Ravinder Nath vs State Bank of India

K. Kannan, J.—The State Bank of India was the plaintiff and the suit for recovery of money against the defendants had been decreed for Rs. 3,69,286.59 with interest. The appeal filed by the defendants was also dismissed. The 1st defendant is the appellant before this Court. The suit had been filed by the Bank on an averment that the 2nd defendant Narain Dass Gosain as the authorized signatory of the 1st defendant applied to the Bank for opening a letter of credit favouring Paras Ram & Brothers, Singapore for a sum of $ 67700 for import of 75 M.T. of RBD Palm Oil and 10 M.T. GUM DAMAR, C&F BOMBAY. The Bank had opened two letters of credit and on the request of the defendants, the credit was enhanced by another $ 70175 making a total credit of $ 1,37,875/-. The letters of credit had also been amended to provide for the first consignment of 75 M.T. of RBD Palm Oil to be shipped before 16.01.1979. The second installment of 82.5 M.T. to be supplied before 25.01.1979. There was also done an amendment regarding the party, who could do the parcel of the stocks. The documents had been sent to Amritsar Branch of the plaintiff Bank and all the documents pertaining to three consignments had been accepted by the 2nd defendant on behalf of the 1st defendant on 07.04.1979.

The 2nd defendant accepted the invoice PR/41/79 dated 30.12.1979 for US Dollars 42495.75 for shipment of 3030 tins of RBD Palm Oil from Singapore to Bombay on C&F basis through S.S. Soloveyev. On the acceptance of the consignments by the defendant without any hindrance, the Amritsar Branch intimated due date to negotiating Bank and the reimbursing bank Irvin Trust, New York and on due date namely in May 1979, the reimbursing Bank paid the amount to the negotiating bank by debit to the plaintiffs bank account and on that basis, the New Railway Road Branch of the plaintiff debited the said sum of Rs. 3,61,000/- in the current account of the 1st defendant. The 1st defendant confirmed the debit on 18.06.1980 and the 2nd defendant accepted the bill of exchange and other documents on behalf of the 1st defendant. The bill of exchange dated 16.01.1979 were presented to the 1st defendant by Mulkh Ran Wadhawan Notary Public, Jalandhar on 30.04.1980 and he was asked to honour the same but the 1st defendant refused to pay the amount. The fact of presenting and dishonouring was noted by the Notary Public and the suit was filed for recovery of the amount covered through the bill of exchange.

The defence was that surveyor''s report No. 1659/79 pertaining to the goods in dispute was made by the International Institute of Adjustors and Surveyors on 16.01.1979 only and the certificate of fitness for human consumption was made on 15.01.1979 which showed the mark JOT and after that, the goods were to be shipped in M.V. S.S. Soloveyev. The list of packing was also done on 16.01.1979. The defendants'' contention was that these goods were not the goods to be supplied to the defendants and the bill of lading mark JOT on 16.01.1979 pertained to the goods sent by M/s. Paras Ram Brothers, Singapore for invoice of US Dollars 42495.75 did not pertain to the goods ordered by the defendants. Pointing out of a contention that the defendants had accepted the invoices, the contention was that the 2nd defendant took the document dated 07.04.1979 on behalf of the 1st defendant on the assurance given by the Manager, State Bank of India that the documents were correct and the acceptance was retrospective w.e.f. 13.03.1979. But when the defendant scrutinized the document with the help of M/s. A. Ahmed & Company, clearing agents at Madras, they found no trace of goods either at Bombay or Madras. The defendant was, therefore, justified in returning the documents to the plaintiff Bank on 13.04.1979 denying that the documents were not correct and the invoices were fake, fabricated and forged. The marking JOT was meant for M/s. Jai Hind Oil Traders of M/s. Multani Soap Factory, Ladowali Road, Jalandhar. The certificate given by the International Institute of Adjustors and Surveyors, Singapore actually showed that the goods ordered by the 1st defendant were in Singapore on 16.01.1979 while the goods marked JOT had been shipped through S.S. Soloveyev that left Singapore on 16.12.1978 and reached Madras on 23.12.1978. The ship had actually berthed at the port on 03.01.1979. M/s. D.B. Madan & Company after discovering that consignment of goods marked JOT were of New Bank of India, Jalandhar Road, wrote an ordinary post card to clear the goods and they having not received any reply sent a reminder to the Bank also and having failed in their attempt, M/s. D.B. Madan & Company abandoned the cargo on 22.01.1979 and informed the said fact to the port trust. The firm had actually sent a registered letter to the 1st defendant on 23.01.1979 followed by telegram of the same date that the destination of the goods was Madras while the goods of the 1st defendant were to be dispatched to Bombay for which the freight had been pre-paid. The 1st defendant sent letters dated 20.03.1979 and 30.04.1979 to the Manager, New Railway Road Branch of the State Bank of India requesting them not to remit the amount pertaining to the consignment of 3030 tins of RBD Palm Oil because the documents relating to the same were false and fabricated. The Bank had literally ignored the letters of the 2nd defendant and therefore, the 1st defendant filed a suit against the State Bank of India, New Railway Road Branch and Amritsar Kotwali Branch of the plaintiff Bank for permanent injunction restricting the defendants from remitting the money of the aforesaid consignment abroad. The suit had been filed in the Court of Sub Judge, Jalandhar on 10.05.1979 but the suit was allowed to be dismissed for default when an assurance had been allegedly given by Managers of the Bank that they would not remit the money.

