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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
O.O.C.J.
APPEAL NO.590 OF 2003
IN
SUIT NO.646 OF 1993
...
Central Bank of India ...Appellant
v/s.
Saraf Chemicals Pvt.Ltd.
and ors. ...Respondents
...
Ms.V.Srivastava i/b Consulta Juris for the Appellant.
Mr.F.Devitre with Mr.J.P.Sen i/b Fedral & Rashmikant
for Respondent No.1.
Mr.M.P.S.Rao i/b Udwadia & Udeshi for Respondent
No.2.
...
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CORAM: D.K.DESHMUKH &
A.A.SAYED, JJ.
DATED: 13th March, 2009
P.C.: (PER D.K.DESHMUKH, J.)
1. By this Appeal the original Defendant challenges
the judgment and decree dated 8-7-2002, 26-7-2002 and
1-11-2002 passed by the learned single Judge of this
Court in Suit No.646 of 1993. That suit was filed by
Saraf Chemicals Pvt. Ltd., the present Respondent
No.1, claiming a money decree against the Appellants.
The learned single Judge by the judgment and decree
impugned in the appeal has decreed the suit in favour
of the Plaintiffs and against the
Appellant-defendant. To the suit the Plaintiff-Saraf
Chemicals Pvt.Ltd. had joined only the present
Appellant as the Defendant. The present Appellant
had taken out third party notice against the
Respondents Nos. 2 & 3. That third party notice has
been discharged by the order impugned in the appeal.
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2. The facts which are material and relevant for
deciding this appeal are, the Plaintiff which is a
private limited company is engaged in the business of
manufacture and export of latex gloves and carry on
its business through one of its division viz.
M/s.Sarex Overseas. The present Appellant, which was
the Defendant in the suit carries on business as
bankers and is a nationalised bank. According to
averments in the plaint, the Plaintiff had entered
into an agreement with M/s.PIE Import & Export USA
(herein
after referred to as “the said M/s.PIE” for
the sake of brevity) for supply of 42,00,000 latex
gloves of the aggregate value of US $ 1,28,100.
M/s.PIE placed an order pursuant to the order dated
21-1-1992 for sale and supply of abovementioned
quantity of goods on the Plaintiff. In respect of
this transaction, the said M/s.PIE agreed to make
payment for the said goods by an irrevocable letter
of credit to be issued in favour of the Plaintiff by
an American Bank, which letter of credit would
provide for payment to be made on FDA approval or 60
days from the Bill of Lading date if there was no
response from FDA. According to agreement, the said
M/s.PIE arranged to open an irrevocable Letter of
Credit dated 30-1-1992, which was issued by the Chase
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Manhattan Bank, New York-Respondent No.3 in favour of
the Plaintiff as beneficiary for the said amount of
US $ 1,28,100, which was advised through the
Defendant. As per the terms of the letter of credit,
drafts were to be drawn ‘at sight’ and payment would
be made to the negotiating bank by Chase Manhattan
Bank, New York-Respondent No.2 on the latter
receiving an authenticated cable advice that the
negotiating bank had negotiated the said sight drafts
in compliance with the terms of the letter of credit.
