State Bank Of Hyderabad vs Rabo Bank

3. In order to adjudicate the controversy between the parties, at the outset it is necessary to cull out the facts of the case to the extent of deciding the dispute before us.

4. The respondent/plaintiff is a banking institution located in Singapore and on behalf of its constituent namely M/S Gloland (Far East) Pte. Ltd., the respondent/plaintiff carried on business dealings with the appellant/defendant. The constituent of the respondent is engaged in the business of export of Chick Peas and it shipped a consignment to its Indian clients, namely, M/S Kothari Global Ltd. and M/S Marudhar Edible Oils Ltd., while handing over three sets of relevant documents dated 4.2.1998, 24.2.1998 and 13.7.1998 to the respondent/plaintiff for collecting the payment totaling US $ 8,19,199.35 from its Indian clients. The respondent/plaintiff in turn forwarded those documents to the appellant/defendant on the condition of releasing them to the Indian clients of its constituent against payment. It appears that the appellant/defendant did not receive payment from the clients of the respondent and hence did not release the documents to them.

5. While the things stood so, on 9th September, 1998 the respondent/plaintiff sent a fax message to the appellant Bank enquiring whether they would accept Bills of Exchange (Drafts) payable after 170 days, to which the appellant Bank conveyed its acceptance. Accordingly, the respondent sent four Bills of Exchange, all dated 9th September, 1998 in favour of the appellant Bank for an amount of US $ 8,19,198.75. Again on 21st September, 1998, the respondent sent another set of documents together with Bills of Exchange to the appellant Bank for the amount of US $ 11,12,428.54 for collection from the Indian clients of constituent of the respondent. The collection tenor was specified as 170 days after the date of Draft (Bill of Exchange). The respondent by a Telex message dated 23rd October, 1998 instructed the appellant Bank to deposit the payment against Bills of Exchange totaling US $ 19,31,627.89 into their New York Correspondent Bank viz., Bankers Trust Company on the due date of 27th February, 1999.

6. When the appellant Bank did not remit the amount even after the expiry of due date, the respondent/plaintiff on 9th March, 1999 sent a Telex message to the appellant/defendant to remit the proceeds along with interest @ 9.75% for the late payment. It appears that on the same day, the appellant Bank replied to the respondent denying its liability on the ground that the manner and mode in which the transactions took place was not in ordinary course of business and the acceptance given by its Kolkata Branch at Burra Bazar appears to be in total disregard to the prevailing procedure in Banks. It has also been informed to the respondent that the matter has been entrusted to the Central Bureau of Investigation (CBI). This was followed by various correspondences exchanged between the parties alleging and denying the liability till 31st March, 2001 on which date the respondent filed Summary Suit No. 1586 of 2001 before the High Court.

7. The learned Trial Judge fixed the liability on the appellant/defendant and made absolute the summons for judgment awarding interest @ 9.75% p.a. w.e.f. 27th February, 1999 i.e. the maturity date of Bills of Exchange, till realization of principal amount. Aggrieved thereby, the defendant/appellant filed an intra-Court appeal before the High Court which came to be dismissed by the Division Bench upholding the order of the learned Single Judge. Not satisfied with the Judgment of the High Court, the appellant/defendant filed the appeal on hand by way of special leave. On 15th December, 2014, this Court while issuing notice, stayed operation of the impugned order of the High Court.

17. An analysis of the above principles makes it clear that in cases where the defendant has raised a triable issue or a reasonable defence, the defendant is entitled to unconditional leave to defend. Leave is granted to defend even in cases where the defendant upon disclosing a fact, though lacks the defence but makes a positive impression that at the trial the defence would be established to the plaintiff’s claim. Only in the cases where the defence set up is illusory or sham or practically moonshine, the plaintiff is entitled to leave to sign judgment.

23. Although certain other issues are raised by both the parties, in view of our finding that the defendant/appellant is entitled to leave to defend the Suit, we do not find it necessary to go into other issues at this stage. As regards the contention advanced on behalf of the respondent/plaintiff that the mere denial of liability by the appellant Bank saying that the Officer in charge of the Foreign Exchange Department of the appellant Bank was not authorized to give co-acceptance to the Bills and thereby alleging a fraud by the officials cannot be sustained as those are the internal affairs of the defendant Bank for which the plaintiff/respondent cannot be penalized and the international trade practices and banking regulations have to be respected, this Court need not to go in detail in respect of these issues when we have come to an irresistible conclusion that the appellant/defendant is entitled to defend the Suit. Hence, we are reluctant to give findings on any of these issues which may adversely affect the trial of the Suit.

24. Accordingly, we allow the appeal by setting aside the judgment and decree passed by the Courts below. The appellant/defendant is granted unconditional leave to defend the Summons for Judgment in Summary Suit No. 1586 of 2001. The learned Single Judge of the High Court has to deal all the issues raised by the parties afresh and any observation made by this Court while dealing with this appeal should not be construed as an expression of this Court. There shall, however, be no order as to costs.