The 1st defendant also denied the fact that they had confirmed the debit entry on 18.06.1979 and the voucher produced by the plaintiff alleged to have been signed by the 1st defendant was for making a draft of Rs. 15,000/- at Jagroan Branch of the plaintiff Bank and was to be debited to account No. 3015 which had a credit of Rs. 15,296.11. The defendants would explain that it was sent on 23.04.1980 and not on 18.06.1979 when he was actually at Hyderabad under the treatment of Dr. G. Narasiah. The 1st defendant shifted from Bombay to Hyderabad in connection with his business. To probabilise the contention in defence that the 1st defendant could not have signed the debit entry on 18.06.1979, he would produce the hotel bills of 01.06.1979 and 16.06.1979 at a hotel at Bombay and medical certificate from 18.06.1979 to 20.06.1979 from the hospital at Hyderabad. The 1st defendant would contend that it was signed in blank on the assurance of the clerk of plaintiff Bank Satpal Pusri that it will be filled up only for the purpose of issuance of a draft.

The defendant would give an explanation that he did not also collect the draft allegedly on account of the fact that the official of the Bank Satpal Pusri said that the Bank Manager was very busy and the following day he said that draft was not being issued but it was transferred to the sundry account since the Bank had a dispute with the 1st defendant in his account No. 3020. The 1st defendant was reported to have been upset about the information and forgot to get back the blank voucher from Satpal Pusri. To lend credibility to his defence that the signature was in a voucher only of blank form, the defendant would point out that an amount of Rs. 15,000/- had been transferred to the sundry account on 23.04.1980 the date when he would say when the 1st day actually signed a blank voucher. The Bank had fraudulently used the blank voucher for account No. 3020 and filled up by the Bank to suit their own ends to file the suit.

On the contention raised by the plaintiff that the 2nd defendant had actually accepted the bills of exchange and three sets of documents pertaining to the shipment of 3030 tins of RBD Palm Oil on behalf of the 1st defendant, the contention is that they were prevailed upon to accept the bills on the representation made by the Bank that they would secure the goods properly but it turned out to be false and fake promise. The defendants were engaging with their agents at Chennai about the status of the goods between 07.04.1979 and 30.04.1979. The 2nd defendant refused to accept the bill of exchange only because of the circumstances mentioned above that the goods have not been dispatched at all and the documents were signed on false promise given by the Bank Manager that they would not be misused.

