Madras High Court
Indus Ind Bank Limited vs Sivakumar S/O.Boologapandian on 3 January, 2024
Author: R.Subramanian
Bench: R.Subramanian
THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 03.01.2024
CORAM:
THE HONOURABLE MR. JUSTICE R.SUBRAMANIAN
AND
THE HONOURABLE MR. JUSTICE R.SAKTHIVEL
OSA (CAD) NO.57 OF 2023
AND
CMP NO.12610 OF 2023
Indus Ind Bank Limited
Rep. By its Manager
No.3, Village Road, Nungambakkam,
Chennai – 600 034. ... Appellant
Vs.
1.Sivakumar S/o.Boologapandian
Proprietor Muthuramman and Co.,
No.54, G.V.T. Complex,
Varadarajapuram, Nazrethpuram,
Chennai – 602 103.
2.Surya Exports and Imports
A Firm Rep. By its Proprietor
Mr.N.Surya Srinivas S/o.Bhaskara Rao,
Flat No.15, Rams Flats,
Second Floor, New No.5,
Old No.2-A, Madhavan Nair Road,
Mahalingapuram, Chennai – 600 034.
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3.Indian Bank
Rep. By its Assistant Regional Manager
W-100, II Avenue, Anna Nagar,
Chennai – 600 040. ... Respondents
PRAYER: Appeal filed under Order XXXVI Rule 11 of Original Side
Rules read with C1 XV of Letters Patent, to set aside the order of the
learned Single Judge dated 09.06.2022 made in C.S.(Com.Div) No.591
of 2018.
For Appellant : Mr.E.Om Prakash
Senior Advocate
for M/s.Ramalingam Associates
For Respondent-1 : Mr.SharathChandran
for M/s.Govind Chandrasekhar
For Respondent-2 : No appearance
For Respondent-3 : Mr.G.V.Kalyanaraman
for M/s.Aiyar&Dolia
JUDGMENT
(Judgment of the Court was made by R.SUBRAMANIAN, J.)
This appeal is at the instance of the Bank which figured as the
second defendant in C.S.(Comm.Div) No.591 of 2018.
2.For convenience, the parties will be referred to as per their
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rank in the Suit.
3.The plaintiff sued for recovery of a sum of Rs.1,15,09,628/-
with interest at 18% on the principal amount of Rs.1,06,33,863/- from the
date of plaint till the date of realization. According to the plaintiff, he had
supplied Steel (TMT Bars) weighing about 2,55,540 Kgs at Rs.38.20 per
kg to the first defendant under an Invoice dated 22.05.2017. A Bill of
Exchange was drawn by the plaintiff and the same was discounted with
the plaintiff's Banker, namely the third defendant. The third defendant on
receipt of the Bill of Exchange, forwarded it to the second defendant,
which is the Banker of the first defendant / purchaser seeking its
acceptance for collection. According to the plaintiff, the second
defendant initially accepted the Bill of Exchange, however, subsequently
came up with a false reason that the goods were returned by the buyer for
quality issues and therefore, it is not liable to pay. The plaintiff would
further plead that having accepted the Bill of Exchange through a SFMS
message on 29.05.2017, the second defendant cannot resile from the
contract and refuse to pay on an imaginary pretext of return of the goods.
The plaintiff hence sued for recovery.
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4.The first defendant did not appear either in person or through
counsel duly instructed before the Trial Court. The second defendant
though appeared through a counsel did not file a written statement within
the time allowed under law.
5.The plaintiff was examined as P.W.1 and Exs-P.1 to P.12
were marked. One Mr.K.N.Choudhary, Senior Manager of Indian Bank,
the Banker of the plaintiff was examined as C.W.1 and one
Mr.K.V.S.Prakash Rao, former Additional General Manager of the Anna
Nagar Branch of Indian Bank was examined as C.W.2.
6.The only contention that was raised by the second defendant
Bank was that the transaction was not a 'Discounting of Bill' but it was a
'Document Collection Method' which according to the second defendant
will not involve liability for payment on its part. The second defendant
did not also let in any evidence. Upon consideration of the evidence on
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record, the Commercial Division came to the conclusion that the
transaction is one of bill discounting which would fall within the scope
of Section 37 of the Negotiable Instruments Act, 1881 and therefore, as
the collecting Banker who had assured payment, the second defendant
would also be jointly and severally liable along with the first defendant
for the Suit claim. The learned Trial Judge also took note of the fact that
there was neither pleading nor evidence on the side of the second
defendant Bank. The learned Trial Judge also granted interest at 9% per
annum on the Suit claim. The Suit cost was directed to be paid by the
first and second defendants. Aggrieved by the order, the second
defendant Banker is on appeal.
7.Heard Mr. E. Om Prakash, learned Senior Counsel appearing
for the appellant and Mr. SharathChandran, learned counsel appearing for
the first respondent and Mr. Kalyana Raman, learend counsel appearing
for the third respondent / third defendant Indian Bank.
8.Mr. Om Prakash, learned Senior Counsel appearing for the
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appellant would vehemently contend that the learned Trial Judge was not
right in treating the transaction as a 'Bill Discounting Transaction' where
the appellant had assured payment. According to the learned Senior
Counsel, the transaction is only a 'Document Collection Method' which
does not involve any liability on its part as a collecting Bank.
9.Inviting our attention to the correspondence that has been
marked as Exs-P.5 to P.8, the learned Senior Counsel would contend that
there is no indication in those documents to show that there was an
undertaking to pay in order to create a financial liability on the part of the
second defendant. According to the learned Senior Counsel, the e-mail
dated 06.06.2017 was issued on the pretext that the e-mail will not
amount to an acceptance and the acceptance had to follow.
10.We are unable to accept the said submission of the learned
Senior Counsel for the simple reason that there is neither a plea nor
evidence in support of the said contention of the learned Senior Counsel.
The series of transactions is as follows:
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(i) On 24.05.2017, the third defendant / the plaintiff's Banker
had forwarded a collection schedule to the second defendant requiring
the second defendant to send its acceptance through SFMS and requiring
the second defendant Bank / appellant herein to pay the bill amount of
Rs.1,02,49,709/- on the maturity date i.e., 22.08.2017. The second
defendant Banker had confirmed the same by sending a SFMS message
on 29.05.2017. The print out of the said message has been marked as Ex-
P.6.
11.A perusal of the document shows that the type of message
is 'IFN 754' message and it also indicates the due date as 22.08.2017. It is
not in dispute that this message pertains to the suit transaction. The
Circular of the Reserve Bank of India, issued regarding SFMS messages
between Banks would show that MT 754 amounts to Advice of Payment /
Acceptance / Negotiation and it is also seen from the said Circular that
SFMS messages are sent in MT 754 only when the transaction is secured
by a LC or BG or an OCC limit.
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12.Though Mr. E. Om Prakash, learned Senior Counsel would
contend that there was no underlying LC or BG or an OCC limit in
favour of the first defendant to support these transactions, we are unable
to accept his contention as the arrangement between the first and second
defendants are exclusively within their knowledge and the presence or
absence of LC or BG or an OCC limit will not affect the liability of the
second defendant as against third parties more so when the Bank has
chosen to issue a SFMS message confirming that the bill will be cleared
on 22.08.2017. This is also confirmed by the e-mail dated 06.06.2017
wherein there is a clear and categorical undertaking by the appellant /
Bank to pay the bill amount on the due date.
13.A similar question was considered by a Single Judge of this
Court in REVATHI – C.P. EQUIPMENTS LTD. VS. SANGEETHA
TUBEWELL CORPORATION, MADRAS [1989 (1) L.W. 320] wherein
the impact of Sections 32 and 37 of the Negotiable Instruments Act,
1881, was considered. This Court ultimately concluded that if the Bill of
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Exchange is accepted by a Bank that by itself confirmed a separate and
independent contract. This Court also referred to the judgment of the
Hon'ble Supreme Court in U.P.CO-OPERATIVE FEDERATION LTD.
VS. SINGHCONSULTANTS & ENGINEERS P. LTD., [1987 (4) S.C.
406] wherein the Hon'ble Supreme Court considered a similar question
and had observed as follows:
“The letter of credit has been developed over
hundreds of years of international trade. It was most
commonly used in conjunction with sale of goods between
geographically distant parties. It was intended to facilitate
the transfer of goods between distant and unfamiliar buyer
and seller. It was found difficult for the seller to rely upon
the credit of an unknown customer. It was also found
difficult for buyer to pay for goods prior to their delivery.
The bank's letter of credit came into existence to bridge this
gap. In such transactions, the seller (beneficiary) receives
payment from issuing bank when he presents a demand as
per the terms of the documents. The bank must pay if the
documents are in order and the terms of credit are satisfied.
The bank, however, was not allowed to determine whether
the seller had actually shipped the goods or whether the
goods conformed to the requirements of the contract. Any
dispute between the seller and the buyer must be settled
between themselves. The Courts, however, carved out an
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exception to this rule of absolute independence. The Courts
held that if there has been a "fraud in the transaction", the
bank could dishonour beneficiary's demand for payment.
The Courts have generally permitted dishonour only on the
fraud of the beneficiary, not the fraud of somebody else.”
14.In INDIAN BANK VS. KAPOL CO-OP. BANK LTD. AND
OTHERS [2009 (5) MH.L.J 318] the Bombay High Court has also taken
a similar view after considering the impart of Section 37 of the
Negotiable Instruments Act, 1881.
15.Seciton 37 of the Negotiable Instruments Act, 1881, reads
as follows:
“37.Maker, drawer and acceptor principals.—The maker
of a promissory note orcheque, the drawer of a bill of
exchange until acceptance, and the acceptor are, in the
absence of a contract to the contrary, respectively liable
thereon as principal debtors, and the other parties thereto
are liable thereon as sureties for the maker, drawer or
acceptor, as the case may be. “
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Once the Bill of Exchange is accepted by the Bank, the Banker would be
liable as an acceptor under Section 37 of the Act.
16.In the light of the law laid down by the Hon'ble Supreme
Court as well as this Court, we do not think that we could countenance
the contentions of the learned Senior Counsel for the appellant. Once an
acceptance is issued, the Bank cannot go back and contend that the
acceptance was not backed by proper documentation. We therefore see
no reason to interfere with the judgment of the learned Single Judge and
the appeal fails and the same is dismissed. However, in the
circumstances, there shall be no order as to costs in this appeal.
Consequently, connected Civil Miscellaneous Petition is closed.
[R.S.M., J.] [R.S.V., J.]
03.01.2024
Index : No
Internet : Yes
Neutral Citation : No
Speaking order
TK
To
The Assistant Regional Manager
Indian Bank, W-100, II Avenue, Anna Nagar,
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Chennai – 600 040.
R.SUBRAMANIAN, J.
AND
R.SAKTHIVEL, J.
TK
OSA (CAD) NO.57 OF 2023
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03.01.2024
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