EGSAS ELEKTRONIK VE GIDA SAN Vs. V3M TRANSWORLD

JUDGEMENT

(1.) THE plaintiff company incorporated under the Turkish Law has filed this suit for recovery of US$ 1,39,000/- from defendants No. 1 to 4. Defendant No. 1 is a proprietary firm allegedly owned by defendant No. 3. Defendant No. 2 is a private limited company of which defendant No. 3 is stated to be the managing director. Defendant No. 4 is another company. The case of the plaintiff is that plaintiff entered into a contract for import of wheat with defendant No. 1 through defendant No. 3. Since the crop season in Turkey starts in May (1996), plaintiff had emphasized again and again at the time of entering into the contract with defendants No. 1 and 3 that the wheat should reach the Turkish Port by January/february (1996), i. e. well before the start of crop season. On the assurance, defendants No. 1 and 3 stated that the wheat was available for shipment, plaintiff entered into a contract with defendants No. 1 and 3 for supply of 5000 Metric Tonnes @ US$ 216 per metric tonne C+f Mersin/turkey and opened a letter of credit in favour of defendant No. 1 for the price of wheat. The beneficiary in the Letter of Credit (LC) was defendant No. 1. The LC was to be operative on furnishing of a performance bank guarantee of the two precent of the value of the LC by defendant No. 1 to prime bank on opening of LC by the plaintiff. The terms and conditions, as stated in the LC, were accepted by defendant No. 1, letter of credit was opened on 22nd December 1995. The date of shipment was mentioned as 25th January 1996. The defendant No. 1 had only wanted that the date of shipment be extended to 31st January 1996. This request was acceded to by the plaintiff. However, the shipment was not made by defendant no. 1 or defendant No. 3 due to one or the other reasons and no performance bank guarantee was furnished by defendant No. 1 despite repeated reminders by the plaintiff. Defendants No. 1 and 3 kept on asking the plaintiff for extension of the date of shipment and amendment of the letter of credit accordingly and kept on assuring that the performance bank guarantee shall be furnished. Plaintiff acceded to the requests made by defendants No. 1 and 3 from time to time for extension of date of shipment and kept on issuing amendments in the LC and also kept on insisting for sending performance bank guarantee. All amendments to the lc were made subject to receipt of performance bond from defendant No. 1 on a european Bank acceptable to the banker of the plaintiff in Turkey. Till March 1996, no shipment was loaded by the defendants No. 1 and 3 and on the other hand defendants No. 1 and 3 asked for increase in the quantity from 5000 MT to 7800 MT with the price for additional 2800 MT to be @ 210 per MT. The plaintiff acceded to the request of increase in the quantity to 7800 MT, additional quantity @ US$ 210 per MT, subject to receipt of performance bond by plaintiff's banker latest by 19th March 1996 and the shipment date was revised latest by 10th April 1996. However, the shipment was not done even by 10th April 1996 and defendants No. 1 and 3 requested plaintiff to give up the condition of furnishing performance bank guarantee and delete the performance guarantee clause from the LC. The plaintiff refused to accede to this request and refused to delete the condition of furnishing performance bank guarantee. It is submitted by the plaintiff that although the shipment date was revised by the plaintiff as 10th April 1996 but plaintiff, due to domestic marketing conditions needed to receive the cargo on its port latest by April as the delay in receipt of cargo would have caused marketing problems. Defendants No. 1 and 3 had been assuring the plaintiff that the loading was being done and assured that they have engaged a comparatively young ship which will reduce the sailing time and the vessel will start sometime on 30th March 1996. By their communication dated 11th April 1996, defendants no. 1 and 3 told the plaintiff that they were taking help of defendant No. 4 and the loading of wheat was in full swing and wanted that defendant No. 4 be made beneficiary of the LC and necessary amendments in the LC be made. The Plaintiff told defendants No. 1 and 3 that amendments to the LC would only be made after receipt of a valid bank guarantee and copy of the performance bank guarantee be sent to the plaintiff's bank. It also told defendants No. 1 and 3 that their proposal for amendment of LC and extension of date of shipment etc was not agreeable. Defendant No. 4 also addressed a communication to the plaintiff company informing the plaintiff that the LC was being transferred in their name by defendant No. 1 and it would like to honour the commitment and it was going ahead with loading of ship on the basis of its goodwill and plaintiff's goodwill. Defendants No. 1 and 3 again made a request to the plaintiff for amendment of LC whereby extending last date of shipment as 24th April 1996. A copy of unconditional performance bank guarantee of US$ 33,360 given by defendant No. 4 was sent to plaintiff. Defendants No. 1 and 3 admitted vide communication dated 18th April 1996 their negligence and delay in sailing of the vessels and apologized for the same. The plaintiff, however, stated that it would accede to the request of changing date of shipment only if the defendants agreed that whatever losses are suffered by plaintiff's company due to delay in the shipment and local marketing conditions, the same shall be borne by the defendants. The Plaintiff also put the condition that extending the date of shipment to 24th April 1996 would be considered subject to defendants furnishing performance bank guarantee by 24th April 1996 to be valid till 30th May 1996. The LC would become valid and operative only after receipt of acceptance of performance bank guarantee. The defendants were required to give confirmation that all terms and conditions stipulated by the plaintiff for extension of date of shipment and amendments of LC were acceptable to them. None of the conditions put by plaintiff were complied with. The defendants failed to honour the contract and the commitments made in correspondence and the ship did not sail even as per the proposed amended dates of loading and the cargo did not reach plaintiff. The performance bank guarantee as required by the plaintiff was not furnished. Request of the defendants that performance bank guarantee be not insisted upon were turned down. Defendants further asked for amendment of LC which was refused. A further request of extension of date and shipment were denied. It is pleaded by the plaintiff that the defendants were incapable and incompetent to perform their obligations in respect of export of wheat and they throughout indulged into willful suppression and misrepresentation of facts and committed default and breach of the contractual obligations. The plaintiff suffered losses on account of expenses paid to banker to the tune of US$ 31675. 66 due to amendments of LC from time to time. In addition, plaintiff suffered damages to the tune of US$ 73632 due to loss of profits arising out of failure and negligence of the defendants. The plaintiff also claimed US$ 33,360 being the amount of performance bank guarantee. Thus, the plaintiff claimed total damages to the tune of US$ 1,38,667. 66 but rounded it off to US$ 1,39,000. It is submitted by the plaintiff that it was entitled to this claim from all the defendants jointly and severally.

