Jamuna Knitting and Dying Ltd. vs. Respondent: Arab Bangladesh Bank Ltd. and Others

IN THE SUPREME COURT OF BANGLADESH
(APPELLATE DIVISION)

Civil Petition for Leave to Appeal No. 1220 of 2004

Decided On: 09.02.2006

Appellants: Jamuna Knitting and Dying Ltd.
Vs.
Respondent: Arab Bangladesh Bank Ltd. and Others

**Hon’ble Judges:**Md. Ruhul Amin, Mohammad Fazlul Karim, Md. Tafazzul Islam and Amirul Kabir Chowdhury, JJ.

Counsels:
For Appellant/Petitioner/Plaintiff: Abdur Razzak, Senior Advocate, instructed by Mvi. Md. Wahidullah, Advocate-on-Record

For Respondents/Defendant: Morshed Ahmed Khan, Advocate appeared with the leave of the Court, instructed by A.K.M. Shahidul Huq, Advocate-on-Record for Respondent No. 1 and Respondent Nos. 2-3 Not Represented

Subject: Banking

Catch Words

Mentioned IN

Case Note:Civil - Money suit - Decree of - Present petition seeks leave to appeal against judgment and decree passed by High Court Division allowing appeal upon modifying judgment and decree passed in Money Suit - Whether against judgment and decree passed by High Court Division need interference - Held, documents in question presented far beyond stipulated period as per terms and conditions - Issuing bank in that event has to intimate refusal of document - Must also state whether it is holding documents at disposal of, or is returning them to petitioners - Nothing on record to show that issuing bank has to communicate reason for refusal of documents - No interference called for - Petition dismissed. [11]

Disposition:
Petition Dismissed

Industry: Banks

JUDGMENT

Mohammad Fazlul Karim, J.

1. The petitioner seeks leave to appeal against the judgment and decree dated 10.02.2004 passed by the High Court Division in First Appeal No. 297 of 1998 allowing the appeal upon modifying the judgment and decree dated 24.03.1998 passed by the Fourth Court of Subordinate Judge, (now Joint District Judge), Dhaka in Money Suit No. 16 of 1995 decreeing the suit. The relevant facts of the case are that Jamuna Knitting and Dying Limited, as plaintiff instituted Money Suit No. 16 of 1995 on 19.07.1995 against the respondent defendant Nos. 1-2 for realization of money on account of bills amounting to Tk. 27,17,412.76, together with interest at the rate of 15% thereon till realization of the said amount.

2. The plaintiff stated in the plaint that the plaintiff is a limited company and an export oriented concern. The defendant No. 2, the Tajimara Company is also a limited company. The defendant No. 2 opened a Letter of Credit through defendant No. 4 Arab Bangladesh Bank for import of fabrics against a back to back L.C. No. K.B/Inland/117/92 dated 10.12.1992. The plaintiff supplied fabrics for an amount of 51,71/50 U.S. Dollars to the defendant No. 2 in terms of the L.C. stated above. The defendant No. 2 Tajimura Company received the delivery of fabrics by granting receipt. Thereafter the plaintiff submitted the document such as delivery challan and other documents to the defendant No. 3 Bank for negotiation for the payment under the Letter of Credit and the defendant No. 3 submitted said documents to the defendant No. 1 on 21.03.1993 for payment, but on 29.03.93 the defendant No. 1 Arab Bangladesh Bank refused to pay the bills on the ground of late presentation of the documents. Thereafter, the defendant No. 2 instituted Title Suit No. 241 of 1993 in the Court of 4th Assistant Judge, Dhaka and informed the plaintiff that as there had been an order of injunction in the said suit, it was not possible for them to pay the bills. The order of injunction was subsequently withdrawn by the Court but the defendant No. 1 Bank refrained from paying the bills. It is the contention of the plaintiff that the defendant No. 1 Bank is under obligation to pay the bills under the terms of the Letter of Credit. The Bangladesh Bark wrote to the defendant No. 1 Bank that the withholding of the payment was not proper as the defendant No. 2 had accepted the goods inspite of the defects without returning the goods to the supplier and advised the defendant No. 1 to resolve the matter within 15 days. The legal Advisor of the Bank also opined for making payment of the bills, but the defendant No. 1 Bank did not pay the bills. The bill amount stood at $ 51471.50 U.S. Dollar up to 31.03.1995 together with 15% interest accrued thereon. Total amount of dues under the bills thus stood to Tk. 27,17,412.76, in local currency, which the defendant No. 1 is bound to pay to the plaintiff. The plaintiff by serving legal notice demanded for payment of the said amount of money, but the defendant had been withholding payment on the plea of litigation. The plaintiff was thus constrained to file the suit.