It is not as if that the entire consignment of the goods were challenged by the defendants. As regards two Letters of Credit No. 24/780 and 24/781 dated 19.11.1978, of which the first letter of credit to the 1st consignment had been taken delivery of and it was only the second letter of credit for the second consignment there had been allegedly fraud committed by the consignor and the Bank had allegedly colluded with the consignor. Giving details of the second consignment, the defendant would contend that invoice No. 61979 for 3030 tins of RBD Palm Oil valued at $ 42,495.75 had been issued from Singapore to Bombay C&F basis to the 1st defendant and survey report carried out by the International Institute of Adjustors and Surveyors was reported to have been carried on 15.01.1979 at Singapore. Bill of lading from Singapore to Bombay freight pre paid had mentioned the consignee as State Bank of India, notify M/s. Ravindra Chemical Works. None of these documents could be true according to the defendant by the fact that the Russian steamer Zonoviy Soloveyev had not left on 16.01.1979 but records would show that they had left on 16.01.1978 entered the Madras harbour on 23.12.1978 and berthed at the port on 03.01.1979. M/s. D.B. Madan & Company, Steamer Agents, Madras of Russian vessels got information that Zonoviy Soloveyev had been still in the harbor but not berthed and among other cargo vessels was containing 3030 tins RBD Palm Oil with mark JOT Madras. The bill of lading relating to the said goods were consigned to the order of New Bank of India, Jallandhar. It appears that the M/s. D.B. Madan & Co. sent a post card and later abandoned the consignment which was identical in quantity, quality and all other respects to the goods ordered by the 1st defendant from Singapore Shippers M/s. Paras Ram Brothers.

The defendant would contend that the consignor M/s. Paras Ram Brothers themselves got wind of the mistake in the consignment having been sent to Madras Port and had requested M/s. D.B. Madan and Co. to transit the goods to Bombay but he was not prepared to transit them to Bombay as per the original bill of lading in favour of M/s. New Bank of India. The goods were manifested at Madras for discharge at Madras and he also refused to reship the goods to Singapore when he had to express helplessness in view of the fact that the required permission from custom to reship the goods could not be obtained by him. It was said to be brought out through the communication of M/s. B.D. Madan that the ship had actually left Madras port on 28.01.1979 and the goods which were alleged to have been shipped from Singapore for Bombay on 16.01.1979 could not have been shipped at Singapore in the manner sought to be made out by the plaintiff bank. The defendant would rely on a letter issued by the Madras Port Trust on 03.01.1980 referring to the goods having been received at the Madras Port and the warning that the cargo would be disposed of by the Port Trust if the goods were not cleared. It had been addressed to M/s. Jai Hind Trade Corporation with copy marked to the State Bank of India, Overseas Branch and M/s. D.B. Madan & Co. This letter itself according to the defendant was ample proof that the consignment of JOT could not be in any manner be foisted upon defendant.

The trial Court and the Appellate Court accepted the contention of the plaintiff-Bank that the defendant having accepted the goods could not be heard to state that there had been any fraud committed by the consignor or pleaded that the Bank ought not to have honour the credit extended by the Bank in favour of the consignor. The suit was decreed as prayed for and hence, the appeal by the defendants.

Learned counsel appearing on behalf of the appellant reiterates the contentions brought out through the written statement and posts before me principally three contentions. (i) The bill of lading revealed that the goods were required to be delivered C&F at Bombay and admittedly, the goods are not delivered at Bombay at all. Under such a circumstances the Bank ought not to have released the credit without confirming from the defendant that there was no objection for release of the amount to the consignor. (ii) The defendants had actually served a notice on 20.03.1979 setting out the fraud committed by the shipper at Singapore in making it appear as though the goods had been inspected on 16.01.1979 and dispatched through S.S. Soloveyev. Actually the goods which had already arrived in the 12th month of 1978 itself and the bill of lading and the letter of inspection were, therefore, a fabrication. (iii) The ship was never known to have berthed at Bombay and therefore, the goods had never been delivered to the defendant and the payment made by the Bank was not bona fide. There had been an act of collusion between the consignor and the Bank and the Bank cannot recover any amount on the basis of its own fraudulent deed.