(2.) IN the written statement, defendants No. 1 and 3 took the stand that defendant No. 1 was a proprietary concern owned by Ms. Madhuri Bhargava, it was not owned by defendant No. 3. Defendant No. 3 was merely working as an attorney of Ms. Madhuri Bhargava so defendant No. 3 does not have the personal liability at all with regard to the transactions in any manner. Defendant No. 2 had no concern with the contract at any point of time. Defendant No. 2 had not entered into a contract with the plaintiff. Therefore, defendant No. 2 was not a necessary party.

(3.) DEFENDANTS No. 1 and 3 submitted that they were not liable in any manner because the LC in question was sold by defendant No. 1 to defendant No. 4 and that arrangement was accepted by the plaintiff in toto and if the plaintiff was aggrieved, he can claim relief only from defendant No. 4, since defendant No. 4 had stepped into the shoes of defendant No. 1. It was also stated that the suit has not been filed and verified by a competent persons. The verification was defective and the suit was non est in the eyes of law. On merits it was admitted that the contract for export and purchase of wheat was originally entered into by the plaintiff with defendant No. 1. The communications exchanged between plaintiff and defendants No. 1 and 3 were not denied. It is submitted that the performance bank guarantee was to be given only by defendant No. 1 and not by defendant No. 3. Seeking of extension of shipment dates and seeking various amendments in the LC was not denied. It is stated that the terms of the contract were finalized between plaintiff and defendant No. 1. In terms of the contract vessel MV Danube was chartered by defendant No. 1 through Brisk Marin Services and was Anchored off Bedi Bundar since March 23, 1996 allowing a load of 750 MT per day. The extension of shipment validity was sought in view of the banking procedure etc. All extensions of shipment dates and other amendments in the LC were sought due to unavoidable circumstances explained in the correspondence. All correspondence was made by defendant No. 1 and there was no correspondence by defendant No. 2. It is also admitted that vide communication dated 11th April 1996, defendant No. 1 requested for amendment of LC asking that defendant No. 4 be incorporated as the beneficiary. The Plaintiff was informed by defendant No. 1 that it has sold the letter of credit to defendant No. 4. The Plaintiff allowed defendant No. 4 to purchase the LC from defendant No. 1. It is pleaded by defendants No. 1 and 3 that through market sources defendant No. 4 had contacted defendant No. 1 and offered to load balance 3500 MT of wheat on behalf of defendant No. 1 and thereafter an understanding took place between defendant No. 1 and defendant No. 4. Defendant No. 1 had agreed for transfer of LC to defendant no. 4 for a consideration of US$ 30000 as expenses and profits. Defendant No. 4 agreed to give US$ 30000 to defendant No. 1 as export proceeds from LC. Defendant no. 4 further agreed to export 4500 MT of wheat and an agreement to this effect was signed and sealed between defendant No. 4 and defendant No. 1 on 28th March 1996. Defendant No. 4 issued a cheque dated 20th April 1996 drawn on Banque indosuez, Mumbai. Defendant No. 4 was to complete its part of loading within the stipulated time and submit the documents to bank of Maharashtra. The Plaintiff had agreed to aforestated arrangement. Thereafter it was the duty of defendant no. 4 to perform the contract and to ship the entire consignment in time without incurring any demurrage. Defendant No. 4 received several reminders from clearing agents that no loading was going on and ship would go on demurrage. Vessel was kept waiting right from May to June 1996 and it finally sailed in the end of june 1996 to an unknown destination. Defendants No. 1 and 3, therefore, put the entire blame of non performance of the contract on defendant No. 4 and stated that it was defendant No. 4 who was responsible for damages and loss to the plaintiff. It is also stated that after 11th April 1996, defendant No. 1 was supposed to seek further amendment in the LC because of the non cooperative and non business like approach of defendant No. 4 and defendants No1. and 3 were not answerable to the plaintiff and it was only defendant No. 4 who was answerable to the plaintiff.