w w w . L a w y e r S e r v i c e s . i n



Al Mustanir Establishment For Trade v/s Varuna Overseas Private Limited


Company & Directors' Information:- A & F OVERSEAS TRADE LIMITED [Active] CIN = U52321TN1984PLC010790

Company & Directors' Information:- A.T. TRADE OVERSEAS PRIVATE LIMITED [Active] CIN = U99999MH1997PTC110234

Company & Directors' Information:- VARUNA OVERSEAS PVT LTD [Active] CIN = U74899DL1976PTC008297

Company & Directors' Information:- TRADE INDIA OVERSEAS PRIVATE LIMITED [Strike Off] CIN = U51909GJ1994PTC022799

    Suit Appeal No. 688 of 1981

    Decided On, 01 February 1998

    At, High Court of Delhi

    By, THE HONOURABLE MR. JUSTICE K. RAMAMOORTHY

    For the Appearing Parties: Nandini Sahni, R.C. Gulabani, Ravinder Sethi, Advocates.



Judgment Text

K. RAMAMOORTHY, J.


(1) THE plaintiff had instituted the suit on 30. 5. 1981 for the recovery of Rs. 31,57,322. 57 against all the defendants and for the recovery of Rs. 3,08,440. 00 from defendants 17 and 18 in addition to the first relief jointly and severally and payment of interest@ 18% per annum from the date of suit till the date of realisation. There are 19 defendants in the suit. The case of the plaintiff could be stated in the following terms.


(2) THE plaintiff is a Company carrying on business in Saudi Arabia and governed by the laws enforced in the Kingdom of the Saudi Arabia. The plaintiff placed two orders on 22. 11. 1978 bearing Nos. 548 of 1978 and 549 of 1978 with the first defendant for the purchase of 1000 metric tons Round bars each. The orders were placed through the agent of the first defendant in Saudi Arabia, who is called M/s. United Arab Agencies. The agent issued indents which contained the following terms and conditions:


(a) The value of each indent was U. S. $ 34,000. 00 (three lacs forty thousand), (b) All shipments were to be made within 90 days; (e) The goods were to be delivered at Hodde dah port. (d) The payments was to be made by means of Letters of Credit to be opened by the plaintiffs in favour of Defendant No. 1 through their bankers. The plaintiff later on obtained the confirmation from the first defendant through the 5th defendant Mr. Ravi Shankar Upadhaya. The plaintiff first requested to make arrangements for opening a Letter of Credit which should be made transferable. On 23. 11. 1978 the plaintiff opened a Letter of Credit through its bankers. The at Saudi Al Francis with reference to two contracts. The first defendant was named as the beneficiary of the Letter of Credit. It was opened for U. S. $ 80,000. 00 C and F Hoddeidah Port. The Letter of Credit provided that the reimbursement was to be made by sight drafts on the Banque Del' Inde Chine Et De Suez Chicago, Illinois, U. S. A. The Letter of Credit was valid upto 3. 3. 1979. The first defendant sent a telex message to the United Arab Agencies that the Letter of Credit should be amended by making a divisible so that the first defendant could arrange for the shipment of M. S. Round Bars from various suppliers on behalf of the first defendant. The first defendant assured that the shipment would be made in the month of February, 1979. 189 In the month of February, 1979 Sh. Bharat Shah of M/s. United Arab Agencies, who was the agent of the first defendant, happened to be in India and contacted the 5th defendant Mr. Ravi Shankar Upadhaya who assured Mr. Bharat Shah that the consignment was actually in Bombay Port and was in the process of being loaded into the ship. Mr. Bharat Shah returned to Jeddah. He received a telex message from Mr. Ravi Shankar Upadhaya, 5th defendant on behalf of the first defendant that on the 5th of March, 1979 a shipment of approximately 500 metric tons of M. S. Round Bars was being effected on the same day. Mr. Ravi Shankar Upadhaya, 5th defendant, came tojeddah and requested the plaintiff to extend the Letters of Credit for a further period of three months. He stated that if the Letters of Credit were extended the entire consignment would be shipped within a few days. The plaintiff insisted that if the first defendant was prepared to give 10% performance guarantee from a scheduled bank the time for Letters of Credit could be extended. The Bank guarantee was given on behalf of the 6th defendant M / s. Kupal Material and Metal Private Limited, who was not known to the plaintiff or to Mr. Bharat Shah, the agent of the first defendant. Later on, Mr. Ravi Shankar Upadhaya, the 5th defendant, gave an affidavit that the entire quantity agreed upon would be shipped within the extended period of Letters of Credit. He also agreed that if the consignment was not shipped the first defendant would reimburse the plaintiff.


On the strength of the assurance given by Mr. Ravi Shankar Upadhaya on behalf of the first defendant and on his own behalf, the plaintiff gave instructions to its bankers for the extension of the Letters of Credit upto 25. 5. 1979. It appears that the Letter of Credit was transferred in favour of the 6th defendant M/s. Kupal Material and Metal Private Limited. The Letters of Credit had been encashed by making false representations to the bank that the ship named (Nikkir) was never berthed at Hoddeidah Port. Defendants 15 and 16 when enquired gave evasive replies. The plaintiff's manager and Mr. Bharat Shah of the United Arab Agencies, the agent of the first defendant, came to India and found that a huge fraud had been committed. A criminal complaint was lodged against the first defendant and others in the Court of the Metropolitan Magistrate, New Delhi. The plaintiff came to know that defendants No. 6 to 14 had fabricated documents for encashing the Letters of Credit and money was received by them on 21. 4. 1979 from defendants 17 and 18. Defendants 15 and 16 had issued bills of lading dated 19. 4. 1979 stating that a shipment of M. S. Round Bars was made in Nikkir Ship in the Bombay Port. The bills of lading had been fabricated. Defendants 1 to 5 had joined in the fraud along with defendants 6 to 16. The Syndicate Bank (defendants 17 and 18) failed and neglected to scrutinise the documents before paying money under the Letters of Credit. It is stated in the plaint that with reference that with the negligence of the defendants 17 and 18 that they had failed to make very crucial enquiries to find out the genuineness of the documents produced for receiving money under the Letters of Credit. Paragraph 13 of the plaint is relevant and it reads as under: "that the plaintiff says that the defendants No. 17 and 18 before parting with the money failed to scrutinise the documents and to check up them carefully in accordance with the instructions and the conditions mentioned in the Letters of Credit. Defendants No. 17 and 18 failed to observe that the documents which were to be scrutinised before payment, were not even tendered to the Bank for its perusal. Further defendants No. 17 and 18 failed 190 to take into consideration that although the invoices, bills of lading were dated 19. 4. 1979, the G. R.-I form for the same were' dated 18. 1. 1979 and were thus prima facie stale. The defendants No. 17 and 18 also failed to notice that the bills of lading did not bear signatures of any authorised person of a shipping company nor did the bills of lading mentioned the owner of the ship. The plaintiff says that under the amended Letter of Credit, the documents which were required to accompany, the bills of lading were inter alia a certificate from the General Superintendent certifying in the docks that M. S. Bars are/ were strictly as per Agents' Indent Nos. 548/78 and 549/78 dated 22. 11. 1978 as mentioned in the Letter of Credit in respect of the sizes, quantities etc. and also a certificate from the defendants Nos. 6 certifying that the goods shipped are strictly in accordance with the agents' indent Nos. 548/78 and 549 of 1978 dated 22. 11. 1978 as mentioned in the Letters of Credit and that any claim received from the openers of the letters of credit M/s. at Mustaneer Establishment, Jeddeah, Saudia Arabia, the plaintiff in this regard will be settled/paid by M/s. Kupal Material and Metal Private Ltd. , defendant No. 6 on first demand. None of these documents were tendered to defendants Nos. 17 and 18 and yet the defendants No. 17and 18 did not consider it necessary to call for the said documents from the defendants. The plaintiff says that the defendants No. 17 and 18 is not scrutinising the documents tendered to it and not calling the documents required to be tendered, was grossly negligent in its duties as Bankers and were not entitled to make the payment under the said Letter of Credit to any person and are liable to the plaintiff for the amounts parted with by the Bank/defendants No. 17 and 18 under the said Letter of Credit. " Defendants 1 to 16 and 19 had received Rs. 22,27,445. 89 conniving with defendants 17 and 18. It is stated by the plaintiff that it never agreed for the transfer of Letter of Credit in favour of the 6th defendant and the first defendant had not discharged its obligations under the contract. 2. It is stated that defendants 15 and 16 had received a sum of Rs. l,65,000. 00 as freight charges by producing forged receipts enabling the 6th defendant to receive the payment under the Letters of Credit.


(3) DEFENDANTS 17 and 18 ought to have examined the documents produced before them with due care and diligence and they failed to discharge their duties.


(4) THE plaintiff claims interest @ 18% perannum on the sum of Rs. 22,26,445. 89 from 23. 4. 1979 upto 27. 5. 1981 the plaintiff had calculated the interest and had claimed a total sum of Rs. 31,57,322. 57. In paragraph 18a, it is stated :


"that the plaintiff says that the defendants 17 and 18 had given a performance guarantee, the same was performed only for 1200 metric tons. Thus the defendants 17and 18 are bound to perform the said guarantee and pay to the plaintiff for the remaining 800 metric tons which were also never shipped to the plaintiff. Thus the defendants Nos. 17and 18 are liable and bound to make payment of US $ 27,200 equivalent to Rs. 2,17,600. 00 (Rs. two lacs seventeen thousand six hundred) in addition to the amount claimed above with interest @ 18% (eighteen) p. a. which comes to Rs. 90,840. 00 (Rs. ninety thousand eight hundred forty). An addition amount of Rs. 3,08,440. 00 (Rs. three lacs eight thousand four hundred forty) is due to the plaintiff from the defendants Nos. 17 and 18. "


The plaintiff had made the claim for Rs. 3,08,440. 00 against defendants 17 and 18 in addition to the sum of Rs. 31,57,322. 57.


(5) ON 1. 4. 1986 defendants 17 and 18 Syndicate Bank filed its written statement. The plea that is taken by the Syndicate Bank is that the negotiating Bank is answerable only to the Bank which established the Letter of Credit and there was no privity of contract between the plaintiff and the Syndicate Bank and, therefore, the plaintiff cannot make any claim against the Syndicate Bank. It is stated in paragraph 7 in the written statement :


"m/s. Kuppal Materials and Metal Private Limited (defendant No. 6) presented the export documents on 23. 4. 1979 for negotiation. The said defendant No. 6 also produced a photo copy of the letter intimating extension of the validity period of the Letter of Credit. "


(6) IT is stated by the Syndicate Bank that it was not aware of the additional conditions imposed by the Canara Bank. It is asserted in paragraph II as under:


"it is ,there fore, submitted that the answering defendants negotiated documents fully in accordance with the terms of the Letter of Credit in question. From the additional pleas, it will be seen that the answering defendants have no knowledge or, information of the additional conditions because the same were communicated to the answering defendants subsequent to the negotiation was completed. There is nothing unusual in the bills of lading being of the date 19. 4. 1979 and G. R. I, forms were of 18. 1. 79. It is denied that the G. R. I, forms had become stale. The defendants had negotiated the documents fully in accordance with the provisions of the uniform customs and practice for negotiation of documentary credits which governs the negotiation of documentary Letters of Credit in question. It is denied that the bill of lading did not bear signatures of any authorised person of the Shipping Company. It is denied that the bills of lading did not mention the owner of the ship. In any event, non-mention if any, is immaterial. It is submitted that all the discrepancies sought to be now pointed out are after-thoughts and if, in fact, there was any such discrepancy, the Bank which established the Letter of Credit ought to have pointed out the same within reasonable time. The Bank which established the Letter of Credit not only failed to point out any discrepancy within reasonable time but, in fact, has not raised any dispute till this date. Further, the said Bank has paid the amount in accordance with its commitments. Therefore, if the plaintiff is in any way aggrieved, its remedy is against the Bank which established the Letter of Credit and not against the answering defendants. It is, therefore, denied that the answering defendants are in any way liable to pay any part of the amount to the plaintiff. "


(7) IT is asserted in paragraph 12 that "the payment was made in the normal course of banking transactions. " It is stated in paragraph 14 :


"it is, however, submitted that by their letter dated 6. 9. 1979 the defendant No. 16 has admitted that certain bills of lading mentioned in the said letter were issued without actually receiving the goods. The said letter also mentions that a sum of Rs. 1,65,519. 40 was received by the said defendants No. 15 and 16 towards freight charges. Apart from the said letter, the answering defendants had no other information regarding the allegations made in para under reference. "


(8) ACCORDING to the Syndicate Bank, it was not liable to pay any amount to the plaintiff. Stating to be additional pleas, in paragraph 21 it is stated by the Syndicate Bank:


"the Letter of Credit in question was established by the Bank, viz. , at Bank Al Saudi at Francis. The said Letter of Credit was transferable and not restricted to any Bank in particular. Originally, the period of validity of the Letter of Credit was till 3. 3. 1979. The Banque Nationale de Paris, Calcutta, confirmed the credit. The said Banque Nationale de Paris by their letter dated 2. 4. 1979 advised M/s. Dhar General Overseas General Private Limited (who subsequently changed their name to Varuna Overseas Private Limited) that the validity of the Letter of Credit was extended up to 25. 5. 1979. The said letter also stated, "all other terms and conditions remain unchanged". There was nothing on the face of the letter to indicate that the extension was subject to any additional conditions. The defendant No. 7 as a transferee of the L/c submitted a photo copy of the abovesaid letter to the answering defendants on 23. 4. 1979 and sought to negotiate the documents. Defendant No. 6 was already having dealings with the answering defendants and the answering defendants without having any reason to suspect the authenticity of the letter of the Banque Nationale de Paris negotiated the documents in the normal curse. The said negotiation was accepted as correct by the confirming Bank, viz. , Banque Nationale de Paris, and also the opening Bank. Therefore, as far as the answering defendants are concerned, the transaction had come to an end long before the filing of the suit and the immediate parties to the Letter of Credit viz. , the opening Bank, the confirming Bank and the negotiating Bank had no dispute whatsoever. "


(9) THE Syndicate Bank had prayed for the dismissal of the suit. Defendants 1 to 5 and 19 filed the written statement on 6. 7. 1987. The written statement had been signed by first defendant, second defendant, third defendant, 4th defendant, 5th defendant and 19th defendant. In paragraph 5 of the preliminary objections of the written statement, it is stated :


"a transferable Letter of Credit was opened by the plaintiff for it was known to the plaintiff that defendant No. 1 is not the supplier of the goods. Defendant No. 1 had the right to transfer the credit to the actual supplier. These facts were within the knowledge of the plaintiff through its agent. By opening a transferable Letter of Credit and on transfer of the same in favour of the actual supplier, i. e. defendant No. 6, a new contract came into existence between the plaintiff and defendant No. 6 on the same terms and conditions as indicated in the Letter of Credit. In these circumstances, the rep lying defendants state that the suit is bad in law and that the plaintiff has no cause of action against defendant Nos. 1 to 5 and 19f or the reason that the transfer of the Letter of Credit created a new contract and that such an arrangement was fully in the mind of the plaintiff and the defendant No. 1 and for this reason the credit was made transferable. On the actual transfer of the Letter of Credit in favour of defendant No. 6, the old contract between the plaintiff and defendant No. 1 was rescinded and a new contract came into existence between the plaintiff and the defendant No. 6 on the same terms and conditions as indicated in the Letter of Credit. "


(10) IT is asserted by these defendants that the contract between the plaintiff and the first defendant had come to an end on 3. 3. 1979 on the expiry of the validity of the period in the Letter of Credit dated 23. 11. 1978. The plaintiff insisted on for performance guarantee for 10% of the value of the Letter of Credit, that was furnished by the 6th defendant through Syndicate Bank and that was accepted by the plaintiff and the period of validity of the Letter of Credit was extended by the plaintiff. Therefore, according to these defendants there had been no vation of the original. contract and, therefore, a new contract had come into existence between the plaintiff and the 6th defendant. The plaintiff through its agent M/s. United Arab Agencies directly approached the 6th defendant and obtained a guarantee dated 23. 5. 1979 and thus the plaintiff had accepted the 6th defendant to be liable to perform the obligations of the contract. The plaintiff had encashed the performance guarantee given by the Syndicate Bank and, therefore, estopped from denying the no vation of the old contract.


(11) ACCORDING to this defendant, the 5th defendant Mr. Ravi Upadhaya did not go to Jeddah for taking up the matter of extension of Letter of Credit. The guarantees relied on by the plaintiff, alleged to have been executed by the defendant, were without any authority by the first defendant. The first defendant did not authorise Mr. Ravi Upadhaya, the 5th defendant, to give any affidavit and the first defendant is not bound by the guarantees executed by the 5th defendant. According to these defendants, in any event, when the plaintiff relies on the guarantees executed at Jeddah, this Court has no jurisdiction to try the suit. These defendants would state that the plaintiff exercised coercion, duress for getting documents from the 5th defendant. It is stated ;


"the replying defendants further state that the plaintiff with the help of Mr. A. I. Shah and Mr. B. J. Shah of United Arab Agencies had forcibly taken away the passport of defendant No. 5 and had threatened him that besides not being allowed to move out of Jeddah he would remain in their custody till he executes a guarantee. Defendant No. 5 had no authority on behalf of defendant No. 1 and other replying defendants to execute any guarantee. However, since his passport had been taken away and he was not allowed to move at his free Will he had no option but to do as asked for by Mr. A. J. Shah and Mr. B. J. Shah ostensibly for and on behalf of the plaintiff. The defendant No. 5 was not allowed to leave the office of M/s. United Arab Agencies, the agents of the plaintiff, except under escort and that too without his passport till he executed the guarantee as was required by the agents of the plaintiff. Defendant No. 5 was further threatened by Mr. A. J. Shah and Mr. B. J. Shah of M/s. United Arab Agencies that if he fails to execute the guarantee as required by them he will have to face dire consequences and may never be allowed to leave Jeddah as also lose his life. The threat to his life, the restriction on his movement, the taking away of his passport constituted duress and coercron, besides being criminal acts, in getting the guarantee deed executed from defendant No. 5 by the agents of the plaintiff. The said guarantee deed is null and void besides being not binding on defendant No. 1 as having been executed without its authority and having been extracted from defendant No. 5 by coercion, threats of physical force and illegal detainment. The agents of the plaintiff, namely, M/s. United Arab Agencies, through its proprietors Mr. A. J. Shah and Mr. B. J. Shah, sent various telex messages to defendant No. 1 in the name of defendant No. 5 for authorising defendant No. 5 to execute the deed of guarantee as was required by the said agents of the plaintiff. The defendant No. 1 did not authorise defendant No. 5 to execute any guarantee and defendant No. 5 besides having executed the guarantee under duress and coercion, executed the same without any lawful authority from defendant No. 1. The said guarantee is not binding on anyone of the replying defendants, the said guarantees having been obtained by exercise of undue influence, coercion and duress are null and void and cannot form the subject matter of the present suit. "


(12) IT is further stated in the written statement that the Syndicate Bank did not act as a prudent banker. Defendants 6 to 18 are guilty of fraud and conspiracy in fabricating various documents. Defendants 6 to 18 had acted in collusion with one another ignoring the provisions of Uniform Customs and Practice and also the Rules of International Commerce. Defendants 2 to 4 and 19 are neither necessary nor proper parties to the suit. In reply on merits, these defendants would deny liability. It is stated that two orders were placed on the first defendant by the agent of the plaintiff on 22. 11. 1978 for the purchase of 2000 MT of M. S. Round Bars. First defendant was only a merchant exporter and not a manufacturer, It was only for this reason that the plaintiff obtained a transferable Letter of Credit in favour of the first respondent so that the first defendant could transfer the same to any party which could export steel to the plaintiff. First defendant, therefore, availing the position transferred the Letter of Credit in favour of the 6th defendant who was doing export of steel, who was associated with Shah Brothers of Bombay, who were exporters of steel and Mr. Kirti H. Shah of Shah Brothers was also one of the Directors of the 6th defendant M/s. Kupal Material and Metal Private Limited. The transfer to the 6th defendant was accepted by the plaintiff. It is stated by these defendants that when the original Letter of Credit had expired on 3. 3. 1979 and when the plaintiff had agreed to extend the Letter of Credit on the Syndicate Bank furnishing performance guarantee for 68,000 US Dollars which was the 10% of the value of the Letter of Credit. The obligation of the first defendant had come to an end. It was the 6th defendant who had undertaken to shift the entire quantity of 2,000 MT M. S. Round Bars by January 1979. The first defendant would again reiterate the visit by the 5th defendant to Jeddah. According to the defendants, the 5th defendant landed at Jeddah on 9. 3. 1979. As stated above, the plaintiff exercised undue influence and duress and obtained documents from the 5th defendant. The validity of the period of Letter of Credit was extended upto 25. 5. 1979. These defendants would admit:


"defendant No. 1 forwarded the amendment to the Letter of Credit dated 2. 4. 1979 to their bankers Canara Bank to transfer the same in favour of defendant No. 6. However, on the reverse of the said extension (amendment) of the Letter of Credit, certain conditions were also imposed by defendant No. 1 which were to be complied with before the documents in respect of the shipment of the said quantity of 2,000 M. Tons of M. S. Round Bars could be negotiated. Inview of the unfortunate history of the matter the conditions set out below were added bydefendant No. 1 to protect the interest of the plaintiff although to benefit and obligation under the L/c had passed to defendant No. 6. 1. Negotiations of the document should be made on or before 25th May, 1979. 2. The following certificates must be obtained from the transferee, M/ s. Kupal Materials and Metals P. Ltd. at the time of negotiation of the documents and this may be sent to M/s. Dhar General Overseas P. Ltd. , 8, Malcha Marg Market, Chanakyapuri, New Delhi along with the non-negotiable copy of the documents: (a) A certificate from Genera! Superintendent certifying in the docks that the M. S. Bars are strictly as per agent indent No. 548/78 and 549 / 78 dated 22nd November, 1978 as also mentioned in L/c in respect of the sizes, quantity and quality etc. (b) A certificate from M/s. Kupal Materials and Metals Pvt. Ltd. certifying that the goods shipped are strictly in accordance with the agent indent Nos. 548/78 and 549/78 dated 22nd November, 1978 as mentioned in the L/c and that any claim received from the openers of the L/c (M/s. at Mustaneer Establishment for Trade, Jeddah, Saudi Arabia) in this regard will be settled/paid by M/s. Kupal Materials and Metals Pvt. Ltd. on first demand. The L/c Extension Advice duly endorsed was forwarded by defendant No. 1 to Syndicate Bank, (defendant No. 17) vide its registered letter dated 13. 4. 1979 and a copy of the same to M/s. Kupal Materials' Metals Pvt. Ltd. (defendant No. 6). These letters were received by Syndicate Bank on 16. 4. 1979 and by Kupals on 17. 4. 1979. "


