IMPORTANT POINT
Article 10 of UCP 400 does not provide that by virtue of terms of letters of credit drawn of bills is exempted from liability on the bills.

S.S. Parkar, Chairperson—The only point which is required to be considered in these two appeals is whether in view of the terms and conditions of the letters of credit dated 5th August, 1991, the bills of exchange dated 5th August, 1991 drawn by the appellants, Western Ministil Limited and discounted by the respondent No. 1-the Bank of Rajasthan Limited can be said to be “without recourse” to the drawers. The said point is required to be considered in the following facts and circumstances.

2. The respondent No. 3 Virgo Steels had placed Orders on the appellants, Western Ministil Limited for supply of R.C.S. billets sometime in the months of July and August, 1991. The payment was to be made under the letters of credit against the bills of exchange which were accepted by the buyers. The respondent No. 3 who were constituents of the respondent No. 2 the U.Co., Bank had got irrevocable letters of credit issued from the U.Co., Bank on 5th August, 1991 in favour of the appellants. The said letters of credit were without recourse to the vendors of the goods i.e. the appellants. The letters of credit could be negotiated by any Bank. The bills of exchange were not marked as “without recourse”. The appellants had received payment for the goods supplied by them to the respondent No. 3 Virgo Steels from the respondent No.1, the Bank of Rajasthan. When the respondent No. 2, the U.Co., Bank declined to make payments to the respondent No. 1 Bank as per the terms of the letters of credit, the respondent No.1 filed two suits for recovery of the amount due on the bills of exchange guaranteed by the letters of credit. There were different letters of credit issued by the U.Co., Bank and the bills of exchange drawn by the appellants Western Ministil Limited on the same day. The demand in respect of all the bills were made by the Bank of Rajasthan but the amount was not reimbursed by the U.Co. Bank and therefore four suits had been filed by the Bank of Rajasthan impleading the U.Co. Bank as defendant No. 1, the purchasers Virgo Steels as defendant No. 2 and the appellants, Western Ministil Limited, the vendors of the goods as defendant No. 3.

3. After enactment and coming into force of the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (for short “RDDBFI Act”) the suits filed initially in the High Court came to be transferred to the Debts Recovery Tribunal (for short “D.R.T.”). The suits were decreed by the D.R. T. against all the defendants including the appellants. The matters were brought in appeal before this Tribunal by all the three defendants. The appeals were dismissed by this Tribunal by a common Judgment dated 31st December, 2004. Even the original applicant, the Bank of Rajasthan Limited, had also filed appeal before this Tribunal against the very same Order of the D.R.T. on the question of interest. That appeal also came to be dismissed along with the appeals preferred by the defendants by the common Order dated 31st December, 2004. Aggrieved by the said decision of this Tribunal only the appellants had taken the matter before the High Court in writ petition Nos. 2079/2005 and 2089/2005. When these two petitions came up for hearing before the High Court it was noticed that the aforesaid point though raised by the appellants both before the D.R.T. and the Debts Recovery Appellate Tribunal (for short “D.R.A.T.”) was not decided either by the D.R.T. or the D.R.A.T. and therefore the matters were remanded to this Tribunal for deciding the said issue within three months from the date of the Order of the High Court i.e. 21st July, 2006. Accordingly I have heard both sides at length.

4. It would be relevant to mention here at this stage that on 18th September, 2006 when these appeals came up for hearing, the Advocates for the respondent No. 1 Bank took time to obtain instructions from the said Bank as the Senior Manager of the respondent No. 2 U.Co. Bank who was present in the Court on that day stated that the mat