M/S.Bhushan Steel & Strips Ltd vs M/S.Tyo Trading Enterprises & Ors

S.P.Garg, J

Present suit for recovery of US$ 4,09,183/- equivalent to `1,79,38,582.72/- has been filed by M/s.Bhushan Steel & Strips Ltd. (hereinafter ‘the

plaintiff’) against M/s.Tyo Trading Enterprises (hereinafter ‘defendant No.1’), Commercial Bank of Ethiopia (defendant No.2),

M/s.Arcadia Shipping Ltd. (defendant No.3) and M/s.M.G.Trading Worldwide Pvt. Ltd. (defendant No.4).

Briefly stated, averments in the plaint are that defendant No.1 placed an order for supply of 400 MT Galvanised Steel Corrugated Sheets upon

defendant No.4, their agent in India and opened an irrevocable Letter of Credit (in short ‘LC’) in their favour for a sum of US$ 2,98,000/-. On

instructions of the defendant No.1, defendant No.4 approached the plaintiff at Delhi to supply the said order which was acceded to. The irrevocable

LC was transferred in the plaintiff’s name. Pursuant to that, the plaintiff dispatched the material vide two invoice Nos.E-98/033A TO B/GC dated

23.06.1998 for US$ 1,49,000/- and No.E-98/033B TO A/GC dated 23.06.1998 for US$ 1,47,510/-. The shipment was sent through defendant No.2,

loaded by defendant No.3 in their vessel Winco Pionner (VOY-04/98) from Mumbai Port to Djibouti Port, Ethiopia, vide Bills of Lading. The plaintiff,

thus, fulfilled all their obligations in time.

It is further averred that the freight amounting to US$ 8400/- and US$ 8316/- respectively were prepaid by the plaintiff to defendant No.3.

Defendant No.3 was directed to deliver the goods to the order of defendant No.2 to whom the documents were submitted by the plaintiff though their

bankers Punjab National Bank, Connaught Place, New Delhi (in short ‘PNB’). PNB negotiated the said documents and sent it to defendant

No.2 for making payment thereof. After the dispatch of the goods on ship and negotiation of the documents through their bankers, the plaintiff

received a letter dated 29.07.1998 from Citi Bank, Mumbai informing that defendant No.2 had requested them to obtain acceptance of cancellation of

the LC favouring the plaintiff and transferred by them vide their reference No.9543 dated 09.06.1998 and requested the plaintiff to give consent to the

cancellation. The plaintiff declined to accept the cancellation as the goods had already been shipped within the validity period of the LC.

It is averred that the plaintiff has not been released the payment despite various correspondence with defendant No.1 and others. Vide letter dated

07.09.1998 it was informed to the plaintiff by defendant No.1 that they had already made the payment last week. Despite that, no payment was

released by defendant No.2. Defendant No.3 by a fax dated 25.08.1999 informed the plaintiff that both the shipments have been released to the

consignee i.e. defendant No.1 against presentation of original Bills of Lading duly endorsed by defendant No.2 in favour of defendant No.1.

It is further urged that despite that, PNB returned the original documents including the original Bills of Lading to the plaintiff stating that the said

documents had not been encashed and had been received back without encashment from defendant No.2. On enquiry from Djibouti Port, it revealed

that the goods were not lying there. Apparently, the said goods were released by defendant No.3 unauthorizedly.

It is urged that despite delivery of the goods pursuant to the orders placed by defendant No.1, the payment has not so far been received by the

plaintiff. Hence the suit.

Initially, the suit was contested by defendants No.2 and 3. Defendants No. 1 and 4 did not appear despite service; they were proceeded ex-parte.

Defendant No.2 in the written statement denied his liability to make payment to the plaintiff. It urged that this Court had no territorial jurisdiction to

entertain and decide the present suit. It was further urged that under the LC, the last date of shipment was 07.07.1998 and the required documents

were to be negotiated by 28.07.1998. The plaintiff was repeatedly reminded to abide by the stipulations of the LC. The plaintiff, however, failed to

comply with the requirements of LC and there was delay in both the shipments of goods and negotiation of documents. The goods were shipped only

on 17.07.1998 and the documents were presented for negotiation on 31.07.1998. On scrutiny of the documents forwarded by the negotiating bank i.e.

PNB, the defendant No.2 found discrepancies on the face of the documents and therefore, rightfully refused to pay the LC amount.

Defendant No.3 in the written statement averred that it being an agent was not liable for the payment in the absence of owner of vessel Winco

Pionner to have been impleaded as a party. This Court lacks territorial jurisdiction. The obligation to deliver the cargo to the holder of the original Bills

of Lading was that of M/s. J.Kothari and Company Ltd. at Djibouti Port.

In the replication to the written statements of defendants No.2 and 3, the plaintiff reiterated the version given in the plaint.

On the basis of the pleadings of the parties and the documents on record, following issues were framed by an order dated 31.05.2010 :

“(i) Whether this Court has the territorial jurisdiction to try this Suit? OPD-2

(ii) Whether the plaintiff is entitled to a decree for US $ 1,49,000 equivalent to Rs. 1,79,38,582.72 as per the conversion rate at the time

when suit was filed, if so, to what effect? OPP

(iii) Whether the plaintiff is entitled to pendent lite interest @ 24%, if so, to what amount and for what period? OPP

(iv) Relief.â€​

It is relevant to note that defendant No.2 opted to remain ex-parte subsequently. Presently, the suit is being contested only by defendant No.3.

The plaintiff examined PW-1 (P.K.Aggarwal) in its evidence. Defendant No.3 examined Dinkar Malvankar as D3W1.

I have heard the learned counsel for the parties and have examined the file. Issue-wise findings are as under :

Issues No.2 & 3

Both these issues are taken together as they are inter-related.

The burden to prove these issues was upon the plaintiff. It is admitted position that the goods in question were dispatched vide two invoices

(Ex.PW-1/6 and Ex.PW-1/9) for delivery to defendant No.1. It is also not at issue that the shipment sent through defendant No.2 was loaded by

defendant No.3 in their vessel Winco Pionner (VOY-04/98) from Mumbai Port to Djibouti Port, Ehiopia, vide Bills of Lading Ex.PW-1/4 and PW-1/5.

Freight for the shipment was duly paid to defendant No.3 (Ex.PW-1/19 & Ex.PW-1/23).

On perusal of the plaint, it is, however, not clear and certain as to whom the plaintiff considers to be liable to make the payment of the articles in

question. The plaintiff is not sure as to which of the defendants is at fault and is liable to make the payments of the goods dispatched by it through

defendant No.3. It is not at all clear as to, to whom the goods were released, and if so, when and by whom. The order for the goods in question was

placed by defendant No.1 upon defendant No.4 - their agent in India; they opened the Letter of Credit in favour of the defendant No.4 for a sum of

US$ 2,98,000/-. The record reveals that various correspondences between the plaintiff and defendants No.1 to 3 took place with defendant No.4 after

the dispatch of the goods. However, the plaintiff did not claim any relief against defendant No.4 in the present proceedings. No credible document has

emerged on record to infer if there was any correspondence directly between the plaintiff and defendants No.1 and 2.

No evidence has emerged on record that the goods in question were delivered by defendant No.3 to defendant No.1. Defendant No.1 was not

traceable; it is so reflected from the letter dated 29.06.1999 (Ex.PW-1/29) written by the plaintiff to Chief Manager, PNB. It was informed therein

that defendant No.1 could not be contacted despite best efforts on account of war between Ethiopia and Eritria. It was suspected that the customer

had probably run away from Ethiopia and his whereabouts were not known to anybody even to Commercial Bank of Ethiopia (defendant No.2).

