LexSTATE BANK OF INDIA AND ORS. versus MANGANESE ORE (INDIA) LTD. AND ANR.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
A
STATE BANK OF INDIA AND ORS.
v.
MANGANESE ORE (INDIA) LTD. AND ANR.
OCTOBER 8, 1996
B
[K. RAMASWAMY AND G.B. PATTANAIK, JJ.)
Banking,.·
Letters of credit-Non-conipliance with terms and conditions by
C seller-Bank's liability co honour the letters of credit-Respondent-seller com-
pany filed a suit for recovery of money against the buyer and the bank as the
two defendants had entered into letters of credit-Trial Court decreed the suit
as against buyer only holding that quality of goods supplied by the seller did
not match the quality of goods contracted under the letters of credit-High
Court reversed the decree as against the Bank and held it liable to pay the
D decretal amount-Held, when the parties have admitted that the goods sup-
plied were not of a specification and standard required under the letters of
credit vis-a-vis the Bank and the buyer, the obligation to honour the letters of
credit having been conditional one, the Bank is absolved of its liability to
honour the letters of credit and pay over the value of goods supplied by the
E plaintiff to buyer company-Judgement and decree of High Court set aside
and that of the trial court is restored-Plaintiff shall seek for payment from
the buyer company.
F
G
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1717 of
1980.
From the Judgment and Order dated 31.10.79 of the Bombay High
Court in A. No.163 of 1971.
Sanjay Kapur, Yashank Adhyaru and M.K Michael for the Appel-
lants.
A.K. Sanghi for the Respondents.
The following Order of the Court was delivered :
This appeal by special leave arises from the judgment of the Division
H Bench of the Bombay High Court made on October 30-31, 1979 in Appeal
310
•
STA1EBANKOFINDIAv.MANGANESEORE(l)LTD.
311
No. 163/71.
A
The first respondent-Manganese Ore {India) Ltd. laid the suit
against the appellant and M/s. Emmenor Export Traders, the first defen-
dant to recover the suit amount in the sum of Rs. 1,69,000 and odd. The
trial Court in Special Suit No. 91/69 by judgment and decree dated April
30, 1971 decreed a sum of Rs. 1,66,191.10 as against the first defendant. B
On appeal by the first respondent, the High Court reversed the decree as
against the appellant and made the appellant liable to pay over the same.
When the leave was granted by this Court, the appellant was directed to
deposit the decretal amount and the first respondent was given liberty to
withdraw the amount on furnishing adequate security to the satisfaction of C
the Registrar of the High Court.
The question in this case is: Whether the appellant is liable to honour
the letters of credit entered into between the appellant and M/s. Emmenor
Export Traders? The admitted position is that under the letters of credit
a conditional contract was entered into between the appellant and the first D
defendant. The most important clauses relating thereto are as under :
"Clauses l{i) and l{iii){b ). Clause l{i) provides in respect of the
documents for negotiations. Firstly, it is the seller's signed com-
mercial invoice in quadruplicate based on the weight, sampling, E
analysis and moisture determined at the time of shipment, valuing
the ore at the ratio of 17 U.S. dollars converted into@ Rs. 4.75
to one U.S. dollar per dry metric Tonne of 1,000 Kg. net dry weight,
F.O.B. Vishakhapattanam, on the basis of 40 per cent Manganese
/
with the pro rota scale for each unit of Manganese content above
or below 40 per cent down to the minimum of 39 per cent. The F
clause l{iii){b) speaks about the certificate in triplicate from M/s.
R.G. Brigga and Co. Private Ltd. of sampling assaying and mois-
ture, determined at the post of shipment showing the material to
conform to the following contracted qualities. {B) hard lumpy,
Indian Low grade Manganese Ore having the following chemical G
analysis at 105 degrees C. minimum 39 per cent. {F.E.) Iron
Maximum 8.25 per cent· SI0-2 Maximum 23.00 per cent Phos-
phoruio. Minimum 0.23 per cent {All approximately)."
The trial Court as well as the High Court have recorded a finding
that the quality of the goods supplied by the defendant to the buyers did H
312
SUPREME COURT REPORTS [1996] SUPP. 7 S.C.R.
A not match the quality contracted for under the letters of credit. The trial
Court considered this aspect of the matter and the obligation to honour
l
B
c
D
E
F
G
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the contract in paragraph 13 and concluded as under :
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"Now I proceed to see whether, the Plaintiff had coExcerpt shown. Read the full judgment & AI analysis in Lexace.