Manmohan Sarin, J. ( 1 ) THE plaintiff has sued the defendant for a sum of Rs. 4 lakhs together with interest at 22% from the date of institution of the suit till realization. The sum of Rs. 4 lakhs claimed in the suit comprises, Rs. 2,26,127. 00 being the amount claimed to be due in respect of the documents presented under the Letter of Credit by the plaintiff to the defendant bank. A sum of Rs. 1,69,000. 00 is claimed as interest at 22% P. A. on the amount of Rs. 2,26,127. 00 from 25th December, 1981 till 21st December, 1984, the date of institution. Another sum of Rs. 5,000. 00 is claimed towards telex and other miscellaneous expenses. ( 2 ) THE main question that arises for consideration in the suit is whether the defendant had negotiated the Bills of Exchange under the Letter of Credit, as a holder in due course for value and was, therefore, liable to the plaintiff for the amount of the Bill? or whether the defendant had only accepted the Bills of Exchange for collection and/or had negotiated the same as an agent of the plaintiff and, thereforehad no liability to pay the amount to the plaintiff unless proceeds were received? ( 3 ) THE relevant facts giving rise to the filing of the present suit may be noticed:- (I)BANQUE Nationale De Paris had opened a transferable irrevocable documentary Letter of Credit bearing No. 3/0820/81194 on the Bank of India, Janpath, New Delhi in favour of M/s. Grand Slam Exports for shipment of readymade garments, garment accessories and handicrafts. The Letter of Credit, permitted partial shipment. The original value of the Letter of Credit was Rs. 1 lakh, but was subsequently increased to Rs. 3,50,000. 00. The Letter of Credit, at the request of M/s. Grand Slam Exports, was transferred to the plaintiff by the State Bank of India. (II)THE plaintiff claimed to have shipped the goods on December, 1991 to M/s Grand Slam Exports in accordance with terms and conditions of the documentary credit. The plaintiff then approached the State Bank of Patiala, Defence Colony, defendant No. 1 herein, with the request for negotiation of the said documents, which were drawn up under the Letter of Credit bearing No. 3/0820/81194 of the Foreign Bank. The plaintiff then approached the State Bank of Patiala, Defence Colony, defendant No. 1 herein, with the request for negotiation of the said documents, which were drawn up under the Letter of Credit bearing No. 3/0820/81194 of the Foreign Bank. It is the case of the plaintiff that the Defence Colony branch of the defendant No. 1, forwarded the same to defendant No. 2 for negotiation and realization from the foreign bank. In the event, the documents sent by the defendant were not accepted by the Banque Nationale De Paris. The objections raised being that the shipment related only to readmade garments, while the Letter of Credit provided for three categories of goods namely readmade garments, garment accessories and handicrafts. It is the contention of the foreign bank that even the partial shipment in respect of any one of the three items should have comprised all the three. Indisputably, in the instant case, the shipment was only of readmade garments. The defendant did not pay or credit the account of the plaintiff with the amount of the Bill under the Letter of Credit. The defendants, however, at the behest of the plaintiff entered into detailed correspondence with the foreign bank claiming payment. In the said correspondence, the defendants have stated that the documents had been negotiated by them and they were holders in due course and demanded payment. It was also contended that the plaintiff had complied with the terms of the Letter of Credit and the stand taken by the foreign bank was untenable. The buyers of the goods one M/s. G. B. filed an appeal to have the garnishee order vacated so that the foreign bank could make the payment. THE defendants also called upon the foreign bank to refer the matter to arbitration. A letter was also written to Indian Council of Arbitration seeking their goods offices for resolution of the disputes. The defendant bank, which had not credited the account of the plaintiff, with the amount of the Bills of Exchange under the Letter of Credit, had nevertheless given clean overdrafts of Rs. 3,711. 62 on 6-1-1982 and Rs. 8,711 on 12-1-1982. The plaintiff, however, adjusted these overdrafts by making the deposit on 23-3- 1982. The defendant bank, which had not credited the account of the plaintiff, with the amount of the Bills of Exchange under the Letter of Credit, had nevertheless given clean overdrafts of Rs. 3,711. 