S. KANDAPPA PILLAI Vs. STATE BANK OF INDIA

JUDGEMENT

(1.) The Plaintiff who succeeded in the trial Court, but failed in the lower Appellate Court is the Appellant before me. The suit was for recovery of a sum of Rs. 3,937.15 as damages on account of negligence on the part of the Respondent Bank in not realising the monies due to the Appellant on a bill of exchange exhibit A -1 drawn by him under a letter of credit opened by the Mercantile Bank, Colombo branch on behalf of the foreign buyer of garlic There was a contract between the foreign buyer Vijaya Mercantile Company, Colombo and the Appellant for the supply of garlic by the Appellant. The letter of credit was opened by the foreign buyer and thereafter the Appellant despatched the garlic on 13th November 1967. The Appellant prepared bills of exchange for part of the amount covered by the letter of credit and he presented the bills of exchange with the necessary documents to the Respondent bank on 14th November 1967. According to the Appellant, there is a custom whereby the Respondent bank should have examined the documents immediately and pointed out then and there the mistake, if any, for . correction and for immediate credit being given to the Appellant for the amount mentioned in the bill. The Appellant's case is that on 24th November 1967 the Respondent wrote to him saying that some corrections had to be made in the documents submitted by him and the corrections were made on the same day. But in the meanwhile devaluation of the pound took place on 19th November 1967 and consequently under the letter of credit which is for payment in pounds, the Appellant got a lesser amount, namely less the suit amount, The suit was therefore filed for the recovery of that amount.

(2.) The defence was that the Respondent was not aware of the advice exhibit A -7, dated 17th October 1967 of the Mercantile Bank, Colombo to the Appellant about the opening of a letter of credit that the Respondent is only an intermediary bank and that it was not liable to pay the amount immediately to the Appellant. The further contention was that there was no agreement between the Mercantile Bank Ltd., Colombo and the Respondent bank to reimburse the Respondent bank whatever money that may be paid by the Respondent bank on the basis of the letter/of credit and that all that the Respondent promised was only to collect the bills of exchange and not to make an out -right payment. The Respondent further contended that it informed the Appellant's agent when be brought the bills and documents that they would only collect the money and not make an out -right payment. The trial Court found that the Respondent bank had received the letter like exhibit A -8, dated 20th October 1967 regarding reimbursement agreement between the Mercantile Bank, Colombo and the Respondent bank and that the Respondent was bound to look into the bills and documents immediately. The trial Court further found that there were some irregularities and mistakes which in the opinion of that Court were minor and could be rectified and that the delay in getting the irregularities and the mistakes rectified only on 24th November 1967 was due to the Respondents negligence in sending the bills for collection without proper scrutiny, contrary to the instructions given in the letter of credit. The learned District Munsif further found that the bills were not landed over to the Respondent for collection and that the loss due to the devaluation of the pound was caused on account of the negligence on the part of the Respondent bank. On these findings, the learned District Munsif observed the suit as prayed for with costs. But on appeal, the learned Sub -ordinate Judge observed that the Appellant has not proved that the Respondent bank had confirmed the letter of credit issued by the Mercantile Bank, Colombo and held that in the absence of such confirmation, there was no liability or undertaking on the part of the Respondent bank to give credit for the bill amount without sending it for collection. - The learned subordinate Judge further found that the custom pleaded by the Appellant had not been proved and dismissed the suit with costs. Hence the second appeal.

(3.) The points arising for consideration in the second appeal are: