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Petitioner: MANZOOR TEXTILE MILLS LTD. VS Respondent: SPECIAL JUDGE BANKING, LAHORE and others
Court Name: Lahore High Court Judge(s): Ch. Mushtaq Ahmad Khan Title: MANZOOR TEXTILE MILLS LTD. vs SPECIAL JUDGE BANKING, LAHORE and others Case No.: Writ Petition No, 11551 of 1994 Date of Judgment:1994-11-01 Reported As: 1996 CLC 422 Result: Petition dismissed
JUDGMENT
JUDGMENT ' M/s. Manzoor Textile Mills Ltd., the petitioner before this Court which is an incorporated company, entered into a contract for supply of cotton by M/s. Dunavant SA World Trade Centre, respondent No,3, through its agent M/s. Amir Umar Industries (Pvt.) Ltd. Respondent No, 4, before this Court. 2. In pursuance of the aforementioned contract five pro forma invoices, stating the specifications, quantities, price and other terms of the contract of supply referred to above, were issued in terms whereof, the cotton had to be supplied. L.Cs. Were opened with the respondent No,2. The cotton was supplied by the respondents Nos.3 and 4, a major portion whereof, has already been received by the petitioner, and balance delivery is only about 1500 bales. 3. The petitioner filed a suit seeking a decree for declaration and permanent injunction on the basis of the allegation; that the cotton supplied is inferior in quality; that the terms of the contract have been violated and that fraud has been committed by the respondents in the manner of supply of cotton. In the plaint following prayers have been made:-- (a) It be declared that the defendant No,1 has no right to debit the accounts of the plaintiff against any of the L.Cs, subject-matter of the suit and the bills drawn there under or to release any securities connected therewith. (b) The defendant No,1 be permanently restrained from debiting the accounts of the plaintiff against any of the LCs or bills drawn there under, or realising any securities given there under. (c) The defendant No,1 be directed to reverse all debit entries that may already have been made for any bills drawn under the L.Cs. (d) Defendant No,1 be permanently restrained from making any payments under the LCs (mentioned in para. 2 above) or any bills drawn there under.
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(e) Defendant No,2 be permanently restrained from receiving any payments under the LCs whether directly or indirectly through its agents, assignees, transferees etc. (f) Any other relief that this Honourable Court deems fit and proper in the facts and circumstances of the case may also kindly be granted. (g) Costs ' Alongwith the plaint an application under Order XXXIX, Rules 1 and 2 has also filed, wherein it has been prayed that the respondents may be restrained from adjusting the accounts of the plaintiff against any of the LCs/Bills drawn thereunder, realising any securities, any bills drawn, receiving any amount and making of payments against the LCs in question. This application has been contested and dismissed by the learned Special Judge Banking vide order dated 27-9-1994. This order has been challenged through this Constitutional petition. 4. Mr. Hamid Khan, Advocate, learned counsel for the petitioner has referred to copies of LCs, the bills of lading, the invoices and a copy of the facsimile transmission (Annexures 'A to C') which have been appended to the paper book at pages 21 to 37 thereof, and has contended that there is a noncompliance with the terms of the contract inasmuch as the goods had to be shipped on the basis of pre-paid freight, but the same have been supplied subject to payment of freight at destination and further that the dates of loading of the goods in the ships are proved to be false as on the said dates the ship was not on the port, hence it stands prima facie established that it is a case of fraud as well as non-compliance of the terms of the contract as such the petitioner is entitled to the grant of stay order as prayed for. Learned counsel has further contended that in view of the admitted position that the respondent No,3 has no assets in Pakistan, therefore, if the payment is made, the decree if passed in favour of the petitioner shall stand frustrated and the petitioner shall be left with no remedy and shall suffer irreparable loss, hence balance of inconvenience lies in favour of the petitioner, but the learned Trial Court has illegally refused interim injunction, hence the impugned order is illegal and is without a lawful authority. In support of his arguments learned counsel has relied upon the following cases:-- (i) Pan Ocean Enterprises (Pvt.) Ltd. v. Thai Rayon Company Ltd. And 5 others (PLD 1990 Karachi 395). (ii) M/s. Kohinoor Trading (Pvt.) Ltd. v. Mangrani Trading Co. And 2 others (1987 CLC 1533). (iii) M/s. Allied Industries HUB (Pvt.) Ltd. v. M/s. China National Metals and Mineral Import and Export Corporation and another (1989 MLD (Karachi) 2027). ' Lastly, learned counsel has contended that the petitioner is ready to deposit the amount payable to foreign bank, with respondent No,2 subject to the condition that it is not paid to the foreign bank and hence taken out of Pakistan and hence has prayed that in order to avoid further complicating stay order may be granted in the above terms. 5. Mr. Shahid Hamid Khan, Advocate, learned counsel for the respondent No,2 has referred to a book-let named "ICC Uniforms Customs and Practice for Documentary Credits", has taken me thorough Articles 1, 3, 9, 13, 14, 15, 23, 32, 33 & 37 thereof and has argued that collective reading of the above articles clearly shows that so far as banking is concerned it has got no concern with the terms of the contract between the private parties and alleged violation thereof as banks deal in documents on the basis of face entries thereof and any alleged violation of the terms of the contract does not confer any actionable cause of action, upon the petitioner to ask for grant of interim injunction as grant thereof will interfere with the internal working of the bank as well as smooth running of the foreign trade. Even on merits of the case, it is contended that prima facie no case of fraud or non-compliance of terms contract is made out. Further elaborating hi& arguments learned counsel has referred me to the documents Annexures 'A to C' of the writ petition and Document Annexure 'G' appended at page 95 of the reply submitted by the respondent No,3 and has demonstrated that the ship in question had arrived at the port on 25-6-1994, had loaded the
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goods till 6th of July, 1994, and then have to go for repair and whereafter it sailed of on 29th July, 1994. The documents bear the stamp of freight being pre-paid and it is only the handling charges which had to be received at the terminal, postponement of payment whereof, being not prohibited under the trading practice referred to above, it cannot be said that there was a violation of terms of the contract hence it is contended that the petitioner has no prima facie case. Learned counsel has further argued that the respondent No,2 has got nothing to do with the dispute between the parties and therefore on the face of the documents there being no discrepancies, fraud or evidence of noncompliance case of the petitioner does not fall within any of the exceptions as enumerated in case of Pan Ocean Enterprises (Pvt.) Ltd. (supra), hence payment against the irrevocable L.Cs cannot be directed to be stopped. It is further contended that issuance of stay order in this case will result in causing of irreparable loss to the respondent No,2 in whose favour balance of inconvenience lies, hence in Constitutional jurisdiction discretionary interim order passed by a Court of special jurisdiction, which is not even appealable under the statute no interference should be made, therewith. In support of his contentions learned counsel relies on the cases of:-- (i) Tarapore & Co., Madras v. Tractoro Export, Moscow (AIR 1970 SC 891). (ii) United Commercial Bank v. Bank of India and others (AIR 1981 SC 1426). (iii) M/s. National Construction Ltd. v. Aiwan-e-Iqbal Authority (PLD 1994 SC 311). ' Offer made by the learned counsel for the petitioner regarding grant of stay on deposit has been put to the learned counsel, but he has not accepted and has placed on record a written undertaking to the effect that in case it is finally adjudicated that the respondent bank should not have made payment to the bankers of respondent No,3 under L.Cs 46/148 dated 23-4-1994 and 46/153 dated 23-4-1994, the respondent bank will refund to the petitioner the amounts realized from them for payment to respondent No,3's bankers, provided the petitioner returns to the respondent bank cotton bales of equivalent value as on date of refund. This undertaking has been marked as "CI". None has appeared on behalf of respondent No, 1 . Learned counsel for respondents Nos.3 and 4 has adopted the arguments, addressed by Mr. Shahid Hamid, Advocate. 6. Before embarking upon the. Discussion and decision on issues involved in this case in hand it will be appropriate that the relevant articles referred to by the learned counsel for respondent No,2 and gist of the relevant case-law on the subject is reproduced which is as under:-- Article 1: ' Application of UCP: ' The Uniform Customs and Practice for Documentary Credits, 1993 Revision, ICC Publication N 500 shall apply to all documentary credits (including to the extent to which they may be applicable, Standby Letter (s) of Credit) where they are incorporated into the text of the Credit. They are binding on all parties thereto, unless otherwise expressly stipulated in the credit. Article 3. ' Credits v. Contracts: (a) Credits, by their nature, are separate transactions from the sales or other contract (s) on which they may be based and banks are in no way concerned with or bound by such contract (s), even if any reference whatsoever to such contract (s) is included in the credit. Consequently, the undertaking of a bank to pay, accept and pay draft (s) or negotiate and/or to fulfil any other obligation under the credit, is not subject to claims or defences by the applicant resulting from his relationships with the issuing bank or the beneficiary. (b) A beneficiary can in no case avail himself of the contractual relationships existing between the banks or between the applicant and the issuing bank. Article 9. ' Liability of Issuing and Confirming Banks: ' An irrevocable credit constitutes a definite undertaking of the issuing bank, provided, that the stipulated documents are presented to the nominated bank or to the issuing bank and that the
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terms and conditions of the credit are complied with-- (i) if the credit provides for sight payment-to pay at sight; (ii) if the credit provides for (erred payment--to pay on the maturity date (s) determinable in accordance with the stipulations of the credit; (iii) if the credit provides for acceptance-- (a) by the issuing bank-to accept draft (s) drawn by the beneficiary on the issuing bank and pay them at maturity, or (b) by another drawee bank--to accept and pay at maturity draft(s) drawn by the beneficiary on the issuing bank in the event the drawee bank stipulated in the credit does not accept draft (s) drawn on it, or to pay draft(s) accepted but not paid by such drawee bank at maturity; (iv) if the credit provides for negotiation--to pay without recourse to drawers and/or bona fide holders, Draft(s) drawn by the beneficiary and/or document(s) presented under the credit. A credit should not be issued available by Draft(s) on the applicant. If the Credit nevertheless calls for Draft(s) on the applicant, banks will consider such draft (s) as an additional document(s). (b) A confirmation of an irrevocable credit by another bank (the "confirming Bank") upon the authorisation or request of the issuing Bank, constitutes a definite undertaking of the confirming Bank, in addition to that of the issuing Bank, provided that the stipulated documents are presented to the confirming bank or to any other Nominated Bank and that the terms and conditions of the Credit are complied with-- (i) if the Credit provides for sight payment--to pay as sight; (ii) if the Credit provided for deferred payment--to pay on the maturity date (s) determinable in accordance with the stipulations of the Credit; (iii) if the Credit provides for acceptance-- (a) by the confirming bank--to accept draft(s) drawn by the beneficiary on the confirming bank and pay them at maturity; or (b) by another drawee bank--to accept and pay at maturity draft(s) drawn by the beneficiary on the confirming bank, in the event the drawee bank stipulated in the credit does not accept Draft(s) drawn on it, or to pay Draft(s) accepted but not paid by such drawee. Bank at maturity; (iv) if the credit provides for negotiation--to negotiate without recourse to drawers and/or bona fide holders, Draft(s) drawn by the beneficiary and/or document(s) presented under the Credit. A Credit should not be issued available by Draft(s) on the applicant. If the Credit nevertheless calls for Draft(s) on the applicant, banks will consider such Draft(s) as an additional document(s). (c)(i) If another bank is authorised or requested by the issuing Bank to add its confirmation to a Credit but is not prepared to do so, it must so inform the issuing Bank without delay. (ii) Unless the issuing Bank specifies otherwise in its authorisation or request to add confirmation, the advising bank may advise the Credit to the Beneficiary without adding its confirmation. (d)(i) Except as otherwise provided by Article 48, an irrevocable Credit can neither be amended nor cancelled without the agreement of issuing bank, the Confirming bank, if any, and the beneficiary. (ii) The issuing bank shall be irrevocably bound by an amendment(s) issued by it from the time of the issuance of such amendment (s). A Confirming Bank may extend its confirmation to an amendment and shall be irrevocably bound as of the time of its advice of the amendment. A confirming bank may, however, choose to advise an amendment to the beneficiary without extending its confirmation and if so, must inform the issuing bank and the beneficiary without delay. (iii) The terms of the original credit (or a credit incorporating previously accepted amendment(s) will remain in force for the beneficiary until the beneficiary communicates his acceptance of the amendment to the bank that advised such amendment. The beneficiary should give notification of
