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1988 Supreme(Del) 137
High Court Of Delhi
NEHA INTERNATIONAL - Appellant
Versus
BANK OF AMERICA N.T.AND S.A - Respondent
Interim Application 8036 of 1987
Decided On : 05/27/1988
A.K.DUTT, L.M.SINGHVI, R.P.BHATT, R.RANGASWAMY, SANDIP AGARWAL
The court's interpretation of the provisions of the Uniform Customs and Practices for Documentary Credits (U. C. P.) 1983 Revision in determining the validity of the discrepancies cited by the bank.
Headnote:
LETTER OF CREDIT - DISCREPANCIES - WAIVER - JURISDICTION - BANK'S OBLIGATION - INSURANCE COVERAGE - LATE SHIPMENT - AIR WAY BILL SIGNATURE - INTERPRETATION OF U. C. P. 1983 REVISION.
Fact of the Case:
Plaintiff, an export firm, entered into a contract with Defendant No. 3, a U.S.-based company, for the sale of garments. Defendant No. 1, Bank of America, established an irrevocable letter of credit in favor of the plaintiff. The plaintiff presented the documents to Defendant No. 2, Canara Bank, for negotiation with Defendant No. 1. Defendant No. 1 refused payment, citing discrepancies in the documents. The plaintiff filed a suit against Defendants No. 1 and 3 for the recovery of the price of the goods and interest. Defendant No. 1 applied for leave to defend the suit.
Finding of the Court:
The court found that the discrepancies cited by Defendant No. 1 were not valid. The insurance document covered the goods from the date of taking charge by the carrier, which was prior to the date of shipment. The shipment was not late as the date of issuance of the transport document, which was 10th May 1985, was deemed to be the date of shipment. The Air Way Bill was signed by the shipper/agent. The court also held that it had jurisdiction over the case as Defendant No. 1 at New Delhi had issued the Letter of Credit, negotiated the documents, and refused payment in its own right.
Issues: 1. Whether the discrepancies cited by Defendant No. 1 were valid. 2. Whether the court had jurisdiction over the case.
Ratio Decidendi: 1. The court interpreted the provisions of the Uniform Customs and Practices for Documentary Credits (U. C. P.) 1983 Revision to determine the validity of the discrepancies. It held that the insurance document covered the goods from the date of taking charge by the carrier, which was prior to the date of shipment, as required by Article 36 of the U. C. P. The court also held that the shipment was not late as the date of issuance of the transport document, which was 10th May 1985, was deemed to be the date of shipment, as per Articles 47(b)(ii) and 50(b) of the U. C. P. 2. The court held that it had jurisdiction over the case as Defendant No. 1 at New Delhi had issued the Letter of Credit, negotiated the documents, and refused payment in its own right.
Final Decision: The court dismissed Defendant No. 1's application for leave to defend the suit and decreed the suit in favor of the plaintiff against Defendant No. 1 for the recovery of the suit amount with costs and interest.
( 1 ) THIS order shall dispose of this application. moved under order 37 Rule 3 (5) of the Code of Civil Procedure moved by defendant No. 1 Bank of America N. T and S. A. Hansalaya, 15, Barakhamba Road, New Delhi, for leave to defend the suit being Suit No. 203/87 brought by the plaintiff M/s. Neha International against defendant No. 1 as also against defendant No. 2 Canara Bank, 56 Janpath, New Delhi, and defendant No. 3 M/s. S. Kumar and Co. INC, 3212 South Main Street, Los Angeles, California 90007, U. S. A. , under Order 37 of the Code of Civil Procedure. Defendent No. 3 M/s. S. Kumar and Co , the buyer in this suit, did not put up appearance in court within the statutory period of ten days from the date of its service and so in view provision of law contained in sub-rule (3) of rule 2 of Order 37 Civil Procedure Code a decree in favour of the plaintiff against defendant No. 3 was passed for the recovery of the suit amount i e. Rs. 177,731. 60 paise with costs as also with future interest at the rate of 12% per annum from the date of the suit till realisation.
( 2 ) THE learned counsel for the plaintiff made a submission in court on 2nd September 1987 that did not press any claim against defendant No. 2.
( 3 ) THUS, defendant No. I alone has remained in the arena and has sought leave of the court to defend the suit.
( 4 ) THE plaintiff is a registered partnership firm carrying on business of export of readymade garments having its registered partners (1) Champak Bagia and (2) Sushma Jain and the suit has been filed by Champak Bagia on behalf of the partnership. Defendant No. 3 M/s S. Kumar and Co. is doing business of import and export at 212, Sough Main Street, Los Angeles, U. S. A.
( 5 ) THE plaintiff was to supply and did not supply to defendant No. 3 M/s. S. Kumar and Co. 57 packages containing 2,849 pieces of cotton mill made ladies garments and the same were sent by air through M/s. Lemuir Air Express, agents of M/s. Air France, the carrier The international banking division of defendant No. 1 at Los Angeles, U. S. A. established on behalf of its clients M/s S. Kumar and Co. defendant No. 3, an irrevocable letter of credit for and amount of Rs. 7,00,000. 00 being Credit No. LA 1, 5529000 13th December 1984 in favour of M/s. Delhi State Industrial Development Corporation, Bombay Life Building, Conaaught Place. New Delhi, and this credit was established under and governed by the Provisions of Uniform Customs and Practices of Documentary Credits (U. C. P) 1983 Revision (for short U. C. P.) and this credit was transferrable and divisible. In terms of the Advice dated 10th May 1985, defendant No. 1 had. through its Delhi Office, intimated the plaintiff that Delhi State Industrial Development Corporation had requested defendant No. 1 to partially transfer the irrevocable credit in favour of the plaintiff of the account of S. Kumar and "co. for an amount of Rs. 1,36,894. 45 paise and it was complied.
( 6 ) THE plaintiff effected the shipment and presented on 21st May 1985 the documents to its Banker defendant No. 2canarabankwitha request to negotiate with the Bank of America defendant No. I as per terms of the aforesaid Letter of Credit. Defendant No. 2 then presented the documents for negotiation to Bank of America, New Delhi on 27th May 1985.
( 7 ) ON 3rd June 1985 defendant No. I advised defendant No. 2, with a copy to the plaintiff, that it was unable to effect negotiation of the Letter of Credit for the following reasons :-
(A) Late shipment effected. (b) A. W. B. not signed by shipper/agent. (e) Insurance does not cover from the date of A. W. B.
( 8 ) UPON further representation defendant No. 1 refused payment saying : "accountees do not authorise payment".
( 9 ) DEFENDANT No. 2 intimated the plaintiff that defendant No. 1 had returned the documents, on representation, for the under-mentioned reasons :-
"return unpaid reason; collecting Bank states shipment was late and not of good quality. "
( 10 )
