In this case seller was from Hyderabad who got a 90 days usance Irrevocable Letter of Credit from buyer.
Supplier shipped the goods worth few crore Indian Rupees to the buyer and presented the documents to Negotiating Bank.
Negotiating Bank credited amount of Bill of Exchanges to seller & forwarded documents to Issuing Bank for release of the payment.
Issuing Bank denied to release payment pointing out some discrepancies in documents.
According to Seller / Complainant, discrepancies in documents were removed within short time but still payment was not released by Issuing Bank.
Seller’s / Complainant’s Negotiating Bank debited amount of said LC from seller’s account & an additional amount of Rs.6.68/- Lac was debited from account of seller / Complainant as interest charges.
According to Complainant, discrepancies in documents were removed within short time but still payment was not released by Issuing Bank.
In above transactions, complainant has alleged following deficiency on part of Issuing Bank:
1. That Issuing Bank failed to promptly pay full amount under Irrevocable L/C (ILC) after complying presentations well before L/C expired in accordance with terms of L/C.
2. Issuing Bank made inexplicable & gross delay in notifying Negotiating Bank, SBI, of refusal & return of documents. It took nearly 3 months after complying presentation was made & almost 2 months after L/C expired.
3. Issuing bank continuously failed to provide any reasons or explanations to seller / complainant for said refusal.
- Above failures & gross delays by Issuing Bank are clearly inconsistent with provisions of UCP 600 like Art. 0.a, 0, 0.b, 0.c, 04.b, 00.d & 00.f.
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Detail Case Discussion
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Seller / Complainant: Vectori, Hyderabad.
Buyer: YYYY System
Issuing Bank: The bank which issued the Letter of Credit
Negotiating Bank: SBI, Hyderabad.
Letter of Credit: Irrevocable 90-day L/C in favor of Victory & said Issuing Bank undertook to pay to Seller (Complainant) or its Negotiating Bank a sum of Rs.2,29,79,000/- within 90 days on presentation of stipulated documents evidencing such shipment of 5 electric transformers to the buyer. LC was subject to UCPDC 2007 Revision ICC Publication No. 600.
Seller / Complainant company Vectori from Hyderabad dispatched 5 transformers to consignees / buyer & submitted requisite documents like:
- Five consignment notes shipment of 5 transformers by Complainant to consignees / buyer
- Three Bill of Exchanges amount to Rs.2,29,79,166/- in favor of SBI, the Negotiating Bank, OP-3.
SBI credited amount of Bill of Exchanges in to Complainant & forwarded requisite documents to Issuing Bank for release of the payment.
Issuing Bank did not release payment pointing out some discrepancies.
According to Complainant / seller, discrepancies in documents were removed within short time but still payment was not released by Issuing Bank & thereafter, Complainant’s Negotiating Bank debited amount of irrevocable LC & an additional amount of Rs.6,68,000/- in account of Complainant / seller.
In above transactions, complainant has alleged following deficiency on part of Ops / banks:
1. Failure by Issuing Bank to promptly pay full amount under Irrevocable L/C (ILC) after complying presentations (well before L/C expired) in accordance with terms of L/C.
2. Inexplicable & gross delay by Issuing Bank in only notifying Negotiating Bank, SBI, of refusal & return of documents; nearly 3 months after complying presentation was made & almost 2 months after L/C expired.
3. Continuing failure by Issuing Bank to provide any reasons or explanations to Complainant for aforesaid refusal.
4. Above failures & gross delays by Issuing Bank are clearly inconsistent with provisions of UCP 600, including without limitation,
- Art. 0.a,
- Art. 0
- Art. 0.b,
- Art. 0.c,
- Art. 00.b,
- Art. 00.d &
- Art. 00.f
Therefore, aforesaid shortcomings in nature, quality & manner of performance required by UCP 600, which performance was expressly contractually undertaken by Issuing Bank under ILC, amount to deficiency in services within the meaning of sec. 2 (1) (g) of xxxxx Protection Act, 1986.
RELIEF / PRAYER:
The complainant in this case demanded the relief in the court as under:
a) Order & direct Issuing Bank to pay seller / complainant a sum of Rs.2,77,48,000 being a sum of Rs.2,29,79,000/- being amount payable under L/C along with a sum of Rs.47,69,000/- being interest due on such sum at above interest rate.
b) Order and direct Issuing Bank to pay seller / complainant a further sum of Rs.7,67,000/- being a sum of Rs.6,68,000/- borne by complainant as a direct result of Issuing Bank’s failure to comply with its obligations under Irrevocable L/C, along with a sum of Rs.99,000/- being interest due on such sum at above interest rate.
c) Order & direct Issuing Bank (OP-1) to pay seller / complainant pendent lite & future interest at aforesaid rate of 14.5% (on a 360-day yr basis & compounded every 30 days).
d) Order & direct Issuing Bank (OP-1) to pay seller / complainant an additional sum of Rs.50,00,000 as damages for severe economic hardship & loss of business opportunity and profit caused by IDBI Bank’s gross deficiency in service to complainant.
e) Order & direct Issuing Bank (OP-1) to pay seller / complainant legal fees as well as the legal fees & costs incurred in connection with present complaint, being a sum in the amount of Rs.5,00,000.
f) Pass such further orders as may deem fit & proper.
Legal Questions:
Is complainant a consumer?
Referred Old Cases:
Kishor Lal Vs. ESIC
Trans Mediterranean Airways Vs. Universal Exports
Autocade Vs. Std. Charter Bank