3. The defendant No. 1 contested the suit by filing written statement denying material allegations made in the plaint. The defendant No. 1 contended that the suit was barred under the banking law and the suit was not maintainable in the present form. The defendant No. 1 stated that the defendant Bank can refuse payment under letter of credit, if the documents are discrepant. The defendant No. 2 stated that it opened the L/C No. 117/92 dated 10.12.92 with the defendant No. 1 Bank for import of goods from the plaintiff. The letter of credit was valid up to 30.10.93, but the document was submitted on 21.03.93 for encasement to the Bank. The document was submitted on 21.03.93, after expiry of the valid period of the L.C. as such it was discrepant document and defendant No. 1 intimated the negotiating Bank of the plaintiff on 29.03.93 about the late presentation of the document. The defendant No. 1 further stated that there was a Title Suit No. 241 of 1993 at the instance of defendant No. 2 against plaintiff, between the seller and purchaser of the goods, and for the suit the defendant No. 1 had no liability for payment of the bills. The discrepancy of the document was not rectified even after withdrawal of injunction order and as such the defendant No. 1 Bank could not pay the bills. The Bangladesh Bank only wanted a settlement of the dispute within 15 days. Legal Adviser of the defendant No. 1 Bank in his opinion dated 22.03.94 advised the Bank not to make payment which is against International Banking practice. The legal notice was served on the Bank by the plaintiff for illegal gain.

4. The defendant No. 2 M/s. Tujimara Company contested the suit by filing a separate written statement denying material allegations made in the plaint. The defendant No. 2 stated in the written statement that the plaintiff supplied inferior quality of fabrics to them and they raised objection against the quality of the goods and they filed Title Suit No. 241 of 1993, which suit was not decreed in favour of the defendant No. 2 and they preferred an appeal from the said judgment and decree which is pending. They stated that the plaintiff was entrusted with the task of pre-shipment inspection of the goods, but the plaintiff without discharging their obligation of pre-shipment inspection properly supplied the goods to the defendant and caused loss to the defendant No. 2. The plaintiff did not compensate the loss, they were constrained to file suit seeking declaration that they had sustained loss and they were entitled to compensation. The quality of goods supplied by the plaintiff was inferior and by that fabric the defendant No. 2 could not make garments of adequate number, for which they had to sell garments at a lower rate of U.S. 7.50 Dollar instead of 15 dollars. The defendant No. 2 offered payment of 20,000 U.S. Dollars, after deducting the loss, which they sustained, but the plaintiff refused to accept said payment. The defendant No. 2 had to take shelter of law, and the suit was pending, the amount of loss sustained by the defendant out of this transaction has not been determined and the dispute arising out of the contract was to be settled in arbitration and the suit was not maintainable without resolving the dispute in arbitration.

5. Mr. Abdur Razzak, the learned Counsel appearing for the petitioner submitted that the High Court Division acted illegally in holding that the L/C having contained a condition to negotiate documents by 30 January 1993 and the documents having been negotiated on 21.03.1993, the documents were discrepant due to late presentation and the respondent No. 1 were under no obligation to make payment under the L/C, when late presentation of documents does not automatically discharge the liability of the respondent No. 1 as advising bank and the respondent No. 1 having not rejected the documents till to-day waived its right as to discrepancy if any, in the documents under the UCPDC 400 and the respondent No. 1 is liable to make payment under the L/C (Exhibit-1) and as such the judgment and order dated 10.02.2004 passed by the High Court Division is liable to be set aside. The learned Counsel further submitted that the High Court Division acted illegally in not holding that the respondent No. 1 instead of rejecting and returning the documents vide letter dated 29.03.2004 withheld the documents on the promise of reverting back after obtaining the consent of respondent No. 2, when under the UCPDC 400 no such documents could be legally withheld which in law amounts to acceptance after expiry of reasonable time, especially when the respondent No. 1 did not issue notarised note of protest under section 100 of the Negotiable Instruments Act, 1882, more so, when the respondent No. 2 having received and utilized the goods, impliedly consented to the documents being negotiated beyond time and as such the impugned judgment is liable to be set aside.

6. Mr. Morshed Ahmed Khan, the learned Counsel appearing for the respondent No. 1 Arab Bangladesh Bank Ltd. has, however, submitted that the Bank deals with the documents and not with the goods and that the Bank refrained from making payment of letter of credit value of the reasons of discrepancy of presentation as per terms and conditions of the letter of credit which is in consonance with the provision of Article 16 of the Uniform Customs and Practice of Documentary Credits shortly known as “UCPDC” and accordingly, the Bank did not commit any illegality in not paying the amount under the letter of credit contrary to its terms embodied therein.

7. Mr. Abdur Razzak, the learned Counsel has referred to Article 16 of the UCPDC read with the letter dated 29.03.1995 (Ext.6) for the proposition that the Bank has been withholding the document without communicating the acceptance thereof inasmuch as no rejection has yet been made by the Bank.

8. The impugned note referred to by respondent No. 2 Arab Bangladesh Bank Ltd. in respect of KB/LC/BB (F-848) addressed to the Manager, Janata Bank, Janata Bhaban Corporate Branch, 110, Motijheel Commercial Area, Dhaka as under:

We have received documents for USD 51.471.50 Your Bill Ref. JBCB/SBSC/F-017/93 drawn under L/C No. KB/INLAND/117/98 with the following discrepancies:

1. Late presentation.

Contacting opener for acceptance and shall revert on hearing. Meanwhile holding documents at your entire risk and responsibility.

