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2016 DIGILAW 297 (CAL)

State Trading Corporation of India Ltd. v. Vijaya Bank

2016-03-29

HARISH TANDON

body2016
JUDGMENT : Harish Tandon, J. 1. It would be unnecessary to go into extensive details of the facts as pure question of law is raised at the time of entertaining G.A. No. 2628 of 2009 filed by Deutsche Bank for vacation, variation and modification of interim order passed in the suit without seeking its impleadment and/or addition as party in the suit. 2. In a suit for declaration that the Respondent No. 1 is not liable to make any payments under the letter of credit dated 22nd May, 2008 for a sum of US$1912756.57 for supply of 3340.495 metric tons of French Yellow Peas under the commercial invoice dated 15th September, 2008 and the Respondent No. 2 is not entitled to any payment under the said Letter of Credit and cancellation thereof, an order of temporary injunction was passed, on January 16th, 2009, after recording the existence of prima facie case of fraud and balance of convenience and/or inconvenience lies in favour of the Petitioner in terms of Prayer ‘A’ to the application which is set out herein below:- “An order of injunction restraining the respondent no. 1 from making any payment or reimbursing the bankers of the respondent no. 2 any sums under the Letter of Credit dated 22nd May, 2008;” 3. It is not in dispute that the said order was extended from time to time and is still in force. The Deutsche Bank, the applicant in G.A. No. 2628 of 2009 took out an application claiming following reliefs:- (a) The said interim order dated January 16, 2009 passed by this Hon’ble Court be vacated and/or set aside; (b) The said interim order dated January 16, 2009 passed by this Hon’ble Court be suitably varied and/or modified and/or clarified; (c) The defendant No. 1 be directed to release and make payment of the said US$ 1,912,756.57 equivalent to Rs. 93,094,086.71 forthwith in terms of the said Letter of Credit dated May 22, 2008; (d) Ad interim order in terms of prayers above; (e) Cost of and/or incidental to this application be paid by the plaintiff; (f) Such further or other order or orders be passed and/or direction or directions be given as to Your Lordship may deem fit and proper. 4. 4. Essentially, the said application is taken out for variation, vacation and/or setting aside the order dated January 16, 2009 without seeking addition and/or impleadment as party in the suit. 5. The point which emerges whether the stranger or third party to the suit can apply for vacation, variation and/ or setting aside the ex-parte order without being impleaded as party therein. 6. According to the learned Advocate representing the Plaintiff, the application for variation, vacation and/or setting aside the ad interim order was passed under Order 39, Rule 1 and 2 of the Code of Civil Procedure which can only be taken out by any party to the suit under Rule 4 Order 39 of the Code and not by a stranger or a third party. In support of the aforesaid contentions, the reliance is placed upon a judgment of the Bombay High Court in case of Madhavji Jeyram Kotak & Others v. Lay Laxmi Gopalji Surji & Others, reported in (2007) 5 Mah. LJ 797. It is further submitted that the party referred under Order 39, Rule 4 of the Code is referable to a party to the suit and therefore an application at the instance of a third party or stranger is neither maintainable nor entertain able by the Court. On merit it is submitted that though normally the Court does not pass an order of injunction against the invocation of bank guarantee or Letters of Credit, but the same is not a rigid rule. It is, thus, submitted that in case of a fraud or of a like nature, the Court, in a given circumstances, can issue injunction against the bank guarantee or Letters of Credit. To buttress the aforesaid submission the several judgments are placed before the Court. It is, thus submitted that it would be apparent that a fraud has been practised for issuing a Letter of Credit and was made known to the applicant as well. 7. On the other hand, the Deutsche Bank submits that an application for variation, vacation and setting aside the ad interim order is very well maintainable at the instance of a stranger or a third party as there is no fetter either under the procedural or substantive law. 7. On the other hand, the Deutsche Bank submits that an application for variation, vacation and setting aside the ad interim order is very well maintainable at the instance of a stranger or a third party as there is no fetter either under the procedural or substantive law. The reliance is placed upon a Co-ordinate Bench decision of this Court in case of Sabari Ventures Limited v. Canara Bank, reported in (2004) 1 CAL LT 155 (HC) and a Division Bench Judgment delivered in case of SREI Infrastructure Finance Ltd. v. Fitch Ratings India Pvt. Ltd. & Another, reported in (2013) 1 CAL LT 227 (HC). 