Relying upon this information, the plaintiff decided to call back the shipment from Djibouti so that they could make an alternative arrangement for

disposal of the material. The bank was requested to instruct its counterpart in Ethiopia to return the original set of documents. Apparently, on

29.06.1999 the plaintiff was not aware of the status of the goods in question.

Letter dated 19.08.1998 (Ex.PW-1/D2) written by defendant No.4 to the plaintiff lends credence to the assertions of the defendant No.2 in the

written statement. Defendant No.2 was categorical to inform that due to certain discrepancies and non-performance of the terms and conditions of

the LC, it could not be encashed. This letter dated 19.08.1998 (Ex.PW-1/D2) written by defendant No.4 informed the plaintiff that their banker Punjab

National Bank had created the following problems :

“(a) They have acknowledged Late Negotiation of Documents. Please note while claiming our reimbursement, PNB should in no way

specify Late Negotiation documents. They should try and circumvent this somehow and commit to Commercial Bank Ethiopia that documents

received from Bhushan Steel are in time.

(b) Refute allegation by the bank of alteration on Date of B/L. (We are surprised that with all your experience how you can make alteration

on the B/L issued even if you have shipped late).

..................

Kindly arrange to do the needful after using your influence in PNB to ensure that your documents are accepted by Commercial Bank of

Ethiopia.

We are surprised that in spite of our repeated requests to your people, cautioning them to ensure that documents should be in order, such

mistakes have been made causing problem to you as well as us.â€​

On perusal of the contents of this letter, it can be inferred that there were certain discrepancies as a result of which the defendant No.2 was

within its right to cancel the LC. Pursuant to document (Ex.PW-1/D2), Punjab National Bank wrote a letter dated 20.08.1998 (Ex.PW-1/27) to

defendant No.2; its copy was marked to defendant No.4 pursuant to their discussion on phone. The plaintiff has failed to establish that the terms and

conditions of the LC were duly complied with. PW-1/25 is the correspondence dated 29.07.1998 from Citi Bank to the plaintiff whereby they had

received telex from LC issuing bank. It was informed by defendant No.2 about the request received from the importer to cancel the LC. Accordingly,

request was made to obtain consent of beneficiary to cancel the LC.

Reliance has also been placed on the photocopy of letter purportedly written by defendant No.1 to defendant No. 4 on 07.09.1998 (Ex.PW-1/28).

In this letter, defendant No.1 informed defendant No.4 about making of the payment for the goods last week. This letter has, however, not been

proved. It is not clear as to which goods this letter pertained. This does not talk of release of the goods by defendant No.3. It is also silent if the goods

were accepted on the strength of Bills of Lading.

It is not in dispute that the original documents including Bills of Lading were returned and are in possession of the plaintiff. Purportedly a

correspondence (Ex.PW-1/30) was received by the plaintiff from defendant No.3 on 25.08.1999 whereby in response to the fax dated 23.08.1999, it

was informed that both the shipments have been released to the consignee defendant No.1 against presentation of original Bills of Lading duly

endorsed by defendant No.2 in favour of defendant No.1. Defendant No.3 in the evidence elaborated that this information was provided as a matter

of courtesy after a gap of more than one year. It was not elaborated as to when the shipments were released to the consignee. This information is

apparently incorrect as the original Bills of Lading continued to be in possession of plaintiff and there was no question of its being released to the

consignee against presentation of original Bills of Lading duly endorsed by defendant No.2.

The plaintiff had written letter dated 27.09.1999 to defendant No.3. It was informed that due to reasons best known to the consignee, the

documents remained unretired till that time with the result that both the above shipments were lying in their custody in Djibouti Port. Due to the said

situation, the plaintiff decided to call back the shipments after receipt of complete sets of original documents (including complete sets of both Bills of

Lading) through normal banking channel which were presently available with them. Defendant No.3 was requested to arrange reshipment of both the

shipments; consignments to Mumbai on “freight to collect basisâ€, after making the payment of all dues of Djibouti Port, which they undertook to

reimburse them. Needless to say on 27.09.1999, the plaintiff was not aware as to where the goods were and what was their status.

