State Bank Of India vs M/S. Malini Management And ...
2016 Latest Caselaw 5698 Del

*             IN THE HIGH COURT OF DELHI AT NEW DELHI

+ RSA No.89/2010 & C.M. Appl. No. 8402/2010 (for stay, under Order
  XLI Rule 5 read with Order XLI Rule 1(3) r/w Section 151 CPC)

%                                                             31st August, 2016

STATE BANK OF INDIA                                              ..... Appellant
                          Through:       Ms. Vaishali Kakra and Mr. Bheem Sain
                                         Jain, Advocates.
                          versus

M/S. MALINI MANAGEMENT AND CONSULTANCY
PVT. LTD AND ANR.                                               ..... Respondents

Through: None.

CORAM:

HON'BLE MR. JUSTICE VALMIKI J.MEHTA

To be referred to the Reporter or not?        YES

VALMIKI J. MEHTA, J (ORAL)

1. This Regular Second Appeal under Section 100 of the Code of

Civil Procedure, 1908 (CPC) is filed by defendant no. 1/State Bank of

Saurashtra against the concurrent Judgments of the courts below; of the Original

Court/First Court dated 17.7.1999 and the First Appellate Court dated

15.12.2009; and by which judgments the courts below have dismissed the leave

to defend application filed by appellant/defendant no. 1 in a suit for recovery of

Rs.37,455.65/- under Order XXXVII CPC by respondent no.1/plaintiff.

2. The case of respondent no. 1/plaintiff was that it received export

orders from M/s. Vestro of Italy, M/s. Indian Bazar of Rome and M/s.

Modevarsand Ritter International of Austria for readymade garments.

Respondent no.1/plaintiff assigned/transfered this order to defendant

no.2/respondent no.2/M/s. Inter-Sales subject to respondent no. 2 paying 10%

commission charges and design and development charges to respondent no.

1/plaintiff. This amount was agreed to be Rs.42,330/-. In order to secure this

amount to be paid by defendant no.2/respondent no.2 to the respondent

no.1/plaintiff, respondent no.1/plaintiff asked defendant no.2/respondent no.2 to

issue instructions to its bankers (appellant/defendant no.1) for issuing of

irrevocable liability for respondent no.1/plaintiff being paid an amount of

Rs.42,330/- by the appellant/defendant no. 1. Accordingly, appellant/defendant

no. 1 issued its Letter dated 27.4.1983 stating that irrevocable instructions have

been received by it to pay to the respondent no.1/plaintiff an amount of

Rs.42,330/- once the bills with respect to the exported garments are realised by

the appellant/defendant no.1 for the defendant no.2/respondent no.2. This

Letter dated 27.4.1983 reads as under:-

"State Bank of Saurashtra (Subsidiary of the State Bank of India) NEHRU PLACE NEW DELHI Branch M/s. Inter Sales, C-232, Defence Colony, New Delhi.

Our ref. AKD : BL : 293 Date 27/4/ 1983 Dear Sir, FOBC/DOC/4 to 6/83 FOR Rs. 25,000/-

Rs.65,000/- AND Rs.74,520/- As per your irrevocable instructions to us, we shall remit total commission of Rs.42,330/- to M/s. Malini Management and consultancy Pvt. Ltd. directly on realization of the captioned three bills sent by us on collection on your behalf. Yours faithfully, MANAGER"

3. The case of the respondent no.1/plaintiff in the plaint was that in

spite of realization of amounts of the bills, appellant/defendant no.1 did not

make payment of the amount of Rs.42,330/- which the appellant/defendant no.1

had contracted by putting in writing by a Letter dated 27.4.1983, but the

appellant/defendant no. 1 only paid an amount of Rs.8,189.35/- along with the

appellant/defendant no.1's Covering Letter dated 21.7.1983 on the ground that

defendant no.2/respondent no.2 had withdrawn the instructions for payment

given under the Letter dated 27.4.1983. The subject suit therefore came to be

filed for recovery of the difference between Rs.42,330/- and Rs.8,189.35/- along

with interest.

4. Appellant/defendant no.1 entered appearance and filed leave to

defend application which has been dismissed by the impugned Judgment of the

First Court dated 17.7.1999. In the leave to defend application two

basis/grounds of defence were raised by the appellant/defendant no.1. First was

that there was no privity of contract between the appellant/defendant no.1 and

respondent no.1/plaintiff and therefore appellant/defendant no.1 was not liable

to pay any amount to the respondent no.1/plaintiff. The second argument which

was raised was that the Letter dated 27.4.1983 was not in the nature of any

irrevocable letter of credit and therefore the instructions issued by the Letter

dated 27.4.1983 could have been withdrawn by the appellant/defendant no.1.

5. Counsel for the appellant/defendant no.1 once again argues the

same two grounds before this Court for setting aside the judgments of the courts

below. In my opinion both the grounds do not have any merit.

