SWADESHI POLYTEX LTD. vs CENTRAL BANK OF INDIA

COMPLAINT was filed, inter alia, alleging that complainant-company has been carrying on business of manufacturing and marketing Polyester Staple Fibre (PSF) and same is sold under the trademark ''Jailene''. On 30.12.1994, the complainant received an order by telex from Shri Meenakshi Mills Ltd. - opposite party No. 4 for supply of Jailene PSF. On 31.12.1994, the complainant booked the order, inter alia, on the following terms and conditions : (1) Price including excise duty, sales tax and other applicable levies : Rs. 50.50 per kg. (2) Terms of payment : Sight L.C.

ON 21.1.1995, opposite party No. 4 confirmed the order as per terms and conditions and opened on 19.4.1995 an irrevocable without recourse at sight letter of credit in favour of the complainant through Central Bank of India. Madurai Branch, opposite party No. 2 for Rs. 66 lakhs. Subsequently, this LC was amended on 7.6.1995. As per L.C. and its amendment issued on 7.6.1995, the following documents were required to be submitted by the complainant to opposite party No. 2 for claiming the payment : (a) Complainant''s drafts on principals of opposite party No. 2 payable at sight without recourse to the complainant. (b) Signed invoices in duplicate (c) Marine insurance policy or certificate in duplicate. (d) Packing list in duplicate. (e) Original consignee copy of lorry receipt from IBA approved transporter evidencing despatch of merchandise duly signed and marked ''freight pre-paid'' and made out to opposite party No. 2 and notified to both credit openers and the Bankers.

The validity of LC was upto 15.7.1995. Complainant despatched Jailene PSF to opposite party No. 4 in 9 batches, as per details given below : ------------------------------------------------- Invoice Date Quantity Amount No. (Rs.) ------------------------------------------------- 028 13.6.1995 9088.0 7,27,040/- 030 15.6.1995 9189.9 7,35,192/- 031 16.6.1995 8910.8 7,12,864/- 032 19.6.1995 9038.2 7,23,056/- 033 21.6.1995 9133.0 7,33,640/- 034 23.6.1995 8336.3 7,06,904/- 035 27.6.1995 9147.7 7,31,816/- 036 28.6.1995 9040.8 7,23,264/- 037 29.6.1995 9118.8 7,39,504/- -------------------------------------------------

THE complainant submitted documents as per the terms and conditions of said LC through its Bank-opposite party No. 3 and opposite party No. 3 forwarded those documents to opposite party No. 2 between 17.6.1995 and 10.7.1995. Since payment was not released on receipt of documents, the complainant and opposite party No. 3 took up the matter with opposite party No. 2. Opposite party No. 2 by telex message dated 27.6.1995 intimated opposite party No. 3 that there were following discrepancies in the documents submitted by complainant through opposite party No. 3 : (a) Invoices - No mention of licence number and date and no mention of order number and date. (b) Lorry receipts - corrections in lorry receipts not authenticated and truck number not mentioned. (c) Insurance policy or certificate not received.

