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Calcutta High Court · body

2009 DIGILAW 950 (CAL)

F. Ahmed And Company v. Md. M. A. Shahid

2009-12-24

Maharaj Sinha

body2009
JUDGMENT 1. THE plaintiff, F. Ahmed and Co., a partnership firm instituted the above suit in the year 2006 primarily for recovering the amounts covered by four irrevocable letters of credit of different dates issued by the second defendant, Janata Bank of Bangladesh at the instance of the first defendant, Md. M, A. Shahid in favour of the plaintiff. THE cause of action of the plaintiff is based on the allegations that the second defendant, Janata Bank failed to make payments covered by the said irrevocable letters of credit in spite of presentation of proper documents by the plaintiff for obtaining such payments in its favour. 2. BRIEFLY stated, the case of the plaintiff as made out in the plaint proceeds on the basis that since the business of the plaintiff is to export of various commodities including onion, in the year 2004, some representatives of the first defendant, Md. M. A. Shahid who was carrying on business in Dhaka, Bangladesh came to visit the plaintiffs place of business in Calcutta, to be precise at Baitakkhana Road and "offered to purchase on a regular basis substantial quantities of onion of Indian origin at NAFED rates". For making payments for supply of onions the Banker of the first defendant, namely the second defendant would issue irrevocable letters of credit at the instance of the first defendant favour of the plaintiff. The arrangement was that the supply of onion would be made to the first defendant only upon irrevocable letters of credit covering the amount of each supply or consignment, so to say. 3. ON the above basis, from time to time the first defendant placed orders for supply of onions of Indian origin of diverse quantities and the plaintiff in his turn supplied such quantities of onion and for making payments for such supply the first defendant instructed his Banker, the second defendant herein to issue irrevocable letters of credit in favour of the plaintiff (specifying the documents required for negotiations). The second defendant, Janata Bank in Bangladesh issued letters of credit in favour of the plaintiff on the basis of such instruction of the first defendant. 4. The second defendant, Janata Bank in Bangladesh issued letters of credit in favour of the plaintiff on the basis of such instruction of the first defendant. 4. FOR the sake of convenience the particulars of the four letters of credit being the subject-matter of the suit are mentioned below:- [i] LC No. 0442 dated 20 October 2004 US $ 40,700 [ii] LC No. 0009 dated 3 January 2005 US $ 20,000 [iii] LC No. 0026 dated 12 January 2005 US $ 20,000 [iv] LC No. 0034 dated 16 January 2005 US $ 20,000 Total US $ 100,700" Upon receipt of the above letters of credit the plaintiff in due discharge of its obligation supplied onions of agreed specification by various invoices of different dates and after effecting such supply the plaintiff had duly submitted all the necessary documents for the purpose of negotiation of the above letters of credit. The said documents were duly made over to the second defendant by the plaintiffs Banker, the third defendant herein for the purpose of receiving payments from the second defendant on the basis of the above letters of credit. 5. THE second defendant, however, duly acknowledged the receipt of the documents which were submitted to it by the plaintiff after effecting supply against the above letters of credit without raising any objection of any nature. 6. IN spite of submission of all the necessary documents as specified in the said letters of credit to the second defendant against each letter of credit for the purpose of receiving payments for the supply of agreed quantities of onion of specified grade both the first and the second defendants failed and refused to release payments covered by the said four letters of credit in utter breach of their obligation to pay for the consignments in question. Full particulars of the documents so submitted to the second defendant by the plaintiff for receiving payments against the four letters of credit are mentioned in several paragraphs of the plaint, namely between paragraphs 11 and 27 thereof. Full particulars of the documents so submitted to the second defendant by the plaintiff for receiving payments against the four letters of credit are mentioned in several paragraphs of the plaint, namely between paragraphs 11 and 27 thereof. As despite the acknowledgment of receipt of all the necessary documents as specified in each letter of credit the second defendant or the first defendant or both of them failed or refused to pay the amounts covered by the said four letters of credit, the plaintiff repeated its demands for payments from both the second defendant and the first defendant and in spite of such repeated demands made by the plaintiff neither the second defendant nor the first defendant made any payments of credit, the failure on the part of the first and the, second defendant of their obligations to make payments, needless to mention, compelled the plaintiff to institute the suit for relief against the first and the second defendants herein. 7. IT is important to point out, however, that the first defendant, the importer did not file any written statement and as such the suit has remained uncontested as far as the first defendant is concerned. 