There is no representation on behalf of the Bank and therefore, I have examined the case on the basis of arguments and records placed before the Court. The liability for the Bank under LOC is clear and unambiguous. A Bank which opens a letter of credit cannot be heard to resile from its undertaking and delay the payment when the demand was made by the shipper and when a letter of acceptance for the goods had been conveyed by the defendants. In this case, it is an admitted fact that the shipping documents were sent to the Amritsar Branch of the plaintiff Bank through the Singapore Branch of the Bank of India. The documents pertaining to three consignments were accepted by the 2nd defendant on 07.04.1979 brought out through Ex.D1. The document recites as follows:--

I, Paras Ram Sharma on behalf of M/s. Paras Ram Brothers Pvt. Ltd., Singapur hereby confirm that all the 4 bills accepted by M/s. Ravindra Chemical Works, Jullundur as on 13.03.1979 and payable after 60 days i.e. 14.05.1979 are correct. There will be no claim of interest on the party as well as on the State Bank of India, Amritsar. However, M/s. Ravindra Chemical Works will try to make the payment of all the bills as early as possible or before due date in order to save the shipper M/s. Paras Ram Brothers Pvt. Ltd., Singapur for the excessive days.

Apart from this document is a voucher where the defendant has signed showing that a debit for Rs. 90,353/- was made against LC 24 of 1979 under two bills totalling upto Rs. 9,00,353.72 on 18.06.1979. The defendant would have an explanation for both of them; that the acceptance of the bill was made by the defendant on promise by the Bank that they would ensure that the goods were delivered at Bombay and the debit voucher which was signed by the defendant was done on blank paper and the recitals were filled in later on 18.06.1979 the day when according to the defendant he was in Hyderabad taking treatment. The defendant would explain the bill of lading that makes reference to the goods to be delivered at Bombay and if they had been dispatched on 16.01.1979 and vouched by the Institute of Adjustors and Surveyors on 16.01.1989 (Ex.D16) that the goods had been tested and found to be merchantable then the documents filed by the plaintiff bank itself would show that the goods had already arrived at Madras by S.S. Soloveyev in December 1978 itself that falsified the contention that the goods were dispatched from Singapore on subsequent date. This was informed by the defendant to the plaintiff Bank on 20.03.1979 under Ex.D27 making specific mention of fact that the goods had been berthed at Madras Port on 03.01.1979 vide letter of M/s. D.B. Madan and Company dated 23.01.1979 when the defendant had specifically given instructions to the plaintiff Bank to return all the three sets of documents to the shipper''s Bank at Singapore. These transactions, according to the learned counsel appearing on behalf of the appellant, would show that the bank had been adequately informed about the fraud practised by the shipper at Singapore and the credit ought to have been released to the shipper and claim the same from the defendant in the manner done through the suit.

In my view, as far as the Bank was concerned, they deal with the documents and not with the goods. The place of discharge cannot be an issue of consideration, for all that a creditor Bank could do is to secure an affirmation for acceptance of goods and if the goods are accepted and transmitted to the shipper then the bank is bound to honour the same. From a simple fact that the goods had arrived at Chennai port before 16.01.1979, it must only be that the bill of lading containing details as though goods were dispatched on 16.01.1979 cannot be true. Again if the goods had already arrived in Chennai even the certificate of inspection alleged to have been issued by the Institute of Adjustors and Surveyors on 16.01.1979 ought to be a fabrication. It also shows that a packing list said to have been prepared by the shipper on 16.01.1979 and brought out through a packing list Ex.D18 cannot also be true, for the goods had already arrived by S.S. Soloveyev.

