CS(OS) 930/2000 Page 1 of 29

$~P-1

* IN THE HIGH COURT OF DELHI AT NEW DELHI

Decided on: 28.02.2025

+ CS (OS) 930/2000

KANNU EXPORTS .....Plaintiff

Through: Mr. Ashish Batra, Advocate

versus

BANQUE NATIONALE DE PARIS

SUISSE) SA,AND ORS. .....Defendants

Through: Mr. Deepak Nargolkar, Senior

Advocate with Mr. Viraj Kadam,

Advocate for D-1.

Mr. H.S. Dahiya & Mr. Yuv

Dahiya, Advocates for D-2.

Mr. Ajoy Roy, Ms. Aishani Das,

Mr. Aayush Kevlani, Ms.

Balapragatha & Mr. Shashvat

Chandra, Advocates for D-4.

CORAM:

HON’BLE MR. JUSTICE PRATEEK JALAN

J U D G M E N T

1. This is a suit for recovery of Rs. 5,23,49,757/-, alongwith interest at

the rate of 20% per annum, based on an irrevocable Letter of Credit

[hereinafter, “L/C”] opened by defendant No. 1-bank in favour of the

plaintiff.

I. The parties

2. The plaintiff is an exporter/importer of commodities, and is the

beneficiary of the L/C.

CS(OS) 930/2000 Page 2 of 29

3. The following four defendants were originally impleaded in the suit,

and the decree was sought against them jointly and separately:

• Defendant No. 1 – Banque Nationale De Paris (Suisse), being the

bank which issued the L/C.

• Defendant No. 2 – State Bank of Mysore, being the negotiating bank,

to which the plaintiff submitted the L/C.

• Defendant No. 3 – State Bank of Indore, being the advising bank

under the L/C.

• Defendant No. 4 – Gyma International, being the purchaser of goods

from the plaintiff, at whose instance the L/C was opened.

4. Defendant no. 3, which was the advising bank, was deleted by an

order dated 31.01.2006. At the stage of final arguments, it was recorded, in

an order dated 14.11.2024, that the plaintiff seeks a decree in this suit only

against defendant No. 1. In terms of the aforesaid order, the plaintiff filed

an affidavit dated 21.11.2024, confirming that it is not pressing the suit

against other defendants, i.e. defendant Nos. 2 and 4.

II. Case of the plaintiff

5. The case pleaded in the plaint is that the plaintiff had entered into an

agreement to export rice to defendant no. 4, a French entity. The payment

was to be made under an irrevocable L/C bearing Documentary Credit No.

98-404200/MC dated 17.08.1998 for a sum of USD 3,29,808/-. The

plaintiff exported the rice to defendant No. 4 through five separate bills of

lading, details whereof are as follows:

CS(OS) 930/2000 Page 3 of 29

S. No. Particulars Exhibit No.

1. Bill of Lading No. 1 dated 15.11.1998 released

in respect of shipment in terms of agreed terms

and conditions between plaintiff and defendant

No. 4 and in terms of L/C.

Ex. PW1/7

2. Bill of Lading No. 2 dated 15.11.1998 released

in respect of shipment in terms of agreed terms

and conditions between plaintiff and defendant

No. 4 and in terms of L/C.

Ex. PW1/8

3. Bill of Lading No. 3 dated 15.11.1998 released

in respect of shipment in terms of agreed terms

and conditions between plaintiff and defendant

No. 4 and in terms of L/C.

Ex. PW1/9

4. Bill of Lading No. 4 dated 15.11.1998 released

in respect of shipment in terms of agreed terms

and conditions between plaintiff and defendant

No. 4 and in terms of L/C.

Ex. PW1/10

5. Bill of Lading No. 5 dated 15.11.1998 released

in respect of shipment in terms of agreed terms

and conditions between plaintiff and defendant

No. 4 and in terms of L/C.

Ex. PW1/11

6. The documents were submitted by the plaintiff to defendant No. 2,

which was the negotiating bank, and from whom the plaintiff had taken an

advance against the corresponding export bills. Defendant No. 2 accepted

the documents, and forwarded them to defendant No. 1 by telex message

CS(OS) 930/2000 Page 4 of 29

dated 23.11.1998, which was acknowledged by defendant No. 1 on

25.11.1998.

7. On 26.11.1998, however, defendant No. 1 raised the following

discrepancies:-

“1) ALL DOCUMENTS SHOW YOUR L/C NUMBER.

2) B/L NO. 1 THE MENTION “NO LIEN TO BE EXERCISED AT

DISCHARGING PORTS FOR DEMURRAGE INCURRED AT

LOADING PORT” IS NOT COUNTERSIGNED BY THE MASTER.

3) PHYTOSANITARY CERTIFICATES DO NO CERTIFY THAT

GOODS ARE FIT FOR HUMAN CONSUMPTION .”

Defendant No. 1, therefore, asserted that the claim was “not taken into

consideration as documents are not in strict conformity”. The documents

were therefore refused, and the L/C remained unpaid.