8. THE Banker of the first defendant, namely the second defendant herein, Janata Bank in its written statement has sought to contest the suit mainly on two grounds, in that the second defendant has said that since two essential conditions contained in the letters of credit were not fulfilled by the plaintiff, the letters of credit in question could not be honoured by it. For the sake of convenience the above two conditions as mentioned in the written statement of the second defendant are set out below:- "[a] We shall arrange remittance on realization covering fund from the opener against the relative shipping document. [b] Documents evidencing shipment from Kolkata to Benapole/ Bhomra/ Sonamasjit." 9. APART from alleging breach on the pail of the plaintiff of the above two conditions, the second defendant has made a faint and feeble attempt to raise yet another dispute to the effect that the documents issued by the Customs Authority in Bangladesh acknowledging receipt of goods, namely consignments of onion in question at Bangladesh border were forged or fabricated or manufactured documents. 10. 10. APART from making some bare allegations, no particulars of any nature have, however, been given or mentioned in the written statement of the alleged fraud on the part of the plaintiff regarding the receipts of goods (onion) issued by the Customs Authority at Bangladesh Border. In support of its contention regarding breach of condition - 'b' above as mentioned in paragraph 3 of the written statement of the second defendant the written statement of the second defendant is absolutely silent as to the particulars of fraud allegedly committed by the plaintiff in obtaining receipts from Bangladesh Customs Authority. 11. HOWEVER, on the basis of the pleadings of the parties, namely the plaintiff and the second defendant herein, a few issues were framed. HOWEVER, for the sake of adjudicating the suit the real issue, I think, is whether the second defendant was entitled to refuse or withhold payments to the plaintiff covered by the said four letters of credit as mentioned in the plaint or in particular paragraph 38 thereof. 12. THE most feeble attempt, however, on the part of the second defendant to raise a plea of fraud against the plaintiff without any particulars of any kind cannot, in my opinion, give rise to any issue at all. THE said plea was raised by the second defendant, for the sake of raising an issue as in the absence of proof of fraud it is well-known that the Bank generally cannot withhold payments against an irrevocable letter of credit or a Bank guarantee in general. THE plea of fraud, however, has further been weakened as the first defendant at whose instance the second defendant issued the letters of credit favour of the plaintiff has not contested the suit at all at any stage. I proceed on the basis of the very fact that since the first defendant has not contested the suit, the first defendant has fully admitted the claim or claims of the plaintiff made in this suit. 13. IN my opinion, therefore, if the above issue is answered either way the other issues as framed being mere incidental to the above issue would automatically be answered likewise on the basis of the answer to the above main issue. 14. 13. IN my opinion, therefore, if the above issue is answered either way the other issues as framed being mere incidental to the above issue would automatically be answered likewise on the basis of the answer to the above main issue. 14. IN order to prove its own case the plaintiff presented its witness, namely one of its partner, Samar Mohan Saha who proved all the documents in possession of the plaintiff including the said four letters of credit on the basis of which the plaintiff instituted the suit or rather on which the cause of action of the plaintiff is based and those documents were tendered and marked as exhibits. He was also fully cross-examined by the second defendant's Counsel as well. As aforesaid, although the first defendant did not contest the suit at any stage, the second defendant, it appears, used a written statement and served a copy thereof upon the plaintiff. However, as per the record of the proceedings and the report of the department concerned the written statement of the second defendant was not filed and therefore is not on record. It further appears from the report of the department that the said written statement of the second defendant is still lying in the custody of the second defendant or its Advocate-on-record "as defective" 15. HOWEVER, since the witness of the second defendant, Sarwar Hossain gave evidence in Court and since written notes of arguments have been filed on behalf of the second defendant and the plaintiff and since the written notes filed on behalf of the plaintiff have dealt with the case of the second defendant contained in its written statement, I would deal with the defence of the second defendant as taken in its written statement and as sought to be set up at the trial of the suit even though the written statement of the second defendant was not filed after removing its defect and as such is not on record of the proceedings. 16. THE second defendant has sought to contend that on the basis of the two conditions which I have mentioned above in this judgment, the second defendant rightly withheld payments covered by the said four letters of credit as the second defendant did not receive any payment from the first defendant. 