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TMI Blog2006 (5) TMI 536X X X X Extracts X X X X X X X X Extracts X X X X ..... la. Two similar Summons for Judgment Nos. 784 of 2003 and 786 of 2003 were also taken out by the Petitioner-Bank in connection with Summary Suit Nos. 1515 of 2000 and 6089 of 1999. 2. Inasmuch as, the said three suits were filed in respect of various Letters of Credit, where the terms and conditions were identical and the defence taken were also identical, the said three Summons for Judgment were taken up for hearing and disposal analogously and were dismissed by a common order dated 28th October, 2005. The Learned Single Judge of the High Court of Judicature at Bombay also granted unconditional leave to the Respondent-Banks to defend their respective suits. 3. Three separate Special Leave Petitions, being Special Leave Petition ) Nos. 5639 of 2006, 6141 of 2006 and 6134 of 2006, have been filed against the common judgment disposing of the said three suits and since they involve common questions of law and fact, they have been taken up for admission together. 4. Since the facts in the three matters are more or less similar, we will first deal with the facts relating to the Special Leave Petition in respect of the State Bank of Patiala (SLP) No. 5639 of 2006). 5. On 27th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Petitioner-Bank that it had been advised not to make any payment under the aforesaid Letter of Credit dated 27th March, 1998, favouring M/s. Frobevia S.A. 9. On receipt of the said communication, the Petitioner- Bank wrote to the Respondent-Bank on 7th April, 1999 indicating that documents presented by the beneficiary had been negotiated and payments had already been made on 6th April, 1998 long prior to the allegations of fraud indicated by the learned advocate of the Respondent-Bank. It was pointed out that irrespective of the said fact, under the Uniform Custom and Practice for Documentary Credit 500 (hereinafter referred to as ' UCP 500') the Respondent-Bank was under an obligation to reimburse on the due date of the Letter of Credit, the amount already paid by the Petitioner-Bank to the beneficiary. There was no evidence that the beneficiary had acted fraudulently. The Respondent-Bank was once again requested to remit the actual outstanding amount, together with interest at the rate of 5.7%, from the date of maturity upto the date of payment to the account of the Petitioner- Bank, that is, UBS AG, Stamford Branch, C.T., U.S.A. 10. Inasmuch as, despite the rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnational Chambers of Commerce Publication No. 500. 14. According to the Appellant-Bank, the beneficiary presented the documents indicated by the Letter of Credit for negotiation to the Appellant-Bank on 6th April, 1998 and on the basis thereof the Appellant-Bank made payment under the Letter of Credit to the beneficiary M/s. Frobevia S.A. and informed the Respondent-Banks accordingly. 15. On 22nd July, 1998, the Respondent-Bank informed the Appellant-Bank that its documents for U.S. Dollars 1,320,900 referred to in the Letter of Credit had been accepted to mature on 23rd September, 1998 on which date the funds would be remitted as per the instructions of the Appellant-Bank. By a subsequent communication dated 21st August, 1998, the Respondent-Bank informed the Appellant-Bank that the beneficiary had agreed to extend the maturity date of the Letter of Credit from 23rd September, 1998 to 21st March, 1999. The Appellant-Bank was requested to confirm such extension. In response to the said communication, the Appellant-Bank by its communication dated 31st August, 1998 confirmed the extension of the reimbursement date till 21st March, 1999. 16. As indicated hereinbefore, notwit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e suit raises serious triable issues and in that view of the matter unconditional leave was granted to the Defendant-Banks to defend their respective suits. The reasoning of the learned Single Judge of the High Court in granting such leave has been questioned in these appeals on the ground that the High Court had completely misconstrued the law relating to Letters of Credit which is sometimes referred to as the life-blood of international commerce. 20. The main contention raised on behalf of the Appellant- Bank is that since it had no knowledge of any fraud perpetrated by the constituent of the Respondent-Bank before making payment under the Letter of Credit in question, the Respondent-Bank could not refuse to reimburse the Appellant- Bank of payments already made to the beneficiary under the Letter of Credit before such intimation was received. It was also the case of the Appellant-Bank that since it had no knowledge of the fraud said to have been committed with regard to the Bills of Lading and the Letter of Credit itself, it negotiated documents presented before it by the beneficiary and made payment accordingly as per the instructions of the Respondent-Bank. 21. Appearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Respondent-Bank had no defence since no triable issues arise in the suits as filed. 25. The stand taken on behalf of the Respondent-Bank was that the Appellant-Bank could claim reimbursement only on the due date of payment as stipulated in the Letter of Credit agreed upon between the issuing bank and the confirming bank. It was urged that since the fraud committed by M/s. Hamco Mining Smelting Ltd. had been discovered and intimated to the Appellant-Bank before the due date of reimbursement, the Respondent-Bank was entitled to withhold payment under the Letter of Credit. It was also urged that several triable issues arise in the suit, which had been taken note of by the High Court while granting unconditional leave to defend the suit. 26. Mr. R.F. Nariman, learned senior advocate, appearing for the Respondent-Bank contended that one such triable issue was whether payment had at all been made by the Appellant- Bank to the beneficiary under the Letter of Credit before being informed of the fraud perpetrated by M/s. Hamco Mining Smelting Ltd. It was contended that in the correspondence exchanged between the two banks, except for intimation that the documents presented by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The court should not reject the defence of the defendant merely because of its inherent implausibility or its inconsistency. It was urged that the defence was not required to show that it would inevitably succeed in the suit, but that a plausible defence, capable of being tried, was sufficient to grant leave to a defendant to defend a suit of this nature. The principle in such matters was to grant leave to a defendant to defend a suit if there was the slightest possibility of a triable defence. 29. In addition, it was contended that the appeals were not maintainable as the impugned order of the High Court granting leave to the Defendant-Banks to defend their respective suits did not amount to a judgment against which an appeal would lie. Placing reliance on the decision of this Court in Shah Babulal Khimji v. Jayaben D. Kania and Anr . [1982]1SCR187 , Mr. Nariman submitted that no civil right of the Appellant-Bank had been adversely affected by grant of such leave and that as far as the Appellant-Bank was concerned, the suits filed by it remained and the defendants therein would only get an opportunity to defend the same. 30. On consideration of the submissions made on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by the Appellant-Bank. 32. The High Court, appears to have been persuaded to hold that serious triable issues arise in the present suits since the record reveals that a fraud had been committed in obtaining the Letter of Credit. Even if the constituent of the Respondent-Bank had committed fraud in obtaining the Letter of Credit, the same would not be a triable issue to decide whether the Appellant-Bank was entitled to reimbursement under the Letter of Credit before such fraud was brought to its notice. The High Court has wrongly interpreted Clause 8 of the Letter of Credit in holding that the plaintiff's claim for encashment of the Letter of Credit could not be accepted because prima facie Clause 8 of the said Letter of Credit did not provide for discounting of the said Letter of Credit and in view of such discounting the plaintiff would not be entitled to claim reimbursement on the ground that the said amount had been paid to the beneficiary. The Letter of Credit itself shows that the same was to be negotiated as had been done by the Appellant-Bank. 33. As far as the submission regarding the maintainability of the appeals are concerned, we are satisfied that the pri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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