Standard Chartered Bank, Small Medium Enterprises Banking Consumer Banking, Rep. By its Regional Sales Manager K. Satish, Chennai vs Olympics Cards Limited, Rep. By its Managing Director Mr. N. Mohammed Faizal

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2021 Supreme(Mad) 2860

IN THE HIGH COURT OF JUDICATURE AT MADRAS
T. RAJA, P. RAJAMANICKAM, JJ.
Standard Chartered Bank, Small Medium Enterprises Banking Consumer Banking, Rep. By its Regional Sales Manager K. Satish, Chennai & Another - Appellant
Versus
M/s.Olympics Cards Limited, Rep. By its Managing Director Mr.N. Mohammed Faizal - Respondent
A.S. No. 947 of 2020
Decided On : 25-02-2021

Advocate Appeared:
For the Appellants :M.S. Murali for M/s. R & P Partners, Advocates.
For the Respondent:K. Sankaran, Advocate.

Headnote:
Civil Procedure Code, 1908 - Section 96 - Company - Bank - Letter of Credit - Whether defendants failed and neglected to open forward contract in respect of documentary letter of credit - Whether loss of Rs.3,19,651.84/- is incurred by plaintiff on account of delayed opening of forward contract - Whether defendants are entitled to charge plaintiff preclosure penalty of Rs.14,49,449/- for closure of their overdraft account - Whether defendant Bank has caused any delay - Held, Court is of considered view that defendant is not entitled to ask for pre-payment charges for simple reason that in said letter, plaintiff was informed that overdraft credit limit has been reduced to nil and the overdraft credit facility of Rs.0/- is hereby treated as outstanding and due - Moreover, Ledger Account shows that plaintiff had repaid entire loan amount of Rs.6.45 crores on and accordingly, zero balance has been arrived - During this period, there was only 33 days left out - Therefore, Court is of considered view that pre-payment charges said to have been levied on plaintiff by defendant bank is not justified and accordingly, finding given by learned trial Court in respect of issue No.9 is upheld and it is answered in favour of plaintiff - Appeal partly allowed.

JUDGMENT :

T. Raja, J.

Prayer: First Appeal has been filed under Order 41 Rule 1 read with Section 96 of Civil Procedure Code, against the judgment and decree dated 29.11.2019 passed by VI Additional City Civil Court Judge, Chennai, in O.S.No.5239 of 2019.

1. The defendants in the suit are the appellants and the plaintiff in the suit is the respondent. The defendants/appellants herein have filed this appeal challenging the impugned judgment and decree dated 29.11.2019 passed in O.S.No.5239 of 2019 by the learned VI Additional City Civil Court Judge, Chennai, partly decreeing the suit with a direction to the defendants/appellants to pay a sum of Rs.33,13,634.39/- to the plaintiff with interest at 9% per annum from the date of plaint till the date of judgment and again with further interest at 6% per annum from the date of judgment till the date of realization.

2. For the sake of convenience, the parties will be referred to as arrayed in the original suit.

3. It is averred in the plaint that the plaintiff's Company was incorporated on 21.04.1992 to carry on business of manufacturers, importers, exporters, dealers and retailers in all types and varieties of stationery, wedding cards, invitations, greeting cards, etc. They are having their bank account with the second defendant bank. It is the claim of the plaintiff that the defendant bank after satisfying with the financial requirement of the plaintiff sanctioned credit facility by Banking Arrangement Letters dated 02.03.2007, 11.10.2007 and 03.04.2008 as stated below:-

(a) Overdraft Rs.6,45,00,000/-

(b) Term Loan-1 Rs.1,50,00,000/-

(d) Import Letter of Credit Rs.50,00,000/-

(e) Inland Letter of Credit Rs.12,50,000/-

(f) Housing Loan in the name of H.Noormohamed and S.Jarina Rs.1,50,00,000/-

The plaintiff in order to extend his business resolved to import printing machines from Germany, and therefore, when the plaintiff approached the defendant bank for Letter of Credit for a sum of Euro 2,16,800/- favouring HEIDSLBERGER, Germany, the Bank has also issued a Letter of Credit to the plaintiff. Thereafter, as requested by the Bank, the plaintiff also deposited a sum of Rs.20 lakhs towards the margin money for the Letter of Credit and another sum of Rs.3 lakhs on 10.04.2006 for forward contract. However, it is alleged, the defendant bank without issuing forward contract delayed the process. Therefore, the plaintiff made an oral request to open forward contract, but, the defendant bank was negligent in opening the forward contract as on 24.02.2006, hence, again, the plaintiff said to have made a request to open fixed deposit for Rs.3 lakhs on 29.03.2006, but, it was opened only on 07.04.2006. Finally, the second defendant bank opened the forward contract on 26.04.2006 for the value of Euro 1,70,000/- instead of Euro 2,16,800/-. When the date of Letter of Credit was mentioned as 24.07.2006, the due date under the Letter of Credit was mentioned as 18.08.2006 and value of Euro rate was 53.3947880. But, on the date of payment of Letter of Credit the rate of Euro increased to 59.96. Therefore, it was claimed that the plaintiff suffered a loss of Rs.14,23,338/-, hence, such sum may be directed to be paid towards deficiency in service.

4. It is further claimed by the plaintiff that on account of unjust, unfair acts of the defendant bank, the plaintiff had suffered financial loss apart from mental agony, therefore, the plaintiff, after closing their account with the defendant bank, moved to Kotak Mahindra Bank, however, the defendant bank have wrongly levied pre-closure penalty to the tune of Rs.14,49,444/- for the closure of overdraft account. When the defendant bank issued zero balance letter on 05.02.2008, there is no question of charging pre-closure penalty, because, overdraft limit was closed on 21.01.2008 by the defendant bank. Moreover, during the closure of account, the defendant bank retained five demand drafts sent by the plaintiff through registered post on 17.

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