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TMI Blog1966 (3) TMI 88X X X X Extracts X X X X X X X X Extracts X X X X ..... act, the purchaser placed two indents dated December 26, 1950, and December 27, 1950, for the said stuff of value of ₹ 13,500/- and ₹ 6,750/- respectively. The buyer entered into a second contract with the seller for the purchase of 24 drums of the same material of the value of ₹ 16,000/- under an indent dated January 23, 1951. In respect of the first contract and indents the buyer opened and confirmed an irrevocable Letter of Credit No. 4748 dated December 28, 1950, for U.S. $4535 plus war risk with the Eastern Bank Limited. In regard to the second contract he opened another irrevocable Letter of Credit No. 5012 dated January 31, 1951 for U.S. $3,330. As the said Bank had no branch of its own at New York, it arranged with the Marine Midland Trust Company of New York for payment of the bills that might be presented by the seller in New York. Pursuant to the said contracts, the seller delivered to the shipowners certain consignments in reused fibre drums. The bills of lading issued by the shipowners described the drums simply as drums. After taking a letter of indemnity to cover against any loss, the shipowners issued clean bills of lading. The seller negotiated th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lusion that the shipowners with the knowledge that the bills of lading would be negotiated gave, at the request of the seller, clean bills of lading while as a matter of fact only unclean bills of lading should have been given. They further held that the purchaser was damnified, as on the basis of the misrepresentation found in the bills of lading the Bank paid the amount against the shipping documents which it would not have done if it had known that the bills of lading were unclean. In the result, they gave a decree for the entire suit claim against the shipowners. They allowed C.C.C.A. No. 61 of 1957 against the shipowners but dismissed it against the Bank. C.C.C.A. No. 54 of 1957, the appeal filed by the Bank, was allowed. The shipowners have preferred the present appeal against the decree given by the High Court against them. The argument of Mr. A. K. Sen, learned counsel for the appellant, may broadly be placed under the following three heads: (1) While the respondent based his cause of action on a breach of contract, the High Court gave the relief founded on deceit; (2) under common law or contract the appellant had no duty or obligation to make a statement in the bills o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the bills of lading without disclosing the real state of facts would show their consciousness that they were not right in issuing the bills of lading in the terms they did and whatever their rights as against the shippers may be on the indemnity, the plaintiffs are not concerned with the same, but the second defendants are liable to the plaintiffs to make good the loss resulting by reason of a representation acted on by which the plaintiffs have been damnified . This passage in the plaint contains all the necessary allegations to sustain a claim in tort. It is clear, therefore, that the claim of the buyer against the shipowners was also based upon the misrepre. sentation made by the latter in the bills of lading. In the written- statement the appellant denied the allegations in para 9 of the plaint and stated that there was no secret arrangement between them and the seller in regard to the goods or the containers. The shipowners also denied that they inserted any untrue statement in the bills of lading acting in collusion with the seller to enable the latter to obtain money against the bills of lading. Issue 6 framed by the learned City Civil Judge reads: Did the second d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er with the seller in respect of Fresh Monsanto Polystyrene Injection Moulding Powder of value of ₹ 13,500/-. The packing was to be in new fibre drums each containing 250 lbs. nett. Exhibit A-2 is another indent dated December 27, 1950, placed by the buyer with the seller. The quantity required thereunder was of the value of ₹ 6,750/- and the packing was to be in new fibre drums each containing 250 lbs. nett. Exhibit A-5 is the third indent dated January 23, 1951, for the same goods worth ₹ 16,500/- with similar terms. The buyer opened two letters of credit, Exs. B-1 and B-2, with the Eastern Bank Limited, Madras, for U.S. $ 7,625. Exhibits B-28 and B-29 are the letters written by the Eastern Bank Limited, Madras, to the Marine Midland Trust Company, New York, to open letters of credit for payment of the bills that might be presented by the seller. Exhibit B-1 reads: We hereby authorise and request you and/or your Agents and/or Representatives at New York to open a confirmed and irrevocable bank credit in favour of Messrs. British Mercantile Company Limited etc., and to make payment or payments thereunder on our behalf............ against documents purport- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , to indemnify you and each of you against all claims and/or demands which may be made against you or any of you in respect of the undermentioned goods and to hold you harmless from any and all consequences that may arise by your granting such clean B/L and acting thereon including losses, damages, costs or any other expenses which you or any of you may sustain or incur by reason of the premises or in any way relating thereto. After obtaining the said indemnity bond, the shipowners issued the bill of lading wherein instead of reused drums only drums was mentioned. It will be seen from the said documents that according to the indents the seller had to pack the goods in new fibre drums. that the Bank opened letters of credit for payment against bills of lading, that the Marine Midland Trust Company of New York, the agent of the Eastern Bank Limited, Madras, opened letters of credit whereunder payments could be made only against clean bills of lading, that in the Mate's receipt given to the seller on the arrival of the goods at the wharf for being carried by S.S. City of Lucknow the drums were described as reused drums and that thereafter, after giving indemnity against an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mportance of letters of credit in the international commerce has been stated by Denning, L. J., in Pa via Co., A.P.A. v., Thurmann Neilsen(1) as follows: The sale of goods across the world is now usually arranged by means of confirmed credits. The buyer requests his banker to open a credit in favour of the seller and in pursuance of that request the banker, or his foreign agent, issues a confirmed credit in favour of the seller. This credit is a promise by the banker to pay money to the seller in return for the shipping documents. Then the seller, when he presents the docu- ments, gets paid the contract price. The conditions of the credit must be strictly fulfilled, otherwise the seller would not be entitled to draw on it. But when issuing banker has no branch in the relevant country where the beneficiary operates, the services of an intermediary banker may be requisitioned. The intermediary banker may be asked to advise the beneficiary of the credit or may be asked to add his confirmatory undertaking to it. In the latter event the beneficiary has the promise of both the bankers. As letters of credit are issued or opened on conditions on which the request is made, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eon, as in the present case the words are found in the body of the bill itself. But it is said that the omission of the adjective new qualifying the word drums or indeed the addition of the adjective old to qualifying the same would not necessarily make the bill any the less a clean bill, if old drums were suitable vehicles for conveying the articles supplied therein. The newness or the oldness of the container, the argument proceeded, was not decisive of its suitability, for in the main it depended upon its condition and contents. This argument as a proposition of law appears to be sound. In The Tromp(3) potatoes, to the knowledge of the defendants' master who signed the bill of lading, were shipped in wet bags and in a damaged condition. The court held that as in the bill of lading the potatoes were described as shipped in good order and condition, which rep- resented the external condition of the bags, the defendants were estopped from denying that the bags were dry when shipped. But it would be noticed that the packing in that case was defective and that was the main cause for the rotting of the potatoes and, therefore, the bill of lading was not a clean one. In Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of lading, the said bill would not have been a clean bill. Though the apparent condition of the drums was old, the shipowners made an assertion that they were not old drums, i.e., they gave a clean bill. This representation was obviously intended, in collusion with the seller, to enable him to operate upon the credit with the Bank. This collusion is also apparent from the indemnity bond they took from the seller to guard themselves against the consequences of the said representation. All the elements of deceit are present. The decision in Brown Jenkinson Co., Ltd. v. Percy Dalton (London) Ltd.(1) is apposite. There, the defendants had a quantity of orange juice which they wish to ship to Hamburg. The plaintiffs, as agents of the owners of the vessel on which the orange juice was to be shipped, informed the defendants that the barrels containing the orange juice were old and frail and that some of them were leaking and that a claused bill of lading should be granted. The defendants required a clean bill of lading, and the shipowners, at the defendants' request and on a promise that the defendants would give to them an indemnity, signed bills of lading stating that the barre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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