- (1.) Notice was ordered in the Special Leave Petition (now Appeal) on 9th July, 2007, but while doing so, this Court had specifically clarified that: "Pending further orders the impugned order passed by the High Court shall continue to operate". The impugned Order decreed the suit filed by Ghanshyam Das Agarwal, who is hereinafter referred to as 'the Exporter', for a sum of USD 352,250 against the Appellant Bank (Defendant No.3 before the Trial Court/Single Judge) in favour of the Bank of India, which is the Exporter's Bank. The remaining claim has been relegated for Trial. The impugned Order further clarifies that upon the payment of these decreetal dues the injunction granted by the Debt Recovery Tribunal by its Order dated April 10, 2002 shall stand vacated; and upon this payment the Orders of injunction passed by the Calcutta High Court on 22nd December, 1999 and 14th January, 2000 shall also stand vacated. The impugned Order goes further to state that the decreetal amount shall be satisfied from out of the funds lying with the American Express Bank Limited, Defendant No.2. To this extent the decreetal amount also stands satisfied. It also transpires that the Defendant No.4, M/s. Sarumeah & Sons, a proprietorship concern, has, consequent on the death of the sole proprietor, been struck off from the array of parties. In any event, since claims are posited on a Letter of Credit furnished by the Appellant, albeit, on the instructions of its now non-existent constituent, namely, M/s. Sarumeah & Sons, (hereinafter nomenclatured as the 'Importer') the latter is really a proforma or at best, a proper party, to the extent that the claim pertains to the subject Letter of Credit (L.C.). The decreetal amount stands satisfied and the Plaintiff/Exporter should be pragmatic enough not to expect any further recovery owing to the legal dissolution of the sole proprietorship concern, i.e., the Importer. In essence, therefore, the question raised by the Appellant is reduced to an academic one, which Courts normally abjure from answering. However, since Leave has been granted, we feel curially compelled to briefly delve into the factual matrix of the dispute.
(2.) On 20th April, 1999, on the request of the Importer, the Appellant had opened a Letter of Credit for the aforementioned sum of USD 352,250 on Bank of India, Calcutta (Negotiating Bank) in favour of the Plaintiff- Exporter; the American Express Bank Ltd. Calcutta, is Defendant No.4 in the said civil suit bearing CS No.678 of 1999, as the advising Bank of the Appellant. The contract was placed on the Plaintiff/Exporter for a consignment of non-basmati rice to be exported from India to the Importer in Bangladesh by railroad. One of the terms of the Letter of Credit was that one set of non-negotiable shipping documents would be couriered after the consignment was despatched to the opener of the LC, namely, the Appellant before us. This was done on 11th May, 1999 and thereupon the Bill of Exchange drawn by the Exporter was discounted by its banker, namely, Bank of India, which thereupon drew another Bill of Exchange upon the Importer. It is alleged that the Appellant received the documentation on 19th May, 1999, and on that very day pointed out the existence of certain discrepancies therein to the Negotiating Bank. The Appellant's case is that it received a letter from the Importer on 1st June, 1999, stating that the documents were not acceptable and that the goods were damaged, and there were also shortages therein. In its telex dated 24th June, 1999, the Appellant suppressed the stand of the Importer and stated as follows:- "RE YR TLX MSG NO. 2288 DTD 24/6/99 CONCERNING PAYMENT OF YR BILL UNDER OUR L/C NO. 02-133-99. PLS BE INFMD THAT THE DOCTS HV NOT BEEN ACCEPTED BY THE IMPORTER TILL DATE (.) MEANTIME WE HOLD YR DOCTS. AT YR ENTIRE RISK AND DISPOSAL (.)"
(3.) The Negotiating Bank, viz., Bank of India, thereafter, raised a demand on the Appellant for the said sum of USD 352,250 by its telex dated 12th July, 1999 in response to which the Appellant again, as we see it, evasively and with mala fide intent, mentioned that the Importer was out of station and that they would revert to the subject upon his arrival. On 18th July, 1999, the Appellant addressed a telex to Bank of India informing it that the consignment was located at Darshana Land Custom and that the Importer and Exporter were in dialogue with each other. Eventually, by its telex dated 26th August, 1999, the Appellant informed Bank of India that the documents had not been accepted by the Importer. The Appellant has admitted in its Written Statement that the documentation was received by it on 19th May, 1999 and returned to the Bank of India as late as 10th October, 1999. It has also been admitted by the Appellant that in the interregnum, without prior information to the Negotiating Bank or to the Exporter, it had certified photocopies of the shipping documents to its constituent, i.e., the Importer, ostensibly for customs purposes. These documents have not been returned to the Appellant and, obviously on their strength, the Importer has managed to clear the entire consignment from the Darshana Railway Authority. The say of the Appellant is that this was achieved through the C&F Agent of the Importer by producing a forged NOC and endorsement on the reverse of the photocopies of the shipping documents, certified by the Appellant. Any reasonably diligent Banker would be alive to the possibility of the misuse of documents certified by it, even if we are to assume that it was not privy to the fraud. We have earlier noted and we emphasise that the Appellant had evaded mentioning that without the permission of or information to either the Exporter or the Bank of India, it had provided its certification to photocopies of the documentation which, in the event (and as any prudent Banker would anticipate), were misused by the Importer to have the rice consignment released to him. In trans-border or international transactions, trade depends almost entirely on the faith reposed in banking institutions to secure the price of the exported goods, commodities etc. The Exporter can legally and reliably expect that the Bankers will watch its interests by ensuring that the exported consignment shall be released to the buyer only on the transmission of the price of the shipment as secured through the Letter of Credit. Heavy and fiduciary responsibility, therefore, rests on the Opening Bank which furnishes the Letter of Credit to ensure that payment is secured unless the documentation is defective and/or the invocation of the Letter of Credit is discrepant. In every legal system spanning our globe, jural opinion is unanimous to the effect that the Opening Bank cannot disregard, delay or dilute its responsibility to make payment strictly and promptly as obligated by the terms of the Letter of Credit. This Bank owes a duty to all concerned to ensure that any action taken by it would not enable or conduce the frustration of the obligations contained in a Letter of Credit, as recognised by International Banking norms or extant Uniform Customs and Practice for Documentary Credits (UCP) 500. As we see it, therefore, keeping in perspective that the Importer's Bank i.e., Appellant before us, should not have certified the documentation, reasonably anticipating or being aware of the possibility that this certification could be abused. Law assures the Exporter and its Bank to repose in the expectation, nay, certainty, that the consignment, which is the subject-matter of the Letter of Credit, is not usurped by the Importer/Consignee or its agents, without remitting payment to the consignor's Bank. This is a strict liability cast on the bank which opens the Letter of Credit, since otherwise International trade and commerce will virtually and indubitably come to a standstill.;