 1985. In addition to this, though Shri Ochen and Shri Dolder filed affidavits on February 9, 1987, save and except stating that the bill of exchange was handed over immediately on tender of documents, it was not positively asserted that the documents, were, in fact negotiated on October 21, 1985. The attitude of Shri Jejeena in not disclosing the date on which the bill of exchange was accepted also speaks volumes. From these circumstances, in our judgment, the conclusion is inescapable that the documents were accepted subsequent to October 21, 1985.
23. Shri Cooper then submitted that even assuming that the document were accepted after October 21, 1985, still that would not lead to the conclusion that the acceptance was contrary to condition (f). Learned counsel urged that the expression "negotiation" has no value and what it really means it that the documents must be presented before October 21, 1985. We are not impressed by this submission. Condition (c) provides that documents must be presented for negotiation within 21 days, while condition (f) provides that the latest date for negotiation is October 21, 1985. It is obvious that documents were required to be presented before October 21, 1985, and were also required to be negotiated before October 21, 1985. A plain reading of the conditions of the letter of credit indicates that the act of presentation and the act of negotiation are two separate and distinct acts and it is not possible to confuse the expression "Presentation" with "negotiation". The documents were required to be presented for negotiation and then the documents were further required to be negotiated. The expression "negotiation", in our judgment, means acceptance of documents by Swiss Bank and it was necessary to carry out that exercise also before October 21, 1985. Shri Cooper relied upon the decision in Forestal Mimosa Ltd. v. Oriental Credit Ltd. [1986] 2 All ER 400, where one of the contention urged before the Court of Appeal was that the documents were not negotiated within 30 days of the bill of lading, and, therefore, the credit ceased to be operative on that count. The provision as to the 30 days contained in the special condition read as under (at page 406):
"The beneficiaries are permitted to negotiate the documents within 30 days from the date of Bill of Lading."
24. The Court of Appeal felt that the word "negotiate" is an unfortunate word in that context, but as it is the plaintiffs who had to "negotiate" the documents and as under the terms of the contract, the only thing that they could do with the documents is to hand them to the confirming bank, that provision must be taken as having been fulfilled if the plaintiffs provide the necessary documents to the confirming bank within 30 days of the bill of lading. The Appeal Court, therefore, felt that the point was devoid of substance. Relying on these observations, Shri Cooper submitted that defendant No. 4, beneficiary was required to present the documents for negotiation within 21 days of the bill of lading and once having discharge that liability, it was not within the powers of defendant No. 4 to compel Swiss Bank to negotiate the documents on the same day. It was urged that defendant No. 4 was the beneficiary of the letter of credit and the advantage cannot be denied to him for something over which the beneficiary has no control. We are not impressed by the submission, because the letter of credit is an agreement between the parties and it is necessary that the terms of the letter are strictly complied with. In case the credit demands that Swiss Bank should negotiate the documents before October 21, 1985, then defendant No. 4 was taking a risk by presenting the documents for negotiation almost by the closing time of the bank on October 21, 1985. In normal circumstances, the bank requires 3 or 4 days to inspect the documents, because the documents cannot be accepted unless it is documents, because the documents cannot be accepted unless it is ensured that the documents are in conformity with the terms of the credit. The mere fact that the bank could not have negotiated the documents on October 21, 1985 is not enough for Swiss Bank to claim that the documents will be negotiated or accepted subsequent to that date and even then the plaintiffs cannot complain that the terms of letters of credit were violated. In our judgment, it was necessary for the Swiss Bank to establish as to when the documents were negotiated and when the bills of exchange were accepted. The affidavit filed on behalf of Swiss Bank does not disclose these facts but, on the other hand, leaves an impression that the relevant information is held back. Shri Cooper produced for our perusal a booklet titled "Documentary Operations" issued by Swiss Bank and the expression "negotiation" has been defined on page 75 of this booklet as "Action by which the advising bank buys the documents. See pages 38/39. Page 38 refers to article 15 and provides that the bank upon receipt of the documents shall check whether the documents agree with the credit condition and the Uniform Credit Practice in all respects. It further provides that the check must be carried out painstakingly and the bank requires a reasonable time for it. In our judgment, the submission urged on behalf of Swiss Bank that the expression "negotiation" should be ignored or in any event should be treated as equivalent to "presentation of documents for negotiation" cannot be accepted. Shri Cooper wondered that in case such a view is taken, serious prejudice is likely to be caused to the beneficiary of the credit and that too for no fault of his. The submissions is of no merit, because in case Swiss Bank is so careful as to protest the interest of the beneficiary as well as to protect its own interest in ensuring that the documents presented were in accordance with letters of credit, then the easiest course was to accept the documents "under reserve". It is a common practice amongst banks to accept the documents "under reserve" when the bank has either some doubt about the accuracy of the documents of requires more time to peruse the same. On presentation of documents for negotiation, the bank can either accept the documents or reject the same or in a given case could require some more documents before accepting the same. In such case, it is not only permissible but it is the practice of the bank to accept the documents under reserve. The expression "payment under reserve" occurs in Article 16 of "Uniform Customs and Practice" and this expression was considered by the Court of Appeal in Banque de I'Indochine et de Suez SA v. J. J. Rayner (Mincing Lane) Ltd. 1983 QB 711 and it was held that the payment to be made "under reserve" means that the beneficiary would be bound to repay the money on demand if the issuing bank should reject the documents, either on its own initiative, or on the buyer's instructions. In our judgment, nothing prevented Swiss Bank from accepting the documents "under reserve" on October 21, 1985 in case Swiss Bank found that the documents could not be negotiated on that date, the beneficiary having tendered it very late and the time of inspect the same was not enough. In our judgment, once it is found that negotiation was subsequent to October 21, 1985, then negotiation of documents and acceptance of the bill of exchange by Swiss Bank was entirely at the risk of Swiss Bank and the plaintiffs are entitled to claim that Swiss Bank is not entitled to be reimbursed.
25. It was also contended on behalf of the plaintiffs that the documents were accepted by Swiss Bank contrary to the terms of letters of credit inasmuch as there were several discrepancies in the documents tendered. Though the plaint refers to a large number of discrepancies, Shri Jethmalani, in his submission, restricted it only to three discrepancies. The first discrepancy referred to by learned counsel is the discrepancy about commercial invoice and indent. The indent refers to the commodity as "Turkish Chick Peas - 1985 Crop", while the commercial invoice refers to the commodity as "Turkish Chick Peas" and the words "Crop 1985" are missing. Shri Jethmalani submitted that condition No. 1 of the letter of credit prescribes that a commercial invoice must certify that the goods shipped are as per the indent and a mere perusal of the invoice would have satisfied Swiss Bank that it was not in accordance with the indent and that therefore condition No. 1 of the letter of credit was not satisfied. In our judgment, this discrepancy does not seem to be the very material as S.G.S. certificate, which accompanies the commercial invoice clearly refers to the commodity as "Chick Peas Crop 1985". It must be remembered that each and every small discrepancy in describing the commodity would not lead to the conclusion that the document tendered was not in accordance with the letter of credit. The second discrepancy pointed out by Shri Jethmalani is in respect of the phytosanitary certificate. Condition (5) of the letter of credit recites that the beneficiary must tender a combined phytosanitary & fumigation certificate issued by an authorised institution or competent authority. Learned counsel referred to the certificate and submitted that a perusal would establish that though the certificate is issued by the Ministry of Agricultural, Forest and Rural Affairs, it recites that samples were thoroughly examined by a firm. It was contended that this certificate was not valid because it is not known which was the firm and whether it has any authority. According to learned counsel, this discrepancy, should have been noticed by Swiss Bank and the documents should have been rejected. We are not inclined to accept the submission. It must be remembered that Swiss Bank was not required to investigate about the validity of the certificate and it is indeed impossible for Swiss Bank to go round and find out whether the certificate was valid or otherwise. The Swiss Bank was required to ensure that the documents presented were in accordance with the requirements of the letter of credit and it would not be fair to expect the Swiss Bank, to investigate as to whether the contents of the certificate are correct or otherwise. The third discrepancy claimed by Shri Jethmalani was that though condition (6) of the letter of credit demanded that the goods shipped are as per the indent, Swiss Bank failed to notice that the commercial invoice did not satisfy that the goods were of "Spainola quality". Learned counsel submitted that on September 10, 1985, the plaintiffs requested Canara Bank to carry out the amendments in Clause (6) of the letter of credit by adding the words "S.G.S." (Turkey) and also to certify that the goods are of Spainola quality. Learned counsel submitted that the invoice did not tally with clause (6) as amended. Shri Cooper rightly points out that though the plaintiffs have addressed Canara Bank to effect the amendment, the amendment was in fact not carried out as the amendment could not be carried out without the consent of the beneficiary and there is nothing on record to indicate that such consent was ever given. Shri Jethmalani submitted that in the affidavit filed by Shri Shenoy on November 28, 1986, it was stated in paragraph 5 that the amendment as requested by the plaintiffs on September 10, 1985, was carried out. We are unable to place any reliance on this averment, because the amendment could not have been carried out but for the consent of the beneficiary. It is also required to be stated that in the objections raised by Canara Bank to the acceptance of the documents forwarded by Swiss Bank, there is not even a whisper of complaint on the ground that the invoice did not set out the quality of the goods as required by amended clause (6). Indeed, no reference whatsoever was made to the amendment sought on September 10, 1985. In these circumstances, it is impossible to accept the submission of the Shri Jethmalani that the documents tendered did not conform to the requirements of the letter of credit as there were discrepancies and therefore the acceptance by Swiss Bank did not confer any rights to realise the amount from Canara Bank in accordance with the letters of credit.
26. As we have come to the conclusion that the documents were negotiated and the bill of exchange was accepted in violation of condition (f) of the letter of credit, the result is that Swiss Bank cannot claim reimbursement from Canara Bank and, consequently, Canara Bank cannot debit the account of the negotiation. In view of this conclusion, it is really not necessary to investigation the second question as to whether the documents tendered on behalf of defendant No. 4 were fraudulent and if so, whether Swiss Bank had knowledge of that fact. But we propose to briefly refer to this aspect also as the question was argued at length before us.
27. Shri Jethmalani submitted that it was necessary under the letter of credit that shipment should be effected before September 30, 1985, and the bill of lading tendered on behalf of defendant No. 4 claims that loading was done on the vessel on September 30, 1985. Learned counsel urged that the partner of the plaintiffs on inquires found that the loading could not have been effected on September 30, 1985, as the loading of vessel started only on October 1, 1985. In support of the submission, reliance is placed on a document dated December 27, 1985, issued by Port Authorities at Mersin, which inter alia states that the port record of M/s. Butchman - the vessel shows that the vessel arrived in the port on September 27, 1985, and was berthed on September 28, 1985, while the loading started only on October 1 1985, the vessel sailed on October 16, 1985. Relying on this document, it was contended by Shri Jethmalani that if the loading started on October 1, 1985, then the bill of lading issued on September 30, 1985, was clearly fraudulent and was probably issued only to claim that the loading was done as required by the letter of credit on September 30, 1985. Reference was also made to the charter party agreement between the owners of the ship and defendant No. 4, the charterers. The charter party agreement sets out that the owners were Sider Line of Italy, while the ship brokers were Dazners & Van Deel Chartering Hel De. Now, certain conditions are attached to this Charter Party agreement, and clause 38 provides "Owners agreed for issuing predated bills of lading 30th September, 1985, unless otherwise required for which charterers to inform owners in due time". Learned counsel urged that this clause unmistakably indicates that the owners were prepared to issue predated bills of lading and indeed issued it on September 30, 1985, even when the loading had no commenced. Apart from the bill of lading, learned counsel contended that the S.G.S. certificate was issued on September 30, 1985, on the basis of inspection of goods loaded on the vessel. The certificate could not have been issued because inspection could not have been taken on that date as the loading commenced only on October 1, 1985. Shri Jethmalani also submitted that the phytosanitary certificate issued on September 28, 1985, indicates that the original date was October 28, 1985, and that was altered so as to provide that the certificate was issued before September 30, 1985. Learned counsel invited our attention to the copy of the certificate received by Canara Bank and that does indicate that it was originally issued in October, 1985. The certificate which was produced before Swiss Bank corrected that date as September 28, 1985. Shri Jethmalani submits that these documents clearly indicate that defendant No. 4 was guilty of fraud and tried to secure indicate that defendant No. 4 was guilty of fraud and tried to secure advantage of the letter of credit by his fraudulent actions. Shri Copper controverted the submission by urging that there must be clear and strong evidence of fraud and that the court should not draw the conclusion merely because there are suspicious circumstances. There cannot be any debate about the claim made by Shri Cooper, but it cannot be overlooked that defendant No. 4 has chosen not to appear to these proceedings and delay any of the allegations. It is true that defendant No. 4 has already secured the advantage under the letter of credit and it was not necessary for him to appear in the proceedings, but then it also equally true that the learned singe judge was right in the absence of any challenge to the claim made by the plaintiffs to prima facie hold that the documents tendered were forged.
