* IN THE HIGH COURT OF DELHI AT NEW DELHI
Order reserved on: 12.1.2010
% Order delivered on: 18.1.2010
+ I.A.10702/2006 in CS(OS)557/2006
M/S B.G.CREATIONS PVT.LTD. ......Plaintiff
Through: Mr.Sudhir Makkar, Adv.
Versus
STATE BANK OF SAURASHTRA & ANR. .......Defendants
Through: Mr.R.K.Saxena, Adv. for
Defendant no.1.
Mr.Ajay Monga and
Mr.Manish Paliwal, Advts.
for the applicant
CORAM:
HON'BLE MS. JUSTICE INDERMEET KAUR
1. Whether the Reporters of local papers may be allowed to see
the judgment?
2. To be referred to the Reporter or not?
Yes
3. Whether the judgment should be reported in the Digest?
Yes
INDERMEET KAUR, J.
I.A.10702/2006 (under Order 1 Rule 10 r/w Section 151 CPC)
1. This application has been filed by the applicant namely the
Citi Bank A.S. Turkey who has prayed for impleadment in the
present suit.
2. Present suit is suit for permanent injunction. The prayer
made in the application is that the defendant no.1 Bank i.e. the
I.A.10702/2006 in CS(OS) 557/2006 Page 1 of 6
State Bank of Saurashtra, now known as the State Bank of India be
restrained from making any payment in pursuance of letter of
credit dated 7.12.2005.
3. Plaintiff was a company engaged in the business of trading
of food-grains. A supply order of chickpeas had been placed upon
defendant no.2 whereby defendant no.2 was required to make this
supply to the plaintiff. In pursuance of this agreement plaintiff
asked its banker defendant no.1 to issue a letter of credit in favour
of the banker of defendant no.2. Accordingly, the aforementioned
letter of credit dated 7.12.2005 was issued by defendant no.1 in
favour of the banker of defendant no.2. Defendant no.2 was
indicated as the beneficiary. On inspection of the consignment the
plaintiff found the goods to be defective. He has accordingly
prayed that this letter of credit issued by defendant no.1 be not
enforced in view of this fraud played by defendant no.2 upon the
plaintiff.
4. The applicant before this court i.e. the Citi Bank A.S. Turkey
was the advisory bank/negotiating bank for this letter of credit. On
affidavit, it is stated that the amount payable on this letter of
credit has already been released by the applicant to the
beneficiary namely to defendant no.2. The applicant had
approached defendant no.1 for release of payment in its favour but
the applicant has been informed that an ad-interim injunction has
been granted in favour of the plaintiff and against defendant no.1
I.A.10702/2006 in CS(OS) 557/2006 Page 2 of 6
not to release this amount on this letter of credit. It is further
stated that a settlement has been proposed between the plaintiff
and the defendants which would be behind the back and against
the interest and to the prejudice of the applicant as it is the
applicant who has to receive this amount on this letter of credit
from defendant no.1. Applicant is the ultimate effected party in
the present proceedings and as such he would be a necessary and
a proper party for adjudication of the dispute between the parties.
Accordingly, impleadment has been prayed for.
5. The application has been opposed. It is submitted that there
is no privity of contract between the applicant bank and the
plaintiff who is neither a proper and nor a necessary party. It is
stated that the applicant has wrongly concealed that on 25.4.2006
the applicant had sent a swift message to defendant no.1 wherein
the applicant had agreed to get the said letter of credit cancelled
and the applicant and the beneficiary had agreed to acquit each
other irrevocably. It is further stated that in fact a settlement had
been arrived at between the plaintiff and defendant no.2 on
20.4.2006. It is stated that the plaintiff had on 25.4.2006
submitted the original documents including the commercial
invoice, packing list, bill of lading with the defendant no.1 bank.
On 18.9.2006, the plaintiff came to understand that vide a swift
message of even date defendant no.1 bank had called the Citi bank
Mumbai to confirm the cancellation of this letter of credit. It is,
I.A.10702/2006 in CS(OS) 557/2006 Page 3 of 6
thus, manifest an understanding had been arrived at between the
parties and defendant no.2 had agreed to settle its disputes with
the plaintiff and in view thereof the Citi bank Turkey would not
claim any amount against the said letter of credit and once this
fact was confirmed by Citi Bank, defendant no.1 would release the
margin money held by it to the plaintiff whereupon the plaintiff
would withdraw the suit. It is stated that the present application
is misconceived and is liable to be dismissed.
6. In the rejoinder filed by the plaintiff it is stated that the
admissions made in the reply clearly show that there is connivance
between the plaintiff and the defendants i.e. defendant no.1 and 2
and if any settlement is arrived at between the parties behind the
back of the applicant it would be to his prejudice. It is stated that
as is evident from the message dated 24.4.2006 sent by the
applicant to defendant no.1 at the instance of defendant no.2, the
applicant bank had agreed not to press for its reimbursement
claim if the original documents are returned which in turn would
signify that the plaintiff had not taken delivery of the goods. It is
stated that till date defendant no.1 has not returned the original
documents to the applicant and therefore the reimbursement claim
of the applicant is valid and subsisting; defendant no.1 is under
obligation to credit the account of the applicant bank. Thereafter
several messages dated 5.5.2006 and 20.9.2006 and 27.9.2006
I.A.10702/2006 in CS(OS) 557/2006 Page 4 of 6
were sent by the applicant to defendant no.1 reiterating that the
reimbursement claim of the applicant bank is valid.
7. On an appreciation of the rival contentions of the parties,
this court is of the view that the applicant is a necessary and
proper party. The role assigned to the applicant is that of a
confirming, advising, and negotiating bank. The applicant bank
has admittedly made payment to defendant no.2 the beneficiary.
Defendant no.2 is ex-parte in these proceedings. As per trade
practice the applicant bank had forwarded the original document
to defendant no.1 which was the issuing bank.
8. A letter of credit is a document issued mostly by a financial
institution, used primarily in trade finance which usually provides
an irrevocable payment undertaking. Such a document is
primarily used in international trade transactions of significant
value, for deals between a supplier in one country and a customer
in another. The parties to a letter of credit are usually a
beneficiary who is to receive the money, the issuing bank of whom
the applicant is a client, and the advising bank of whom the
beneficiary is a client. Almost all letters of credit are irrecovable,
i.e., cannot be amended or cancelled without prior agreement of
the beneficiary, the issuing bank and the confirming bank, if any.
9. In this scenario the presence of the applicant bank in the
present proceedings would be necessary. The test laid down for
testing an application of this nature is that a person is a proper
I.A.10702/2006 in CS(OS) 557/2006 Page 5 of 6
party if his presence before the court is necessary to enable the
court to arrive at an effectual adjudication and settle all the
questions involved in the suit. The object of this provision is also
to avoid needless multiplicity of suits.
10. Application is accordingly allowed. Applicant be impleaded
as defendant no.3. Amended plaint and amended Memo of parties
be filed within two weeks with advance copy to the counsel for the
defendants who may file written statement to the amended plaint
within four weeks.
(INDERMEET KAUR)
JUDGE
JANUARY 18, 2010.
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