In paragraph 12 of the Letter of Credit it was particularly indicated that the credit was subject to Uniform Customs and Practice for Documentary Credit 1993 Revision as published in International Chambers of Commerce Publication No.500.
The short point for decision in these appeals is whether unconditional leave companyld have been granted to the Respondent Banks to defend the suits filed against them by the Appellant Bank for their refusal to reimburse the Appellant Bank in respect of the amounts disbursed to the beneficiary of the Letters of Credit before being informed of the fraud allegedly perpetrated by the beneficiary and the companystituent of the Respondent Banks.
As indicated hereinbefore, numberwithstanding the fact that the Appellant Bank had made payment to the beneficiary under the Letter of Credit as far back as on 6th April, 1998, and had informed the Respondent Bank accordingly, the Respondent Bank caused a letter dated 3rd February, 1999 to be written by its learned advocate stating that certain frauds perpetrated by its companystituent, M s. Hamco Mining Smelting Ltd., M s. Frobevia and one M s. Solo Industries Ltd., had been brought to its numberice by several other banks which had established Letters of Credit at the instance of M s. Hamco Mining Smelting Ltd. It was also mentioned that the clear implication was that the Letters of Credit were fraudulently encashed by production of bogus Bills of Lading and other shipping documents.
The beneficiary of the Letter of Credit was M s. Frobevia S.A. The said Letter of Credit appears to have been issued for the import of 255.00 MT of Tin Ingots by M s. Hamco Mining Smelting Ltd. On 30th March 1998, the Petitioner Bank companyfirmed the said Letter of Credit, which was to be valid till 23rd September, 1998.
On receipt of two such demands made on 17th March 1999 and 23rd March, 1999, the Respondent Bank replied drawing the attention of the Petitioner Bank to the letter written by its learned advocate on 3rd February, 1999, informing the Petitioner Bank that it had been advised number to make any payment under the aforesaid Letter of Credit dated 27th March, 1998, favouring M s. Frobevia S.A. On receipt of the said companymunication, the Petitioner Bank wrote to the Respondent Bank on 7th April, 1999 indicating that documents presented by the beneficiary had been negotiated and payments had already been made on 6th April, 1998 long prior to the allegations of fraud indicated by the learned advocate of the Respondent Bank.
It was further stipulated that the documents for negotiation were to be presented within 21 days from the date of the shipping documents and were to be accompanied by the documents evidencing shipment of 255 metric tonnes of tin ingots.
Three separate Special Leave Petitions, being Special Leave Petition Nos.
By a subsequent companymunication dated 21st August, 1998, the Respondent Bank informed the Appellant Bank that the beneficiary had agreed to extend the maturity date of the Letter of Credit from 23rd September, 1998 to 21st March, 1999.
The Learned Single Judge of the High Court of Judicature at Bombay also granted unconditional leave to the Respondent Banks to defend their respective suits.
There was numberevidence that the beneficiary had acted fraudulently.
8907 of 2000, 1515 of 2000 and 6089 of 1999, against the State Bank of Patiala, Federal Bank Limited and United Western Bank, respectively.
897 of 2000 in the Ordinary Original Civil Jurisdiction of the High Court of Judicature at Bombay under Order XXXVII of the Code of Civil Procedure, 1908.
In response to the said companymunication, the Appellant Bank by its companymunication dated 31st August, 1998 companyfirmed the extension of the reimbursement date till 21st March, 1999.
While companysidering the application filed by the Appellant Bank for summary judgment, the High Court took numbere of the fraud said to have been perpetrated by M s.Hamco Group of Industries and that it was the case of the Defendant Bank that they had been defrauded by their companystituent in obtaining the Letter of Credit.
On 22nd July, 1998, the Respondent Bank informed the Appellant Bank that its documents for U.S. Dollars 1,320,900 referred to in the Letter of Credit had been accepted to mature on 23rd September, 1998 on which date the funds would be remitted as per the instructions of the Appellant Bank.
The Respondent Bank was once again requested to remit the actual outstanding amount, together with interest at the rate of 5.7, from the date of maturity upto the date of payment to the account of the Petitioner Bank, that is, UBS AG, Stamford Branch, C.T., U.S.A. Inasmuch as, despite the repeated demands, the Respondent Bank did number reimburse the Petitioner Bank in respect of the amount paid to the beneficiary under the Letter of Credit before receipt of the letter dated 3rd February, 1999, written by the advocate of the Respondent Bank, the Petitioner Bank sent a legal numberice dated 30th June, 1999 informing the Respondent Bank that on account of their failure to honour their companymitments under UCP 500, the Petitioner Bank would be companystrained to file a suit for recovery of their dues.
By the said letter, the Petitioner Bank was informed further that the Respondent Bank had been advised number to make any payment under the above mentioned Letter of Credit dated 27th March, 1998 and the Petitioner Bank was put on caution and was advised number to negotiate the export bills presented by M s. Frobevia and further number to make any payment to M s. Frobevia in respect of the said Letter of Credit.
1515 of 2000 and 6089 of 2000, respectively.
Two similar Summons for Judgment Nos.
It was pointed out that irrespective of the said fact, under the Uniform Custom and Practice for Documentary Credit 500 hereinafter referred to as UCP 500 the Respondent Bank was under an obligation to reimburse on the due date of the Letter of Credit, the amount already paid by the Petitioner Bank to the beneficiary.
The Petitioner Bank took out Summons for Judgment No.783 of 2003 in Summary Suit No.897 of 2000 against the State Bank of Patiala.
5639 of 2006, 6141 of 2006 and 6134 of 2006, have been filed against the companymon judgment disposing of the said three suits and since they involve companymon questions of law and fact, they have been taken up for admission together.
Since the facts in the three matters are more or less similar, we will first deal with the facts relating to the Special Leave Petition in respect of the State Bank of Patiala SLP No.
On 3rd February, 1999, the advocate for the Respondent Bank wrote to the Petitioner Bank that the Respondent Bank had received information that M s. Hamco Mining Smelting Ltd, M s. Frobevia and one Solo Industries Ltd., having its offices at London and Sharjah, in companynivance with other group companypanies of Hamco had been perpetrating huge frauds on several banks in India.
Arising out of SLP No.5639 of 2006 With Civil Appeal No.
By the said letter the Appellant Bank was put on caution number to negotiate the export bills, if any, presented by M s. Frobevia and further number to make any payment whatsoever to M s. Frobevia in respect of the Letter of Credit.
2579/2006 Arising out of SLP No.6134 of 2006 and Civil Appeal No.
1515 of 2000 and 6089 of 1999.
784 of 2003 and 786 of 2003 were also taken out by the Petitioner Bank in companynection with Summary Suit Nos.
2580/2006 Arising out of SLP No.6141 of 2006 ALTAMAS KABIR, J. The Petitioner Bank, namely, United Bank of Switzerland, Lausanne, Switzerland hereinafter referred to as USB AG filed three separate Summary Suits, being Nos.
Inasmuch as, the said three suits were filed in respect of various Letters of Credit, where the terms and companyditions were identical and the defence taken were also identical, the said three Summons for Judgment were taken up for hearing and disposal analogously and were dismissed by a companymon order dated 28th October, 2005.
5639 of 2006 .
As indicated, hereinbefore, two similar suits on similar causes of action, were filed by the Petitioner Bank against the Federal Bank Limited and United Western Bank, being Summary Suit Nos.
The Appellant Bank was requested to companyfirm such extension.
Inasmuch as, the three Special Leave Petitions against the said three suits have been taken up for companysideration together, leave is granted in all the three Special Leave Petitions.
On 6th April, 1998, upon production of relevant documents by the beneficiary, the Petitioner Bank made payment under the said Letter of Credit to the said beneficiary, namely, Frobevia S.A. Despite having made payment of the entire amount companyered by the Letter of Credit to the beneficiary, the Petitioner Bank agreed to the extension of the maturity date of the Letter of Credit from 23rd September, 1998 till 21st March, 1999.
On 27th March, 1998, on the request of its client, M s Hamco Mining Smelting Ltd, the State Bank of Patiala issued an Irrevocable Letter of Credit for a sum of U.S. Dollars 1,320,900 to the Petitioner Bank.
Notwithstanding the aforesaid letter dated 3rd February, 1999, the Petitioner Bank demanded remittance of the entire amount companyered by the Letter of Credit, which was due for payment on 21st March, 1999.
The Letter of Credit further indicates the 20th of June, 1998 as the expiry date for shipment and 10th of July, 1998, for negotiation in Switzerland.
The Letter of Credit issued by the Respondent Bank requests the Appellant Bank to advise the beneficiary that the Respondent Bank was establishing an Irrevocable Letter of Credit for 1,320,900 U.S. Dollars only.
It was also mentioned that from the enquiry undertaken, it was clear that M s. Frobevia did number ship any goods on the vessel in question and the Bill of Lading negotiated by M s. Frobevia was fraudulent.
Pursuant thereto, the Petitioner Bank instituted Summary Suit No.
According to the Appellant Bank, the beneficiary presented the documents indicated by the Letter of Credit for negotiation to the Appellant Bank on 6th April, 1998 and on the basis thereof the Appellant Bank made payment under the Letter of Credit to the beneficiary M s.Frobevia S.A. and informed the Respondent Banks accordingly.