(13) IT may be noticed here that the letter dated 13. 4. 1979 and the receipt of those letters by the Syndicate Bank are not spoken to by the 5th defendant as Ex. DIW2 and Mr. Gupta as DIW3. It is stated by these defendants that sometimes towards the end of April, 1979 the first defendant learnt from 6th defendant that the 6th defendant had shipped a quantity of approximately 800 MT M. S. Round Bars to the plaintiff. The first defendant by its letter dated 30. 4. 1979 wrote to the Syndicate Bank, 17th defendant, that the 6th defendant had shipped 800 MT of M. S. Round Bars and the copies of the non negotiable bills of lading had been sent to them by the 6th defendant. The first defendant requested the Syndicate Bank, 17th defendant, to pay their commission. On 2. 5. 1979 the first defendant received letter dated 26. 4. 1979 from the 17th defendant along with its commission one set of non negotiable document of each of the three bills of lading. The first defendant by letter dated 5. 5. 1979 wrote to the Syndicate Bank, 17th defendant, for the certificates relating to the condition of the consignment regarding the quality and quantity. The 6th defendant received a letter from Mr. B. J. Shah of United Arab Agencies (P. W. 2) for the exact date of the shipment in the vessel Nikkir. On receiving the said letter from Public Witness. 2 the first defendant sent a telex message to 6th defendant for information. The 6th defendant did not give any reply. By letter dated 18. 5. 1979 (Ex. DIW3/2) the 6th defendant informed the first defendant that a quantity of 799. 26 MT of M. S. Round Bars had already been shipped but the balance 1200 MT could not be shipped in view of the ban imposed by the Govt. of India. On 29. 5. 1979 the first defendant informed the plaintiff that the 6th defendant had not shipped the entire quantity of 2,000 MT M. S. Round Bars and the plaintiff could encash the performance guarantee furnished by the 6th defendant for the sum of 68,000 US Dollars. On 14. 5. 1979 (Ex. DIWI/17) the Syndicate Bank (defendant No. 17) wrote to the 6th defendant to furnish certificates as per the conditions of the transfer of Letter of Credit. They could show that the 17th defendant had not acted in accordance with the Banking Practice. It is stated that on 17. 5. 1979 a telephone call was received by the 5th defendant from Public Witness. 2 Mr. B. J. Shah, who was in Calcutta, informing that the 799 MT of M. S. Round Bars for which bills of lading was issued were lying in the Warehouse of the 15th defendant Amphora Marine Consultants Pvt. Ltd. , Bombay and Mr. Shah was only sceptical regarding the quality. It is stated "on the basis of the said telephonic call, it was taken by defendant No. 1 that it was only a normal shipping delay. Since Mr. Shah was satisfied with the transaction, no fraud or foul play was suspected". The first defendant came to know that Mr. B. J. Shah Public Witness. 2 was directly contacting the 6th defendant and obtained from the 6th defendant a guarantee bond dated 23. 5. 1979 which is certified by the 15th defendant M/s. Amphora Marine Consultants Pvt. Ltd. stating that the consignment would be loaded latest by the 30th June, 1979 either by Vessel NIKKIR or by any other Vessel. It may be noticed that this document is marked by the first defendant through D. IW3 Mr. B. M. Gupta and marked as DIW3/13. It was only towards the end of June, 1979 that Mr. Shah P. W. 2 informed the first defendant that the goods had not been shipped and that the money had been realised without shipping the goods. It is only thereafter the first defendant made enquiries both with the 6th defendant and the 15th defendant and came to know that defendants 6 and 17 played a fraud and had defrauded the first defendant to the extent of Rs. 22. 27 lakhs. The first defendant then wrote to its bankers Canara Bank, Chanakyapuri to keep the commi ssion received from the 17th defendant (Syndicate Bank) in a suspense account pending the investigation regarding the alleged fraudulent transaction of documents by the 6th defendant. The 17th defendant Syndicate Bank in conspiracy with the 6th defendant to defraud the plaintiff negotiated the documents presented by the 6th defendant inspite of the fact that two certificates had to be furnished by the 6th defendant as per the conditions imposed at the time of the transfer of the Letter of Credit. The first defendant was not at all aware of the fraud. The 17th defendant had acted negligently. These documents would refer to the conduct of the 17th defendant as to how it had acted ignoring relevant provisions of the Banking Practice. It is stated:


"it may further be submitted that in case defendant No. 17 had any reservations about the conditions of transfer of the L/c, it should have objected to such conditions when the same were imposed, while transfering the L/c and not after wrongful negotiation in utter disregard of such conditions imposed. The replying defendants state that the position in law is that the negotiating/ paying Banker must obey strictly the instructions in the Letter of Credit. In this case the Letter of Credit called for inter aha full set of "clean", "on Board",


"ocean" bills of lading stamped "liner Terms" issued to die order of shipper and endorsed to the order of at Bank at Saudi at Fransi Jeddah marked "freight Prepaid". It is an admitted fact that the Bill of Lading which the Syndicate Bank accepted and against which they paid does not bear the name of a Shipping Company. The defendants further state that in Article 19 (a) (i) of the Uniform Customs and Practice 1974 which is universally followed by Bankers it is clearly laid down that the bills of lading issued by forwarding agent will be rejected. Again in the book "documentary Credit Operation" published by the International Chamber of Commerce, Paris it is clearly stated that the Bill of Lading must be issued by a Shipping Company and bear the signature or the stamp of the Carrier or its agent. Admittedly the bills of lading was signed "for Amphora Marine Consultants Pvt. Ltd. " and signed by a Director. Although the name of the ship NIKKI'r is given, the name of the Shipping Line is not given and the signature is not as agents of the Shipping Line but on behalf of the agents themselves. Further the corrections and alterations in the Bills of Lading were not duly authenticated by the signatory of the B/ls. Clearly such a bill of lading should have been rejected by the Bank as not conforming to the rules laid down by the Uniform Customs and Practice".


(14) THESE defendants refer to the criminal complaint made by the plaintiff and for the purpose of deciding the issues that is not relevant. These defendants ultimately prayed for the dismissal of the suit. In the additional plea, it is stated by these defendants "the defendant No. 1, as already stated, has only received a commission of Rs. 53,251. 95 which amount, as already stated, on learning of the fraud practised by defendants No. 6 to 18, has been kept in a suspense account with the bankers. The fraud and collusion had been practised by defendants 6 to 18 in collusion with each other. These defendants had stated :


"if in law it is held that a decree has to be passed against defendants No. 1 to 5 and 19 then the amount for which the said decree will be passed, the replying defendants will be entitled to recover the same from defendants No. 6 to 18 and a cross decree to that effect has to be passed by this Hon'ble Court in favour of the replying defendants and against defendants Nos. 6 to 18".


(15) A specific relief has been prayed for by these defendants. These defendants had not paid any court fee and had not initiated any action under Order 8 Rule A, CPC.


(16) ON 10. 7. 1987 defendants 6 to 8 and 10 filed their written statement. In the preliminary objections, it is stated that the plaintiff should prove its legal entity. The suit has not been filed by an authorised person. All the averments in the plaint are denied. These defendants had not committed any forgery or fabrication. There is no cause of action by the plaintiff against these defendants. These defendants had stated that this Court had no jurisdiction and these defendants are not liable to pay any amount.


(17) THE plaintiff had filed replications to the written statements bydefendants and it is not necessary to set out the averments therein.


(18) FOLLOWING issues were framed on 25. 10. 1988 by this Court :


Issues 1. Whether the plaint has been signed, verified and the suit filed by a duly authorised person? 2. Whether Delhi Courts have jurisdiction to try and entertain the suit? 3. Whether suit is bad fur mis-joinder of parties? 4. Whether suit is bad for non-joinder of necessary parties? 5. Whether there was privity of contract between the plaintiff and defendants? 6. Whether defendant No. 1 was bound and liable to ensure delivery of the goods under Orders No. 548 and 549 of 1978 to the plaintiff not with standing the transfer of Letter of Creditin favour of defendant No. 6 and inspite of performance guarantee issued by defendant No. 6? 7. Whether defendant No. 1 committed breach of contract in not supplying to the plaintiff the contracted goods. 8. Whether a fraud was committed by defendant No. 6 and its Directors defendants No. 7 to 14 as alleged in the plaint? 9. Whether the suit has abated on account of the legal representatives of defendant No. 14 having not been impleaded? 10. Whe ther plaintiff is entitled to recover Rs. 2,17,000. 00 from defendants No. 17 and 18 and if so, is plaintiff entitled to interest on the said amount? 11. To what amount, if any, the plaintiff is entitled and if so, from which of the defendants? 12. Whether there was novation of the original contract as pleaded by defendants No. 1 to 5 and 19? 13. Whe ther plaintiff is entitled to interest? If so,on what amount and for which period? 14. Relief".


(19) PLAINTIFF examined Mr. Omer Mohamed Mossallam as Public Witness. 1 and Mr. Bharat Kumar Shah B. as Public Witness. 2. The first defendant examined Mr. Lalit Kaushik, working as LDC with CBI, New Delhi as DIWI, the 5th defendant Mr. Ravi Upadhaya as DIW2 and Mr. B. M. Gupta as DIW3.


(20) THE 6th defendant examined Mr. Kuldip Singh, a Director of the 6th defendant Co. as D6wi. The defendants 17 and 18 examined Mr. S. K. Issar as D17w1.


(21) THE plaintiff had filed documents Exs. P. 1 to P. 37 and P. 39. There is no document marked as Ex. P. 38. Wrongly at the time of the trial the document which should have been marked as Ex. P. 38 had been marked as Ex. P. 39. This is only to clear the record.


(22) FIRST defendant marked Exs. D1w1/1 to D1w1/17 through Mr. Ravi Upadhaya, the 5th defendant. Through Mr. B. M. Gupta DIW3 the first defendant marked Exs. DIW3/1 to DIW3/14. The 6th defendant did not file any documents. "the Syndicate Bank defendants 17 and 18 did not file any documents.


(23) BEFORE I enter upon an analysis of the oral evidence and the documents filed by the parties, I feel it is better I record the chronological events as emerging out of the documents produced which would enable me to comment on the oral evidence later on when I consider it.


(24) EX. P. 5 dated 9/11/1978 is an agreement between the first defendant now Varuna Overseas Pvt. Ltd. , previously Dhar General Overseas Pvt. Ltd. United Arab Agencies was appointed as the agent of the first defendant. The agreement reads as under;


"agency Agreement First Party : M/s. United Arab Agencies, A1-Maghrahi Building Apartment No. 101, P. O. Box No. 1045, Jeddah as Agent. Second Party: M/s. Dhar General Overseas Private Limited, 8, Malcha Marg Market, Chanakyapuri, N. Delhi-21 having its registered office at D. C. M. Premises, Bara Hindu Rao, Delhi-110006 as Supplier. It is hereby agreed that the 'second party' has appointed the first party as their agent for the territory of Jeddah, Saudi Arabia for supply of engineering and allied items manufactured in India. The Agent will try to attain maximum amount of business for the Supplier. This Agreement begins from 1st October, 1978 and will remain in force until 30th September, 1980. It can be further extended with the mutual consent of both the parties. The Supplier will allow a commission not exceeding 5% on FOB value to the Agent on all orders received and realisations made through the Agent. The remittance commission will be made by Bank Draft after each negotiation of the documents and after the receipt of money into the Indian Bank. The Agent will watch the interest of the Supplier regarding procurement of business, opening the Letter of Credit and promoting further business. In accordance to the above terms and conditions both parties affix their stamp and signatures hereunder. "


(25) WHAT is now stated by the first defendant is M/s. United Arab Agencies was only an agent of the plaintiff. On 21. 11. 1978 a telex message was sent by the 5th defendant Sh. Ravi Upadhaya (Ex. P. 26) on behalf of the first defendant to United Arab Agencies to get an order for export of 2000 M. T. M. S Bars. The 5th defendant had mentioned therein that the Letter of Credit should be opened through Syndicate Bank, Foreign Exchange Branch, Connaught Place, New Delhi. Under Ex. P. 2 of 22. 11. 1978 the United Arab Agencies, acting as Commission Agents, what is called an Order Sheet No. 548 / 78 informed the plaintiff that the first defendant would be sending 1000 MTS of M. S. Round Bars. The total value is mentioned as 3,44,000. 00 US Dollars. The shipment was to be made from India within a period of 90 days from 22. 11. 1978. Ex. P. 3 is of the same date which is also called Order Sheet No. 549/78 for 1,000 MT mentioning the same details about the quality and price as in Ex. P. 2. On 23. 11. 1978 (Ex. P. I) the plaintiff opened Letter of Credit for 6,80,000 US Dollars in favour of the first defendant, which was called Dhar General Overseas Pvt. Ltd. The money was payable at Calcutta. The validity period was fixed up to 3. 3. 1979. On 2. 12. 1978 the first defendant wrote to the United Arab Agencies under Ex. P. 6 in the following terms :


"this has reference to your letter No. 972/78 dated 25th November, 1978 and your letter 977/78 dated 25th November, 1978. 1 was glad to know you had a pleasant stay in Delhi and I could make some minor contribution towards making your stay a happy one. M/s. Bin-Mahfouz L/c of 500 tons is ready for execution but is still awaiting the two L/c amendments called for, but till date they have not come through. M/s. Al-Mustaneer L/c of 2000 tons is being taken care of. I am awaiting the "divisible" amendment which was agreed to be made by you. "


(26) THE 6th defendant (Kupal Material and Metal Pvt. Ltd.) on 22. 12. 1978 (Ex. D1w3/14) wrote to the first defendant requesting for the transfer of the Letter of Credit in the name of the 6th defendant :


"with reference to the dimensions the undersigned had with your Mr. Ravi Upadhaya over the last many days for the transfer of L/c No. 2965. In this connection we have to mention that this L/c may please be transferred to us today definitely. Kindly also refer our letter No. G. 26/78/4564 dated 21st Dec. , 1978, wherein we requested you to transfer the balance 1000 M. Tons on our association M/ s. Oberai Exports, Sheraton Hotel, Nariman Point, Bombay. Please note that all the shipments would be made by us only and also complete 2000 M. Tons of goods of this L/c would be shipped by us to Hodeidah in the same ship by January. Please be sure that the transfer of this L/c would be done today itself, so that the arrangements of 2000 M. Tons can be made with our mills for the production. "


(27) ON 23. 12. 1978 the Manager, Canara Bank, Diplomative Enclave, New Delhi sent a communication under Ex. P. 36 in the following terms :


"the REQUEST OF OUR CUSTOMER DHAR GENERAL OVERSEAS PVT. LTD. 8, MALCHA MARG MARKET, CHANKYAPURI, NEW DELHI M 21 WE TRANSFER THIS L/c TO THE EXTENT OF US $ 3,40,000. 00 (US DOLLARS THREE LACS FORTY THOUSAND ONLY) TO M/s. KUPAL METALS and MATERIALS PVT. LTD. , LOBBY NO. 3 KANCHANJUNGA BUILDING, 18 BARAKHAMBA ROAD NEW DELHI-110001, ON THE SAME TERMS AND-CONDITIONS OF THE ORIGINAL L/c SUBJECT HOWEVER TO THE FOLLOWING CONDITIONS : 1. AT THE TIME OF NEGOTIATION OF DOCUMENTS IN THE AFORESAID L/c, THE NEGOTIATING BANK WILL DEDUCT THE FOLLOWING AMOUNT AND REMIT THE SAME BYMEANS OF DEMAND DRAFT TO DHAR GENERAL OVERSEAS PVT. LTD. , 8 MALCHA MARC MARKET, CHANKYAPURI, NEW DELHI-21 WITHOUT ANY COST TO THEM : (A) A SUM OF US $ 5 PER M. T. THE CONSIDERATION AMOUNT FOR THE TRANSFER OF L/c ON 1000 M. T. WHICH WORKS OUT TO US $ 5,000. 00 EQUIVALENT TO INDIAN RUPEES. (B) COMMISSION AT ONE PERCENT ON F. O. B. VALUE IS ALSO TO BE DEDUCTED AT THE TIME OF NEGOTIATION AND WILL BE PAID TO DHAR GENERAL OVERSEAS PVT LTD. , 8, MALCHA MARG MARKET, CHANKYAPURI, NEW DELHI- 21 ON ACCOUNT OF THE COMMISSION PAYABLE TO THE FOREIGN AGENT. 2. ONE SET OF NON NEGOTIABLE DOCUMENTS SHOULD BE FORWARDED BY THE NEGOTIATING BANK TO DHAR GENERAL OVERSEAS PVT. LTD. , 8, MALCHA MARG MARKET, CHANKYAPURI, NEW DELHI-21 ALONGWITH THE DRAFT. 3. ANY ENHANCEMENT IN THE VALUE OF L/c WILL ONLY BE TRANSFERRED AFTER GETTING INSTRUCTION FROM DHAR GENERAL OVERSEAS PVT. LTD. , 8, MALCHA MARG MARKET, CHANKYAPURI, NEW DELHI-21. 4. ALL THE BANK CHARGES RELATING TO THE AFORESAID L/ CREGARDING TRANSFER, AMENDMENT, NEGOTIA TING ETC. WILL BE BORNE BY M/s. KUPAL METALS and MATERIALS PVT. LTD. LOBBY NO. 3, KANCHANJUNGA BUILDING, 18 BARAKHAMBA ROAD, NEW DELHI-110001. A PAYMENT OF RS. 3351. 66 HAS ALREADY BEEN EFFECTED TO M/s. BANQUE NATIONALE DE PARIS CALCUTTA AS THEIR L/c CONFIRAMTION CHARGES. THIS MAY BE REMITTED TO DHAR GENERAL OVERSEAS PVT LTD. ALONG WITH THEIR COMMISSION. 5. THE QUANTITY BREAKUP OF THE 1000 MT TO BE SUPPLIED BY YOU IS: 6mm/10mm/12mm/14mm/16mm 100 MT/200mt/250mt/200mt/250mt 6. THIS TRANSFER IS VALID FOR SHIPMENT AND NEGOTIATING UPTO 3. 3. 1979. THERE AFTER THE SECOND BENEFICIARY WILL NO MORE BE A PARTY TO THIS TRANSFER UNLESS AGREED TO, IN WRITING BY DHAR GENERAL OVERSEAS PVT. LTD. THIS TRANSFER IS EFFECTED BY US WITHOUT ANY RISK, RESPONSIBILITY AND UNDERTAKING ON OUR PART. "


(28) MR. B. M. Gupta (DIW3), who was working with the first defendant at the relevant time, would state in his evidence that Ex. P. 36 is a transfer endorsement of part of Letter of Credit in favour of the 6th defendant. On 25. 12. 1978 the first defendant Dhar Overseas wrote to the bankers in Jeddah of the plaintiff (Ex. P. 7) in the following terms:


"sub: L/c No. 2965 amounting to US $. 6,80,000 for 2000 tons of M. S. Round Bars We have received the above referred L/c, duly confirmed by Banque Nationale De Paris, Calcutta. It has been observed from the L/c that while opening the same alongwith the expiry date, the expiry place has been mentioned as Calcutta, India. We shall be thankful if you kindly amend the L/ C, so that the negotiation of the documents is not restricted to Calcutta only but anywhere in India. Since it is un-restricted L/c, the bankers take it otherwise and feels that it is restricted only to Calcutta. You are requested to kindly delete the word 'calcutta' from the column of "expiry place" and confirm us accordingly at an early date. "


(29) ON the 19th of January, 1979 (Ex. P. 8) the first defendant wrote to Public Witness. 2 Mr. B. K. Shah of United Arab Agencies in the following terms:


"i have just, received your letter No. 62/79 dated 15. 1. 79, pointing out the irregularities in our first business. I would like to explain that these are not irregularities but delays on the part of the Bank. The B/l for 500 tons was issued by the Bank to us on the 18th January, 1979, as the documents were negotiated on the 16th of January, 79. This was received by us in our office this morning, and immediately on receipt of this I am sending you the same for your information. I hope this would satisfy you. With reference to the Yemen steel L/c it has been transferred and would be executed in time. The L/c validity is till March, 79, but shipment would be affected by Feb. , 79. Please be rest assured about it. With regards to the sundry goods, they are lying in the docks and the B/l would have by now been taken by our shipping agentin Bombay. Immediately on receipt of the same they will be passed on to you. With regards to the sample of brushes and sanitary fittings I distinctly remember leaving one set of paint brushes with Mr. Abdul Qayyum. I would request you to kindly check with him once again. However am posting 1 paint brush to you. I have been really trying to give personalised service and would sincerely and earnestly assure you not to get any feeling of past experience which resulted in the absence of business for a long time between our two firms. You yourself would agree that it is the first time that we have affected steel shipment much before the L/c expiry date and the delay in despatch of B/l was only because the Bank could forward it on the dates mentioned above. I hope this would pacify you on the above points. "


(30) ON 27. 1. 1979 (Ex. P. 12) first defendant again wrote to Public Witness. 2 in the following terms:


"i have, on the 25th January, 79 immediately after return from Bombay, sent you a telex which I quote below : "steel PRICES UNDER REVISION BY SAIL (.) REGRET AT PRESENT CANNOT BOOK ORDERS FOR MS BARS LESS THAN USD 365 PER M. T. Candf NETT MARKET POSITION VERY UNSTABLE (.) HAVE JUST RETURNED FROM BOMBAY AFTER A THROUGH STUDY (.)" I had spent about 3 days in Bombay working in the market visiting manufacturers in order to find out the minimum base prices of the raw materials enabling me to quote a 'realistic price'. The position is very unstable and the base prices are fluctuating on a day to day basis. SAIL is also revising the floor prices from $ 340 to $ 350/355 P. M. T. Orders from Jeddah have been received during this period at $ 380 P. M. T. and this was being rolled out by a rolling mill I happened to visit. I was also working on the idea of investing our own finances and supply material directly to you instead of transferring the L/c and I am quite hopeful of making arrangements according to this line of thinking. The documents of Ben-Mahfouz were negotiated on the 16th of January and by the time you get his letter the party's Bankers would also have received the information. I have vide my letter dated 19th January enclosed 2 copies of the bill of lading and packing list for your information, which I hope you would have received and would have found the same in order. Regarding the sundry items the material had been carted in my presence in Bombay and the B/l has been received by our Commercial Department which would be forwarded to you in due course. I am also in receipt of your telex dated 25th Jan. , 79 and have conveyed the message about your programme uncertainty to Mr. Bapat and Mr. Sounak. With regard to your telex dated 21. 1. 79 this has been covered in this letter and your message has also been conveyed to telex No. 011-4917 RAJU IN, in Bombay on 22nd. "


(31) ON 1. 3. 1979 (Ex. D1w1 /1) the 6th defendant wrote to the first defendant stating:


"sub: Extension of L/c No. 2965 of US$ 3,40,000. 00 and US$ 3,40,000. 00 Please refer to the above, we wish to inform you that the total quantity of 2,000 M. Tons is ready for shipment and lying at dock. Due to the non-availability of the vessel, we are unable to ship the material, therefore, your good selves is requested to please arrange to get the amendment as given below : "l/c VALID UPTO 30th MARCH, 1979 FOR SHIPMENT AND NEGOTIATION. " You are hereby requested to give a telex to your customer with a request to telex to our banker for the above referred amendment. Your early and immediate action in this respect will be highly appreciated. "


(32) THE 6th defendant without making any efforts for exporting the material wanted the extension of the validity period of the Letter of Credit upto 30. 3. 1979. On the same day i. e. 1. 3. 1979 (DIW2) the first defendant sent reply to the 6th defendant stating (in reply to Ex. D1w1/1) :


"this has reference to your letter G-26/k/79/4670 dated 1. 3. 79 requesting us to get extension of L/c upto 30th March, 1979. In this connection we have to draw your attention to your letter No. G-26/78/4564 dated 21st December, 79 and G-26/78/4568 dated 22. 12. 78 addressed to us by your Managing Director, wherein heh?s confirmed that shipment of the said L/c would be effected by January, 79. In addition to this we have been in daily contact literally with your Bombay and Delhi Offices and have been always told that the D/d will be given to us by the 28th February, 1979. This request for extension has put us in a very embarrassing position as the buyer is sitting right in Delhi and is very upset that the carting has not yet started. If you refer to the L/c terms stipulated on the back of the transferred L/c you will find Clause No. 6 stipulated that the transfer is valid only up to 3. 3. 78 after which your Bank would have to return the L/c to our Bank for further necessary action As per your letter since the material is ready it would be advisable for you to book space with any shipping line and give us the B/l. In case of any complaints raised against us kindly note that they will be transferred to your account. The undersigned is leaving for Jeddah on 2nd March, 79 and would appreciate if a favourable response is given by then. "


(33) THE 5th defendant Mr. Ravi Upadhya informed the 6th defendant that he would be leaving for jeddah on the second of March, 1979. On the 5th of March, 1979 (Ex. P. 39) the 5th defendant on behalf of the first defendant sent a telex message but Mr. B. J. Shah Public Witness. 2 of United Arab Agencies in the following terms:


"shipment OF 500 M. T. APPROX. BEING EFFECTED BALANCE HELD UP DUE TO RAW MATERIAL PROBLEM. KINDLY EXTEND LC. "


(34) HAVING informed the plaintiff that 500 M. T of M. S. Bars was ready for shipment the 5th defendant had made a volte-face and had stated that only 500 MT of M. S. Bars could be sent and the period of L/c should be extended.


