National Consumer Disputes Redressal
M/S. Amitara Industries Ltd vs State Bank Of India on 11 October, 2012
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO.120 of 2007 (From the Order dated 31.08.2006 in Complaint Case No.56/99 of the State Consumer Disputes Redressal Commission, Gujarat) M/s. Amitara Industries Ltd. Suryarath, First Floor, Opposite White House, Panchwati, First Lane, Ambawadi, Ahmedabad Gujarat-6 .. Appellant Vs. State Bank of India, Vatwa Industrial Branch, Vatwa, Ahmedabad Gujarat ..Respondent BEFORE: - HONBLE MR. JUSTICE ASHOK BHAN, PRESIDENT HONBLE MRS. VINEETA RAI, MEMBER For the Appellant : Mr. Amar Dave, Advocate For the Respondent : Mr. R.N. Keswani and Mr. Hitesh Vali, Advocates PRONOUNCED ON: 11.10.2012 O R D E R
ASHOK BHAN, J., PRESIDENT Complainant/Appellant herein has filed this Appeal against the judgment and order dated 31.08.06 passed by the State Consumer Disputes Redressal Commission, Gujarat (in short, the State Commission) in complaint No. 56/99 wherein the State Commission dismissed the complaint filed by it.
FACTS:-
Complainant/Appellant was engaged in the business of exporting textile goods to the foreign currencies. During the course of business, Appellant sold the textile goods to M/s. BPS Nico Ltd., Moscow, Russia under irrevocable Letter of Credit (ILC) No.96129 opened on 28.11.96 by Bangkok Bank, PCL, London. The entire purpose of operating under the ILC was to ensure that the said letter of credit in no way be revoked or cancelled and the ILC opening Bank would mandatorily honour the said letter of credit by making the payments irrespective of the outcome of the dealing between the parties concerned on the due date of payment according to the prevailing international documentary credit practice and rules. The bill of sale along with letter of credit and the relevant documents was submitted by the Appellant with the Respondent Bank with a clear instructions to deliver the same to the buyers Bank on the acceptance from the buyer and collect the payment on due date from the foreign correspondent bank/letter of credit operating bank. Appellant negotiated the said bill with the Respondent and the Respondent discounted the bill on the strength of the ILC and agreed to render service to the Appellant after charging consideration for the same.
Respondent discounted the said export bill for $ 88,443/- on 6.1.97.
The bill was due for payment on 31.3.97.
The Letter of Credit Opening Bank (Bank of Bangkok) accepted the export bill for payment on due date, i.e. 31.3.97. However, before the due date of payment, i.e., 31.3.97, the importer BPS Trading approached the London Court and obtained an ex-parte order restraining the ILC opening bank, i.e. Bank of Bangkok from making the payment towards the export bill on due date on the ground of serious quality problem in the goods imported. Respondent Bank contested the proceedings in the London Court and the London Court set aside the restrain order in January, 1998 in its favour.
The principle amount of $ 88,443/- was received from Bank of Bangkok on 19.1.98 and the interest amounting to $ 4,355.94 awarded by the London Court was also paid to the Appellant. The costs of 7704 British Pounds awarded by the London Court could not be recovered by the Respondent Bank as the importer company went into liquidation. Respondent Bank incurred legal expenditure amounting to GBP 11257.45 (approx.Rs.7,43,000) which were debited in Appellants account. Respondent Bank also recovered a sum of Rs.4,84,158/- towards interest from the Appellant as it received the amount in respect of the discounted export bill of $ 88,443/- only on 14.1.98 though the payment was due on 31.3.97.
Appellant, being aggrieved, filed the complaint before the State Commission.
Respondent, on being served, entered appearance and filed its written statement resisting the complaint on the grounds that the Appellant requested the Respondent to defend the suit instituted in the London Court by the importer and a stamped agreement dated 16th July, 1997 was entered into between them by which Appellant agreed to bear the litigation expenses. That since the costs of GBP 7704.20 awarded by the London Court could not be recovered from the importer on their having gone into liquidation, the legal expenditure amounting to GBP 11257.45 incurred by the Bank were debited in the Appellants account. That the Respondent received the principle amount of discounted export bill only on 14.1.98 though it was due on 31.3.97 and, therefore, it charged interest of Rs.4,84,158/- from the Appellant for the period from 31.3.97 to 14.1.98. That there was no deficiency in service on their part and complaint was liable to be dismissed.
State Commission, after taking into consideration the facts, pleadings and the evidence led by the parties, came to the conclusion that the Respondent contested the litigation and got the injunction vacated from the London Court on the request of Appellant and an undertaking was given by the Appellant to the Respondent to bear the legal expenses. It further held that the Respondent rightly charged the interest for the period from 31.3.97 to 14.1.98 from the Appellant as per RBI guidelines.
State Commission dismissed the complaint by observing thus:-
In affidavit Exh. 23 it has been testified by the Chief Manager of the opponent Bank that for recovery of outstanding amount, the opponent bank has charged interest on outstanding amount of entire bill i.e. approximately Rs. 32 lakhs, even though the cost of litigation was Rs.
