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2017 Supreme(Del) 182
IN THE HIGH COURT OF DELHI AT NEW DELHI
DEEPA SHARMA, J.
MALAYAN BANKING BERHAD – Plaintiff
Versus
ALLAHABAD BANK – Defendant
CS (OS) No. 745 of 2015
Decided On : 20-01-2017
For the Plaintiffs : Mr. Sandeep Sethi with Mr. Kanishk Ahuja.
For the Defendants : Mr. Sugam Seth with Ms. Renukha Iyer.
Banks must be allowed to honour their guarantees without interference except in clear cases of notice of fraud to the bank.
Headnote:
LETTERS OF CREDIT - LEAVE TO DEFEND - [KEYWORD] - [SUBJECT] - [ACT SECTION LIST] - [SUMMARY]
Fact of the Case:
AB, a nationalized bank, issued four irrevocable Letters of Credit (LCs) at the instance of STC for the purchase of copper wire rods. MBB, a foreign bank, was the negotiating bank. AB confirmed the acceptance of the documents and undertook to reimburse the amount on the maturity dates. AB did not point out any discrepancy in the documents sent to them by MBB within five banking days following the day of presentation as required by Article 16 (d) of the UCP-600 and thus MBB considered it a deemed acceptance of the documents in respect of these two LCs and released the payment under these LCs. AB informed MBB that the buyer had informed them that he had not received the goods dispatched as per the documents and had apprehended that the shipping documents were fabricated. MBB replied that they were not concerned with any dispute between the buyer and the seller and they had to resolve it among themselves in view of the provisions of UCP-600. AB failed to reimburse the amount even despite several reminders. MBB served a notice upon AB asking for the reimbursement.
Finding of the Court:
The court held that AB had failed to bring on record any triable issue or any issue which needs enquiry and investigation. The application for leave to defend was, therefore, rejected and the present suit of the plaintiff/MBB was decreed for a sum of Rs. 11,00,04,972.03p. along with pendente lite and future simple interest till its realization at the rate of 9% per annum in terms of Section 34 of the Code of Civil Procedure.
Issues: Whether the Civil Court has jurisdiction to entertain the present suit considering the pendency of the investigation before RBI and Police officials? Whether the suit of the plaintiff is barred by law? Whether the plaintiff has committed serious fraud and irreparable injury would be caused to the parties if the claims of the Plaintiff are allowed? Whether the Plaintiff has acted against the mandate of the Letters of Credit? Whether the Plaintiff has acted in an independent capacity of a banker and not as an agent of the Defendant bank? Whether the Plaintiff ought to have acted in a prudent manner and cannot take advantage of its own wrong? Whether the defendant bank is liable to pay any amount to the plaintiff? Whether the present suit is bad for concealment of material facts from this Hon’ble Court? Whether the present suit is bad as the same cannot be adjudicated without the impleadment and evidences of necessary parties including STC, Synergy and Millennium Wires?
Ratio Decidendi: The court held that the allegation of fraud on the part of MBB is merely a bald allegation not supported by any facts on record. The defendant AB has failed to bring on record any triable issue or any issue which needs enquiry and investigation. The application for leave to defend is, therefore, rejected and the present suit of the plaintiff/MBB is hereby decreed for a sum of Rs. 11,00,04,972.03p. along with pendente lite and future simple interest till its realization at the rate of 9% per annum in terms of Section 34 of the Code of Civil Procedure.
Final Decision: The court decreed the suit in favor of MBB for a sum of Rs. 11,00,04,972.03p. along with pendente lite and future simple interest till its realization at the rate of 9% per annum in terms of Section 34 of the Code of Civil Procedure.
DEEPA SHARMA, J.
I.A. No. 22985/2015 (application on behalf of defendant under Order 37 read with Section 151 CPC for leave to defend)
1. Vide this application the defendant (hereinafter called as “AB”) has sought the leave to defend the case.
2. The present suit has been filed by the plaintiff under Order XXXVII of the Code of Civil Procedure (CPC) for the recovery of USD 1,505,267.81 equivalent to Rs. 11,00,04,972.03p. along with pendente lite and future interest at the rate of 12% per annum from the date of institution of the present suit till its actual realization.
3. The brief facts of the case are that the plaintiff Malayan Banking Berhad (hereinafter called as “MBB”) is a foreign bank of Malaysia. AB is a nationalized bank functioning in India and has one of its branches at Delhi and is working under the supervision of the Reserve Bank of India (hereinafter called as RBI) and therefore is bound to adhere to all the norms and international standards for banking practices in its operations. It is submitted that M/s Millennium Wires Pvt. Ltd (buyer) through State Trading Corporation of India Ltd. (STC) had placed an order for purchase of copper wire rods through one M/s Synergic Industrial Materials and Services Pte Ltd. a company in Singapore (seller). There was a contract between the buyer, STC and the seller. At the instance of STC, AB had issued four irrevocable Letters of Credit (LCs), the details of which are as under:-
| LC No. | Date | Amount In USD | Beneficiary |
| 0189111FLU000150 | 07.12.2011 | 371,750 + 3% | Synergic Industrial Materials and Services Pte Ltd. |
| 0189111FLU000151 | 07.12.2011 | 371,750 + 3% | Synergic Industrial Materials and Services Pte Ltd. |
| 0189111FLS000154 | 17.12.2011 | 371,750 + 3% | Synergic Industrial Materials and Services Pte Ltd. |
| 0189112FLU000159 | 02.01.2012 | 371,750 + 3% | Synergic Industrial Materials and Services Pte Ltd. |
4. It is submitted that the said LCs were available for negotiation with any bank in Malaysia and were governed by the rules framed by the International Chamber of Commerce (ICC) being the rules contained in Uniform Customs and Practice for Documentary Credits (UCP-600). By virtue of these LCs which were irrevocable in nature, the plaintiff and the defendant entered into a separate and independent contract wherein the defendant i.e. AB had agreed to reimburse the Negotiating Bank i.e. the Plaintiff/MBB the amount due at the maturity of the LCs subject to the presentation of the documents in accordance with the terms of the LCs. The seller submitted the documents to the plaintiff and the negotiating bank i.e. plaintiff/MBB forwarded them to AB and AB vide its Swift Message dated 23.12.2011 for LC No. 0189111FLU000150 (hereinafter called as 'LC-50') and 16.01.2012 for LC No. 0189112FLU000159 (hereinafter called as 'LC-59') confirmed the acceptance of the documents and undertook to reimburse the said amount on the maturity dates i.e. 07.03.2012 and 06.04.2012 respectively. In respect of LC No. 0189111FLU000151 and LC No. 0189111FLS000154 (hereinafter called as 'LC-51' and 'LC-54' respectively), AB did not point out any discrepancy in the documents sent to them by MBB on receipt from seller, within five banking days following the day of the presentation as required by Article 16 (d) of the UCP-600 and thus MBB considered it a deemed acceptance of the documents in respect of these two LCs and released the payment under these LCs. It was only vide message dated 31.01.2012 that AB informed MBB that the buyer had informed them that he had not received the goods dispatched as per the documents and had apprehended that the shipping documents were fabricated. This message was duly replied. It is submitted that MBB was not concerned with any dispute between the buyer and the seller and they had to resolve it among themselves in view