(35) ON 10. 3. 1979 (Ex. D1w1/3) 5th defendant Mr. Ravi Upadhya having reached at Jeddah on 9. 3. 1979, sent a message to his Company defendant No. 1 in the following terms;


"pls TREAT THIS MSG MOST SERIOUS AND IMPORT (.) SINCE 2000 TONS SHIPMENT NOT EFFECTED BUYER HAS HELD ME IN JEDDAH TILL HE GETS 10 0/0 PRICE DIFFERENCE TO BE SENT IN NAME OF M/s. AL-MUSTANEER TRADING EST THRU BANK at SAUDI at FRANSI (BANK DE INDOCHINE) IN JEDDAH WITHIN 48 HOURS. TREAT THIS MOST URGENT AS I AM BEING HELD TILL MONEY COMES. ALSO MR. SHAH DETERMINED TAKE UP THIS ISSUE AGAINST OUR COMPANY WITH SAUDI CHAMBER OF COMMERCE BIJU PATNAIK, MOHAN DHARIA (WITH WHOM HE HAS PERSONAL ACQUAINTANCE) GEORGE FERNANDEZ, WORLD CHAMBER OF COMMERCE AND ALSO PRESS IN BOMBAY AND DELHI IS MATTER NOT SETTLED. INDIAN EMBASSY HAS ASSURED MR. SHAH FULLEST CO-OPERATION REPEAT ONCE AGAIN MONEY SHOULD REACH HERE LATEST BY MONDAY/ TUESDAY. SAUDI AIRPORT HAS BEEN INFORMED TO STOP MY DEPARTURE. BUYERWANTED 18 0/0 BUT WITH HEART FEL TEFFORTS MR SHAH CONVINCED HIM TO ACCEPT 10 0/0 PLS RUSH MY PASSPORT HAS BEEN TAKEN AWAY. "


(36) THE 5th defendant sent another message in Ex. D1w1/4 in the following terms:


"yes I HAVE BUT THERE IS NO NEWS OF ANY DESPATCH OF 500 TONS FROM BOMBAY ALSO PLS TAKE THIS TO LALABANSIDHARJEE AND GET ME OUT OF HERE CHAUDARY IS HERE I AM IN TOUCH WITH KIRTI WHO HAS COME TO DELHI AND HAS ASSURED THAT B/l COPIES FOR 500 TONS IS REACHING DELHI THIS EVENING PLS CONFIRM IF THEY WILLING TO EXTEND L/c IF 500 TONS IS SHIPENT IS CONFIRMED AND WILL THEY RELEASE U? ACCORDING TO BUYER HE IS WILLING TO EXTEND L/c FOR 30 DAYS BUT IN 48 HRS AND UNCONDITIONAL 15 PERCENT BANK GUARANTEE SHOULD BE TRANSMITTED TO THE ASVEE ABOVE BANK IN THE NAME OF THE ABOVE PARTY. THIS BEING SATURDAY AND SUNDARY THE EARLIEST ANY ACTION CAN BE TAKEN THROUGH BANK IS ON MONDAY WHICH WL DO PLS TELL THE BUYER WHO WAIT. TO WAIT TILL TUESDAY EVENING AND WE WL DO NEE. AND WE WL DO THE NEEDFUL FOR L/c EXTENSION. PLS SEND B/l PARTICULARSEEN PARTICULARS OF 500 TONS IMMEDIATELY BY THIS EVENING OR YOU MUST DO IT BY TOMORROW. OK WE WL TRANSMIT THEM AS SOON AS WE GET THEM THIS EVENING OR EARLY IN THE MORNING. ? PLS INFORM KOTHI AND MY RESIDENCE EXPECTING YR REPLY POSITIVELY. "

It looks as if it was sent on 10. 3. 1979. On 11. 3. 1979 i. e. the next day the 5th defendant sent message to the first defendant under Ex. D1w1/5. It was to the second defendant and her husband. The message is in the following terms :"room NO. 217, TEL23511 AND 23851 /2 TLX N0. 401174 BAHAJD SJ. PLS ENSURE THAT ALL SETTLEMENT TLX's ARE SENT ON SHAH's NTLY, OTHER MESSAGE RE ACTION TAKEN CAN BE SENT HERE OR CARE DR. MEHROTRA 661010 0 TO SJ ON HOTEL TLX PLS DO NOT MENTION THE PROBLEM BUT SOLUTION. "


(37) ON 18. 3. 1979 the 5th defendant sent a message from Jeddah to the first defendant under Ex. D1w1/7 making the following request :


"have SENT NUMEROUS TELEXES NO CONCRETE REPLY RECD. I AM IN SERIOUS TROUBLE. THE BANK GUARANTEE NOT RECD IN BRITISH BANK. MR. SHAH VERY ANNOYED AS NO TLX RECD HERE FROM DELHI OFFICE. PLS REFE TLX SENT TO U BY ME FROM BOMBAY AND SEND AUTHORIZATION ON TLX IMDTLY. KINDLY TAKE PERSONAL INTEREST AS I AM IN A VERY BAD STATE MENTALLY AND PHYSICALLY. MR. SHAH's TLX NOS. ARE 401062 MOST IM SJ, 401573 PETSTR SJ, 401790 ABARJD SJ - TELEPHONE 34318. "


(38) ON 19. 3. 1979 (Ex. D1w1/6) 5th defendant sent a Telex message to the second defendant requesting that he must be a uthorised to sign an agreement in the Indian Embassy. The message reads as under:


"bank GUARANTEE NOT YET RECEIVED ON BANK I FEAR PERSONAL REPERCUSSION. PLS SEND TLX TO SHAH AUTHORISING ME TO SIGN AGREEMENT IN INDIAN EMBASSY. 72346 PLEASE ASK USE YOUR SOURCE WITH INDIAN EMBASSY. I AM RUNNING TEMPERATURE. PLEASE INFORM GEN. CANDETH AT TEL. NO. 69177 (.)".


(39) ON 19. 3. 1979 (Ex. P. 29) the Saudi British Bank wrote to the bankers of the plaintiff guaranteeing the payment of 68,000 US Dollars on behalf of the 6th defendant. The 5th defendant under Ex. DIWI/8 sent the format of authorisation to be given by the first defendant and the format is in the following terms ;


"pse SEND FLG TLX IMDTLY TO UNITED ARAB AGENCIES 9attn MR. SHAM) SIGNED BY MG. DIRECTOR. QUOTE WE AUTHORISE MR RAVI UPADHYAYA TO SIGN ANY AFFIDAVIT IN PRESENCE OF IND. EMBASSY OFFICE IN CONNECTION WITH DISPUTE OF WEIGHT AND SIZES AGAINST SHIPMENT MADE UNDER L/c NO. JGOIQITUE ALSO AFFIDAVIT IN SAME MANNER THAT WEIGHT AND SIZE OF SHIPMENT OF 2000 TONS TO BE EFFECTED AGAINST ORDERS 548/78 AND 549/78 WILL EXACTLY AS PER REQIRE ENT MENTIONED IN AGENT's INDENT NO. 548/78 AND 549/78. ALSO AFFIDAVIT THAT 1 0/0 COMMISSION ON FOB ON JEDDAH SHIPMENT WILL BE REMITTED TO AGENT AND IF HODEIDAH SHIPMENT NOT EFFECTED ACTUAL TLX/cableexpenses INCURRED BY AGENT WILL BE PAID BY US. WE SHALL HONOUR MR RAVI UPADHYAYA's SIGNATURE (IN ABOVE MATTER ONLY) WHETHER HE IS EMPLOYED WITH US OR NOT. UNQUOTE PLSE TREAT THIS MATTER MOST URGENT AND SERIOUS. BANK GUARANTEE NOT RECD - AM IN TROUBLE PLS SEND TLX REPLY ABOVE 2000 TONS HODEIDAH CLIENT INSISTING STRICTLY 40 DAHS SHIPMENT VAS KPER YR PREVIOUS TLX. "


(40) ON 29. 3. 1979 (Ex. D1w1/10) the 6th defendant (Kupal Material and Metal Pvt. Ltd.) wrote to Mr. B. L. Gupta (D1w3) in the following terms :


"performance BOND OF USD 68000 IS GIVEN FAVOURING THE BUYER OF JEDDAH EXTENSION IN L/c NOT RECD STILL NOW PL EXPEDITE THE MATTER AND ARRANGE TO GET AT THE EARLIEST THE EXTENSION IN LETTER OF CREDIT. MATERIAL ARRIVIN+ awaiting SHIPMENT AT PORT. REGARDS: KUPAL 314115 GSPL IN 312791 KMML IN PLACK+? MSG WELL RECD MOM WHAT HAVE U DONE REGARDING 500 M TONNE CASE+? WILL REVERT +? HAVE SENT TLX TO PARTY TO EXPEDITE EXTENSION+? 31 4115 GSPL IN 312791 KMML IN"

On the same day first defendant (Ex. D1w1/11) wrote to Mr. Kamlesh Sharma in the following terms :"our REPRESENTATIVE MR RAVI UPADHYAYA HOLDING PASSPORT NO. L498670 HAD REACHED JEDAH ABOUT 10 DAYS AGO ON NORMAL EXPORT PROMOTION TOUR (.) WE HAD BN DEALING THERE WITH M/ S ALMASTNIR ESTABLISHMENT FOR TRADE, P. O. BOX 6503, JEDDAH AND M/s REN MAHFOUZ ESTABLISHMENT, P. O. 1642, JEDDAH THROUGH M/s UNITAR WHO R OUR AGENTS THERE (.) WE UNDERSTAND THAT DUE TO SOME PROBLEM REGARDG SOME OF THE SUPPLIES THE ABOVE PARTIES R NOT ALLOWING OUR REPRESENTATIVE TO LEAVE JEDDAH (.)RAVI UPADHYAYA CAN BE CONTACTED AT HIS HOTEL TEL NO 23511 /23851, ROOM NO 217 (.) WE SHALL BE GRATEFUL IF U KINDLY USE YR GOOD OFFICES TO GET HIM RELEASED FROM ABOVE PARTIES SO THAT HE CAN COME BACK TO INDIA (.) WE ARE READY TO DISCUSS ALL OR ANY TRADE DISPUTE WITH THE ABOVE PARTIES AS PER INTERNATIONAL TRADE PRICE + PRACTICES') DHAR GENERAL OVERSEAS PRIVATE LIMITED MSG OVER PLS ACK HOW RECD+? 401261 INDIA SJ 314115 GSPL IN"


(41) ON the 21st of March, 1979 the 5th defendant contacted the 1st defendant and requested for the extension of the validity of the guarantee till 31. 5. 1979:


"under ADVISE OF BOTH BANKERS, BUYER REFUSES ACCEPT GUARANTEE UNLESS FLG AMENDMENT EFFECTED IN IT. 1. THE WORDS "evidencing" OF MON SHIPMENT SHOULD BE SUBSTITUTED WITH WORDS "stating" OF MONSHIPMENT. 2. IF BANK IN JEDDAH DO NOT RECEIVE AUTHENTICAED TLX FROM ISSUING (SYNDICATE) BANK CONFIRMING SHIPMENT OF GOODS WITHIN THREE DAYS AFTER EXPIRY OF L/c BANK WILL RELEASE USD 68000 IMDTLY. 3. VALIDITY OF GUARANTEE SHOULD BE EXTENDED TILL 31 ST MAY 1979. PLS ACT IMDTLY. 4. TLX ME EITHER WAY YR FINAL INTENTION ON SENDING AUTHORIZATION OR PERSONAL GUARANTEE AS PER MY TLX 1789 TO ENABLE DECIDE MY FATE. "


(42) 0nthe22nd of March, 1979 (Ex. D1w1/13) the first defendant sent another message to Mr. Kamlesh Sharma in the following terms :


"ref OUR TLX NO. 243 DATED 20/3/79 REGARDING OUR MR RAVI UPADHYAYA HOLDING PASSPORT NO. 1 498670 TO LEAVE JEDDAH DUE SOME ALLEGED TRADE DISPUTE IN HOTEL NUBAHUDIN TELEPHONE NO 23511 23851 RO PSE BE SO KIND TO GET HIM OUT OF SAUDI ARABIA S BAD SHAPE STOP WE SHALL BE VERI GRATEFU IF U CAN ON OUR TLX NO D31-4146 GSPSIN ABOUT HIS RELEASE SHALL BE HIGHLY OBLIGED FOR YOUR KIND CO-OPERATION KIND REGARDS DHAR GENERAL OVSERSEAS PVT. LTD NEW DELHI MSG OVER PLS ACK HOW RECD+?"


(43) ON the 24th of March, 1979 (Ex. D1w1/14) the 5th defendant from Jeddah sent a message to Mr. Lalaji, husband of the second defendant that a guarantee should be from Syndicate Bank. The document reads as under:


"they HV CHANGED THEIR MIND AGAIN. WILL NOW RELEASE ME ONLY WHEN THE GUARANTEE AMENDED WITH K3 CLAUSES IS RECD IN THE BANK. KINDLY ENSURE IT IS POSITIVELY TLXD TODAY FROM THE SYNDICATE BANK, NEW DELHI AS TOMORROW WOULD BE HOLIDAY. PLS LET WE HV BANK TLX REF. REGARDS RAVI MR. SHAH MUCH ANNOYED THAT INSPITE OF TELEX NO ONE CONTACTED HIM SO FAR. HE STAYS IN BOMBAY SHERATON. HV JUST RETURNED FROM EBASSY. THEY ARE UNABLE TO DO ANYTHING TILL GUARANTEE RECD IN BANK. REGARDS RAVI"


(44) ON the 25th of March 1979 (Ex. DIWI/15) the 5th defendant from Jeddah to the first defendant (in the name of Lala Bansi Dharji, husband of the second defendant) stating that he will be released only after Bank guarantee is received. Another message was sent under Ex. DIWI/16 on the same day. On the 27th of March, 1979 (Ex. P. 13 = P. 25) the 5th defendant gave guarantee in the following terms:


"guarantee 2000 TONS MS BARS BOOKED VIDE AGENT's INDENT NO. 548/78 AND 549/78 -L/c NO. 2965 TOM/s: AL-MUSTANEER- ESTABLISHMENT FOR TRADE, JEDDAH. I, undersigned Ravi Shankar Upadhyaya of M/s. Dhar General Overseas Pvt. Ltd. , on behalf of my Company and its MG. Director do hereby guarantee that goods of above both orders will be shipped in their entirety within extended period of above L/c and if the goods are not shipped in exact sizes, correct weight and specification as per L/c and agent's indents we shall be liable to pay difference according to prevailing rate of beneleux extra system for sizes, difference for shortage of weight, if any, at time of landing at Hodeidah Port against submission of any independent recognised Surveyor's report. My being a representative of M/s. Dhar General Overseas Pvt. Ltd. is referred to in Company's Telex dated 20. 3. 79 addressed to Mr. K. Sharma, Counsellor, Indian Embassy, Jeddah. S. A. sd/- (Ravi Shankar Upadhyaya) Sworn and signed before me this 27th March, 1979 at Jeddah. "


(45) ON the 29th of March, 1979 (Ex. P. 30) the Saudi British Bank wrote to the bankers of the plaintiff relating to the guarantee for 68,000 US Dollars in the following terms;


"further to our above letter of guarantee please incorporate following amendments: (1) The validity period of the guarantee is extended upto and inclusive of 31st May, 1979, subject to extending the validity period of the LC. 2965 upto 15th May, 1979. (2) 2nd paragraph 3rd line reading as quote : "in the event of our clients etc etc by our client "unquote should read as quote: "in the event of our clients failing to effect the shipment during the extended period of this LC as requested above we undertake to pay to you a sum of US$ 68,000. 00 only on your first demand in writing stating non-shipment of goods within extended validity period of LC by our client unless an authenticate telex from Syndicate Bank, New Delhi confirming the shipment of goods is received within three days after the expiry of LC" unquote. All other terms and conditions remain unchanged. "


(46) ON the 2nd of April, 1979 (Ex. P. 28) The Banque Nationale De Paris wrote to the first defendant demanding payment of Rs. 6,977. 21 being its commission for confirmation.


(47) IT transpires that the invoice and other documents for negotiating the Letter of Credit were prepared to look as if they bear their dates found in the documents.


(48) EX. P. 9 = P. 31 dated 19. 4. 1979 is invoice raised by defendant No. 6 bearing No. BM/16for599. 450m. Tons. Ex. P. IO=p. 32datedl9. 4. 1979isinvoicebearingno. BM/17 for 99. 900 M. Tons. Ex. P. I I = P. 33 is dated 19. 4. 1979 invoice raised by defendant No. 6 bearing No. BM/18 for 99. 910 M. Tons. Ex. P. 17 to P. 19 (dated 19. 4. 1979) are stated to be bills of lading concocted for the purpose of negotiating the Letter of Credit. Mr. G. R. Shave on behalf of die 6th defendant wrote to the Syndicate Bank on 20. 4. 1979 (Ex. P. 14) in the following terms ;


"drawn on L/c No. 2965 dated 23. 11. 78 of at Bank at Saudi at Fransi Jeddah. No. BM/16/79 Exchange for US $ 2,03,813. 00 20th April, 79. Pay this First of exchange second unpaid to the order of Syndicate Bank, F/ 40, Can naught Circus, New Delhi the sum of US $ Two lac three thousand eight hundred thirteen only. Value received Shipment of M. S. Round Bars 599. 450 M/tons. To M/s. at Mustaneer Establishment For Trade 6503 (P. O. Box) Jeddah. Saudi Arabia. For Kupal Materials and Metals P. Ltd. sd/- AUTHORISED SIGNATORY. "


(49) EX. P. 15 dated 20. 4. 1979 is same as Ex. P. 14. Ex. P. 16is same as Ex. P. 14 and P. 15.


(50) FOR the purpose of satisfying the requirements. Certificates of Origin were also produced by defendant No. 6 for encashment of the Letter of Credit through Exs. P. 20 to P. 22 bearing dated 20. 4. 1979. On the 23rd of April, 1979 defendant No. 6 would appear to have presented the documents for encashing the L/c and the payment would appear to have been made on 22. 4. 1979 by the Syndicate Bank.


