1993 Supreme(Bom) 27

IN THE HIGH COURT OF BOMBAY
M.L. Pendse S.H. Kapadia, JJ.
Swiss Bank Corporation .... Appellants.
Versus
Jai Hind Oil Mills Co. and another .... Respondents.
Appeal No. 1155 of 1989 with A. No. 120 of 1990 in Suit No. 807 of 1986, decided on 20/21/22-1-1993.
Advocates appeared :
K.S. Cooper with S.K. Cooper, E.B. Desai, D.J. Kakalia i/b. Mulla Mulla Cragie Blunt Caroe, for appellants, in A.No.115/1989 in A.No.120/1990 for respondent No.2.
R.A. Kapadia with D.D. Madon i/b Gagrat Co., for respondent No. 1.
A.M. Setalvad with S.H. Doctor and Rao i/b. Crawford Bayley Co., for respondent No. 2, in A. No. 115 of 1989 in A. No. 120 of 1990 for appellants.

Headnote:BANKING LAW

       Practice of-Interpretation of commercial documents-They must be construed in accordance with customs and without a view to find fault with it-Meaning of presentation for recognition and latest date of negotiation in terms of banking-Customs and usage-Bank when can be reject a document.

       Held, the interpretation which could be accepted must be one in accord once with the Uniform Customs and Practice and which is also in accordance with the Banking and Commercial Practice throughout the world and which interpretation would give commercial efficacy and consistency and workability to the letter of credit. It would not be proper to give gramatical and technical interpretation to the commercial documents, because the anxiety of the courts should be to ensure that the commercial documents are so interpreted as to enable the international trade to runs smoothly. It is undoubtedly true that the Banks dealing in commercial documents are required to follow the principle of strict compliance while acting on the credits, but the courts while interpreting the commercial documents must bear in mind the intention of the parties as well as how the commercial world understands the expression used in the documents. The intention of the parties could well be gathered from the surrounding circumstances and the exercise of determine the meaning of the terms used in the documents should be with an object to give commercial efficacy and to sustain the transaction between the parties.

       Taking into consideration the provisions contained in Uniform Customs and Practice regarding letters of credit and the practice followed by several banks in various countries, the conclusion is inescapable that the expression negotiation in condition (f) means only the date of expiry of the credit and the expression negotiation does not demand that the documents presented by the beneficiary must be scrutinised and accepted the expiry date.

       A more complete description in the invoice is not necessarily an irregularity and bank should not act like robots but use their judgment or common sense and in case the additional information is not inconsistent with the description of the credit, then the documents should not be rejected. What is obvious, is that if the documents produced bear a link to each other, then it is not necessary that the accompanying document should be exactly consistent in their wording of the description of goods in the commercial invoices.

       The proper approach would be that if the description of the goods in the accompanying document is in accordance with the letter of credit, but also indicate some additional words, then the bank should ascertain whether such additional words are likely to change the nature of the goods described in the invoice or the goods may be different from the one described in the invoice. In case the bank finds that the goods are not different, then the bank need not reject the documents merely because of some additional words.

       Order 20, Rule 1-Court-Empowered to discover discrepancies-But when it be dangerous?

       Held, While examining the question as to whether the documents were presented on October 21, 1985, consideration of this aspect was deferred. It is necessary to bear in mind that Canara Bank at all time was prepared to reimburse Swiss Bank in accordance with the assurance under the letter of credit. Swiss Bank prior to institution of the suit and at all stages in the Out, took a consistent stand that to maintain the honesty and reliability in dealings with the banks, Canara Bank is bound to reimburse Swiss Bank. The plaintiffs were fully conscious of this fact and even though the goods had not reached Bombay Port and according to the witness Shamlal discrepancies in the documents were found out in November. 1985 and fraud sometime in February, 1986 still no action was taken to file any suit against Canara Bank, but the present suit was instituted only on March 24, 1984 apprehending that Canara Bank would reimburse Swiss Bank by April 1, 1986. It is the case of Swiss bank, and court do not find any reason to discard the same that it is the usual banking practice that demand for reimbursement in respect of documentary credit is made a couple of days before the due date for payment. Swiss Bank claimed that payment was due on April 1, 1986 and although the Bank was conscious of the proceedings instituted in this Court, the Bank felt that as the trial Court had declined to grant any ad-interim injunction restraining Swiss Bank from demanding reimbursement, there was no obstacle in securing payment. Swiss Bank also felt that it is not the practice to grant injunction in respect of inter nation transactions evidenced by documentary credits as held by several decisions of the Supreme Court. Swiss Bank accordingly sought payment on legal advice and the amount was credited by making book entries by original defendant No.3. Entries were reversed when Canara Bank subsequently raised an objection that in view of the injunction granted by this Court payment was not permissible. The trial judge felt that the conduct of Swiss Bank in securing payment was suspicious, but court are unable to accept the conclusion of the trial Court. It must be borne in mind that once the litigation starts every party tries to protect its interest and in case Swiss Bank was advised to secure reimbursement a couple of days before April 1, 1986, that action cannot have any reflection on the dealing carried out by Swiss Bank on April 21, 1985 while accepting documents from Canara Bank. The knowledge of fraud or collusion cannot be attributed to Swiss Bank on October 21 1985 with reference to the circumstances which transpired several days thereafter. It is always dangerous to inferred and collusion by taking into consideration the events which are far separated from time when the alleged fraud is committed. In courts judgment, the trial judge was not right in holding that Swiss Bank was guilty of collusion with original defendant No.4 and therefore knowledge of fraud can be attributed to Swiss Bank.

