Jay Pee Exports Ltd. vs Importodora Kid K.A. De. C.V. And ...
2005 Latest Caselaw 468 Del

JUDGMENT

T.S. Thakur, J.

1. The plaintiff has filed a suit for recovery of a sum of Rs.28,81,748.20/- representing the invoice value of goods supplied to defendants No. 1 and 3, banking expenses incurred in connection with the said supply, interest and loss of profit. The claim arises in the following circumstances :-

The plaintiff is engaged in the manufacture and export of readymade garments. Defendants No. 1 and 3 are also companies CS(OS) 99/1998 registered under the laws of Mexico and laws of Hongkong respectively. The plaintiff's case is that on or around September, 1993, defendant No. 2 who claimed to be an agent of defendant No. 1 in India approached the plaintiff and expressed the desire to place an order for supply of merchandise of specific style and quality. The said defendant is alleged to have represented to the plaintiff that defendant No. 1 will open an Irrevocable Confirmed Letter of Credit favoring the plaintiff for payment of the value of goods to be supplied by the plaintiff. Following the negotiations that appear to have taken place between the plaintiff and defendant No. 2, the latter placed a confirmed order for supply of goods of specific style, quantity and quality detail whereof have been given in para 4 of the plaint as under :-

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S.No.    STYLE NO.      US FOB US
 1.      9865/8018     Poplin Ladies
Vests with
Crochet Lace 1800 pcs 5.00 9000.00
2.       9748/8017    Poplin Ladies
Vests with
Crochet Lace 1800 pcs 5.00 9000.00
3.       9929/8019    Popline Ladies
Vests with
Laces and EMBR1800 pcs 5.50 9900.00
CS(OS)   99/1998
4.       9653/8015      Chamb Blue
Vests with
Laces and EMBR1440 pcs 5.00 7200.00
5.       9866/8016       Chamb Blue
Vests with
Natural Chrochet
Lace 1440 pcs 5.00 7200.00
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TOTAL
PCS.     8280 PCS    TIL. 42,300.00
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2. The plaintiff's further case is that defendant No. 3 opened a Confirmed Irrevocable Letter of Credit at the instance of Defendant No. 1 for a sum of 42,300 favoring the plaintiff at the Branch of Defendant No. 4, advice in respect whereof was received through the plaintiff's bank. Plaintiff claims to have pursuant to the above manufactured/fabricated the ordered goods and called upon Defendant No. 2 as the agent for Defendant No. 1 to inspect the same. Defendant No. 2 accordingly is alleged to have inspected the manufactured goods on 14th February, 1994 at the plaintiff's factory and found the same to be in order. A certificate of inspection confirming that the merchandise is suitable for shipment was also issued in accordance with the conditions of confirmed Irrevocable Letter of Credit under which Defendant No. 5 was nominated by Defendants No. 1 and 2 as the Shipping Agent. The plaintiff claims to CS(OS) 99/1998 have arranged transport of the goods in question for being handed over to Defendant No. 5 the Shipping Agent nominated by Defendant No. 1 on 21st February, 1994, i.e., well before the date of shipment.