62 on 6-1-1982 and Rs. 8,711 on 12-1-1982. The plaintiff, however, adjusted these overdrafts by making the deposit on 23-3- 1982. ( 4 ) THE plaintiff relies heavily on a certification put by the defendants on the Bill, by means of a stamp to the effect that the said Bill had been negotiated by them. As also on the correspondence with the foreign bank, which according to the plaintiff clearly establishes the factum of negotiation of the Bills by the defendants as holders in due course. ( 5 ) THE defendants on the other hand rely on the fact that neither did the defendants credit any amount to the plaintiff s account nor did the plaintiff ever make any demand for the same thereby clearly establishing the intention of the parties manifesting acceptance of the bills by defendant on collection basis or having acted purely as agent of the plaintiff in negotiation. ( 6 ) THE suit was registered on 10-1-1985. Pleadings were completed in due course. Admission/denial was done and the following issues were framed on 27-7-1987:- 1. Whether the plaintiff is a registered partnership firm and the person suing is one of its registered partners? OPP. 2. Whether the defendants have negotiated the document submitted by the plaintiff? If so, its effect? OPP. 3. What is the effect of the foreign Bank rejecting the document? OPD. ( 7 ) PARTIES were also permitted to file the additional documents. Learned counsel for the defendant offered to admit the photocopies of documents, the originals of which were sought from the defendant. The admitted documents were exhibited. Vide order dated 20-2-1994, parties were directed to file affidavit by way of evidence. Affidavit by way of evidence, has been filed by both the parties. None of the parties chose to apply for cross-examination of the deponents and the case was as such directed to be listed in short causes. ( 8 ) HAVING noticed the rival contentions and submissions of the parties, I proceed to analyze and evaluate the same. Issue No. 1. 1. Whether the plaintiff is a registered partnership firm and the person suing is one of its registered partners? OPP. ( 8 ) HAVING noticed the rival contentions and submissions of the parties, I proceed to analyze and evaluate the same. Issue No. 1. 1. Whether the plaintiff is a registered partnership firm and the person suing is one of its registered partners? OPP. THE plaintiff has averred in the plaint that Sh. O. P. Bansal is one of the partners of the plaintiff firm and is authorized to verify, sign and institute this suit. The plaintiff has produced on record Form A and Form B to prove the registration of the firm as well as Shri O. P. Bansal being the registered partner. Certified copy of Form A is Ex. PA. There is an error in the affidavit of evidence filed by the plaintiff wherein the deponent Mr. Bansal is described as the sole proprietor instead of partner. However, considering the submissions of the plaintiff and the documentary evidence on record, Form A and Form B of Registrar of Firms and in the absence of any specific objection on this issue during arguments, the error in the affidavit can be ignored. Accordingly, it is held that the plaintiff firm is a duly registered firm and suit has been instituted by a duly authorized person. The first issue is decided in favour of the plaintiff. Issue Nos. 2 and 3. WHETHER the defendants have negotiated the document submitted by the plaintiff? If so, its effect? OPP. WHAT is the effect of the foreign Bank rejecting the document? OPD. THE crux of the matter is whether defendant accepted and negotiated the Bills under the Letter of Credit in regular course of business and thereby is liable for the amount or the same were forwarded only for realization on collection basis and defendant acted purely as an agent. ( 9 ) THE correspondence exchanged between the parties may be noticed. (I) The plaintiff had drawn the Bills of Exchange dated 22-12-1981 for Rs. 2,26,127. 00. Vide its letter dated 22-12-1981, plaintiff requested the defendant No. 1 (Defence Colony Branch of the bank) to negotiate the said documents and credit the same to its current account. The said letter Ex. D-1 ends with the following para: "we are enclosing herewith the irrevocable documentary credit duly endorsed by the State Bank of India transferring a sum Rs. 2,14,000. 00 in our favour since for negotiation by us. The said letter Ex. D-1 ends with the following para: "we are enclosing herewith the irrevocable documentary credit duly endorsed by the State Bank of India transferring a sum Rs. 2,14,000. 