On 10th November 2022, the Supreme Court in a Division Bench comprising of Justice B.R. Gavai and Justice B.V. Nagarathna observed that when there is a deficiency in rendering services, the National Consumer Disputes Redressal Commission ought not have reduced the compensation payable. (M/s Bawa Paulins Pvt. Ltd. Vs. UPS Freight Services (India) Pvt. Ltd. and Another)
Facts of the Case:
The appellant during the course of its business entered into a contract with respondent No.5 for export of two hundred and thirty-four packages of MN’s 100% CTN Twill messenger bags for a total invoice value of US$ 31,920. The mode of payment was agreed to be through Letter of Credit against the Forwarder Cargo Receipt. Respondent No.5 consignee appointed respondent No.4 as the purchaser’s bank through which the Letter of Credit was opened in favour of the appellant. Immediately after shipping the goods, appellant presented the documents to its bank for negotiating with respondent No.4 to release the payment. By letter dated 08.03.1999, respondent No.4 informed the bank of appellant that according to Uniform Customs and Practice for Documentary Credits documents had been refused and LC could not be honoured.
After the refusal, appellant approached respondent No.1 in connection with the negligence on their part in mentioning the wrong point of loading in the FCR. The appellant neither got the goods back nor did they get any payment in respect of the said goods and therefore the aggrieved appellant approached the concerned State Commission by way of a complaint claiming Rs.13,79,901/-. The same was allowed and respondents were directed to play Rs.79,901/-. There was a typographical error in the figure, it was later corrected to Rs.13,79,901/-, Rs.50,000/- towards mental agony and harassment and Rs.10,000/- towards cost of litigation. Respondent Nos. 1 to 3 filed an appeal in the National Commission which was admitted and it was held that the order of the State Commission holding respondent Nos.1 to 3 liable to the extent of the price of the goods, Rs.50,000/- as compensation and Rs.10,000/- as cost of litigation could not be sustained. This reduction gave rise to the present appeal.
Contentions of the Appellant:
The counsel for the appellant submitted that “the delay in payment could not be attributed to the appellant herein since the Letter of Credit specified that the consignment had to be shipped in the month of March and the appellant herein on 11.02.1999 had informed the shippers to take the delivery. Any delay occasioned was only on account of the conduct of the shippers in taking delivery of the goods and not on the part of the appellant. The respondents acted in collusion with each other to deceive the appellant. The modus operandi was to issue a defective FCR and withhold the documents till the expiry of the Letter of Credit and thereafter, rectify the FCR and in the meanwhile, get the goods delivered without payment of consideration to the appellant. The LC was irrevocable, the FCR was prepared by the respondent Nos. 1 to 3 on the instructions given by the appellant herein. Therefore, respondent No.4 had no option but to release the payment without any objection. Respondent Nos. 1 to 3 were appointed as the shippers, solely by the respondent No.5 – the buyer/consignee of the goods as per an FOB contract”
Contentions of the Respondents:
The counsel for the respondents submitted that “had the appellant herein been vigilant, the FCR could have been corrected before presenting the same to the banker. The return of the documents could be on account of the connivance between respondent Nos.4 and 5 and not on account of the error in names of port of loading. The endorsement made on the reverse side of the FCR and later on concealed by putting ink on it and the return of documents by respondent No.4 cannot be attributed to the mistake in the FCR but solely to the acts of connivance on the part of respondent Nos.4 and 5. Goods exported by the appellant were seized by the U.S. Customs and thereafter auctioned by the Customs to recover the dues. The whole transaction failed since respondent 5 had filed for bankruptcy under the US laws and the goods went to General Order due to non-payment of freight, ocean duty etc. by respondent No. 5. Respondent 4 had clearly stated in their letter dated 18.03.1999 that respondent No.5 was not willing to make the payment. The appellant did not take any action against respondent No.5 for recovery of money, thus, not responsible for the said payment.”\
Observations and Judgment of the Court:
The hon’ble court observed that “appellant availed services provided by the respondent Nos. 1 to 3 and respondent No. 4 is a beneficiary of such services, therefore the appellant would fall under the definition of a ‘consumer’ as is under Section 2(1)(d)(ii) of the Act of 1986. The appellant vide its letter dated 11.02.1999 gave shipping instructions to respondent Nos. 1 to 3 wherein it was mentioned that the shipment is from FOB, New Delhi to Baltimore. However, despite clear instructions vide the said letter, respondent Nos. 1 to 3 negligently recorded the port of loading to be JNPT Bombay. It is due to this negligence as well as deficiency in service of the respondent Nos. 1 to 3 that the respondent No. 4 Bank refused to accept the documents including the FCR and the same was returned to the bank of the appellant.
Due to refusal of honouring the said documents, the sale consideration was not paid to the appellant herein who suffered loss as well as mental harassment and agony. The appellant received the telex/letter on 08.03.1999 wherein the documents including the FCR were refused. When it is admitted that a mistake was committed by the respondent No.1, it is not correct to say that the said mistake was not noticed by the appellant while forwarding the documents to its bank and that the appellant should have been more vigilant. It would be incorrect to now say that the appellant should have exercised due diligence in that regard.” The case of Hindustan Steel Workers Construction Ltd. V G.S. Atwal & Co. (Engineers) (P) Ltd. Was referred.
The appeal was allowed. The respondents were severally and jointly liable held liable to make the payment of the amount as assessed by the State Commission.
Case: M/s Bawa Paulins Pvt. Ltd. Vs. UPS Freight Services (India) Pvt. Ltd. and Another
Citation: Civil Appeal No. _ Of 2022 (Arising Out Of SLP (Civil) No. 16722 Of 2015)
Bench: Justice B.R. Gavai and Justice B.V. Nagarathna
Date: November 10, 2022.
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