8. It is vehemently submitted that being a negotiating bank it is obliged to honour the document in absence of any objection from the confirming back. The negotiating bank is dealing with the document and not the goods. He relies upon Uniform Customs and Practise for Documentary Credits (UCP 600) to support the aforesaid contentions that the bank deals with the documents and not with goods, services, performance to which the documents may relate. Further reliance is placed on the undertaking of the confirming bank in Article 8 of UCP 600 that the confirming bank is irrevocably bound to honour or negotiate as of the time it adds its confirmation to the credit. By referring Article 16 thereof it is contended that if the issuing bank did not inform about the discrepancy in the presentation, it would be construed that he has waived such right. It is, thus submitted that the issuing or confirming bank have never raised any objection, on the other hand, confirms the documents and therefore, the injunction should be vacated and the Vijaya Bank, the Respondent No. 1 should be directed to make payments. 9. In reply the Plaintiff says that the application filed by the Deutsche Bank for vacation, variation and setting aside the order is bereft of any material particulars required under Order 39, Rule 4 of the Code. It is, thus submitted that the application of the Deutsche Bank, is liable to fail on such count alone. 10. 9. In reply the Plaintiff says that the application filed by the Deutsche Bank for vacation, variation and setting aside the order is bereft of any material particulars required under Order 39, Rule 4 of the Code. It is, thus submitted that the application of the Deutsche Bank, is liable to fail on such count alone. 10. Taking the preliminary objection first as to maintainability of the application on the behest of a third party or stranger, it is clear from the language employed under Order 39, Rule 1 and 2 of the Code that the order of temporary injunction should be passed against any party to the suit. The expression “any party to the suit” is conspicuously absent in Order 39, Rule 4 of the Code which only refers to “any party”. The identical point arose before the Single Bench of the Bombay High Court in case of Madhavji Jeyram Kotak & Others (Supra) and noticing the difference in language used in Order 39, Rule 1 and Order 39, Rule 4 of the Code, it is held:- “5. To buttress the submission, the counsel for the applicant, however, has drawn my attention to the provisions of Order 39, Rules 1, 6 and 7 where the expression used is “any party to a suit”. Relying on the said provisions, it is argued that the Legislature was conscious of the distinction between the expressions “ any party to a suit” and “any party”. In other words, it is contended that “any party” means “any person”, “an aggrieved person” or “a third party”. However, to my mind, the setting in which Rule 4 Order 39 has been placed and going by the scheme of Order 39, I am inclined to accept the submissions of the plaintiff that the expression “any party” in Rule 4 would mean any party to the suit. The counsel for the plaintiff has rightly drawn a distinction, relying on the expression used in Order 40, Rule 1, sub-rule (2) of the Civil Procedure Code which refers to “any person whom any party to the suit”. The distinction between the word “person” and “party” is recognised at different places in the Civil Procedure Code.” 11. The distinction between the words “any party” and “aggrieved person” is also succinctly noticed in the said judgment as under:- “4. The distinction between the word “person” and “party” is recognised at different places in the Civil Procedure Code.” 11. The distinction between the words “any party” and “aggrieved person” is also succinctly noticed in the said judgment as under:- “4. To my mind, going by the language of Order 39, Rule 4, the plaintiffs are right in contending that such an application cannot be entertained at the instance of a “third-party” to the suit; for the expression employed in Rule 4 is “any party”. That expression would necessarily mean that only a party to the suit can invoke the remedy under Order 39, Rule 4 of the Civil Procedure Code. There is marked distinction between the words “any party” and “aggrieved person”. The expression “party” is not defined in the Code of Civil Procedure. The meaning of word “party” in the common parlance refers to those by or against whom a legal suit is brought, whether in law or equity, the party plaintiff or defendant. On the other hand, an “aggrieved person” is one whose legal right is affected directly and adversely by a decision of the Court.” 12. There is no ambiguity in my mind that an aggrieved person whose legal right is directly and adversely affected by an order has a right to appeal after obtaining leave from the Appellate Court. The legislature concisely omitted the expression “aggrieved person” within the four corners of Order 39, Rule 4 of the Code and therefore the meaning to be assigned to the word “any party” generally means a person who initiates or against whom a suit is brought and arraigned as a plaintiff or defendant. 13. In this regard, a judgment of this Court in case of Narayan Chandra Garai & Others (Supra) can be noticed. An application was taken by a third party for her addition as defendant in the suit and for vacating and / or setting aside the order of injunction passed therein. On the facts of the said case it was found that she was neither a necessary nor a proper party in relation to the subject matter of dispute in the suit. On the facts of the said case it was found that she was neither a necessary nor a proper party in relation to the subject matter of dispute in the suit. On a question whether the order of injunction can be vacated, varied and / or set aside at the instance of a stranger an argument was advanced that such petition can be treated as a proceeding in the nature of preinteresse suo where the Court can adjudicate the title of a third party without impleadment. It is held in unequivocal terms that the proceeding of such nature though not provided either in the Code of Civil Procedure or in the Rules of the Original Side can only be entertained for examining a person on his title to the goods or property over which the receiver is appointed. The aforesaid principles cannot be extended in lock, stock and barrel to any other proceedings where the receiver is not appointed. There appears to be some observations recorded in Para 11 and 12 of the said report where excerpts from “Kerr on Injunction (6th edition Page 662)” based on a decision rendered in case of Bour Baud v. Bour Baud, reported in (1864) 10 LT 781, were quoted. It was held in the said proceedings that where a stranger is evicted by an injunction he may apply to have injunction set aside. The facts involved in the said judgment is concisely recorded therein with the specific observations that no corresponding Indian Authority in support thereof has been brought to the Court. However, the Bench recorded that since it is not possible to visualise all possible contingencies and normally the Court does not grant any relief at the instance of the stranger to the suit may however in an appropriate case may give relief to a stranger by dissolving an order of injunction as was done in case of Bour Baud (Supra). 14. It cannot be said in expressive terms that the Co-ordinate Bench propagates such proposition of law and the meaningful reading of the said judgment would lead to an inescapable conclusion that neither the procedural nor the substantive law recognised the vacation, variation and/or setting aside an order of injunction at the behest of a stranger or a third party to the suit. 15. 15. The Co-ordinate Bench in case of Sabari Ventures Limited (Supra) merely proceeded on an observation recorded in Narayan Chandra Garai (Supra) and held that the ratio which could be curled out therefrom is that a non-party is entitled to apply before the Court for vacating the order of injunction. The observation which is unconnected with the decision of the Court cannot form ratio decidi. 16. The Division Bench in case of SREI Infrastructure Pvt. Ltd. (Supra) is distinguishable on the facts involved therein though the point incidentally cropped up whether the Court can allow a party to seek for intervention for the purpose of vacation, modification and discharge of the interim order without formally adding as party in the suit. At the time of passing an order of injunction it was desired by the Trial Court that the SEBI should be notified about the suit. In the special facts of the said case the application for SEBI for vacation of the interim order was allowed to be entertained. It would be apt to quote the observations recorded in Paragraph 12 thereof which are set out herein below:- “12. We shall not make any comment on the issue whether the second respondent is a necessary party or not, but from the order of the learned Trial Judge dated 22nd March, 2012 it appears that the learned Trial Judge desired that SEBI should be notified about the suit and interim order passed. However, it appears from the record that no such notice was given, and SEBI itself came forward with the applications on which the impugned judgment and order was passed. Thus, from initial perception of the learned Trial Judge, it is clear that SEBI is required to be heard at the interlocutory stage. While overruling the submission of Mr. Sarkar we think that learned Trial Judge has jurisdiction to vary, modify or discharge the interim order passed earlier even without formally adding second respondent as it is affected by the interim order in exercise of inherent power on the principle that action of the court does not unjustly injure or affects any one else.” 17. A decision is what is decided in the facts involved therein. A decision is what is decided in the facts involved therein. The judgment of the Division Bench, in my opinion is not pointer to said core issue that under any circumstances the third party can apply for variation, vacation and discharge of the injunction order without seeking impleadment or addition. The procedural law, in this case, the Code of Civil Procedure guides, regulates and controls the proceeding before the Civil Court and therefore the due regard should be given to the provisions incorporated therein. I cannot persuade myself to take a dissenting view to what had been taken by the Bombay High Court in case of Madhavji Jeyram Kotak & Others (Supra) on interpretation of the provisions contained in Order 39, Rule 1 and Rule 4 of the Code. “Any party” appearing in Rule 4 Order 39 should mean and construe as a party to the suit and not otherwise. The legislature consciously provided the remedy of an appeal to a person aggrieved and concisely omits the word “any party”. A person feeling aggrieved by an order passed in a suit has a right to prefer an appeal to the Appellate Court subject however a leave is granted but definitely cannot intervene in a suit without seeking formal addition and/or impleadment. The Deutsche Bank in the instant case has not formally prayed for its addition as party in the suit, therefore, cannot independently apply for vacation, variation and/or discharge of the order of injunction. 18. The G.A. No. 2628 of 2009 is hereby dismissed.