OPPOSITE party No. 2 also wrote letter dated 18.7.1995 to opposite party No. 4 pointing out the said discrepancies in the documents. In response to this letter, opposite party No. 4 sent reply dated 21.7.1995 by which it accepted all the discrepancies pointed out and requested opposite party No. 2 to accept the documents and effect payments of the bills. Despite the said letter of opposite party No. 4, the opposite party No. 2 returned the documents to opposite party No. 3 on 3.8.1995. By the letter dated 17.8.1995 addressed to opposite party No. 2, the complainant clarified that there was no requirement of mentioning the licence number and order number on the invokes as per the amended LC, the certificate of insurance had already been forwarded with the invoices and truck numbers were indicated in all the invoices and delivery challans. By the letter dated 24.8.1995, opposite party No. 4 advised opposite party No. 2 that discrepancies in documents had been waived by them and payment of the bills be released to the complainant without delay. Complainant re-submitted the documents through opposite party No. 3 on 21.8.1995 with the lorry receipts authenticated for cuttings though it was not of any significance. However, opposite party No. 2 did not release payment despite several reminders and again returned the documents along with covering letter dated 9.10.1995 advising the complainant to take up the matter directly with opposite party No. 4. It was claimed that it was a case of deficiency in service on the part of opposite party No. 2. Complainant got a legal notice dated 11.12.1995 served on opposite party No. 2 to which interim reply dated 4.1.1996 and detailed reply dated 16.1.1996 were sent by opposite party No. 2 repudiating the liability for payment of the amount under the LC in question. It was prayed that opposite parties 2 and 3 be jointly and/or severally be directed to pay to the complainant a sum of Rs. 65,20,250/- with interest @ 20.25% from 29.6.1995 till date of realization in addition to Rs. 40 lakhs by way of damage for the financial loss caused to the complainant. To be only noted that Surat Goods Transport Service and Arya Central Transport Limited through whom the consignment of Jailene PSI were despatched, were impleaded as opposite parties 5 and 6 respectively later on. On 16.12.2003 Mr. N. L. Ganapathy appearing fur complainant made the statement that complainant did not press complaint against opposite party No. 3 as also relief No. 2 as made in the complaint. In the complaint, no relief has been claimed against opposite parties 5 and 6. Therefore, only the pleas raised in written version by opposite No. 2 need be referred for deciding this complaint. Opposite Party No. 1 is the head office of Central Bank of India at Bombay. It was alleged that as opposite party No. 4 was desirous of purchasing 116 MTs of PSF @ Rs. 56.50 per kg. it by the letter dated 29.3.1995 asked the answering opposite party to open irrevocable letter of credit at sight in favour of complainant for Rs. 66 lakhs. Along with letter, opposite party No. 4 also enclosed application and agreement of letter of credit, both dated 29.3.1995. Answering opposite party issued a letter of credit for the said amount on 19.4.1995. Some of the conditions of that letter of credit were as under : (1) In the invoice mentioning of advance import licence number and order date was necessary : (2) insurance policy or certificate was required to accompany the documents. (3) Motor transport receipt of approved transport company marked prepaid to be made out in the name of opposite party No. 2 and notifying opposite party No. 4.

ON request of opposite party No. 4 LC opened on 19.4.1995 was amended on 7.6.1995. It was further alleged that as per prevailing practice for the transaction as in present case, any alteration or cutting in a document is required to be duly authenticated by the maker of the document. It was stated that answering opposite party received documents for negotiation on 19.6.1995, 23.6.1995, 29.6.1995, 3.7.1995 and 13.7.1995. Opposite Party Nos. 3 and 4 were intimated on 26.6.1995, 27.6.1995, 29.6.1995, 1.7.1995, 3.7.1995, 5.7.1995, 6.7.1995 and 17.7.1995 and 19.7.1995 that there were certain discrepancies in the documents sent by omplainant through opposite party No. 3. The discrepancies mentioned therein were as under : (a) Invoice - No mention of licence number and date. No mention of order number and date. (b) Lorry receipts - Corrections in lorry receipts not authenticated. Truck number not mentioned. (c) Insurance policy or certificate not received.

OPPOSITE Party No. 3 was cautioned that the documents were being held at its risk and responsibility. On 18.7.1995, answering opposite party also sent a letter to opposite party No. 4 stating that it had so far not cleared the bills for payment. On 21.7.1995, opposite party No. 4 wrote to answering opposite party accepting the discrepancies for the first time. By then, the letter of credit had already expired on 15.7.1995. Therefore, such an acceptance was invalid. Though in response to the letters dated 20.7.1995, 21.7.1995, 25.7.1995 and 28.7.1995 sent by replying opposite party being consignee, the transporters informed that consignments had not reached and undertook to inform it of their arrival at Madurai and allow inspection thereof but intimation regarding receipt of consignments was never received from the transporters nor was answering opposite party allowed inspection of the consignments. It was admitted that documents were returned along with covering letter dated 30.9.1995 to opposite party No. 3 as they did not conform to the terms of letter of credit, and Uniform Customs and Practice for Documentary Credits (1993-Revision) issued by International Chamber of Commerce. It was not denied that after documents were re-submitted the same were again returned on 9.10.1995. It was emphatically denied that there was any deficiency in service on part of answering opposite party as alleged. Admittedly, opposite party No. 2 issued irrevocable without recourse at sight letter of credit for Rs. 66 lakhs on 19.4.1994 which came to be amended on 7.6.1995 in favour of the complainant at the instance of opposite party No. 4 and this SC was valid upto 15.7.1995. Jailene PSF in 9 batches was sent between 13.6.1995 and 29.6.1995 of an aggregate amount of Rs. 65,20,280/- by the complainant to opposite party No. 4; consignments covered by invoice Nos. 028, 030, 031, 033, 034, 035, 036, 037 were despatched through opposite party No. 5 while covered by invoice No. 032 through opposite party No. 6, transporters. Photostats of consignee''s copy of lorry receipts issued by opposite party No. 5 bearing Nos. 37574 dated 13.6.1995, 37570 dated 15.6.1995, 37585 dated 16.6.1995, 37589 dated 21.6.1995, 37591 dated 23.6.1995, 37596 dated 21.6.1995, 37701 dated 28.6.1995 and 37702 dated 29.6.1995 are Annexure 6 Colly. Copy of lorry receipt No. 821632 dated 19.6.1995 issued by opposite party No. 6 also forms part of Annexure 6. Photostat copies of invoice Nos. 28, 30 to 37 are Annexure 4 Colly. At the cost of repetition, it may be mentioned that grounds on which documents submitted by complainant through opposite party No. 3 for collection of payment were found to be deficient by opposite party No. 2 were (i) in the said invoices, licence number and its date(s) and order number, and its date(s) were not mentioned; (ii) corrections on said lorry receipts were number authenticated nor truck numbers mentioned therein; and (iii) insurance policy or certificate was not forwarded to opposite party No. 2. Contention advanced by Mr. Ganapathy, Advocate for complainant was that in view of amendment made to the letter of credit on 7.6.1995, said condition of LC regarding mentioning licence numbers, order numbers together with dates in invoices had been deleted. Having perused the amendment, we are in agreement with Mr. Ganapathy on that count.

IT was pointed out by Shri Ganapathy that complainant had forwarded the certificate concerning insurance along with invoices, etc. to opposite party No. 2. He invited our attention to the copies of certificate dated 13.6.1995, 15.6.1995, 16.6.1995, 19.6.1995, 21.6.1995, 23.6.1995, 27.6.1995, 28.6.1995 and 29.6.1995 filed as Annexure 8 Colly with the complaint. One of the certificates dated 13.6.1995 which is typed on the letterhead of complainant and is material, is reproduced below : "This is to certify that the consignment with the bills noted below has been declared for insurance under open general declaration policy No. 40100/21/26/0174/24-95 dated 1.11.1994 issued by United India Insurance Company Ltd. D.O.I. 54, Janpath, New Delhi w.e.f. 1.11.1994 to 30.10.1995 : Details of Consignment : (A) Description of material : Jailene Polyester Staple Fibre (B) No. of Bills : 37 (C) Quantity : 9088.0 kgs. (D) GR No. : 201-37574 (E) Destination from : Ghaziabad To : Paravi Unit, Madurai (F) Invoice Value : Rs. 7,27,040.00 (G) Insured value (cost of Insured + 10%) : Rs. 7,99,744.00 (H) Terms of insurance : All risks including SRCC risk as per current instructions, strike, riots and civil commotion, Clause and TEND at transit risks warehouse to warehouse. For Swadeshi Polytex Ltd. Sd/- (Authorised Signatory)"