00 in our favour since for negotiation by us. Even if there are discrepancies, kindly negotiate the bill under reserve. YOU are requested to kindly certify the enclosed Bank certificate and return us the original and a copy with 2 x 4 copies of invoices for our further action. THANKING you, YOURS faithfully, FOR Shivkar Exports. ( 10 ) FROM a careful perusal of correspondence as discussed above, it is seen that the plaintiff had no doubt requested for negotiation of the documents. It was also mentioned that in case of discrepancies, it may be negotiated under reserve. The said documents were accepted by the defendant bank. The stamp certification on the invoice also suggests negotiation. ( 11 ) WHILE, it is true that endorsement of a Bill of Exchange in favour of the partner or the party purchasing the same coupled by delivery transfers the title in the Negotiable Instrument to the endorsee, yet the intention of the parties may only be to permit endorsee to act as an agent and to collect the proceeds. As regards negotiation under reserve, the position is that if the Bill is accepted or purchased under reserve, the bankers credit the account of the party subject to the condition that in case of any objection or the payment not forth coming or the bill being not honoured, the credit would stand reversed. In the instant case, the defendant bank simply forwarded the Bill drawn under the Letter of Credit for collection. In the affidavit by way of evidence filed, the officer of the bank has clearly stated that the said remittance schedule was signed by the Chief Manager and carried the endorsement of having sent the Bill only on collection basis. The Bank officials have explained further that the reference No. FSCB/1981162 itself denotes the Bill being sent on "cb" i. e. Collection Basis. In case where the payments are discounted or purchased, the abbreviation "fddr" is used. It has also to be noticed that in this case defendant bank was neither the opening bank nor the advising bank in respect of the Letter of Credit. The defendant bank had also not confirmed the Letter of Credit. In case where the payments are discounted or purchased, the abbreviation "fddr" is used. It has also to be noticed that in this case defendant bank was neither the opening bank nor the advising bank in respect of the Letter of Credit. The defendant bank had also not confirmed the Letter of Credit. There is merit in the contention of the defendant that the bill had been accepted for collection and the defendant bank was acting as an agent of the plaintiff. Indeed, if the bills had been negotiated and purchased by the defendant bank, the plaintiff was entitled to immediate credit. The fact that the defendant bank neither credited forthwith the account of the plaintiff with the amount under the Letter of Credit, nor did the plaintiff demand payment from the defendant bank supports the defendants contention of having accepted the Bill on collection basis and acting as an agent of the plaintiff, which appears to be real transaction between the parties. It negates the plaintiff s claim of the defendant having negotiated and purchased the Bills of Exchange under the Letter of Credit. The defendants explanation with regard to the stamp with the legend being used whenever bills are sent for payment or are discounted, appears plausible. In any case, the legend of the stamp cannot be determinative of the matter in issue, especially when the endorsement on the remittance schedule as claimed by the defendant runs counter to it. The defendant bank in some of the letters namely letter No. 113/84 to the plaintiff hadgiven the caption, "your Bill for collection of Rs. 2,26,127. 00 dated 24-12-1981, drawn on Banque Nationale De Paris still unpaid", which was acknowledged by the plaintiff without any protest. The correspondence exchanged between the parties shows that the plaintiff did not for a long period of time ever demand money from the plaintiff. In fact it is at the fag end when the period of limitation was expiring that the request was made to consider suing the Banque Nationale De Paris. The defendant bank refuted the same, advising the plaintiff that as an agent, the suit against the bank would not be maintainable and it was for the plaintiff to sue the Banque Nationale De Paris, if so advised. ( 12 ) LET us, at this stage, consider the legal position. The defendant bank refuted the same, advising the plaintiff that as an agent, the suit against the bank would not be maintainable and it was for the plaintiff to sue the Banque Nationale De Paris, if so advised. ( 12 ) LET us, at this stage, consider the legal position. Notice is to be taken of Section 50 and 46 of the Negotiable Instruments Act. SECTION 46. Delivery THE making, acceptance or endorsement of a promissory note, bill of exchange or cheque is completed by delivery, actual or constructive. AS between parties standing in immediate relation delivery to be effectual must be made by the party making, accepting or indorsing the instrument, or by a person authorized by him in that behalf. AS between such parties and any holder of the instrument other than a holder in due course, it may be shown that instrument was delivered conditionally or for special purpose only, and not for the purpose of transferring absolutely the property therein. A promissory note, bill of exchange