Delhi District Court
M/S Jagan Lamps Ltd vs Union Bank Of India on 4 October, 2007
(1)
IN THE COURT OF PAWAN KUMAR JAIN
ADDITIONAL DISTRICT JUDGE, FAST TRACK COURT, DELHI
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Old Suit No : 2214/01
New Suit No : 106/06
Date of institution : 17.10.01
Date of transfer : 15.11.06
Order reserved on : 27.09.07
Date of order : 04.10.2007
IN THE MATTER :
M/s JAGAN LAMPS LTD.
(Formerly known as Jagan Li-tech Lamps Ltd.)
having its Head Office at :
14, DDA TRANSPORT CENTRE
ROHTAK ROAD,
PUNJABI BAGH,
NEW DELHI. ... PLAINTIFF
Versus
1. UNION BANK OF INDIA
Head Office
UNION BANK BHAWAN
239, VIDHAN BAHVAN MARG,
NARIMAN POINT
MUMBAI-400021.
2. UNION BANK OF INDIA
Overseas Branch at :
26-28D, CONNAUGHT PLACE,
NEW DELHI. .... DEFENDANTS
(2)
SUIT FOR DECLARATION AND MANDATORY
INJUNCTION & COUNTER-CLAIM OF THE DEFENDANT
FOR THE RECOVERY OF RS.1,85,617.61.
Present : Sh. Lalit K. Gupta, Ld. Counsel for plaintiff.
Sh. Aditya Madan, Ld. Counsel for defendants.
*****************
JUDGMENT
1. This is suit for the recovery of Rs. 9,84,315/- in the form of declaration and mandatory injunction. Defendants also filed a counter claim for the recovery of Rs. 1,85,617.61
2. The epitome of the plaint is that plaintiff is a company registered under the Companies Act 1956 while defendant No. 1 is the Nationalized Bank and defendant No. 2 is the Overseas Branch of defendant no. 1. Plaintiff had filed the present suit through its Managing Director Sh. S.P. Aggarwal who was (3) authorized by the Board of Directors to sign, verify and institute the plaint.
(i) It is averred that plaintiff company was maintaining 5 different accounts with defendant No.2, detail of which is mentioned in Para 8 of the plaint. Plaintiff is a 100% Export Oriented Unit.
(ii) It is averred that plaintiff company had received a cheque bearing no. 09432 dated 23.07.98 drawn on First Fidelity Bank N.A. South Jersey, Burlington, New Jersey for US $ 21,100 in normal course of its business from its foreign importer, which plaintiff had deposited with defendant no. 2 on 25.09.98 for collection of the payment.
(iii) It is averred that defendant bank had given the credit of the said amount on 15.10.98 after realization of the cheque and also issued a Certificate of Foreign Inward Remittance Certificate (in short FIRC) on 24.10.98 confirming: "we confirm that we have obtained reimbursement in an approved manner ". It is alleged that the FIRC is final and irrevocable. (4)
(iv) It is alleged that on receipt of FIRC, plaintiff had exported Halogen Lamps to the importer vide GR. No. AR758183 dated 09.11.98 and the shipping documents were also sent to the buyer through defendant no. 2.
(v) It is alleged that after 60 days from the date of deposit of the said cheque, on 14.12.98 defendant no. 2 had debited the amount of said cheque i.e. US $ 21,100 without informing the plaintiff.
(vi) In due course of its business, plaintiff had received another cheque of US $ 52,500 from the same buyer, which plaintiff had deposited with defendant no. 2 on 09.11.98. After adjusting the amount of US $ 21,100, defendant had issued the credit advice for the balance amount of US $ 31,400/- on 14.12.98 . Plaintiff had sent the protest letter to the bank on 16.12.98, but bank had not responded, consequently plaintiff had sent another letter dated 21.12.98.
(vii) It is alleged that on 28.01.99 defendant bank first time (5) informed the plaintiff that the cheque for US $ 21,100 was returned with the remark "unauthorized draft".
(viii) It is alleged that in pursuance of the discussion held on 06.02.1999, matter was settled with the bank, which was confirmed vide letter dated 08.04.1999 wherein plaintiff agreed to get adjust the amount of US $ 21100/- from the amount of US $ 52500/-. Thus, is is alleged that bank was not justified to raise the matter again after a period of 18 months by debiting the said amount again on 16.01.2001, which was communicated by the defendant through letter dated 17.01.2001 and further asked to pay the amount of Rs.1,42,739.71.
