The main legal point established in the judgment is the entitlement of the plaintiff to the benefit of Section 14 of the Limitation Act, 1963, and the unjustified refusal of payment under the letter of credit by the defendant no.2 bank.

Valmiki J. Metha, J

Oral:

1. This suit being CS(OS) No.176/1997 has been filed by the plaintiff for recovery of Rs.24,57,062/-against two defendants. The first defendant-company was the buyer of goods being H.R.coils from the plaintiff. Defendant no.2 is the banker which issued the letter of credit through which payment was to be made for the goods sold by the plaintiff to the defendant no.1.

2. The case of the plaintiff as pleaded in the plaint is that the plaintiff agreed to sell 17 H.R.Coils weighing 180.340 Metric Tonnes (MTs) to the defendant no.1, and for payment of which, the defendant no.1 was to open an irrevocable letter of credit besides providing a cheque as collateral security. The defendant no.1 opened an irrevocable letter of credit with the defendant no.2-bank dated 12.4.1993. There is an amendment to this letter of credit issued on 4.5.1993 for extending the period for enforcing the letter of credit from 15 days to 30 days from the date of dispatch/shipment of the goods. The letter of credit was issued for an amount not exceeding 34 lacs. The plaintiff sold the goods to the defendant no.1 under the invoice No.48 dated 17.4.1993. The value of the goods was Rs. 30,57,124/-. The plaint in para 7 further makes averment that the documents were accepted by Mr. Diwakar Parikh of the defendant no.1 as the authorized signatory of the defendant no.1. Mr. Diwakar Parikh was the employee and Principal Officer of the defendant no.1 and he was authorized to accept the documents on behalf of defendant no.1 because neither the defendant no.1 nor the defendant no.2 ever informed that the said Mr. Diwakar Parikh is not authorized to accept the documents. The plaintiff further pleads that the goods were delivered to the defendant no.1 on 14.4.1993 and the plaintiff thereafter negotiated the Bill of Exchange for payment within the specified period of 30 days of shipment/dispatch, however, the defendant no.1 on 31.5.1993 informed the plaintiff that payment cannot be made as the Board of Directors of the defendant-company had not accepted the goods, and also that the goods were of inferior quality. The plaint also makes averments with respect to the defendant no.2 not honouring the Bill of Exchange on the ground of an alleged discrepancy that there was no proof that the person who accepted the goods/Bill of Exchange for the defendant no.1, was a duly authorized employee of the defendant no.1/buyer-company. The plaint thereafter states that the plaintiff had already filed a writ petition before the Indore Bench, Madhya Pradesh High Court against the dishonest stand taken by the defendants and which writ petition was pending when the suit was filed. The plaint also makes an averment with regard to the cheque given as collateral security being thereafter presented, and which having been dishonoured, consequently, the plaintiff filed a criminal complaint under Section 138 of the Negotiable Instruments Act, 1881 before the concerned judicial Magistrate at Indore. The plaint also refers to the fact that the defendant no.1 made part payment of Rs. 17,38,039/-on 1.2.1994, and therefore, there only remained a balance of Rs.13,19,035/-towards the principal amount, which is claimed in the suit. The plaintiff also claims interest on the balance at 18% per annum. Para 14 of the plaint seeks extension of limitation for filing of the suit on the ground that the writ proceedings were pending in the Indore Bench of Madhya Pradesh High Court.

3. Defendant no.1-company has been wound up and as per the statement of the plaintiff’s counsel recorded on 6.7.2012, the plaintiff in the present suit is not claiming any relief against the defendant no.1-company.

4. Defendant no.2 has filed its written statement. In the written statement, the basic defence is that under the Uniform Customs and Practices for Documentary Credit, Revision 1995 (UCP 500) the bank is duty bound to honour the documents only in accordance with the terms of letter of credi