or cheque payable to bearer is negotiable by the delivery thereof. A promissory note, bill of exchange or cheque payable to order is negotiable by the holder by indorsement and delivery thereof. SECTION 50 Effect of indorsement THE indorsement of a negotiable instrument followed by delivery transfers to the indorese the property therein with right of further negotiation; but the indorsement may, by express words, restrict or include such right, or may merely constitute the indoresee an agent to indorse the instrument or to receive its contents for the indorser, or for some other specified person. " ( 13 ) LEARNED counsel for the defendant, in this connection, relied on Punjab National Bank Vs. Cotton Factory (AIR 1924 Lah 640 ). In this case the locus of the plaintiff to institute the suit was challenged on the ground that the plaintiffs had endorsed the bill to M/s. Sheo Mukh Rai Lachi Ram without any express reservation and they cannot maintain the suit, the objection being that with the endorsement and delivery of the bill, the plaintiffs would have ceased to have any property in the bill. The Courts below held that the plaintiffs had the locus standi because their endorsees had admitted that the bill was sent to them only for collection of money on plaintiff s behalf and the plaintiffs alone are entitled to the money. The Courts below held that the plaintiffs had the locus standi because their endorsees had admitted that the bill was sent to them only for collection of money on plaintiff s behalf and the plaintiffs alone are entitled to the money. The Court took notice of Section 46 and Section 50 of the Negotiable Instruments Act and held that the endorsement of a negotiable instrument and delivery transfer to the endorsee the property therein yet if the instrument is delivered conditionally or for a special purpose only and not for the purpose of transferring absolutely the property therein; the property does not pass to the endorsee. ( 14 ) REFERENCE is also invited to the decision in the case of Khair Mohd. Vs. Taj Mohd. (AIR 1936 Pesh 181 ). In this case the decision in Punjab National Bank (Supra) was approved and the Court further held that where the endorsement contains no explicit words limiting the rights of the endorsee or is a blank endorsement, it is open to the endorser to lead evidence to show that endorsement was for a specific purpose only. In the case of blank endorsement, evidence was admitted to show conditional endorsement for specific purpose of collection. ( 15 ) THESE decisions are cited by the learned counsel for the defendant in support of the contention that even with the bill of exchange being negotiated under the Letter of Credit, if the acceptance of the same was for the purpose of collection only, the property in the said bill would not pass to the defendant bank despite endorsement and delivery. ( 16 ) REFERENCE was made to the decision in Kesharichand Jaisukhalal Vs. Shillong Banking Corporation Ltd. Shillong ( AIR 1965 SC 1711 ) by the counsel for the parties. The Apex Court in this case made certain observations with regard to the opening of confirmed Letter of Credit as constituting bargain between the banker and seller of the goods, which imposes on the banker an absolute obligation to pay. It was held that in view of the banker s obligation under an irrevocable Letter of Credit, the buyer/customer cannot instruct the bank not to pay. However, the banker was not bound to honour the bills of exchange drawn by the seller unless the bills and accompanying documents were in exact compliance with the terms of credit. It was held that in view of the banker s obligation under an irrevocable Letter of Credit, the buyer/customer cannot instruct the bank not to pay. However, the banker was not bound to honour the bills of exchange drawn by the seller unless the bills and accompanying documents were in exact compliance with the terms of credit. The Court also considered the meaning of payment under "reserve". in a case where the issuing bank informed the negotiating bank that there were discrepancies in description of goods and some claims were stale. In case the bank agreed to make payment only under "reserve", The Court explained that a payment under "reserve" is understood to mean that the recipient of the money may not deem it to be its own but must be prepared to return upon demand. The aforesaid decision would not be of assistance, since the defendant did not make any payment either under "reserve" or otherwise. The point of "reserve" hadbeen raised by the defendant only to show that even in the initial request it was not the case of the defendant purchasing the bills or discounting them. ( 17 ) LEARNED counsel for the plaintiff relied on the decision in Dena Bank Vs. MPNT Coop. Ltd. ( AIR 1982 MP 85 ) In this case on