- (1.) The appellant, Ellerman Bucknall Steamship Company Ltd. hereinafter called the shipowners, are a limited liability company incorporated under the law in the United Kingdom carrying on business as common carriers by sea. They own a ship named "City of Lucknow". Messrs, Best and Co. Ltd., having their office at Madras, are the local agents of the shipowners.
(2.) Sha Misrimal Bherajee, the respondent herein, hereinafter called the buyer, entered into two contracts with the British Mercantile Company Limited. New York, hereinafter called the seller, for the purchase of Fresh Monsanto Polystyrene Injection Moulding Powder (not reground) in granules manufactured by Monsanto Chemical of New York. In respect of the first contract, the purchaser placed two indents dated December 26, 1950, and December 27, 1950, for the said stuff of value Rs. 13,500 and Rs. 6,750 respectively. The buyer entered into a second contract with the seller for the purchase of 24 drums of the same material of the value of Rs. 16,000 under an indent dated January 23, 1951. In respect of the first contract and indents the buyer opened and confirmed an irrevocable Letter of Credit No. 4748 dated December 28, 1950, for U. S. $ 4535 plus war risk with the Eastern Bank Limited. In regard to the second contract he opened another irrevocable Letter of Credit No. 5012 dated January 31, 1951, for U. S. $ 3330. As the said Bank had no branch of its own at New York, it arranged with the Marine Midland Trust Company of New York for payment of the bills that might be presented by the seller in New York. Pursuant to the said contracts, the seller delivered to the ship-owners certain consignments in reused fibre drums. The bills of lading issued by the shipowners described the drums simply as drums. After taking a letter of indemnity to cover against any loss, the shipowners issued clean bills of lading. The seller negotiated the bills of lading with the Marine Midland Trust Company, New York, and obtained payment of U. S. $ 6998.75 under the letters of credit. Thereafter, the bills of lading were forwarded to the Eastern Bank Limited, Madras, and buyer paid to the said Bank a sum of Rs. 33,012-5-9 against the said letters of credit. When the shipment arrived it was discovered that the goods sought to be delivered did not answer the description given in the documents. Indeed, the drums contained only coal dust and factory shavings. The buyer took appropriate proceedings against the seller in the American Courts and realized a sum of Rs. 13,604-9-0. Thereafter, he instituted the present suit in the City Civil Court, Madras, for the recovery of a sum of Rs. 23,760-15-6 against the Bank as well as the shipowners. To that suit the Bank was made the 1st defendant and the shipowners, the 2nd defendant. Broadly stated, the basis of the claim against the Bank was that, though under the letters of credit the Bank had the authority to pay only against clean bills of lading, it paid against unclean bills of lading. The cause of action against the shipowners was that they made a misrepresentation that the bills of lading were clean whereas in fact they were not so, with the result, acting on that misrepresentation, the agent of the Bank paid against the said bills of lading which it would not have done had it known the real facts.
(3.) The learned City Civil Judge held that the bills of lading were clean ones but in respect of one of the letters of credit the Bank should not have accepted the shipping documents which related only to a part of the goods contracted for. On that finding the learned Judge held that the Bank was liable to refund the amount paid only under one of the letters of credit. As against the shipowners he came to the conclusion that even if the bills were not clean, the Bank would nevertheless have paid the amount, as the terms of the letters of credit were comprehensive enough to authorize such payments. In the result, he dismissed the suit against the shipowners but decreed it in part against the Bank. The Bank and the shipowners preferred appeals to the High Court against the said decree insofar as it went against each of them.;