(51) ON the 8th of May, 1979 (Ex. DIW3/1) the first defendant (signed by Mr. B. M. Gupta, D1w3) wrote to the Syndicate Bank, Can naught Place in the following terms:


"we acknowledge the receipt of your letter dated 26. 4. 79 along with a draft for Rs. 59955. 27 and non negotiable copies of documents. In this connection, we have to inform you that we have not received the following documents which was to be forwarded to us after the negotiation of documents was done by you along with the non negotiable copies of documents as per the terms and condition of transfer of amendment dated 23. 11. 70 dated 22nd May, 79 as L/c No. 2965 for US$ 6,80,000. 00. A certificate from General Superintendent certifying in docks that M. S. Bars are strictly as per agent Indent Nos. 548/78 and 549/78 dated 22nd May, 79 as mentioned in L/c in respect of the quantity and quality etc. A certificate from M/s. Kupal Material and Metals Pvt. Ltd. certifying that the goods shipped are strictly in accordance with the agent Indent Nos. 548/78 and 549/78 dated 22nd Nov. , 78 as mentioned in the L/c and that any claim received from the openers of L/c (M/s Al-Mustaneer Establishment, Jeddah, Saudi Arabia) in this regard, will be settled/paid by M/s. Kupal Material and Metals Pvt. Ltd. on first demand. You are requested to kindly look into the matter and arrange to send us the above certificate at your earliest. "


(52) A copy was sent to the 6th defendant. The Syndicate Bank, Cannaught Place on 14. 5. 1979 (Ex. D1w1/17) wrote to the 6th defendant asking it to produce certain documents:


"as per conditions of transfer of amendment of above L. C. the following documents are to be submitted to Dhar General Overseas Pvt. Ltd. 1. A Certificate from General Superintendent certifying in docks that M. S. Bars are strictly as pragent Indent Nos. 548/78 and 549/78 dated 22nd Nov. 78 as mentioned in L/c. in respect of the quantity and quality etc. 2. A Certificate from you, certifying that the goods shipped are strictly in accordance with the agent Indent Nos. 548/78 and 549/78 dated 22nd Nov. 78 as mentioned in the L. C. and that any claim received from the openers of L/c. (M/s. Al-Mustaneer Establishment, Jeddah, Saudi Arabia) in this regard, will be settled/paid by M/s. Kupal Materials and Metals Pvt. Ltd. on first demand. Please arrange to forward the above documents for onward transmission to them. Please treat this as urgent. "


(53) IT may be noted that it was after the payment of money under the Letter of Credit, the first defendant (signed by G. S. Chaudhary, G. M.) wrote on 18. 5. 1979 (Ex. DIW3/2) requesting the 6th defendant to make shipment of 2,000 MT of M. S. Round Bars. The letter reads as under:


"further to our letter No. D-650 dated 10th April, 1979, please confirm that shipments of 2,000 M. Tons M. S. Bars, strictly in accordance with Indent Nos. 548/78 and 549/78 of Messrs. Al-Mustaneer Establishment for Trade, Jeddah as mentioned in the Letter of Credit No. 2965 dated 25. 11. 78 are being made by you within the validity period of the L/c. As you are aware, Saudi Authorities and the Buyer take strict view of the goods are not shipped in accordance with the contracted specifications and quantities, as it happened in the case of 500 M. T. of M. S. Bars shipped by you to Messrs.


(54) BIN Mahfouz Establishment as per your Invoice No. BM/6 dated 21. 12. 78. Please ensure that no such mishap occurs in respect of this 2000 M. Tons M. S. Bars shipment and please note, as already advised to you earlier, that if any claim are received by us from foreign buyer the same will be to your account and you will be liable to indemnify and save us harmless and keep us indemnified and harmless against all damages, losses, costs, charges or expenses suffered or incurred by us on account of any demand, or claim made by the foreign buyer by reason of your failure to supply the above referred M -S. Bars strictly in accordance with Indent Nos. 548/78 and 549/78 and L/c No. 2965 dated 25. 11. 78 and within the validity period of the said L/c. "


(55) THE 6th defendant Kupal Materials and Metals Pvt. Ltd. wrote on 23. 5. 1979 (Ex. D1w3/3) to the first defendant stating:


"this has reference to your letter No. DR/cont. II dated May 18, 79. In this respect we wish to inform you that we have shipped already 799. 260m. Steel Round Bars. However, further quantity could not be shipped due to the ban imposed by Govt. of India for that reason we are hereby enclosing photo state copies of the reply which we received from Government of India and have been denied to export. From the enclosed copy your good elf will observe that due to the forces majure of Government we have been compelled not to export. Therefore, you are requested to kindly to inform your foreign customer explaining reason beyond our control. Extension made in the L/c by foreign buyer is also not approved by Steel Authority of India letter dated May 7, 79. When the sovereign of the country does not allow the export, there is no likelihood of exporting material. We, therefore, request you to act accordingly. "


(56) THE letter is signed by Mr. G. R. Sharma, Export Manager on behalf of the 6th defendant. The 6th defendant on 23. 5. 1979 wrote a letter signed by Mr. M. V. Nethani, Manager (Ex. DIW3/13) to the plaintiff in the following terms:


"i, Mr. Nathani, Manager of M/s. Kupal Materials and Metals Pvt. Ltd. , the shipper of 800 M/tons of M. S. Bars for which B/l No. HD/23, HD/24 and HD/25 have been issued in the V/l 'nikki 'r' and against which the L. C. is negotiated in the Bank, I do hereby guarantee that the entire goods lying ready in our ware house will be shipped latest by 30th June by above V/lor any other G. I. C. approved substitute vessel. If however, the whole of the goods remain unshipped I shall return to the opener of the L/c. the total Cand F value plus 10% compensation against non shipment as agreed by the original beneficiary of the L/c. "


(57) THIS document is certified to be a true copy by the 15th defendant (Amphora Marines Consultant Pvt. Ltd.). The 6th defendant wrote to the Manager, Syndicate Bank under Ex. D1w3/6 dated 24. 5. 1979 in the following terms:


"please refer to your letter No. FXB/773/fdbp/283/284/285/79 dated 14th May, 1979, vide which you have asked us for some information not completed by us while negotiating the documents with you under the subject L/c. We clarify the same as under : We have negotiated the subject documents in terms of the original transferred Letter of Credit because along with the extension we have not received any amendment. We have also come to know about the amendment made by M/ s. Dhar General Overseas Pvt. Ltd. , New Delhi only on 25th April, 1979 and before this date the material has already been shipped and the negotiation have made with you. At this stage the material has already shipped and the documents have already negotiated and it is quite impossible for us to procure any Certificate of Inspection from any Inspection Agency, such as G. S. I, and to issue a Certificate from our side regarding the goods already shipped. Moreover we have mentioned in Invoice itself that the material shipped is as per indent. We hope you will find the same in order and will in a position to satisfy the first beneficiary. "


(58) ON the 29th of May, 1979 the first defendant wrote to the Manager, Syndicate Bank, Foreign Exchange Branch (Ex. D1ws/4) in the following terms :


"kindly refer to our letter No. DG/a-Cont/t-1 dated 5th May, 1979 and your letter No. EXB/652/fobp 283-284-285/a-79 dated 26. 4. 79. We have not received till date the two certificates which were required to the Bank to be sent to us along with the commission and other documents. These certificates were to be obtained from the transferee i. e. M/s. Kupal Materials and Metals Pvt. Ltd. at the time of negotiation, as per the terms and conditions of the transfer of amendment dated 23. 11. 78 which were sent to you on. You are once again requested to kindly arrange to expedite these certificates on priority basis in order to avoid any complications at a later stage. "

The Syndicate Bank wrote to the first defendant on 2. 6. 1979 (Ex. D1w3/5) in the following terms:"kindly refer to our letter No. DG/a-Cont/t-1 dated 5th May, 1979 and your letter No. EXB/652/fobp 283-284-285/a-79 dated 26. 4. 79. We have not received till date the two certificates which were required by the Bank to be sent to us alongwith the commission and other documents. These certificates were to be obtained from the transferee i. e. M/s. Kupal Materials and Metals Pvt. Ltd. at the time of negotiation, as per the terms and conditions of the transfer of amendment dated 23. 11. 78 which were sent to you on 5th May, 1979. You are once again requested to kindly arrange to expedite these certificates on priority basis in order to avoid any complications at a later stage. "


On the 11th of June, 1979 (Ex. D 1w3/7) the first defendant wrote to the Syndicate Bank in the following terms :"kindly refer to our letter Nos. DH/a- Cont/t-1 dated5. 5. 79and dated2. 6. 79 regarding the following documents not received by us for documents pertaining to B/l No. HD/23, HD/24 and HD/25 all dated 19th April, 1979 negotiated by you for M/s. Kupal Materials and Metals Pvt. Ltd. , against the above L/c : - A certificate from General Superintendent certifying in the docks that M. S. Bars are strictly as per agent Indent Nos. 548/78 and 549/ 78 dated 22nd Nov. 1978 as also mentioned in L/c, in respect of the sizes, quantity and quality etc.- A certificate from M/s. Kupal Material and Metals Pvts. Ltd. certifying that the goods shipped are strictly in accordance with the agent Indent No. 548/78 and 549/78 dated 22nd Nov. , 78 as mentioned in the L/c and that any claim received from the openers of L/c (M/s Al-Mustaneer Establishment, Jeddah, Saudi Arabia), in this regard, will be entitled/paid by M/s. Kupal Material and Metals Pvt. Ltd. on first demand. It is regretted that we have not received these documents till date. Kindly arrange to send us the same without any further delay. Also kindly note that in case we do not receive these documents immediately, we will hold you liable for all the consequences thereof. "


On the 15th of July, 1979 the first defendant sent a message (Ex. DIW3/8) to foreign bankers namely at Bank at Saudi at Fransi, Banque Del' Inde Chine and Banque National De Paris in the following terms :"re: L/c NO. 2965 DATED 25. 11. 1978 ESTABLISHED BY "all BANK AL SAUDI at FRANSI" JEDDAH - SAUDI ARABIA ACCOUNT M/s. AL MUSTANEER ESTABLISHMENT FOR TRADE JEDDAH FAVOURING M/ S. DHAR GENERAL OVERSEAS PRIVATE LTD, NEW DELHI FOR US DOLLS 6,80,000 PERTAINING TO SUPPLY OF 2000 METRIC TONS M S ROUND BARS FROM INDIA TO HODEIDAH WHICH WAS TRANSFERRED, SUBJECTTO SUPPLEMENTARY TERMS, TOM/s KUPAL MATERIALS AND METALS PRIVATE LTD, NEW DELHI WHO WERE TO EFFECT SUPPLIES, FOR NEGOTIATIONS THROUGH THEIR BANKERS M/s. SYNDICATE BANK NEW DELHI WITH FULL KNOWLEDGE AND CONSENT OF M/s AL-MUSTANEER (.) UNDER STAND DOCUMENTS PRESENTED AGAINST L/c BY KUPALS THROUGH SYNDICATE BANK IN DISREGARD OF SUPPLEMENTARY TERMS FOR REALISING PAYMENTS OF US DOLLS 271748. 40 FOR ALLEGED PARTIAL SHIPMENT PER VESSEL 'nikkp -'r' UNDER ALLEGED BILLS OF LADING NO. HD-23, HD-24, HD-25, DATED 19. 4. 1979 PURPORTING TO BE OF AMPHORA MARINE CONSULTANTS SHIPPING LINE (.) FURTHER UNDERSTAND FROM AL-MUSTANEER AND BUYER's AGENT SHAH WHO HELD DISCUSSIONS WITH US TODAY THAT THEREISNONEWSABOUT ALLEGED CONSIGNMENT, no rexistence AND WHERE ABOUTS OF ALLEGED VESSEL TRACEABLE, AND THEY SUSPECT FRAUD AND FOUL PLAY AND ENQUIRIES MADE BY THEM REVEAL THAT NO VESSELNAMED 'nikki' - 'r' BERTHED AT BOMBAY PORT DURING APRIL, 1979 AND NO CUSTOMS CLEARANCE WAS OBTAINED AND NO SHIPMENT WAS EFFECTED AND FURTHER ALLEGED THAT KUPALS ARE FRAUDULENTLY TRYING TO REALISE MONEY UNDER L/c WITH PRESUMABLY FICTITIOUS DOCUMENTS THOUGH CONSEQUENT UPON TRANSFER OF L/c WE ARE NOT DIRECTLY CONCERNED YET IN VIEW OF AFORESAID DISCUSSIONS WITH AL-MUSTANEER WE NOTIFY YOU THAT YOU MAY PLEASE ASCERTAIN AND INVESTIGATE GENUINENESS AND AUTHENTICITY OF DOCUMENTS AND FACTS REGARDING ACTUAL SHIPMENT BEFORE RELEASING PAYMENT SO AS TO AVOID LIKELY LEGAL COMPLICATIONS (.) M/s. DHAR GENERAL OVERSEAS PVT. LTD. "


The first defendant on 15. 7. 1979 (Ex. D1ws/9) wrote to the Syndicate Bank, Foreign Exchange Branch, Can naugnt Place, Bahadur Shah Zafar Marg, New Delhi and Manipal (Kamataka) complaining about the 6th defendant sent a message in the following terms:"re: L/c NO. 2965 DATED 25. 11. 78 ESTABLISHED BY 'al BANK AL ' SAUDI at FRANSI 'jeddah - SAUDI ARABIA ACCOUNT M/s AL- MUSTANEER ESTABLISHMENT FOR TRADE JEDDAH FAVOURING M/s DHAR GENERAL OVERSEAS PRIVATE LTD. , NEW DELHI FOR US DOLLS 6,80,000 PERTAINING TO SUPPLY OF 2000 METRIC TON M. S. ROUND BARS FROM INDIA TO HODEIDAH WHICH WAS TRANSFERRED, SUBJECTTO SUPPLEMENTARY TERMS, TO M/skupal MATERIAL AND METALS PRIVATE LTD. , NEW DELHI WHO WERE TO EFFECT SUPPLIES, FOR NEGOTIATIONS THROUGH THEIR BANKERS M/s SYNDICATE BANK NEW DELHI WITH FULL KNOWLEDGE AND CONSENT OF M/s AL-MUSTANEER. UNDERSTAND DOCUMENTS PRESENTED AGAINST L/c BY KUPALS THROUGH SYNDICATE BANK IN DISREGARD OF SUPPLEMENTARY TERMS FOR REALIZING PAYMENT OF US DOLLS 271748. 40 FOR ALLEGED PARTIAL SHIPMENT PER VESSEL 'nikki'-'r' UNDER ALLEGED BILLS OF LADING NO. HD-23, HD-24 AND HD-25 DT. 19. 4. 1979 PURPORTING TO BE OF AMPHORA MARINE CONSULTANTS HIPPING LINE. FURTHER UNDERSTAND FROM AL-MUSTANEER AND BUYER's AGENT SHAH WHO HELD DISCUSSION WITH US TODAY THAT THERE IS NO NEWS ABOUT ALLEGED CONSIGNMENT FOR EXISTENCE AND WHERE ABOUTS OF ALLEGED VESSEL TRACEABLE, AND THEY SUSPECT FRAUD AND FOUL PLAY AND ENQUIRIES MADE BY THEM REVEAL THAT NO VESSEL NAMED 'nikki' - 'r' BERTHED AT BOMBAY PORT DURING APRIL, 1979 AND NO CUSTOMS CLEARANCE WAS OBTAINED AND NO SHIPMENT WAS EFFECTED AND FURTHER ALLEGED THAT KUPALS ARE FRAUDULENTLY TRYING TO REALIZE MONEY UNDER L/c WITH PRESUMABLY FICTITIOUS DOCUMENTS. THROUGH CONSEQUENCES EXPENSES AND DAMAGES THAT MAY RESULT FROM YOUR DISREGARD OF THE CONDITIONS GOVERNING TRANSFER OF THE ABOVE SAID L/c AND FROM RELEASE OF PAYMENTS. IN VIEW OF THE FACTS NOW REVEALED DURING DISCUSSIONS WITH FOREIGN BUYER, THE AMOUNT REMITTED AGAINST NEGOTIATIONS VIDE. YR LETTER NO. FXB/652/fdbp 282-284-285/a /79 DT. 26 'april 1979 ARE BEING KEPT IN A SUSPENSE ACCOUNT. "


On the 16th of July, 1979 (Ex. D1w3/10) the first defendant wrote to the plaintiff in the following terms:"this has reference to the discussions you and Mr. B. J. Shah of M/s. Unitor had with us on the 14th and 15th July, 1979 regarding shipment of 799. 260 M. Tons of M. S. Round Bars total value US $ 271748. 40 by M/s. Kupal Materials and Metals Pvt. Ltd. New Delhi vide B/l Nos. HD-23 to HD-25 dated 19. 4. 79 against your L/c No. 2965. You alleged that actually this shipment has not been made and M/s. Kupals Materials and Metals Pvt. Ltd. are fraudulently trying to realise payment against said L/c by using presumably fictitious documents. Asalready informed to you during discussions, weadvise you to immediately bring this to the notice of your Bank, the Reimbursing Bank, the Advising Bank and the Negotiating Bank and advise them not to release payments against above L/c pending investigations in the alleged fraudulent negotiation of documents by M/s. Kupals. If you fail to act so above, you will do so on your risk and responsibility. Though consequent to the transfer of L/c to M/s. Kupals with your full knowledge and consent, we are not directly connected with the documents, yet purely as a matter of abundant caution we have sent telex messages as per copy enclosed to the above Banks. This, however, is without any liability on our part and without prejudice to our other rights and contentions. "


On the 16th of July, 1979 (Ex. DIW3/12) the first defendant wrote to the Syndicate Bank, Foreign Exchange Branch, New Delhi in the following terms :"this has reference to your letter No. FX/825/fdbp/79 dated 2nd June, 79 under cover of which you have forwarded to us a copy of letter No. EXP. /104/ ORDER/776 dated 24th May, 1979 of M/s. Kupal Materials and Metals Pvt. Ltd. addressed to you regarding the following two documents not sent by you to us against the subject negotiation of documents : 1. Certificate from General Superintendent certifying in docks that M. S. Bars are strictly as per Agent Indent No. 548/78 and 549/78 dated 22nd Nov. , 78 as mentioned in L/c in respect of the quantity and quality etc. 2. Certificate from M/s. Kupal Materials and Metals Pvt. Ltd. that the goods shipped are strictly in accordance with the Agent Indent No. 548/78 and 549/78 dt. 22nd Nov. , 78 as mentioned in the L/c and that any claim received from the openers of L/c (M/s. AI-Mustaneer Establishment for Trade, Jeddah, Saudi Arabia) in this regard will be settled/paid by M/s. Kupal Materials and Metals Pvt. Ltd. on first demand. The explanation given by M/s. Kupal Materials and Metals Pvt. Ltd. that along with the extension of L/c they have not received any terms of transfer, is wrong on the face of it because the terms of the transfer were typed on the original letter enhancing the validity of L/c upto 25th of May, 1979. Thus it is obvious that they could not have received these two things separately. However, notwithstanding any explanation, the fact is that the terms of the above L/c were not complied with by M/s. Kupal Materials and Metals Pvt. Ltd. , and as such are not entitled to release of any payments against the subject negotiation. In case you have negotiated the"


The document is incomplete. Whatever is available is quoted.


(59) ON 17. 7. 1979 (Ex. DIW3/11) the first defendant wrote to the Syndicate Bank, Cannaught Place, Bahadur Shah Zafar Marg and Manipal in the State of Karnataka in the following terms :


"we confirm having sent to you a Telex/cable as under : Re: L/c No. 2965 No. 2965 dated 25. 11. 1978 established by 'al Bank at Saudi Al Fransi' Jeddah-Saudi Arabia Account M/s. A-Mustaneer Establishment for Trade Jeddah favouring M/s. Dhar General Overseas Private Ltd. , New Delhi for US Dolls 6,80,000 pertaining to supply of 2000 metric tons M. S. Round Bars from India to Hodeidah which was transferred, subject to supplementary terms, to M/s. Kupal Material and Metals Private Ltd. , New Delhi who were to effect supplies, for negotiations through their Bankers M/s. Syndicate Bank New Delhi with full knowledge and consent of M/s. Al- Musstaneer. Understand documents presented against L/c by Kupals through Syndicate Bank in disregard of supplementary terms for realising payments of US Dolls 271748. 40 for alleged partial shipment pervessel 'nikki' 'r' under alleged bills of lading No. HD-23, HD-24, HD-25 dated 19. 4. 1979 purporting to be of Amphora Marine Consultants Shipping Line. Further understand from Al- Mustsaneer and buyer's agent Shah who held discussions with us today that there is no news about alleged consignment, nor existence and whereabouts of alleged vessel traceable, and they suspect fraud and foul play and enquiries made by them reveal that no vessel named 'nikki' 'r' berthed at Bombay Port during April, 1979 and no customs clearance was obtained and no shipment was affected and further alleged that Kupals are fraudulently trying to realise money under L/c with presumably fictitious documents. Though consequent upon transfer of L/c we are not directly concerned yet in view of aforesaid discussions with AI-Mustaneer we notify you that you may please ascertain and investigate genuineness and authenticity of documents and facts regarding actual shipment before releasing payment so as to avoid likely legal complications. Without prejudice to our other rights please also be notified we shall hold you liable for all losses, consequences expenses and damages that may result from your disregard of the conditons governing. transfer of the above said L/c and from releasw of payments. This is also an incomplete document but whatever the document contains is quoted.


