Back
1978 Supreme(Del) 65
High Court Of Delhi
NATIONAL OILS AND CHEMICAL INDUSTRIES - Appellant
Versus
PUNJAB AND SIND BANK - Respondent
Interim Application 935 of 1978
Decided On : 05/02/1978
AMARJIT SINGH, ARUN MOHAN, B.N.KIRPAL, R.JETHAMALANI, S.L.VATEL, SHIV CHARAN SINGH
The principle of the independence of the Bank's obligation under the letter of credit is not to be extended to protect the unscrupulous seller.
Headnote:
LETTER OF CREDIT - INJUNCTION - FRAUD - BILLS OF LADING - INTERPRETATION OF TERMS - DUTY OF BANK - JURISDICTION OF COURT - INTERNATIONAL TRADE - BANKING PRACTICE - SALE OF GOODS ACT, 1930.
Fact of the Case:
The plaintiff, National Oils and Chemical Industries Ltd. , filed a suit seeking perpetual injunction against the defendant bank, Punjab and Sind Bank Ltd. , restraining it from paying any amount on the basis of three Letters of Credit to the defendant company, B. S. Aujla Company Pt. Ltd. , alleging that no amount was and is payable by the defendant bank or the plaintiff to the defendant company on the basis of the aforesaid letters of credit. The plaintiff further seeks perpetual injunction against the defendant company restraining it from drawing upon the aforesaid letters of credit or receiving any amount thereunder.
Finding of the Court:
The court found that there was prima facie evidence of fraud on the part of the company and that the Singapore Bank, which had negotiated the letters of credit, appeared to be a party to the conspiracy to perpetrate a fraud on the plaintiff. The court also found that the bills of lading presented by the company were not in accordance with the terms of the letters of credit.
Issues: 1. Whether the court had jurisdiction to grant an injunction restraining the bank from paying the amount under the letters of credit. 2. Whether the bills of lading presented by the company were in accordance with the terms of the letters of credit. 3. Whether there was prima facie evidence of fraud on the part of the company and the Singapore Bank.
Ratio Decidendi: 1. The court held that it had jurisdiction to grant an injunction restraining the bank from paying the amount under the letters of credit, as there was prima facie evidence of fraud on the part of the company and the Singapore Bank. 2. The court held that the bills of lading presented by the company were not in accordance with the terms of the letters of credit, as they were not "on board" ocean shipping company's bills of lading and were signed by the company's agents as agents for the "master" of the ship, rather than as agents of the shipping company. 3. The court held that there was prima facie evidence of fraud on the part of the company and the Singapore Bank, as the company had submitted forged bills of lading and the Singapore Bank had suo motu sought the amendment for negotiating the letters of credit, which as earlier stipulated could be done through Algemene Bank, Netherland.
Final Decision: The court granted the injunction restraining the bank from paying the amount under the letters of credit and confirmed the injunction already granted by the lower court.
( 1 ) THE plaintiff, National Oils and Chemical Industries Ltd. , filed suit No. 244 of 1978, seeking perpetual injunction against defendant No. 1, Punjab and Sind Bank Ltd. (herein called the Bank ) restraining it from paying any amount on the basis of the three Letters of Credit No. NDHO 9541 to 9543 dated 2nd Dec. , 1977, to defendant No. 2, B. S. Aujla Company Pt. Ltd. , (herein called the company ) alleging that no amount was and is payable by defendant No. 1, or the plaintiff to defendant No. 2 on the basis of the aforesaid letters of credits. The plaintiff further seeks perpetual injunction against defendant No. 2 restraining it from drawing upon the aforesaid letters of credit or receiving any amount thereunder.
( 2 ) THE case of the plaintiff is that the company through its agents (M/s Tri-Une Produce Brokers) entered into an agreement at Delhi with them for the supply of 1100 metric tons of raw palm oi (of the specifications detailed in the contract) at the rate of U. S. $511 per metric ton C. I. F. Madras and that pursuant to the said agreement, three contracts were. executed between the parties, photo copies whereof are Annexures A to C to the plaint. In terms of the aforesaid contracts, the plaintiff submitted three irrevocable letters of credit, noted above by the Bank to the Company for a total sum of U. S. $ 5,76,208. 70 stipulating, among other terms, that a full set of clean on board ocean shipping company s Bill of Lading was to be submitted by the Company to the order of the Bank, besides the report by a recognised independent surveyor. In pursuance of the aforesaid contracts and the issue of Letters of Credit by the Bank, the Company claimed to have shipped a total quantity of 1100. 80 metric tons of raw oil on ship "katrina" from Singapore. The Company is alleged to have prepared three invoices dated 24th Dec. 1977, along with two bills of lading dated 24th Dec. 1977, and a third bill of lading dated 28th Dec. 1977, in respect of the above-mentioned supply. The said bills of lading are alleged to be not valid and acceptable documents in law being against the terms of the letters of credit, inter alia, on the following grounds, namely, (1) bills of lading in question purport to be by "m/s. Straits Chartering and Agencies Pvt. Ltd. " who are not an "ocean Shipping Co. ," or even a shipping Co. whereas it was specifically provided in the letters of credit that it had to be from the ocean Shipping Co. ";
(2) The alleged bills of lading were got issued from Straits Chartering and Agencies Pvt. Ltd. without any authority and at a point of time when the palm oil had not been placed on board. The plaintiff alleged that the ship "katrina" on which the palm oil was alleged to have been loaded was on high seas on 24/28th Dec. 1977, and reached Singapore on 14th Jan. 1978, the question of the palm oil having been loaded on the ship "katrina at Singapore on 24/28th Dec. 1977, does not arise. The bills of lading are not valid bills. The same were to be issued by the Master of the Ship only when the goods were loaded on board a named ship; (3) and that according to the contract between the plaintiff and the company the weights and quality certificates were to be issued by the recognised independent surveyors at the port of loading but this was not done by the company. It is alleged that the plaintiffs in good faith and basing themselves on the representations Of the company accepted the documents in respect of the letters of credit. It was thereafter that the plaintiffs discovered the true state of affairs regarding the documents, their validity in law and the fraud perpetrated on them. Consequently, and in any case in law as well, it is alleged, the acceptance of the plaintiffs is meaningless. The plaintiffs accordingly contend that there having been no compliance with the terms of the letters of credit, the company is not entitled to recover any amount on their basis from the bank from them and that the
