IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 13.08.2010 CORAM: THE HONOURABLE MR.JUSTICE ARUNA JAGADEESAN CS.Nos.1846/93 & 726/95 1.Nippon Impex Corporation, Granite Exporters by its Proprietor R.Vijayarahavan 2.Granite Export Corporation by its Proprietrix V.Padmvathi Plaintiffs in CS.1846/93 3.M/s.Nestor Granite Handel GmbH & Co. A partnership Firm Plaintiff in CS.No.726/95 Vs 1.M/s.Nestor Granite Handel GmbH & Co. by its Partners 2.Sven Ronne 3.Heinz Wemer Hempel 4.Commerz Bank, Bremen, German 5.Central Bank of India by its Chief Manager, Mount Road Madras-6 6.Puy Vast Chartering by Director Hendrikl Vander Puij. Linden Plein.8 2201, JJ Noordwijk, Netherlands 7.M/s.Arcadia Shipping Pvt. Limited by Sitharth, Manager,, 10, Wallajah Road Madras 600002 Defendants in CS.1846/93 8.R.Vijayaraghavan Defendant in CS.No.726/95 Prayer:- CS.No.1846/1993 is filed for a Judgement and Decree, (a) directing the Defendants 1 to 3 to jointly and severally pay the second Plaintiff (Transferee/Assignee of the first Plaintiff) 29,713.75 US Dollars (or its equivalent in Indian Currency at the time of payment) being the value of 47.542 Cu.M (214 M.T.) of cut and dressed granite dimensional stones of colour "GANGA" by accepting the sale documents sent by the first Plaintiff and honouring the transferable and irrevocable Letter of Credit given by the 4th Defendant Bank No.BRE 1006 34493 dated 15.7.1993 by crediting 29713.75 US Dollars to the credit of the second Plaintiff with the 5th Defendant Bank, (b) for permanent injunction restraining the Defendants 1 to 3 from in any way taking delivery of the cut and dressed granite dimensional stones of colour "GANGA" covered by Invoice No.006 dated 9.11.1993 without accepting the sale documents sent by the first Plaintiff and without paying the amount covered under the transferable and irrevocable Letter of Credit given by the 4th Defendant Bank No.BRE 1006 34493 dated 15.7.1993 viz. 29713.75 US Dollars (or its equivalent in Indian Currency at the time of payment) by crediting the said amount to the 2nd Plaintiff with the 5th Defendant Bank viz. Central Bank of India, Madras-6, (c) for permanent injunction restraining the shipping agent viz. the 6th Defendant herein from in any way delivering the cut and dressed granite dimensional stones of colour "GANGA" covered by Invoice No.006 dated 9.11.1993 without getting clearance from the Plaintiffs to the effect that the Defendants 1 to 3 have honoured the documents and paid the sum of 29713.75 US Dollars through Commerz Ban, Bremen, the 4th Defendant, payable to the Plaintiff's bankers viz. Central Bank of India, Mount Road, Madras-6 the 5th Defendant and (d) for directing the Defendants to pay the costs of the suit. CS.No.726/1995 is filed for a Judgement and Decree in favour of the Plaintiff against the Defendant for recovery of a sum of Rs.33,27,914.15/- together with interest at 15% p.a from the date of the plaint till the date of realization. For Plaintiff : Mr.R.Thiagarajan-P1-CS.1846/93 Mr.R.Krishnaswami,SC-CS.726/95 for Mr.Srinath Sridevan For Defendants : Mr.R.Krishnaswami,SC-CS.1846/93 for Mr.Srinath Sridevan Mr.R.Thiagarajan-CS.726/95 JUDGEMENT CS.No.1846/1993 is filed for a Judgement and Decree, (a) directing the Defendants 1 to 3 to jointly and severally pay the second Plaintiff (Transferee/Assignee of the first Plaintiff) 29,713.75 US Dollars (or its equivalent in Indian Currency at the time of payment) being the value of 47.542 Cu.M (214 M.T.) of cut and dressed granite dimensional stones of colour "GANGA" by accepting the sale documents sent by the first Plaintiff and honouring the transferable and irrevocable Letter of Credit given by the 4th Defendant Bank No.BRE 1006 34493 dated 15.7.1993 by crediting 29713.75 US Dollars to the credit of the second Plaintiff with the 5th Defendant Bank, (b) for permanent injunction restraining the Defendants 1 to 3 from in any way taking delivery of the cut and dressed granite dimensional stones of colour "GANGA" covered by Invoice No.006 dated 9.11.1993 without accepting the sale documents sent by the first Plaintiff and without paying the amount covered under the transferable and irrevocable Letter of Credit given by the 4th Defendant Bank No.BRE 1006 34493 dated 15.7.1993 viz. 29713.75 US Dollars (or its equivalent in Indian Currency at the time of payment) by crediting the said amount to the 2nd Plaintiff with the 5th Defendant Bank viz. Central Bank of India, Madras-6, (c) for permanent injunction restraining the shipping agent viz. the 6th Defendant herein from in any way delivering the cut and dressed granite dimensional stones of colour "GANGA" covered by Invoice No.006 dated 9.11.1993 without getting clearance from the Plaintiffs to the effect that the Defendants 1 to 3 have honoured the documents and paid the sum of 29713.75 US Dollars through Commerz Bank, Bremen, the 4th Defendant, payable to the Plaintiff's bankers viz. Central Bank of India, Mount Road, Madras-6 the 5th Defendant and (d) for directing the Defendants to pay the costs of the suit. CS.No.726/1995 is filed for a Judgement and Decree in favour of the Plaintiff against the Defendant for recovery of a sum of Rs.33,27,914.15/- together with interest at 15% p.a from the date of the plaint till the date of realization. 