8. Defendant No. 2 clarified the alleged discrepancies by telex

messages dated 27.11.1998 and 01.12.1998, but the documents were

nonetheless rejected by defendant No. 1 on 02.12.1998.

9. Following the refusal of defendant No. 1 to pay under the L/C, the

plaintiff sold the subject consignment to alternative buyers between

16.12.1998 and 09.06.1999. According to the plaintiff, these sales were

distress sales; the plaintiff recovered a sum of Rs. 10,15,11,135/-, thus

incurring a loss of Rs. 3,83,88,516/-, as against the amount payable under

the L/C. It is further contended that the aforesaid amount had to be repaid

to defendant No.2 with interest at the rate of 20% per annum with effect

from 09.12.1998, as a result of which the plaintiff ultimately paid a sum of

Rs. 5,23,49,757/- to defendant No. 2 to foreclose the transaction.

10. The plaintiff therefore filed the present suit for the following reliefs:-

“That accordingly under the facts and circumstances of the present

case it is most respectfully prayed that your Lordship may be pleased

to pass a decree in favour of the plaintiff and against the defendants

CS(OS) 930/2000 Page 5 of 29

Nos. 1, 2 and 4 jointly as well as severally thereby directing then to pay

to the plaintiff a sum of Rs. 5,23,49,757/- alongwith interest @ 20%

p.a. till the realisation of the whole amount.”

III. Case of the defendants

11. The written statement filed by defendant No. 1 raised preliminary

issues as to the jurisdiction of the Court, and on the ground that the

purchaser to whom the consignment was ultimately sold was not impleaded

as a defendant. A plea of multifariousness and misjoinder of causes of

action was therefore taken.

12. On merits, defendant No. 1 asserted that the documents were

discrepant on the grounds taken in the communications between the parties,

which have been noticed in paragraph 7 above.

13. As the suit is pressed only against defendant No. 1, it is not necessary

to consider the written statements filed by the other defendants.

IV. Issues framed

14. On the basis of the pleadings, the following issues were framed by

an order dated 23.09.2008:-

“1. Whether the plaintiff is entitled to recover Rs. 5,23,49,757/-, if

so from which of the Defendants? OPP

2. If the issue no. 1 is decided in favour of the Plaintiff, whether

the Plaintiff is entitled to any interest and if so, at what rate, for what

period and from which of the Defendants? OPP

3. Whether this Court has no territorial jurisdiction to entertain

the suit against the defendants no. 1 & 4? OPD – 1 & 4.

4. Relief.”

It may be noted that these are the only issues framed in the suit, and no

issue has been framed with regard to any other preliminary objection taken

in the written statement of defendant No. 1.

CS(OS) 930/2000 Page 6 of 29

V. Evidence

15. The plaintiff examined one witness, being its authorised

representative, Sh. Ram Lal [PW-1]. The witness filed an affidavit of

evidence dated 29.05.2010, which was tendered on 14.09.2012, and

marked as EX PW-1/A. PW-1 was cross examined by learned counsel for

defendant Nos. 1, 2 and 4.

16. Forty three documents were exhibited in the evidence of PW-1,

being the following:-

Exhibit No. Particulars

Ex. PW1/1 Letter of Credit dated 17.08.1998 bearing No. 98-

404200/MC, alongwith amendments issued by

defendant No. 1 in favor of the plaintiff.

Ex. PW1/2 True and certified copy of Commercial Invoice

No. EXP-1114/98 dated 17.08.1998.

Ex. PW1/3 True and certified copy of Commercial Invoice

No. EXP-1114A/98 dated 17.08.1998.

Ex. PW1/4 True and certified copy of Commercial Invoice

No. EXP-1114B/98 dated 17.08.1998.

Ex. PW1/5 True and certified copy of Commercial Invoice

No. EXP-1114C/98 dated 17.08.1998.

Ex. PW1/6 True and certified copy of Commercial Invoice

No. EXP-1114D/98 dated 17.08.1998.

Ex. PW1/7 True and certified copy of Bill of Lading No. 1

dated 15.11.1998 released in respect of shipment

in terms of agreed terms and conditions between

plaintiff and defendant No. 4 and in terms of L/C.

Ex. PW1/8 True and certified copy of Bill of Lading No. 2

dated 15.11.1998 released in respect of shipment

CS(OS) 930/2000 Page 7 of 29

in terms of agreed terms and conditions between

plaintiff and defendant No. 4 and in terms of L/C.

Ex. PW1/9 True and certified copy of Bill of Lading No. 3

dated 15.11.1998 released in respect of shipment

in terms of agreed terms and conditions between

plaintiff and defendant No. 4 and in terms of L/C.

Ex. PW1/10 True and certified copy of Bill of Lading No. 4

dated 15.11.1998 released in respect of shipment

in terms of agreed terms and conditions between

plaintiff and defendant No. 4 and in terms of L/C.

Ex. PW1/11 True and certified copy of Bill of Lading No. 5

dated 15.11.1998 released in respect of shipment

in terms of agreed terms and conditions between

plaintiff and defendant No. 4 and in terms of L/C.

Ex. PW1/12 True and certified copy of Mate’s Receipt No. 1

dated 15.11.1998 in respect of B/L No. 1.

Ex. PW1/13 True and certified copy of Mate’s Receipt No. 2

dated 15.11.1998 in respect of B/L No. 2.

Ex. PW1/14 True and certified copy of Mate’s Receipt No. 3

dated 15.11.1998 in respect of B/L No. 3.

Ex. PW1/15 True and certified copy of Mate’s Receipt No. 4

dated 15.11.1998 in respect of B/L No. 4.

Ex. PW1/16 True and certified copy of Mate’s Receipt No. 5

dated 15.11.1998 in respect of B/L No. 5.

Ex. PW1/17 True and certified copy of Boat Notes, issued by

boat owners and stamped by Customs

Department, showing loading of cargo from

20.08.1998 to 14.11.1998.

Ex. PW1/18 True and certified copy of Certificate of

Kakinada Boat Suppliers dated 25.11.1998.

CS(OS) 930/2000 Page 8 of 29

Ex. PW1/19 True and certified copy of Certificate of origin as

issued by Delhi Chamber of Commerce in respect

of B/L No. l.

Ex. PW1/20 True and certified copy of Certificate of origin as

issued by Delhi Chamber of Commerce in respect

of B/L No. 2.

Ex. PW1/21 True and certified copy of Certificate of origin as

issued by Delhi Chamber of Commerce in respect

of B/L No. 3.

Ex. PW1/22 True and certified copy of Certificate of origin as

issued by Delhi Chamber of Commerce in respect

of B/L No. 4.

Ex. PW1/23 True and certified copy of Certificate of origin as

issued by Delhi Chamber of Commerce in respect

of B/L No. 5.

Ex. PW1/24 True and certified copy of Phytosanitary

Certificate No. 696 dated 10.09.1998, issued by

the Directorate of Plant Protection, Quarantine

and Storage, Ministry of Agriculture,

Government of India.

Ex. PW1/25 True and certified copy of Phytosanitary

Certificate No. 760 dated 24.09.1998, issued by

the Directorate of Plant Protection, Quarantine

and Storage, Ministry of Agriculture,

Government of India.

Ex. PW1/26 True and certified copy of Phytosanitary

Certificate No. 761 dated 24.09.1998, issued by

the Directorate of Plant Protection, Quarantine

and Storage, Ministry of Agriculture,

Government of India.

Ex. PW1/27 True and certified copy of Phytosanitary

Certificate No. 762 dated 24.09.1998, issued by

the Directorate of Plant Protection, Quarantine

CS(OS) 930/2000 Page 9 of 29

and Storage, Ministry of Agriculture,

Government of India.

Ex. PW1/28 True and certified copy of Phytosanitary

Certificate No. 833 dated 13.11.1998, issued by

the Directorate of Plant Protection, Quarantine

and Storage, Ministry of Agriculture,

Government of India.

Ex. PW1/29 True and certified copy of the certificate bearing

No. 5301/08/009612 dated 18.11.1998 in respect

of B/L No. 1, alongwith its annexures namely the

Phytosanitary certificate, fumigation certificate

and inspection report of Vessels Holds

Cleanliness as received from the defendant No.

2-Bank.

Ex. PW1/30 True and certified copy of the certificate bearing

No. 5301/09/009613 dated 18.11.1998 in respect

of B/L No. 2, alongwith its annexures namely the

Phytosanitary certificate, fumigation certificate

and inspection report of Vessels Holds

Cleanliness as received from the defendant No.

2-Bank.

Ex. PW1/31 True and certified copy of the certificate bearing

No. 5301/09/009614 dated 18.11.1998 in respect

of B/L No. 3, alongwith its annexures namely the

Phytosanitary certificate, fumigation certificate

and inspection report of Vessels Holds

Cleanliness as received from the defendant No.

2-Bank.

Ex. PW1/32 True and certified copy of the certificate bearing

No. 5301/09/009615 dated 18.11.1998 in respect

of B/L No. 4, alongwith its annexures namely the

Phytosanitary certificate, fumigation certificate

and inspection report of Vessels Holds

CS(OS) 930/2000 Page 10 of 29

Cleanliness as received from the defendant No.

2-Bank.

Ex. PW1/33 True and certified copy of the certificate bearing

No. 5301/09/009616 dated 18.11.1998 in respect

of B/L No. 5, alongwith its annexures namely the

Phytosanitary certificate, fumigation certificate

and inspection report of Vessels Holds

Cleanliness as received from the defendant No.

2-Bank.

Ex. PW1/34 True and certified copy of message dated

17.11.1998 by plaintiff to defendant No. 4

detailing the shipment for insurance purposes.

Ex. PW1/35 True and certified copy of letter dated 19.11.1998

by plaintiff to defendant No. 2, including

documents for the purposes of negotiation of the

L/C.

Ex. PW1/36 True and certified copy of telex dated 23.11.1998

by defendant No. 2 to defendant No. 1 forwarding

documents against L/C.

Ex. PW1/37 True and certified copy of telex dated 25.11.1998

by defendant No. 1 to defendant No. 2

acknowledging Telex dated 23.11.1998.

Ex. PW1/38 True and certified copy of telex dated 26.11.1998

by defendant No. 1 to defendant No. 2 rejecting

the claim.

Ex. PW1/39 True and certified copy of telex dated 27.11.1998

by defendant No. 2 to defendant No. 1 clarifying

the alleged deficiencies.

Ex. PW1/40 True and certified copy of telex dated 01.12.1998

by defendant No. 2 to defendant No. 1 requesting

for honouring the L/C.

CS(OS) 930/2000 Page 11 of 29

Ex. PW1/41 True and certified copy of telex dated 02.12.1998

by defendant No. 1 to defendant No. 2 informing

rejection of documents.

Ex. PW1/42 True and certified copy of certificate dated

30.06.1999 issued by defendant No. 2 regarding

sale of cargo at a loss of Rs 3,83,88,516 attracting

interest @ 20% p.a.

Ex. PW1/43

[Wrongly exhibited

as Ex PW1/45]

True and certified copy of certificate dated

28.09.2005 issued by defendant No. 2 confirming

payment of Rs 5,23,49,757/- by plaintiff.

17. The defendants did not lead any oral evidence. The statements of

learned counsel for defendant No. 1, 2 and 4 to this effect were recorded

on 03.04.2014.

VI. Analysis

18. I have heard Mr. Ashish Batra, learned counsel for the plaintiff, and

Mr. Deepak Nargolkar, learned Senior counsel for defendant No.1. Their

arguments, and judgments cited by them, are discussed under each of the

issues separately.

A. Issue No. 3

19. Issue no. 3 is taken up for consideration first, as it deals with the

jurisdiction of this Court.

20. In support of the challenge to jurisdiction, Mr. Nargolkar submitted

that defendant No. 1 is an international bank with its office in Switzerland.

The transaction in question did not involve its branch in Delhi, and the

Court’s jurisdiction under Section 20(a) of Code of Civil Procedure, 1908

[“CPC”] was therefore not attracted. He also submitted that the L/C was

issued by defendant No. 1 in Switzerland, and the documents submitted by

CS(OS) 930/2000 Page 12 of 29

the plaintiff were examined in Switzerland, which is also where the L/C

was rejected. The obligation to pay under the L/C was also referrable to the

location of defendant No. 1 in Switzerland. He therefore submitted that

Switzerland therefore had the most real connection with the contract

comprised in the L/C, and no part of the cause of action arose within the

jurisdiction of this Court, as required by Section 20(c) of the CPC.

21. Mr. Nargolkar also relied upon Article 2 of the Uniform Customs

and Practice for Documentary Credits (1993 revision) (UCP 500)

[hereinafter, “UPCDC”], which states as follows:-

“Article 2. Meaning of Credit

For the purposes of these Articles, the expressions "Documentary

Credit (s)" and "Standby Letter(s) of Credit" (hereinafter referred to

as "Credit (s) "), mean any arrangement, however named or

described, whereby a bank(the "Issuing Bank") acting at the request

and on the instructions of a customer (the "Applicant") or on its own

behalf,

i) is to make a payment to or to the order of a third party(the

"Beneficiary"), or is to accept and pay bills of exchange(Draft(s))

drawn by the Beneficiary, or

ii) authorises another bank to effect such payment, or to accept and

pay such bills of exchange(Draft(s)), or

iii) authorises another bank to negotiate, against stipulated

document(s), provided that the terms and conditions of the Credit are

complied with. For the purposes of these Articles, branches of a bank

in different countries are considered another bank.”

1

Mr. Nargolkar submitted that Article 2 of the UPCDC specifically provides

that branches of a bank located in different countries are to be treated as

different banks for the purposes of UPCDC.

1

Emphasis supplied.

CS(OS) 930/2000 Page 13 of 29

22. In response, Mr. Batra first submitted that an application filed by

defendant No. 4, under Order 7 Rule 11 of CPC [I.A. 9339/2001], which

included the question of jurisdiction, was dismissed by the order of this

Court dated 31.01.2006.

23. Without prejudice to the above, Mr. Batra submitted that this Court

has jurisdiction, as the defendant No. 1 has its sole office in India at New

Delhi. While this is sufficient for the purposes of Section 20(a) of CPC,

Mr. Batra also submitted that part of the cause of action arose within the

jurisdiction of this Court. He relied upon a Division Bench decision of this

Court in a similar suit, concerning the defendant No. 1 itself, viz. Banque

Nationale De Paris v. Globus Agronics Ltd

2

. Mr. Batra also handed up to

the Court, a printout from the portal of the Supreme Court to show that

SLP(C) 11891/1999, filed by defendant No. 1 herein against the aforesaid

judgment of the Division Bench, was dismissed on 27.08.1999.

24. Examining the issue first from the perspective of accrual of cause of

action, the plaintiff has pleaded

3

that the L/C was received by the plaintiff

at New Delhi, tested and verified at the New Delhi branch of defendant No.

1, and also stamped by it. This has also been stated in evidence by PW-1

in paragraph 47 of his affidavit in evidence, and PW-1 was not cross-

examined on this point. The documents to be submitted by the plaintiff

were also submitted to defendant No. 2 within the jurisdiction of this Court,

and the communications between defendant Nos. 1 and 2 were carried out

by defendant No. 2 in New Delhi.

2

(1999) 50 DRJ 623 [hereinafter, “Globus Agronics”].

3

Paragraph 31 of the plaint.

CS(OS) 930/2000 Page 14 of 29

25. Although I have proceeded on the basis that the jurisdictional issue

[Issue No. 3] survived for decision on evidence, despite the order in I.A.

9339/2001, it may be noted that the defendants have not led any evidence,

so as to discharge the burden placed upon them with regard to this issue.

26. The judgments of this Court, on facts similar to the present case, also

support the plaintiff’s position on jurisdiction.

27. The claim in Globus Agronics, to which defendant No.1 herein was

a party, was also based upon an L/C issued by defendant No. 1 herein, in

connection with a contract for sale of goods. On an objection as to

jurisdiction of this Court, the Division Bench, relying upon Article 2 of

UCD 500, held as follows:-

“Bare perusal of the Letter of Credit, which is the basis of the suit

shows that the documentary credit was made available assuring

payment at the counter of respondent No. 2 (defendant No. 1) at New

Delhi on presentation of the documents. Admittedly, after exports

were effected and the documents were presented by respondent No. 1

at Delhi which were found in accordance with the Letter of Credit.

The amount was payable in Delhi. Under clause (c) of Section 20 of

the Code suit can be instituted in a Court within the local limits of

whose jurisdiction the cause of action wholly or in part arises. In

terms of the Letter of Credit the money was payable in Delhi though

the Letter of Credit was executed outside the jurisdiction of this

Court. Consequent to the Letter of Credit, the seller exported the

agreed quantity of "Fermentation Ethanol" to the seller. Therefore,

a part of cause of action had arisen within the territorial jurisdiction

of this Court. The expressions to the "advising bank" and

"confirming bank" under UCP 500 are not at all relevant to decide

the issue of territorial jurisdiction of this Court qua the appellant

which is admittedly the “issuing bank”…..”

4

4

Emphasis supplied.

CS(OS) 930/2000 Page 15 of 29

28. In the present case also, the L/C was addressed by defendant No. 1

to State Bank of Indore [original defendant No. 3] at its office in Delhi. As

in the judgment cited above, it was stated to be “payable at site at your

counters”, i.e. in New Delhi. The plaintiff has asserted, and it was not

controverted, that the L/C was received by it in New Delhi and was tested

and verified by the New Delhi branch of defendant No. 1. A stamp to that

effect appears on the face of the L/C itself.

29. It may be mentioned that Mr. Nargolkar sought to rely upon a

judgment of a coordinate bench dated 08.05.2012 in Tata Motors Ltd. v.

JSC VTB Bank Ltd.

5

, which was referred to in a compilation filed by

defendant No. 4. However, he withdrew reliance upon the said judgment,

in view of the fact that the Division Bench, by its judgment dated

21.02.2013 in Tata Motors Limited v. JSC VTB Bank

6

, had reversed the

aforesaid judgment. A Special Leave Petition

7

was filed challenging the

view taken by the Division Bench, but the Supreme Court declined special

leave to appeal, observing that the High Court was right in holding that the

courts at Delhi have territorial jurisdiction to entertain the suit.

30. The Division Bench, in Tata Motors Limited, considered the effect

of Article 3 of the UCD 600, which corresponds to Article 2 of the UCD

500, in the following terms:-

“….Article 3 of UCP 600 requires it to be treated that each branch of

a bank in a different country is a separate branch. But the same has

to be limited for the purpose of 'documentary credits' and not to

make branches of a bank separate entities in all respect. It is settled

law that the juristic entity is the Corporation and not its branch.

Issues pertaining to jurisdictions, vesting Courts with the authority

5

(2012) 130 DRJ 142.

6

(2013) 200 DLT 115 (DB) [hereinafter, “Tata Motors Limited”].

7

SLP(C) 24607-24608/2013.

CS(OS) 930/2000 Page 16 of 29

to entertain suits, and the law pertaining to territorial jurisdiction

has not to be confused with the concept of juristic entities and

likewise, provisions dealing with documentary credits and the

deeming effect thereof, which is limited to documentary credits,

cannot be expanded to other areas. Article 3 of UCP 600 is a mere

enabling provision which allows the same bank's branch offices in

different countries to perform additional roles in a documentary

credit. For example, branch at place 'X' of bank 'A' can act as an

advising bank and the branch at place 'Y' of the same bank 'A' can

act as a confirming bank for the same documentary credit. Without

this interpretative provision in Article 3 of UCP 600, which we find

was in fact introduced in UCP 500, this could not be done. It was

meant to facilitate the same juristic bank to perform two roles at its

two different branches because this is the necessity in international

transactions.

30. We simply highlight that the official ICC Commentary clarifies

the aforesaid in the following words : -

"It is often the case that the branches of the same bank

in different countries are involved in the same

documentary credit transaction. Through the use of the

term 'separate banks', this interpretation makes it clear

that for purposes of these rules these branches of banks

should be treated as separate banks."”

8

31. These judgments thus clarify that Article 2 of UCP 500 is not

relevant for the purposes of determining the territorial jurisdiction of this

Court. Defendant No. 1 clearly has a branch office within the jurisdiction

of this Court, and therefore is deemed to carry on business within

jurisdiction.

32. For the aforesaid reasons, I hold that this Court has jurisdiction in

the present suit. Issue No. 3 is accordingly answered in favour of the

plaintiff and against the defendants.

8

Emphasis supplied.

CS(OS) 930/2000 Page 17 of 29

B. Issue No. 1

33. The only defence taken by defendant no. 1, to resist payment under

the L/C, is that the documents submitted by the plaintiff were not in terms

of the L/C. Three specific conditions in the L/C (as amended) have been

relied upon in this connection. They are as follows:-

(i) Documentary credit number be not mentioned on any document/s

except commercial invoice.

(ii) No lien to be exercised at discharging port for demurrage

incurred at loading port. It was stipulated in the L.C. that this

mention of no lien, as stated above, be counter-signed by Captain of

the Vessel or its agent with Captain's authorisation.

(iii) The negotiating documents must have a phytosanitary

certificate, which must clearly state that the “goods are fit for human

consumption.”

Each of these alleged discrepancies is taken up in turn.

(i) Re: Mentioning of L/C number

34. The first discrepancy cited by defendant No. 1 was that the

documentary credit number was mentioned on documents other than the

commercial invoice and copy of the telex or fax. Mr. Nargolkar argued that

the documents submitted by defendant No. 2 all showed the number of the

documentary credit. However, no details of the specific documents in

question are contained in the written statement filed by defendant No. 1.

35. The relevant special condition in the L/C is reproduced hereinbelow:

CS(OS) 930/2000 Page 18 of 29

“NO PRICE/VALUES OR CONTRACT/INVOICE/DOCUMENTARY

CREDIT NUMBERS TO BE MENTIONED ON ANY DOCUMENT

EXCEPT COMMERCIAL INVOICE AND COPY OF TELEX OR FAX.”

36. On a perusal of the documents exhibited, the number of the

documentary credit, which appears on the face of PW 1/1 as “98-

404200/MC” does not appear in the documents. In the telex message dated

27.11.1998

9

, sent by defendant No. 2 to defendant No. 1, it was clarified

that the documents show the negotiation reference, and not the L/C

numbers. The following extract of the said telex is relevant for this

purpose:-

“ALL DOCUMENTS SHOW OUR NEGOTIATION REF. NO AND

NOT ANY OF OUR L/C NUMBERS. THIS IS A COMMON

PRACTISE IN INDIA AMONGST THE BANKERS TO BRAND THEIR

NEGOTIATION REF. NO. ON ALL THE DOCUMENTS OF A BILL

TO ESTABLISH VOUCH AND TITLE. AS YOUR SPECIAL

CONDITION 5 BARS FROM MENTIONING ANY DOCUMENTARY

CREDIT NUMBERS. THUS WE BELIEVE YOU ARE ANSWERED

FOR THIS POINT.”

10

37. In the course of arguments, Mr. Nargolkar submitted that even the

negotiation reference number ought not to have been stated in the

documents, as only the commercial invoice and copy of telex or fax were

to be mentioned.

38. I do not find the aforesaid contention to be tenable. The L/C clearly

prohibited mention of stipulated particulars on the documents, except

commercial invoice or copy of telex or fax. Those particulars did not

include the negotiation reference numbers. As submitted by Mr. Nargolkar

himself, a documentary credit is to be strictly complied with; its conditions

9

EX. PW 1/39.

10

Emphasis supplied.

CS(OS) 930/2000 Page 19 of 29

must also be taken as they stand. What was prohibited in the present case

included reference to the L/C number, but the defendants have not shown

any document which contains a reference to the L/C number, as printed on

the face of the L/C. I, therefore, hold that the assertion of a discrepancy on

this ground was unwarranted.

(ii) Re: Countersigning of the “no lien” endorsement

39. The second discrepancy urged by defendant No. 1 was that the

Master was required to specifically counter-sign the “no lien” clause in the

bill of lading.

40. The following clause was added in the L/C by an amendment dated

15.10.1998:

“UNDER SPECIAL CONDITION THE FOLLOWING CLAUSES IS

ADDED:

BILLS OF LADING MUST BEAR THE FOLLOWING MENTION

“NO LIEN TO BE EXERCISED AT DISCHARGING PORTS FOR

DEMURRAGE INCURRED AT LOADING PORT.”

THIS MENTION MUST BE COUNTERSIGNED BY CAPTAIN OF

THE VESSEL OR ITS AGENT WITH CAPTAIN AUTHORIZATION.”

41. All the five bills of lading have been exhibited as Ex. PW 1/7 to Ex.

PW1/11. I find that each of them contains an endorsement “No lien to be

exercised at discharging ports for discharge incurred at loading port”, and

bears the stamp and signature of the Master of vessel in close proximity, in

fact touching the endorsement in each case. As this point turns on a visual

examination of the documents in question, copies of the said documents

are reproduced below. I have highlighted the relevant endorsement and the

signature of the Master, which have led me to the above conclusion.

CS(OS) 930/2000 Page 20 of 29

CS(OS) 930/2000 Page 21 of 29

CS(OS) 930/2000 Page 22 of 29

CS(OS) 930/2000 Page 23 of 29

CS(OS) 930/2000 Page 24 of 29

CS(OS) 930/2000 Page 25 of 29

42. Mr. Nargolkar’s submission, as far as this aspect is concerned, was

that the three signatures which appear on these documents, were in support

of the endorsement “Freight Prepaid” and “Clean on Board”, and for the

bill of lading as a whole, but no specific signature of the Master is to be

found in respect of the endorsement in question.

43. Upon a perusal of the bills of lading, however, it is seen that the

endorsement, “Clean on Board” in each bill of lading, is separately and

proximately endorsed by the Master. Further, although the original L/C

required the bills of lading to be marked as “Freight Prepaid”, it did not

contain a specific stipulation that the said marking must be separately

countersigned by the Master of the vessel. Artilce 33(b) of the UPCDC also

indicates that stamping of the words “Freight Prepaid” is sufficient for this

purpose. On a balance of probabilities, therefore, I am of the view that the

“no lien” endorsement was duly countersigned by the Master of the vessel,

on each of the bills of lading.

44. For these reasons, I find in favour of the plaintiff that the “no lien”

endorsement was stamped and signed by the Master as required in the L/C,

and the assertion of defendant No. 1 to the contrary, is unsustainable.

(iii) Re: Phytosanitary certificate

45. This allegation concerns the requirement in the L/C, with regard to

a phytosanitary certificate issued by SGS India Ltd. [“SGS”]. The relevant

condition in the L/C (as amended)

11

is reproduced hereinbelow:

“PHYTOSANITARY CERTIFICATE ISSUED BY S.G.S. INDIA LTD IN

ONE ORIGINAL & TWO COPIES CERTIFYING THAT GOODS ARE

FIT FOR HUMAN CONSUMPTION.”

11

By amendment dated 07.09.1998.

CS(OS) 930/2000 Page 26 of 29

46. Phytosanitary certificates, in support of each bill of lading, have

been exhibited as Ex. PW 1/29 to Ex. PW 1/33. Each of them contains an

identical endorsement in the following terms:

“WE HAVE SIGHTED A COPY OF PHYTOSANITARY

CERTIFICATE NO. 696, ISSUED BY THE DIRECTORATE OF

PLANT PROTECTION, QUARANTINE AND STORAGE , MINISTRY

OF AGRICULTURE, GOVERNMENT OF INDIA, CERTIFYING

THAT THE PLANT PRODUCE DESCRIBED ABOVE HAVE BEEN

INSPECTED AND FOUND FREE FROM QUARANTINE PESTS

AND SUBSTANTIALLY FREE FROM OTHER INJURIOUS PE STS,

AND THAT THEY ARE CONSIDERED TO CONFORM WITH THE

CURRENT PHYTOSANITARY REGULATIONS OF THE

IMPORTING COUNTRY & ALSO HAVE SIGHTED A COPY OF

HEALTH CERTIFICATE ISSUED BY VETERINARY DOCTOR

CERTIFYING THAT THE GOODS ARE FIT FOR HUMAN

CONSUMPTION.

BASED ON THE ABOVE INFORMATION, CERTIFIED THAT

THE GOODS ARE FIT FOR HUMAN CONSUMPTION. ”

12

47. The contention of defendant No. 1 is that the stipulation required

SGS to carry out the analysis of the goods, and the certification could not

be based upon phytosanitary certificates issued by the Government of

India.

48. As noted above, the stipulations in an L/C are to be strictly

construed. The stipulation in present case was for certification by SGS,

which SGS has duly provided. The L/C did not provide any particular basis

or specific manner in which SGS was to reach the conclusion that the goods

were fit for human consumption. It certainly did not require that the

underlying scientific analysis be undertaken by SGS itself. The

requirement of the L/C is, in my view, duly satisfied by the certificates

provided by SGS.