28. Even though it is held that the documents tendered on behalf of defendant No. 4 were fraudulent, that would not necessarily lead to the conclusion that Swiss Bank was not entitled to act on these documents and accept the bill of exchange unless it is further established that Swiss Bank had knowledge that defendant No. 4 was guilty of fraud and that the documents tendered were fraudulent. Shri Jethmalani submitted that not only did Swiss Bank have knowledge of the fraudulent nature of the documents, but it was also a party to the fraud committed by defendant No. 4. Shri Jethmalani relied upon certain circumstances at the time of presentation of the documents for negotiation and also the subsequent conduct of Swiss Bank in support of his submission. It was contended that the phytosanitary certificate was materially alterned by changing the date and that fact could not have escaped that notice of Swiss Bank. It was also contended that the bank could not have perused the documents within fifty minutes and satisfied itself about the accuracy of the documents and also that the documents were in conformity with the terms of the credit, and in case the bank claims to have done so, then it is not impossible to hold that the bank was also hand in glove with defendant No. 4. Shri Jethmalani highlighted the subsequent conduct of Swiss Bank by pointing out that though the payment under the bill of exchange was to be made after 120 days from the date of the bill of lading and though the parties had sent telex messages advising extension of that date, still Swiss Bank paid the amount to defendant No. 4 through their bankers on January 28, 1986. Shri Jethmalani wondered what prompted Swiss Bank to honour the bill on January 28, 1986, when all the parties concerned with the bill had advised that payment should be made after 180 days from the date of bill of lading. Learned counsel also urged that the fact that payment was made on January 28, 1986, was not disclosed by Swiss Bank till filing of the affidavit by Shri Jejeena on December 15, 1985 and suppressing this fact even from Canara Bank for more than nine months from the date of institution of the suit is a tell-tale circumstances to indicate that everything was not above board with Swiss Bank. One more circumstances was pointed out and that is that even though Swiss Bank had agreed that Canara Bank would not be liable to be reimbursed till April 1, 1986, an attempt was made to secure the payment of a larger amount towards reimbursement from American Bank. defendant No. 3, before April 1, 1986, after Swiss Bank became aware that this court had granted an ad interim injunction restraining Swiss Bank from receiving the amount. This conduct of Swiss Bank is clear from receiving the amount. This conduct of Swiss Bank is clear from the affidavit filed by Shri Shenoy, Manager of Canara Bank, complaining against the attitude of Swiss Bank. Relying on this circumstances, Shri Jethmalani submitted that the action of Swiss Bank at the time of acceptance of the documents and even subsequent to that should lead to the conclusion that Swiss Bank had knowledge that the documents tendered were fraudulent. We do find that the subsequent conduct of Swiss Bank requires n explanation, but from its conduct itself, we are not prepared to hold that Swiss Bank had knowledge that the documents tendered were fraududent on the date or presentation of the documents. We are also unable to hold that Swiss Bank had knowledge of the fraudulent nature of the documents on January 28, 1986, the date on which Swiss Bank has alleged to have made payment to the Credit Bank in terms of the bill of exchange. We cannot overlook the fact that even the plaintiffs did not realise the fraudulent nature of the documents till February or March, 1986 when the partner of the plaintiffs secured the certificate from the Port Authorities of Mersin. It is easy to claim with reference to sub-sequent events that Swiss Bank should have noticed the fraudulent nature of the documents, but in our judgment whether Swiss Bank did notice or otherwise has to be determined with reference to the circumstances prevailing on the date of presentation of the documents and on the date of payment under the bill of exchange, and it would be unfair to draw any conclusion by referring to the subsequent events. In these circumstances, we are unable to accept the submission of Shri Jethmalani that Swiss Bank had knowledge of the fraudulent nature of the documents at the time of presentation of the documents on October 21, 1985, or on the date of payment, that in January 28, 1986.
29. Shri Cooper then submitted that it is not permissible to grant injunction either against Swiss Bank or Canara Bank as payment has already been made by Swiss Bank in favour of Credit Bank on January 28, 1986. Reference was made to the decision in the case of United Trading Corporation v. Allied Arab Bank Ltd. [1985] 2 Lloyds LR 554 to claim that injunction is not permissible after the payment is made in accordance withe the terms of the letter of credit. Shri Jethmalani, on the other hand, submitted that even assuming that payment has been made by Swiss Bank to Credit Bank on January 28, 1986, it must be held that such payment was not under the bill of exchange but under some other arrangement between Swiss Bank and the Credit Bank. Learned counsel urged that there was no compulsion on Swiss Bank to make payment on January 28, 1986, because defendant No. 4 who was the beneficiary under the letter of credit had agreed to extend the date of payment and that fact was brought to the attention of Swiss Bank. Copies of telex messages on record to indicate that the plaintiffs, defendant No. 4 and Canara Bank had informed Swiss Bank about extension of date of payment under the bill of exchange. Shri Jethmalani submitted that with this background, it is necessary to ascertain whether the payment was made under the bill of exchange or under some other arrangement. Learned counsel submitted that it is the usual practice amongst bankers to make payment under the letter of credit by giving advance to the seller and in the present case the court must proceed to hold that the payment was not made under the bill of exchange. We are not inclined to investigate this aspect in greater detail in this appeal against the interlocutory order. The fact of payment of January 28, 1986, as the record stands, cannot be debated, but as mentioned hereinabove, even if Swiss Bank has made payment, that would not enable Swiss Bank to seek reimbursement from Canara Bank because the documents were negotiated beyond the date prescribed under the letter of credit, and consequently all actions of Swiss Bank on the basis of negotiation of those documents sare not binding on Canara Bank, and consequently on the plaintiffs. In our judgments, the payment made by Swiss Bank is at its own risk and the plaintiffs are entitled to the injunction.
30. Canara Bank, defendant No. 1 has filed cross-objections to challenge the grant of injunction restraining Canara Bank from reimbursing Swiss Bank. Shri Chagla, learned counsel appearing on behalf of Canara Bank, submitted that in case injunction is granted against Swiss Bank, the Canara Bank would not reimburse Swiss Bank and that might undermine the reputation of Canara Bank in banking circles. It was submitted that injunction is not to be granted except in exceptional cases and the grant of injunction would undermine Canara Bank's greater asset, viz., its reputation for financial and contractual probity. We do not wish to express any opinion on this submission save and except pointing out that Canara Bank, which thinks so highly of its reputation, had no explanation as to why the documents received from Swiss Bank on September 20, 1985, were not attended to by its foreign department till November 14, 1985. Shri Chagla very fairly accepted that it was incumbent on Canara Bank to attend to these documents immediately on their receipt and when repeatedly asked as to why Canara Bank slept over the documents nd thereby enabled Swiss Bank to urge that the documents even assuming they suffered from discrepancies were rectified by the inaction of Canara Bank, Shri Chagl has no explanation to offer.