16. THE second defendant has sought to contend that on the basis of the two conditions which I have mentioned above in this judgment, the second defendant rightly withheld payments covered by the said four letters of credit as the second defendant did not receive any payment from the first defendant. To put it simply, the second defendant was not obliged to make the payments in terms of the said four letters of credit to the plaintiff as the second defendant did not realize the fund from the first defendant or rather as the first defendant did not pay the amounts to the second defendant covered by the said four letters of credit issued in favour of the plaintiff by the second defendant at the instance of the first defendant, and secondly, in order to receive payments in terms of the said four letters of credit the plaintiff was to furnish evidence of entry of goods, namely the consignments of onion through the "Bangladesh Customs", which the plaintiff failed to do as the evidence of entry of goods was not considered to be genuine by the second defendant. Since the plaintiff and the third defendant had accepted the above two conditions or rather the conditions contained in the clauses of the letters of credit in question the plaintiff was bound by such conditions and, therefore, the 2nd defendant was justified in withholding the payments covered by the said four letters of credit for non-fulfillment of the above two conditions on the part of the plaintiff. 17. IN spite of the above two conditions and in spite of the non-payment of amounts by the first defendant to the second defendant covered by the said four letters of credit, the second defendant in order to honour the said four letters of credit, however, intended to pay the amounts covered by the said four letters of credit to the plaintiff by creating a forced loan on account of the first defendant upon obtaining permission from the Bangladesh Bank, namely the Central Bank of Bangladesh. 18. 18. THE said Central Bank of Bangladesh, however, directed the second defendant that before creation of forced loan the second defendant had to obtain bills of entry of goods through Bangladesh Customs and when the second defendant made an attempt to obtain bills of entry of goods through Bangladesh Customs the Bangladesh Customs Authority in its turn intimated the second defendant that the goods in question, namely the consignments of onion did not cross the Bangladesh border. THE second defendant was further informed that the seals and stamps of the Bangladesh Customs Authority on the documents submitted by the plaintiff to the second defendant for obtaining payments against the said four letters of credit were not genuine or rather those stamps or seals were false or forged as the stamps and seals as appeared on the documents in question submitted by the plaintiff were in "English in place of Bangali script". In other words, since the endorsements on the documents by the Customs Authority of Bangladesh were in English and not in Bengali the Customs Authority of Bangladesh assumed that the said endorsements on the documents were forged or false and were not of the Bangladesh Customs Authority. 19. THE 2nd defendant duly intimated these allegations of Bangladesh Customs Authority to the third defendant, namely the plaintiffs banker as well as the plaintiff and withheld payments and did not honour the said four letters of credit on the basis of the above information received from the Bangladesh Customs Authority. 20. THE second defendant has also taken the stand that since the plaintiff failed to produce any eye-witness who saw that the consignments in question passed through Bangladesh Customs or rather the seals and stamps of the Bangladesh Customs Authority on the documents were actually put by the Customs Authority of Bangladesh it should be presumed that the plaintiff could not contradict the alleged stand taken by the Bangladesh Customs Authority and as such the plaintiff failed to substantiate by evidence to prove that the consignments in question, in fact, crossed the Bangladesh border or there was proper evidence of the entry of goods as exported to Bangladesh by the plaintiff. The second defendant, as aforesaid, as far as I have been able to appreciate has taken the stand that the seals and stamps on the documents of entry of goods to Bangladesh "at Bhomra and Benapole customs checking station" were forged. 21. I have already said that the second defendant has merely tried to make out a case of fraud on the part of the plaintiff in its notes of arguments and not in its written statement in utter desperation to set up some kind of defence to the claim or claims of the plaintiff. No particulars of any kind of any alleged wrong doing including fraud or fabrication on the part of the plaintiff have been mentioned in the written statement. 22. THE second defendant, however, did not make any attempt far from any serious attempt to prove the allegations of fraud or fabrication or falsity on the part of the plaintiff by any evidence at all. None from the Customs Authority of Bangladesh came to give evidence in support of the allegations of fraud or fabrication against the plaintiff by the second defendant. THE second defendant also has not been able to throw any challenge far from a serious challenge to the documents issued by the Bangladesh Customs Authority evidencing entry of consignments to Bangladesh by any evidence at all. The Bangladesh Customs Authority, as aforesaid, has not adduced or given any evidence or rather it has not questioned the authenticity of the documents evidencing entry of consignments into Bangladesh in the first place. 23. IN dealing with the above condition (a) and the stand taken by the second defendant in its written notes of argument the plaintiff at the time of hearing and also in its notes of argument has categorically stated that the four letters of credit in question are governed by Uniform Customs and Practices [U.C.P.] 500 which became effective from.10 January 1994 replacing the Uniform Customs and Practices 400 as evident from exhibit - (a), namely a letter dated 20 October 2004 (plaintiffs document 2 of Judge's Brief of Documents). 