(ix) It is alleged that vide legal notice dated 25.04.2001, it was revealed that bank had debited Rs.9,84,315/- (equivalent to US $ 21100/-) and created the overdraft to the sum of Rs.9,78,395.61 in the account of the plaintiff and Rs.8,35,656/- was debited from other three accounts, detail of which is mentioned in para 29 of the plaint and further demanded the balance amount of Rs.1,42,739.61. Plaintiff refuted the said allegations by sending the reply to the said legal notice but bank (6) refused to give the credit of Rs.9,84,315/-.
(x) With these averments, plaintiff filed the present suit for seeking declaration that the action of defendant of debiting the account of plaintiff and demand of Rs.1,42,739.61 are illegal and arbitrary and defendant be further directed to give the credit of said amount to the plaintiff.
3. Defendants controverted the claim of plaintiff by filing their joint written statement and they also claimed Rs.1,42,739.61 along with interest by way of counter-claim.
(i) In their written statement, defendants took the preliminary objections inter alia that the suit is bad for non- joinder of necessary parties as plaintiff had not impleaded either the buyer or RBI as defendant. It is further stated that the suit is not properly valued for the purpose of court fees and jurisdiction and plaint is not signed and verified by the duly authorized person.
(ii) On merits, it is stated that there was no privity of (7) contract with the plaintiff and the credit of US $ 21100/- was given in the approved manner, when bank had received the payment against the cheque in issue but later on when it was found that the said cheque was unathorized and the foreign USA bank had debited the account of defendant against the said cheque, defendant also debited the amount of said cheque in the account of plaintiff. It is submitted that bank cannot be liable to suffer for the said unauthorized cheque as bank was merely a collecting agent and acted bona fide, in good faith and in ordinary course of its business. It is further stated that the payment was released to the plaintiff under the heading of 'UNDER RESERVE'.
(iii) It is alleged that when the cheque had returned with the remarks of unauthorized draft, it was the duty of the plaintiff to return the amount to the bank but plaintiff failed to do the same, thus bank was justified to debit the said amount from the accounts of the plaintiff. It is further stated that under the US law, bank could debit the account in case of unauthorized instrument within three years from the date of payment. It is further recited that FIRC is an evidence that fund had been (8) received and had no other value and did not prevent the bank to recover the amount from the plaintiff.
(iv) It is alleged that the another cheque of US $ 52,500/-
was also returned unpaid with the remarks "REFER TO DRAWER", consequently the amount of US $ 21,100/-, which was deducted from the said amount also remained due from the plaintiff. Since plaintiff failed to refund the amount of US $ 21,100/- as per declaration made in GR form, bank had no option except to recover the said amount by debiting the accounts of the plaintiff maintained with the defendant bank. It is stated that the letter dated 08.04.1999 is not binding upon the defendant as bank was not party to the same as bank had not signed the same.
(v) It is alleged that after making the debit entry in all the accounts of the plaintiff, a sum of Rs.1,42,739.61 remained outstanding. Bank also claimed interest on the said amount @ 15.75% per annum with quarterly rest. In total, bank claimed Rs.1,85,617.61 in the counter-claim.
4. Plaintiff filed the written statement to the counter- (9)
claim wherein plaintiff denied the defendants' version and stated that bank had no right to debit the amount of Rs.9,84,315/- and demand of bank is illegal and arbitrary. It is stated that once the bank had issued the FIRC, bank had no right to debit the said amount as the FIRC is final & irrevocable.
5. Neither the plaintiff nor the defendant had filed the replication to the written of the plaint and counter-claim.
6. Vide order dated 08.07.04, following issues were framed :
(1) Whether the suit is bad for non joinder of
necessary parties in view of preliminary
objection No. 2 of the written statement ?
OPD
(2) Whether the plaint has not been properly
valued ? OPD
(3) Whether the plaint has been properly signed,
stamped and verified ? OPP
(4) Whether the plaintiff is entitled to a decree
of declaration as prayed for ?OPP
(5) Whether the plaintiff is entitled to a decree
of mandatory injunction as per prayer-B of
the plaint ?
