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TMI Blog2024 (4) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... nderlying LC or BG or an OCC limit in favour of the first defendant to support these transactions, we are unable to accept his contention as the arrangement between the first and second defendants are exclusively within their knowledge and the presence or absence of LC or BG or an OCC limit will not affect the liability of the second defendant as against third parties more so when the Bank has chosen to issue a SFMS message confirming that the bill will be cleared on 22.08.2017. This is also confirmed by the e-mail dated 06.06.2017 wherein there is a clear and categorical undertaking by the appellant / Bank to pay the bill amount on the due date. A similar question was considered by a Single Judge of this Court in REVATHI C.P. EQUIPMENTS LT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exchange was drawn by the plaintiff and the same was discounted with the plaintiff's Banker, namely the third defendant. The third defendant on receipt of the Bill of Exchange, forwarded it to the second defendant, which is the Banker of the first defendant / purchaser seeking its acceptance for collection. According to the plaintiff, the second defendant initially accepted the Bill of Exchange, however, subsequently came up with a false reason that the goods were returned by the buyer for quality issues and therefore, it is not liable to pay. The plaintiff would further plead that having accepted the Bill of Exchange through a SFMS message on 29.05.2017, the second defendant cannot resile from the contract and refuse to pay on an imagi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Trial Judge also granted interest at 9% per annum on the Suit claim. The Suit cost was directed to be paid by the first and second defendants. Aggrieved by the order, the second defendant Banker is on appeal. 7. Heard Mr. E. Om Prakash, learned Senior Counsel appearing for the appellant and Mr. SharathChandran, learned counsel appearing for the first respondent and Mr. Kalyana Raman, learend counsel appearing for the third respondent / third defendant Indian Bank. 8. Mr. Om Prakash, learned Senior Counsel appearing for the appellant would vehemently contend that the learned Trial Judge was not right in treating the transaction as a 'Bill Discounting Transaction' where the appellant had assured payment. According to the learned S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017. It is not in dispute that this message pertains to the suit transaction. The Circular of the Reserve Bank of India, issued regarding SFMS messages between Banks would show that MT 754 amounts to Advice of Payment / Acceptance / Negotiation and it is also seen from the said Circular that SFMS messages are sent in MT 754 only when the transaction is secured by a LC or BG or an OCC limit. 12. Though Mr. E. Om Prakash, learned Senior Counsel would contend that there was no underlying LC or BG or an OCC limit in favour of the first defendant to support these transactions, we are unable to accept his contention as the arrangement between the first and second defendants are exclusively within their knowledge and the presence or absence of LC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heir delivery. The bank's letter of credit came into existence to bridge this gap. In such transactions, the seller (beneficiary) receives payment from issuing bank when he presents a demand as per the terms of the documents. The bank must pay if the documents are in order and the terms of credit are satisfied. The bank, however, was not allowed to determine whether the seller had actually shipped the goods or whether the goods conformed to the requirements of the contract. Any dispute between the seller and the buyer must be settled between themselves. The Courts, however, carved out an exception to this rule of absolute independence. The Courts held that if there has been a fraud in the transaction , the bank could dishonour beneficia ..... X X X X Extracts X X X X X X X X Extracts X X X X
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