IDENTICAL are the contents except the details of consignment of remaining 8 certificates. Clause 4 of the letter of credit dated 19.4.1995 (copy Annexure B) provides that the drafts drawn on opposite party No. 4 should be accompanied by the insurance policy or certificate in duplicate for not less than 10% over the invoice value including all risks with extended cover irrespective of percentage. In the rejoinder filed to the written version of opposite parties 1 and 2, it is alleged that complainant had taken open general insurance policy to cover transit risk for all consignments including polyester staple fibre, necessary particulars of the consignments were declared by the complainant to the Insurance Company periodically, certificate to that effect was submitted with each invoice to opposite party No. 2, it was not necessary to obtain certificate from Insurance Company for individual consignments by the complainant. In our view, it being a case of open general declaration policy, forwarding of aforesaid certificates along with invoices was sufficient compliance of said Clause 4 of the letter of credit. Coming to aforementioned discrepancy No. (ii), it may be noticed that 8 lorry receipts referred to above issued by opposite party No. 5 are on printed forms and blanks therein had been filled in hand. In the middle towards right hand side of these lorry receipts, there are 2 small boxes - one meant for the place from where the consignment is booked and another for the place to which the consignment is to be taken. In the first box after cutting printed words "New Delhi", "Ghaziabad" has been written in hand. In the 2nd box, Paravi Unit, Madurai is written in hand. Submission advanced by Mr. A. N. Haskar, Senior Advocate for opposite party Nos. 1 and 2 was that the said cutting was required to be authenticated by the complainant and as authentication was not done during the currency of letter of credit despite being pointed out, the opposite party No. 2 was well within its right not to honour the LC. According to him, opposite party No. 2 was answerable to opposite party No. 4 in case an objection was raised by the latter, why ignoring the said discrepancy, the former made payment under the letter of credit in question. It was pointed out that terms of LC are to be construed strictly. To be only noted that in lorry receipt dated 19.6.1995 issued by opposite party No. 6 alleged discrepancy does not occur. Aforesaid 9 invoices would show that consignments covered by said 8 lorry receipts were loaded for being transported to opposite party No. 4 from the factory/warehouse of the complainant company at Ghaziabad. So the words - "New Delhi" as printed in the lorry receipts were to be substituted as "Ghaziabad", the place of booking. In our view, the cutting was not required to be authenticated as contended and even if it was so, it was not such a discrepancy on basis whereof, the opposite party No. 2 could have refused to honour the letter of credit thereby denying payment to the complainant who acting on the LC had made delivery of Jailene PSF of the value of more than Rs. 64,00,000/- to opposite party No. 4. It is pertinent to note that in the written version, opposite party No. 2 admits that by the letters dated 21.7.1995 and 24.8.1995, opposite party No. 4 intimated that it has accepted/waived the said discrepancy and impressed upon opposite party No. 2 to make the payment of bills. Obviously, in the face of these letters, the argument about there being objection by opposite party No. 4 to the making of payment on ground of said deficiency, cannot be available to opposite party No. 2. From aforesaid discussion, it must follow that there was gross deficiency in service on part of opposite party No. 2 in withholding payment of the value of consignments for which said letter of credit was issued by it. Money continues to be withheld for over 8 years and that must have caused serious financial problems to the complainant. With the giving up of claim for damages for Rs. 40 lakhs, the complainant, in the facts and circumstances of case, deserves to be awarded interest on withheld amount @ 12% p.a.

ACCORDINGLY , while partly allowing complaint with cost of Rs. 15,000/- the opposite party No. 2 is directed to pay amount of Rs. 65,20,250/- with interest @ 12% per annum from 29.6.1995, the date of despatch of last consignment till realization. Complaint against opposite parties 3 to 6 is dismissed.