MADURA COATS LIMITED Vs. BANK OF INDIA

JUDGEMENT

(1.) A legal nodus of considerable interest and import has arisen in this case; whether a third party can invoke the moratorium available under Sick Industrial Companies (Special Provsions) Act, 1985 (hereinafter referred to as `SICA'). The Plaintiff has filed a suit for the recovery of Rs.87,99,121.00 under Order XXXVII of the CPC against the Bank of India (as Defendant Nos.1 and 2 `the Bank' for short) and HILTON Rubbers Ltd. (Defendant No.3 `HILTON' for short). HILTON had placed several purchase orders for nylon and polyster fabrics on the Plaintiff in February and March, 1999 and on instructions of HILTON, the Bank had opened Irrevocable Letters of Credit for the payment of the material supplied against the aforementioned purchase orders. Payments were to be made by the Bank within ninety days from the date of despatch in respect of 100% of the invoice value, but this was not done, ostensibly because of some discrepancies in the documentation. It is alleged by the Plaintiff that the Bank has fabricated letters in this context (this allegation seems to have been fortified by the Plaintiff's Bankers namely State Bank of India), in order to circumvent their monetary obligations established under the Irrevocable Letters of Credits. However, one payment of Rs.10,45,612/- was released by the Bank against a particular Letter of Credit dated 24.3.1999. A prevaricatory stance has been adopted by the Bank in respect of the notice dated 7.9.1999. The Plaintiff has asserted that but for the Letter of Credits it would not have effected supplies to HILTON. The Plaintiff had unsuccessfully invoked the extraordinary writ jurisdiction of this Court in CWP No.5894/1999. So far as HILTON is concerned, it has placed on record the factum of its having been declared sick under Section 3(1)(o) of SICA. It appears that the Bank has been directed to work out a package under Sections 17(2) and 18 of the SICA, in the public interest.

(2.) The decision in Maharashtra Tubes Ltd. v. State Industrial & Investment Corporation Limited and Anr., JT 1993 (1) SC 310 : 1993 (2) SCC 144: 1993 AIR SCW 991 has been relied upon by Mr. Mata, learned counsel for the Bank, to buttress the contention that the present proceedings ought not to continue any further. The Bank has prayed for the grant of Leave to Defend the suit in IA No.1069/2000 in which it has controverted the charge of fabrication of documents. It has been submitted, inter alia, that the Bank has no knowledge about the transactions between the Plaintiff and HILTON; and that it is bound only to discharge its contractual duties in the matter of the establishment and payment under Letters of Credit. In pointing out discrepancies in the Letter of Credit the Bank has acted on its commercial judgment in accordance with its contractual rights. It has been averred that a Letter of Credit is a contract between the Bank and the Plaintiff, and waiver of discrepancies by HILTON would be inefficacious against the Bank. It has been pleaded that the Bank is obliged to make payment strictly in conformity with the terms of engagement contained in the Letter of Credit but the contentions seem to me to be to the contrary. After filing this application the Bank has also preferred IA No.12902/2000 under Section 22(1) of SICA praying for the stay of proceedings.

(3.) Section 22(1) of SICA reads as under: