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State Bank of India and ors. Vs. Guru Ispat Limited - Court Judgment

LegalCrystal Citation
CourtKolkata High Court
Decided On
Case NumberA.P.O.T. No. 1558 of 2010; A.P.O. No. 76 of 2010; W.P. No. 1469 of 1999
Judge
AppellantState Bank of India and ors.
RespondentGuru Ispat Limited
Appellant AdvocateMr. Mr. A.K. Routh; Mr. Saudeep Pal Chowdhury, Advs.
Respondent AdvocateMr. Rudrajyoti Bhattacharya; Mr. Debabrata Banerjee; Ms. Debjani Ghosh; Mr. Ashutosh Mukherjee; Ms. Moumita Mukherjee, Advs.
Excerpt:
.....jj.] - the respondents contended that they are the proprietors inter-alia of the trade mark 555 written in a stylized manner. the respondents claim to be the assignees of this mark. the mark was assigned from time to time. ultimately by a deed of assignment dated 14.9.2004, the registered trade mark label 555 was assigned to the respondents. the application for renewal of the mark is pending. the respondents have used the trade mark label 555 in conjunction with other marks such as meredian, merelane delux and merelane premium. see also, fuentes trade marks (1891, 2 ch.,166)." the above observations establish that it is a defence even to an action for passing off or infringement of a trade mark that the plaintiffs (in this case the respondents) marks are an imitation of the mark of..........in its letter dated august 2, 1994, can withhold payment of the whole of the maturity value of the fixed deposits, even if it is assumed that it was entitled to recover the amount mentioned in the letter dated august 2, 1994 from the maturity value of the fixed deposits by exercising its right under s. 171. in my view, sbi wrongfully withheld payment of the whole of the maturity value of the fixed deposits, and hence it is liable to pay the amounts with interest. it is to be noted that mr. pal chowdhury has said that according to the arrangements the parties agreed at the time the fixed deposit accounts were opened, accumulated interest was to be credited to guru ispats current account with the bank, and that interest has been duly credited. the position has been disputed by mr......
Judgment:
This appeal is directed against a Judgment and/or order dated 11th January, 2010 passed by the Hon'ble Single Judge whereby His Lordship was pleased to hold as follows:

I am of the view that the question whether citing UBLs refusal to pay the billed amount and thus honour the irrevocable letter of credit issued by it on October 6, 1993, SBI can call upon Guru Ispat to pay the amount demanded by its letter dated August 2, 1994 should not be examined by the high court in exercise of its power under art. 226, for nothing in the question involves enforcement of any public law right by Guru Ispat, or discharge of any public law obligation or duty by SBI that has claimed and asserted a pure private law contractual right. In my view, the petitioners, questioning the validity of SBIs demand and consequential exercise of its right under s. 171 of the Indian Contract Act,1872, should be relegated to the civil court for seeking adjudication and determination of all questions pertaining to SBIs s. 171 action.

I am, however, unable to see how SBI, demanding payment only of the amount mentioned in its letter dated August 2, 1994, can withhold payment of the whole of the maturity value of the fixed deposits, even if it is assumed that it was entitled to recover the amount mentioned in the letter dated August 2, 1994 from the maturity value of the fixed deposits by exercising its right under s. 171. In my view, SBI wrongfully withheld payment of the whole of the maturity value of the fixed deposits, and hence it is liable to pay the amounts with interest. It is to be noted that Mr. Pal Chowdhury has said that according to the arrangements the parties agreed at the time the fixed deposit accounts were opened, accumulated interest was to be credited to Guru Ispats current account with the bank, and that interest has been duly credited. The position has been disputed by Mr. Bhattacharjee.

In view of the above-noted situation and for the foregoing reasons, I dispose of the petition ordering as follows :

With respect to the amounts mentioned in SBIs letter dated August 2, 1994, recovered by SBI in exercise of a right claimed under s. 171 of the Indian Contract Act, 1872, the petitioners will be free to approach the appropriate civil court in accordance with law. Within four weeks from the date of communication of this order SBI shall pay to the petitioners balance of the maturity value of the fixed deposits with interest, at the rate specified in the receipts concerned, till the date of payment, after adjusting interest already credited, if any, to Guru Ispats account. SBI need not pay costs in terms of the last order. No costs. Certified xerox according to law.

Being aggrieved, this appeal has been filed by the appellant State Bank of India (hereinafter referred to as the SBI). The facts of the case briefly are as follows:

On 06th October, 1993 the United Bank Ltd. Dubai at the request of M/s Tahir Trader of U.A.E. issued irrevocable Latter of Credit to the writ petitioner. The Credit was transmitted through the Syndicate Bank, N.S. Road, Kolkata. On 19th November, 1993 the writ petitioner duly shipped the goods under indent. On 25th November, 1993 the writ petitioner obtained a Bank Guarantee for a sum of Rs.10,00,000/- (Rupees Ten Lakhs) only for a period of one year from the SBI. The Bank Guarantee was furnished against a different business purpose. As a condition thereof the writ petitioner opened two fixed deposits accounts for a sum of Rs.5,00,000/- each.

The writ petitioner maintains accounts with the SBI, the appellant herein as follows:-

(i) A Current Account bearing No. CA-3A/724 having a balance of Rs. 80,000/-

(ii) Two Fixed Deposit Accounts bearing No. 608991 and 608992 for a sum of Rs 5,00,000/- each.

On 6th December, 1993 the amount referred to in the Irrevocable Latter of Credit is US$ 7035 equivalent to Rs. 2,16,945/- was credited in favour of the writ petitioner by the appellant Bank after negotiation with the Foreign Bank. On 15th December, 1993 the issuing bank by their telex message intimated the discrepancies in the documents. On 28th December, 1993 the said documents were sent back by the Appellant SBI to the United Bank Ltd. Abu Dubai, the opening bank/issuing bank after rectification of the documents and asked for release of payment.

On 7th March, 1994 the Bank asked the issuing Bank at Abu Dhabi for payment of Bill which had been fallen due on 6th January, 1994. A reminded was also issued to the issuing Bank on 10th May, 1994.

On 20th June, 1994 the issuing Bank informed the SBI that the said L/C account holder had refused to accept the documents for the said USD 7035 on the grounds of discrepancy and the documents sent for collection for USD 2415 was also not taken delivery by the said importer.

The said fact was communicated by the United Bank Ltd. along with the remarks that the importer Tahir Traders refused to accept the said documents and to make payment.

On 28th June, 1994 the said documents were returned by the United Bank Ltd., Abudhabi on the ground of discrepancy, and informed that the said subject stood closed.

On 2nd August, 1994 the appellant, SBI communicated to the writ petitioner to the effect that the SBI debited the entire amount in writ petitioners current account as on 2nd August, 1994. The recovery of over draft interest at the rate of Rs.22.25% on bill amount from 5th January, 1994 to 2nd August, 1994 is Rs.28,143/-. The SBI requested the writ petitioner to deposit Rs.2,21,954/- along with interest at the rate of Rs.24.25% per annum till such deposit is made and further directed to RBI permission to re-import the said goods to India. It further appears that the appellant SBI also informed the United Bank Limited, Dubai that rejection of the documents by the drawee does not absolve the said Bank or their liabilities and further requested to immediately reimburse the said amount for a sum of USD 7035 along with interest at the rate of 24.35% per annum.

The writ petitioner informed by a letter dated 8th September, 1994 to the appellant SBI that since the issuing Bank had not raised any objections it should be presumed that they had accepted the documents. It further appears that the Bank Guarantee expires on 25th November 1996.

The writ petitioner filed an application before the State Consumer Dispute Redressal Commission being S.C. Case No. 429/O/96 and the SBI was directed to pay compensation for an amount of Rs.1,00,000/- for its deficiency to the writ petitioner. The said order was passed by the State Commission on 28th September 2007. The writ petitioner thereafter filed the writ petition and the said writ petition was disposed of on 11th January, 2010.

It appears from the facts that the writ petitioner filed an application before the State Consumer Disputes Redressal Commission (hereinafter referred as the State Commission) being S.C. Case No. 429/O/96 for compensation. The application was disposed of by the said commission directed the SBI to pay compensation for an amount of Rs.1,00,000/- on 25th November 2009. The writ petitioner filed an execution application being No. EA/20/2009 before the State Commission, West Bengal to execute the order dated 28th September 2007. The said application was disposed of on 16th March 2010 when the Bank issued a Banker Cheque bearing No. 144300 dated 15th March 2010 amounting to Rs. 1,24,167/- in favour of Guru Ispat Limited.

It is contended on behalf of the appellant that a Suit being Title Suit No.5948 of 2009 has been instituted by the writ petitioner No. 1 before the City Civil Court at Kolkata against the Bank interest praying for a declaration and mandatory injunction concerning the subject matter of the writ petition. The said suit is pending.

It is further submitted that the Bank is also entitled to get the interest at the rate of 22.25% on the amount of Rs.2,21,954/- from 5th January, 1994 till its realization. It is submitted that such amount would be Rs.10,80,628.66 up to 16th July, 2010.

It is admitted that a sum of Rs.22,51,858.34 is lying with the Bank in respect of the said Special Term Deposits. It is submitted that the bank is agreeable to pay the amounts lying with the Bank in respect of said two Fixed Deposits after deducting a sum of Rs.10,80,628.66 from the total amount of Rs.22,51,858.34 to the writ petitioner No. 1, on an undertaking that the said Suit which has been filed and pending before the City Civil Court at Calcutta should be withdrawn, by the respondent, Guru Ispat.

It is contended that the impugned judgment and/or order is not tenable in the eye of law since the Writ Court has already relegated the demand made by the appellant to the appropriate Civil Court in exercise of writ petitioners right under Section 171 of the Indian Contract Act, 1872. Therefore, the Writ Court cannot direct the appellant to make any payment to the writ petitioners arising out of the transaction without the matter being decided by the appropriate Civil Court. It is further submitted that the Writ Court has no jurisdiction to decide the disputed question of facts. The appellant has a right and is entitled to recover the amount mentioned in the letter dated 2nd August, 1994 from the maturity value orf the Fixed Deposits by exercising its rights under Section 171 of the Indian Contract Act, 1872.

It is further submitted that the Writ Court did not decide the actual rights and liabilities of the parties to each other and without ascertaining such rights and liabilities of the parties the Writ Court cannot direct the appellant to pay balance amount of the maturity value of the fixed deposits with interest to the respondent company.

It is further submitted that if the documents in respect of the said Fixed Deposits are paid the bank would not be in a position to recover its legal dues to the tune of Rs.10,80,628.66. Hence, it is submitted that the order so passed by the learned Trial Court should be modified and the matter should be decided by the Civil Court and no payment of amount is required to be made by the appellant to the writ petitioner at this stage.

Learned Counsel appearing on behalf of the respondent submitted that the appeal is not maintainable since the order so passed by the Court at the instance of the appellant Bank.

It is further submitted that the SBI has withheld the amount illegally. It is further submitted that the lien cannot be credited or exercised on the Fixed Deposit and bank has no right to withhold the maturity value. It is further submitted that the statement of accounts which has been filed by the bank through its affidavit dated 30th July, 2010 is nothing but a manufactured and fabricated one only to mislead this Court.

It is submitted that the issuing bank must pay on demand by the negotiating bank if the documents are in order. Any disputes between the buyer and seller must be settled between themselves. The obligation of the issuing bank is absolute and he relied upon the decision in the case of Hira Lal and Son and Ors. v. Lakshmi Commercial Bank reported in 1985 (58) Company Cases 677 where the Court held as follows :

An irrevocable letter of credit constitutes an independent contract between the issuing banker and at the seller and is not qualified by or subject to the terms of the contract of sale made between the buyer and the seller, or the contract between the issuing banker and the buyer. But there is also an equally well settled rule that a person who ships in reliance of a letter of credit must do so in exact compliance with its terms. It is elementary to say that a bank is not bound or indeed entitled to honour drafts presented to it under a letter of credit unless those drafts with the accompanying documents are in strict accord with the credit as opened.

He further relied upon a decision in the case of Edward Owen Engineering Ltd. v. Barclays Bank International Ltd. reported in 1978 (1) ALL ER 976 (CA) where the Court held as follows :

Where, therefore, a bank had given a performance guarantee it was required to honour the guarantee according to its terms and was not concerned whether either party to the contract which underlay the guarantee was in default. The only exception to that rule was where fraud by one of the parties to the underlying contract had been established and the bank had notice of the fraud. Accordingly, as the defendants guarantee provided for payment on demand without proof or conditions, and was in the nature of a promissory note payable on demand, and the plaintiffs had not established fraud on the part of the buyers, the defendants were required to honour their guarantee on the demand made by the Libyan bank.

He relied upon a decision in the case of U.P. Cooperative Federation Ltd. v. Singh Consultants and Engineers (P) Ltd. reported in 1989 (65) Company Cases 283 where the Court held that an irrevocable commitment either in the form of a confirmed bank guarantee or an irrevocable letter of credit cannot be interfered with except in the case of fraud or where a case of apprehension of irretrievable injustice has been made out.

He relied upon a decision in the case of United Commercial Bank v. Bank of India reported in AIR 1981 SC 1426 where the Court held as follows :

A bank issuing or confirming a letter of credit is not concerned with the underlying contract between the buyer and seller. Duties of a bank under a letter of credit are creted by the document itself, but in any case it has the power and is subject to the limitations which are given or imposed by it, in the absence of the appropriate provisions in the letter of credit. In view of the bankers obligation under an irrevocable letter of credit to pay, his buyer customer cannot instruct him not to pay. The opening of a conformed letter of credit constitutes a bargain between the banker and the vendor of the goods which imposes on the banker an absolute obligation to pay. The same considerations apply to a bank guarantee. A letter of credit sometimes resembles and is analogous to a contract of guarantee must honour that guarantee according to its terms.

He relied upon a decision in the case of Punjab National Bank v. Arura Mal reported in AIR 1960 page 632 where the Court held that there is a distinction between a Bankers lien and the Banks right to set off. A lien is confined to securities and property in Banks custody. Set off is in relation to money and may arise from a contract or from mercantile usages or by operations of law. The right of a Bank to apply a deposit to an indebtedness due from the depositor, results from the right of set-off, which obtains between persons occupying the relation of debtor and creditor, and between whom there exist mutual demands. Mutuality is essential to the validity of a set off, and in order that one demand may be set off against another, both must mutually exist between the same parties.

He further submitted that the order so passed by the learned Trial Court should be affirmed.

After hearing the learned Counsel for the parties and after scrutinizing the facts placed before us and the decisions cited at the bar it appears to us that the question arose is whether the 1st respondent had a lien on the said Fixed Deposit receipt for the loans and advances granted by the 1st respondent to the writ petitioner and after perusing the facts it appears to us that issue raised in this appeal that whether the SBI is entitled to exercise its rights and/or lien under Section 171 of the Contract Act? It is a fact that a Suit is pending between the parties decided the said issue.

In our considered opinion a disputed question of fact cannot be decided by the Writ Court when there is a necessity of adducing evidence. We also do not wish to express our opinion on the issue on the ground that opinion may prejudice the interest of a party in the suit. It appears to us in the instant case the learned Advocate appearing on behalf of the Bank on instructions submitted before the Trial Court as follows:-

Mr. Pal Chowdhury has said on instructions that balance of the maturity value can be paid to Guru Ispat with accumulated interest. Under these circumstances, Mr. Bhattacharjee has invited me to dispose of the application directing SBI to pay the balance of the maturity value of the fixed deposits with accumulated interest, and giving the petitioners liberty to question the validity of SBIs s.171 action and consequent recovery of the amount demanded by its letter dated August 2, 1994, before the appropriate civil court.

His Lordship further held :

I am of the view that the question whether citing UBLs refusal to pay the billed amount and thus honour the irrevocable letter of credit issued by it on October 6, 1993, SBI can call upon Guru Ispat to pay the amount demanded by its letter dated August 2, 1994 should not be examined by the high court in exercise of its power under Art. 226, for nothing in the question involves enforcement of any public law right by Guru Ispat, or discharge of any public law obligation or duty by SBI that has claimed and asserted a pure private law contractual right. In my view, the petitioners, questioning the validity of SBIs demand and consequential exercise of its right under S. 171 of the Indian Contract Act, 1872, should be relegated to the civil court for seeking adjudication and determination of all questions pertaining to SBIs S. 171 action.

I am, however, unable to see how SBI, demanding payment only of the amount mentioned in its letter dated August 2, 1994, can withhold payment of the whole of the maturity value of the fixed deposits, even if it is assumed that it was entitled to recover the amount mentioned in the letter dated August 2, 1994 from the maturity value of the fixed deposits by exercising its right under S. 171. In my view, SBI wrongfully withheld payment of the whole of the maturity value of the fixed deposits, and hence it is liable to pay the amounts with interest. It is to be noted that Mr. Pal Chowdhury has said that according to the arrangements the parties agreed at the time the fixed deposit accounts were opened, accumulated interest was to be credited to Guru Ispats current account with the bank, and that interest has been duly credited. The position has been disputed by Mr. Bhattacharjee.

In view of the above-noted situation and for the foregoing reasons, I dispose of the petition ordering as follows. With respect to the amounts mentioned in SBIs letter dated August 2, 1994, recovered by SBI in exercise of a right claimed under S. 171 of the Indian Contract Act, 1872, the petitioners will be free to approach the appropriate civil court in accordance with law. Within four weeks from the date of communication of this order SBI shall pay the petitioners balance of the maturity value of the fixed deposits with interest, at the rate specified in the receipts concerned, till the date of payment, after adjusting interest already credited, if any, to Guru Ispats account. SBI need not pay costs in terms of the last order. No Costs. Certified xerox according to law.

Mr. Bhattacharjee appearing on behalf of the respondent/writ petitioner No. 1 has also invited this Court to dispose of the appeal directing SBI to pay the balance of the maturity value of the Fixed Deposits with accumulated interest. According to him a liberty should be granted to the petitioners to question the validity of the SBIs action under S.171 of the Contract Act and consequent recovery of the amount demanded by its letter dated 2nd August, 1994 before the appropriate Civil Court.

In view of such stand taken by the parties before the learned Trial Court, the Trial Court passed an order directing SBI to pay the balance of the maturity value of the fixed deposits with interest to the Guru Ispats Account.

Therefore, on the given facts, in our considered opinion, it would be proper for us to direct the SBI to set apart the claim mentioned by them to the tune of Rs.10,80,628.66 out of the maturity value of the said fixed deposits in a separate interest bearing account to the credit of the suit pending before the City Civil Court at Kolkata. In our opinion, the claim of the SBI should be adjudicated upon by the Court first and thereafter the said amount should be disbursed in favour of the decree holder in the suit. We direct to set apart the said amount for the reason the claim of the SBI has not yet been properly adjudicated and the suit is pending therefor. The balance amount of the said fixed deposits with accrued interest thereon should be refunded to the writ petitioner/the respondent herein because the SBI has no claim on the said amount.

Accordingly, we only modify the order passed by The Hon'ble Single Judge to that extent.

For the reasons stated hereinabove, the appeal is disposed of.

Xerox certified copy of this order, if applied for, be supplied to the parties on usual undertakings.


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