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Judgment
The plaintiff has taken out a summons for judgment for a sum of Rs.6,98,50,000/- payable by the defendant under an inland letter of credit.
The petitioner is a distribution licencee within the meaning of Section 2(17) of the Electricity Act, 2003. for electricity One Vasavi Steel Industries LTD.applied connection Electricity Board (WBSEB).from the erstwhile West Bengal An agreement dated 15th November, 1997 was entered into between WBSEB and Vasavi Steel by which the company furnished a bank guarantee as well as a security deposit for availing the supply of electricity.
The company in terms of Clause 19 of the agreement also furnished an irrevocable, revolving, unconditional and non-recours.letter of credit being L/C No.520INLC0011/08 issued by ING Vysya Bank LTD.the predecessor in interest of the respondent bank on behalf of the company for a sum of Rs.490 crores.
Subsequently, the said letter of credit was amended on 27th May, 2013 to the extent that the amount covered thereunder was enhanced to Rs.550 crores. The expiry date of the letter of credit was extended till 19th June, 2015.
In view of the failure on the part of the company to pay the energy charges in terms of the energy bills, the said letter of credit was invoked.
The petitioner states that the company being a consumer having failed to pay the electricity dues in terms of the agreement, the defendant on demand is required to pay the said sum. The inland letter of credit, inter alia, contains the following matter: "3. The bank will be liable to pay the amount or part thereof if documents as required under the letter of credit are properly presented strictly in terms of the conditions of the letter of credit within the overall limit under this LC on or before the expiry date of the LC.
In case Letter of of any steps Credit for facility revocation/cessation without any of limitation the to WBSEDCL, clause no.8 of the memo C/BC/BAN/13/3163A dated 28/07/04 SHALL APPLY.
NOTWITHSTANDING anything contained herein above our total liability under this Revolving letter of Credit shall not exceed only. The purpose.
Rs.490 lacs (rupees Four Hundred Ninety Lacs) At any point of time. other terms are not necessary for the present The said terms are set out since an objection is raised on behalf of the respondent bank that the invocation is not in terms of clause 5 of the said letter of credit."
Although the letter of invocation is not on record, but the letter denying payment is at page 65 of the petition. " 15th December, 2014.
The said letter is dated The relevant portion of the letter is set out below: We have scrutinized the documents under terms and conditions of the above Letter of Credit and observed the following discrepancy.
Document presented are over and above the value available under the LC, hence overdrawn We have advised the discrepancy in document vide our SFMS Message Type 734to Punjab National Bank, copy enclosed for your ready reference."
In consideration of above facts and since M/S.Sr.Vasavi Industries LTD.has so far not communicated their acceptance to the discrepant document, the documents stands rejected at our counter, note of which may please be taken. The learned Counsel appearing on behalf of the bank submits that the invocation letter refers to a sum in excess o9f Rs.490 lakhs, amount in submitted unless excess that of the the beneficiary Rs.550 lakhs discrepancy is accept could not because the be in liability paid. the any It is letter of invocation a sum over and above Rs.490 lakhs have been claimed.
The bank contends that mention of an amount over and above Rs.550 lakhs in the letter of invocation is the discrepancy for which the letter of invocation was not honoured.
Mr.Datta, learned Advocate for the bank submits that invocation is not in terms of clause 5 of the letter of credit which requires the plaintiff to invoke the letter of credit and make demand within the limit of letter of credit and within its validity period. Although the plaintiff the may have demanded the payment within validity period, but having regard to the fact that a much larger claim has been made, the bank has refused to honour the terms of the Letter of Credit.
Mr.Datta, has referred to a judgment of the Honble Supreme Court in the case of United Commercial Bank versus Bank of India & ORS.reported in AIR1981SC1426to submit that the bank is not obliged to make payment if the demands are discrepant and are not in conformity with the terms of the letter of credit. The said defence raised, in my view, is of no substance.
The reply of the bank shows that the bank had refused to make payment since a claim over and in excess of Rs.550 crores have been made by the plaintiff although under the letter of credit the liability of the bank is restricted to Rs.550 crores. be termed as a discrepancy.
This cannot The discrepancy as the law recognised is material and substantial and not merely an omission of dotting is and cutting ts. In the instant case, there cannot be any doubt that the letter of invocation does not suffer from any discrepancy. The liability of the bank is restricted to Rs.550 crores.
The claim might have been more than the aforesaid sum would contend plaintiff that that it had although been the a The bank possibly specific plaintiff contention might have of larger the claim against the company but having regard to the fact that the letter of credit restricts a liability to Rs.550 crores. The plaintiff would have restricted its claim to Rs.550 crores and could not have demanded larger sum. It does not appear that the plaintiff had asked for larger sum over and above Rs.550 crores.
In any event, the liability of the bank to pay Rs.550 crores in terms of the letter of credit cannot be disputed. Under such circumstances, there shall be a decree for a sum of Rs.550 crores together with interest at the rate of 8% per annum on and from January 2015 until payment.
Since the aforesaid order virtually disposed of the suit and Mr.Mainak Basu, learned Counsel appearing for the plaintiff, on instructions, submits that the plaintiff is not praying for any further reliefs, the suit is also treated on the days list and disposed of by this order.
GA No.3728 of 2016 is disposed of. decreed. CS No.173 of 2016 is The department is directed to draw up and complete the decree as expeditiously as possible.