TaxTMI 
TaxTMI 
2013 (5) TMI 140
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....te limited company constituted under the Companies Act, 1956 and is inter alia engaged in the manufacture of rubber products. 3. It is the case of the plaintiff that defendant no.3 placed an order with it for the supply of conveyor belting fabric vide a purchase order dated December 19, 1998. It was agreed between these two parties that the payment in respect of the goods would be made by means of documentary letters of credit (for short L/C). In pursuance of the same, defendant no.3 directed its bank, M/s Bank of India, to open a number of L/Cs in favour of the plaintiff. 4. The plaintiff submits that the instant suit is with respect to L/C No 16/24 (for short „the said L/C), which was for a sum of Rs. 20, 92, 802. 40P/- (Twenty Lakhs Ninety Two Thousand Eight Hundred and Two Rupees and Forty Paise) dated June 12, 1999 and was due to expire on September 5, 1999. The said L/C was opened by the defendant no.2 and forwarded to defendant no.1, the plaintiff‟s banker. The plaintiff submits that it delivered all requisite documents as required under the said L/C like invoices, bills of exchange, delivery challans etc to its banker, defendant no.1. On these documents be....
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....efendant no.2 further contends that it had received a set of documents for a sum of Rs. 20, 92, 802. 40P/- (Twenty Lakhs Ninety Two Thousand Eight Hundred and Two Rupees and Forty Paise). On finding certain discrepancies, the defendant no.2 submits that, it had intimated the same to defendant no.1 vide a letter dated July 2, 1999, giving the details of the discrepancies. A reminder to this letter was sent by the defendant no.2 on August 19, 1999 and by registered post on August 21, 1999. The defendant no.2 contends that on the basis of these discrepancies, it refused to make the payment and had advised defendant no.1 that it was holding the documents pending instructions from the negotiating bankers. And that on not receiving any instructions from the defendant no.1, the defendant no.2 returned all the documents drawn under the said L/C vide letters dated November 11, 1999 and December 6, 1999. The defendant no.2 contends that it had brought to the notice of defendant no.1 regarding the discrepancies immediately and because of this, the undertaking by the defendant no.2 in the L/C no longer existed and that there was no question of making any payment under the said L/C. 9. I hav....
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.... defendant argued that no acceptance on its part meant that the documents were rejected. It was further contended that the defendant no.2 never returned the documents to defendant no.3 but was holding them pending instructions from the negotiating bank i.e. defendant no.1. 16. Before proceeding to decide the matter at hand, it would be pertinent to note the settled law on the aspect of what would constitute a triable issue, which would allow the defendant leave to defend in cases under Order XXXVII of the Code. The Apex Court in the case of "Raj Duggal v. Ramesh Kumar Bansal, 1991 Supp (1) SCC 191" had occasion to lay down the test to determine as to what would constitute a triable issue. The Court held as follows: "3. Leave is declined where the court is of the opinion that the grant of leave would merely enable the defendant to prolong the litigation by raising untenable and frivolous defences. The test is to see whether the defence raises a real issue and not a sham one, in the sense that if the facts alleged by the defendant are established there would be a good or even a plausible defence on those facts. If the court is satisfied about that leave must be given. If there ....
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....ether it has decided to take up or refuse the documents submitted. Article 14 (c) further provides that incase the issuing bank decides to approach the applicant (defendant no.3 herein) for waiver of the documents, that still does not extend the period prescribed in the aforesaid Article 13(b). Article 14(e) finally states that if the issuing bank fails to act in accordance with the provisions of this Article (Article 14), then it is precluded from claiming that the documents are not in compliance with the terms and conditions of the L/C. In reading the all the above provisions together, it is clear that the information of refusal or acceptance of the documents should be made within a period of seven banking days. The defendant no.2 has clearly exceeded this period by a large margin, travelling beyond the expiry of the L/C, when the documents were finally returned on November 30, 1999. 20. The Apex Court, in the case of "Federal Bank Ltd vs. V.M Jog Engineering Ltd. & Ors., (Supra)", examined the provisions of the UCP Rules regarding refusal of documents. The Court held that: "49. Clause (d) of Article 16 of the 1983 Revision states that, if the issuing bank decides to refuse....