Bombay High Court
Hindustan Copper Ltd vs Vijaya Bank And 2 Others on 9 November, 2022
Bench: N. J. Jamadar
SWAROOP Digitally
SWAROOP
signed by
SHARAD SHARAD PHADKE
Date: 2022.11.09
PHADKE 18:49:45 +0530
18 SJ 69 OF 2017.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
IN ITS COMMERCIAL DIVISION
SUMMONS FOR JUDGMENT NO.69 OF 2017
IN
SUMMARY SUIT NO.252 OF 2017
Hindustan Copper Limited ... Plaintiff
versus
Vijaya Bank and Ors. ... Defendants
Mr. Shriram Kulkarni with Mr. Radhali Kadam i/by Mr. Sachin Chavan, for Plaintiff.
Mr. Sanjeev Punalekar with Mr. Sachin Kanse i/by PRS Legal for Defendant Nos.1
and 2.
Mr. Dhruv Dandekar with Mr. Sahil Harjani i/by Desai and Diwanji for Defendant
No.3.
CORAM : N.J.JAMADAR, J.
RESERVED ON : 26th SEPTEMBER, 2022
PRONOUNCED ON : 9th NOVEMBER, 2022
P.C.:
1. This Commercial Division Summary Suit is instituted to recover a sum
of Rs.1,00,04,637/- along with interest @ 18% p.a. from the date of institution of the
Suit till payment and/or realization.
2. The Plaintiff is a Public Sector Undertaking. It is a vertically integrated
copper manufacturing company. M/s. Unicon Connector Pvt. Ltd. - Defendant No.3
is a private limited company. Over a period of time, Defendant No.3 had placed
orders with the Plaintiff and purchased copper in the CC Rod form of varying sizes.
Defendant No.1 is a banking company constituted under the Banking Regulation Act,
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1949. At the instance and for and on behalf of Defendant No.3, Defendant No.1 -
Vijaya Bank (before merger) had issued letters of credit. Indian Overseas Bank -
Defendant No.2 is the Plaintiff's banker and has acted as a negotiating bank.
3. At the threshold, it may be apposite to note that the Plaintiff rested its
claim in the summary suit on two counts. First, failure on the part of the Defendant
Nos.1 and 2 to honour the letters of credit and make payment thereunder. Second, the
liability which Defendant No.3 incurred consequent to the dishonour of the cheques
drawn by the Defendant No.3 towards the price of the goods sold and delivered by the
Plaintiff to the Defendant No.3.
4. Though the Plaintiff took out Summons for Judgment No.69 of 2017, in
the year 2017 itself, it seems the parties especially the Plaintiff and Defendant No.3
were exploring possibility of a negotiated settlement. On 10 th April, 2019 Plaintiff and
Defendant No.3 settled the disputes and tendered Consent Terms. By an order dated
16th April, 2019, the suit came to be decreed in accordance with the Consent Terms
and the Suit and the Summons for Judgment were both disposed of.
5. Furthermore, in view of the Consent Terms, the Suit against Defendant
Nos.1 and 2 also stood disposed with a rider that it would stand revived against
Defendant Nos.1 and 2 only if Defendant No.3 commits default. As the Defendant
No.3 committed default in compliance with the Consent Terms and the undertakings
given thereunder, by orders dated 8th February, 2021 and 30th March, 2021, the Suit as
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against Defendant Nos.1 and 2 stood restored to file and the Summons for Judgment
was directed to be taken up for hearing.
6. Keeping in view the aforesaid context, I proceed to consider the
Summons for Judgment.
7. Shorn of superfluities, the substance of the Plaintiff's claim can be
stated as under :
7.1 Pursuant to purchase orders placed by M/s. Unicon Connector Pvt. Ltd.
- Defendant No.3, the Plaintiff had sold and delivered copper in CC Rod form. The
sale and delivery of the goods is evidenced by commercial invoices raised by the
Plaintiff for various amounts, delivery challans and the lorry/transporter's receipts.
Price of the goods sold and delivered was secured by letters of credit issued by
Defendant No.1 - Vijaya Bank at the instance of Defendant No.2. Upon the delivery
of the goods, the Plaintiff had duly lodged the commercial documents i.e. invoices,
delivery challans and lorry / transporter's receipts through its banker - Indian
Overseas Bank - Defendant No.2 for payment in accordance with the terms of the
letters of credit.
7.2 The particulars of the letters of credit, with the corresponding invoices,
value and date of maturity can be conveniently noted in the following tabular form :
Our Ref Vijaya Bank LC Invoice No. Total Date of Due date
No. No. Amount Dispatch
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(Rs.)
QUBB 5043ILCIS1302 UNICON - 3556319 31.12.2013 24.03.2014
QUBB 5043ILCIS1302 UNICON - 266042 09.01.2014 24.03.2014
20/14 84 131S
QUBB 5043ILCIS1302 UNICON - 3015926 02.01.2014 27.03.2014
QUBB 5043ILCIS1302 UNICON - 181337 09.01.2014 27.03.2014
21/14 89 132 S
QUBB 5043ILCIS1302 UNICON- 910979 20.01.2014 10.04.2014
7.3 The aforesaid letters of credit were subject to the latest UCP (UCP 600). The
Plaintiff asserts that to encash the aforesaid letters of credit, all the commercial
documents like invoices, delivery challans, lorry receipts etc., were presented to the
Defendant No.1 through Defendant No.2 negotiating bank. The Defendant No.1 failed
and neglected to inform any discrepancy thereunder within 5 days of the receipt of the
documents as mandated by UCP 600.
7.4 Despite rigorous persuasion, Defendant No.1 did not honour letters of
credit. Nor gave any reason for not encashing the letters of credit. It was only on 7 th
May, 2014 the Defendant No.1 informed Defendant No.2 about the alleged
notification of discrepancy and refusal to honour the letters of credit. In fact on 28 th
April, 2014 itself Defendant No.3 had informed Defendant No.1 that it had accepted
all the discrepancies and requested Defendant No.1 to retire all the bills and make
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payment to the Plaintiff. Yet the Defendant No.1 in breach of its obligation under the
letters of credit declined to honour the letters of credit on the premise that the
Defendant No.3 had not, in turn, made the payment. The aforesaid stand of
Defendant No.1 was in clear breach of its obligation as the issuing bank in a transaction
effected through documentary credit.
7.5 The Plaintiff has also asserted that the Defendant No.3 issued the
cheques to discharge its liability to pay the price of the goods sold and delivered and all
those cheques were dishonoured on presentment. However, since the suit has been
decreed as against Defendant No.3, on the basis of the Consent Terms, for the
present, I deem it superfluous to delve into the second limb of Plaintiff's claim.
8. Upon being served with the Summons for Judgment, Defendant No.1
(Vijaya Bank) has filed an affidavit in Reply seeking unconditional leave to defend the
Suit. Defendant No.1 contends the Suit is hopelessly barred by the limitation. Since
the Defendant No.1 had conveyed its decision not to honour the letters of credit to
Defendant No.2 - negotiating bank, in the month of January 2014, the institution of
the suit on 20th March, 2017 is stated to be clearly beyond the period of limitation. It is
contended that Defendant No.2 negotiating bank was the agent of the Plaintiff and,
therefore, the Plaintiff cannot be permitted to urge that cause of action arose on the
date the Plaintiff became aware of the refusal to honour the letters of credit.
9. Defendant No.1 further contends that the suit, even otherwise, raises
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number of complex issues including interpretation of the terms of the contract, which
can only be determined after recording evidence. Therefore, many triable issues arise
for consideration which warrant unconditional leave to defend. In particular, the
question as to whether Defendant No.1 had notified the discrepancies, immediately
after the Defendant No.2 had presented the commercial documents for encashment,
or the said communications were 'ante dated', as alleged by the Plaintiff, is essentially a
question rooted in facts and warrants trial. On this count also, Defendant No.1
deserves unconditional leave.
10. It is further contended that the Plaintiff has accepted the cheques drawn
by Defendant No.3 towards discharge of the underlying liability i.e. unpaid price of the
goods sold and delivered by the Plaintiff to Defendant No.3. Few of those cheques
were, in fact, honoured. Therefore, having accepted those cheques, the Plaintiff is
not entitled to again institute a suit against the Defendants on the basis of the letters of
credit. The Plaintiff is also alleged to be guilty of breach of the terms of the contract
in directly delivering the goods to defendant No.3 without presenting the bills to the
Defendant No.1. On these, amongst other grounds, Defendant No.1 prayed for an
unconditional leave to defend the Suit.
11. Defendant No.2 has also filed an Affidavit in Reply. Impleadment of
Defendant No.2 as party Defendant to the Suit is said to be an abuse of the process of
law as Defendant No.2 had merely acted as a negotiating bank. On merits, Defendant
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No.2 contends that the Defendant No.1 had not notified the discrepancies in the
documents at any time prior to 9th May, 2014, though the commercial documents were
presented for encashment by the Defendant No.2 in January, 2014. It is further
contended that the Defendant No.2 had pursued the matter with Defendant No.1 as
part of prudent banking practice. However, that would not make Defendant No.2
liable for not honouring the letters of credit. In the passing, Defendant No.2 states
that the suit involves several complicated facts and triable issues which are not
amenable to summary disposal.
12. Affidavits in Rejoinder are filed on behalf of the Plaintiff.
13. I have heard Mr. Kulkarni, learned Counsel for the Plaintiff, Mr. Sanjeev
Punalekar, learned Counsel for Defendant Nos.1. With the assistance of the learned
Counsel for the parties, I have perused the pleadings, Affidavit in support of the
Summons for Judgment and the Affidavits in Rejoinder thereto. I have also perused
the documents placed on record.
14. In the context of the controversy between the Plaintiff and Defendant
Nos.1 and 2, which arises out of the issue of letters of credit, the following facts appear
rather incontestable. At the instance of M/s. Unicon Connector Pvt. Ltd. - Defendant
No.3, the Defendant No.1 Bank had issued first letter of credit bearing
No.5043ILCIS130284 dated 17th December, 2013 for an amount of Rs.43,05,750.00,
wherein the Plaintiff was named the beneficiary. The letter of credit was subject to
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UCP latest version. It was of 90 days Usance. The said letter of credit was in respect
of copper wire rods 8MM DIA standard and the documents required were bill of
exchange, invoices, lorry receipt/delivery challans. It was irrecovable. The second
letter of credit was issued on 26th December, 2013 with identical terms and conditions
for an amount of Rs.43,05,750/-. The sale and delivery of the goods, as such, is not
much in dispute.
15. In the case at hand, we are essentially concerned with the documentary
credit. The chart extracted above would indicate that the commercial documents in
respect of invoices No.UNICON-113 and 131S for Rs.35,56,319/- and Rs.2,66,042/-
relatable to LC 284 were dispatched on 31st December, 2013 and 9th January, 2014.
The date of maturity was 24th March, 2014. In respect of Unicon Invoice No.116, 132
and 137 for Rs.30,15,926/-, Rs.1,81,337 and Rs.9,10,979 respectively relatable to LC
No.289, the documents were dispatched on 2 nd January, 2014, 9th January, 2014 and
20th January, 2014, respectively, and the dates of maturity were 27 th March, 2014, 27th
March, 2014 and 10th April, 2014.
16. At the hub of the controversy between the parties is the alleged
notification of discrepancies by Defendant No.1 'the issuing bank' to Defendant No.2
'the negotiating bank'. It is the claim of Defendant No.1 that it had notified the
discrepancies in respect of invoice No.Unicon 113 (LC 284) on 5 th January, 2014,
Unicon 131S (LC No.284) on 18th January, 2014, Unicon 116 (LC No.289) on 5 th
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January, 2014, Unicon 132S (LC No.289) on 18 th January, 2014 and Unicon 137 (LC
No.289) on 27th January, 2014. In contrast, on behalf of Defendant No.2, oath is put
behind the assertion that Defendant No.1 had not at all notified the discrepancies till
9th May, 2014.
17. It would be contextually relevant to note that the defence of bar of
limitation also hinges upon the alleged notification of discrepancies, as Defendant
No.1 contends that the notification of discrepancies constitutes a communication of
refusal to honour the letters of credit, until the conditions were fulfilled, and,
consequently, the period of limitation would start from the dates of those
communications.
18. Before adverting to deal with the aforesaid contentious issue, it may be
advantageous to notice the principles which govern the grant of leave to defend the
summary suit. In the case of Raj Duggal V/s. Ramesh Kumar Bansal1, the Supreme
Court laid down the test succinctly as under :
"3. Leave is declined where the Court is of the opinion
that the grant of leave would merely enable the defendant to
prolong the litigation by raising untenable and frivolous
defences. The test is to see whether the defence raises a real
issue and not a sham one, in the sense that if the facts alleged by
the defendant are established there would be a good or even a
plausible defence on those facts. If the Court is satisfied about
1 1999 Supp (1) SCC 191
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that leave must be given. If there is a triable issue in the sense
that there is a fair dispute to be tried as to the meaning of a
document on which the claim is based or uncertainty as to the
amount actually due or where the alleged acts are of such a
nature as to entitle the defendant to interrogate the plaintiff or
to cross-examine his witnesses leave should not be denied.
Where also, the defendant shows that even on a fair probability
he was a bona fide defence, he ought to have leave. Summary
judgments under Order 37 should not be granted where serious
conflict as to matter of fact or where any difficulty on issues as
to law arises. The court should not reject the defence of the
defendant merely because of its inherent implausibility or its
inconsistency."
19. In a recent pronouncement in the case of B.L. Kashyap
and Sons Limited vs. JMS Steel and Power Corporation and Anr. 2 after
considering the judgments of the Supreme Court in the cases of Mechelec Engineers
& Manufacturers vs. Basic Equipment Corpn.3 and IDBI Trusteeship Services
Ltd. vs. Hubtown Limited4, wherein the tests were reformulated, the Supreme
Court enunciated the principles as under :
"33. It is at once clear that even though in the case of IDBI
Trusteeship, this Court has observed that the principles stated in
2 (2022) 3 SCC 294
3 (1976) 4 SCC 687
4 (2017) 1 SCC 568
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paragraph 8 of Mechelec Engineers' case shall stand superseded
in the wake of amendment of Rule 3 of Order XXXVII but, on the
core theme, the principles remain the same that grant of leave to
defend (with or without conditions) is the ordinary rule; and
denial of leave to defend is an exception. Putting it in other words,
generally, the prayer for leave to defend is to be denied in such
cases where the defendant has practically no defence and is unable
to give out even a semblance of triable issues before the Court.
33.1 As noticed, if the defendant satisfies the Court that he has
substantial defence, i.e., a defence which is likely to succeed, he is
entitled to unconditional leave to defend. In the second
eventuality, where the defendant raises triable issues indicating a
fair or bonafide or reasonable defence, albeit not a positively good
defence, he would be ordinarily entitled to unconditional leave to
defend. In the third eventuality, where the defendant raises triable
issues, but it remains doubtful if the defendant is raising the same
in good faith or about genuineness of the issues, the Trial Court is
expected to balance the requirements of expeditious disposal of
commercial causes on one hand and of not shutting out triable
issues by unduly severe orders on the other. Therefore, the Trial
Court may impose conditions both as to time or mode of trial
as well as payment into the Court or furnishing security. In the
fourth eventuality, where the proposed defence appear to be
plausible but improbable, heightened conditions may be imposed
as to the time or mode of trial as also of payment into the Court or
furnishing security or both, which may extend to the entire
principal sum together with just and requisite interest.
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33.2 Thus, it could be seen that in the case of substantial defence,
the defendant is entitled to unconditional leave; and even in the
case of a triable issue on a fair and reasonable defence, the
defendant is ordinarily entitled to unconditional leave to defend.
In case of doubts about the intent of the defendant or
genuineness of the triable issues as also the probability of defence,
the leave could yet be granted but while imposing conditions as to
the time or mode of trial or payment or furnishing security. Thus,
even in such cases of doubts or reservations, denial of leave to
defend is not the rule; but appropriate conditions may be imposed
while granting the leave. It is only in the case where the defendant
is found to be having no substantial defence and/or raising no
genuine triable issues coupled with the Court's view that the
defence is frivolous or vexatious that the leave to defend is to be
refused and the plaintiff is entitled to judgment forthwith. Of
course, in the case where any part of the amount claimed by the
plaintiff is admitted by the defendant, leave to defend is not to be
granted unless the amount so admitted is deposited by the
defendant in the Court.
33.3 Therefore, while dealing with an application seeking leave to
defend, it would not be a correct approach to proceed as if
denying the leave is the rule or that the leave to defend is to be
granted only in exceptional cases or only in cases where the
defence would appear to be a meritorious one. Even in the case of
raising of triable issues, with the defendant indicating his having a
fair or reasonable defence, he is ordinarily entitled to
unconditional leave to defend unless there be any strong reason to
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deny the leave. It gets perforce reiterated that even if there
remains a reasonable doubt about the probability of defence,
sterner or higher conditions as stated above could be imposed
while granting leave but, denying the leave would be ordinarily
countenanced only in such cases where the defendant fails to
show any genuine triable issue and the Court finds the defence to
be frivolous or vexatious."