3. The plaint goes to say that after the merchandise was handed over to Defendant No. 5, the nominated Shipping Agent, the Agent arranged shipment of the merchandise with Defendant No. 6 to issue a Bill of Lading. The plaintiff on receipt of the said Bill of Lading Along with other documents including the invoices forwarded the same to Canara Bank, Hanuman Lane, New Delhi for further deliberations. In the meanwhile, Defendant No. 5 the nominated Agent of Defendant No. 1 arranged custom clearance and the shipment left Bombay Port on 6th March, 1994. The plaintiff's version is that the documents prepared in accordance with the conditions contained in Confirmed Irrevocable Letter of Credit were tendered to the plaintiff's bank for presentation and negotiation of payment and that the plaintiff was given credit of the negotiated amount by its Bank. On or about 19th August, 1994, however, the plaintiff noticed that its bankers had debited the bill amount that it had negotiated for the plaintiff and there alone debited the plaintiff's account additionally in a sum of Rs. 52,017/- representing the interest charged for non-payment of the bill. Enquiries were made from the Canara Bank who CS(OS) 99/1998 were requested to represent the bill and in the event of its non-payment, to lodge a protest. The plaintiff also addressed a communication to Defendant No. 6 asking for information regarding the status of the goods. Plaintiff's case is that on 7th February, 1995, Defendant No. 6 for the first time informed the plaintiff that Defendant No. 1 had refused to accept the shipment allegedly due to discrepancies in the Letter of Credit and further conveyed that the said defendant is seeking information from the Mexico Customs Authorities if the shipment is available in the warehouse. The plaintiff claims to have contacted Defendant No. 2 immediately thereafter and demanded from the said defendant the reasons for non-acceptance of the shipment. Defendant No.6 did not, however, respond to queries made by the plaintiff nor did he disclose the fate of the shipment despite a written request to that effect. The plaintiff's claim in the above backdrop is that the defendants failed to discharge their obligations on law resulting in the loss of the goods and that they acted wrongfully and in total disregard of the terms subject to which the transaction had been finalised. The plaintiff's version is that it is not only deprived of the value of the shipment but has been burdened with large amounts by way of interest. The defendants have according to the allegations made in the plaint acted in collusion and thereby deprived the plaintiff of the value of the goods CS(OS) 99/1998 and other benefits. Plaintiff also claims to have suffered business losses apart from exposing the plaintiff to severe consequences by the Government agencies. The plaintiff's further case is that Defendants No. 1 - 3 had failed to honour their obligations in accordance with the Letter of Credit to make the payment on the claims made on it for the loss suffered. Their conduct was mala fide, unjust and wrongful especially when the commercial risk was covered by the Letter of Credit issued by the Bank it the instance of Defendant No. 3. The plaintiff has, in the above backdrop, claimed the following amounts :-

1. Invoice value of the goods 42,300 Convertible currency of exchange at that time Rs.31/- per US Rs.13,22,721.00

2. Amount debited by the plaintiff's bankers to the account of the plaintiff Rs. 52,017.00

3. Interest @ 18% on the aforesaid Rs. 6,57,010.20 amounts

4. Loss of profits Rs. 8,50,000.00 Rs.28,81,748.20

4. Interest @ 18% per annum from the date of the institution till realisation has also been prayed for.Defendant No. 1 and 3 have not filed any written statement, although written statements have been filed on behalf of Defendants No. CS(OS) 99/1998 . It is unnecessary, in my opinion, to refer to the said written statements having regard to the fact that the plaintiff has given up its claim against all the defendants except defendants No. 1 and 3 who have been set ex parte. A statement to that effect was made by Ms. Yashmeet Kaur, counsel for the plaintiff on 27th January, 2005 which has been separately recorded. The plaintiff has also declined to produce any evidence except what is already filed in the form of an affidavit to be treated as examination-in-chief.

5. Sh. Prakash G. Dudani has in his affidavit inter alia stated that the deponent is the permanent director of the plaintiff company at its principal office. The affidavit recounts the circumstances in which an order for the supply of the goods was placed with the plaintiff company and the goods eventually shipped. It refers to a letter of credit marked as Ex.PW-1/2, the amendment to the said letter marked Ex.PW-1/3, the certificate issued by defendant No. 2 as the agent of defendant No. 1 regarding the goods being in order marked Ex.PW-1/4, the cargo receipt showing dispatch of the goods by the plaintiff to defendant No. 5 marked Ex.PW-1/5 and the bill of lading issued by defendant No. 6 evidencing the shipment of the goods marked Ex.PW-1/6. The affidavit also marks the original invoice as Ex.PW-1/7 and the original packing list as Ex.PW-1/8. CS(OS) 99/1998 The statement of account issued by the plaintiff's bank in respect of the debit entry of Rs.52,070/- is marked Ex.PW-1/10 and a telex dated 23rd August, 1994 received by the plaintiff's bankers stating that the foreign bank had received instructions from the buyer that they will not accept the payment marked as Ex.PW-1/11. The letter received from the foreign bank dated 23rd September, 1994 returning the original documents to the plaintiff's bankers has been marked Ex.PW-1/12 whereas the letter received from defendant No. 6 informing the plaintiff that defendant No. 1 had refused to accept the shipment due to a discrepancy in the letter of credit marked as Ex.PW-1/13. The affidavit goes on to state that the purchaser defendant No. 1 had, without any case, refused to take delivery of the merchandise at the destination even when the confirmed letter of credit was irrevocable. Defendants 3 and 4 could not, therefore, refuse to make the payment on the said credit.

