AKAI IMPEX LIMITED Vs. GENERAL STEEL EXPORT

JUDGEMENT

(1.) THIS suit has been filed by the plaintiffs for a declaration that the first defendants are not entitled to claim, demand or receive an amount to the extent of U. S. $ 2,16,819. 55 under the Letter of Credit, hereinafter referred to as the "l/c", dated 30th August, 1994. Prayer is also made for a permanent injunction restraining the first defendant from claiming or receiving the said amount. The Notice of Motion has been taken out for an injunction in similar terms. An affidavit in support of the Notice of Motion has been filed. Affidavit in reply has been filed by the defendant No. 2. No replies have been filed by defendant Nos. 1, 3 and 4 although the service is stated to have been effected upon them.

(2.) BRIEFLY stated the facts are that the first defendant by an offer (proforma) dated 17th August, 1994 agreed to sell cold rolled sheets of various sizes and gauges on certain terms and conditions. The payment was by way of an irrevocable L/c payable 180 days after shipment i. e. B/l. The value of the L/c in terms of the offer/profora dated 17th August, 1994 which was opened by the second defendants in favour of the third defendant was U. S. $ 10,44,000. Subsequently on 5th October, 1994 by an amendment the value of the L/c was reduced to U. S. $ 8,57,500 and the quantity of HR coils was reduced from 3000 M. T. to 2500 M. T. On 7th November, 1994 the plaintiffs obtained from the second defendant a copy of the B/l dated 3rd November, 1994, a copy of the invoice, a copy of the packing list, a copy of the test certificate, a copy of the certificate of origin and a copy of the certificate of weight. The cargo loaded on the vessel AMER VED arrived in Bombay on 7th December, 1994. The plaintiffs took delivery of the said cargo and the same was transported by trucks to different warehouses. Prior to the transport of the cargo the trucks in which it was loaded were weighed on the weighbridge outside the Port and the plaintiffs found that though the number of bundles stated by the first defendant was correct as 424 but the actual weight of the cargo was 2204. 000 M. T. against the declared weight of 2589. 560 M. T. The plaintiffs, therefore, by a fax dated 19th December, 1994 informed the fourth defendant accordingly. They were informed that the cargo would be kept in the same condition in which it was received. They were invited for a personal inspection in order to compensate the plaintiffs for the loss due to shortloading. Defendant No. 4 is the agent of defendant No. 1. In view of this defendant No. 4 inspected the said cargo and found that what had been stated by the plaintiff is correct. By a letter dated 20-1-95 the plaintiffs pointed out to the first defendant that according to the survey carried out by SGS India Ltd. in all the 146 bundles the net shortage worked out to 121. 715 M. T. There was a shortage of about 14 per cent. Thus the claim was lodged by the plaintiff with the first defendant for a sum of U. S. $ 2,16,819. 53. This claim included the cost of material, amount of duty paid to Customs, expenses incurred for weighment, trucking charges, weighbridge charges, the amounts paid to SGS India Ltd. for inspection, warehousing charges etc. The fourth defendant also called upon the first defendants to settle the claim of the plaintiffs as contained in their letter dated 20th Jan. 1995. By a fax dated 16th Feb. 1995, fourth defendant confirmed to the plaintiffs that the first defendants have in fact confirmed/accepted the findings of the SGS India Ltd. , report and admitted the shortage of 218 M. T and had also agreed to settle the claim without delay. In the fax message it is stated that it was proposed by the first defendant that as a first gesture to help the plaintiffs the credit period for this L/c would be extended by about 3 months free of cost to the plaintiffs. The claim for the shortage of about 218 M. T from the bundles which are actually inspected by SGS and certified in their report will be settled without delay. In view of the intended settlement, representative of the plaintiffs actually went to Switzerland and met the representative of the first defendants on 7th April, 1995. The first defendants refused to settle the claim even to the extent of 218 M. T. The first defendant was ready and willing to compensate the plaintiffs only to the extent they receive from their supplier. The first defendants were further willing to give price reduction in future business. The first defendants despite admitting shortage in weight were not ready and willing to make any payment in respect of the said shortage to the plaintiff. The aforesaid offer of the first defendant is reflected in a fax dated 7th April, 1995 addressed by the first defendant to the fourth defendants. The plaintiffs, however, refused to sign this settlement as the first defendants were not willing to make any payment unless and until they receive the same from their suppliers. It is thereafter stated by the plaintiffs that the first defendants had contracted to supply to the plaintiffs 2509. 560 M. T. of cold rolled sheets. The first defendants have accordingly furnished the aforesaid documents, evidencing shipment of the said cargo, packing list, bill of lading, invoice and certificate of weight representing that 424 bundles weighed 2509. 560 M. T. The shortage was discovered only after the plaintiffs had taken delivery. The plaintiffs submit that the certificate of weight, bill of lading, invoice, packing list which are part of the various documents to be furnished by the first defendants are patently fraudulent. The first defendants have issued the same with an intent to defraud the plaintiffs and obtain payment through L/s opened by the second defendants in favour of the third defendants. The first defendants are bound and liable to pay the plaintiffs the amount claimed in the suit being the value of the cargo shortshipped by the first defendants, the duty paid thereon and various other expenses incurred by the plaintiffs. As per the L/c the second defendants had to pay to the third defendants on expiry of 180 days from shipment the price of the cargo. The second defendants had to pay U. S. $ 857,500 on or about 1st May, 1995. At the time of the filing of the suit it was apprehended that the second defendants are liable to remit the suit amount after the expiry of 180 days to the third defendants on or about 1st May, 1995. If the said amount is remitted, irreparable harm and injury resulting in irretrievable injustice would be caused to the plaintiffs. The plaintiffs will not be in a position to recover their claim from the first defendants who are a foreign party. In the aforesaid circumstances it is prayed that the reliefs as prayed for ought to be granted to the plaintiffs.

(3.) AN affidavit in support of the Notice of Motion has been filed wherein the aforesaid averments have been reiterated. No affidavits in reply have been filed by the defendant Nos. 1, 3 and 4. Defendant No. 2 has, however, filed an affidavit in reply. This affidavit has been filed after the ad-interim injunction came to be granted on 27th April, 1995. A perusal of the order dated 27th April, 1995 shows that ad-interim injunction in terms of prayer clauses (a) and (b) operative till 15th June, 1995 only was granted. Liberty to apply for grant of ad-interim reliefs and extension of the order was also granted after notice to the defendants. The plaintiffs gave notice to the defendants and the matter came up for hearing on 13th June, 1995. Again none was present on behalf of the defendants. Consequently the ad-interim order dated 27th April, 1995 came to be confirmed. Thereafter an application was made by defendant No. 2 for vacating the ad-interim order. This application was dismissed. Liberty was granted to defendant No. 2 to apply for an expeditious hearing of the Notice of Motion. Thus the Notice of Motion has come up for hearing.