       The Court cannot uphold the finding of the trial judge that Swiss Bank had actively participated in attempting to secure payment to original defendant No 4 with full knowledge that defendant No.4 was not entitled to the same. The Court is also unable to accept the finding that even if there was no discrepancy in any of the documents and even if the complaint of fraud is not proved, still Swiss Bank is not entitled to claim reimbursement. The finding, is entirely erroneous and cannot be sustained. Swiss Bank is entitled to reimbursement once it is found that the documents were presented on October 21, 1985 and there was no discrepancy in any of the documents so as to warrant rejection. Reimbursement from Canara Bank to Swiss Bank cannot be denied once it is held that the plaintiffs have miserably failed to established alleged fraud of antedating bills and Swiss Bank was neither aware of the fraud nor was guilty of any collusion with original defendant No 4.

       THE COMMERCIAL DOCUMENTS EVIDENCE ACT, 1939.

       Section 3, Schedule Part n, Clause 7-Port authority -Report and Publication issued by, showing movement of vessel.

       Such document though be admissible on facts but a letter adheshed by some management cannot be treated to be a report or publication or certificate issued by such authority.

       Section 63 - Waiver-Doctrine of.

       For attracting it meeting of minds or agreement or contract between parties not necessary-Unilateral waiver held permissible.

       Section 126-Doctrine of strict compliance of-What is ?

       Held, Doctrine of strict compliance in rubut of letter of credit is also well settled and the bank is bound to reject documents which do not strictly confirm with the terms of the credit is conveniently referred to as doctrine of strict compliance.

       Section 3-Officers evidence-Effect of-Evidence of messenger and receptionist not such absence whereof could destroy its effect.

       Section 69 (2)-Nature and scope of.

       Even assuming that the claim made by the plaintiff arises out of the tortuous actions of the defendants, still the alleged tortuous liability of the defendants also arises from a contract between the parties. The tort alleged against the defendant is failure to take requisite care expected of the banker. The occasion to take care arises only in view of the contract between the parties and independent of the contract the suit could not have been maintained on the alleged failure or negligence of the bank to take requisite care. Held, that the contention that the suit is one for injunction and in any event liability arises out of the tort and therefore is not one to enforce a right arising from the contract cannot be accepted. The trial Judge accepted the contention of the plaintiffs on this count and we are afraid we cannot hare the view that the suit was not one to enforce a right arising from the contract.

       Shri Kapadia then submitted that the bar under sub-section (2) of Section 69 of the Partnership Act is not attracted because the sub-section demands that (a) the firm should be registered and (b) the persons suing should be shown in the register of Firms as Partners. It was contended that it is not in dispute that the firm is registered and the expression "persons suing" should be construed as one who has declared the plaint. The plaint was declared by Shamlal, who is admittedly the partner, and whose name is shown in the Register of Firms, and therefore the requirements of sub-section (2) are complied with. It is not possible to accede to the submission that the expression "person suing" means that the person who declares the plaint should be shown in the register as a partner.

       If name of one of the partner is not shown in the Register of Firms on the date of filing of the suit, then the suit is not maintainable.

       The contention of that the person suing should be shown as partner in the register is complied with because Shamlal is a partner has no force. A plaint can be declared by any person familiar with the contents of the plaint and that would include even a person who is not a partner. The expression "person suing" cannot be limited to the person who declares the plaint. In our judgment the requirement of sub-section (2) of Section 69 of the Partnership Act is not complied with as all the partners of the firm on the date of institution of the suit were not shown as partners in the Register of Firms.

       Rajesh Kishnani was admitted to the benefits of partnership on August 13, i982 and became major on November 9, 1935 Rajesh Kishnani was however registered as partner only on August 11, 1988. Shamlal deposed at the trial that Rajesh Kishnani was shown as a partner in the Gibraltar suit and therefore it is obvious that Rajesh was a partner on the date of presentation of the suit filed on March 20, 1986 in this Court. As Rajesh was not shown as partner on the date of institution of the suit in the Register of Firms the bar of sub-section (2) of Section 69 is clearly attracted. The trial Judges tried to overcome the objection raised on behalf of the defendants as regard non-registration of name of Rajesh as partner in the Register of Firm by holding that the defendants should not be permitted on highly technical grounds to defeat a just claim. We are afraid we cannot decline to by pass the clear cut statutory provisions by holding that the objection is highly technical.

       All those, who were partners of the firm on the date of institution of the suit, were not shown as registered in the Register of Firms and consequently the suit filed on behalf of the firm was not maintainable.