12

Emphasis supplied.

CS(OS) 930/2000 Page 27 of 29

Answer to Issue No.1

49. In view of the aforesaid, I find that none of the alleged discrepancies

raised by defendant No. 1, in its communications dated 26.11.1998 and

02.12.1998, were justified in terms of the L/C. To the contrary, the

explanation offered by defendant No. 2 was satisfactory in all aspects.

50. No other defence has been raised by defendant No.1 on the merits of

the plaintiff’s claims. There is also no dispute with regard to the quantum

of the claim, which has been justified by the plaintiff as follows

13

:

“That total amount which is claimed in the present suit as against the

defendants jointly as well as severally comes to Rs.5,23,49,757.00 which

also includes the interest due thereon or the reducing balance @ of 20%

p.a. till 31.3.2000 as per guidelines of Reserve Bank of India. The

defendant No.2 has also raised the claim for interest at the same rate.

The transaction between the parties was commercial and the plaintiff is

entitled to the said rate.”

51. Issue No. 1 is, therefore, decided in favour of the plaintiff, and

against defendant No. 1.

C. Issue No. 2

52. The plaintiff claims interest at the rate of 20% per annum, based

upon the rate of interest which it paid to defendant No. 2. Mr. Batra relied

upon two certificates issued by defendant No. 2 marked as Ex. PW 1/42

and Ex. PW 1/43 [wrongly marked as Ex. PW 1/45].

53. As far as these certificates are concerned, it may be noted that the

entire amount paid by the plaintiff to defendant No. 2 has already been

included in the plaintiff’s claim under issue No. 1. The averment in

paragraph 33 of the amended plaint is also to the effect that interest has

been included until 31.03.2000. The question to be determined is,

13

Paragraph 33 of the plaint.

CS(OS) 930/2000 Page 28 of 29

therefore, of the rate of interest pendente lite, if any, and future interest, i.e.

for the post decree period, until realisation.

54. In this connection, Mr. Batra drew my attention to Section 34 of the

CPC, which provides for grant of pendente lite interest at the rate

considered reasonable by the Court. He also cited the judgment of the

Supreme Court in C.K. Sasankan v. Dhanalakshmi Bank Ltd.

14

, and of this

Court in Dhani Ram v. Delhi Development Authority

15

.

55. The judgment of the Supreme Court in C.K. Sasankan makes it clear

that the Court’s discretion with regard to fixation of the rate of interest, is

to be exercised “properly, reasonably and on sound legal principles and

not arbitrarily”. The Court found the rate of 25% per annum, granted by

Debts Recovery Tribunal in that case, to be excessive and instead granted

interest at the rate of 9% per annum. In Dhani Ram, this Court referred

inter alia to the aforesaid judgment of the Supreme Court, and found the

plaintiff therein entitled to the interest at the rate of 12% per annum.

56. On the point of interest, Mr. Nargolkar’s submission was that interest

ought to be awarded only upon the principal sum of Rs. 3,83,88,516/-,

which was the difference between the amount of the L/C and the amount

recovered by the plaintiff through the sale of the consignment to third

parties. He submitted that the balance of the amount claimed in issue No.

1, i.e. Rs. 1,39,61,241/- was paid by the plaintiff to defendant No. 2 on

account of interest upon the advance amount.

57. I am not persuaded by Mr. Nargolkar’s submission, with regard to

the quantum upon which interest should be computed. Recovery is sought

14

(2009) 11 SCC 60 [hereinafter, “C.K. Sasankan”].

15

(2018) 249 DLT 716 [hereinafter, “Dhani Ram”].

CS(OS) 930/2000 Page 29 of 29

by the plaintiff of the amount actually paid by it to defendant No. 2. To the

extent that such payment was by way of interest, it was a direct and

foreseeable consequence of the failure of defendant No. 1 to honour the

L/C. In a commercial transaction, the fact that an exporter has availed of

an advance against export bills, is not so remote or unprecedented, so as to

render the interest actually paid unrecoverable.

58. As far as the rate of interest pendente lite and future interest are

concerned, in my view, award of simple interest at the rate of 12% per

annum is reasonable, bearing in mind that the transaction was a commercial

transaction under a documentary credit.

D. Issue No. 4

59. No other relief was claimed or pressed.

VII. Conclusion

60. For the reasons aforesaid, the suit is decreed in favour of the

plaintiff, and against defendant No. 1, in the sum of Rs. 5,23,49,757/-,

alongwith simple interest pendente lite at the rate of 12% per annum.

Interest will be paid upon the said sum at the same rate, until realisation.

61. The suit, as against defendant Nos. 2 and 4, is dismissed as not

pressed.

62. Defendant No. 1 will also pay costs of the suit to the plaintiff,

assessed at Rs. 10 lakhs, inclusive of court fees paid of Rs. 5,13,280/-.

63. Decree sheet be prepared accordingly.

PRATEEK JALAN, J

FEBRUARY 28, 2025/pv/Ainesh