(60) ON 7. 8. 1979 (Ex. P. 24) the plainfiff executed a power of attrney in favour of Public Witness. 1 for the purpose of filing the present plaint. O 31. 8. 1979 (Ex B 34) Mr. Kirti H. Shah, one of the Directors of the 6th defendant Kupals Materials and Metals Pvt. Ltd. , wrote to the Syndicate Bank, Bombay in the following terms "you are aware that Mr. Kuldip Singh,managing Director of Kupal Materials and Metals Pvt. Ltd. , and Mr. Atul Sabharwal have under intimidation and duress taken away certain stock material, cheques, pay slips and cash from M/ s. Shah Brothers and they have handed over the same to you. M/s. Shah Brothers have recorded the same by their letter dated 13. 7. 1979 addressed to you, and have also recorded that they had requested to you to keep the same in the name of M/s. Shah Brothers and not in the name of M/s. Kupal Materials and Metals Pvt. Ltd. You have sold away the stocks lying in the godown of M/s. Shah Brothers at Wadala and also sold away their material from Okha. According to the market price prevalent at the time you sold the material, you must have realised Rs. 9,60,000. 00 for the stock at Wadala godown and Rs. 3,70,000. 00 for the Okha materials. Thus you have with you, on behalf of M/s. Shah Brothers, a sum of Rs. 14 lakhs approx. inclusive of the cash, cheques, pay slips etc. amounting to Rs. 1. 24 lakhs approx. further, you have realised a sum of Rs. 50,000. 00 by encashing the cheque issued by M/s. Karnataka Invsestment and Traders Ltd. , in favour of Shree Padma Wire Products Pvt. Ltd. , of which I am a Director. Although I have resigned as a Director from M/s. Kupal Materials and Metals Pvt. Ltd. , I feel that I owe moral obligation to the foreign buyer since I was deemed to be a Director at the relevant time. You are hereby instructed that out of the above amount a sum of Rs. II lakhs be remitted to M/s. Al- Mustaneer Establishment for Trade, Jeddah through their banker, AI Saudi Al Franci, Jeddah on account of documents negotiated against the L/c No. 2965 dated 23. 11. 78, by Kupal Materials and Metals Pvt. Ltd. , through your New Delhi Foreign Exchange Dept. Since there has been no shipment of material against the said L/c. I also enclose a letter authorising you to this effect from M/s. Shah Brothers. The above remittance may please be made through your Foreign Exchange Dept. , Cannaught Circus, New Delhi within l4 days from rcceipt of this letter/ accompanying letter of authorisation, failing which, your Bank shall be liable for all losses, damages, costs arising there from. " On the 6th of October, 1979 (Ex. P. 23) M/s. Amphora Marine Consultants Pvt. Ltd. , 15th defendant, wrote to the Syndicate Bank in the following terms:


"on a request made by M/s. Kupal Materials and Metals Pvt. Ltd. vide their letter dated 14th April, 1979, weissued three Bills of Lading referred to above, for shipment of 799. 260 MT of M. S. Round Bars to Hodeidah. Those Bills of Lading were issued as we were given to understand by M/s. Kupals that the L/c No. 2965 dated 23. 11. 78 which was transferred in their name, was due to expire and further that they would definitely make the shipment within 15 days of our releasing the said Bills of Lading. The total freight amounted to Rs. 1,81,945. 36 against which a sum of Rs. 1,65,519. 45 was collected by us from M/s. Kupals vide Cheque No. 625 dated 21. 5. 79 on Bombay Mercantile Co-operative Bank for a sum of Rs. 60,000. 00 and Pay-slip for a sum of Rs. 1,05,519. 45 dated 4. 5. 79 making a total of Rs. 1,65,519. 45. As you are aware, the nnaterial covered by the said Bills of Lading has not been shipped. In the meantime, M/s. Kupal Materials 7 Metals Pvt. Ltd. have negotiated the documents through your New Delhi Foreign Exchange Dept. and have collected payment against the above referred L/c. Since the material has not been shipped, they have promised to refund the amount collected by them, to the foreign buyers. Similarly the freight amount referred to above, which was collected by us has also become refundable. Since the documents against the above referred L/c have been negotiated by your good Bank, we are remitting herewith a sum of Rs. 60,000. 00 by a Demand Draft No. 714861 dated 6. 9. 79 issued by Bank of Baroda in your favour out of Rs. 1,65,519. 45 collected by us. The balance of Rs. 1,05,519. 45 will be remitted to you shortly. This amount may kindly be kept in a separate amount pending further advice in the matter. "


On the 8th of September, 1979 (Ex. P. 35) Syndicate Bank, Mumbai wrote to the 15th defendant in reply to Ex. P. 23 in the following terms :"reg: M/s. Kupal Materials and Metals Pvt. Ltd. We acknowledge receipt of your letter Ef:amc:547:79 dated the 6th September, 1979 along with the enclosed Draft No. 714861 drawn on Bank of Baroda, Nariman Point Branch for Rs. 60,000. 00. We are shocked and surprised to note vide para 3 of your letter that the materials covered under the said Bills of Lading have never been shipped by you and the Bills of Ladings having been issued without actually evidencing shipment of goods. Please note that the Banks deal only in documents strictly in accordance with the Uniform Customs and Practice for Documentary Credits and we are in no way concerned with the happenings between yourselves and M/s. Kupal Materials and Metals Pvt. Ltd. Hence we return your Draft No. 714861 drawn on Bank of Baroda, Nariman Point Branch for Rs. 60,000. 00. In view of what is stated hereinabove, there is no need for sending any further amount to us. Please note that if sent, it will be returned to you. Since it has been brought to our notice that the Bills of Ladin ghave been issued without actual shipment of goods, we endorse a copy of this letter and your letter to the Enforcement Directorate, Indian Banks Association and FEDAI for such action as they deem fit. "


(61) AS could be seen from the pleadings there were criminal complain its by the plaintiff and thereafter the plaint in this case was presented on 30. 5. 1981.


(62) THE evidence has to be analysed, in my view, (1) about the contentions of the first defendant that United Arab Agencies was not its agent; (2) about the opening of L/c; (3) about the visit of D1w2 (defendant No. 5) to Jeddah; (4) about the extension of Bank guarantee and encashment; (5) and about the encashment of the L/c on 23. 4. 1979.


(63) THE first defendant has taken up the plea that United Arab Agencies was only agent of the plaintiff. I have already referred to the documents Exs. P. 5, P. 26, P. 22 and P. 3. The 5th defendant Mr. Ravi Shankar Upadhaya as D1w2 deposed: Q. 5. Did they have any business with Unitar? Ans. Yes. We had the business of steel bars with Unitar. Q. 6. What do you mean by business of steel bars? Ans. Unitar as agents representing at Mustaneer, Jeddah had approached us for placing order of 2000 tons of steel bars. The order was placed in November, 1978. Q. 7. Were any orders placed on behalf of any one else by M/s. Unitar on Varuna Overseas? Ans. I am not very sure but I think there was one steel order before. Q. 8. So far as this export of 2000 M. Tons was concerned, in what capacity this order had been placed by Unitar on defendant No. 1? Ans. Unitar on behalf of their principals at Mustaneer had placed an order of steel bars on Varuna Overseas. Q. 9. With whom the negotiations take place in respect of this order by defendant No. 17? Ans. I was the Export Executive who was finalizing terms and conditions of this contract with Mr. B. J. Shah of Unitar. He visited the office of Varuna Overseas sometimes in November, 1978 and during this meeting Mr. Kuldip Singh of Kupals Materials and Metals Pvt. Ltd. were also present. Mr. Shah was introduced to Kuldip Singh and informed that he in association with Kirti Shah of Bombay would be executing by manufacturing this carder. Q. 10. Was an indent placed in respect of this, by whom and on whom? Ans. The indent was placed by B. J. Shah of United Arab (Unitar) on Varuna Overseas. Q. 11. On whose behalf Unitar made this order? Ans. On behalf of at Mustaneer, Jeddah. Q. 12. Before placing this order did Varuna Overseas or its officer had any meeting, discussions or negotiations with at Mustaneer or their representatives? Ans. No. Q. 13. Did any representative of at Mustaneer meet you or any other officer of the Co. in respect of the placing of the order? Ans. No. In the cross-examination by defendants No. 6 to 8 and 10, the witness would depose: Q. 55. Please state duty concerning contract in question and what the other defendants 2, 3, 4 and 19 had done for the performance of the contract? Ans. I was the Export Executive ln-cha"ge, so it was my job to fix the terms and conditions of the business. The others were not involved in it. 221 Q. 58. I put it to you that order Nos. 548 and 549 dated 22. 11. 78 were placed on defendant No. 1. Ans. Yes. Q. 62. Did you get any agreement or anything in writing signed that orders 548 and 549 were to be executed by defendant No. 6? Ans. We had signed a contract with Kupals that they would execute this order. Q. 66. I put it to you that there was nothing in writing that orders 548 and 549 were to be executed by defendant No. 6. Ans. In the indent, there was nothing in writing. About the meeting that took place prior to the transaction following questions were put to the witness : Q. 67. Did you write any letter or sent any telex informing defendant No. 6 or defendant No. 7 to be present in the said meeting, alleged to have been taken place in 1978 at Delhi? Ans. It was done only on telephone on the request of Mr. Shah. Q. 68. Did you have any written document to show that B. J. Shah at all visited India in November, 1978? Ans. Our letters carry reference of his visit. Q. 69. Have you filed those letters on the file? Ans. I do not know. Q. 70. I suggest to you that B. J. Shah never visited India in November, 1978. Ans. I deny the suggestion. Q. 71. I suggest to you neither there was any meeting at Delhi in November, 1978 nor Kuldip Singh was present in the meeting. Ans. I deny the suggestion.


(64) THE attempt by the 5th defendant was that the 6th defendant knew about the contract between the first defendant and the plaintiff, and the plaintiff is represented by Public Witness. 2 for United Arab Agencies. In the cross-examination by the plaintiff with reference to the question of agency between the first defendant and P. W. 2 the following facts were elicited : Q. 112. I put it to you that Mr. B. J. Shah was appointed as agent by defendant No. 1 in Jeddah? Ans. He was a general agent and not an exclusive one. Q. 1 13. I put it to you that he booked the orders Ex. P. 2 and Ex. P. 3, under the garb of defendant No. 1 as seller and supplier of these orders and were addressed to the plaintiff, is it correct? Ans. No. He contacted us informing me tha the had with him an immediate order possibly of 2000 Ton of steel M. S Round Bars. He did not approach us but asked us specifically if we can get the order accep ted. This order pertain to the plaintiff. Q. 114. I put it to you that B. J. Shah had contacted you to confirm the contract which you offered to the purchaser (Almastaneer) and for negotiation of terms with you? Ans. No. Q. 115. Mr. B. J. Shah was a commission agent independently functioning in Jeddah, is it correct? Ans. Yes. Q. 119. You had settled for commission of 1% for your foreign agent, is it correct? Ans. Yes. I have settled 1% for the FOB value for the foreign agent. Q. 120. I put it to you that it was Mr. B. J. Shah? Ans. Yes. Q. 121. It was meant for B. J. Shah because he was the agent of the Company. Ans. No. When an agent purchases any for company for an order or proposal he also seeks a consideration for this order would be 1% of the FOB value. Q. 122. Consideration for the agent for your company Mr. B. J. Shah has already been settled in the agency agreement is it correct? Ans. Yes, it is correct. Q. 150. Kindly see telex dated 21. 11. 1978 and tell to this Court who had sent it accepting the terms of the contract entered into by your Company (Defendant No. 1) with Almustaneer (plaintiff)? Ans. Telex sent by me to state the terms. Telex dated 21. 11. 1978 is exhibited as P. 26. Q. 151. This acceptance was on behalf of your Company, is it correct? Ans. It states the terms as Letter of Credit. Q. 156. I put it to you that the correspondence that was made by your Company was with your agent Mr. B. J. Shah who further gave instructions or information to Almustaneer the plaintiff, is it correct? Ans. Yes. B. J. Shah was the agent and not an exclusive agent of our Company. Q. 157. I put it to you that M/s United Arab Agency was owned by Mr. B. J. Shah and the United Arab Agency acted as your agent of your Company for booking this order, is it correct? Ans. It was owned by Mr. B. J. Shah but in this order of 2000 Tons he approached us on behalf of Almustaneer. Q. 158. I put it to you in the matter of these orders it is only your agent and you had appointed it only for that purpose. 223 Ans. Not necessary.


(65) THE first defendant examined Mr. B. M. Gupta (DIW3) to speak about this aspect also.


Q. 2. Did your Co. enter into any transaction with at Mustaneer? Ans. A purchase order was received from at Mustaneer in the year 1978 for the supply of 2000 M. T. M. S. Bars through their agent B. J. Shah. Q. 3. Were you involved in this transaction? Ans. I was involved in this transaction as far as the financing part is concerned. Q. 4. Did anyone from plaintiff's side come to defendant No. 1 Varuna Overseas? Ans. In November, 1978 B. J. Shah came to our office and Kuldip Singh Sahni, Director of Kupals was also there and Ravi Upadhaya and myself were present in the meeting wherein Ravi Upadhaya clarified to B. J. Shah that Kupals will be supplying M. S. Bars to at Mustaneer since our Co. is a merchant exporter and we are not manufacturing the goods.


(66) IN the cross-examination by Mr. S. N. Gupta Advocate on behalf of defendants 6 to 8 and 10 no question was put to the witness. In the cross- examination on behalf of the plaintiff the following questions were put :


Q. 45. I put it to you that Ex. P. 5 is signed by Ms. Suman Bansi Dhar as Managing Director of Dhar General Overseas Pvt. Ltd. Ans. It is correct. I identify her signatures. Q. 46. Ex. P. 5 is the agency agreement between United Arab Agency, Jeddah and Dhar General Overseas Pvt. Ltd. Is it correct? Ans. It is correct. Q. 47. I putit to you that United Arab Agency was the agent of Dhar General Overseas and you have deposed falsely before this Court that he was the agent of at Mustaneer. Ans. I deny the suggestion. Q. 48. Can you produce any document to indicate that United Arab Agency was the agent of at Mustaneer? Ans. This was the dealing done by the operational person and I do not know anything about it nor I can produce any such document. Q. 49. United Arab Agency was to get commission from Dhar General Overseas for doing business on behalf of Dhar. Is it correct? Ans. It is correct. Q. 50. Have you seen Exs. P. 2 and P. 3 at any time? Ans. I do not remember. Q. 51. The originals of Exs. P. 2 and P. 3 were sent by United Arab Agency to Dhar General Overseas. Ans. I do not remember. Q. 52. I put it to you that according to Exs. P. 2 and P. 3 Dhar General Overseas was mentioned as suppliers and consumers. Ans. I have never seen these documents. Q. 53. Was any telex sent by Dhar General Overseas confirm the terms of the orders Exs. P. 2 and P. 3? Ans. I do not remember. Q. 54. Kindly see Ex. P. 26 and I put it to you that this telex was sent by Dhar General Overseas confirming the terms of the supply of materials. Ans. I was involved only in the financial aspects and the telexes received or sent regarding the orders are not known to me. Q. 56. Kindly go through the telex and tell the Court whether you can deny that this is not the telex sent by defendant No. 1 approving and accepting the terms of contract. Ans. I do not know whether it was sent or not. Q. 78. I put it to you that defendant No. 1 arranged the Bank guarantee from Kupals, def endant No. 6, the Company which was not known to the plaintiff or the agent B. J. Shah and plaintiff insisted on the guarantee and affidavit of defendant No. 1. Is it correct? Ans. If I remember correct B. J. Shah, the agent of plaintiff took up the matter with Kupals for giving the performance guarantee since the goods were not shipped and L/c expired. However, we were also following up with Kupals for the same. Q. 79. I put it to you that B. J. Shah was agent of defendant No. 1 and he had never any talk or correspondence with Kupals nor did he require from Kupals to send any performance guarantee. Is it correct? Ans. No. This is wrong. B. J. Shah was the agent of plaintiff and was following up with Kupals also for the supply of material and supply of performance guarantee so that the L/c could be extended as desired by Kupals.


(67) THE 6th defendant examined Mr. Kuldip Singh, one of its Directors as D6wi. He did not say anything about the agency between the first defendant and P. W. 2.


(68) TO find out whether what exactly happened at the time of the opening of the L/c and how did the defendants go about this aspect could be gleaned from an analysis of the evidence in the following manner.


(69) 1 shall first consider the evidence of D1w2 Mr. Ravi Upadhaya (defendant No. 5). The following questions and answers would show the part played by him in this behalf:


Q. 14. Was Letter of Credit given to Varuna Overseas sent by Unitar? Ans. The L/c was established in favour of Varuna Overseas by Al Mustaneer and intimation of this was communicated to us by Unitar. Q. 15. Was that L/c transferable? Ans. During the discussions when Mr. Singh and Shah were present in our office we had specifically asked for transferable L/c and hence the transfer clause was incorporated in the L/c. Q. 16. Why transferable L/c was asked by you? Ans. This was because as made clear we were merchants and we were going to transfer this order for execution to Kupals. Q. 17. Mr. Shah of Unitar knew about the fact that the order had to be executed and by whom? Ans. Very much. He was personally present during the meetings. Otherwise, transferable word would not have been incorporated. Q. 18. What happened thereafter? Ans. After receipt of the transferable L/c we advised our bankers to transfer the L/c immediately to Kupals Materials and Metals Pvt. Ltd. for execution. Kupals confirmed that they will effect the shipment in the month of January, 1979. Q. 19. Was the shipment made by Kupals in January, 1979? Ans. No. 1t was not made. In fact, we were regularly following up with Kupals for execution of this order and since Mr. Shah happened to be in Delhi in February, 1979 he was informed that the Kupals would effect shipment later. In the cross-examination by Mr. S. N. Gupta, Advocate on behalf of defendants No. 6 to 8 and 10, the witness deposed: Q. 58. I put it to youthat Order Nos. 548 and 549 dated 22. 11. 78 were placed on defendant No. 1. Ans. Yes. Q. 59. I put it to you that plaintiff and defendant No. 1 were the contracting party and there was no provision in the contract for assigning it to any party? Ans. There was no contract direct with the plaintiff and Varuna Overseas. The order was brought to us by Unitar. The terms and conditions were finalised with Unitar. We did not see or discuss any terms and conditions with the at Mustaneer. Q. 60. Was there any specific condition for assigning the contract? Ans. Yes. This was agreed between Unitar and V Arnna Overseas that the contract will be transferred for execution. Q. 61. I put it to you that it was only L/c that it was to be transferred but there was nothing in the contract that it can be assigned. Ans. L/c is an integral part of the contract. So contract comes into force only after the L/c is received. Q. 62. Did you get any agreement or anything in writing signed that orders 548 and 549 were to be executed by defendant No. 6? Ans- We had signed a contract with Kupals that they would execute this order. Q. 63. Is that contract in writing that defendant No. 6 had to execute the order? Ans. I do not remember. Q. 64. Was any consent given by the plaintiff in writing that it was to be executed by defendant No. 6? Ans. We were not in touch with the plaintiff.


(70) IT could be seen that an attempt was that there was no contract between the first defendant and defendant No. 6 about the shipment. In answer to question No. 72 the witness would admit that L/cs were opened in favour of the first defendant. Question was asked about the extension of the L/c by the plaintiff and the performance guarantee given by the 6th defendant:


Q. 73. I put it to you that after the L/c was transferred in favour of Kupals the plaintiff refused to accept the same. Ans. No. Q. 74. The plaintiff extended the L/c in your name only after taking affidavit of guarantee from you to the effect that you shall be liable for contractual amount. Ans. No. at Mustaneer extended the L/c only on the basis of the performance guarantee received from Kupals directly from Syndicate Bank. If they had accepted on my signing of the certificates I would not have been at Jeddah. In the cross-examination on behalf of defendant Nos. 17 and 18 no questions were put about the opening of the L/c. On behalf of the plaintiff in the crossexamination the following facts were elicited : Q. 192. Now this original Letter of Credit was received by your Company on 23. 11. 1978, is it correct? Ans. Yes. Q. 193. I put it to you that transfer of this Letter of Credit was made in two instalments on 23. 12. 1978 and 27. 12. 1978 after a lapse of one month, is it correct? Ans. Yes. These were against two indents. Q. 194. I put it to you that these two indents were covered with one Letter of Credit, is it correct? Ans. Yes. Q. 195. Can you say why this delay was done in transferring the Letter of Credit when execution was to be made by Mr. Kupal? Ans. This is because the contract was signed immediately and the transfer through Bank take its own normal time and I do not remember the date of contract.


(71) MR. Kuldeep Singh (D6wi), as I had noticed above, was examined by the 6th defendant. 21 questions were put to him in the examination-in-chief by the learned Counsel for the 6th defendant. The questions and answers have to be extracted just to show that no serious attempt had been made by the 6th defendant to meet the case of the plaintiff except harping on the point that there was no contract between the plaintiff and the 6th defendant:


Q. I. What is the constitution of defendant No. 6? Ans. I am the Director of the Company. Q. 2. What were you in the said Company at that time? Ans. I was the Managing Director of the Company. Q. 3. Where is the office of defendant No. 6? Ans. We have an office in Delhi as well as in Bombay. Q. 4. Who was In-charge of defendant No. 6 at Bombay? Ans. Mr. Kirti H. Shah was the In-charge of our Bombay Office. Q. 5. What were the powers in respect monetary dealing? Ans. He did not have any power. Q. 6. Is 'it a fact that some winding up petition, is pending against defendant No. 6? Ans. Yes. Q. 7. Are you aware appointment of liquidator in that? Ans. Yes. Q. 8. Were you aware acquaintance with the plaintiff in the suit? Ans. No. Q. 9. Have you ever dealing with the plaintiff at all? Ans. Never. Q. 10. Have you ever any party to the contract? Ans. No. Q. 11. Have you ever attended any of the meetings of defendant No. 1? Ans. No. Q. 12. Whether the defendant No. 6 ever entered into a contract to execute the Order Nos. 548 and 549 of November 1978 either with the plaintiff or defendant No. 1? Ans. Never. 3. Could you tell us in whose favour L/c was issued on 23. 11. 1978? Ans. It was in favour of the first defendant. Q. 14. Whether Exs. P. 3 and P. 4 bear your signatures? Ans. No. Q. 15. Is it a fact that the Bank guarantee furnished by you on behalf of defendant No. 4 was not accepted by the plaintiff on the ground that defendant No. 6 was not known to them? Ans. Yes. Q. 16. This fact is also mentioned in the plaint. Is it correct? Ans. Yes. Q. 17. Is this a fact that when the L/c was refused the defendant No. 5 have sworn to an affidavit? Ans. Yes. Mr. R. Up adhaya had sworn an affidavit. Q. 18. By this affidavit, did he take the responsibility that he will be liable? Ans. Yes. He took the responsibility. Q. 19. Did you attend any meeting in November, 1978 alleged to have taken place in the office of defendant No. 1 in which B. J. Shah and others had attended the meeting? Ans. I never attended any such type of meeting in the office of defendant No. 1. Q. 20. When Smt. Ram Kaur, defendant No. 14 died? Ans. She died on 6th of December, 1982. Q. 21. You have read the statements of D. W. 1 and D. W. 2. Are these correct? Ans. They are all false statement. In the cross-examination by the learned Counsel for defendants No. 1 to 5 and 19 the witness would try to suppress material facts and was giving evasive answers and his demeanour was far from satisfactory. He appeared to me to be a person trying to conceal the relevant facts from Court. The following questions and answers would show the nature of the person : Q. 24. Was the Letter of Credit executed by the plaintiff was transferred in the name of defendant No. 6 Kupal Material and Metals Pvt. Ltd. of which you were the Managing Director? Ans. I am not aware of the transfer of the Letter of Credit. Q. 25. Were the proceeds of this Letter of Credit obtained by defendant No. 6? Ans. I do not know. Q. 31. You have copies of those returns for the relevant period 1979-80. Ans. I can arrange the same. Q. 33. Where was the Bank account of defendant No. 6? 229 Ans. Syndicate Bank, Can naught Place Branch, New Delhi. Q. 34. You have the statement of accounts for that period from the Bank. Ans. The said statement in respect of our Bank account is in the books. I am not in a position to produce any records of the Co. Q. 35. I put it to you that money against this Letter of Credit was received by your Co. Ans. I do not remember such things. Q. 39. Did the Company furnish a performance guarantee issued through the Syndicate Bank to the plaintiff? Ans. I do not know. Q. 41. Whatever is stated in the written statement is correct? Ans. It must be correct. Q. 42. Kindly see the letter dated 21. 12. 78. Is it signed by you? Ans. The signatures on the letter dated 21. 12. 78, which is a photo copy, are not mine. Q. 43. Is the signature of Kuldeep Singh, Managing Director, on Ex. DIW14 your signatures? Ans. No. They are not my signatures. The following questions and answers would show the characteri sties of the witness: Q. 45. Your Co. did not give any performance guarantee to the plaintiff. Ans. Since I was not involved in this contract and so I do not know anything about this. Q. 46. Can you name the person who was involved about this contract? Ans. I do not know. Q. 47. Who was Mr. G. R. Sharma? Ans. He was the Manager. Q. 48. Is he still in your employment? Ans. No. Q. 49. I put it to you that the money against this Letter of Credit has been taken by defendant No. 6 Co. ? Ans. I do not know. Q. 51. Have you seen Mr. G. R. Sharma writing and signing? Ans. I cannot identify the signatures of G. R. Sharma who was the Manager of defendant No. 6. He would expect the Court to believe that he is very innocent knowing nothing about the transaction: Q. 50. I put it to you that defendant No. 6 Co. was responsible for shipment 230 of these goods and these goods were not shipped by defendant No. 6 through the Marine Agents. Ans. I have already explained that I do not know anything about the contract. Therefore, I am not in a position to answer the question. Q. 52. I put it to you that in collusion with the other directors and the shipping agent have cheated the plaintiff. Ans. It is only a lie. I do not accept this. He would also deny the meeting for the purpose of deciding the question of transfer of the L/c: Q. 53. I also put it to you that you attended the meeting in respect of transfer of Letter of Credit in favour of defendant No. 6 and also in respect of the shipment which was to be made by defendant No. 6 to the plaintiff. Ans. Never. He would even go to the extent of denying that he did not know anything about Mr. Nathani: Q. 54. Who was M. B. Nathani? Ans. This name is not known to me till today and he has not worked with us at all. In the cross-examination on behalf of the plaintiff the witness would deny each and every fact put to him : Q. 59. The account in the syndicate bank in the name of defendant no. 6was being operated by you and you were making correspondence with them in respect of this Letter of Credit. Ans. I cannot say if laws making correspondence with the syndicate Bank. It may be that it was being operated by me. Q. 60. Against the Letter of Credit in this suit you had applied for taking loan. Ans. I do not remember. Q. 61. Kindly see Exs. P. 9, P. IO and P. 11. Are these invoices of your Co. signed by Manager Sharma? Ans. It seems to be the invoices of our Co. (The witness is not straight in his answer. He is trying to avoid the direct answers to the questions). Q. 63. Kindly tell whose signatures are on Exs. P. 9 to P. 11? Ans. Here fuses to answer. (The witness even without seeing the documents is denying the signatures in the documents. He is also arguing with the Counsel). Q. 64. Kindly see Exs. P. 31, P. 32, P. 33. These are the photo copies of the original invoices which were filed by defendant No. 6 in the Syndicate Bank for obtaining negotiation amount against Letter of Credit. 231 Ans. I do not know because it is not signed by me. Q. 65. Kindly see Exs. P. 17, P. 18 and P. 19 which are the bills of lading submitted by your Co. in the matter of negotiations of Letter of Credit. Ans. Our Co. has no connection at all. Q. 66. These documents were obtained by defendant No. 6 from defendants No. 15 and 16 fraudulently and by fraud and given in the bank and received money falsely. Ans. I am not a party to the contract. I did not do anything and I do not know these documents. Q. 67. In this connection drafts Exs. P. 14,p. 15 and P. 16 were also submitted by your Co. along with invoices. Ans. I do not know. Q. 68. I put it to you that these are signed by G. R. Sharma, Manager as authorised signatories on behalf of the defendant. Ans. I do not know. Q. 69. I put it to you that on the basis of these documents the Syndicate Bank drew the money and credited to the account of defendant No. 6. Is it correct? Ans. I do not remember. Q. 76. Kindly see letter Ex. P. 34. Is it signed by Kirti Shah? Ans. I do not know.