According to the Plaintiff, the goods were shipped by
them on 27-3-1992 through M/s.Sea Land Service
Incorporated, who issued their Bill of Lading dated
27-3-1992. The Plaintiff drew sight drafts dated
26-3-1992 for the said sum of US $ 1,28,100 as
required under the letter of credit. The
Appellant/Defendant negotiated the documents under
the said letter of credit and made payment to the
Plaintiff of the sum of Rs.31,08,915/- being the
amount equivalent to 85% of the Rupee equivalent of
the letter of credit amount, which payment was made
on or about 9-4-1992. According to the Plaintiff,
the payment of the aforesaid amount of 85% was made
by the Appellant by crediting the said amount to the
Plaintiff’s account namely “S/L A/C Marginal Deposits
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against Foreign Bills Purchased- A/c. Sarex
Overseas” with the Defendant at their Bombay, Main
Branch. According to the Plaintiff, at the request
of the Plaintiff, the Defendant used and kept with
themselves as margin money in respect of an Inland
letter of credit opened by the Defendant, at the
instance of the Plaintiff, in favour of M/s.Shangrila
Latex Industries Pvt.Ltd. for the sum of
Rs.30,24,000/-. According to the Plaintiff, it
appears that the Respondent No.3 did not make payment
to the Defendant-Appellant. Therefore, the Defendant
made an application dated 28-8-1992 to the RBI
seeking permission of RBI to file suit against the
Respondent No.3 to recover their claim under the
letter of credit stating ” that the documents had
been negotiated by the Defendant/Appellant on
9-4-1992 and that the Respondent No.3 had rejected
bonafide documents negotiated strictly under the
Letter of their Credit”. According to the Plaintiff,
the Respondent No.3 on behalf of the Appellant filed
proceedings to intervene in legal proceedings pending
in the Court of the United States District Court, for
the District of New Jersey and in the said
application they have stated that the Appellant had
negotiated the documents on 9-4-1992 and therefore
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the Defendant had security interest in the goods
covered by the Letter of Credit. The Plaintiff
stated that Inland Letter of Credit in favour of M/s.
Shangrila expired and therefore the Plaintiff sought
return of margin money which was kept in relation to
that Inland Letter of Credit. But the Defendant
refused to release the amount and hence the Plaintiff
has filed the suit for release of that amount and
also for recovery of the balance 15% amount.
3. The Defendant,
ig on being served, appeared and
filed their written statement. In the written
statement, there were several defences raised by the
Defendant, but the principal defence raised by the
Defendant was that the Plaintiff does not have any
cause of action against the Defendant as the
Defendant has not received any amount either from the
Plaintiff’s foreign bearers namely M/s.PIE or their
bank namely the Respondent No.3. According to the
Defendant, the Letter of Credit is conditional one
and since the conditions have not been fulfilled, the
Plaintiffs are not entitled to any amount as nothing
is due and payable to the Plaintiff. According to
the Defendant, so far as Letter of Credit is
concerned, the Defendant merely forwarded the said
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Letter of Credit and were only an advised bank
without there being any obligation on their part to
make the payment. It is the case of the Defendant
that it accepted the documents on collection basis.
The Appellant also took out the third party notice
against the Respondents Nos. 2 & 3. Initially in
the suit there were 12 issues framed, but by order
dated 1st July, 1998 the issues were recast. The
recast issues are as under:-
ig I S S U E S
(i) Whether the suit is misconceived, not
maintainable and the plaintiff has no cause
of action as alleged in paragraph 1; of the
written statement?
(ii) Whether the suit is bad for nonjoinder
of necessary parties?
(iii) Whether the defendants dealt with the
document under the L/C on the basis of the
agreement alleged in para 8(v) of the W.S.?
(iv) Whether the defendants negotiated the
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drafts and other documents drawn under the
said L/C issued by Chase Manhattan bank,
Newyord and become owners of the said
documents?
(v) Whether the documents were sent on an
express understanding that no payment could
be made to the plaintiffs unless the
defendant received the same from the
corresponding bank?
(vi) Whether the entry of the amount of
Rs.31,08,912/- in defendants sundry ledger
A/c was only a notional entry?
(vii) Whether the said credit entry was made
as per any agreement only with a view to
assist the plaintiffs?
(viii) Whether the said defendant should be
ordered and decreed to pay and release to the
plaintiffs the amount claimed in prayer (a)
of the plaint?
(ix) Whether the said defendant should be
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ordered and decreed to pay and release to the
plaintiffs the amounts claimed in prayer (b)
of the plaint?
(x) What order and decree?
4. It appears that oral and documentary evidence was
led on behalf of the Plaintiff and the Defendant.
The learned single Judge considering the entire
evidence in detail and by her exhaustive judgment
held that the
defence of the Defendant that the
documents were accepted on collection basis and that
the Letter of Credit was not negotiated by the
Defendant-Bank cannot be accepted. The learned Judge
held that the Letter of Credit was negotiated by the
Defendant-Bank and 85% payment was actually made to
the Plaintiff and therefore the Plaintiff is entitled
to a money decree against the Defendant.
5. We have heard the learned counsel appearing for
the Appellant and the learned Counsel appearing for
the Respondents. With their help, we have gone
through the entire record. We find from the judgment
of the learned single Judge, which is impugned in
this Appeal that the learned single Judge has
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discussed all the rival pleadings of the parties, the
entire documents and the oral evidence in detail for
recording her findings. At the hearing of this
appeal, the learned Counsel appearing for the
Appellant could not point out to us that any piece of
relevant and material evidence has not been
considered by the learned single Judge for recording
her findings. The learned Counsel for the Appellant
mainly tried to assail the finding recorded by the
learned single Judge that the Letter of Credit was
negotiated by the Appellant-bank on collection basis.
However, in our opinion, two documents which are on
record are enough to uphold the finding recorded by
the learned single Judge that the Letter of Credit
was negotiated by the Appellant-bank and that the
documents were not accepted on collection basis only;
One is the letter written by the Defendant-bank to
RBI seeking its permission to file a suit against the
third Respondent. In that letter the Appellant/Bank
has clearly accepted that the Letter of Credit was
negotiated by the Appellant-Bank and that the
Respondent No.3 has wrongly declined to make payment
to it. If the Appellant had not negotiated the
Letter of Credit and made payment to the Plaintiff,
there was no question of the Defendant moving the RBI
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for its permission to file a suit against the
Respondent No.3 for recovery of the amount. Unless
the amount is paid by the Appellant to the Plaintiff,
there was no question of the Appellant being entitled
to recover the amount from the Respondent No.3. The
only defence raised in relation to that letter was
that the letter was written because the Plaintiff had
promised to pay for the cost of litigation that would
be lodged by the Appellant against the Respondent
No.3. In our opinion, in other words, this means
that
the Appellant which is a nationalised bank was
prepared to take a false stand in the court of law in
litigation that it proposed to lodge against the
Respondent No.3, only because the Plaintiff had
promised to fund that litigation. In our opinion,
this explanation is incapable of being accepted. The
second document, which according to us belies all the
defences raised by the Appellant is the application
filed by the Respondent No.3 in American Court on
behalf of the Appellant. In that application, a
clear statement was made that the Letter of Credit
has been negotiated by the Appellant and therefore
the underlying goods were the security of the
Appellant. We do not find any explanation given on
behalf of the Defendant for making such statement in
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the application filed before the American Court, if
it is the case of the Appellant that the Letter of
Credit was not negotiated by it. In our opinion,
considering the exhaustive judgment delivered by the
learned single Judge, wherein every point has been
considered in detail and in view of what we have
found there is no room to interfere with the judgment
and decree impugned in the Appeal. So far as
discharge of the third party notices taken out by the
Appellant against the Respondents Nos. 2 & 3 are
concerned, no
steps were taken by the Appellant to
prosecute those notices. In fact, the Appellant
opposed the third party when it wanted to
cross-examine the witnesses of the Plaintiff. In our
opinion, therefore, in these circumstances, the
learned single Judge was perfectly justified in
discharging the third party notices.
6. We find no substance in the Appeal. Appeal,
therefore, fails and is dismissed. No order as to
costs.
7. At the request of the learned Counsel appearing
for the Respondent No.1, it is directed that the bank
guarantee furnished by the Respondent No.1 pursuant
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to the interim order passed in the Appeal may be
discharged after expiry of a period of four weeks
from today.
(D.K.DESHMUKH, J.)
(A.A.SAYED, J.)
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