DHANALAKSHMI BANK LTD Vs. CORPORATION BANK

JUDGEMENT

(1.) THIS appeal arises from the judgment and decree of the sub Court of Kochi in O. S. No. 178 of 1981.

(2.) THE appellant was the first defendant in O. S. No. 178/81 before the Additional Sub Court of Kochi. THE suit was filed by the 1st respondent, which is the Cochin Branch of Corporation Bank for realisation of the amount against a bill of lading endorsed for negotiation in their favour. THE facts are that the first defendant which is the Mattancherry Branch of dhanalakshmi Bank forwarded Ext. A2 bill of lading drawn by the second defendant firm by name M/s. Regal Fisheries Corporation, Karuvelipady, cochin-5, on Corporation Bank, Geneva along with Ext. Al letter on 12. 4. 1979. THE purpose was for negotiation of an export bill for US $ 5,914. 80 drawn by the 3rd defendant by name Mohammed Ali, who was the partner of the second defendant firm under a letter of credit opened by Corporation Bank, Geneva , which was the issuing bank by order of M/s. Charco Ltd. THE plaintiff negotiated the bill at the rate of 12. 30 US $ per Rs. 100/ -. THE plaintiff bank noticed certain discrepancies in the documents at the time of negotiation and it was brought to the notice of the first defendant informing that the payment against the bill was credited with the specific remark "payment under reserve". THE credit voucher dated 12. 4. 1979 was forwarded to the first defendant showing the remark at the top portion of the credit voucher. A copy of the advice given by corporation Bank dated 12. 4. 1972 was also forwarded to the second defendant through the first defendant. THEre was a direction to get an indemnity letter. Thus, an indemnity letter was obtained from the second defendant represented by its partners in favour of the plaintiff Bank through the first defendant. THE indemnity was forwarded to the first defendant with a covering letter dated 16. 4. 1979 for obtaining signature of the partners of the second defendant firm. Thus alleging that the first defendant was made aware of the discrepancies and that the bill concerned was negotiated and the amount credited to his account only subject to its liability to reimburse the amount with interest in case the foreign bank which is the issuing bank, were not to pay the amount of the bill drawn under the letter of credit. On 26. 4. 1979 the plaintiff received the telex communication from Corporation Bank mentioning about the discrepancies in the documents and for further instructions. This was intimated by the plaintiff as per letter dated 27. 4. 1979 and the first defendant was requested to recall the amount if same was credited to the second defendant's account by the first defendant. Later the plaintiff received cable from Corporation Bank regarding the rejection of the documents. That was also intimated to the first defendant by the plaintiff by its letter dated 11. 5. 1979. Thus, the first defendant was requested to reimburse the amount. A copy of the cable was also sent to the second defendant. THE first defendant was further informed that interest will be collected separately at the time of reimbursement of the amount by the first defendant. THE plaintiff informed the first defendant on receiving back the documents on 17. 5. 1979 about its return. Thus, the first defendant was requested to provide sufficient balance amount in the account of the plaintiff so as to enable adjustment of the bill amount, interest and charges. THE first defendant was informed that the documents were held at the entire risk and responsibility of the first defendant. As there was no reply another letter was sent on 30. 5. 1979 and on 16. 7. 1979. THE plaintiff furnished Photostat copies of the letter of credit as requested for. Thus, the case of the plaintiffs was that the first defendant was bound and liable to reimburse the amount to the plaintiff bank with interest. As the first defendant had endorsed the bill drawn by the second defendant in favour of the plaintiff for value, and that the plaintiff was a holder in due course. It was also alleged that defendants 2 to 5 were liable to indemnify the plaintiff on account of having negotiated the bill notwithstanding the discrepancy. THE plaintiff had informed the first defendant that the goods were remaining at the risk of the first defendant and that appropriate steps should be taken for the protection and disposal of the goods or for re-importing of the goods. On 29. 4. 1980, the first defendant sent to the plaintiff a copy of the letter dated 13. 3. 1980 to show that the second defendant had received form M/s. Gokak Patel Volkart Ltd. conveying the information that the goods concerned will be sold in public auction on 4. 6. 1980 by their principal. On receipt of the letter with the copy, the plaintiff wrote back to the first defendant to obtain specific instructions from the beneficiary exporters namely, the 2nd defendant firm in connection with the auction of the goods for passing on the same to the shipping agents. But no details were furnished. As the plaintiff was giving all information to the first defendant and as the plaintiff negotiated the bill at the instance of the first defendant, it was alleged that it was the duty of the first defendant to inform the second defendant about such information and to see that timely steps were taken by the second defendant especially as the bill concerned was negotiated "under reserve" and that the primary responsibility was that of the first defendant. On 27. 5. 1980, the plaintiff wrote to the first defendant informing the receipt of the communication from the shipping agents about the demand for demurrage and other charges and requesting the first defendant to authorise the plaintiff bank immediately the action to be taken with regard to the auction. Defendants 1 and 2 did not take any action. Thus, the goods exported under the bill were spoiled completely on account of long storage. Thus, the plaintiff sent a registered notice on 20. 10. 1980 and a suit notice was sent on the same date to defendants 2 to 5 and also to Mohammed Ali. Thus, the plaintiff claimed Rs. 48,087. 80 with interest at the lending rate applicable from time to time from the defendants jointly and severally,

(3.) COUNSEL for both sides were heard. According to the learned counsel for the appellant, the appellant was not liable and mat the appellant was not an intermediary agent. According to the learned counsel, the first defendant Bank had only forwarded the bill of a customer and mat the payment was under good faith and negligence was not proved. It was argued that the appellant had not signed any indemnity bond and that the plaintiff could have noted the lien on account. It was further argued that as the plaintiff called for indemnity, the plaintiff was aware of that fact. It was argued that the plaintiff would have rejected the bill. The learned counsel argued that the bill was forwarded for negotiation only because the appellant had no facility for foreign bank discount. It was contended that the plaintiff failed to prove that it was a holder in due course. In view of the provision under S. 131 of the negotiable Instruments Act it was argued that the plaintiff was not entitled to get any relief. According to the learned counsel, the basic duty of the appellant was towards the customer and the bill was forwarded only in the process of collection of the amount. Thus, the learned counsel argued that the appellant was entitled to the benefit under S. 131 of the Negotiable Instruments act. As there was no provision in the letter of credit that the promise of uniform practice is excluded the learned counsel argued that the appellant was entitled to the benefit under S. 131 of the Negotiable Instruments Act.