(72) ABOUT Mr. Kirti Shah he admitted that except Mr. Kirthi H. Shah all Directors defendants 7 to 14 are his relations.


(73) ON behalf of defendants 17and 18 the witness D17wi Mr. S. K. Issar, Asstt. Manager, Syndicate Bank, Can naught Place was examined. This witness would say that he did not know any thing about the transaction. The following questions and answers would show that the defendants 17 and 18 had not at all taken any interest in the case.


Q. 5. Can you tell this Court if the negotiation is supposed is not accepted by the confirming bank is it necessary to intimate the negotiating bank and within how many days? Ans. There is difference between the practice and law in this case. But normally it was under the previous Uniform Customs Practice for documentary evidence. Under the UCPDE previously it was stated reasonable time within which the reimbursing Bank could complete the discrepancy if traced. Now the revised UCPDE it is five working days but this aspect is always open to discussion of objection. Q. 6. When the negotiation was accepted by confirming Bank, what was its effect? Ans. We are to treat the transaction is over because full and final payment has been made or the non-recei pt of communication and discrepancy to us denotes that the bill negotiated by us as per the Letter of Credit terms was correct and has been so accepted. Q. 4. Can you tell this Court when negotiation is complete and how you know that the negotiation is correct? Ans. In this case it has two angles. One when we negotiate the bill and we purchase the currency and credit to the party and half of the negotiation is over and in totality it is over when the Overseas Bank from whom we are claiming imbursement makes the payment that transaction is complete. Overseas Bank is called a confirming Bank also in banking way parlance.


(74) NO document was produced by this witness. In the cross-examination, on behalf of plaintiff, the witness would state :


Q. 9. When were you working with defendant No. 17, Foreign Exchange, Cannaught Place, New Delhi? Ans. I joined this Branch on 29. 7. 91 and still I am working. Q. 10. Who was the Manager of this Branch in November, 1978? Ans. I do not know. Q. 11. Who was the Officer v/ho dealt with the negotiations of the Letter of Credit in this suit? Ans. Exactly I do not know. Q. 12. Can you give the number of the L/c involved in this suit? Ans. I do not know. Q. 13. Can you give the date of the L/c involved in the suit? Ans. I do not know. Q. 14. Who was the party who had opened this L/c? Ans. I believe it was at Mustaneer Establishment for Trade, as per the name of the suit. Q. 21. Can you identify the L/c, the subject matter of the suit, if shown to you? Ans. I cannot identify the L/c, if shown to me because so far I have not seen it. Q. 22. Have you seen the exchange drafts which were sent by your Bank to the foreign Bank for getting proceeds of the L/c for 800 MT? Ans. I have not seen. Q. 23. Kindly see Ex. F. 37. Is this the exchange draft sent by your Branch to the foreign Bank for collection/reimbursement of the proceeds for 800 M. T. on account of Kupals Material and Metal Pvt. Ltd. ? Ans. I do not know whether Ex. P. 37 was sent by our branch. It is a standard format. I was not there then working. Q. 24. Can you identify the signatures of the Manager on the forwarding letter and draft? Ans. No. Q. 25. I put it to you that this exchange draft was from your Bank defendant No. 17. Is it correct? Ans. I am not able to say anything about it. Q. 26. You do not personally know under what circumstances this L/c was negotiated and what negligence and connivance was shown in the matter when the fraud was committed for not shipping the goods and claiming the money. Ans. I am not in a position to depose anything about the transaction. I am quite unaware about it. Q. 27. Kindly see Ex. P. 28 and the transfer endorsement on the back of it Was it received by your Bank? Ans. I cannot say anything whether the Bank received it or not. I was not a party to it. In the cross-examination on behalf of defendants 1 to 5 and 19 the witness would depose: Q. 34. Whether the record has been destroyed? Ans. That has to be confirmed. Q. 35. Did you ever try to verify whether the record has been destroyed or whether it is traceable or they are available? Ans. I do not know anything about the record. Q. 39. Can you please state as to who was the officer of the Bank dealing with this case at the relevant time? Ans. I cannot say. Q. 41. What happens when you receive the L/c? Ans. The terms and conditions of L/c have to be seen and the beneficiary tenders the bills and negotiation is done. Q. 42. Only when the terms and conditions are satisfied that the Bank can credit account of the beneficiary. Ans. Yes. Q. 45. Suppose the L/c requires the document of shipping to be given to the Bank before proceeds to be credited to the account of the beneficiary, when you ask for the documents relating to the shipping bill? Ans. We take bill of lading. Q. 46. Can you proceed to credit the account of the beneficiary without the original L/c being presented to you? Ans. We act only on the L/c. As per the terms and conditions we credit beneficiary. Q. 47. If the L/c requires non negotiable documents to be taken and to be forwarded to the drawee in a case of transfer of L/c you have to comply with that. Ans. I do not know about this aspect. Q. 48. In the present case objections were raised by Varuna Overseas in respect of credit on account of Kupals. Q. 50. I put it to you that the Bank had negotiated documents on the basis of expired L/c. Ans. I do not know. Q. 51. I put it to you that the officers of the Bank were in collusion with Kupais and totally fraudulent transfer was made in favour of Kupais. Ans. I am not aware. Q. 52. The intimation to the foreign Bank is sent only after the credit is made in favour of your party. Ans. We credit in Indian rupees to the party account and as per the L/c terms and conditions we claim reimbursement by sending the documents. Q. 53. Once you have credited the account in Indian rupees the foreign Bank has no status to refuse to send the amount to you. Ans. I am not aware about it. Q. 54. The very concept of L/c means that once the payment has been made here in Indian rupees the foreign Bank on the advice received by them have to transfer the amount to you. Ans. It is not necessary. If they feel that there are discrepancies they can communicate the same to the Bank. In the cross-examination on behalf of defendants 6 to 8 and 10 the witness would depose: Q. 61. Before deposing in this Court, did you go through the files? Ans. I have read the files. Q. 62. I suggest to you that Kupais had not played any fraud with the bank nor the Bank has played any fraud with the Kupais. Ans. I was not a part at that time and I do not know. 75. It could be seen from above that the 5th defendant through the United Arab Agencies had offered to supply 2000 M. T. of M. S. Bars to the plaintiff and with the help of the 6th defendant attempted to make arrangement for shipment and induced the plaintiff to open Letter of Credit for a huge sum of money and defendant I Nos. 6, 17 and 18 had been parties to the same along with the first defendant,


(75) FROM the evidence one can see how the 6th defendant had encashed the Bank guarantee by artifices and by foul means. The 5th defendant projected a case of duress and coercion while all the defendants had colluded together in encashing the Bank guarantee. I refer to defendants 17 and 18 at this stage because they had acted negligently and had paid money on the representation of the 6th defendant. Therefore, an inference of collusion would arise. With reference to the question of colusion, there cannot be any specific pleadings and it is purely a matter of inference on facts established. A scanning of evidence, as I had stated just above, would show the game of the defendants. In the examination of DIW2 Mrs. Ravi Upadhaya following facts were sought to be elicited :


Q. 23. Did you thereafter visit Jeddah ? Ans. On the 3rd of March, 19791 visited Saudi Arabia enroute Egypt and Kuwait for business promotion. Q. 24. Before going to Saudi Arabia did you meet Kirti Shah on 2. 3. 79? Ans. I personally met Kirti Shah on the 2nd of March, 1979 to find out the shipment details of this order and he promised to send a telex to go latest by the 4th March in Damam. I reached Damam on 3rd of March, 1979. Q. 25. As to what happened at Darnam? Ans. I received a call in my Hotel in Darnam from B. J. Shah from Jeddah asking me for my flight details to Jeddah which I gave. Q. 26. Did Shah meet you there? Ans. I reached Jeddah on the 9th of March, 1979 and was received at the Airport by A. J. Shah, B. J. Shah's brother, who took me to a hotel booked by them called New Bahuddin, which was across their office. This happened to be Friday, which is a holiday there. Q. 27. What happened there? Ans. The next day on the 10th of March I was escorted to the office of Unitar by the two brothers and while I was there Umar Mohd. of the plaintiff also came in. I explained to them that B. J. Shah is aware that the shipment date needs to be extended due to reasons given by Kupals. They wanted me to furnish a compensation of 18% of the order or give a Bank guarantee of 10% of the order after which they would extend the L/c. I told them that as an Export Executive I was not authorised to make this commitment on which the three of them physically caught hold of me, snatched away my Passport and started abusing me. Mr. Shah then made out a telex in my name to my Co. in Delhi mentioning that I am going to be held till 10%i Bank guarantee is furnished. They showed me a telegram which they had sent to the Amir of Mecca stating that Ravi Shankar Upadhaya had cheated them of 6. 8 lakhs US Dollars and should be held in Jeddah till money is recovered from him. I immediately on protest rang up the Indian Embassy in Jeddah. I was put on to the Commercial Section. I do not remember the name of the officer I spoke to but he told me very clearly that the choice I have is on the basis of the telegram they can make police case and put me in prison or if they prefer to put me in a hotel I should accept it. In Saudi Arabia you are not allowing to walk in the street with out an identity card or passport and if you are found without any of these documents, the police immediately will pout you in the prison. I was sent back to the hotel without my passport and told to remain within the confines of my room. Every morning I was produced in the office of Shah and I was brought there with an escort and every morning I was subject to filthy abuses. Literally, everyday telexes were sent to my office asking for the guarantee in my name. I was held there till the 29th of March during which period my visa had also to be extended. While I was in the office of Shah. Mr. Umar also used to join in shouting at me and abusing me. It was 17th of March when they felt that I was getting a little used to the abuses they made it very clear that they would take me to the ground where physical whipping and floggings on the criminals are carried out. This broke me down completely and I had a temperature of about 102 to 103 that night. Q. 28. Kindly look at the telex on the files and state as to whether you were made send these telexes from Jeddah. Ans. Yes. Ex. D1w2/3 to D1w2/16 were the telexes which I had sent on several days at the asking of B. J. Shah. Q. 29. Did the defendant No. 1 authorise you to sign an y agreement, execute any bond or guarantees as you were asking them through telex messages? Ans. No. Q. 30. Was tha re any reply received to these telexes giving you the authority to sign guarantees? Ans. No. Q. 31. Did you ask Delhi Office of your Co. to send the performance guarantee? Ans. All this was done by Shah himself. Q. 32. What happened regarding requests which Shah had made you to send regarding performance guarantee? Ans. Kupals Materials and Metals Pvt. Ltd. through their Bankers Syndicate Bank directly sent the guarantee of 10% performance bond in favour of Shah's Company. This was turned down by the bankers in Jeddah so Kupals made amendments to the guarantee and transmitted through Syndicate Bank to the party's bankers. Q. 33. The performance guarantee was given bysyndicate Bank, defendant No. 17 at the asking of defendant No. 6 was accepted by plaintiff. Ans. It was accepted by the plaintiff's Bank. Q. 34. Then what happened? Were you captive after that? Ans. This happened on 27th after which they wanted me to sign further guarantees in the Indian Embassy only after which my passport was returned to me. They had told me that the exist visas against my passport have been blocked in Jeddah, Damam and Riad Airports and the Indian Embassy also has been intimated officially that no emergency passport should be released to me. Q. 35. When was your passport returned to you? Ans. It was returned to me on the 29th March afternoon which was a Thursday, and I flew back to Delhi same night since I was not mentally and physically in the right shape to continue my tour to Egypt and Kuwait. Q. 36. Did you sign the guarantee dated 27. 3. 79 on your own volution and free Will? Ans. I have seen Ex. P. 25 guarantee. It bears my signatures. Under the Circumstances, that I was there I would have signed any document. The witness had admitted Ex. P. 25 guarantee. The attempt was that it was under duress and coercion. I shall further note the evidence : Q. 37. Was it of your on your own free consent? Ans. No. Q. 38. Were you forced to sign these documents? Ans. Under the circumstances since I wanted to get away from Jeddah I would sign anything. Q. 39. Please state after issue of performance guarantee by Syndicate Bank, did plaintiff extend L/c? Ans. They extended the L/c till 25. 5. 79. Q. 40. Then what happened thereafter? Ans. Immediately after we received the extension in L/c we wrote to bankers Canara Bank to transfer the same to Kupals through Synd ica te Bank and further requested them, in order to safeguard our position, to incorporate the requ irement of two additional certificates, one was a certificate issued by S. G. S. , an Inspection Agency who would inspect the goods in the Port and loading to ensure quality, specifications; and (2) a certificate from Kupals Materials and Metals Pvt. Ltd. confirming that they would be liable for any quality or shortage claims. Q. 41. Is the letter dated 14. 5. 79 issued by the Bank accepting the condition for negotiation of the L/c? Ans. Yes. Its is exhibited as Ex. Dl W2 /17. Q. 42. Was a letter written by the Syndicate Bank, defendant No. 17 to defendant No. 6 with a copy to Dhar General Overseas Pvt. ltd. informing Kupals the two conditions in respect of the L/c. Ans. Yes. Q. 43. Please inform me as to whether these documents were taken by the Bank before transferring the proceedings of the L/c. Ans. Its was sometime in June that Syndicate Bank sent us a cheque or a draft for Rs. 53,251. 95 as our commission but they did not send us alongwith the amount certificates that were supposed to be submitted Kupals. Q. 44. To whom did the balance amount of L/c go? Ans. It went to Kupals Materials and Metals Pvt. Ltd. who negotiated the documents and their account was credited by the Bank directly. Q. 45. Did defendant No. 1 receive any other payment apart from these commission charges? Ans. No. Q. 46. Did you write to the Bank about the send ing of these two documents? Ans. We immediately protested to the Bank pointing out that this was highly irregular and requested them to immediately obtain two required certificates and send to us. Q. 47. Did the amended L/c in original was with the Bank at the time of encashment of the L/c? Ans. In fact the original had not even reached the Bank and the negotiations was done on the basis of the photo copy of the L/c between the bank and Kupals Materials and Metals. Q. 48. Did you receive any reply from the Bank to your request for sending you the documents? Ans. I do not remember. Q. 49. Who was to send the goods to the plaintiff? Ans. Kupals Materials and Metals Pvt. Ltd. were to send the goods directly to at Musteen and negotiate documents. Q. 50. Did Kupals Materials and Metals ship the goods? Ans. No. They did not ship the goods. We were continuously writing to them aswell as in Delhi and Bombay asking them to furnish shipment information since the L/c would expire on 25. 5. 79. Q. 51. Was the negotiation and receipt of money by Kupals after the shipment of the goods? Ans. I do not know. But it is obvious that the documents which they put up to the Bank must have shown the shipment of the goods. Q. 52. Did you inform the plaintiff by a telex message of lodging a claim against the Bank guarantee furnished by Kupals? Ans. Yes. Ex. D1w2/18 is the telex message. Q. 53. What did the defendant No. 1 do with the commission? Ans. As soon as the Company realised that the goods were not shipped and there was a fraud committed they advised their bankers Canara Bank to keep the amount in a separate account. Q. 54. Who had committed this fraud? Ans. It was Kupals Materials and Metals, in association with the Syndicate Bank as well as the Shipping Line who issued the false Bill of Lading.


(76) THE following facts were sought to be established by the 6th defendant in the cross-examination:


Q. 74. The plaintiff extended the L/c in your name only after taking affidavit of guarantee from you to the effect that you shall be liable for contractual amount. Ans. No. at Mustaneer extended the L/c only on the basis of the performance guarantee received from Kupals directly from Syndicate Bank. If they had accepted on my signing of the certificates I would not have been at Jeddah. Q. 75. I put it to you that you concocted a false story that you were forced to sign an affidavit of guarantee. Did you write any complaint with the Airport Authority abroad or in India immediately after your arrival? Ans. I lodged a complaint and sought permission from the Ministry of Home Affairs with a request that I may proceed against these people for holding me forcibly in Jeddah for three weeks. There was no one I could turn for help in Jeddah. So I did in India. Q. 76. Is that complaint filed by you on record? Ans. I do not know. Q. 77. I put it to you that as you stated that those documents were forcibly signed by you, you did not file any suit or any proceedings challenging those documents that they were falsely or forcibly got signed by you. Ans. No suit has been filed. Q. 82. I suggest to you that whatever you have stated and answered to questions No. 32,33,34,35,36,37 and 38 these are false and concocted story and even beyond the pleadings. Ans. I deny the suggestion.


(77) IN the cross-examination on behalf of defendants 17 and 18 the following facts were elicited:


Q. 84. Why was letter of credit transferable? Ans. We were merchant exporter and we had made it clear right from the beginning at the time of taking the order that execution would only be carried out by Kupals Material and Metals and hence we asked for word transferable which was agreed between the United Arab Agency and the plaintiff. Q. 85. When was Letter of Credit transferred? Ans. We had signed the contract on 22. 11. 1978. This was followed by the Letter of Credit which was transferable immediately on receipt through our bankers Canara Bank to Kupals through Syndicate Bank. Q. 86. Was Letter of Credit transferred in December, 1978? Ans. May be. Q. 87. What was your role in transfering of Letter of Credit? Ans. My role was only to follow up the execution and establishment with Kupals. Q. 88. I am asking you what was your role in transfering of Letter of Credit? Ans. My role was nothing in transfering of Letter of Credit. Q. 89. What was your role in extension of Letter of Credit? Ans. The Letter of Credit was extended till 25. 05. 1979. Q. 90. I am asking you what was your role in extension of Letter of Credit? Ans. My role was because I was placed in Jeddah and because of my being held there Kupals gave 10% performance guarantee and thereby A. L. Mustancer (plaintiff) extended the Letter of Credit. Q. 91. Was there any role for you to play to inform defendants 17 and 18 about the extension of Letter of Credit? Ans. No. There was no role played by me as I was dealing with the Company. Q. 92. Can you state whose role was? Ans. Mr. B. N. Gupta from Varuna Ovesrseas was responsible for financially related transaction. Q. 93. He was responsible for that. Ans. I assume so. Q. 94. Was the duty of Varuna Overseas to inform about the Letter of Credit to defendants 17 and 18? Ans. Varuna Overseas by means of the first receiver of Letter of Credit were guaranteed with the Kupals and the Banks. 79. About the transfer of Letter of Credit at the instance of the first defendant the witness would say : Q. 95. You have stated in question No. 40 examination-in-chief that you had written to the Canara Bank to transfer Letter of Credit to Syndicate Bank, when had you written that? Ans. This must have been written by Mr. Gupta. Q. 96. How was the information given to Syndicate Bank by your Canara Bank? Ans. The Canara Bank was intimated by our Company to incorporate clause in the Letter of Credit which they did so and sent it to Syndicate Bank. Two clauses mentioned therein. Q. 97. It was after the extension of Letter of Credit? Ans. Yes. Q. 98. In question No. 42 which was the letter written by Syndicate Bank and copy thereof was sent to defendant No. 6? Can you tell the number and date of that letter? Ans. I do not know the number and date. Q. 99. That copy is there. Ans. I think it is there. Q. 100. Have you any information whether the Canara Bank has sent other instructions to defendants 17 and 18? Ans. Yes. The Canara Bank endorsed two clauses on the back of the extended Letter of Credit and sent it to the Syndicate Bank. A copy of which was available in the office record.