6. What is significant in the affidavit is that the same claims a profit margin of 25% on the invoice value. The affidavit also claims a further benefit in the form of statutory duty drawback of 10% of the invoice value. The approximate business loss for one year on the invoice value, therefore, has been calculated at Rs.4,25,000/- and the claim for Rs.8,50,000/- made in the plaint justified by taking into account the CS(OS) 99/1998 page 8 of 11 business loss for two years.

7. Having heard learned counsel for the plaintiff and having perused the material on record, I am of the view that the plaintiff is indeed entitled to a decree for a sum of Rs.13,22,721/- representing the invoice value of the goods shipped to defendant No. 1. I am also of the view that the debit of Rs.52,017/- by the plaintiff's bankers on account of interest charged for non-payment of the bill is a legitimate burden that must fall on the defendants, as a result of the failure of the defendant buyer to tae the delivery of the goods at the destination. That leaves me with two other items claimed by the plaintiff, namely, interest @ 18% p.a. amounting to Rs.6,57,010.20 and loss of profit amounting to Rs.8,50,000/-. In so far as the payment of interest in concerned, the affidavit filed by the plaintiff does not disclose either a contract between the parties regarding such payment or any trade practice under which the same may be cleared. There is no foundation laid for the claim for payment of interest even in the plaint. In the circumstances, I find it difficult to award the suit claim in so far as the same comprises interest at the rate of 18% or at any lesser rate. The loss of profit of Rs.8,50,000/- is also, in my opinion, based on a surmise that the profit margin is as high as 25%. It is true that the plaintiff has, in the affidavit, made a claim to that CS(OS) 99/1998 effect but there is nothing except the oral assertion made in the affidavit to that effect. The plaintiff has obviously withheld with the best evidence available in regard to this aspect comprising its records regarding similar transactions or supplies on the past which could and ought to have been produced by it. All the same, it cannot be said that the plaintiff could not have or did not suffer any business loss as an element of profit in a commercial transaction is what the parties to the transaction eventually look at. A certain amount of profit must, therefore, be conceded to the plaintiff even if it is not as high as 35% (25% towards profit+ 10% towards duty pay back) claimed by it. Having regard to the totality of the circumstances, I am of the view that 10% of the invoice value could be termed as the profit which plaintiff would have earned from out of the transaction if it had not run into rough waters. I accordingly allow a sum of Rs.1,32,272.10 to the plaintiff towards loss of profit.

8. In the result, the plaintiff is entitled to a decree for the following amounts against Defendants No. 1 and 3 only :

(i) Towards value of the goods Rs.13,22,721.00

(ii) Towards the amount debited by the plaintiff's bankers on account of interest charged Rs,52,017.00 and

(iii) Towards loss of Profit Rs.1,32,272.00

CS(OS) 99/1998

9. This suit is accordingly decreed against Defendants No. 1 and 3 to the extent of Rs.15,07,010.10 only with interest pendente lite and till realisation @6% p.a. and proportionate cost. In so far as the remaining defendants are concerned, the suit shall stand dismissed as withdrawn.