20. In the context of the controversy revolving around the documentary
credit, it would also be advantageous to note the nature of jural relationship brought
about by the letters of credit and the value of Uniform Commercial Practice Of
Documentary Credit, subject to which letters of credit were issued.
21. In the case of Federal Bank Ltd. V/s. V.M.Jog Engineering Ltd. and
Ors.5 the Supreme Court had an occasion to consider the UCP Code (1983 Revision).
It was, inter alia, observed as under :
"35. This Court had occasion in United Commercial Bank
V/s. Bank of India6 to refer to the Uniform Customs and
Practices for Documentary Credits ('UCP' for short) by which
the
"general provisions and definitions and the Articles
following are to apply to all documentary credit and binding
upon all parties thereto, unless otherwise expressly agreed"
UCP states that it shall be deemed incorporated into
5 (2001) 1 SCC 663
6 (1981) 2 SCC 766
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each documentary credit if there are words in the credit
indicating that such credit was issued subject to Uniform
Customs and Practices of Documentary Credits.
36. UCP has been formulated by the International
Chamber of Commerce. Prof. R.M.Goode described it as the
"most successful harmonising measure in the history of
international commerce". Prof. E.P.Ellinger stated that UCP
was the result of necessity and the need for use of banks as
agents in international trade. The first UCP was drafted in 1929,
the next one in 1933, then in 1951, 1962 and 1974 and 1983. The
1983 version (relevant in the case before us) was used in 170
countries. ( It was revised in 1990 and 1993). The New York
Version of it revised in 1998.). See Principles of International
Trade Law by Indira Carr, 2nd Edn., 1999).
37. In the absence of incorporation, UCP will not apply
but it can be taken into account as part of mercantile custom and
practices and most of it is also treated as part of common law,
barring a few differences. If an express term in the contract
contradicts UCP terms, the correct prevails. Mustill, J. in
Royal Bank of Scotland Plc V/s. Cassa Di Risparmio Delle
Provincie Lombard7 said :
".... It must be recognized that (UCP) terms do not
constitute a statutory code. As the title marks clear, they constitute a
formulation of customs and practices, which the parties to a letter of
credit can incorporate into their contracts by reference. If it is found
that the parties have explicitly agreed to such a term, then the search
7 Financial Times 21-01-1992
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need go no further, since any contrary provision in UCP must yield to
the parties expressed intention."
22. After referring to various clauses of UCP Code (1983 Revision), the
Supreme Court, in the context of grant of injunction by a court restricting encashing
of bank guarantees or letters of credit, observed as under :
55......In case of an irrevocable bank guarantee or letter of credit the buyer
cannot obtain injunction against the banker on the ground that there was a
breach of the contract by the seller. The bank is to honour the demand for
encashment if the seller prima facie complies with the terms of the bank
guarantee or the letter of credit, namely, if the seller produces the documents
enumerated in the bank guarantee or the letter of credit. If the bank is
satisfied on the face of the documents that they are in conformity with the list
of documents mentioned in the bank guarantee or the letter of credit and
there is no discrepancy, it is bound to honour the demand of the seller for
encashment. While doing so it must take reasonable care. It is not
permissible for the bank to refuse payment on the ground that the buyer is
claiming that there is a breach of contract. Nor can the bank try to decide this
question of breach at that stage and refuse payment to the seller. Its
obligation under the document having nothing to do with any dispute as to
breach of contract between the seller and the buyer."
(emphasis supplied)
23. In the case at hand, the following clauses of UCP 600 are relevant :
Article 14 (f ) : If a credit requires presentation of a document other
than a transport document, insurance document or commercial invoice, without
stipulating by whom the document is to be issued or its data content, banks will accept
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the document as presented if its content appears to fulfill the function of the required
document and otherwise complies with sub-article 14(d).
Article 15 - Complying Presentation
a. When an issuing bank determines that a presentation is
complying, it must honour.
b. When a confirming bank determines that a presentation is
complying, it must honour or negotiate and forward the documents to the issuing
bank.
c. When a nominated bank determines that a presentation is
complying and honours or negotiates, it must forward the documents to the
confirming bank or issuing bank.
Article 16 - Discrepant Documents, Waiver and Notice :
a. When a nominated bank acting on its nomination, a confirming
bank, if any, or the issuing bank determines that a presentation does not comply, it may
refuse to honour or negotiate.
b. When an issuing bank determines that a presentation does not
comply, it may in its sole judgement approach the applicant for a waiver of the
discrepancies. This does not, however, extend the period mentioned in sub-article
14(b).
c. When a nominated bank acting on its nomination, a confirming
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bank, if any, or the issuing bank decides to refuse to honour or negotiate, it must egive
a single notice to that effect to the presenter.
The notice must state :
i. That the bank is refusing to honour or negotiate; and
ii. each discrepancy in respect of which the bank refuses to honour
or negotiate; and
iii.
a) that the bank is holding the documents pending further
instructions from the presenter; or
b) that the issuing bank is holding the documents until it receives a
waiver from the applicant and agrees to accept it, or receives further instructions from
the presenter prior to agreeing to accept a waiver; or
(c) that the bank is acting in accordance with instructions previously
received from the presenter.
d. The notice required in sub-article 16(c) must be given by
telecommunication or, if that is not possible, by other expeditious means no later than
the close of the fifth banking day following the day of presentation.
e. A nominated bank acting on its nomination, a confirming bank, if
any, or the issuing bank may, after providing notice required by sub-article 16(c) (iii) or
(b), return the documents to the presenter at any time.
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f. If an issuing bank or a confirming bank fails to act in accordance
with the provisions of this article, it shall be precluded from claiming that the
documents do not constitute a complying presentation.
g. When an issuing bank refuses to honour or a confirming bank
refuses to honour or negotiate and has given notice to that effect in accordance with
this article, it shall then be entitled to claim a refund, with interest, of any
reimbursement made.
Article 18 - Commercial Invoice
a. A commercial invoice :
i. Must appear to have been issued by the beneficiary (except as
provided in article 38);
ii. Must be made out in the name of the applicant (except as
provided in sub-article 38(g);
iii. Must be made out in the same currency as the credit; and
iv. Need not be signed.
b. a nominated bank acting on its nomination, a confirming bank, if
any, or the issuing bank may accept a commercial invoice issued for an amount in
excess of the amount permitted by the credit, and its decision will be binding upon all
parties, provided the bank in question has not honoured or negotiated for an amount
in excess of that permitted by the credit.
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c. the description of the goods, services or performance in a
commercial invoice must correspond with that appearing in the credit.
24. Under Article 14 (b), it is incumbent upon the issuing bank to determine
within maximum of five banking days following the day of presentation whether the
presentation of documents is in order. The determination must be based on the
documents alone. Under Article 16(a) if the issuing bank determines that a
presentation does not comply, it may refuse to honour or negotiate. It may also in its
discretion approach the applicant for waiver of the discrepancies. Clause (b) further
clarifies that this does not, however, extend the period mentioned in sub-clause 14(b).
Sub-clause (c) of Article 16 stipulates what a notice, in the event of refusal, should
state. Sub-clause (d) indicates the mode of communication namely
telecommunication or other expeditious means, not later than the close of the fifth
banking day following the day of presentation. Sub-clause (f ) of Article 16 provides
that if the issuing bank fails to act in accordance with the provisions of this article, it
shall be precluded from claiming that the document do not constitute a complying
presentation.
25. In the light of the aforesaid terms of UCP 600, reverting to the facts of
the case, twin controversy arises. First, whether the notification of discrepancies was
in time, if indeed there was one. Second, whether the Defendant No.1 bank was
justified in notifying discrepancies and the consequent refusal to honour the letters of
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credit.
26. On the first count, as noted above, there is a serious dispute between
Defendant Nos.1 and 2. Defendant No.2 asserts no discrepancies were notified till 9 th
May, 2014 despite repeated reminders by Defendant No.2. In contrast, Defendant
No.1 contends discrepancies were notified in the month of January, 2014 itself and the
copies of the communication notifying the discrepancies were annexed to the letter
dated 9th April, 2014 onwards.
27. Mr. Kulkarni, learned Counsel for the Plaintiff took the Court through
the record to urge that the aforesaid stand of Defendant No.1 is demonstrably false.
Attention of the Court was invited to the letter dated 5 th February, 2015 addressed on
behalf of Defendant No.1 to the effect that the Defendant No.2 was notified about the
discrepancies on 8th January, 2014 itself and proof of delivery was also sought to be
annexed thereto. It was urged that the communication by the courier through whom
the said article was allegedly delivered belies the claim of the Defendant No.1, as the
courier has categorically asserted that the article referred to in the receipt which
constitutes the alleged proof of delivery was, in fact, delivered on 9 th May, 2014.
