Case: Bank Of India Vs. M/S. Mehta Brothers

1. The appellant - Bank of India, a body corporate constituted under the Banking Companies [Acquisition and Transfer of Undertakings] Act, 1970 filed a suit for recovery of Rs.91,58,480.09 against the defendants - respondents on 30th of August, 1982, inter alia, alleging that on the request of defendant nos. 1 to 5, namely, M/s. Mehta Brothers and Ors. on 26th of June, 1979, the appellant Bank issued an irrevocable Letter of Credit for US $ 6,10,900, equivalent to Indian currency about Rs.50,00,000/-, in favour of M/s. Bentrex and Co., Singapore. The said Letter of Credit was expressly made subject to the terms and conditions of Uniform Customs and Practice for Documentary Credits [1974] Revision, International Chamber of Commerce Publication No.290. On 1st of September, 1979, the beneficiary drew a site draft for an amount of US $ 6,10,740 and presented the same along with other documents to Deutsche Bank Asia [formerly known as European Asian Bank], a body corporate incorporated in West Germany being a foreign company under the Companies Act, 1956 - defendant No.6 - respondent no. 6 (in short ‘the respondent No.6) for negotiations. On 4th of September, 1979, respondent no.6 after negotiating the documents dispatched the original and duplicate set of the documents from Singapore directly to the Chandni Chowk Branch of the appellant Bank and called upon the New York Branch of the appellant Bank for reimbursement under the Letter of Credit. The appellant Bank further alleged that this was done without furnishing the necessary certificate of compliance which was required under the terms of letters of credit. On 5th of September, 1979, the New York Branch of the appellant Bank on receipt of the aforesaid claim, in good faith, paid on account, without prejudice, the said amount of US $ 6,10,740. On 13th of September, 1979 the appellant Bank received the documents from respondent no.6 and found that there were many discrepancies in the documents and they were not as per the Uniform Customs and Practice of Documentary Credits [1974 Revision]. On 14th of September, 1979, by a telex the appellant Bank pointed out to respondent no.6 some of the discrepancies in the documents and stated that the documents were being held at its risk and responsibility. Respondent no.6 was requested to reverse the reimbursement already claimed by it from the New York Branch of the appellant Bank. On the same day respondent no.6 by its telex to the appellant Bank rejected the claim of the appellant Bank alleging that these discrepancies were of minor nature and all the terms and conditions of the Letter of Credit were complied with. On 14th of September, 1979, Mehta Brothers- defendant nos. 1 to 5 - respondent nos.1 to 5 (in short ‘respondent nos. 1 to 5) also did not honour and return the documents as they were not at all in accordance with the terms of Letter of Credit. The appellant Bank - further alleged that respondent no.6 had failed and neglected to reply and reimburse to the appellant Bank the amount received by it from the New York Branch. Respondent no.6 had failed to furnish to the New York Branch of the appellant Bank the certificates of compliance in terms of the said Letter of Credit, for that reason also respondent no.6 acted in breach of its obligation under the Letter of Credit to do so and, therefore, was not entitled to claim and return the payment received thereunder. Despite repeated requests and reminders, respondent nos. 1 to 5 did not honour and return the said documents and went on contending that there were discrepancies in the documents. Respondent nos. 1 to 5 also stated that their claim with the insurance company was likely to be finalized soon and the amount payable thereunder shall be received by the appellant Bank directly from the insurance company for the adjustment of the amount due and payable by them under the Letter of Credit. Respondent nos. 1 to 5 as also respondent no.6 had denied their respective liability to repay to the appellant Bank the amounts claimed by it and the appellant Bank was in doubt as to the persons from whom it was entitled to redress, accordingly, the appellant Bank joined respondent nos.1 to 5 and respondent no.6 as parties to the suit in order to determine the question as to which of the defendants was liable to the appellant Bank and to what extent. If separate suits were brought against respondent nos. 1 to 5 and respondent no.6, common question of law and fact would arise, therefore, the appellant Bank had a right to relief against respondent nos. 1 to 5 or respondent no. 6.2. Upon the aforesaid allegations, the appellant Bank had filed the aforesaid suit for recovery of Rs.91,58,480.08, being the amount of Letter of Credit and interest. Decree was claimed primarily against respondent no.6 and alternatively, against respondent nos. 1 to 5 in case, the court would come to the conclusion that respondent no.6 was not liable to pay any amount to the appellant Bank. It would be appropriate at this stage to reproduce the reliefs claimed in the suit itself which read asThis Honble Court will be pleased to decree and order defendant no.6 to pay to the plaintiff the equivalent in rupees at the time of payment, the sum of US $11,46,492.99 together with interest thereon at 21% per annum with quarterly rests from the said 30th day of August, 1982 untill payment and costs of the suit and such further and other reliefs as this Honble Court may deem fit.[b] That in the event of this Honble Court holding that defendant no.6 is not liable to pay any amount to the plaintiff, this Honble Court will in the alternative be pleased to decree and order defendant Nos. 1 to 5 jointly and each severally to pay to the plaintiff bank the said sum of Rs.91,58,480.00 with further interest at theper annum with quarterly rests from the 30th day of August, 1982 until payment.