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acceptance or rejection of amendment(s). If the beneficiary fails to give such notification, the tender of documents to the Nominated bank or issuing bank, that confirm to the Credit and to not yet accepted amendment(s), will be deemed to be notification of acceptance by the beneficiary of such amendment(s) and as of that moment the credit will be amended. (iy) Partial acceptance of amendments contained in one and the same advice of amendment is not allowed and consequently will not be given any effect.. Article 13. ' Standard for Examination of Documents (a) Banks must examine all documents stipulated in the credit with reasonable care, to ascertain whether or not they appear, on their face, to be in compliance with the terms and conditions of the credit. Compliance of the stipulated documents on their face with the terms and conditions of the credit, shall be determined by international standard banking practice as reflected in these articles. Documents which appear on their face to be inconsistent with one another will be considered as not appearing on their face to be in compliance with the terms and conditions of the credit. ' Documents not stipulated in the credit will not be examined by bank. If they receive such documents, they shall return them to the presenter or pass them on without responsibility. (b) The issuing bank, the confirming bank, if any, or a nominated bank acting on their behalf, shall each have a reasonable time, not to exceed seven banking days following the day of receipt of the documents, to examine the documents and determine whether to take up or refuse the documents and to inform the party from which it received the document accordingly. (c) If a credit contains conditions without stating the document(s) to be presented in compliance therewith, banks will deem such conditions as not stated and will disregard them. Article 14. ' Discrepant Documents and Notice: (a) When the issuing bank authorises another bank to pay, incur a deferred payment undertaking, accept drafts, or negotiate against documents which appear on their face to be in compliance with the terms and conditions of the credit, the issuing bank and the confirming bank, if any, are bound; (i) to reimburse the nominated bank which has paid, incurred a deferred payment undertaking accepted draft(s) or negotiated, (ii) to tece up the documents. (b) Upon receipt of the documents the issuing bank and/or confirming bank, if any, or a nominated bank acting on their behalf, must determine on the basis of the documents alone whether or not they appear on their face to be in compliance with the terms and conditions of the credit. If the documents appear on their face not to be in compliance with the terms and conditions of the credit, such banks may refuse to take up the documents. (c) If the issuing bank determines that the documents appear on their face not to be in compliance with the terms and conditions of the credit, it may in its sole judgment approach the applicant for a waiver of the discrepancy(ies). This does not, however, extend the period mentioned in sub-Article 13(b). (d) If the issuing bank and/or confirming bank, if any, or a nominated bank acting on their behalf, decides to refuse the documents, it must give notice to that effect by telecommunication or if it that is not possible, by other expeditious means, without delay but no later than the close of the seventh banking day following the day of receipt of the documents. Such notice shall be given to the bank from which it received the documents, or to the beneficiary, if it received the documents directly from him. (ii) Such notice must state all discrepancies in respect of which the bank refuses the documents and must also state whether it is holding the documents at the disposal of, or is returning them to,
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the presenter. (iii) The issuing bank and/or confirming bank, if any, shall then be entitled to claim from the remitting bank refund with interest, of any reimbursement which has been made to that bank. (e) If the issuing bank and/or confirming bank, if any, fails to act in accordance with the provisions of this Article and/or fails to hold the documents at the disposal of, or return them to the presenter, the issuing Bank and/or confirming bank, if any, shall be precluded from claiming that the documents are not in compliance with the terms and conditions of the credit. (f) If the remitting bank draws the attention of the issuing bank and/or confirming bank, if any, to any discrepancy(ies) in the document(s) or advises such banks that it has paid, incurred a deferred payment undertaking accepted draft(s) or negotiated under reserve or against an indemnity in respect of such discrepanc(ies), the issuing bank and/or confirming bank, if any, shall not be thereby relieved from any of their obligations under any provision of this Article. Such reserve or indemnity concerns only the relations between the remitting bank and the party towards whom the reserve was made, or from whom, or on whose behalf, the indemnity was obtained. Article 15. ' Disclaimer on Effectiveness of Documents: ' Banks assume no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any document(s), or for the general and/or particular conditions stipulated in the document(s) or superimposed thereon; nor do they assume any liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery value or existence of the goods represented by any document(s), or for the good faith or act