(6) Whether the defendant is entitled to a
(10)
counter claim of Rs.1,43,420.61 paise along
with the interest as prayed for ?
(7) Relief.
7. To prove its case, plaintiff has examined Sh. S.P. Aggarwal as PW1. In counter defendants have examined Sh. Anil Malhotra, Asstt. Manager as DW1.
8. I have heard Ld. Counsel for the plaintiff, Ld. Counsel for the defendants at length, perused the record carefully and gave my thoughtful consideration to their contention. My issue- wise findings are as under :
9. ISSUE No. 1
Onus to prove the said issue was upon the defendants.
(i) Ld. Counsel for the defendants contended that the present suit is bad for non joinder of necessary parties as plaintiff had not impleaded the importer and RBI as defendants. It is urged that since the cheque in dispute was issued by the importer, thus he was necessary party to the present suit and (11) similarly RBI is also necessary party as Foreign Exchange is involved in the suit. Ld. Counsel for the plaintiff refuted the said contention by arguing that plaintiff had not claimed any relief either against the importer or against RBI, thus they are not necessary party in the present suit.
(ii) Admittedly, plaintiff had not claimed any relief either against the importer who had issued the cheque in dispute or against the RBI. In the present suit, plaintiff had claimed relief only against the defendants who as per the plaintiff's version, had illegally and arbitrarily made a debit entry to the sum of Rs.9,84,315/-. According to the plaintiff's version, defendants had made the said entry illegally, arbitrarily and unauthorizedly, thus prayed that defendants be directed to make reverse entry by giving the credit of the said amount. The dispute arose between the parties on the action of the defendant no.2, when defendant no.2 had made the impugned debit entry in the accounts of plaintiff. Thus, merely the fact that importer had issued a cheque and foreign exchange is involved, does not mean that the (12) importer and RBI are the necessary party in the present suit.
(iii) Considering the above discussion, I decide this issue against the defendants and in favour of plaintiff.
10. ISSUE No.2 Onus to prove the said issue was upon the defendants. But Ld. Counsel for the defendants has not pressed for the said issue as during the course of arguments, it was revealed that plaintiff had already paid the proper court fees. Accordingly, the said issue is decided in favour of the plaintiff and against the defendants.
11 ISSUE No.3
Onus to prove the said issue was upon the plaintiff.
(i) Ld. Counsel for the defendants contended that plaintiff failed to establish that the present suit was filed by the duly authorized person. Ld. Counsel for the plaintiff opposed the said contention by arguing that the plaintiff had filed the extract of resolution passed by the Board of Directors authorizing Sh. S.P. (13) Aggarwal to sign, verify and to institute the plaint.
(ii) PW1 in his testimony, categorically deposed that he was authorized by the Board of Directors vide resolution dated 21.08.2001, which is Ex.PW1/1 to sign, verify and to institute the suit. From his testimony, it reveals that PW1 also produced the original minutes books during his deposition. It emerges from Ex.PW1/1 that Board of Directors of the plaintiff company had authorized its Managing Director Sh. S.P. Aggarwal i.e PW1 to sign, verify the pleadings and to institute the suit. During the trial, defendants failed to produce any contrary evidence. In the absence of any contrary evidence on record, I do not find any reason to disbelieve the evidence led by the plaintiff.
(iii) Considering the above discussion, I am of the opinion that the present suit was signed, verified and instituted by duly authorized person. Accordingly, I decide this issue in favour of the plaintiff and against the defendants.
12. ISSUE No. 4 to 6
Since all the issues are connected to each other, hence (14) are taken together.
Onus to prove the first two issues was upon the plaintiff while it was upon the defendants in case of last issue.
(i) Ld. Counsel for the defendants has controverted the claim of plaintiff on four grounds. Firstly, that under the US law, bank had power to debit the account within a period of three years if the credit was given on the unauthorized instrument. Secondly, that FIRC did not prevent the bank to recover the amount, which bank had released on the unauthorized instrument as FIRC only proves that bank had received the payment. Thirdly, that plaintiff itself had authorized the bank to deduct US $ 21100/- from its account vide letter dated 08.04.1999. Fourthly, bank had a lien to deduct the said amount from the accounts maintained by the plaintiff with the defendants. Since the cheque for the said amount had been returned with the remarks of "unauthorized draft", bank was justified and within its power to deduct the same from the account of plaintiff.