24. 24. ACCORDING to the plaintiff Article 13(c) of the U.C.P. 500 says:- "If a credit contains conditions without stating the document(s) to be presented in compliance therewith, Banks will deem such conditions as not stated and will discharge them." Since the clause relied on by the second defendant in the letters of credit is a "non-documentary clause" as evident from the above 13(c) in U.C.P. 500, the Bank should disregard such condition. In other words, the Bank ought to have disregarded the above condition and made the payments in terms of the letters of credit in question. That the above clause is a non- documentary clause has, it is pointed out by the plaintiff, been accepted by the second defendant's sole witness, Md. Sarwar Hossain in his evidence. 25. AS far as the above second condition is concerned as mentioned in paragraph 3 of the written statement of the second defendant that the consignments in question had not crossed the Bangladesh Border the plaintiff has relied on several documents which are all exhibits as those documents were proved by the plaintiffs witness when he gave evidence in Court, namely bills of export etc. 26. FOR the sake of convenience the particulars of documents relied upon by the plaintiff and the statements made in support of its case that the consignments in question crossed the Bangladesh Border and that the Bangladesh Customs Authority duly acknowledged the same are set out below:- "I] Bill of Export, being Exhibit - "G" consisting of plaintiff's document Nos. 20, 41, 60, 61 and 77. FOR the purpose of convenience, learned Counsel on behalf of the plaintiff at the time of making submissions had relied upon. PD-20, a part of Exhibit "G" to demonstrate the plaintiff's case. The said documents are prepared by the plaintiff at the time of sending the goods to the importer, it is apparent from various endorsements on the Bills of Export (collectively marked Exhibit "G") that the goods covered the Indo-Bangladesh Border. Such endorsements included in chronological sequence, the assessment of duty made by Indian Customs, duly passed by the plaintiff so' assessed and the endorsement by the Inspector, Indian Customs, Petrapole Preventive Unit, allowing export to take place mentioning the relevant vehicles/trucks Nos. therein on a particular day. II] The original of the documents were sent by the plaintiff to the 2nd defendant. therein on a particular day. II] The original of the documents were sent by the plaintiff to the 2nd defendant. The plaintiff retains copies of the original documents. Relevant answers in connection with the bills of export given by the plaintiff's witness, Mr. Samar Mohan Saha are answers to questions 68 to 102. The defendant's witness, Mr. Hussain in answer to questions 79 to 88 has admitted the fact that the bill of export is a proof of entry of goods in the hands of the exporter, the plaintiff herein and furthermore, in the instant case all the procedures were completed at various stages as evident from the authentic certificates of the Inspector of Customs, Petrapole Preventive Unit to that effect. That the bill of export proves that the goods had crossed the Indian Territory as per certification given by the Indian Customs and entered into Bangladesh. III] The next set of documents to prove that the goods had crossed Indian Border and reached Bangladesh are the invoice-cum-packing lists which have been marked as Exhibit "H" collectively being the plaintiff's documents 21, 27, 59, 79 and 80. From the above documents it is evident that the Bangladesh Customs had accepted the goods in their territory. The documents had been received by the plaintiff along with the empty vehicles returning form Bangladesh. The Indian Customs sent the goods with the bill of export and invoice- cum-packing lists to identify the goods and the consignment. Relevant answers pertaining to this point given by the plaintiffs witness Mr. Samar Mohan Saha are answers to questions 103 to 123. The defendant's witness, Mr. Hussain in his answer to questions 84 to 88 has admitted that the goods had crossed the Border." The allegations of fraud against the plaintiff or that the plaintiff manufactured documents to prove that the goods crossed the Bangladesh Border and the Bangladesh Customs Authority duly acknowledged the same have been seriously denied by the plaintiff. I do not think I need to spend much time in dealing with the allegations of fraud or fabrication or lack of genuineness of the documents issued by the Bangladesh Customs Authority as alleged by the second defendant in its utter desperation to set up a defence for non-payment of amounts to the plaintiff covered by the four letters of credit. Most importantly however, the second defendant has, in any event, miserably failed to discharge its onus of proving that the plaintiff fraudulently obtained the documents in question from the Bangladesh Customs Authority or that the plaintiff fabricated any documents in order to obtain payments from the second defendant covered by the said letters of credit at all. 27. I have already said that this is the most feeble attempt on the part of the second defendant merely to set up a defence on the allegations of fraud or fabrication documents against the plaintiff without any supporting evidence of any nature whatsoever on the plea that the endorsements on the documents in question by the Bangladesh Customs Authority were in English instead of Bengali. It is my considered view having regard to the facts and circumstances of the case and the evidence on record that the stand of the second defendant in this regard is utterly dishonest as well. 28. SINCE I think the attempt on the part of the second defendant to raise this plea of fraud as not genuine, I do not think I need to go on dealing with it any further. I wonder how the second defendant in the facts and circumstances of the case and the evidence on record could raise such a plea of fraud or fabrication of documents on the part of the plaintiff in the first place. Before I conclude I must mention once again that since the first defendant did not contest the suit at any stage and the suit against the first defendant has remained uncontested the second defendant, in my opinion, ought to have honoured the four letters of credit issued by it in favour of the plaintiff at the instance of the first defendant. 