receipt of documents and bills from customer, duly endorsed in bank s favour, the bank had credited value thereof to the customer s account and permitted the customer to withdraw therefrom. It was held that the bank was the holder of the documents/bills for full value and it could not reverse credit entry without returning documents to customers if the drawee dishonored them or if the drawee could not be traced, it was the responsibility of the bank to collect the amount. The bank was not permitted to reverse the credit entry without returning the documents. This was a case where the Court had found that the bank was not only a collecting agent of documents presented to it by presenting company, but documents presented were discounted by the bank and the value was credited to the account of the plaintiff immediately, without waiting for its collection from the drawee. The bank was the purchaser of the documents and holder thereof for full value. The bank was the purchaser of the documents and holder thereof for full value. The facts in the above case are completely distinguishable as in the instant case the defendant bank neither discounted the bills nor purchased the same and credit the account of the plaintiff immediately. ( 18 ) AS regards the numerous letters in which the defendant bank has referred to the factum of negotiation of the bills and being holders in due course, while making representations to the bank, National De Paris, for payment, the explanation of the defendant bank is that this correspondence was entered into and efforts made by the defendant bank only to obtain payment. The correspondence with the foreign bank was at the instance and behest of the plaintiff and as a part of its goodwill to maintain good relations with customer. It is noticed from the correspondence that the defendant bank had even sent telex messages to the foreign bank as per the exact draft provided by the defendant in consultation with the professional team of consultants. There is merit in the submission of the learned counsel for the defendant that simply because the defendant was cooperative and endeavored to accommodate the plaintiff, no liability could be fastened on it or an adverse inference drawn as regards the nature of transaction between the parties. Similarly, the correspondence between the Indian Council of Arbitration was at the behest of the plaintiff and with a view to safeguard the interest of the plaintiff. It is borne out from the correspondence exchanged that the defendant bank had notified the plaintiff two clear courses of action available viz. the defendant to recall the bills sent and return them to the plaintiff or seeking recourse to arbitration under the Indian Council for Arbitration. The plaintiff opted for the latter and agreed to even bear the expenses therefore. It is seen from the correspondence that the defendant, in due course, even made a reference to the Indian Council of Arbitration and sought relief from them. All these clearly establish that the plaintiff was not acting on the basis that the property in the documents had been transferred to the defendant and that the defendant alone had the obligation to make the payment to the plaintiff irrespective of the defendant bank receiving the money or not. All these clearly establish that the plaintiff was not acting on the basis that the property in the documents had been transferred to the defendant and that the defendant alone had the obligation to make the payment to the plaintiff irrespective of the defendant bank receiving the money or not. This would indeed have been the situation had the defendant bank negotiated the bills as purchasers, in which case it was immediately obliged to make the payment to the plaintiff. The course of events that have taken place lend credibility to the defendant s case that the bills had been accepted on collection basis and in any case it was only acting as an agent of the plaintiff. The factum of the plaintiff not demanding payment from defendant for a long period of time and calling for suit to be filed at the fag end when limitation was to expire, supports this position as analyzed in para 8 of the judgment. ( 19 ) ACCORDINGLY, it is held that the defendants had accepted the bills for negotiation on collection basis and were acting only as the agent of the plaintiff. The defendants do not have any liability since the foreign bank has refused to honour the bills on the ground of breach of terms of letters of credit. It was for the plaintiff to institute a suit or take appropriate legal action for rejection of the documents by the foreign bank and the defendant has no liability in the matter. ( 20 ) IN view of the foregoing discussion and decision on issue Nos. 2 and 3, the plaintiff fails in the suit. The suit is dismissed with no order as to costs.