(15)
(ii) Ld. Counsel for the plaintiff confuted the said contentions, by arguing sagaciously that once the bank had issued the FIRC, it proves that bank had received the payment against the cheque in dispute. It is further contended that plaintiff had sent the shipping documents through the defendant bank, who delivered the same to the importer. It is urged that if the cheque was unauthorized draft, bank should have informed the plaintiff before sending the consignment to the importer but bank failed to do so and plaintiff had acted on the representation of the bank, who confirmed in FIRC that bank had received the payment, thus now the bank cannot take the plea that it is not bound by the FIRC or the deposited cheque was unauthorized draft. It is further argued that bank failed to produce any evidence to establish that bank had power to deduct the said amount even under the US law after releasing the payment.
13. Ld. Counsel for the defendants vehemently contended that bank had a right to recover the said amount by debiting the account of the plaintiff within a period of thee years from the date of payment under the US law. Similar plea was raised by (16) the defendants in their written statement. In his cross examination DW1 admitted that the bank had not filed any provision of law of the US under which the bank was empowered to deduct the amount by doing debit entry in the accounts of plaintiff. Though DW1 deposed in his cross examination that bank was following the procedure of the USA bank, where defendant was maintaining an account yet defendant bank failed to produce any such procedure to establish that under that procedure bank was competent to deduct the amount by debiting the entry in the account of the plaintiff. As defendants were relying upon the US law to justify their action, it was incumbent upon the defendants to produce such provision of law but they failed to produce the same without any just and reasonable explanation. In these circumstances, adverse inference will be drawn against the defendants that no such provision is in existence. Considering the above discussion, I am of the opinion that the said contention is without any substance.
14. Ld. Counsel for the defendants energetically contended that plaintiff had itself authorized the bank to deduct the amount in dispute from its account vide letter dated 08.04.99. Ld. (17) Counsel has strongly relied upon the said letter to justify the action of the bank.
(i) The said contention per se is inconsistent with the plea taken by the defendants in their written statement as in para 26 of the written statement it is emphatically recited that defendant was not a party to the letter dated 08.04.99 and was not bound by the same. It is further stated that defendant had not signed the said letter. Thus, the contention of ld. Counsel for the defendants is paradox to the defence taken by the defendants in their written statement.
(ii) Now, I will examine the said letter as Ld. Counsels for both the parties have strongly relied upon the same during the course of arguments. Perusal of the photocopy of the said letter reveals that the said letter was written by the plaintiff in pursuance of the discussion held with the officers of defendant bank on 06.04.99. According to the said letter, the plaintiff company recited that company should have returned the money to the bank after deducting US $ 21100/- as plaintiff company had not exported the Halogen Bulbs against another cheque (18) amounting US $ 52,500/-, which was also received from the same buyer and further requested the bank to credit the balance amount amounting US $ 31,400/- in its EEFC account after deducting US $ 21,100/- from the amount of US $ 52,500/-. It is pertinent to mention here that the bank had already debited the plaintiff's account by the sum of US $ 21,100/- on 14.12.98. It is undisputed fact that subsequently the plaintiff company had received another cheque from the importer to the tune of US $ 52,500/-. After receiving the said amount, plaintiff thought it appropriate to legitimate the act of defendant of deducting US $ 21,100/- from its account by debiting the said amount in its account as plaintiff had not exported the goods against the said cheque. From the said letter, it is not transpired that plaintiff had authorized the bank in any other manner to debit its account in future in respect of the amount in dispute. Thus, the contention of Ld. Counsel for the defendants that plaintiff had authorized the bank to debit its account is devoid of merits. On the contrary, said letter elucidates that plaintiff had agreed to authorize the act of defendant as company had not exported the goods against the payment of US $ 52,500/-.
(19)
15. Ld. Counsel for the defendants vigorously argued that the FIRC did not prevent the bank to recover the amount by doing debit entry in the accounts of the plaintiff. It is urged that issuance of FIRC means that bank had received the payment from the importer in due course of its business and the said FIRC is not binding upon the bank if the instrument is found unauthorized subsequently.