(78) IN the cross-examination on behalf of the plain tiff the following facts were elicited:


Q. 104. Kindly see Exhibit P. 28, this is a extension Letter of Credit which was transferred by your Bank in the name of Kupals by their endorsement on 12. 4. 1979, is it correct? Ans. I do not remember the clauses which were led by my Company through Canara Bank to be followed by M/s. Kupals and the Syndicate Bank. Q. 105. I am askingyou whether this extension of Letter of Credit in the name of defendant I was made? Ans. Yes. It is correct extension of Letter of Credit was made in the name of defendant No. 1. This letter of extension is marked as Exhibit P. 28. Q. 106. This Letter of Credit was received by defendant No. 1 on 2. 4. 1979, is it correct? Ans. I do not know the date of receipt but this was extension. Q. 107. Now this extension is dated 2nd April. 1979, is it correct? Ans. It is correct that the extension is 2nd April, 1979. Q. 108. When was it actually received ? Ans. I do not remember when it was actually received. Q. 108. Now I put it to you that this extension of Letter of Credit could not be acted upon by defendant No. 6 or defendant 17 (Syndicate Bank) and defendant No. 18 unless the transfer was made by your Company through bankers in the name of M/s. Kupals? Ans. It is correct. Q. 109. Did you take any undertaking from M/s Kupals about the performance of these two terms which you have mentioned in extension letter (Exhibit P. 28) before this endorsement was made by your Bank? Ans. I remember talking to them and getting the acceptance but I am not very clear if this was followed by a letter subsequently because of the telephonic talk the clauses were incorporated. Q. 124. I put it to you that on your own you got word transferred of the Letter of Credit? Ans. Yes it is correct. Q. 126. In your correspondence before the date of expiry of Letter of Credit you have not mentioned M/s. Kupals specifically as transfer of the Letter of Credit, is it correct? Ans. It is correct that it is not mentioned in any correspondence. Q. 127. Your Company (Defendant No. 1) requested for extension. Ans. Yes. Q. 128. You are the author of that request, is it correct? Ans. Yes. Being an executor of the exporter. Q. 129. A telex was sent on 5. 3. 79 requesting by your Company under your name requesting for extension of the Letter of Credit, is it correct? Ans. I do not remember. Definitely an extension request must have been made but I was in Daman on 3rd March, 1979. Kupal had requested our Company on the 1st of March, 79 to extend the Letter of Credit upto 30th March, 79 as goods inspite of ready could not be shifted due to non-availability of vessels. Q. 130. Kindly see this telex Annexure I dated 5. 3. 79 which was sent by defendant I in your name for extension of Letter of Credit? Ans. Yes. This was sent by me from Daman to Jeddah and was based on Kupals request for Letter of Credit extension. Q. 131. In this telex is correct that there is no mention of any request of Kupal (defendant No. 6) and this telex clearly shows that it was the request of defendant No. 1? Ans. Yes. Q. 132. You were on the official tour to Jeddah as representative of defendant No. 1, is it correct? Ans. Yes. Q. 133. As Export Executor you are responsible for entering into any arrangement with any buyer regarding the export matter, is it correct? Ans. No. My job was only to book orders based on the export promoters of cost. Q. 134. At Jeddah you had personally requested the plaintiff and Mr. B. J. Shah for extension, is it correct and that request was made on behalf of defendant No. 1? Ans. Yes, it is correct. Q. 135. I put it to you that all these telex or story of confinement is concoction and your manipulation and after thought so that you may make hoax of everybody? Ans. No. 1 still friticken when I think of the time I spent in Jeddah the conditions I went through which can never he concocted. Q. 137. The affidavit you signed in the Indian Embassy before the Indian Consuler did you any complaint in writing to him abou t any coercion or any compulsion to give this affidavit? Ans. No written complaint was made but the Embassy was very well aware of my being held there from day one. Q. 145. Kindly see this document and tell to this Court, is it correct? Ans. Yes. It is correct. There is my signatures on this document. The document is exhibited as P. 25. Q. 146. Kindly see this affidavit which you have affirmed from K. L. Vedi Attache (Consuler) Embassy of India, Jeddah dated 27. 3. 1979, is it correct? Ans. Yes. Under the circumstances mentioned by me I would have signed any document. Q. 147. This affidavit was in the form of guarantee on behalf of your Company, is it correct? Ans. Yes. Q. 169. Did you know defendant No. 9 Kirti H. Shah who was the Director ofm/s. Kupal? Ans. Yes. Q. I 70. Did you have any correspondence with him at any time? Ans. I do not remember. Q. 171. Please see this document and tell to this Court whose are signatures on this? Ans. The document shown to me is a letter by Mr. Kirti H. Shah but I do not identify his signatures. This letter is exhibited as P. 34. Q. I 72. Copy of this letter was also received by your Company, is it correct? Ans. I do not know since it related to financial matter, I was not in picture. Q. 173. I put it to you that the copy of the letter (Ex. P. 34) endorsed in the name of your Company, is it correct? Ans. Yes.


(79) THE Bank guarantee had been encashed and the first defendant had received a commission. About these facts the witness would say :


Q. 174. Did your Company or you pursue the Syndicte Bank to see that money offered by Mr. Kirti H. Shah is paid to the plaintiff? Ans. I was not in this picture. Q. 175. I put it to you that your Company (defendant No. 1) received a draft of Rs. 59,955. 27 from Syndicate Bank vide their DD No. 342518/340 and this amount was received in April, 1979, is it correct? Ans. I remember the month of receipt as June, 1979, but I do not know the amount. Rs. 59,955. 27 is a consideration amount of transfer of Letter of Credit of 800 Ton, 2043 1% commission, of FOB value and 6% as Letter of Credit confirmation charges, is it correct? Ans- I do not know the break up. Q. 176. I put it to you that this draft was sent by defendants 17 and 18 on 26th April 1979, is it correct? Ans. I remember the month June, 1976. The witness would say that the 6th defendant was guilty of fraud : Q. 177. I put it to you that this amount was part of the amount of fraud committed by M/s. Kupal, is it correct? Ans. Yes. Whatever amount was sent. Q. 191. I put it to you that this act you did not do because you colluded with defendant No. 6, is it correct? Ans. Yes.


(80) FROM this one can gather that how the witness was trying to project the facts ignoring what was done by the defendants in taking away the money of the plaintiff clandestinely by committing fraud.


(81) THE nex twitness D1w3 Mr. B. M. Gupta for the first defendant would also give evidence on the same strain, a fair sprinkling of his evidence would show that he is also not ready to tell us the truth :


Q. 1. Where were you working in 1978? Ans. I was working with Dhar General Overseas Pvt. Ltd. known as Varuna Overseas Pvt. Ltd. as Manager, Accounts and Finance. Q. 5. What happened to the shipment which was to be sent through Kupals? Ans. Kupals had to send M. S. Bars by 3rd March, 1979 as per the transfer L/c which he did not shift the goods by that time though reminders were sent to them for the shipment. . Q. 6. Whom did you send the reminders? Ans. Kupals. Q. 7. Kindly see the letter dated 5. 5. 79. Is it signed by you? Ans. It is signed by me and it was sent to the Syndicate Bank. It is exhibited as Ex. D1ws/1. Q. 8. Did you receive any reply from Syndicate Bank? Ans. We did not receive any reply from the Syndicate Bank. 245 Q. 9. Did the Syndicate Bank send you the certificates which you had asked for? Ans. No. As per the condition of the transferred L/c while negotiating of the documents, two certificates were to be sent but the Syndicate Bank did not send those certificates and we wrote-letters to them. Q. 10. Did the Syndicate Bank send you a copy of the letter written to Kupals asking for certificates? Ans. Yes. Syndicate Bank sent the copy of the letter Ex. D1w2/17 to us requiring Kupals to arrange for the documents as to enable them to send them to Varuna Overseas. Q. 11. Thereafter, did you receive two documents? Ans. We did not receive the two documents at any time. Q. 12. Did your Co. write to Kupals for ensuring the shipment of the goods? Ans. Yes. We wrote letters to Kupals for the shipment of the goods. Q. 13. Is this the copy of the letter which was sent to Kupals? Ans. DIW3/2 is the copy of the letter sent to Kupals requesting them to ensure the shipment of the goods. Q. 14. Who was G. R. Sharma? Ans. G. R. Sharma was the Manager of Kupals. Q. 15. Kindly see letter dated 23. 5. 79. Whether this was sent by Kupals to defendant No. 1 in reply to your letter dated 18. 5. 79? Ans. Yes. It is exhibited as DIW3/3. (objected to). Q. 16. How many letters approximately did Varuna Overseas wrote to Syndicate Bank for the two negotiating documents? Ans. For supplying two certificates, Varuna Overseas had written atleast 3-4 letters to Syndicate Bank since it was the condition of the L/c that these documents should be obtained at the time of the negotiation of documents. Ex. DIW3/4 to DIW3/7 are the copies of the letters which had been written by defendant No. 1 to Syndicate Bank requiring them to send the two documents which were to be taken from Kupals before the L/c could be negotiated. Q. 17. Did defendant No. 1 send a telex message to the plaintiff regarding illegal encashment of the L/c? Ans. Yes. Q. 18. Kindly see telex dated 15. 7. 79. Ans. It was sent by defendant No. 1 to the plaintiff regarding illegal encashment of the L/c. It is exhibited as DIW3/8. Q. 19. Was a telex message sent to Syndicate Bank that the entire negotiation has been done illegal producing against the negotiation of the L/c? Ans. Yes. It is exhibited as Ex. D1w3/9. Q. 20. Did you inform the plaintiff that they should lodge their claims with Kupals in respect of loss caused to them by letter dated 16. 7. 79? Ans. Yes by letter Ex. DIW3/10 the plaintiff was informed to lodge the claim with their bankers in respect of illegal negotiation of the L/c. Q. 21. Was a notice dated 16. 7. 79 given to the Syndicate Bank in respect of this illegal negotiation of L/c? Ans. Yes. Ex. D1ws/11 and DIW3/12 were the notices issued by us to the Syndicate Bank in respect of wrong negotiations of the L/c. Q. 22. Kindly see the letter dated 23. 5. 79. Was it sent by Kupals to the plaintiff? Ans. Yes. Ex. DIW3/13 is the copy of the written by defendant No. 7 to the plaintiff. Q. 23. Who were Amphora Marine Consultants? Ans. They were the shipping agents of Kupals. Q. 25. Whether shipping was actually done by Kupals? Ans. It is understood that shipment was not actually done. Q. 26. Who took the money on the basis of L/c from Syndicate Bank? Ans. The money against the negotiations of documents, which appears to be forged, were paid to Kupals and only commission of Rs. 53,000. 00 were paid to Varuna Overseas. Q. 27. Oncoming to know of this fraud, what Varuna Over se as did with this amount? Ans. After coming to know that the shipments were not made and documents were negotiated on the photo copy and the certificates required as per the transferred L/c were not received by us. We wrote a letter to the bank to keep the commission amount of Rs. 53,000. 00 approximately, which was received from Syndicate Bank in suspense account. He would go to the extent of saying that Mr. Ravi Shankar Upadhaya D1w2 was not authorised to give affidavit by the first defendant Co. : Q. 29. Kindly tell us as to whether defendant No. 1 ever authorise Ravi Upadhaya to give any guarantees and affidavits in respect of this transaction? Ans. Ravi Upadhaya was never authorised to give any guarantees or affidavits in this regard. Rather, Kupals have sent performance guarantee to at Mustaneer through their bankers Syndicate Bank, based on which the L/c which expired on 3. 3. 79 was extended by Al Mustaneer. He would give answer in a very casual way, evidenced from the following: Q. 30. Did Ravi Upadhaya ever tell you about the circumstances in which he executed the guarantee and the affidavit at Jeddah? Ans. Ravi Upadhaya went to Jeddah on business tour were we understood at that time through his telex that he was being harassed by Al Mustaneer. He telephoned to me also and was asked to sign some documents. However, no authority was given to him in this regard.


(82) IN the cross-examination on behalf of defendants 6 to 8 and 10, he would assert that there was a contract between the first defendant and the 6th defendant:


Q. Was there any contract executed between you and defendants 6 to 8 and 10 concerning the orders 548 and 549 dated 22. 11. 78? Ans. Yes. Q. 34. Is there any document in writing to show that a contract was entered into between defendant No. 1 with defendant No. 6? Ans. I do not remember. Q. 35. Have any letter written that time todefendantno. 6forexecuting the order? Ans. I being the Manager Accounts and Finance looking after the financial aspects and the L/c received from at M ustaneer was transferred to Kupals for the shipment of goods. Q. 36. The L/c, which was sent by the plaintiff, was it in the name of defendant No. 1? Ans. L/c sent by the plaintiff was a transferable L/c. As ';uch it was transferred in the name of Kupals. Q. 37. Even when the L/c was extended it was extended in the name of Dhar General Overseas. Ans. The L/c was extended based on the Bank guarantee for the performance of the contract by Kupals to at Mustaneer and basing on that the L/c was extended and sent to us. Q. 38. Is it a fact that the orders 548 and 549 dated 22. 11. 78 was placed on defendant No. 1 by the plaintiff? Ans. As far as orders are concerned, I was not involved and as such I do not remember.


(83) IN the cross-examination on behalf of defendants 17 and 18 one question was put and that shows casual manner in which defendants 17 and 18 had conducted the case:


Q. 39. Did you get any reply to your letter to defendants 17 and 18 Syndicate Bank stating that Syndicate Bank indulged in illegal transaction? Ans. I do not remember. 86. In the cross-examination on behalf of the plaintiff, the witness would not give any direct answer and had been trying to beat about the bush : Q. 57. I put it to you that it was Dhar General Overseas who had asked specifically for transferable L/c. Ans. Yes. It was Dhar General Overseas who had asked at Mustaneer to have the L/c transferable. Q. 58. Did you obtain the consent of at Mustaneer before transferring the L/c to Kupais? Ans. I remember that we asked at Mustaneer for the transferable L/c since Dhar General Overseas were the merchant exporters and do not manufacture the goods. Transferable L/c was requested and I remember correctly this was discussed in November 78 along with B. J. Shah and Kuldip Singh Sahni, Director Kupais for the execution of the contract and to get transferable L/c. at Mustaneer gave consent. Q. 59. Can you produce any document to show at Mustaneer giving consent for the transfer of L/c to Kupais? Ans. Yes. Witness volunteers, so far as I remember after the expiry of the L/c which v/as 3. 3. 79 a performance guarantee was issued by Kupais to at Mustaneer based on which at Mustaneer extended the L/c since at Mustaneer insisted at that time that L/c will not be extended till they get the performance guarantee from Kupais. Q. 60. Can you show any document before this Court that you had intimated about the transfer of L/c to the plaintiff before the date of expiry? Ans. I am not aware. Q. 61. Can you produce any letter of consent from the plaintiff regarding transfer of L/c to Kupais before the date of expiry i. e. 3. 3. 79? Ans. I am not aware. Q. 65. Who had requested for the extension of L/c? Ans. Kupais. Q. 67. Will you explain as to why Dhar Overseas requested the plaintiff for extension of the L/c when the L/c had already been transferred by you to Kupals. Ans. We had requested for the extension of L/c based on the request of Kupais for getting it extended. Q. 68. Did you mention in your request to plaintiff about the extension of the L/c that you are making it at the instance of Kupais? Ans. As far as the contents of the telex, I do not remember since I had not sent it. But at Mustaneer were aware that Kupais wanted the extension of L/c for which at Mustaneer had asked performance guarantee from Kupais which was sent to at Mustaneer by Kupais directly through their Syndicate Bank. I He would give a different version from what was stated by DIW2 about the guarantee given by the 6th defendant : Q. 78. I put it to you that defendant No. 1 arranged the Bank guarantee from Kupais, defendant No. 6, the Company which was not known to the plaintiff or the agent BJ. Shah and plaintiff insisted on the guarantee and affidavit of defendant No. 1. Is it correct? Ans. If I remember correctly B. J. Shah, the agent of plaintiff took up the matter with Kupals for giving the performance guarantee since the goods were not shipped and L/c expired. However, we were also following up with Kupals for the same. :. ,


(84) THE following questions and answers would show how the first defendant through this witness was trying to wriggle out of the situation :


Q. 82. I put it to you that it was only when Ravi Upadhaya gave guarantee and affidavit on behalf of defendant No. 1 and its Managing Director that the plaintiff agreed to extend the L/c. Is it correct? Ans. If I remember correctly, Ravi Upadhaya was never given any authority by the Company to give any guarantee etc. Q. 83. I put it to you that as representative of defendant No. 1 he was fully authorised to give affidavit guarantee on behalf of Managing Director and defendant No. 1? Ans. I have already replied, i Q. 84. Kindly see Ex. P. 36 and tell the Court whether it is a transfer endorsement of part of L/c on 23. 12. 78 in favour of Kupals. Ans. Yes. I know that it was partly transferred. Q. 85. I put it to you that there was second transfer regarding 1000 M. T. the same L/c? Ans. I confirm that there was a second transfer of balance quantity. Q. 86. I put it to you that both the transfer cover the L/c of 2000 M. T. Ans. It is correct. Q. 87. I put it to you that according to this condition beneficiary will no more be party to this transfer after 3. 3. 79 unless agreed to in writing by defendant No. 1. Ans. The L/c expired and after it is extended the conditions mentioned therein continued to be valid.


(85) ABOUT the extension, of the Letter of Credit, this witness would try to give a new theory:


Q. 88. I put it to you that conditions could only become valid when defendant No. 1 gave in writing about the extension. Is it correct? Ans. Defendant No. 1 has sent the extension to Kupals of the same L/c. Q. 89. When did you receive the extension of L/c? Ans. The extension of L/c was received. If I remember correctly, in the last week of March, 1979. Q. 90. I put it to you that it was received on 2. 4. 79. Is it correct? Ans. May be, it is correct. 250 Q. 91. Kindly see Ex. P. 28, is this the transfer endorsement regarding extension letter, both are in Ex. P. 28. Is it correct? Ans. Yes. It is correct. Q. 92. Who had authorised it, whether it was Ravi Upadhaya or you with the consent of Managing Director of defendant No. 1 the conditions on the back of Ex. P. 28? Ans. These conditions were framed in consultation with the operational officials and myself. Since these are normal things no specific approval of the director is required and as I have already told there was no Managing Director in the Company, if I remember correctly. The witness would admit that the 6th defendant was not a manufacturer of iron steel bars but he would try to explain it away by saying ; Q. 93. I put it to you that Kupals, defendant No. 6, was not a manufacturer of iron steel bars. Ans. I personally do not know but during the meeting I was told that Kupals are the manufacturers. I do not have any personal knowledge about it.


(86) ABOUT the receipt of commission, he would almost admit all the facts :


Q. 100. In this case,you received a cheque of Rs. 59,955. 27 from Syndicate Bank as consideration after negotiation, for defendant No. 1. Is it correct? Ans. Yes. We received cheque. This consists of around Rs. 6 or 7 thousand which we felt as bank charges and balance Rs. 53,000. 00 and some odd figure as our commission. Q. 101. This you received as consideration for transfer of extended L/c. Is it correct? Ans. It is correct. Q. 102. Some amount of Rs. 53,000. 00 was meant for your foreign agent, none else B. J. Shah. Is it correct? Ans. Out of Rs. 53,000. 00 approximately received from Syndicate Bank, Rs. 33,000. 00 was against the consideration of the transfer of L/c and approximately Rs. 20,000. 00 was for the foreign agent. B. J. Shah was not the foreign agent from our side in this particular case. This commission was meant for some foreign agent whose name was not decided and to be appointed after the goods received thee at Jeddah, as far as my knowledge goes because this is operational matter. Q. 103. Negotiation was made by Kupals on 24. 3. 79. Is it correct? Ans. I do not exactly remember the date on which the negotiation was done, but the amount of commission was received from Syndicate Bank by us was definitely in the end of April, 1979. Q. 104. I put it to you that the cheque/draft was dated 24. 3. 79. Is it correct? Ans. I do not remember the exact date. Q. 105. This draft was sent to your Company by the Syndicate Bank vide letter dated 26. 4. 79. Is it correct? Ans. It is correct. Q. 106. Did your Co. , defendant No. 1, send the endorsement copy of the transfer endorsement made on, the extension letter to the plaintiff? Ans. I don't think it was necessary. Q. 107, I put it to you that when you received this letter and you received the non negotiable document in which the two certificates were not included. Did you inform the plaintiff that the required two certificates have not been received? Ans. We have not received the requisite certificates from the Syndicate Bank and we have written letters to the Syndicate Bank for sending those certificates and reminders were also sent in this regard to the Bank as well as Kupals. Q. 108. I put it to did you or Ravi Upadhaya or defendant No. 1 or defendant No. 2 inform the plaintiff that these certificates have not been received advising him to stop payment? Ans. If I remember correctly there was a letter written to the plaintiff that some shipment was not made according to L/c or so and they should ask their bankers not to release the payment. Q. 111. I put it to you that if defendant No. 1 would have immediately sent advice to the plaintiff about non receipt of two certificates instructing to stop payment, the fraud would not have been committed. Ans. I have already answered the question.


(87) ON behalf of the 6th defendant there has been no evidence at all on this aspect and the witness Mr. Gurdeep Singh, as I had noticed above, has not been able to give us facts to find out the truth. In my view, the witness is not prepared to speak to truth. His evidence is totally worthless.


(88) THE evidence of Mr. S. K. Issar on behalf of defendants 17 and 18 is again completely useless. It is really amazing that when such a large claim had been made by the plaintiff against the Bank, the Bank should have been totally indifferent to the realities and should have chosen not to file any documents at all. The Bank should have examined a person to inform the Court as to what exactly happened in April, 1979. The Bank had been totally negligent and the negligence in this case would amount to a total lack of responsibility on the part of the officials of the Bank. The witness on behalf of the Bank was not a person who was working in 1979 in the Branch. He was not asked to tell the Court as to what had happened to the records and the witness does not say that the Bank made any efforts to trace the records and the records are not available with the Bank and if so under what circumstances and why? The Bank has almost conceded the case of the plaintiff by this conduct in not producing the documents and not giving any explanation. On four aspects which I had mentioned at page 61 the evidence discloses that United Arab Agencies was employed by the first defendant and opening of L/c was done by the parties by mutual consent and about the visit of DIW2 I had dealt with it elaborately. About the extension of the Bank guarantee also, evidence is very clear to the effect that the defendants had played fraud on the plaintiffs for keeping the Bank guarantee extended. The evidence is overwhelmingly in favour of the plaintiffs that the defendants had committed fraud in encashing the Letter of Credit. I am driven to the position of inferring collusion of the Bank with the defendants I and 6 and fraud on the part of the Bank. Fraud is committed whereever one man causes another to act on false belief by a representation which he does not himself believe to be true. He need not to have definite knowledge or belief that it is not true. Fraud is only one of the facets of dishonesty. In R. V. Ghosh, (1982) 2 All E. R. 689 the Court of Appeal in England had referred to this aspect of dishonesty in the following terms :


"this brings us to the heart of the problem, ,is 'dishonest' in Sec. I of the 1968 Act intended to characterise a course of conduct? Or is it intended to describe a state of mind? If the former, then we can well understand that it could be established independently of the knowledge or belief of the accused. But if, as we think, it is the latter, then the knowledge and belief of the accused are at the root of the problem. Take for example a man who comes from a country where public transport is free. On his first day here he travels on a Bus. He gets offwithout paying. He never had any intention of paying. His mind is clearly honest; but his conduct, Judged objectively by what he has done, is dishonest. It seems to us that, in using the word 'dishonestly' in the 1968 Act, Parliament cannot have intended to catch dishonest conduct in that sense, that is to say conduct to which no moral obloquy could possibly attach. This is sufficiently established by the partial definition in Sec. 2 of the Theft Act, 1968 itself. All the matters covered by Sec. 2 (1) relate to the belief of the accused. Section 2 (2) relates to his willingness to pay. A man's belief and his willingness to pay are things which can only be established subjectively. It is difficult to see how a partially subjective definition can be made to work in harness with the test which in all other respects is wholly objective. If we are right that dishonest is something in the mind of the accused (what Professor Glanville Williams calls 'a special mental state'), then if the mind of the accused is honest it cannot be deemed dishonest merely because Members of the Jury would have regarded it as dishonest to embark on that course of conduct. So we would reject the simple uncomplicated approach that the test is purely objective, however attractive from the practical point of view that solution maybe. There remains the objection that to adopt asubjective test is to abandon all standards but that of the accused himself, and to bring about a state of affairs in which 'robin Hood would be no robber' (see R V Greenstein). This objection misunderstands the nature of the subjective test. It is no defence for a man to say, I knew that what I was doing is generally regarded as dishonest; but I do not regard it as dishonest myself. Therefore I am not guilty. ' What he is, however, entitled to say is, I did not know that anybody would regard what I was doing as dishonest. ' He may not be believed; just as he may not be believed if he sets up 'a claim of right' under Sec. 2 (1) of the 1968 Act, or asserts that he believed in the truth of a misrepresentation under Sec. 15 of the 1968 Act. But if he is believed, or raises a real doubt about the matter, the jury cannot be sure that he was dishonest. In determining whether the prosecution has proved that the defendant was acting dishonestly, a jury must first of all decide whether according to the ordinary standards of reasonable and honest people what was done was dishonest. If it was not dishonest by those standards, that is the end of the matter and the prosecution fails. If it was dishonest by those standards, then the jury must consider whether the defendant himself must have realised that what he was doing was by those standards dishonest. In most cases, where the actions are obviously dishonest by ordinary standards, there will be no doubt about it. It will be obvious that the defendant himself knew that he was acting dishonestly. It is dishonest for a defendant to act in a way which he knows ordinary people consider to be dishonest, even if he asserts or genuinely believes that he is morally justified in acting as he did. For example, Robin Hood or those ardent anti-vivisectionists who remove animals from vivisection laboratories are acting dishonestly, even though they may consider themselves to be morally justified in doing what they do, because they know that ordinary people would consider these actions to be dishonest. Cases which might be described as borderline, such as Boggeln v. Williams (1978) 2 All ER 1061, (1978) 1 WLR 873, will depend on the view taken by the jury whether the defendant may have believed what he was doing was in accordance with the ordinary man's idea of honest. A jury might have come to the conclusion that the defendant in that case was dishonest or impudent, but not dishonest in what he did. "


(89) THE House of Lords had occasion to consider the concept of fraud in Scott v. Commissioner of Police for the Metropolism, (1974) 3 All E. R. 1032 (H. L.). The House of Lords quoted from Stephens' History of the Criminal Law of England, (1883) Vo. II, pp 121-122, which is in the following terms :


"fraud. There has always been a great reluctance amongst Lawyers to attempt to define fraud, and this is not unnatural when we consider the number of different kinds of conduct to which the word is applied in connection with different branches of law, and especially in connection with the equitable branch of it. I shall not attempt to construct a definition which will meet every case which might be suggested, but there is little danger in saying that whenever the words "fraud" or "intent to fraud" or "fraudulently" occur in the definition of a crime two elements at least are essential to the commission of the crime: namely, first deceit or an intention to deceive or in some cases mere secrecy: and, secondly, either actual injury or to a risk of possible injury by means of that deceit or secrecy. "


The House of Lords had referred to the decision in Welham v. Director of Public Prosecutions, (1960) 1 All E. R. 805, where the House of Lords had observed:"now I think that there are one or two things that can be said with confidence about the meaning of this word "defraud". It requires a person as its object; that is, defrauding involves doing something to someone. Although in the nature of things it is almost invariably associated with the obtaining of an advantage for the person who commits the fraud, it is the effect on the person who is the object of the fraud that ultimately determines its meaning. . . Secondly, popular speech does not give, and I do not think ever has given, any sure guide to the limits of what is meant by "to defraud". It may mean to cheat someone. It may mean to practise a fraud on someone. It may mean to deprive someone by deceit of something which is regarded as belonging to him or, though not belonging to him, as due to him or his right. "


(90) LORD Diplock observed that the following proposition emerge out of the discussion :


" (1) Although at common law no clear distinction was originally drawn between conspiracies to 'cheat' and conspiracies to 'defraud', these terms being frequently used in combination, by the early years of the 19th century 'conspiracy to defraud' had become a distinct species of criminal agreement independent of the old common law substantive offence of 'cheating'. The abolition of this substantive common law offence by Sec. 32 (I) (a) of the Theft Act, 1968, except as regards offences relating to the public revenue, thus leaves surviving and intact the common law offence of conspiracy to defraud. (2) Where the intended victim of 'conspiracy to defraud' is a private individual the purpose of the conspirators must be to cause the victim economic loss by depriving him of some property or right, corporeal or incorporeal, to which he is or would or might become entitled. The intended means by which the purpose is to be achieved must be dishonest. They need not involve fraudulent misrepresentation such as is needed to constitute the civil tort of deceit. Dishonesty of any kind is enough. (3) Where the intended victims of a 'conspiracy to defraud' is a person preforming public duties as distinct from a private individual it is sufficient if the purpose is to cause him to act contrary to his public duty, and the intended means of achieving this purpose are dishonest. The purpose need not involve causing economic loss to anyone. "


(91) THE statement of law in American Jurisprudence 2nd Den. Vol. 37 page 17 para I is very interesting and is also instructive and the same is as follows :


"an actual formal false representation is not essential to an action for deceit, since the action may be based on a fraudulent concealment of a material fact, or on false pretenses and other fraudulent devices, schemes, or tricks. In the broad sense of the term, however, a false representation is an essential element of fraud either as the basis of an action for damages or as a ground for recission and must, of course, be satisfactorily established. But no particular rule can be laid down as to what false representation will constitute fraud; this necessarily depends on the facts of each case, the relative situation of the parties, and their means of information. "


(92) THE House of Lords perhaps for the first time laid down in Will

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iam Derry and Others v. Sir Henry William Peek, Baronet, (1889) Vol. 14 Appeal Cases 337 after reviewing the earlier cases on the point : "i think the authoritis establish the following propositions : First, in order to sustain an action of deceit, there must be proof of fraud, and nothing sort of that will suffice. Secondly, fraud is proved when it is shown that a false representation has been made, (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, fortune who makes a statement under such circumstances can have no real belief in the truth of what he states. To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth. And this probably covers the whole ground, for one who knowingly alleges that which is false, has obviously no such honest belief. Thirdly, if fraud be proved, the motive of the person guilty of it is immaterial. It matters not that there was no intention to cheat or inure the person to whom the statement was made. " The House of Lords in NOCTON v. LORD ASHBURTON, 1914 Appeal Cases 932 observed: "derry v. Peek (1) simply illustrates the principle that honesty in the stricter sense is by our law a duty of universal obligation. If a man intervenes in the affairs of another has must do so honestly, whatever be the character of that intervention. If he does so fraudulently, and though that fraud damage arises, he is liable to make good the damage. A common form of dishonesty is a false representation fraudulently made, and it was laid down that it was fraudulently made if the defendant made it knowing it to be false, or recklessly, neither knowing nor caring whether it was false or true. That is fraud in the strict sense. " The House of Lords further clarified the position by stating :"but side by side with the enforcement of the duty of universal obligation to be honest and the principle which gave the right to recission, the Courts, and especially the Court of Chancery, had to deal with the other cases to which I have referred, cases raising claims of an essentially different character, which have often been mistaken for actions of deceit. Such claims raise the question whether the circumstances and relations of the parties are such as to give rise to duties of particular obligation which have not been fulfilled. Prior to Derry v. Peek the distinction between the different classes of case had not been sharply drawn, and there was some confusion between fraud as descriptive of the dishonest mind of a person who knowingly deceives, and fraud as the term was employed by the Court of Chancery and applied to breach of special duty by a person who erred, not necessarily morally but at all events intellectually, from ignorance of a special duty of which the Courts would not allow him to say that he was ignorant. Such a special duty may arise from the circumstances and relations of the parties. These may give rise to an implied contract at law or to a fiduciary obligation in equity. If such a duty can be inferred in a particular case of a person issuing a prospectus, as, for instance, in the case of Directors issuing to the shareholders of the Company which they direct a prospectus inviting the subscription by them of further capital, I do not find in Derry v. Peek an authority for the suggestion that an action for damages for misrepresentation without an actual intention to deceive may not lie. What was decided there was that from the facts proved in that case no such special duty to be careful in statement could be inferred, and that mere want of care therefore gave rise to no cause of action. In other words, it was decided that the Directors stood in no fiduciary relation and therefore were under no fiduciary duty to the public to whom they had addressed the invitation to subscribe. I have only to add that the special relationship must, whenever it is alleged, be clearly shown to exist. " (93) I may also refer to Section 17 of the Indian Contract Act, 1872 which defines fraud and the section reads as under : "fraud" defined.-"fraud" means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent with intent to deceive another party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract- (1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true; (2) the active concealment of a fact by one having knowledge or belief of the fact; (3) a promise made without any intention of performing it; (4) any other act fitted to deceive; (5) any such act or omission as the law specially declares tobe fraudulent. " (94) NO doubt, one may argue that this provision speaks of fraud with reference to a contract and, therefore, may not be relevant when the Court is to consider the question of fraud outside the contract. It is only for the purpose of amplifying the position, I refer to Section 17 of the Contract Act, 1872 and I am aware that on the facts of this case the fraud or deceit has to be considered perpetrated by the defendants by their conduct not strictly arising out of any written contract. No doubt, defendants were under an obligation by representation to the plaintiff that they will fulfil the task they had undertaken in making the shipment to Jeddah. They had committed fraud in encashing the L/c without making any shipment at all. (95) FROM a reading of the evidence, it could be seen that defendants 1 to 5 and 19 tried to put the blame on 6th defendant and defendants 15 and 16 and vice versa in order to escape the liability. Defendants 17 and 18 having acted without any sense of responsibility have come forward with a case that they have not committed any mis demeanour. On a consideration of the conspectus of events it is clear that defendants 17 and 18 had yielded to the representations of defendants 1 to 5 and 19 and defendants 6 to 16. The defendants 2 to 5 are also liable to the plaintiff because they are guilty of fraud and they cannot umbrage under the plea that the first defendant is a corporate entity and defendants 2 to 5 and 19 are only Directors and, therefore, they cannot be personally made liable. The argument at the first blush may appear to be convincing but it has absolutely no force. The person who had committed fraud cannot seek shelter under the corporate veil. The arm of the law is not only long enough but also strong enough to reach the persons who had committed the fraud and render justice to the persons who have been victimised by the act of fraud. (96) THE 6th defendant has not even cared to tell the Court as to how did it manage to encash the L/c on 23. 4. 1979 and it has not produced the copies of documents submitted by it to the Syndicate Bank. Defendants 17 and 18 have not said anything about the documents produced by the 6th defendant for encashing the L/c. It is not the case of defendants 17 and 18 that a particular set of documents produced by the 6th defendant are not available with the Bank and the said defendants maintained any list and the Bank made efforts to search for the list, the Bank attempted to get the concerned officer who had been working at the relevant time and the documents were given to the police when they investigated to the crime. Nothing has been said by defendants 17 and 18. It is obvious that defendants 17 and 18 had betrayed the trust reposed in them by the Government. A Public Authority is expected in law to take elementary precaution to prevent commission of fraud. In this case, having acted in a negligent way the Bank had not taken any steps to explain its conduct right from 1979 upto the date of examination of the witness D. 17/18w. I. Therefore, I have absolutely no doubt in my mind that all the defendants are liable to pay the money claimed by the plaintiff in this suit. I am of the view that it is not necessary to extract in extenso the excerpts from the evidence given by Public Witness. I and Public Witness. 2 because the defendants had accepted the transaction. The evidence of Public Witness. I and Public Witness. 2 is natural, cogent and I accept their evidence. The plaintiff has proved its case. There is no dispute about the fact that the defendants had undertaken to make the shipment of 2,000 MT of M. S. Bars and the plaintiff had opened the L/c. Public Witness. I had marked the documents. At the time of the marking of the documents, defendants just of the sake of objection, raised objections that the documents should not be marked. But when the defendants do not dispute the main transaction the objection for the marking of the documents produced by the plaintiff through Public Witness. I is absolutely without any substance. Public Witness. I has stated that the entire bundle was given to late Frank Anthony Advocate and he died and the plaintiff could not get the papers from the office of Frank Anthony. In the light of the facts presented before me, I have no doubt in my mind that what Public Witness. I states is true. (97) I now proceed to give findings on the issues. (98) ON Issue No. 1, no arguments were advanced as to how the plaint has not been verified by a duly authorised person. When Public Witness. I was examined the learned Counsel for defendants put number of questions about the law prevailing in Saudi Arabia and how the plaint should have been verified in accordance with law in India. Public Witness. I has stated that the plaintiff is a juristic person established as per the law in Saudi Arabia and he is the person authorised to act on behalf of the plaintiff. Defendants have not produced any material to show that what Public Witness. I was stating was not in accordance with law in Saudi Arabia. Defendants having committed fraud wanted to rely upon some technicalities to defeat the claim of the plaintiff. It was not suggested to Public Witness. I that he has nothing to do with the plaintiff Organisation. P. W. 2 Mr. Shah of United Arab Agencies had explained the position and considering the evidence of Public Witness. I, Public Witness. 2 and Ex. P. 2, the power of attorney in favour of Public Witness. I, I have absolutely no difficulty in coming to the conclusion that even before this Court the defendants had not acted with any sense of purpose in putting questions to Public Witness. I. The correspondence would also show that the defendants had accepted the fact that plaintiff was the person who had opened the L/c. The defendants had connived in encashing the L/c opened by the plaintiff. They cannot now turn out and say that plaintiff is not at all an entity which could be recognised in law and which could institute an action here in India and it is not properly represented by P. W. I. I am satisfied that the plaint has been signed, verified and filed by a duly authorised person on behalf of the plaintiff. This issue is, accordingly, answered in favour of the plaintiff and against the defendants. (99) ON Issue No. 2 about the jurisdiction, I do not find any difficulty in coming to the conclusion that this Court has got jurisdiction, over the subject matter of the suit. This issue is found accordingly in favour of the plaintiff and against the defendants. (100) ON Issues No. 3 and 4, I find that the suit is not bad for misjoinder or non joinder of necessary parties. (101) ON issue No. 5, when we are on the question fraud committed by the defendants, in the light of the facts the question whether there was any privity or contract between the plaintiff and the defendants would pale into any insignificance. The fact that there was contract between the first defendant and the plaintiff and the 6th defendant had undertaken to supply cannot at all be disputed by the defendants. Therefore, the argument on behalf of the 6th defendant that there was no written contract between the 6th defendant and the plaintiff and 6th defendant is not liable cannot at all be sustained. (102) ON Issue No. 6 whether defendant No. 1 was bound and liable to ensure delivery of the goods under Orders No. 548 and 549 of 1978 to the plaintiff notwithstanding the transfer of Letter of Credit in favour of defendant No. 6 and in spite of performance guarantee issued by defendant No. 6, I find that defendants I to 5 and 19 and defendants 6 to 16 are liable to pay the plaintiff. The transfer of L/c in favour of 6th defendant was only a link in the chain of frauds committed by the defendants and having committed fraud the defendants cannot be permitted to take advantage of their own fraud. The Supreme Court in S. P. Chengal Varaya Naidu (Dead) by LRs. v. Jagannath (Dead) by LRs. and Others, 1992 (1) SCC I had categorically laid down that those who had committed fraud should be dealt with firmly. The Supreme Court observed : "the Courts of law are meant for imparting justice between the parties. One who comes to the Court, must come with clean hands. We are constrained to say that more often than not, process of the Court is being abused. Property- grabbers, tax-evaders, bank-loan-dodgers and other unscrupulous persons from all walks of life find the Court-process a convenient lever to retain the illegal-gains indefinitely. We have no hesitation to say that a person, whose case is based on falsehood, has no right to approach the Court. He can be summarily thrown out at any stage of the litigation. " (103) FOLLOWING the dictum laid down by the Supreme Court I have little doubt in holding that the defendants are guilty of fraud and they are bound to pay the money claimed by the plaintiff in this case. The issue is answered in favour of the plaintiff and against the defendants. (104) ON Issues No. 7, I find that the first defendant is not only guilty of committing breach of contract, is guilty of fraud. On Issue No. 8, I find that fraud was committed by 6th defendant and its Directors defendants 7 to 14. The 9th defendant Sh. Kirti H. Shah, who was set exparte on 2. 8. 1985, cannot also escape liability on the basis of the letter which he had written on 31. 8. 1979 (Ex. P. 34). The letter reads as under : "you are aware that Mr. Kuldip Singh, Managing Director of Kupal Materials and Metals Pvt. Ltd. , and Mr. Atui Sabharwal have under intimidation, and duress taken away certain stock material, cheques, pay slips and cash from M/ s. Shah Brothers and they have handed ewer the same to you. M/s. Shah Brothers have recorded the same by their letter dated 13. 7. 1979 addressed to you, and have also recorded that they had requested to you to keep the same in the name of M/s. Shah Brothers and not in the name of M/s. Kupal Materials and Metals Pvt. Ltd. You have sold away the stocks lying in the godown of M/s. Shah Brothers at Wadala and also sold away material from Okha. According to the market price prevalent at the time you sold the material, you must have realised Rs. 9,60,000. 00 for the stock at Wadala godown and Rs. 3,70,000. 00 for the Okha materials. Thus you have with you, on behalf of M/s. Shah Brothers, a sum of Rs. 14 lakhs approx. inclusive of the cash, cheques, pay slips etc. amounting to Rs. 1. 24 lakhs approx. Further, you have realised a sum of Rs. 50,000. 00 by encashing the cheque issued by M/s. Karnataka Investment and Traders Ltd. , in favour of Shree Padma Wire Products Pvt. Ltd. , of which I am a Director. Although I have resigned as a Director from M/s. Kupal Materials and Metals Pvt. Ltd. , I feel that I owe moral obligation, to the foreign buyer since I was deemed to be a Director at the relevant time. You are hereby instructed that out of the above amount a sum of Rs. 121 lakhs be remitted to M/s. Almustaneer Establishment for Trade, Jeddah through their banker, at Saudi Alfranci, leddah on account of documents negotiated against the L/c No. 2965 dated 23. 1 1. 78 by Kupal Materials and Metals Pvt. Ltd. , through your New Delhi Foreign Exchange Dept. , since there has been no shipment of material against the said L/c. I also enclose a letter authorising you to this effect from M/s. Shah Brothers. The above remittance may please be made through your Foreign Exchange Dept. , Cannaught Circus, New Delhi within 14 days from receipt of this letter/ accompanying letter of authorisation, failing which, your Bank shall be liable for all losses, damages, costs arising there from. " (105) THE issues are answered in favour of the plaintiff and against the defendants. (106) ON Issue No. 9 whether the suit is abated on account of death of defendant No. 14,1 find that the suit does not abate. Defendant No. 14 only one of the Directors of the 6th defendant. On Issue No. 10, I find that plaintiff is entitled to Rs. 2,17,600. 00 from defendants 17 and 18 in addition to the amount of Rs. 22 lakhs claimed by the plaintiff against all the defendants. (107) ON Issue No. 12 whether there was any novation of the original contract as pleaded by defendants 1 to 5 and 19,1 find that there is no question of any novation and defendants have completely misconstrued the concept of doctrine of novation and when defendants are guilty of fraud defendants 1 to 5 and 19 cannot make any attempt to get out of the situation by projecting the doctrine of novation. (108) ON Issue No. 1i, I Find that plaintiff is entitled to the sum of Rs. 31,57,322. 57 from defendants 1 to 5 and 19, defendants 6 to 13,15,16 and defendants 17 and 18 and the plaintiff is entitled to recover Rs. 3,08,440. 00 from defendants 17 and 18. (109) ON Issue No. 13, I find that the plaintiff is entitled to interest @ 18% per annum on the sum of Rs. 22 lakhs, which is the principal amount and a sum of Rs. 3,08,440. 00 encashed by invoking the L/c @ 18% per annum from the date of plaint i. e. 13. 5. 1981 till the date of realisation. (110) ACCORDINGLY, there shall be a decree: (a) directing the defendants 1 to 5 and 19, and defendants 6 to 13, and defendants 15 and 16, and defendants 17 and 18 to pay the plaintiff jointly and severally a sum of Rs. 31,57,322. 57; (b) directing the defendants to pay to the plaintiffs interest @ 18% per annum on the sum of Rs. 22 lakhs from the date of the plaint i. e. 13. 5. 1981 till the date of realisation; (e) directing the defendants 17 and 18 to pay the plaintiff a sum of Rs. 3,08,440. 00 alongwith interest @ 18% per annum from the date of the plaint till the date of realisation in addition to the reliefs granted in (a) and (b); (d) directing the defendants 17 and 18 to pay Rs. 2,17,000. 00 along with interest @ 18% per annum from the date of plaint till the date of realisation in addition to the reliefs granted in (a) and (b); (e) directing the dismissal of the suit as against the 14th defendant. (f) directing the defendants 1 to 13, and 15 to 18 to pay the plaintiff the costs of the suit.
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