However, the most crucial point is that it is not as if that the defendants did not know any of these incidents as they made it appear at the trial. The documents produced in Court clearly reveal that the defendants had brought upon themselves a fraudulent deal with the active connivance of the shipper without taking the Bank into active confidence. It was literally the Bank which was being duped by the shipper and the defendants and not the other way about. The fact that the defendants knew that he knew that the goods had already arrived and that a bill of lading was being prepared subsequently are borne out through two important documents which have been brought on record: one, a letter of communication secured from the shipper explaining as to how the bill of lading had been prepared to make it appear as though the goods were shipped only on 16.01.1979 when the goods had already arrived at Chennai and another, a letter of the clearing agent at Chennai detailing circumstances under which the goods had arrived and how the goods which were marked JOT were accepted by the defendant for purchase by an independent deal that the defendant had with the shipper which was not disclosed to the Bank at the time when the bank had been presented with the documents. The defendant has received a telex message on 23.01.1979 under Ex.D3 referring to the information that S.S. Soloveyev had been berthed at Madras and had discharged 51 pallets said to contain 3030 new tins refined, bleached and deodorized (RBD) Palm Oil on account of the defendant. The message states that the goods were incurring heavy demurrage charges and the sender was seeking for immediate direction for clearance of the goods. The defendant has made it appear in the written statement as though he had no clue about how the goods had been arrived and how he had been informed that the goods had been berthed at Chennai when the ship had berthed and goods had been discharged in Chennai when the contract with the defendant was that they should be delivered at Bombay. In the earliest communication by the defendant to the Bank on 24.02.1979, the defendant has informed the Bank that they had asked the exporter on telex on 15.02.1979 to send the survey report showing an analysis done on the goods and the result of the findings to enable them to fill the guarantee bond. The defendant has given some reasons why the bills cannot be accepted and he has advised the Bank that all the usance goods may be returned to the exporter at Singapore. The written statement conceals several incidents which have taken place between the first communication that the defendant has received on 23.01.1979 till the institution of the suit. The letter of M/s. D.B. Madan and Co. issued to the Bank reveals that the vessel M.V. Soloveyev arrived at the port of Madras on 23.12.1978 itself and had berthed the harbor on 03.01.1979 when the discharge of his cargo commenced. As per the manifest of the vessel, the consignment and the bill of lading had been marked JOT Madras on the packages and no mentioned had been made of Bombay. It is now clear that the defendant who had received bill of lading must have known that the goods could not be consigned by the shipper for Bombay as the place of discharge, for even the bill of lading contains an unusual recital that the port of discharge is Madras and the final destination was Bombay. By the very nature of things, a ship berthed at Chennai and which had discharged the goods at the Madras port itself could not have transported the goods to Bombay. It appears that there had been some problem for the shipper to get the original consignee viz. JOT (Jai Hind Oil Traders) to accept the goods dispatched through the ship. The shipper had made new arrangement and nominated the defendants as persons who would be willing to lift the goods. Their clearing agents are on record (through the letter dated 09.07.1978) to state that on 09.07.1978 they had informed by registered letter that the goods covered by bills of lading with mark JOT had already landed and that the defendants should make steps to remove them. The clearing agents would also state that the defendant was informed through a telegram also. All these facts had been deliberately suppressed by the defendant that a deal was made with the shipper and the bill of lading and the certification must have been prepared only subsequent to the actual fact of receipt of goods at Madras port. The letter issued by the clearing agent further reveals the fact that the defendant had actually sent their report and had examined the goods and he was requesting the clearing agent to deliver the goods at Bombay which responsibility shipping agent did not want to undertake for the port of discharge of bill of lading itself referred to only at Madras port and therefore, the defendant alone was required to make separate arrangements for transporting the goods from Madras port to Bombay. This explains the dubious endorsements in the bill of lading that port of discharge was Madras and the place of destination was Bombay. The defendant must have surely known the discrepancy and it is not expected that the bank must take notice of how the goods which were discharged in Madras could have been delivered at Bombay. The responsibility ought to have been on the defendant to secure the transport of the goods and lifted the same. The information about how the contract between the shipper and the defendant has come about is seen also through the copy of the telex message exhibited as Ex.P9 shows that even on 28.12.1978 the defendant had communicated with the shipper that they would be willing to take the goods if the goods could be diverted to Bombay before landing at Madras. The language in the telex clearly reveals the duplicity of the defendant in making a deal with the shipper for diverting the goods which had been originally consigned to some other party which they were willing to buy so long as they were able to secure appropriate LC from the Bank to make possible the purchase. Copy of the telex message reads thus:--

WE ARE NEW TO OIL TRADE. NO FRIEND AT MADRAS. HOWEVER IF YOU CAN DIVERT GOODS TO BOMBAY BEFORE LANDING AT MADRAS AND PREPARE ALL NEW DOCUMENTS AS PER ELCEE. WE WOULD FEEL PLEASURE TO ASSIST YOU.

