| SooperKanoon Citation | sooperkanoon.com/700418 |
| Subject | Commercial |
| Court | Delhi High Court |
| Decided On | Jul-30-2001 |
| Case Number | IA 8910/90 in s.1/82 |
| Judge | Mr. J.D. Kapoor, J |
| Reported in | 93(2001)DLT694; 2002(63)DRJ127 |
| Acts | UCP - Article 7 - Order 11, Rule 21 |
| Appellant | M/S Sawhney Brothers |
| Respondent | Hong Kong and Shanghai Banking Corporation and Others |
| Appellant Advocate | Partiy in perso |
| Respondent Advocate | Mr. V.P. Singh Sr. Adv., and ; Mr. Dalip Mehra, Adv. |
| Disposition | Application Dismissed |
J.D. Kapoor, J.
1. Through this application filed under Order 11 Rule 21 read with Section 151 CPC the plaintiff has prayed for striking out the defense of defendant no. 1 (Hong Kong & Shanghai Banking Corporation) on account of its deliberate and intentional failure to give full reply to the interrogatories of the plaintiff.
2. Facts relevant for the purpose of aforesaid application, put briefly, are as under:-
3. The plaintiffs are a business house engaged in export and import trade. The defendant no. 1 is carrying on business in foreign trade banking at Singapore.
4. The defendants 2 to 5(hereinafter referred to as Suris) approached the plaintiff with representation that they had arranged for an indent for the import of brass scrap/cloves of c.i.f. value of approximately Rs. 40 lacs but as the Suris were not in a position to open the Letter of Credit for that amount the plaintiff should arrange for credit facility and other amount the plaintiff should arrange for credit facility and other facilities in consideration of a service charge. On this representation the plaintiff entered into an agreement with them on 26th July, 1979 to provide the credit facilities through their Bankers. On 30th July, 1979 the plaintiff approached the Central Bank of India with a request for opening of Letter of Credit. The Central Bank of India established a letter of Credit bearing no. 5/164 dated 10th August, 1979 in favor of Bentrex for a sum of US Dollars 4,86,800/- on C & F basis. However due to negligence the Central Bank of India failed to specify in the Letter of Credit that it was only payable against shipment on any 1st class or approved Steamer. On 28th August, 1979 the plaintiff wrote to the Central Bank of India instructing an amendment to the Letter of Credit by which the merchandise quality approval before shipment from the Letter of Credit opener as well as the Indenters was made obligatory. Pursuant to the aforesaid instructions the Central Bank cabled the HKS Bank carrying out the amendment to the Letter of Credit. On 30th August, 1979 Bentrex cabled the plaintiff and stated that the clove had been shipped on board SS 'OHDAI'.
5. The defendant no. 1 claims to have negotiated the documents on 30th August, 1979 itself. As a commercial practice the defendant Bank normally draws drafts on negotiation of documents and sends them by post and reimbursement is made in several days. Again on the representation made by Suris and the delivery of the cheque by them the plaintiff wrote to the Central Bank requesting them to withdraw the amendment dated 29th August, 1979 and accordingly the Central Bank deleted the amendment by a cable dated 4th September, 1979. On 5th September, 1979 the Bentrex wrote to the plaintiff stating that they had effected the shipment. The defendant Bank wrote to the Central Bank stating that it was sending therewith what was represented by the defendant Bank as being the Bill of Lading, Surveyor's Certificate, Commercial Invoice, the Bill of Exchange and other documents and demanded the money from the Central Bank on the basis of Letter of Credit.
6. On 12th September, 1979 the plaintiff wrote to the Central Bank that it was not clear whether the ship was a first class one or one approved by Lloyds or was sea worthy and, thereforee, sent the cable to the defendant Bank to put the payment under reserve till the receipt of confirmation. On 16th September, 1979 it was learnt that the ship 'OH DAI' had sunk on 8th September, 1979 at a position which was later on reported to be 16.2. North and 92.3 East. On 18th September, 1979 the Central Bank wrote to the Insurance Company for claim papers. On 28th September, 1979 the plaintiff delivered a letter in writing to the Central Bank pointing out certain discrepancies in the documents. On 29th September, 1979 the Central Bank sent a cable to the defendant Bank pointing out some of the discrepancies and requesting reimbursement but the defendant Bank refuted the discrepancies. After exchange of series of communications the defendant Bank sent a telex to the Central Bank on 18th October, 1979 reiterating its stand that the documents were genuine and the goods had been shipped and as such they were not liable to refund the money. The insurance company also refused to pay by taking the plea that no goods were shipped and the Bill of Lading, Surveryor's Certificate and other documents were fake.
7. However the relevant interrogatories served upon the defendant by the plaintiff are as under:-
Interrogatory no. 1:
By way of this interrogatory the plaintiff wanted defendant no. 1 to state on oath whether defendant no. 1 Bank negotiated or dealt with 11 Letters of Credit opened by various parties in which Bentrex, Palmex and others were named as beneficiaries.
Interrogatory no. 4:
By this interrogatory the plaintiff sought from defendant no. 1 on oath as to how many accounts in business name or personal name were maintained by defendant no. 1 with respect to Bentrex, Palmex and others.
Interrogatory no. 7:
Through this interrogatory the plaintiff sought information whether or not prior to 5th August, 1979 and after 3rd September, 1979 the defendant no. 1 had negotiated any Letter of Credit in respect of which Bill of Lading was issued by Wellway Lines Shipping Co.
