State Bank of India vs Tata Iron and Steel Company Ltd.

THIS appeal is by State Bank of India filed against order of District Forum, Ludhiana dated August 8,1996 whereby the appellant was directed to pay a sum of Rs. 1,66,880/- to the complainant M/s. Tata Iron and Steel Company Ltd. alongwith a sum of Rs. 3,000/- as costs.

MOST of the facts arising out of the pleadings of the parties are not in dispute, which are as under : M/s. Steel Strips opened a Letter of Credit for a sum of Rs. 40 lacs with Punjab Na tional Bank, Chandigarh (Advising Bank) to be operated with Punjab National Bank, Miller Ganj Branch, Ludhiana. This was done on October 23,1993. The complainant M/s. Tata Iron and Steel Company supplied the goods under the contract covering Letter of Credit to M/s. Steel Strips and handed over necessary documents to recover the price of the goods under the Letter of Credit aforesaid with their Banker State Bank of India, Ludhiana Branch with specific instructions in the covering letter that the papers were to be negotiated through Punjab National Bank, Miller Ganj Branch, Ludhiana and the amount to be collected, to be credited in their account. Instead, the State Bank of India, Ludhiana Branch sent the papers to Punjab National Bank, Chandigarh Branch, the Advising Bank. The papers were returned. Since, in the meantime, the complainant could not derive benefit of the Letter of Credit and had to approach M/s. Steel Strips to recover the amount, price of the goods supplied and in this process the delay having occurred, be had to suffer loss that the complaint was filed before the District Forum. The deficiency in rendering service on the part of the opposite party, the State Bank of India, the appellant being that inspite of specific instruction to negotiate the papers through Punjab National Bank, Miller Ganj Branch, it was not done and thus, the complainant suffered loss, which was claimed @ 24.75% p.a. interest on the price of the goods for the period they were unable to get the same from the date of despatch till recovery of the amount. The appellant-Bank contested the complaint inter alia taking up preliminary objections. The complaint was bad for non-joinder of parties as Punjab National Bank was not impleaded as a party. Deficiency on the part of the appellant was denied. Since, certain discrepancies were pointed out in the papers submitted the same under the rules and precedent, were to be routed through the Advising Bank. No particulars of loss were mentioned in the complaint. Rate of interest claimed was disputed. It is after considering the evidence produced on affidavits and documents that the impugned order was passed.

Learned Counsel for the appellant has argued that Punjab National Bank, who was the Advising Bank as well as the Negotiating Bank was a necessary party and if there was any deficiency in rendering service on the part of the aforesaid Bank in not clearing the documents, the appellant-Bank is not to suffer. There is fallacy in this argument. No relief is being claimed against the Punjab National Bank in the complaint and no deficiency in rendering service is alleged. Thus Punjab National Bank is not considered to be a necessary party to be impleaded. The question to be decided in the complaint/appeal is only with respect to the appellant-Bank. If deficiency as alleged is proved, the complainant can be compensated, otherwise not. The contention of learned Counsel for the appellant that Punjab National Bank, should be impleaded as party, is therefore, repelled.

LEARNED Counsel for the appellant has argued that since no allegation was made in the complaint about the payment of commission to State Bank of India the complainant cannot be described as a "Consumer" as defined under the Act, having hired the services of the appellant Bank for consideration. This contention again cannot be accepted. It is welt-known that State Bank of India is doing the business of Banking for consideration. The Bank is constituted under the Parliament Act. Normally functioning of the Bank is on charging fees. The fee can be charged in advance or at a later stage. It is not the case as pleaded that the appellant-Bank was not to charge commission if the amount had been collected. The contention of learned Counsel in this respect is therefore, repelled. It has been argued on behalf of the appellant that no particulars are mentioned in the complaint as to how the complainant has suffered loss for which he is to be compensated. Reference has been made to paras 7 and 10 of the complaint. In para 7, it is specifically mentioned that on account of negligence and carelessness on the part of the appellant-Bank, the complainant was forced to approach the party concerned for payment and the complainant thus suffered loss, which was calculated on the principle of interest @ 24.75% p.a. from the date of despatch of the goods till receipt of the payment. In para 10, it is asserted that the appellant-Bank had forwarded the aforesaid Letter of Credit to wrong Bank totally ignoring the instructions of the complainant. From the pleadings as aforesaid, it cannot be said that the complainant had not given details of the loss suffered or the allegations regarding deficiency.

