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2013 (5) TMI 140 - HC - Companies LawLeave to defend application by the defendant - plaintiff under Order XXXVII of the Code of Civil Procedure claimed for recovery - Held that - Defendant no.2 had clearly submitted to the rules as provided under UCP 500. Letter sent by the defendant no.2 to defendant no.1, dated 02.07.1999, did not mention about refusal or acceptance of the documents but had merely intimated the defendant no.1 of certain discrepancies and also stated that it would be sending the submitted documents to the defendant no.3 for acceptance. Further as examined the defendant no.2 was in clear violation of Articles 13 and 14 of the UCP 500 with regard to intimating the plaintiff about discrepancies within the prescribed time of seven banking days Thus it is found that the defendant no.2 has not set up any triable issue and thus its application under Order XXXVII Rules 3(5) and 7 is liable to be are hereby dismissed. Consequentially, the application of leave to defend is dismissed and suit is decreed in favour of the plaintiff. Accordingly, a decree for a sum of Rs. 20, 92, 802. 40p id passed in favour of the plaintiff and the defendant no.2. The plaintiff shall also be entitled to pendente lite and future interest at the rate of 12% per annum. Decree be drawn accordingly.
Issues Involved:
1. Whether the defendant no.2 violated the terms of the Letter of Credit (L/C) and the Uniform Customs and Practice for Documentary Credits (UCP 500). 2. Whether the plaintiff is entitled to the claimed amount along with interest. 3. Whether there exist any triable issues warranting leave to defend under Order XXXVII of the Code of Civil Procedure (CPC). Issue-wise Detailed Analysis: 1. Violation of Terms of L/C and UCP 500: The plaintiff, a public limited company, filed a suit for recovery of Rs. 20,92,802.40 along with interest, under Order XXXVII of the CPC. The plaintiff claimed that defendant no.3 placed an order for conveyor belting fabric and agreed to make payments through documentary letters of credit (L/C). Defendant no.2 opened the L/C and forwarded it to defendant no.1, the plaintiff's banker. The plaintiff submitted all requisite documents to defendant no.1, which were then forwarded to defendant no.2. The plaintiff contended that defendant no.2 failed to inform them or defendant no.1 about any discrepancies within the prescribed period of seven banking days, as required by Article 13(b) of the UCP 500. Defendant no.2 held the documents until December 1999, well beyond the L/C's expiry in September 1999, thus violating UCP 500 provisions. Defendant no.2 argued that it had informed defendant no.1 about discrepancies via letters dated July 2, 1999, August 19, 1999, and August 21, 1999, and returned the documents in November and December 1999. However, the court found that defendant no.2's communication did not constitute a clear refusal or acceptance of the documents, violating UCP 500 Articles 13(b) and 14. 2. Entitlement to Claimed Amount and Interest: The plaintiff issued a legal notice on February 2, 2000, demanding payment of Rs. 20,92,802.40 along with 18% interest per annum, citing defendant no.2's failure to comply with UCP 500. Upon receiving an unsatisfactory reply, the plaintiff filed the suit. The court, referencing the Apex Court's decisions in "Federal Bank Ltd vs. V.M Jog Engineering Ltd." and "UBS AG vs. State Bank of Patiala," emphasized that UCP 500 rules bind parties to documentary credits, and the issuing bank must comply with these provisions. The court found that defendant no.2 failed to act within the stipulated time, thus precluding it from disputing the documents' compliance later. 3. Triable Issues and Leave to Defend: The court examined whether the defendant raised any triable issues warranting leave to defend under Order XXXVII. The defense argued technical issues, such as the plaintiff's failure to produce a certificate of incorporation and the authorized signatory's authority to file the suit. The court dismissed these technical defenses as they did not constitute triable issues. The court referred to the Apex Court's ruling in "Raj Duggal v. Ramesh Kumar Bansal," which outlined that leave to defend should be granted if the defense raises a real issue, not a sham one. The court concluded that defendant no.2's defenses were neither real nor plausible, as they failed to comply with UCP 500 provisions. Conclusion: The court dismissed defendant no.2's application for leave to defend, finding no triable issues. Consequently, the suit was decreed in favor of the plaintiff for Rs. 20,92,802.40, along with pendente lite and future interest at 12% per annum. The decree was ordered to be drawn accordingly.
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