7,43,000/-. The interest was charged to the tune of Rs. 4,84,158/-
being the amount due on entire bill for about one year. It is further testified that as per the banking practice when such bill account become irregular, interest is charged @ 16% p.a. with quarterly ret in the said account. Vide Exh. 24 the opponent bank has also filed a circular dated 1.9.97 which pertains to C&I Segment Advance interest rate along with the said circular interest rate structure effective 1.7.1997 has also been produced. Thus, it will be seen from above that opponent bank could not obtain the payment pertaining to irrevocable letter of credit opened by Bangkok Bank PCL, London. The bills were discounted with necessary documents by the opponent for US$88433 on 6.1.97; that the goods exported by the complainant to BPS Nico Limited under ILC were obtained by M/s BPS Nico Limited and thereafter the suit was filed by BPS Nico against Bangkok Bank, PCL, London and obtained injunction from London Court by which the opponent bank was restrained from releasing the bills under irrevocable letter of credit and the suit in London court came to be filed on the ground that the dispute between the complainant and BPS Nico Limited was pertaining to the quality of goods and because of the injunction obtained in the suit pending in the London Court, the opponent bank could not obtain the payment against the irrevocable letter of credit.
Thus, the dispute pertaining to quality of goods was between M/s BPS Nico Limited and present complainant and by virtue of the injunction, a stalemate was created and because of that, at the request of the complainant, OP bank fought the suit filed by M/s BPS Nico Limited, in London court and ultimately succeeded in getting the injunction vacated. Now, when the opponent bank fought the litigation and got the injunction vacated at the request of the complainant and complainant having agreed to bear the cost of the litigation, having given an undertaking as referred to above, now cannot turn round and resile from the undertaking whereby it agreed to bear the legal expenses.
In our opinion, having regard to the facts and circumstances as stated above and the bank having charged interest as per the RBI guidelines, the complainant cannot say that it is not responsible for the litigation expenses incurred by the opponent bank in getting the injunction vacated in a proceeding which were filed in London Court on account of the dispute pertaining to the quality of goods supplied by the complainant to M/s BPS Nico Limited, Moscow, Russia. Obviously, the bank would be entitled to charge interest as per the RBI guidelines.
Appellant, being aggrieved, has filed the present appeal.
We have heard the Ld. Counsel for the parties at length.
Ld. Counsel appearing for the Appellant contends that the Respondent Bank was deficient in rendering service as it handed over the bill of exchange to the Bank of Bangkok without receiving the payment and that the Appellant was not liable to pay the litigation expenses as the Bank could not recover the same from the importer in spite of London Court granting the same.
He further submitted that the Appellant was not liable to pay the interest as the Respondent itself is responsible for the delay in receiving the payment. As against this, Ld. Counsel for the Respondent supports the order passed by the State Commission.
We do not find any substance in the submission made by the Ld. Counsel for the Appellant. Respondent Bank discounted the Bill of exchange as the Letter of Credit Opening Bank, i.e. Bank of Bangkok agreed to make the payment. But instead of making the payment, the importer got the injunction from the London Court restraining its Bank to make the payment. Under these circumstances, the payment was not made. Appellant requested the Respondent Bank to contest the case before the London Court and also agreed to defray the litigation expenses if not paid by the Bank of Bangkok PCL, London or the Importer. The letter written by the Appellant to the Bank agreeing to defray the legal expenses reads as under:-
To The State Bank of India, Vatva Industrial Estate, Ahmedabad Kind Attention: Mr. Arunkumar Rao Sub.: Non-payment of Bills under L/C-D/97/ 1754/ 352007contesting of suit filed on Bangkok Bank PLC London by our SBI London With reference to the above you are requested to contest the case and the necessary legal expenses should be claimed from Bangkok Bank, PLC London. In case the same does not go through we are agreeable to bear the cost.
Kind Regards For Amitara Fabrics Pvt. Ltd.
Sd/-
Kailash Agarwal Director Since the costs incurred by the Respondent could not be recovered either from the importer or the Bank of Bangkok, the Respondent claimed the litigation expenses as well as interest from the Appellant for the delay in receiving the payment due to court injunction and accordingly debited legal expenses and the interest to the account of the Appellant. Respondent Bank was entitled to the interest as well as costs as per the agreement. There was no infirmity in the order passed by the State Commission.
Ld. Counsel appearing for the Appellant contends that the Respondent was liable to pay compensation for the deficiency in service for releasing the bill of exchange without receiving the payment. We do not find any substance in the submission that the Respondent Bank, in any way, was deficient in rendering the service. Respondent Bank had discounted the bill of exchange on the acceptance of the importers bank, i.e., Bank of Bangkok PCL, London which had agreed to make the payment on 31.3.1997. Once the Bank of Bangkok had agreed to pay the amount, the Respondent Bank released the bill of exchange but before the amount could be released an injunction was obtained by the importer which was not in the control of the Respondent Bank. Allegation made by the Appellant that the Respondent was deficient in discounting the bill of exchange under these circumstances cannot be accepted. Moreover, in the complaint, the Appellant had not claimed any compensation for the deficiency on the part of the Respondent. The dispute raised in the complaint is regarding recovery of legal expenses and interest from the Appellant. Prayer clause in the complaint makes it clear that the Appellant had filed the complaint regarding the legal expenses and interest only. No compensation was sought on the ground of deficiency in service.
Respondent Bank had already filed a suit for recovery of costs in the Court of London. It had assured that the recovery, if any, made would be passed on to the Appellant.
After conclusion of the arguments, Ld. Counsel for the Appellant sought permission to file written submissions which was declined as the counsel for the parties had been heard at length.
For the reasons stated above, we do not find any merit in the appeal and dismiss the same with no order as to costs.
.. . . . . .
(ASHOK BHAN J.) PRESIDENT . . . . . . . . . . . . . . . .
(VINEETA RAI) MEMBER Yd