- 1 - IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION. ORIGINAL CIVIL JURISDICTION. ORIGINAL CIVIL JURISDICTION. jmi SUIT NO.1010 OF 1990. Punjab National Bank. ..Plaintiffs. vs. M/s.Karan Hosiery & Textiles & Anr. ..Defendants. .... Mr.Hidayat Mukadam, i/b. Pankaj Vijayan, for the Plaintiffs. None for the Defendants. .... CORAM CORAM CORAM: S.J.KATHAWALLA, J. S.J.KATHAWALLA, J. S.J.KATHAWALLA, J. DATE DATE DATE : 6TH APRIL, 2009 : 6TH APRIL, 2009 : 6TH APRIL, 2009. P.C.: P.C.: P.C.: . This suit is filed by the plaintiffs-Bank against the defendants to pay to the plaintiffs a sum of Rs.1,75,024.00 as per the particulars of claim set out in Exhibit-F to the plaint with further interest on the sum of Rs.1,74,272.58 paise @ 15.75% with quarterly rest from the date of the filing of the suit till payment and costs of and incidental to the suit. The plaintiffs have in prayer clause (b) of the plaint sought a declaration that the stock of imported polyester Filament Texturised Yarn mentioned in the Deed of Pledge of Goods is validly pledged in favour of the plaintiffs as and by way of a first charge for the realisation of the suit dues mentioned in prayer clause (a). The plaintiffs have however restricted their relief/ prayer only to prayer clause (a). - 2 - 2. The plaintiffs are a body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, having their head office at 7, Bhikaiji Cama Road, New Delhi-110 066 and a branch office among other places at Opera House, Bombay-400 004 (the said branch office). The defendant no.1 is the proprietary concern of defendant no.2 and carries on business at the address mentioned in the title shown in the plaint. The defendants are importers, exporters and manufacturers of hosiery goods. After the above suit was filed, defendant nos.1 & 2 filed their written statement through their Advocates. However, the Advocates for the defendants have obtained discharge in the matter, for want of instructions and professional fees, on 15th December 2008. An affidavit of service dated 22nd January 2009 is filed by the Advocate for the plaintiffs setting out how the packet containing the affidavit of plaintiffs’ evidence served on the defendants is returned back with a remark ‘Change of address’. 3. On 9th January 2009, the following issues were framed by this Court :- (1) Whether there is cause of action for the plaintiffs to file the suit ? - 3 - (2) Whether the suit filed by the plaintiffs is premature ? (3) Whether the plaintiffs are entitled for a declaration that the imported polyster filament texture yarn mentioned at Exhibit-A is validly pledged in favour of the plaintiffs ? (4) Whether the plaintiffs liability to pay the claim amount is subject to the release of the goods pledged in favour of the plaintiffs, by the customs authority ? (5) Whether the defendants are due and payable to pay the sum of Rs.1,75,024.55 paise alongwith further interest @ 15.75% p.a. at quarterly rest till realisation ? 4. The plaintiffs have stated that the defendant no.1 is the proprietory concern of which the defendant no.2 is the proprietor. The defendants approached the plaintiffs-Bank for financial facilities by way of Foreign Letter of Credit facility for a sum of Rs.3,72,000/- (Rupees Three Lacs Seventy Two Thousand Only) for importing polyester Filament Texturised Yarn from M/s.Greenland Corporation, Japan. The original document for the grant of letter of credit dated 24th December 1986 issued by the defendants to the plaintiffs-Bank, is signed by the defendants and is at Exhibit-P-2. The plaintiffs issued a letter of credit and the same was delivered to the bank of the beneficiary. To avail the foreign letter of credit facility, the defendant no.2 had opened a current account in the name of defendant no.1 on 17th September - 4 - 1986 and deposited a sum of Rs.1,001/- in the said account. 5. The plaintiffs have stated that the bill alongwith the documents in respect of the said letter of credit were received from the beneficiary foreign bank on 28th October 1986 by the plaintiffs. The plaintiffs made payment of Rs.3,62,403/- to the foreign banker of the beneficiary on 28th October 1986. Thereafter, the plaintiffs called upon the defendants to retire the documents and make the payment under the letter of credit, but the defendants failed to pay the amount. After lapse of more than 2 months, on the request of the plaintiffs, the defendants executed a Deed of Pledge of Goods in favour of the plaintiffs as a security for the payment due under the letter of credit. The original deed of pledge of goods dated 24th December 1986, is at Exhibit-P-3. 