LEARNED Counsel for the appellant while referring to para 6 of the written statement argued that discrepancies in submission of the papers by the complainant were pointed out and in view of Articles 9 and 10 or Uniform Customs & Practices for documentary credits published by the International Chamber of Commerce, Paris, which is accepted Code and applied in India, papers were to be routed through the Advising Bank. An extract from Article 10 is being reproduced from the written statement as under : "An irrevocable credit constitutes a definite undertaking" to pay at sight or on maturity provided the "stipulated documents are presented to the nominated Bank or to the Issuing Bank and that the terms and conditions of the credit are complied with."

This contention again cannot be accepted. Primarily even as per article aforesaid, documents were to be presented before the nominated Bank which had the papers for clearance of the amount. Thus, much importance is not being given to the alleged discrepancies as pointed out which had been subsequently made up. Even otherwise, it may be observed that the Advising Bank had returned the papers. The appellant-Bank has not produced as to when such papers were returned by the Advising Bank i.e., Punjab National Bank, Chandigarh Branch and as to how the papers could not subsequently be routed through Punjab National Bank, Millerganj Branch, Ludhiana. Deficiency on the part of the appellant-Bank is writ large as the appellant-Bank had not acted as per instructions of the complainant to negotiate the papers through Punjab National Bank, Miller ganj Branch as were the instructions as contained in the forwarding letter dated November 19,1993, Annexure 5, the relevant portion thereof is reproduced as under : "We are hereby enclosing L/C No. 163/93 for Rs. 40 lakhs drawn on Punjab National Bank, Millerganj, Ludhiana for necessary negotiation and collection of the amount due. The amount payable at sight 30 days from the date of delivery. The following document is required for negotiation of the L/C is attached herewith."

In the case of monetary loss when the amount specified could not be utilised, normally 18% p.a. interest is allowed to compensate the complainant. The contention of learned Counsel for the appellant-Bank is that interest not more than 6% should be allowed as contemplated under Section 34 of the Code of Civil Procedure. Whereas, learned Counsel for the complainant has argued that since the Bank lends money to private persons @ about 24.75% the damages allowed by the District Forum are just. After hearing Counsel for the parties, we are of the view that the general rule being applied by the fora issued under the Act to compensate on account of non utilisation of specified amount to apply the principle of 18% p.a. interest should be applied to the case in hand.

IT has been argued on behalf of the appellant-Bank that the complainant had failed to bring on the record the material as to when the complainant received the price of the goods supplied through purchaser, M/s. Steel Strips as thereafter the complainant is not to be paid interest. IT is true that no specific date as such has been brought on the record but that does not mean that the complainant is to be denied the relief. The goods were to the tune of Rs. 39,64,407.18 as is mentioned in the letter dated November 7, 1993 (page 84 of the record). The other invoices in support thereof are at pages 90 onwards. Normally, it would not have taken more than a week to get the amount from local Bank. Since the papers were entrusted to the appellant-Bank on November 19, 1995, allowing one week''s time, the interest payable to the complainant would be w.e.f. November 26, 1995. Since, the actual date of receipt of the amount from M/s. Steel Strips is not on the record, such a date can be communicated by the complainant to the appellant-Bank and if necessary before the District Forum in execution proceedings. The appellant-Bank is directed to pay interest @ 18% p.a. thereon within a period of two months from receipt of copy of this order as well as receipt of information from the complainant as stated above. The order of the District Forum is, therefore, modified accordingly. There will be no order as to costs in this appeal. Appeal disposed of. _____________