29. INSTEAD of paying the amounts covered by the said letters of credit the second defendant has raised utter contradictory and inconsistent pleas merely for the purpose of setting up some defence to the claim or claims of the plaintiff made in this suit against the first and the second defendants. 30. 29. INSTEAD of paying the amounts covered by the said letters of credit the second defendant has raised utter contradictory and inconsistent pleas merely for the purpose of setting up some defence to the claim or claims of the plaintiff made in this suit against the first and the second defendants. 30. ON the one hand, the second defendant has alleged that the failure of the first defendant to provide sufficient funds to the second defendant to honour the letters of credit in question in the first place was the cause for not honouring the letters of credit in question upon presentation of the necessary documents by the plaintiff, and on the other hand, the plea of fraud or fabrication of documents on the part of the plaintiff has been raised or rather attempted to have been raised only at the trial for non-payments of the amounts covered by the said letters of credit. The above utter contradictory or inconsistent pleas of fraud or forgery or fabrication of documents against the plaintiff on the one hand and the failure of the first defendant to provide sufficient funds to the second defendant to enable it to honour the said letters of credit on the other, I do not hesitate to hold, are self-destructive. 31. THE stand taken by the second defendant in defending the suit, in my view, has been totally dishonest stand. THE second defendant was under an obligation to honour the letters of credit the moment the plaintiff or its Banker submitted the necessary documents to the second defendant for obtaining payments for supply of goods (onion) to the second defendant covered by the said four letters of credit. THE second defendant could not possibly raise any objection as to the genuineness of the plaintiff in supplying the goods in question, namely the consignments of onion to the first defendant as the first defendant himself had and has never raised any question as to the receipt of goods on the basis of the orders placed by him to the plaintiff at any point of time. 32. 32. IN the facts and circumstances of this case and especially when the first defendant at whose instance the second defendant issued the letters of credit in favour of the plaintiff never contested or questioned the claims of the plaintiff at any point of time the payments should have been made merely upon invocation of the letters of credit in question by the second defendant without raising any objection whatsoever. The view that I have taken in this case I do not think it is necessary for me to deal with the decisions relied on by the learned Counsel on behalf of the second defendant as those decisions have no possible bearing upon the facts and circumstances of the case before me. 33. I have fully considered the evidence of both the plaintiff and the 2nd defendant and I find the evidence of the plaintiff is very convincing. 34. HOWEVER, having regard to the standard of proof required in a proceedings of this nature, namely a civil suit, I am more than certain that the plaintiff has proved its case on the basis of "balance of probabilities" as the plaintiff is required to do in order to obtain the relief claimed by the plaintiff in this suit. Thus there will be a decree as claimed in claim - (a) against the first and the second defendants herein. There will also be a decree for interest @ 12% from the date of institution of the suit till the date of decree, i.e. 24 December, 2009. There will also be a decree for interest @ 10% from 25. December, 2009 till the decree in terms of claim - (a) is satisfied. The plaintiff will also be entitled to the costs of the suit assessed at Rs. 80,000/- and the plaintiff will be entitled to such costs over and above the Court fees that the plaintiff had to pay for the purpose of institution of the suit. 35. NEEDLESS to mention that the plaintiff will be entitled to recover the costs of this suit by way of a decree against the first and the second defendants either jointly or severally. The decree for interests as above is also passed against the first and the second defendants herein jointly and severally. 35. NEEDLESS to mention that the plaintiff will be entitled to recover the costs of this suit by way of a decree against the first and the second defendants either jointly or severally. The decree for interests as above is also passed against the first and the second defendants herein jointly and severally. NEEDLESS to mention that the plaintiff will have an option either to receive payments in U.S. Dollar or in Indian Currency as the plaintiff may choose at the time of execution and/or satisfaction of the decree in question. Let the decree be drawn up expeditiously.