and/or omissions, solvency, performance or standing of the consignors, the carriers, the forwards, the consignees or the insurers of the goods, or any other person whomsoever. Article 23. ' Marine/Ocean Bill of Lading: (a) If a credit calls for a bill of lading covering a port-to-port shipment, banks will, unless otherwise stipulated in the Credit, accept a document, however, named, which-- (i) appears on its face to indicate the name of the carrier and to have been signed or otherwise authenticated by: -- The carrier or a named agent for or on behalf of the carrier, or -- the master or a named agent for or on behalf of the master. ' Any signature or authentication of the carrier or master must be identified as carrier or master, as the case may be. An agent signing or authenticating for the carrier or master must also indicate the name and the capacity of the party, i,e, carrier or master, on whose behalf that agent is acting, and (ii) indicate that the goods have been loaded on board, or shipped on a named vessel. ' Loading on board or shipment on a named vessel may be indicated by pre-printed wording on the bill. Of lading that the goods have been on the bill of lading that the goods have been loaded on board a named vessel or shipped on a named vessel, in which case the date of issuance of the bill of lading will be deemed to be the date of loading on board and the date of shipment. ' In all other cases loading on board a named vessel must be evidenced by a notation on the bill of lading which gives the date on which the goods have been loaded on board, in which case the date of the on board notation will be deemed to be the date of shipment. ' If the bill of lading contains the indication "intended vessel", or similar qualification in relation to the vessel, loading on board a named vessel must be evidenced by an on board notation on the bill of lading which, in addition to the date on which the goods have been loaded on board, also include the name of the vessel on which the goods have been loaded, even if they have been loaded on the vessel named as the "intended vessel".
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' If the bill of lading indicates a place of receipt or taking in charge different from the port of loading, the on board notation must also include the port of loading stipulated in the Credit and the name of the vessel of which the goods have been loaded, even if they have been loaded on the vessel named in the bill of lading. This provision also applies whenever loading on board the vessel is indicated by pre-printed wording on the bill of loading, and (iii) indicates the port of loading and the port of discharges, stipulated in the Credit, notwithstanding that it- (a) indicates a place of taking in charge different from the port of loading, and/or a place of final destination different from the port of discharge, and/or (b) contains the indication "intended" or similar qualification in relation to the port of loading and/or port of discharge, as long as the document also states the ports of loading and/or discharge stipulated in the Credit, and (iv) consists of a sole original bill of lading or, if issued in more than one original, the full set as so issued, and (v) appears to contain all of the terms and conditions of Carriage, or some of such terms and conditions by reference to a source or document other than the bill of lading (short form/blank back bill of lading); banks will not examine the contents of such terms and conditions, and (vi) contains no indication that it is subject to charter party and/or indication that the carrying vessel is propelled by sail only, and (vii) in all other respects meets the stipulations of the Credit. (b) For the purpose of this Article, transshipment means unloading and reloading from one vessel to another vessel during the course of ocean carriage from the port of loading to the port of discharge stipulated in the Credit. (c) Unless transhipment is prohibited by the terms of the Credit, banks will accept a bill of lading which indicates that the goods will be transhipped, provided that the entire ocean carriage is covered by one and the same bill of lading. (d) Even if the Credit prohibits transhipment, banks will accept a bill of lading which-- (i) indicates that transhipment will take place as long as the relevant cargo is shipped in Container(s), Trailer(s) and/or "LASH" barge(s) as evidenced by the bill of lading, provided that the entire ocean carriage is covered by one and the same bill of landing, and/or (ii) incorporates clauses stating that the carried reserves the right to tranship. Article 32. ' Clean Transport Documents. (a) A clean transport document is one which bears no clause or notation which expressly declares a defective condition of the goods and/or the packaging. (b) Banks will not accept transport documents bearing such clauses or notations unless the Credit expressly stipulates the clauses or notations which may be accepted.…
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