(i) It is undisputed fact that bank had issued the FIRC on 24.10.98, which is Ex.PW1/8 and DW1/22. It elucidates from the said FIRC that the purpose of remittance of said FIRC as per beneficiary i.e. plaintiff was "Advance payment for shipment of Halogen Lamps." In the said FIRC, bank had also confirmed that bank had obtained the reimbursement in an approved manner. Thus, it emerges from the said FIRC that bank had professed that bank had received the reimbursement of the instrument in an approved manner for the shipment of Halogen Lamps.
(ii) DW1 in his cross-examination unequivocally admitted that FIRC is an important document and was required to be submitted by the Exporter along with other Export Documents (20) against 100% advance payment. He further admitted that bank had issued the FIRC as it had received the funds. DW1 further clarified in his deposition that FIRC was issued when the Nostro Account of the bank was credited by the foreign bank and thereafter, FIRC was issued. He further elaborated in his cross- examination that the reserve period to issue the FIRC was 15 to 20 days from the date of credit and in the instant case the FIRC was issued after the expiry of reserve period.
(iii) It emerges from his deposition that FIRC was an important document and the same was issued by the bank, when defendant bank had received the fund from the Nostro Account.
(iv) DW1 further admitted in his cross-examination that after shipment of the goods, Exporter had to submit the documents within 21 days and in the present case, plaintiff had submitted the documents within the said period. He further admitted that the documents were released to the importer by the foreign banker under the instructions of the defendant bank. He further admitted that since 100% advance payment had already been received, the documents were sent on free of payment (21) basis. He further admitted that at the time when documents were submitted with the bank, bank was satisfied with the fact that bank had received the payment.
(v) It illuminates from his above deposition that bank had received the payment and not only accepted the export documents but also delivered the same to the importer believing that importer had already made the 100% advance payment. Thus, it becomes abundantly clear that plaintiff had acted on the representation of the bank that bank had received the 100% advance payment against the cheque of US $ 21,100/-.
(vi) DW1 in his examination in chief took the plea that bank had made the payment under "reserve". But during the trial, bank failed to produce any evidence to establish the said fact. On the converse DW1 in his cross-examination unequivocally and unambiguously admitted that bank had issued the FIRC, when bank had received the fund. Thus, the said deposition of the DW1 that payment was made under reserve is without any basis.
(vii) DW1 further in his examination in chief took the (22) defence that the FIRC could not bind the bank for all the times to come. Admittedly in the FIRC, bank had confirmed that bank had received the reimbursement in an approved manner. Now, bank can not be allowed to retract from the said admission. Once the bank had declared that bank had received the fund and plaintiff had acted on the said declaration by sending the consignment to the importer and bank had also delivered the documents to the importer to enable him to take the delivery of consignment, now bank can not take the plea that bank is not bound by its declaration. Thus, the defence taken by DW1 is without any substance.
(viii) It is contended by Ld. Counsel for the defendants that there was no fault on the part of the bank as bank had received the intimation that the deposited cheque was an unauthorized draft from the foreign bank only after delivery of the documents to the importer. If the foreign bank failed to inform the defendant in time that the deposited cheque was unauthorized instrument, it means that lapse was on their part and not on the part of the plaintiff. If defendant thought bank had sustained loss on account of negligence or lapse on the part of Nostro Brach or the (23) foreign bank, defendant should have initiated legal action against them and not to recover the amount from the plaintiff who simply had acted on the confirmation of the bank. To my mind, only in one condition plaintiff would be liable to pay the said amount, if bank succeeds to establish that plaintiff had any collusion with the importer. But there is no scintilla of evidence to establish the same. Even defendants had not taken any such plea.
(ix) Ld. Counsel for the defendants further contended that bank had written letters to the RBI and the foreign bank also but plaintiff even failed to write a letter to the importer. No doubt, bank had written various letters to the RBI for seeking guidelines how bank should have acted in such circumstances. But RBI had not advised the bank to deduct the amount in dispute in such a manner. Even RBI had also failed to point out any rules and regulation to the defendants wherein defendants could have recovered the amount by debiting the accounts of the plaintiff. This further shows there was no rule and regulation wherein bank could have recovered the amount in dispute in such a manner. Merely fact that plaintiff had not written any letter to (24) the importer does not exonerate the defendants from its liability. Further, in the instant case plaintiff had agreed to allow the bank to deduct the amount in dispute from the another cheque of US $52,500, which plaintiff had received from the same importer. This proves that plaintiff was very much concern with the loss sustained by the defendants.