2. The plaint averments in CS.No.1846/93 are as follows:- a. The Plaintiffs are dealing in the sale of granite stones in different colours to foreign buyers. The practice is that the foreign buyer will come to the Plaintiffs and give their requirements and the Plaintiffs will take them to their quarry site and the buyers will tell their requirements regarding the dimension and colour of the said goods. Thereafter, the Plaintiffs will settle the terms like consideration, delivery schedule, mode of delivery and the terms regarding opening of irrevocable Letter of Credit towards payment of sale consideration etc. b. In one of such dealings, after mutual discussions, the 1st Defendant placed orders on the first Plaintiff for the supply of 47.542 cubic meters equivalent of 214 metric tonnes of granite stones at the rate of USD625 per cubic meter (Rs.31.38/- per cubic meter) amounting to the sale consideration of 29713.75 US Dollars equivalent to Rs.9,32,417. The 1st Defendant was represented by its Managing Partner, the 2nd Defendant herein, who placed orders at Madras with the 1st Plaintiff. It was agreed that the 1st Defendant will open a transferable and irrevocable Letter of Credit for the consideration of the granites, viz. the value of 29713.75 US Dollars in favour of the 1st Plaintiff. Accordingly, the 1st Defendant has opened a transferable and irrevocable Letter of Credit No.BRE.1006 34493 dated 15.07.1993 with their bankers, viz. Commerz Bank, Bremen, the 4th Defendant herein, stating that they have communicated the same to the bankers of the 1st Plaintiff, viz. Central Bank of India, Mount Road, Madras-6, the 5th Defendant herein. c. Based on the said transferable and irrevocable Letter of Credit, the 1st petitioner has made arrangements for exporting blue granite of the description of "Cut and Dressed Granite Dimensional Stones of Colour -'GANGA'. ABT 65 cubic meters at US Dollars 625 per cubic meter." The 1st Plaintiff exported the cut and dressed granite dimensional stones of color "Ganga" by Ship M.V.PAL DISKI from Visakapatnam Port to Antwerp. The port of shipment is Visakapatnam and the Port of Destination is Antwerp. The 1st Plaintiff has raised Invoice No.006 dated 9.11.1993 for the sale of the said granite stones as per the specification. The first Letter of Credit was for the purchase of 25 cubic meters of granite stones and it was, later, amended for the purchase of 65 cubic meters and the transferable and irrevocable Letter of Credit was also consequently amended and the invoice was drawn for the sale of 47.542 cubic meters of granite stones for a total consideration of 29713.75 US Dollars equivalent to Rs.9,32,417/-. The invoice makes it clear that the goods have been sold and the goods are transported at the risk of the purchaser, the 1st Defendant herein. d. The amended Letter of Credit sent by the 1st Defendant through their bankers, Commerz Bank, Bremen, the 4th Defendant herein makes it clear that if any set of documents contain discrepancy and presented to the Bankers, that will be charged with a fee of DEM 100.00 to cover the extra work involved and this charge is for the account of the beneficiary and the same will be deducted from the amount to be paid and this credit is said to be subject to ICC 400. On 26.10.93, the second Defendant, who was present in Visakapatnam, has confirmed that the document concerning the last shipment of "Ganga" and the documents of the present shipment of "Ganga" will be accepted as soon as the documents of the present shipment reached their Bank. Thus, the 1st Plaintiff has admittedly transported granite stones of the specification "Ganga" under two consignments. The 1st Plaintiff has sent three sets of documents, one set to the 1st Defendant and the other two sets to their Bankers viz. Commerz Bank, Bremen, the 4th Defendant herein, as per the terms of the Letter of Credit. The said goods exported have reached the destination viz. Antwerp through the port Antwerp and the 1st Defendant should honour the documents with their Banks and their bankers, Commerz Bank, Bremen have to credit in the account of the 1st Plaintiff through their bankers, Central Bank of India, Mount Road, Madras-6. e. Since a transferable and irrevocable Letter of Credit was opened by the 1st Defendant in terms of the aforesaid sale transaction