9. In this regard Article 3, 4 and 16 quoted as under are material:

Article 3

Credits, by their nature, are separate transactions from the sales or other contract (s) on which they may be based and banks are in no way concerned with or bound by such contract(s), even if any reference whatsoever to such contract(s) is included in the credit.

Article 4

In credit operations all parties concerned deal in documents, and not in goods, services and/or other performances to which the documents may relate.

Article 16

a. If a bank so authorised effects payment, or incurs a deferred payment undertaking, or accepts, or negotiates against documents which appear on their face to be in accordance with the terms and conditions of a credit, the party giving such authority shall be bound to reimburse the bank which has effected payment, or incurred a deferred payment undertaking, or has accepted, or negotiated, and to take up the documents.

b. If, upon receipt of the documents, the issuing bank considers that they appear on their face not to be in accordance with the terms and conditions of the credit, it must determine, on the basis of the documents alone, whether to take up such documents, or to refuse them and claim that they appear on their face not to be in accordance with the terms and conditions of the credit.

c. The issuing bank shall have a reasonable time in which to examine the documents and to determine as above whether to take up or to refuse the documents.

d. If the issuing bank decides to refuse the documents, it must give notice to that effect without delay by telecommunication or, if that is not possible, by other expeditious means, to the bank from which it received the documents (the remitting bank), or to the beneficiary, if it received the documents directly from him. Such notice must state the discrepancies in respect of which the issuing bank refuses the documents and must also state whether it is holding the documents at the disposal of, or is returning them to, the presentor (remitting bank of the beneficiary, as the case may be). The issuing bank shall then be entitled to claim from the remitting bank refund of any reimbursement which may have been made to the bank.

e. If the issuing bank fails to act in accordance with the provisions of paragraph (c) and (d) of this article and/or fails to hold the documents at the disposal of, or to return them to, the presentor, the issuing bank shall be precluded from claiming that the documents are not in accordance with the terms and conditions of the credit.

f. If the remitting bank draws the attention of the issuing bank to any discrepancies in the documents or advises the issuing bank that it has paid, incurred a deferred payment undertaking, accepted or negotiated under reserve or against an indemnity in respect of such discrepancies, the issuing bank shall not be thereby relieved from any of its obligations under any provision of this article. Such reserve or indemnity concerns only the relations between the remitting bank and the party towards whom the reserve was made, or from whom, or on whose behalf, the indemnity was obtained.

10. Article 16 clause(a) provides that upon receipt of the document and if the same is found to be inconsonant with the terms and conditions of a credit, the party giving such authority shall be bound to reimburse the bank which has effected payment, or incurred a deferred payment undertaking, or has accepted, or negotiated against the documents. Clause (b) thereof provides that upon receipt of the document, if the issuing bank considers that the same is not in accordance with the terms and conditions of the credit, the bank has option either to take the documents or to refuse them. Clause (c) thereof provides that the bank could consume a reasonable time to examine the documents either to take up or receive the same. Clause (d) thereof provides that if the issuing bank decides to refuse the documents it must give reasonable notice without delay stating the discrepancies for such refusal and as to whether it is holding the documents at the disposal of the Beneficiary or is returning them to the presentor and in that event the issuing bank shall be entitled to claim from the remitting bank refund of any reimbursement made. Clause (e) thereof provides that if the issuing bank fails to get in accordance with the provision of paragraph (c) and (d) above or fails to hold its documents at the disposal of, or to return them to, the presentor, the issuing bank shall be precluded from claiming that the documents are not in accordance with the terms and conditions of the credit and clause (f) thereof provides that if the remitting bank draw the attention of issuing bank to any discrepancy of the documents or advise the issuing bank that it has paid incurred a deferred payment undertaking, accepted or negotiated under reserve or against and indemnity in respect of such discrepancies, the issuing bank shall not be thereby relieved from any of its obligations under any provision of this article. Such reserve or indemnity concerns only the relations between the remitting bank and the party towards whom the reserve was made, or from whom, or on whose behalf, the indemnity was obtained.

11. We have considered the said provisions together with the reason of the issuing bank in its note intimating receipt of the documents with the discrepancy of late presentation in spite of the late presentation. It is in paragraph (d) above that when the issuing bank decides to refuse the documents not found in accordance with the terms and conditions, though the documents in question were agreed to be submitted by 31st January, the same was presented on 21st March i.e. far beyond the stipulated period as per terms and conditions, the issuing bank in that event has to intimate the refusal of the document and must also state whether it is holding the documents at the disposal of, or is returning them to the petitioners as the case may be, meaning thereby that the petitioners on refusal of the documents have been holding the same until the opener accept the late presentation or the petitioners are at liberty to withdraw the documents from the issuing bank and unless it is done, the same shall remain with the issuing bank at the entire risk and responsibility of the petitioners.

12. In view of the above, we do not find any substance in the submission of the learned counsel for the petitioners that the issuing bank has to communicate the reason for refusal of the documents and no material has been produced showing compliance of paragraph (d) of Article 16 of the UCPDC. The petition is dismissed.