The Bank has engaged in communicating to the shipper at Singapore as well and has elicited information about how the transaction was brought about and how the defendant knew at all times that he was bargaining for some goods, which had already arrived at the Madras port and the bill of lading was prepared to suit the defendant''s requirement and to the specification of the goods which already remained berthed at the Madras port. There are a volley of letters exchanged between the defendant and the clearing agent, trading charges against each other as to who would be responsible for the goods at Madras and how they could be brought over to Bombay. At some point of time, the 2nd defendant appears to have sent his own son to negotiate for transshipment of goods from the Madras port. The copy of the communication issued to the Bank by the clearing agent M/s. D.B. Madan to the defendant sets out an important information that on 20.02.1979, a representative Mr. P. Punj of the shipper communicated to the clearing agent that the defendants wanted the goods to be sent through the Indian flag vessel Vishva Jyoti on 20.02.1979. The shipping agent had refused to partake in any transaction of further shipment and the defendants had ultimately developed cold feet and did not want to lift the goods. The examination of the whole file would also reveal that by the time the defendant gave instruction to the Bank to return the bills, the shipment Banker at Singapore had already discounted the bills on the basis of the LC raised by the Bank and it was not possible for the plaintiff Bank to recall the credit. Indeed it would not have been possible at all in a commercial transaction for a Bank to withdraw credit after opening LC and especially after the goods had been accepted by endorsement by making over all the document to the Bank.

The communication which the defendant has had with the shipping agent and the details collected by the Bank through its communication with the shipper and the clearing agent reveal to the fact that the defendant knew already that he was purchasing goods which were at the Madras Port and he was trying to secure the bill of lading to suit his convenience. The Bank had been kept in dark about the entire transaction till when the defendant decided to drop the whole transaction when he did not find the viable method of transporting goods from Madras to Bombay and finally to Jallandhar. At every stage, the defendant knew what he was bargaining for and if he had accepted the goods, it was not on behalf of the bank. Indeed, there was no way by which a banker could compel the defendant when it had opened LC on behalf of the defendant and the shipper could have taken the benefit only with the concurrence of the defendant. The problem in this case had been that by the time when the defendant wanted to call of the entire transaction, things had gone beyond the stage of the bank closing the credit by virtue of the fact that the banker at Singapore had discounted the same.

The defendants have come to grief by their own folly, had manipulated documents with the shipper which did not yield to them the benefit of the bargain. The bank could not in any way be faulted for the mess in which the defendants landed. If there had been any fraud, the defendants were guilty of the same and if they were unable to transport the goods from Chennai to Bombay or to Jallandhar it was their own inability to strike an appropriate deal with the clearing agent at Chennai. Indeed I cannot also find whether there was any obligation for the clearing agent to ensure the goods transshipment for Bombay, for any observation made against him in the absence of party whose interest could be affected will be meaningless. At least I am convinced that there was no fraud on the part of the bank in the whole process and the decree granted in favour of the bank cannot be faulted.

There is no fraud on the part of the plaintiff and the details of fraud alleged by the defendants would better describe their own conduct than the plaintiff. The fact that the goods did not reach Bombay was not a matter of concern for the banker for its liability to stand by its credit that it had extended was unequivocal and they could not have denied the credit to the shipper after the goods had been accepted by the defendants. The question of personal liability of the 2nd defendant, who was said to be an agent does not arise. The 2nd defendant has given a personal guarantee for the entire transaction and the 2nd defendant would, therefore, be equally liable for the obligation which the 1st defendant company had undertaken through the documents made in favour of the plaintiff. The information which the defendant had given to the plaintiff to return the documents to shipper could have been carried out by the plaintiff without breaching its own obligation on the guarantee given to a shipper when the LC was opened. All the questions of law are answered as above. The second appeal is dismissed. There shall be, however, no direction as to costs since there is no representation on behalf of the respondent.