Shree Traders vs Indequip Engineering Ltd on 15 September, 2022

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Gujarat High Court

Shree Traders vs Indequip Engineering Ltd on 15 September, 2022

Bench: A.S. Supehia

     C/FA/804/2002                                          ORDER DATED: 15/09/2022




          IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                           R/FIRST APPEAL NO.804 of 2002
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                           SHREE TRADERS
                               Versus
                 INDEQUIP ENGINEERING LTD. & 1 other(s)
================================================================
Appearance:
MR DHARMESH V SHAH(1050) for the Appellant(s) No. 1
ANAND R PATEL(7352) for the Defendant(s) No. 1
MS AB CHATURVEDI(5419) for the Defendant(s) No. 1
RULE SERVED BY DS for the Defendant(s) No. 2
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 CORAM:HONOURABLE MR. JUSTICE A.S. SUPEHIA
                  Date : 15/09/2022
                   ORAL ORDER

Though served, the respondent No.2-Bank- original defendant No.2 has chosen not to enter its appearance in the present appeal even after a period of 20 years.

1. The present appeal arises out of the judgement and order dated 20.08.2001 passed in Summary Suit No.5351 of 1986 by City Civil Court, Court No.8, Ahmedabad, dismissing the suit instituted by the plaintiff against the defendant-Bank.

FACTS

2. The appellant-plaintiff had instituted Summary Suit No.5351 of 1986 in the City Civil Court at Ahmedabad against the respondents-defendants for payment of amount as per the letter of credit. The respondent No.1-original defendant no.1 had placed an order with the appellant-plaintiff for supplying various goods. The respondent-defendant No.2-Bank Page 1 of 7 Downloaded on : Thu Sep 22 20:14:19 IST 2022 C/FA/804/2002 ORDER DATED: 15/09/2022 had opened and established an irrevocable letter of credit in favour of the appellant-plaintiff. The respondent-Bank had agreed to pay the amount of the said irrevocable letter of credit 60 days after the date of delivery of the goods to the respondent No.1. The appellant supplied the goods to the said company. Since the payment was not received, the appellant called upon the respondent-Bank to pay up the amount of the irrevocable letter of credit. The respondent-Bank failed to honour its commitment.

2.1 The defendant-respondent No.1 did not remain present though served and at the stage of hearing of the summons for judgement on 09.12.1994, a decree was drawn against the respondent No.1 and the respondent-Bank was granted unconditional leave to defend the suit.

3. At the outset, learned advocate Mr.Shah for the appellant has submitted that the impugned judgement and order is required to be quashed and set aside since the entire judgement is premised on interpretation of Exh.39, which is the letter of credit issued in favour of the appellant by the defendant-bank. He has submitted that the trial Court has subsequently observed that the letter of credit incorporates the condition of hundi however, there is no whisper with regard to hundi duly drawn in Exh.39, and thus, the trial Court has tried to impose new contract by making such observation upon Page 2 of 7 Downloaded on : Thu Sep 22 20:14:19 IST 2022 C/FA/804/2002 ORDER DATED: 15/09/2022 the parties and hence, the impugned order may be set aside.

4. Learned advocate appearing for the defendant No.1 has not denied the letter of credit, which was issued by the defendant-bank.

5. This Court has perused the impugned judgement and order. The sole issue which requires consideration in the present appeal is whether the letter of credit, (Exh.39) issued by the defendant- Bank contains any condition for drawing of hundi or not.

6. From the documents on record, the following facts are established:

6.1 The trial Court has framed the issues below Exh.37 and after framing the issues, the trial Court has observed thus:

"Therefore, once it is accepted that the hundies were not drawn on defendant no.1 and were not sent alongwith the other documents like invoices to defendant no.2 Bank whether the defendant no.2 was obliged to honour the letter of credit and make the payment as per the commitment is required to be considered. For that purpose irrevocable letter of credit produce at ex.39 is required to be considered and it is required to be appreciated whether this commitment or the irrevocable letter of credit was subject to the conditions and was dependent upon the compliance of such conditions or not. It is also required to be considered whether the defendant no.2 was obliged to make the payment as per the terms of the letter of credit meaning thereby subject to the fulfillment of the conditions mentioned therein or not. The irrevocable letter of credit at ex.39 clearly provides that it has been established in favour of the plaintiff for defendant Page 3 of 7 Downloaded on : Thu Sep 22 20:14:19 IST 2022 C/FA/804/2002 ORDER DATED: 15/09/2022 no.1 for a sum not exceeding Rs.20,000/-. However, it specifically states that it must be accompanies by the documents stated therein which includes draft, hundies duly drawn and accepted by the opener i.e. defendant no.1. the bottom portion also clearly states that "the draft must be marked "Drawn under BANK OF INDIA, I.F. Br.Ah'bad present for Negotiations in Ahmedabad not later than 12-7-