6. The plaintiffs have stated that bytheir letter dated 16th November 1987, they called upon the defendants to retire the documents and regularise their account. A copy of the said letter dated 16th November 1987 is at Exhibit-P-4. The defendants by their letter dated 3rd December 1987 (Exhibit-P-5) have acknowledged the receipt of the letter of the plaintiffs at - 5 - Exhibit-P-4 and informed the plaintiffs that they would regularise their account. The plaintiffs have stated that the amount of current account of the defendant was transferred to cash credit (pledge) account. The plaintiffs have stated that the periodical statement of the account in respect of the said cash-credit (pledge) account were sent by the plaintiffs, the correctness of which was never disputed nor was there any protest about any discrepancy therein. Under the said account, according to the plaintiffs, an amount of Rs.1,74,024.55 paise is due and payable by the defendants to the plaintiffs inclusive of interest upto 10th December 1989. The certified copy of the statement of account containing entries in ledger of the defendants account made/maintained in usual and ordinary course of business, is at Exhibit-P-6. The plaintiffs have stated that the defendants have admitted their liability by executing the balance and security confirmation letter dated 15th July 1988 (Exhibit-P-7), whereby the defendants acknowledged the liability of Rs.1,39,405.17 paise as on 30th June 1988. 7. The plaintiffs have stated that the operation of the said account was irregular and the defendants were called upon to pay the amount outstanding to the said account, but the defendants failed to comply with the - 6 - terms and conditions on which the financial facilities were granted and further failed to regularise the account. 8. The defendants have in their written statement alleged that the suit is premature as no cause of action has arisen. They have contended that the said pledged goods are lying in the bond under the lien of the plaintiffs and the same goods were imported under duty free scheme with an export obligation attached to its importation. The defendants have contended that the repayment liability is subject to the release of the goods pledged. They have contended that the documents could not be retired since the goods were seized by the custom authorities and hence no fault could be attributed to the defendants. The defendants have alleged that the amount of Rs.1,74,277.58 paise is not due to the plaintiffs and the defendants have signed on the dotted line and the confirmation letters signed by them are not binding since the clearances were withheld for no fault of the defendants. 9. The plaintiffs have denied the aforesaid allegations/contentions of the defendants. The plaintiffs have submitted that the defendants are liable to pay the amount outstanding under the the payment made - 7 - under the letter of credit to the beneficiary irrespective of the dispute between the defendants and the Customs Authorities. The plaintiffs have stated/submittd that the letter of credit was granted to the defendants in good faith and on promise that the goods imported will be pledged as a security for the repayment. The plaintiffs have stated that they have not liquidated the pledged goods so far and they are not pressing for any relief in relation to the pledged goods, since the said goods are of no value after a lapse of about more than 20 years. They have stated/submitted that the defendants are indebted to the plaintiffs for a sum of Rs.1,74,272.58 paise being the amount due and payable as on 10th December 1989 under the cash credit (pledge) at Exhibit-E to the plaint and interest thereon @ 15.75% per annum. The interest from 11th December 1989 till the date of the suit amounts to Rs.751.97 paise. The aggregate amount of Rs.1,75,024.55 paise is due and payable by the defendants as on the date of the filing of the suit, as shown in Exhibit-P-8. They have stated/submitted that under the facts and circumstances, the plaintiffs are entitled to recover a sum of Rs.1,75,024.55 paise being the amount due and payable as per the particulars of the claim at Exhibit-P-8 together with interest @ 15.75% per annum at quarterly rests from the date of filing of the suit till - 8 - payment and/or realisation. 10. Since the defendants did not appear the evidence of plaintiffs witness PW-1 was closed and there was no cross-examintion by defendants. Again, no witness was examined by defendants. R E A S O N S E A S O N S E A S O N S ISSUES ISSUES ISSUES 1 AND 2 :- 1 AND 2 :- 1 AND 2 :- The defendants have contended in their written statement that the goods pledged to the plaintiffs are still detained by the customs authorities and are lying in the bond under the lien of the plaintiffs. Therefore, no cause of action to claim the amounts or to enforce their security has arisen. From Exhibit-P-2, it is established that the defendants have made an application for grant of letter of credit dated 24th June 1986 to the plaintiffs pursuant to which the plaintiffs have issued a letter of credit which was delivered to the bank of the beneficiary. The plaintiffs have made payment of the said letter of credit amount of Rs.3,62,403.98 paise to the foreign banker of