Interrogatory no. 11:
It pertains to and deals with Survey Certificate issued by Unique Marine Services Singapore.
Interrogatory no. 15:
This interrogatory refers to a particular current account as defendant no. 1 Bank has filed documents in respect of this account.
Interrogatory no. 16:
The plaintiff sought information from defendant no. 1 as to what security was taken from Bentrex before negotiating the Letter of Credit at the time of making the payment.
8. The main contention of the plaintiff is that the amendment of the Letter of Credit (Exhibit P-10) was received by the defendant on 30th August, 1979 and the said amendment, thereforee, was to be considered as part of the Letter of Credit. It is alleged that while replying to the interrogatories the defendant intentionally, fraudulently and dishonestly omitted to disclose the name of the shipping company, Bill of Lading numbers and dates of loading on board of all the importers and surveyor's name as well as the information of other four companies.
9. According to the plaintiff the amended Letter of Credit was sent to the defendant by Central Bank of India on 29th August, 1979 by Telex which reached the defendant no. 1 Bank on the same date, as is evidenced by the affidavit of the Chief Officer of the Central Bank of India M.S. Krishnaswami and it, according to the plaintiff must have been on the table of the Manager of the defendant no. 1 by 29th August, 1979 or latest by 30th August, 1979. However in the affidavit dated 8th December, 1982 by Mr. Hill who is an Officer of the defendant no. 1 Bank it was disclosed that the above amendments of Letter of Credit were received by them on 31st August, 1979 and by then the documents had already been negotiated.
10. The plaintiff has taken pains in exposing the conspiracy by defendant no. 1 Along with other defendants in negotiating the documents inspire of having received the amendment of Letter of Credit whereby the goods were asked to be got approved from the plaintiff as well as defendant 2 to 5 before shipment. Bill of Lading is always issued only after sailing of vessel. Vessel S.S. Ohdei sailed on 30th August, 1979 and the documents were negotiated on 30th August, 1979 itself. However the defendant has disclosed that the negotiation of documents including Bill of Lading were issued for ship S.S. Ohdei on 6th September, 1979, 31st August, 1979 and 4th September, 1979 after sailing of ship and the payments to the exporter defendant no. 6 were disbursed thereafter. It is alleged that the payments were disbursed on the basis of false and fabricated documents.
11. At this stage it cannot be presumed that the amended Letter of Credit was received by defendant no. 1 prior to the sailing of the shipping or the negotiations of export documents or that these documents were not in accordance with the terms and conditions of the Letter of Credit and, thereforee, deserves to be declared null and void.
12. The very fulcrum of the controversy involves evidence that is whether the amended Letter of Credit was received by defendant no. 1 on 31st August, 1979 that is after the documents had already been negotiated or was it on the table of the defendant on 29th or 30th August i.e. before the documents were negotiated. Even if it is assumed that the amended Letter of Credit was dispatched by the Central Bank of India on 29th August, 1979 but the defense of defendant no. 1 that this amendment was immediately withdrawn on 4th September, 1979 which also has a significant bearing needs to be taken into consideration to determine the allegations of the plaintiff in the right perspective.
13. To assume at this stage that defendant no. 1 was a party to the fraud because the officers of the Bank had conspired with either the defendants 6 to 12 by way of negotiating export documents would be too much. It involves evidence whether the plaintiff's documents were on their face not in accordance with the terms and conditions of the letter of Credit as per Article 7 of the UCP or not.
14. It is settled law that until and unless there is obduracy or contumaciousness on the part of a party or willful attempt to disregard the order of the Court to produce the documents or reply the interrogatories in full, the inference of non-compliance cannot be jumped at. This position of law was enunciated by the Supreme Court in M/s Babbar Sewing Machine Co. Vs . Trilok Nath Mahajan : [1979]1SCR57 as under:-
'An order striking out the defense under Order 11 Rule 21 should be made unless there has been obstinacy or contumacy on the part of the defendant or willful attempt to disregard the order of the court, to produce the documents. Even assuming that in certain circumstances the provisions or Order 11 Rule 21 must be strictly enforced, it does not follow that a suit can be lightly thrown out or a defense struck out, without adequate reasons. The test laid down is whether the default is willful.'
15. As is apparent the defendants produced all the documents in the reply to the interrogatories that were in their possession and the documents which were sent by them to the Central Bank of India were also produced by Central Bank of India and are on the record. From these documents no definite conclusion can be drawn as to the conspiracy or fraud played by defendant no. 1.
16. The only question to be determined in these proceedings is whether the defendants acted as a prudent banker or not and merely because the plaintiff has taken the plea that an amended Letter of Credit dispatched by a Telex by CBI was received by it before or after the negotiations of the documents by the Bank and whether the Central Bank of India withdrew it later or not are the facts which cannot be determined on the basis of the affidavits filed by both the parties. Whatever information was in possession of the defendant no. 1 has been furnished in reply to the interrogatories and all documents are on the record. The plaintiff shall have ample opportunity to prove these documents or to prove the claim made by him that the defendant had received amended Letter of Credit before it negotiated the documents.
17. I do not perceive any reason to allow the application and strike off the defense. Striking off defense is a very harsh and exceptional step and should not be resorted to merely on the photo copies of the documents and claims and counter claims of the parties disclosed in the affidavits. Unless and until the fraud or deliberate or intentional defiance is writ large defense should not be struck off.
18. In view of the foregoing reasons the application is devoid of merit and is dismissed.
S.1/82
19. The pleadings are complete. List before the Joint Registrar for admission/denial of documents on 30th August, 2001.