83. negotiations must be marked separately on the back hereof and this letter should accompany the draft which exhausts the Credit."

A specific finding has been recorded by the trial Court that in the irrevocable letter of credit at Exh.39, it has been established in favour of the plaintiff for defendant No.1 for a sum not exceeding Rs.20,000/- and it is observed that it specifically states that it must be accompanied by the documents stated therein which includes draft, hundies duly drawn and accepted by the opener i.e., defendant No.1. It is not in dispute that the plaintiff had delivered the goods to the defendant no.1. Before the Court below, a specific contention has been raised by the defendant-Bank that the plaintiff has not drawn hundi on it as per the letter of credit. A Hundi is an informal unconditional order/instrument in writing made by a person directing another to pay a certain sum of money to a person named in the order. The hounouring of letter of credit will not depend on the drawing of hundi, since both are independent of each other. A letter of credit is a document that guarantees the buyer's payment to the sellers. It is issued by a bank and ensures timely and full payment to the seller. If the buyer is unable to Page 4 of 7 Downloaded on : Thu Sep 22 20:14:19 IST 2022 C/FA/804/2002 ORDER DATED: 15/09/2022 make such a payment, the bank covers the full or the remaining amount on behalf of the buyer. Since, the fact of delivery of the goods by the defendant no.1 is not disputed and no witnesses are examined by the defendant-Bank, there was not occasion for the defendant-Bank to honour the letter of credit. The entire case or excuse with regard to hundi has been created for denying the payment as per the letter of credit. Thus, the trial Court has inserted a new covenant between the parties which never existed.

6.2 From the judgement also it is noticed that the defendant-Bank, though have appeared, has not examined any of the officers with regard to establishing the fact that the letter of credit at Exh.39 contains drawing of hundi. As noted hereinabove, before this Court none has chosen to appear on behalf of the defendant-Bank.

7. The plaintiff has prayed for the following reliefs in the plaint:

"2. The plaintiff, therefore, prays that a decree be passed against the defendants in favour of the plaintiff for:

Rs.16,828.98 (Rupees sixteen thousand eight hundred twenty eight and paise ninety seven only) being the principal amount.

Rs.7452.07 (Rupees seven thousand and four hundred fifty two and paise seven only) being the amount of interest at the Page 5 of 7 Downloaded on : Thu Sep 22 20:14:19 IST 2022 C/FA/804/2002 ORDER DATED: 15/09/2022 rate of 21% per annum on the above principal amount from the respective due dates to the date of filing of this suit.

Rs.115.00 (Rupees one hundred fifty one only) being the notice charges _ _ _ _ _ _ Rs.24,396.04 Total Rupees twenty four thousand three hundred ninety six and paise four only with further interest at the rate of 21% on the above stated principal amount from the date of this suit till realization.

(b) Costs of this suit be awarded to the plaintiff.

8. The Court has perused the Exh.39. The observation made by the trial Court runs contrary to what is stated in the letter of credit and there is no whisper with regard to drawing of the hundi and hence, the impugned order suffers from the illegality. The issue is answered accordingly. Thus, the impugned judgement and order is hereby quashed and set aside.

9. Accordingly, the present appeal and the suit filed by the plaintiff is decreed in his favour. The plaintiff-appellant is entitled to recover the amount of Rs.24,396.04 as prayed for in the plaint along with interest of 21% from the filing of the suit till realization from the defendant no.2-Bank.

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C/FA/804/2002 ORDER DATED: 15/09/2022 The Registry shall accordingly draw the decree.

10. No order as to Costs. Record and proceedings to be sent back.

                                                    Sd/-     .
                                            (A. S. SUPEHIA, J)
NVMEWADA




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Gujarat High Court