1. Export transaction under FOB contract and irrevocable Letter of Credit — Error in Forwarder Cargo Receipt regarding port of loading — Complaint for deficiency in service. (Para 5 , 7 , 8 , 9 , 10 , 11 , 12 , 13 , 14 , 15 )
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2022 Supreme(SC) 1152
SUPREME COURT OF INDIA
B.R. GAVAI, B.V. NAGARATHNA, JJ.
M/s Bawa Paulins Pvt. Ltd. – Appellant
Versus
UPS Freight Services (India) Pvt. Ltd. and Another – Respondents
Civil Appeal No. 8298 of 2022, SLP (Civil) No. 16722 of 2015
Decided On : 10-11-2022
Important Points
IMPORTANT POINT
Amount of compensation cannot be unduly reduced by National Commission even after deficiency in rendering service is proved.
Amount of compensation cannot be unduly reduced by National Commission even after deficiency in rendering service is proved.
Subject
Consumer Protection - Deficiency in Service
Act Referred
Headnote
Consumer Protection Act, 1986 – Section 23 – [Consumer Protection Act, 2019 – Section 67] – Export – Late shipping – Appellant neither got goods back nor did they get any payment in respect of goods – State Commission had awarded compensation of Rs.13,79,901/- towards loss suffered by appellant plus Rs.50,000/- towards compensation for mental agony and harassment plus Rs.10,000/- towards cost of litigation – National Commission, on other hand, reduced compensation to Rs.10,000/- only along with 9% interest – Sale of goods was through “Free on Board” (‘FOB’) contract – Under ‘FOB’ contract seller is under no duty to make advance arrangements for shipping goods or to bear any expense beyond that of putting goods on board – In international transactions, letter of credit is used as a mode of ensuring payment and performance of contractual terms – Once issuing bank confirms document, confirming bank is obligated to pay to beneficiary on demand, credit amount and in turn recover the same from issuing bank – National Commission has categorically held that there was deficiency in rendering services by respondent No.1, as such, National Commission ought not have reduced compensation payable to appellant – Impugned judgment and order passed by National Commission quashed and set aside and Judgment and Order passed by State Commission restored. (Paras 25, 30, 31, 34, 39, 40 and 41)
Facts of the case:
National Commission vide impugned order has reduced the amount of compensation to Rs.10,000/- as against the amount granted by the State Commission to be paid to appellant herein i.e., a sum of Rs.13,79,901/-, together with compensation of Rs.50,000/- and cost of litigation amounting to Rs.10,000/-. Issue involved in the present appeal is in a very narrow compass and relates only to the quantum of compensation that the appellant is entitled to receive from the respondents.
Findings of Court:
If pursuant to the order of the State Commission, any amount has been deposited by the respondents, the same shall be withdrawn by the appellant in accordance with the order of the State Commission. If any amount has already been paid to the appellant by the respondents herein, then the balance amount, if any, as awarded by the State Commission shall be paid to the appellant within a period of two months from today.
Result : Appeal allowed.
Legal Category Hierarchy
Advocates appeared:
For the Petitioner(s): Mr. Ashish Garg, Adv. Mr. Lalit Nagar, Adv. Mr. T. L. Garg, AOR
For the Respondent(s): Mr. Sudhanshu S. Choudhari, AOR Mr. Vikas Kumar, AOR Mr. Manish Paliwal, Adv. Mr. Deumani Bansal, Adv.
For the Petitioner(s): Mr. Ashish Garg, Adv. Mr. Lalit Nagar, Adv. Mr. T. L. Garg, AOR
For the Respondent(s): Mr. Sudhanshu S. Choudhari, AOR Mr. Vikas Kumar, AOR Mr. Manish Paliwal, Adv. Mr. Deumani Bansal, Adv.
Table of Contents
2. Appellant claims loss due to agent's negligence and collusion — Respondents argue appellant's lack of vigilance and buyer's bankruptcy caused the loss. (Para 21 , 22 )
3. Admitted error in shipping documents constitutes deficiency in service — Lack of vigilance by the beneficiary does not absolve the service provider of admitted negligence. (Para 37 , 38 , 39 )
4. Admitted negligence by a service provider in executing critical shipping documents constitutes a deficiency in service under the Consumer Protection Act, 1986. (Para 36 , 37 , 39 )
5. Appeal allowed — National Commission order set aside — State Commission order restored directing payment of full loss and compensation. (Para 40 , 41 , 42 )
6. What constitutes deficiency in service under the Consumer Protection Act, 1986?
Deficiency is defined as any fault, imperfection, shortcoming, or inadequacy in the quality, nature, and manner of performance required to be maintained by law or undertaken in pursuance of a contract or otherwise in relation to any service. (Para 36 )
