CHANDANMULL BENGANEY Vs. NATIONAL BANK OF INDIA LTD

JUDGEMENT

(1.) This is an appeal from the judgments of Mr. Justice Greaves in a suit for recovery of money on the basis of what is described as a letter of credit. The material facts relevant for the determination of the rights of the parties are really beyond controversy.

(2.) The plaintiffs carry on business in Calcutta as exporters of jute against orders placed with them by approved constituents. They allege that this export business was carried on by them in co-partnership with the firm of Udoy-Chand Pannalall who have been joined as defendants, upon their refusal to join as plaintiffs. On the 25 November 1920, the contesting defendant, the National Bank of India, Ltd., wrote to the defendant-firm the following letter: We beg to inform you that we are in receipt of advice by wire from our London Office, that a confirmed irrevocable credit has been opened under which we are authorised to negotiate your bills, as offered on Messrs. Mildred Goyenche & Co., to the extent of ?16,875 (sixteen thousand eight hundred seventy-five only) on the following conditions: Bills to be drawn payable three months after sight an 3 to be accompanied by invoices, full sets of Bills of Lading, made out to order and blank endorsed, and policies of Insurance war risk representing shipment of 2,000 (two thousand) bales jute marked (Jajodia)/M from Calcutta to Antwerp, during November, December 1920. Such shipping documents are to be delivered on acceptance of the bills and should bear the following clause: Drawn under cable credit No... dated 22 November, 1920. Please note that this advice does not release you from the liability attaching to the drawer of a Bill of Exchange. The credit will expire on When negotiating drafts, please produce this letter to have the amounts recorded on the back thereof. P.S. Under present conditions we can give no undertaking to negotiate bills drawn under this credit.

(3.) The plaintiffs state that, on the faith of this letter and in reliance thereupon, they, in co- partnership with the defendant-firm, shipped 2,000 bales of jute in December 1920, and that the defendant-firm thereupon drew in favour of themselves (for the joint benefit of themselves and the plaintiffs), against such shipment at three months sight in accordance with the terms of the letter of credit, on the firm of Mildred Goyenche & Co., for the value of the goods. The drafts were discounted in Calcutta by the Chartered Bank of India, Australia and China, the Mercantile Bank of India and the National Bank of India. The drafts were, on presentation, duly accepted by Mildred Goyenche & Co., in London, who received the shipping documents. The acceptors, however, suspended payment on the 14 March 1921, before the drafts matured. The result was that the plaintiffs and the defendant-firm were compelled to pay the amount of the drafts without prejudice to their rights under the letter of credit. The plaintiffs now sue to re-cover the sum paid together with interest thereon making an aggregate of Rs. 2,26,931-3-4. The defence of the Bank is a denial of liability. Mr. Justice Greaves has upheld this contention and has dismissed the suit. The determination of the relative rights of the parties must depend upon the true construction of the letter of credit.