[c] Costs of the suit and[d] Such other and other reliefs which this Honble Court may deem fit.On 24th of July, 1984 a written statement on behalf of respondent no.6 was filed. Although, respondent no.6 filed the written statement but finally no body appeared on its behalf and accordingly the suit had proceeded against it ex parte. The suit was decreed on 10th of March, 1987 ex parte against respondent no.6 with costs. However, the suit against respondent nos. 1 to 5 was dismissed on contest and they were left to bear their own costs. However, the appellant Bank did not file any appeal in so far as that part of the decree by which the suit against respondent nos. 1 to 5 had been dismissed. Accepting this position, on 4th of April, 1988, two applications were filed by respondent no.6 under Order 9 Rule 13 of the Code of Civil Procedure (in short the ‘Code) for setting aside the ex parte decree and under Section 5 of the Limitation Act for condonation of delay in filing the application under Order 9 Rule 13 of the Code. By an order dated 28th of February, 1991, the learned single judge of the High Court allowed both the applications filed by respondent no.6. Accordingly, the ex parte decree passed against respondent no.6 was set aside subject to payment of Rs.25,000/- as costs out of which Rs.15,000/- was payable to the appellant Bank and Rs.10,000/- to respondent nos. 1 to 5. While setting aside the ex parte decree against respondent no.6, by the same order, the learned Single Judge also set aside that portion of the decree whereby the suit against respondent nos. 1 to 5 was dismissed. To set aside that part of the decree, the learned single judge had relied on the proviso to Order 9 Rule 13 of the Code. Feeling aggrieved by the said judgment of the learned single judge, respondent nos. 1 to 5 filed first appeal being FAO [OS] No.78 of 1991 before the High Court of Delhi. The appellant Bank also filed FAO [OS] No.100 of 1991.4. By the judgment and final order dated 9th of November, 2000 passed by a Division Bench of the High Court of Delhi in FAO (OS) No.78 of 1991, the Division Bench had set aside the order dated 28th of February, 1991 of the learned single judge to the extent that the said order had set aside an ex parte decree dated 10th of March, 1987 dismissing the suit of the appellant Bank against respondent nos. 1 to 5. In so far as the respondent no.6 was concerned, the Division Bench of the High Court affirmed the order dated 28th of February, 1991 setting aside the ex parte decree dated 10th of March, 1987 passed against the respondent no. 6. It is against this judgment of the Division Bench of the High Court, the appellant Bank filed this special leave petition which, on grant of leave, was heard in presence of the learned counsel for the parties.

Court's reasoning:
In our view, the Division Bench was not justified in setting aside the above part of the order of the learned Single Judge on the ground that the decrees were two distinct decrees : one against respondent No.6 and one in favour of the respondent Nos. 1 to 5. It is to be noted that the judgment of the learned single judge as well as of the Division Bench had not proceeded on the basis that the decree was entirely ex parte against all the defendants. Therefore, we have to see the nature of the decree for the purpose of coming to a proper conclusion whether the decree could be indivisible or the decree that was passed were two separate distinct decrees. In this connection, it would be important to refer to a minority decision of the Assam High Court in the case of Khargesh Chandra Vs. Chandra Kanta Barua [AIR 1954, Assam 183], which would be relevant for us to illustrate and answer thison paragraph 8 of the Full Bench decision of the Assam High Court as relied on by the learned counsel for respondent Nos. 1 to 5 cannot be considered to be a good law in view of the fact that it itself accepts the position that in exceptional cases contemplated by the proviso under Order 9 Rule 13 of the Code, the ex-parte decree could be set aside not only on the defendant who applied for setting aside the ex-parte decree but also on or any other defendants. In view of the discussions made hereinabove, we are not in a position to agree with the submission of the learned counsel for respondent Nos. 1 to 5 who placed strong reliance on paragraph 8 of the aforesaid decision to contend that the decree to be set aside must be a decree "against defendants and not a decree in their favour", irrespective of the fact whether the decree was passed in favour of the defendants onnoted herein earlier, we have already discussed that in the judgment, it was held that respondent No. 6 against whom the ex-parte decree was passed, was only liable to pay the decretal amount to the appellant Bank. The suit was dismissed as against respondent Nos. 1 to 5 only on the ground that the claim of the appellant Bank was satisfied against respondent No. 6 and in view of such relief already obtained by the appellant Bank against respondent No. 6, Issue Nos. 2, 7 & 8 were held in favour of respondent Nos. 1 to 5 and as a result of that, the suit was dismissed on contest as against respondent Nos. 1 to 5. Accordingly, we are of the firm opinion that the ex parte decree was indivisible and rightly set aside not only against respondent No.6 but also against respondent Nos.1 to 5. Since no argument was advanced by the learned counsel for the appellant Bank that the findings of the learned Single Judge as well as the Division Bench on the question whether there was sufficient cause for respondent No.6 to get the ex-parte decree set aside, we do not intend to examine the correctness of the findings of the learned single judge as well as of the Division Bench to the extent that respondent No. 6 had made out sufficient cause for non-appearance on the date, the suit was decreed ex-parte againstwe set aside the judgment of the Division Bench of the Delhi High Court so far as it had set aside the order of the learned Single Judge restoring the suit in its entirety and therefore, the judgment of the learned single judge is restored to its original file. Since, the suit of the appellant Bank was filed in the year 1982 without expressing any opinion on the merits of the suit, we request the learned single judge to decide the suit at an early date preferably within six months from the date of supply of a copy of this order to him.