between the first Plaintiff and the first Defendant, the 1st Plaintiff has transferred the said Letter of Credit in favour of the 2nd Plaintiff and this has been duly intimated to their bankers viz. Central Bank of India, Mount Road, Madras-6 and the transfer has been accepted by the said bankers. Thus, as a transferee, the 2nd Plaintiff is entitled to have the credit of the amount as per the terms covered by the Letter of Credit. The 1st Defendant has committed breach and has not cleared the documents from their bankers, viz. Commerz Bank, Bremen raising some frivolous objections. They have raised a plea that there are some discrepancies in the documents and the so-called discrepancies are not discrepancies at all and the bankers of the 1st Defendant has been sending telex stating that there are discrepancies and that the 1st Defendant has not honoured the documents because of the discrepancies. Immediately, the first Plaintiff contacted the 1st Defendant and informed that the so-called discrepancies are not discrepancies at all and asked the 1st Defendant to honour the documents as promised. The 1st Defendant is dragging on the matter and deliberately not honouring the documents with ulterior motive. f. The 1st Defendant is liable to pay certain amount by way of service charges/commission to the 1st Plaintiff. Now, the 1st Defendant has been asking for concession. The 1st Defendant is bound to honour the documents. While so, the 1st Defendant is trying to clear the consignment from the shipping Agent viz. Puy Vast Chartering, the 6th Defendant herein by misrepresenting to them and by showing only one original Bill of Lading and without honouring the documents. The 1st Defendant cannot take delivery of the goods without honouring the documents and without the entire consideration being credited to the account of the Plaintiffs as covered by the transferable and irrevocable Letter of Credit. g. The 1st Defendant Defendant is misleading the Shipping Agent, as if the 1st Defendant is entitled to take delivery of the consignment by simply producing only one Original Bill of Lading without honouring the documents, which is nothing but a fraud. The 1st Defendant is taking advantage of the fact that they are in a foreign country and knowing fully well that it will be difficult for the Plaintiffs to go to the country of the 1st Defendant and recover the money. The 6th Defendant is pleading helplessness and is stating that it may be compelled to give delivery of the goods. If the Defendants 1 to 3 succeed in their attempt in taking illegally delivery of the goods without honouring the documents and without paying 29713.75 US Dollars, the Plaintiffs will put to irreparable loss, damage and injury. Even though the 1st Plaintiff has a filed a suit in OS.No.9556/93, since this comprehensive suit has been filed for recovery of money, the 1st Plaintiff is taking steps to withdraw that suit. Since, the 1st Defendant has agreed to pay the money covered by the invoice at Madras, the contract was entered at Madras, the money is payable at Madras and the order was placed at Madras, a part of the cause of action has arisen within the jurisdiction of this court. In such circumstances, this suit has been filed. 3. In the Written Statement filed in CS.No.1846/93, it is averred as follows:- a. The 1st Defendant is a Partnership Firm dealing in granites export and import. According to the specification of the 1st Defendant, the Plaintiff offered to export granite blocks and offered to act as the agent of the 1st Defendant in transactions entered into by the 1st Defendant with the Government and other suppliers by receiving commission. The 1st Defendant appointed R.Vijayaraghavan, the Proprietor of the 1st Plaintiff Company as their representative in certain transactions and also entered into a contract with him for the supply of granite blocks. While supplying consignments, R.Vijayaraghavan supplied block of granites of inferior quality, which are not according to the description and the samples seen by the representative of the 1st Defendant and not fit for the purpose, for which they were intended and this resulted in a huge loss and the 1st Defendant is entitled to be indemnified by the Plaintiffs. The 1st Defendant had sustained heavy loss in the transaction with M/s.Western Rock Granite Pvt Limited at Salem through R.Vijayaraghavan. The 1st Defendant had sustained huge loss of 127,500 US Dollars, because the 1st Defendant opened red clause Letter of Credit at the instance of R.Vijayaraghavan. On 28.7.92, the entire dealings between R.Vijayaraghavan and the 1st Defendant were analysed and R.Vijayaraghavan acknowledged the liability and signed a letter in evidence of the same, which was co-signed by the 3rd Defendant herein. b. In the course of the dealings, the 1st Defendant placed an order on 15.7.93 for the supply of cut and dressed granite of colour "Ganga" of 47.542 cubic meters at the rate of US Dollars 625 per cubic meter. The 1st Defendant opened a transferable and irrevocable Letter of Credit with the 4th Defendant in BRE.1006 34493 and the terms of the same have to be strictly complied with. The 1st Defendant received one set of documents relating to the granite blocks shipped by the shippers from Vizagapattinam to Antwerp by Ship "M.V.PAL DISKI". Upon presentation of the bill of lading, the cargo was handed over to the 1st Defendant and on 30.11.93, the agent of the shipping Company acknowledged the receipt of the original bill of lading and placed the blocks irrevocably at the disposal of the 1st Defendant. In the mean while, the 4th Defendant, who had received the documents, had refused to honour the same, since they were not in accordance with the terms and conditions of the Letter of Credit nor in compliance with USPCDC and due to major discrepancies, the 4th Defendant rejected the documents and the 1st Defendant is in possession of the goods sent by the Plaintiffs. As stated above, the Plaintiffs owe a sum of US Dollars 107,874.04 in the course of the various dealings and in addition to the same, the Plaintiffs are liable to pay compensation for the breach of the contract and the 1st Defendant has exercised its charge over the goods and held the same against the Plaintiffs as security for the due repayment of the monies owing to them and the title in the goods have not passed to the 1st Defendant. c. On 10.12.93, the Plaintiffs sent blocks to the 1st Defendant stating that the documents have to be accepted with minor discrepancies, but these discrepancies are major discrepancies, which resulted in rejecting of the documents by the Bank. It was the Bank, which refused to accept the documents on account of the major discrepancies. R.Vijayaraghavan also agreed to ship granite blocks to cover the amount of US Dollars 107,874.04 on or before 31.1.94 and he assured that this would be sent as replacement for the defective materials and the 1st Defendant is entitled to seize and hold the present shipment and adjust it towards the liability. Out of the granite blocks for the aforesaid value, 60% should be in 240(-280) cm x 90(-120) cm x 70(-120) cm and 40% should be in 160 (-240) cm x 90(-120) cm x 100 (-140) cm. The Plaintiff assured that if the blocks in this size are not available, but block of different size, he would sell them to the other customers and send the sale proceeds to the 1st Defendant and there is no question of asking concession, which will be evident from the letter of the Plaintiffs signed on 20.7.92, where he accepts his liability and offers to settle this liability through supply of blocks with bulk allowance or reduced price provided that the 1st Defendant continues to buy blocks from him. The 1st Defendant legally and rightly presented the original bill of lading and took possession of the goods. d. The shipping agent has acted according to the customs and there is no fraud. It is the Plaintiffs who have to uphold the integrity of the Countries and show their bona fides by offering to settle the amounts due to the 1st Defendant. There is no question of payment at all. In the course of the dealings, the dues payable to the 1st Defendant are very huge and therefore, they exercised the charge over the granite blocks. In such facts and circumstances, this suit is liable to be dismissed. 4. The plaint averments in CS.No.726/95 are as follows:- a. The Plaintiff is validly constituted in Germany as a Partnership Firm and it deals mainly in granite. The Defendant, who is dealing in the sale of granite stones in his individual capacity and as Proprietor of Nippon Impex Corporation and other firms met, the Plaintiff's representative at Madras and offered to export granite blocks according to the specifications of the Plaintiff's agent and the Defendant has also offered to act as the agent of the Plaintiff in transactions with TAMIN and in transactions with the other suppliers by receiving commission. The practice of the Plaintiff was that they would specify to their suppliers the size, colour, quality and rate of the supply of granite. The Defendant in any one of the capacities of agent, partner or the sole proprietor agreed to supply the required granite blocks in accordance with the description and specification of the Plaintiff and also in conformity with the samples/blocks selected by the Plaintiff or the representative of the Plaintiff at the quarry. b. When the blocks supplied to the importers are found to be defective during processing, the suppliers would, on intimation by the importers of the defects, replace the defective blocks. The Defendant is aware of this practice and promised the Plaintiff to act according to the same. While so, the Defendant supplied several consignments of granites, which were found to be defective and did not match the quality shown by the Defendant to the representative of the Plaintiff for approval and the goods were not fit for the purpose for which they were intended. The Defendant is aware of the requirements of market in Germany and Italy. The Defendant has been responsible for the supply of inferior blocks which necessitated the Plaintiff to effect sale of those goods and there was a risk of the goods being not sold and this resulted in a big loss to the Plaintiff, which the Defendant has to indemnify. c. There were other transactions entered into by the Plaintiff where the Defendant acted as the agent of the Plaintiff receiving huge commission, wherein also the Plaintiff had sustained a very heavy loss. The Plaintiff entered into a transaction through the Defendant with the firm M/s.Western Rock Granite Pvt. Limited. The Defendant has also offered to indemnify the Plaintiff from any loss that might be sustained by the Plaintiff by opening a Red Clause Letter of Credit. A suit in OS.No.673/94 has been filed by the Plaintiff against M/s.Western Rock Granite as well as the Defendant before the Sub Court, Salem regarding the said transaction. After taking stock of the various transactions between the Plaintiff and the Defendant and keeping in mind the running account between them, the Plaintiff sent a letter to the Defendant reiterating the difficulties of the Plaintiff with regard to the unsold stocks and informing the Defendant that his outstanding were mounting. On 20.7.1992, all the dealings between the Plaintiff and the Defendant were analysed and the Defendant after negotiations admitted and acknowledged his liability to the Plaintiff and signed a letter in acknowledgment of the same and the said letter has also been co-signed by an erstwhile employee of the Plaintiff. The said letter dated 20.7.92 contains a statement of the claims under five heads totaling to a sum of US Dollars 262,291.87. The amounts referred to as claims 4 and 5 is the subject matter of the suit in OS.No.673/94. d. A proposal was also given by the Plaintiff to reduce the outstandings, but the Defendant has not come forward to reduce the same. On 1.12.93, the Plaintiff has sent a letter to the Defendant stating that the Plaintiff has right to replace the defective goods and the outstandings had mounted up to more than hundred thousands of US Dollars. The running account between the Plaintiff and the Defendant would show that the Defendant had to pay 107,874.04 US Dollars as on 30.9.93. It was further proposed that the shipment had to take place on or before 31.1.93 and should cover the amounts of 107,874.04 US Dollars as replacement to the Plaintiff. The Plaintiff has also proposed to the Defendant that in case he is not able to produce enough blocks of the requisite size, he may sell the blocks to the other customers and transfer the sale proceeds to the Plaintiff on or before 31.1.94. The said amounts of 107,874.04 US Dollars is exclusive of the amount claimed in the suit filed referred to above. As per the statement of account filed along with the plaint, the outstanding in the defendant's account is 340,000.56 US Dollars and the amount claimed in this suit is only 107,874.04 US Dollars. In respect of the items 1 and 3 of the said statement of account, a suit has been filed in Salem and as regards the amounts under item 2, no claim is made. Hence, the suit is filed for recovery of 107,874.04 US Dollars. Though the Plaintiff is entitled to interest on the outstanding at 15% p.a. from 30.9.93 till the date of filing of the suit, the Plaintiff is claiming interest from the date of the plaint till the date of realization. e. The Defendant sent a shipment under a Letter of Credit BRE.1006 34493, which was the subject matter of CS.No.1846/93. Pursuant to the order of this court in A.No.2761/94, the Plaintiff had deposited the suit claim of CS.Nos.1846/93 with the Commerz Bank, Bremen. The Defendant is liable to make good the claim of the Plaintiff to the tune of 107,874.04 US Dollars and therefore, the Plaintiff is entitled to have a charge over the blocks and hold the same against the Defendant as security for the due repayment of the monies owing to them. The Defendant has till date not supplied blocks to cover the amount of 107,874.04 US Dollars as replacement to the Plaintiff and therefore, the Plaintiff is constrained to file this suit. 5. In the Written Statement filed in CS.No.726/95, it is averred as follows:- a. The suit is nothing but a counter to the civil suit in OS.No.1846/93 filed by the Defendant herein. In the said suit, an interim order was passed for the sale of the granites exported by Nippon Impex