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HIGH COURT OF CALCUTTA
P.B. MUKHARJI, S. DATTA, JJ.
United Bank Of India Ltd. - Appellant
Versus
Nederlandsche Standard Bank – Respondent
Appeal No : A.F.O.D. 236 Of 1958
Decided On : Jun 08, 1961
LETTER OF CREDIT - CONSTRUCTION - VALIDITY PERIOD - NEGOTIATION - PRESENTATION - EXTENSION OF VALIDITY - ASSIGNMENT - TRANSFER - IRREVOCABLE CREDIT - CONFIRMED CREDIT - LIABILITY OF ISSUING BANK - DUTIES AND LIABILITIES OF ADVISING BANK - DUTIES AND LIABILITIES OF NEGOTIATING BANK - DUTIES AND LIABILITIES OF BENEFICIARY.
Fact of the Case:
The plaintiff bank, as the successor to the Comilla Banking Corporation, sued the defendant bank, Nederlandsche Standard Bank of Amsterdam, Holland, to recover Rs. 36,837-9-3, being the amount advanced by the plaintiff's predecessor to the seller, Herbert Joseph Corporation, under a commercial letter of credit opened by the defendant bank in favor of the seller.
Finding of the Court:
The court held that the letter of credit did not permit negotiation of bills of exchange or drafts, and that the validity period of the letter of credit could not be extended beyond the expiry date specified in the letter of credit. The court also held that the plaintiff bank had no cause of action against the defendant bank on the letter of credit, as the documents were not presented within the time stipulated by the letter of credit.
Issues: 1. Whether the letter of credit permitted negotiation of bills of exchange or drafts? 2. Whether the validity period of the letter of credit could be extended beyond the expiry date specified in the letter of credit? 3. Whether the plaintiff bank had a cause of action against the defendant bank on the letter of credit?
Ratio Decidendi: 1. The court interpreted the terms of the letter of credit and found that it did not permit negotiation of bills of exchange or drafts. The court reasoned that the letter of credit specifically mentioned certain documents, such as bills of lading, invoice, weight list, and insurance policy, but did not include bills of exchange or drafts. The court also noted that the letter of credit stated that 75% of the credit was payable against delivery of the specified documents, which implied that negotiation was not permitted. 2. The court held that the validity period of the letter of credit could not be extended beyond the expiry date specified in the letter of credit. The court reasoned that the letter of credit was a specific and limited letter of credit to a named beneficiary and a specific bank, and that no other bank could take a transfer of or assignment of the letter of credit or act on it. 3. The court held that the plaintiff bank had no cause of action against the defendant bank on the letter of credit because the documents were not presented within the time stipulated by the letter of credit.
Final Decision: The court dismissed the plaintiff bank's suit against the defendant bank.
P.B.Mukharji, J.
1. This is an appeal from the judgment and decree of G.K. Mitter, J. dismissing the plaintiff's suit against the defendant for the recovery of Rs. 36,837-9-3 without costs.
2. The suit was originally instituted by the Comilla Banking Corporation Ltd. to which the present United Bank of India Limited has succeeded. The defendant is Nederlandsche Standard Bank of Amsterdam, Holland. The plaintiff's suit was based on a claim arising out of a commercial letter of credit. The facts may be briefly stated at the outset.
According to the plaintiff, the defendant on the 24th November 1947 under the orders of N. Jacobson and Co., of Amsterdam, opened an irrevocable and confirmed credit in terms of Letter of Credit No. 114 dated the 24th November 1947 in favour of one Herbert Joseph Corporation of Calcutta whose sole proprietor was one D.N. Sharma and the defendant advised the opening of such credit to the seller Herbert Joseph Corporation through Messrs Netherlands Trading Society of Calcutta. The Credit was for .3360. The transaction related to a sale of 20 tons of black garbled Malabar pepper sold by Herbert Joseph Corporation to Jacobson and Company. The validity period of this Letter of Credit was expressed to be "valid December 31st 1947", 75 per cent was payable, against certain documents and 25 per cent was payable after arrival and verification of the goods at Amsterdam/Rotterdam. The plaintiff's case is that the period of validity was extended from 31st December 1947 to 5th January 1948. On the very last extended date, the 5th January 1948, the plaintiff's predecessor in the usual course of business is said to have negotiated the relative Bill of Exchange for 3360 relating to the said goods and on the faith of the said Letter of Credit advanced the sum of 2520 equivalent to Rs. 33,483/11/6 being 75 per cent of the said Credit to the seller Herbert Joseph Corporation against the shipping documents and Bill of Exchange, which were duly said to have been, transferred and negotiated by the seller to the plaintiff Bank's predecessor It is further pleaded by the plaintiff that the sum of Rs. 33,483/11/0 was paid to the seller on diverse dates commencing from the 5th January 1948 through the seller's Current Account with the plaintiff Bank's predecessor. It appears from the Bank Account that these payments were between the 5th, of January 1948, and the 17th of January 1948.
3. The plaintiff's further case is that the goods reached Rotterdam on the 15th January 1948. The plaintiff in due course of business caused the shipping documents and the Bill of Exchange to be presented for payment to the defendant Bank at Amsterdam on the 19th January 1948. On the 11th February 1948, before the arrival of the goods and before the presentation of the documents as aforesaid, it is alleged by the plaintiff that the defendant through, the Netherlands Trading Society of Calcutta made over to the plaintiff's predecessor a cheque for the sum of Rs. 33,483/11/6 but before that cheque could be cashed, it was taken back from the plaintiff's predecessor on the very same day, the 11th of February 1948. On the faith of these pleadings the plaintiff brought the suit for the recovery of Rs. 36,387/9/3. Additionally the plaintiff also pleads that it is the transferee and/or assignee of the Contract between Jacobson and Company and the defendant relating to the said Letter of Credit. It is needless to add that the defendant refused to pay and the allegation, is that the goods were dust and rubbish and that the seller was a fugitive and untraceable. (See the answers to the interrogatories to the defendant's witness W. Bialoglowski).
4. The plaint mentioned the documents filed with the plaint and relied upon by the plaintiff. Among them is the copy of the Letter of Credit dated the 26th November 1947. That is also annexed to the plaint.
The defence is really on the merits and construction of the Letter of Credit. The transactions represente
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