6. Firstly, the issue in the present case is not of any privity of contract

but of the appellant/defendant no.1 being estopped by issuing its Letter dated

27.4.1983 whereby it informed respondent no.2/defendant no.2 that irrevocable

instructions were issued in favour of the respondent no.1/plaintiff for making

payment of an amount of Rs.42,330/- and which letter was forwarded to

respondent no.1/plaintiff and acted upon by the respondent no.1/plaintiff by

issuing inspection certificate of goods to respondent no.2/defendant no.2. It is

not the case of the appellant/defendant no. 1 in the leave to defend application

that this Letter dated 27.4.1983 which was issued by the appellant/defendant no.

1 was not forwarded by respondent no. 2/defendant no. 2 to the respondent

no.1/plaintiff. Therefore, the appellant/defendant no.1 is estopped from acting

against its Letter dated 27.4.1983 once the respondent no. 1/plaintiff received

the Letter dated 27.4.1983, accordingly acted further on the contract and issued

an inspection certificate and thereby export orders were executed by sale of the

readymade garments to the foreign purchasers, and the bills issued with respect

to the exported goods were realized and only then the respondent no. 1/plaintiff

asked the appellant/defendant no. 1 and defendant no. 2/respondent no. 2 for

making payment in terms of the Contract/Letter dated 27.4.1983 for Rs.42,330/-

and the respondent no. 1/plaintiff only received a lesser amount of Rs.8,189.35/.

7. Clearly therefore once irrevocable instructions were issued by the

appellant/defendant no.1, and respondent no.1/plaintiff acted upon the same,

there is a written contract by which appellant/defendant no.1 contracted itself

liable to pay a liquidated amount and is therefore estopped from refusing the

payment as per the Contract/Letter dated 27.4.1983. The issue of privity of

contract is therefore immaterial in the facts of the present case because once the

Contract/Letter dated 27.4.1983 was issued for the benefit of respondent

no.1/plaintiff and respondent no.1/plaintiff acted on that basis, the same results

in the appellant/defendant no.1 being estopped under Section 115 of the Indian

Evidence Act, 1872 from denying payment under the Contract/Letter dated

27.4.1983.

8. So far as issue of the Contract/Letter dated 27.4.1983 not being in

the nature of an irrevocable letter of credit is concerned, once again this

argument holds no water because what is required under Order XXXVII CPC is

a written contract containing liquidated amount and the Contract/Letter dated

27.4.1983 issued by the appellant/defendant no.1 is a written contract

containing a liquidated liability to pay an amount of Rs.42,330/-. Comparison

therefore drawn by the appellant/defendant no. 1 to the Contract/Letter dated

27.4.1983 and a letter of credit is misconceived because the Contract/Letter

dated 27.4.1983 will stand on its own feet and will be covered under Order

XXXVII CPC to fasten liability upon the appellant/defendant no.1.

9. On one aspect however counsel for the appellant/defendant no.1 is

justified for reducing the amount of money decree passed in favour of the

respondent no.1/plaintiff, and which is that the respondent no.1/plaintiff has

claimed interest at the rate of 19.5% per annum as pre-suit interest whereby the

suit amount from the difference of Rs.42,330/- minus Rs.8,189.35/- i.e

Rs.34,140.65/-became Rs.37,455.65. Since there is no written contract for

payment of pre-suit interest, in my opinion, the suit therefore will have to be

decreed with respect to the pre-suit interest only at the banking rate. There is no

document filed on record by the appellant/defendant no.1/Bank as to what

is/was the banking rate and therefore I would take the pre-suit interest also at

12% per annum and which is the rate taken towards pendente lite and future

interest by the impugned judgments. Therefore, the suit will stand decreed by

dismissing the leave to defend application by passing a money decree for a sum

of Rs.34,140.65/- with interest at the rate of 12% per annum from 19.7.1983 till

the date of the filing of the suit on 14.2.1984. Pendente lite and future interest,

however, remain at the same rate of 12% per annum simple.

10. In terms of the present judgment, and since appellant has deposited

amount in this Court pursuant to the Order dated 13.7.2010, the respondent

no.1/plaintiff on approaching the Registry will receive in appropriate

satisfaction the amount as decreed today along with interest accrued thereon on

the amount decreed today as the amount deposited in this Court by the

appellant/defendant no.1 is found to be put in a fixed deposit in this Court.

11. At the time of admission of this Regular Second Appeal the

following substantial question of law was framed:

"Whether the letter dated 27.04.1983 issued by the appellant to respondent No. 2 could be construed as a Bank Guarantee or does the same fulfill the basic characteristics of a Bank Guarantee?"

12. In view of the aforesaid discussion the substantial question of law

is answered against the appellant/defendant no.1 and in favour of respondent

no.1/defendant and accordingly the first appeal is dismissed, leaving the parties

to bear their own costs. However, the money decree is modified by reducing

the pre-suit interest to 12% per annum simple as already stated above.

AUGUST 31, 2016                                         VALMIKI J. MEHTA, J
AK