Defendants No.1 & 2 thus cannot be fastened with any liability in the absence of any positive evidence on record that the goods were released to

defendant No.1 as per the terms and conditions of the contract / Bills of Lading. Defendant No.2 cannot be held liable as there were discrepancies in

the performance of terms and conditions of LC forcing the defendant No.2 to seek cancellation of LC.

The goods in question were undisputedly loaded and transported by defendant No.3 on consideration of freight charges from Mumbai Port to

Djibouti Port and Bills of Lading in question were issued by them. It was their duty to transport the goods to its destination without any loss or damage

to it. The defendant No.3 did not divulge at all as to whom the goods were released after it reached its destination at Djibouti Port. There is no

categorical assertion that the goods in question were released to M/s. J.Kothari and Company Ltd., and if so, on which date. Inconsistent and

conflicting stands have been taken by defendant No.3 in this regard. Before delivery of the goods at Djibouti Port, there was no information conveyed

by defendant No.3 to the plaintiff about its due compliance. The goods could not have been released by defendant No.3 without production of the

original Bills of Lading which continued to be in the plaintiff’s possession. Seemingly, the goods in question were released by defendant No.3

unauthorizedly and it has not been accounted for by them. Since the transaction was only between the plaintiff and defendant No.3 and its so called

undisclosed principal Win Line (UK) Ltd. was not in the picture and was not known to the plaintiff, it cannot be said that the defendant No.3 was not

liable for the loss of the goods in the absence of impleadment of the Principal. Defendant No.3 has not disclosed as to who was the principal and what

was the relationship between Win Line (UK) Ltd. and defendant No.3. Defendant No.3 has not produced on record any document to show if the

freight charges received by it were on behalf of its Principal and it was released to it. No books of accounts in that connection have been produced.

Defendant No.3 has claimed that its only duty was to transport the goods to Djibouti Port safely. The obligation to deliver the cargo at the Djibouti

Port to the holder of the original Bills of Lading duly endorsed by defendant No.2 was that of M/s. J.Kothari and Company Ltd. It is, however, not the

case of defendant No.3 that the goods in question were delivered by them at Djibouti Port to M/s. J.Kothari and Company Ltd. The entrustment of the

goods was to defendant No.3 at Mumbai Port with the clear undertaking that it would be safely transported to Djibouti Port. It was the bounden duty

of the defendant No.3 to prove to whom the goods were handed over at Djibouti Port after the shipment reached its destination and if so, when and on

the strength of which documents. All these aspects have not been established by defendant No.3. The defendant No.3 is thus liable for the loss of the

goods in question and to make the payment of the goods in question to the plaintiff, of course, without any interest, in the absence of any stipulation to

that effect.

These issues are decided accordingly.

Issue No.1

This Court agrees with defendant No.3’s contention that this Court lacks territorial jurisdiction to entertain and decide the present suit.

Apparently, no cause of action arose against defendant No.3 within the jurisdiction of the Court to grant the relief prayed for. Defendant No.3 carries

on its business at Mumbai. It is not at controversy that the goods in question were shipped / loaded at Mumbai; the freight charges were paid there.

The goods were to be delivered at Djibouti Port, Ethiopia. Apparently, no cause of action whatsoever qua defendant No.3 arose in Delhi to attract the

territorial jurisdiction of this Court. This Court has no jurisdiction to entertain and decide the present suit qua the defendant No.3. This issue is decided

in favour of the defendant No.3 and against the plaintiff.

Relief

Since this Court has no territorial jurisdiction to entertain and decide the present suit qua defendant No.3, the relief claimed by the plaintiff against

defendant No.3 cannot be granted.

Plaint be returned to the plaintiff to be presented before the Court of Competent Jurisdiction, as per law.