ROSHAN LAL ANAND Vs. MERCANTILE BANK LIMITED

JUDGEMENT

(1.) The Mercantile Bank Limited, hereinafter referred to as "the Bank" filed a suit for recovery of Rs. 15,147.71 against the appellants on the basis on an account in respect of two Bills of Exchange for 1b731-10 S each. By his judgment the subodinate judge First Class granted a decree to the Bank in the sum of Rs. 8,405. 61 with proportionate costs. The appellants have appealed and have prayed that the suit should have been dismissed in toto. The Bank has filed cross-objections in respect of the reduction in the amount claimed in the suit.

(2.) The first appellant is the sole proprietor of and carries on business in the name of Messrs. Hari Chand Anand & Co. the second appellant. On April 25, 1960 the appellants applied to the Bank for the opening of a without-recourse irrevocable confirmed credit to the extent of 1577-0-0d (sterling) in favour of Messrs. D. Narahara & Sons of Tokyo at the Tokyo Branch of the Bank. The object of opening the letter of credit was to enable the appellants to make payments for parts of industrial sewing machines and Zig-Zag machines which were to be imported by the appellants from Tokyo through Messrs. D. Narahara & Sons, Tokyo under an import licence No. A 860183|59|AU| CCI/D dated October 21, 1959. In pursuance of this application, the Bank opened a letter of credit on April 25, 1960 authorising Messrs. D. Narahara & Sons draw on appellant No. 2 for a sum not exceeding 1b1577-0-0d-CIF at 60 days sight. The import licence referred to earlier is mentioned in this letter of credit which further mentions that the documents evidencing shipment from Japanese port should be in respect of "Part for Industrial Sewing Machines and Zig-Zag machines". It was agreed between the parties that the draft or drafts negotiated by the Bank under the aforesaid letter of credit will be paid by the appellants at 60 days sight and the Bank was not to be responsible for validity of any documents received from the beneficiary, correctness of the description quantity, quality or value of the merchandise as represented in beneficiary's invoice or other documents. In pursuance of this arrangement, the appellants paid the Bank a sum of Rs. 2,100.00 on April 25, 1960 as margin against the letter of credit and a further sum of Rs. 4,300.00 on August 16, 1960 as a deposit against Customs Duty and landing charges to be paid in connection with the importation of goods into India. On May 16, 1960 Messrs. D. Narahara & Sons presented for payment to the Bank's Tokyo Branch two Bills of Exchange No. 174/1 and 174/2 each for 731-10-0d. drawn on the appellants and accompanied by shipping documents, according to the Bank, in terms of the letter of credit. The Bank's branch at Tokyo negotiated these two Bills against the letter of credit and paid in Japanese currency the face value of the two Bills to Messrs. D. Narahara & Sons. These two bills were then presented for payment by the Bank to the appellants on May 24, 1960 and they were accepted by the appellants on May 27, 1960. Since they were payable 60 days after sight, the payment from the appellants became due on or about July 25, 1960. Payment was not made on the due date and extensions were asked for by the appellants from time to time. At the same time the appellants requested the Bank to clear the imported consignment at Bombay and for that purpose a firm of Clearing Agents at Bombay was appointed by the Bank. It is not disputed that the goods were seized by the Customs Authorities at Bombay as they comprised not goods in respect of which the import licence had been issued but domestic sewing machines parts which were neither invoiced nor covered by the import licence and the import of which was prohibited in India. The Bank thereupon sued the appellants for the amounts due together with interest and costs.

(3.) The appellants contended in their written statement that a copy of the import licence had been handed over to the Bank and this is not disputed by the Bank. It was alleged that Messrs. D. Narahara & Sons, Tokyo, were entitled to negotiate Bills against the letter of credit provided the bill of lading, invoices and other papers submitted by them covered goods as mentioned in the import licence. According to the appellants, the bill of lading and other papers presented to the Bade by the beneficiary were not in conformity with the import licence and, therefore, the Bank was not entitled to make the letter of credit available for negotiation of the Bills issued by the beneficiary. It was contended by the appellants that wrong goods had been supplied and the Bank was negligent in permitting negotiation against the letter of credit although the invoices did not tally with the import licence. On these grounds, the appellants contended that the Bank's suit should be dismissed.