the beneficiary on 28th October 1986. Thereafter, the plaintiffs called upon the defendants to retire the documents and make the payment under the - 9 - letter of credit. However, the defendants failed to pay the amount. Therefore, after lapse of more than 2 months, on the request of the plaintiffs, as is established from Exhibit-P-3, the defendants executed Deed of Pledge of Goods in favour of the plaintiffs as a security for the payment of the amount due under the letter of credit. It is further established from Exhibit-P-7 that the plaintiffs have also executed the balance and security confirmation whereby the defendants had acknowledged the liability to pay to the plaintiffs a sum of Rs.1,39,405.17 paise as on 30th June 1988. The cause of action arose in favour of the plaintiffs when the defendants failed to pay the amounts due to the plaintiffs by retiring the documents and making the payment under the letter of credit which the plaintiffs paid to the foreign bankers of the beneficiary on 28th October 1986. The cause of action also arose in favour of the plaintiffs when the defendants by executing the document at Exhibit-P-7 confirmed/acknowledged their liability in respect of the balance of Rs.1,39,405.17 paise payable with 15.5% interest per annum at quarterly rest to the plaintiffs as on 30th June 1988. The cause of action also arose when the defendants by their letter dated 24th April 1987, addressed to the plaintiffs (Exhibit-P-5) acknowledged their inability to regularise their account with the plaintiff and sought time. The - 10 - plaintiffs are in no way concerned with the dispute between the defendants and the customs authorities. The cause of action therefore had certainly arisen when the plaintiffs filed the above suit against the defendants and the suit filed by the plaintiffs is certainly not premature. I, therefore, answer issue no.1 in affirmative and issue no.2 in the negative. ISSUE ISSUE ISSUE 3 3 3 :- In view of the document of Pledge of Goods at Exhibit-P-3, executed between the plaintiffs and the defendants, the plaintiffs are entitled for a declaration that the imported polyster filament texture yarn mentioned at Exhibit-A is validly pledged in favour of the plaintiffs. The plaintiffs have not pressed for prayer clause (b) of the suit since the said goods have lost its value and are of no consequence after a lapse of over 20 years. In any event, I answer issue no.3 in the affirmative. ISSUE ISSUE ISSUE 4 :- 4 :- 4 :- In view of the reasoning given whilst answering issue nos.1 & 2, issue no.4 is answered in the negative. ISSUE ISSUE ISSUE 5 :- 5 :- 5 :- From the documents at Exhibit-P-4 & Exhibit-P-5, it is established that the plaintiffs have recorded in their letter dated 16th November 1987 that - 11 - the defendants have failed to retire the documents and regularise cash credit (pledge) account and that the plaintiffs were called upon to retire the documents immediately. The defendants by their letter dated 28th April 1987 have not disputed what is stated by the plaintiffs in their letter dated 16th November 1987 (Exhibit-P-4) The document at Exhibit-P-6 is a true copy of the defendants account maintained by the plaintiffs in their ledger in usual and ordinary course of the plaintiffs’ business. It is established therefrom that an amount of Rs.1,74,272.58 paise is due and payable by the defendants to the plaintiffs inclusive of interest upto 10th December 1989. From the document at Exhibit-P-7, it is proved/established that the defendants have admitted their liability to the tune of Rs.1,39,405.17 paise in respect of their cash credit account maintained by the plaintiffs as on 30th June 1988 alongwith interest @ 15.75% per annum with quarterly rest as on 30th June 1988. That the interest charged is at the rate of 15.75% per annum at quarterly rest is also established from the document at Exhibit-P-6. . In view thereof, issue no.5 is answered in the affirmative, except that the defendants shall pay to the plaintiffs the sum of Rs.1,75,024.55 paise alongwith - 12 - simple interest @18% per annum from the date of filing of the suit till payment and/or realisation. O R D E R R D E R R D E R 11. In view of the above reasons, I pass the following order:- (a) That the defendants are ordered and decreed to pay to the plaintiffs the sum of Rs.1,75,024.55 paise as per the particulars of claim, Exhibit-E to the plaint, together with simple interest @ 18% per annum on the said amount of Rs.1,74,272.58 paise from the date of the suit till payment and/or realisation. (b) The defendants shall pay the costs of the suit to the plaintiffs. 12. The power of attorney filed by the plaintiff-Bank in favour of Mr. S.K. Inamdar dated 8th October 1986 be returned to the plaintiff upon the plaintiffs tendering the notarised copy of the same for Court record. - 13 - 13. The suit is accordingly disposed of. [S.J.KATHAWALLA, [S.J.KATHAWALLA, [S.J.KATHAWALLA, J.] J.] J.]