(x) On the other hand, defendant bank had not acted diligently to protect the interest of the plaintiff. Since defendant bank was the banker of the plaintiff, thus it was its duty to protect the interest of its client but from the evidence on record it proves that bank had not acted to protect the interest of the plaintiff. It is admitted case of the defendants that plaintiff had sent the shipping documents through defendant bank, which bank had delivered to the buyer without verifying whether the deposited cheque was authorized or unauthorized. If defendant bank had any doubt about the genuineness of the cheque, bank should have verified the same before at least handing over the shipping documents to the importer. But bank had not verified the same even before handing over the documents to the buyer. This proves that bank had not acted diligently. Now, bank can (25) not hold the plaintiff liable for its lapse/deficiency/negligence, whatever it may be. Even during the trial, bank failed to establish at which date bank had delivered the shipping documents to the importer. In the absence of the said evidence, bank failed to establish whether it had delivered the documents before receipt of information of the unauthorized draft or subsequently.
(xi) Mulling over the entire on-going discussion, it is culled out that FIRC was an important document as bank had confirmed therein that bank had received the advance payment and on the basis of said confirmation plaintiff had sent the consignment and delivered the documents to the bank, which bank delivered the same to the importer. Thus, in my opinion bank is bound by the confirmation made in the FIRC. (16) Ld. Counsel for the defendants energetically contended that bank had a lien under section 171 of the Indian Contract Act to deduct the said amount and strongly relied upon the judgment II(2005) BC 259.
(i) Perusal of the said judgment reveals that the facts of the (26) said case were totally different from that of the present case. It further emerges that bank can used its lien under section 171 of the Indian Contract Act, if the amount is really due and recoverable. Thus, to justify its action under section 171 of Indian Contract Act, defendant bank has to establish that the said amount was really due and recoverable from the plaintiff. But during the trial, defendants failed to prove the same.
(ii) It is admitted case of the defendants that plaintiff had deposited the cheque amounting US $ 21,100/- with the defendant bank for clearance and bank had given the credit of the same in the account of the plaintiff, thereafter also issued the FIRC. Till then the said amount was not recoverable from the plaintiff. Thereafter on the basis of confirmation of the defendants, plaintiff had sent the consignment and also handed over the shipping documents to the bank. Again till then the said amount was not recoverable from the plaintiff. Thereafter, bank had issued instructions to its foreigner bank to deliver the documents to the importer, consequently under the instructions of the bank, said documents were delivered to the importer. According to the bank, documents were delivered to the importer (27) believing that importer had made the 100% advance payment to the exporter through defendant bank. It means till then nothing was due from the plaintiff. Thus, bank had no lien to recover the said amount till the completion of the transaction, when bank had delivered the documents to the importer. Merely fact that subsequently, foreign bank informed the defendants that the deposited instrument was an unauthorized draft does not prove that a lien was created in favour of the bank. Defendants should have claimed the said amount from the foreign bank/Nostro Branch as they failed to inform the bank before delivery of the shipping documents to the importer. Considering the above, I am of the opinion bank had no lien to deduct the amount in dispute by debiting the account of the plaintiff.
17. Pondering the entire afore-said discussion, I am of the opinion that defendant bank is liable to pay Rs.9,84,315/- (equivalent to US $ 21,100) to the plaintiff. Thus, the counter- claim of the bank is not maintainable. Accordingly, issue no. 4 & 5 are decided in favour of the plaintiff and against the defendants and issue no. 6 is decided against the defendants and in favour of the plaintiff.
(28)
18. RELIEF In the light of my findings on the issues above, a money decree of Rs.9,84,315/- along with simple interest @ 6% per annum from the date of judgment till the realization of the amount with full cost of the suit is passed in favour of the plaintiff and against the defendants. Counter-claim of the defendants is dismissed without any cost. Decree-sheet be prepared accordingly. It is pertinent to mention here that though the plaintiff has prayed for the decree of declaration and mandatory injunction yet in fact the suit is for the money recovery. Thus, money decree is passed. File be consigned to record room.
Announced in the open court on this 4th day of October, 2007 (Pawan Kumar Jain) Additional District Judge Fast Track Court, Delhi