31. Shri Jethmalani raised a preliminary objection to the maintainability of the cross-objections, and the objects is two-fold. Learned counsel urged that Canara Bank had filed an independent appeal being Appeal Lodging No. 813 of 1987 against the impugned order, but that appeal was presented beyond the period of limitation prescribed under the Original Side Rules. Notice of Motion No. 1758 of 1987 was taken out by Canara Bank for condonation of delay and that motion was dismissed by Action Chief Justice Desai and Justice Aggarwal by a speaking order dated August 3, 1987. The Division Bench felt that Canara Bank did not make out sufficient ground for condonation of delay. Shri Jethmalani urges that in view of the refusal to condone the delay in filing the appeal, Canara Bank cannot refusal to condone the delay in filing the appeal, Canara Bank present cross-objection under Order XXXXI, rule 22 of Code of Civil Procedure. The submission cannot be accepted in view of the dictum laid down by the Division Bench of this court in the judgment Mohamed Comer Mohamed Moorullah Sahib v, S.M. Moorudin 54 Bom LR 28. Chief Justice Chagla, speaking for the Bench, held that the cross-objections are not barred, notwithstanding dismissal of the appeal if that appeal was not dismissed on merits, although the subject- matter of the appeal and cross-objections might be identical. The Division Bench held that the order of the trial court merges when the court of appeal judicially determines the appeal pending before it, but no merger takes place when the court of appeal does not judicially determine the appeal but dismisses it on any preliminary ground like limitation or maintainability. The Division Bench referred to the decision of the Privy Council in Abdul Majid v. Jawahir Lal 16 Bom LR 395 in support of the conclusion. We are in respectful agreement with the view of the Division Bench and we hold that the refusal to condone the delay in filing appeal by Canara Bank would not disentitle Canara Bank from presenting cross- objections in the present appeal.
32. Shri Jethmalani then submitted that in any event cross-objections are not maintainable because cross-objections can be filed against appellant and not against co-respondent. This submission is correct and deserves acceptance. The Supreme Court considered this question s there was divergence of opinion between different High Court and in the decision in Panna Lal v. State of Bombay, , the Supreme Court held that Order XXXXI, rule 22 of Code of Civil Procedure permits, as a general rule, the respondents to prefer an objection directed only against the appellant and it is only in exceptional cases, such as where the relief sought against the appellant in such an objection is intermixed with the relief granted to the other respondents that the cross-objections can be directed against other respondents. In view of the dictum laid down by the Supreme Court, the cross-objections filed by Canara Bank against the co-respondents are not maintainable.
33. Shri Chagla then submitted that even if the cross-objections are not maintainable, it is open for this court to exercise powers under Order XXXXI, rule 33 of the Code of Civil Procedure. Order XXXXI, rule 33 prescribed that the appellant court shall have power to pass any decree and make any order, notwithstanding that the appeal is as to the part only of a decree and the power can be exercised in favour of any of the respondents although such respondents have not filed any appeal or objection. Shri Chagla submitted that the power should be exercised under this rule as the order of injunction granted by the trial court is so intermixed that setting aside the order against Swiss Bank while retaining the order of injunction against Canara Bank would lead to absurd results. It was contended that Canara Bank has been restrained from reimbursing Swiss Bank and Swiss Bank has been restrained from seeking payment from Canara Bank, and in these circumstances, in case Swiss Bank succeeds in the appeal, then relief must be granted to Canara Bank also under Order XXXXI, rule 33 of the Code of Civil Procedure. Reference was made in this connection to the decision of the Supreme Court in Giasi Ram and Ors. v. Ramjilal and Ors., , Loksingh v. Smt. Deokabai, and Choudhary Sahu Dy Irs. v. State of Bihar, . The Supreme Court observed that the object of the rule is to avoid contradictory and inconsistent decisions on the same question and on the same set of facts, but as the power under the rule is in derogation of the general principle, it must be exercised with care and caution. The Supreme Court further observed that, ordinarily, the power conferred by the rule will be confined to those cases where, as a result of interference in favour of the appellant, interference with the decree of the lower court is rendered necessary in order to adjust the rights of the parties according to justice, equity and good conscience. We would have certainly exercised powers under Order XXXXI, rule 33 of the Code in favour of Canara Bank on the facts and circumstances of present case, in case we had come to the conclusion that the injunction granted against Swiss Bank wa not justified. As we have come to the conclusion that the injunction granted against Swiss Bank was perfectly just and proper on the facts and circumstances of the case, the question of exercise of powers under Order XXXXI, rule 33 of the Code does not arise.
34. In the result, both the appeal and the cross-objections are dismissed with costs.
35. Shri Cooper orally applies for leave to appeal to the Supreme Court Court. Leave refused.