7. Does a mistake in a shipping document by a forwarding agent constitute a deficiency in service?
Yes, if the agent negligently records incorrect details, such as the port of loading, despite clear instructions, leading to the refusal of a Letter of Credit and subsequent financial loss, it constitutes a deficiency in service. (Para 37 )
8. Does the failure of a beneficiary to notice an error in documents absolve a service provider of negligence?
No. When a service provider admits to a mistake in rendering services, the fact that the beneficiary did not notice the error before forwarding documents to a bank does not excuse the provider's deficiency. (Para 39 )
9. What is the legal nature of an irrevocable Letter of Credit in international transactions?
A letter of credit is independent of and unqualified by the underlying contract of sale. Its autonomy is protected to prevent misuse by the applicant and to maintain stability in the international financial market. (Para 34 , 35 )
10. What are the obligations of a seller under a Free on Board (FOB) contract?
Under an FOB contract, the seller's liability ceases once the goods are safely put on board the ship named by the buyer. The seller is not required to make advance shipping arrangements or bear expenses beyond loading. (Para 30 , 31 )
JUDGMENT :
B.V. NAGARATHNA, J.
1. Leave granted.
2. This Civil Appeal has been filed assailing the impugned judgment and order dated 30.04.2015 passed by the National Consumer Disputes Redressal Commission (hereinafter referred to as ‘National Commission’ for the sake of convenience) at New Delhi by which the National Commission has allowed Appeal No. 6 of 2010 filed by respondent Nos. 1 to 3 and set-aside the judgment and order dated 09.02.2009 passed by the State Commission, New Delhi.
3. The National Commission vide impugned order has reduced the amount of compensation to Rs. 10,000/- (Rupees Ten Thousand) as against the amount granted by the State Commission to be paid to the appellant herein i.e. a sum of Rs. 13,79,901/- (Rupees Thirteen Lakhs Seventy-Nine Thousand Nine Hundred and One), together with compensation of Rs. 50,000/- (Rupees Fifty Thousand) and cost of litigation amounting to Rs. 10,000/- (Rupees Ten Thousand).
4. The issue involved in the present appeal is in a very narrow compass and relates only to the quantum of compensation that the appellant is entitled to receive from the respondents.
5. The appellant herein-original complainant, a private limited company, filed a consumer complaint before the State Commission against the present respondents-opposite parties. Respondent No. 1-UPS Freight Service (India) Pvt. Ltd. (formerly known as M/s Fritz Freight Forwarding India Pvt. Ltd.) and respondent No. 2-M/s Fritz International are the subsidiaries and agents of respondent No. 3-M/s Fritz Companies Inc. to administer, look after and carry out the business of respondent No. 3, in India. Respondent No. 4-Bank of Boston is the consignee’s bank and respondent No. 5-M/s County Seat Stores, New York is the consignee company.
6. IA No. 1 of 2015 seeking deletion of respondent No. 5 was allowed and IA No. 40994 of 2017 for deletion of name of respondent Nos. 2-M/s. Fritz International and respondent No. 3-M/s. Fritz Companies Inc. was allowed by this Court and were deleted from the array of parties vide order dated 17.07.2017. Respondent No. 5-M/s County Seat Stores was deleted from the array of parties vide order of this Court dated 08.07.2015.
7. Succinctly stated, the facts of the case are that the appellant herein during the course of its business entered into a contract with respondent No. 5 for export of two hundred and thirty-four (234) packages of MN’s 100% CTN Twill messenger bags for a total invoice value of US$ 31,920 (equivalent to Rs. 13,79,901/- approximately). The mode of payment was agreed to be through Letter of Credit (“LC” for short) against the Forwarder Cargo Receipt (“FCR” for short). For the said purpose, 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. Respondent Nos. 1-3 were appointed as forwarding agents to collect the goods from the appellant and forward the same.
8. As per the terms of the agreement and the Letter of Credit, the shipment was Free on Board (“FOB” for short), from New Delhi to Baltimore M.D. Respondent No. 5 consignee appointed Respondent Nos. 1 to 3 as their forwarding agents/consolidators to execute the entire transaction for respondent No. 5 with the appellant herein. A Purchase Order dated 30.10.1998 was issued in that respect.
9. On 11.02.1999, the appellant issued shipping instructions to respondent Nos. 1 to 3 about the consignment from New Delhi to Baltimore and respondent No. 1 in turn issued a FCR to the appellant on 22.02.1999.
10. Immediately after shipping the goods, the appellant presented the documents including the aforesaid FCR to its bank, namely, Canara Bank for negotiating with respondent No. 4- Bank to release the payment against the Letter of Credit which was opened in favour of the appellant herein.
11. By letter dated 08.03.1999, respondent No. 4 informed the bank of the appellant that in accordance with the Uniform Customs and Practice for Documentary Credits