28. In the aforesaid view of the matter, at this juncture, the question as to
whether Defendant No.1 had notified the discrepancies on the dates claimed by it, is in
the arena of controversy and the defence in this backdrop cannot be said to be a
positive defence. A triable issue as regards the exact date of the notification of the
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discrepancies may, however, arise. This also bears upon the defence of limitation as
that aspect is rooted in facts and is a mixed question of fact and law.
29. Mr. Kulkarni was justified in canvassing a submission that the alleged
notification of discrepancies, even if assumed to have been made, cannot be said to be
genuine and bonafide. Two discrepancies were notified. First, 'invoice not in terms of
LC'. Second, 'Transporter not IBA approved'. Second condition is not simply borne
out by the terms subject to which the letters of credit were issued. It was nowhere
stipulated that the transporter should be IBA approved. Even the first discrepancy of
"invoice not in terms of LC" also does not appear to have been borne out by the terms
and conditions of letters of credit and UCP 600. This throws a considerable doubt
about the probability of defence. Fairness and reasonable of this defence is, thus,
suspect.
30. As noted above, the letters of credit required bills of exchange, invoice,
lorry receipt and delivery challans. Under UCP 600 the requirement of commercial
invoices are prescribed (extracted above). From the bare perusal of the invoices raised
by the Plaintiff, requisite elements to constitute the commercial invoice within the
meaning of Article 18 of UCP 600 seem to have been made out as they were issued by
the beneficiary, they were made out in the name of Defendant No.3 and they were
made out in same currency as that of credit.
31. The situation which thus obtains is that, in the circumstances of the
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case, a very heavy onus would lay upon the Defendant No.1 to justify its refusal to
honour the letters of credit. The situation is further accentuated by the fact that by a
communication dated 28th April, 2014, Defendant No.3 informed Defendant No.1 that
it had accepted all the discrepancies and were ready to accept any future discrepancies
raised by Defendant No.1. Furthermore, defendant No.3 requested Defendant No.1
to retire all the bills and make payment to the Plaintiff. To add to this, in the
communication addressed to the Defendant No.2, Defendant No.1 took a stand that
they had instructed LC Applicant (Defendant No.3) for arranging the payment to their
account so as to settle the payment under the letters of credit at an early date. This
stand of Defendant No.1 is in clear negation of the jural relationship brought about by
the letters of credit.
32. In the aforesaid view of the matter, if the matter was to be decided solely
on the basis of jural relationship arising out of letters of credit, the Court may be
justified in declining to grant leave to defend the Suit. In any event, the Defendants
would not be entitled to an unconditional leave to defend the Suit. However, the
events which have transpired during the pendency of the suit deserve cautious
cognizance.
33 As noted above, the suit has been decreed on the basis of the consent
terms arrived at between the Plaintiff and Defendant No.3. Indisputedly, Defendant
Nos.1 and 2 were not parties to the said consent terms. The Plaintiff is, thus, armed
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with a decree against Defendant No.3. Undoubtedly, the liability of the Defendant
Nos.1 to 3 emanating from the letters of credit is joint and several. The Plaintiff may
be justified in independently prosecuting the claim against Defendant Nos.1 and 2 till
his entire claim is fully satisfied. Yet, it is imperative to note that by an order dated
13th July, 2021 this Court directed Defendant No.1 to deposit 3 rd Defendant's title deed
in this Court without prejudice to the Defendant No.1 bank's rights and contentions in
the Suit. The said order was passed as Defendant No.1 took a stand that it cannot
part with the title deeds of Defendant No.3 which is the last security which the bank
holds in the face of the present claim against Defendant No.1.
34. Resultantly, the claim of the Plaintiff stands secured with the deposit of
the title deeds of the property of Defendant No.3 in Court. In my view, this
constitutes a sufficient security for the Plaintiff and subject to continued deposit of the
title deeds of Defendant No.3 in Court, it may be expedient to grant leave to
Defendant Nos.1 and 2 to defend the Suit.
35. Hence, the following order :
ORDER
(i) Leave is granted to Defendant Nos.1 and 2 to defend the Suit on
the condition that the Defendant No.1 shall continue to keep the title deeds of
Defendant No.3 with this Court.
(ii) Defendant Nos.1 and 2 shall file written statements within a
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period of 30 days from the date of this order.
(iii) The Summons for Judgment stands disposed.
( N.J.JAMADAR, J. )
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