S.C.IMPORT EXPORT vs Bank of India

AGGRIEVED by the quantum of the relief granted vide order dated 23.9.1996 passed by the District Forum, Ludhiana, the appellants before us are the complainants before the District Forum.

VIDE its impugned order the learned District Forum has held the Opposite Parties Bank of India deficient in rendering the service for retaining the letters of credit issued in favour of the complainants appellants from 22.11.93 to 11.1.94. Instead of granting the amount as per the letters of credit, the learned District Forum has only granted compensation amounting to Rs. 40,000/ only and hence this appeal. The fabric of the facts weaving the case are short. The complainant No. 1 is M/s. S.C. Import Export, 221, Hearthstone Irvine, CA 92714 U.S.A. and complainant No. 2 is Dr. Subhash Sachdeva, Partner, M/s. S.C. Import Export, 221, Hearthstone Irvine, CA 92714 U.S.A. The complainants had exported certain garments to M/s. Shiwalaya Trading Corporation, Sherpur Byepass Road, Ludhiana, who had opened irrevokable letter of credit No. 5601/25/12 dated 29.6.93 issued by Opposite Party Bank of India. Complainants exported the articles against the said letter of credit and handed over the documents to the Bank of California (U.S.A.) for negotiating the same. Bank of California i.e. the negotiating Bank sent the documents to the collecting Bank i.e. Opposite Party No. 1 Bank of India, Model Town Branch, Ludhiana on 3.8.94 for their approval. These documents were retained by the Opposite Party for the period 23.8.93 to 11.1.94 resultantly the negotiating Bank did not make the payment to the complainants of the value of the goods amounting to the tune of Rs. 1,79,767.66 p. Ultimately, the documents were returned by the Opposite Party and the complainants have to pay a sum of Rs. 13,939.56p. being service charges to the collecting Bank. Hence it was stated in the complaint that because of the deficiency and negligence on the part of the Opposite Party, the complainants had suffered a total loss of Rs. 1,93,727.22 p. Vide its order under challenge District Forum has held the Bank negligent and deficient in rendering the service to the complainants by retaining the said letters of credit from 22.11.93 to 11.1.94 as stated above. The finding of the negligence and deficiency in service has not been challenged by the Opposite Party Bank of India.

We have heard the learned Counsel for the parties and with their kind assistance have perused the record of the District Forum. Mr. Gopi Chand, learned Counsel for the appellants complainants has submitted that the learned District Forum has arbitrarily fixed the compensation to be paid by the Opposite Party at Rs. 40,000/ . The learned Counsel has submitted that it is admitted case of the parties that M/s. Shiwalaya Trading Corporation has opened a letter of credit through Bank of India in favour of the complainants for import of certain goods and complainants had handed over these documents to the collecting Bank i.e. Bank of California (New York) and that documents were received by the Bank of California on 30.8.93. These documents were sent by the Bank of California i.e. negotiating Bank to the Opposite Party i.e. collecting Bank for approval for paying the amount. The complainants had to suffer damages firstly on account of the value of the goods amounting to Rs. 1,79,767.66 p. and then charges of the negotiating Bank amounting to Rs. 13,939.56 p. The learned Counsel has drawn out attention to the FAX message of Greenways Shipping Agencies Pvt Ltd., Annexure B10 before the District Forum wherein demurrage charges were calculated upto 30.4.94 at Rs. 2,64,033 / and the said demurrages are exceeding the total value of the letter of credit amounting to Rs. 1,79,767.66 p. and hence the complainants were within their legitimate right hot to claim the refund of the goods. The Counsel contended in somewhat similar Original Complaint No. 28 of 1994 M/s. Pearl Exports & Imports v. New Bank of India & Ors; decided on March 10,1995, this Commission has awarded total value of the letter of credit along with interest @ 18% per annum in addition to other reliefs granted in the said case. In the case of M/s. Pearl Exports and Imports (supra), this Commission has held that letters of credit assure the payment of the price of the goods and thus avoid any harassment to recover the same from unknown buyers. In this regard, the following para at page 407 from the Law of Contract by Cheshire and Fifoot, 7th Edition, was quoted: "The course of international trade in the twentieth century has offered a new challenge to the traditional mechanism of the difficulties. He may be dealing with a buyer whose credit is doubtful, or at least un known he may be faced with the possibility of sharp fluctuations in the rate of ex change between the formation of the con tract and the date of payment; and, even if free from these peculiar anxieties neither he nor the buyer may wish to see their capital frozen during the time which must necessarily elapse before the goods des patched from the place of manufacture, can be sold by the buyer in his own market. To meet these difficulties it has become usual to finance international trade by what are called Bankers'' Commercial Credits. From the lawyers'' point of view, and reduced to its simplest terms, the device involves three separate transactions. (1) A clause is inserted in the initial con tract of sale whereby the seller re quires payment in a particular manner. The buyer is to ask his Bank to open a credit in the seller''s favour, which shall remain irrevocable for a given time. (2) The buyer makes an agreement with his Bank whereby the Bank under takes to open such a credit in return for the buyer''s promise to reimburse the Bank, to pay a small commission, and to give the Bank a lien over the shipping documents. (3) The buyer''s Bank notifies the seller that it has opened an irrevocable credit in his favour to be drawn on as soon as the seller presents the ship ping documents."

WE are in agreement with the learned Counsel for the appellants. Once the finding of negligence and deficiency in service has been recorded by the District Forum against the Opposite Party Bank of India, the complainants per se are entitled to the value of the articles and letters of credit to the tune of Rs. 1,79,767.66 p in toto and he is also entitled to the service charges paid by him in the sum of Rs. 13,939.56 p. to the collecting Bank. The learned District Forum in pursuance of its findings should have granted the said amount amounting to Rs. 1,93,727.22 p. It cannot be disputed that for no fault of theirs, the complainants have been deprived of the amount of Rs. 1,93,727.22 p. and hence they are entitled to the amount of Rs. 1,93,727.22 p. along with interest @ 18% per annum with effect from 11.1.1994 till its payment. Order of the District Forum is modified to this extent and the Opposite Party Bank of India is directed to pay Rs. 1,93,727.22 p. along with interest @ 18% per annum thereon with effect from 11.1.94 till its payment to the complainants. The complain ants/appellants would also be entitled to the costs of litigation before the District Forum and this Commission, which we assess at the modest amount of Rs. 5,000/ and the appeal stands allowed in the said terms. Complaint allowed with costs.