MRS. M. SHREESHA, MEMBER

Aggrieved by the order dated 15.03.2016 in SC/25/O/2003 passed by the West Bengal State Consumer Disputes Redressal Commission (in short “the State Commission”), Bank of Maharashtra (hereinafter referred to as “the Bank”) preferred this Appeal under Section 19 of the Consumer Protection, 1986 (in short “the Act”). By the impugned order, the State Commission has partly allowed the Complaint directing the Bank to pay an amount of Rs.83,492/-, Rs.10,41,634/- and Rs.1,99,565/- on and from 16.02.2001, 06.03.2001 and 30.04.2001 respectively with interest @ 9% p.a. from 06.02.2001, 06.03.2001 and 30.04.2001 respectively till the date of realisation after adjusting the amount which was deposited in compliance of the order dated 03.08.2005 of the National Commission. The Bank was also directed to pay Rs.5,00,000//- towards expenses incurred by the Complainant for visiting Australia and appointing a Solicitor and also a sum of Rs.10,00,000/- towards compensation for mental agony and  harassment.

2.       Briefly put, the facts in the instant case are that the Complainant, the sole proprietor of Calico India Exports, carrying on export business of diverse type of products including Coiled Paper Board and other materials, maintained an account with the Bank for purpose of transacting his export orders. It was averred that the Complainant shipped 3 consignments of goods to his foreign buyer M/s. Phone Book Covers with the following particulars:

i) 1^st  shipment vide Invoice No. PBC/001/2000-001 & Bill of Lading No. 20036, both dated 20.10.2000 on board the vessel “SIN HAI B-02 for value of the goods of Australian dollar 3139.00. (Invoice value A.$ 35139 minus advance received A.$32000.00) = A.$ 3139.00

ii) 2^nd shipment vide Invoice No.  PBC/002/2000-001 dated 08.11.2000 and Bill of Lading No. 20046 dated 09.11.2000 on board the vessel SINAR SUMBA  V-042 for the value  of goods of Australian dollar 41004.00.

iii) 3^rd   shipment vide Invoice No.  PBC/003/2000-001 dated 04.12.2000, and Bill of Lading No. 626316 dated 07.12.2000 shipped on board the vessel “SUNNY ONE” for the value  of goods of Australian dollar 7820.00.

3.       All the relevant documents relating to the three shipments namely, invoices, Original Bill of Lading, Bills of Exchange and other necessary documents for the purpose of collection of proceeds from the foreign buyer through the buyer’s Bank namely, Common Wealth Bank of Australia, Adelaide Street, Fremantle, Western Australia (hereinafter referred to as “the Foreign Bank”), were submitted by the Complainant. It was stated that the said Bills were to be collected after 30 days, 75 days and 30 days from the date of the first, second and third Bills of Lading respectively. The said three Bills were duly credited to the Complainants account by the Bank on 03.11.2000, 01.12.2000 and 20.12.2000 respectively. The credit vouchers were issued, which shows that the Bank deducted all the service charges and purchased the said Bills at a discount and credited the discount proceeds of said three Bills to account No. CA 761 of the Complainant.

4.       Subsequently, it was stated that the Complainant came to learn that the Bank sent three Bills to the Foreign Bank, by their covering letters vide reference No. 2104713300 dated 3.11.2000; No. 2104714100 dated 17.11.2000 and No. 2104717100 dated 20.12.2000 respectively. The Bank after purchasing  the three Bills as detailed in the aforenoted paragraph, debited the Complainant’s account with interest thereon in contravention of the Banking norms  and was done in the following phased manner:

Voucher dated 16.2.2001 amounts debited  : Rs.     83,492.00

Voucher dated 6.03.2001 Amounts debited : Rs. 10,41,534.00

Voucher dated 30.4.2001 Amounts debited   : Rs.    1,99,565.00

           Total  : Rs.  13,24,691.00

 5.      It was pleaded that the Bank was not showing any interest in realising the export proceeds from the foreign buyers and therefore the Complainant agreed to go to Australia and in the first week of April, 2001 the Complainant met the officials of the Foreign Bank and requested them to let him know the fate of the three Bills,  which had been sent for collection and payment. The officials of the Foreign Bank refused to entertain the Complainant on the ground that it was a matter between themselves and the Bank. Finding no other alternative, the Complainant appointed one Mr.  Rodney Holborn, a reputed Solicitor of Perth, to take up the matter with the Foreign Bank.  Mr.  Rodney Holborn addressed a letter dated 14.05.2001 to the Foreign Bank after stating the facts relating to the sending of three Bills along with other documents for collection and payment under ICC Uniform Rules for collection 522 and requested the said Bank to notify  the steps if any, taken to carry out instructions issued to it by the Bank.

6.       Subsequently it was stated that the Complainant was informed by the Solicitor that he had received  a letter by fax on 31.05.2001, wherein he had been informed that the instructions to the Foreign Bank from the Bank were contained in an envelope addressed to their client, i.e., within the envelope addressed to the branch of the Foreign Bank and the branch did not open the envelope addressed to its client but merely passed it on (as though it were a post office), as a result of which they were not in the knowledge of the contents of the envelope which contains  the instructions to act as a collecting Bank of the Bills of Lading. It was pleaded that it is only on account of gross deficiency of service  of the Bank that the Foreign Bank handed over the original documents including the three Bills for collection and payment to the foreign buyer, who took delivery of the goods without making payments  for the same. In July, 2001 the Complainant was informed by the foreign exchange branch of the Bank that they had received a Swift massage from the Foreign Bank informing them that the three Bills which have been allegedly sent to the Foreign Bank were never received nor accepted by the Bank. The Complainant extracted the text of the Swift massage received  by the foreign exchange branch of the Bank in para 8 of the Complaint as follows:

“upon investigation, it is noted that your above collections were never received nor accepted by our bank. It is also noted that three (3) envelopes addressed to Phone Book Covers (Drawee) were within the envelopes addressed to Fremantle Branch of the bank. Branch did not open envelope(s) addressed to it client and merely passed them on (as if it were a Post Office) and did not know, as a result, the contents therein.”

7.       It was averred that the Complainant met the officers of the Bank and held them fully responsible for the deficiency of service on account of which the foreign buyer collected the goods without making payments. No proper steps were taken by the Bank to realise the export proceeds vide the three Bills in question and no action was taken against the Foreign Bank. After waiting for sometime, the Complainant addressed another letter dated 08.04.2002, in which it was stated by the Complainant that it is understood that the Foreign Bank is in dispute with the Bank on the ground that  each of the three Bills and other documents sent to them on different dates were addressed to them but were contained in another envelope which was addressed to Phone Book Covers, the drawee; that their branch did not open the envelopes addressed to their client and merely passed them on to the drawee, without having any acceptance  in terms of ICC-522 (as if the Bank was functioning as a mere Post Office); that on account of the negligence the Complainant suffered the non-payment of the export  proceeds for no fault  of him. It was also stated in that letter that till May 2001 the Bank had no clue as to what had happened to the three Bills and other documents sent by it to the Foreign Bank for collection and payment; that the Complainant went to Perth  to enquire  in the matter which ultimately  resulted in the discovery  that the three Bills in question along with other relevant documents were sent by the Bank to the Foreign Bank for collection and payment in three separate envelopes on three different dates and that inside the envelopes addressed to the Bank there was no envelope containing the documents addressed to the addressee and the Foreign Bank merely passed on the said envelopes containing the documents to the foreign buyer. It was stated that it was most unfortunate that the Bank did not pursue the matter though two years have passed resulting in the Complainant’s financial stress and agony as there was no positive response from the Bank.

8.       As there was no reply to the aforenoted letter, the Complainant wrote another letter on 02.08.2002 reiterating all the facts. Thereafter, the Bank gave the Complainant copies of some letters/ telex massages exchanged between them and the Foreign Bank only to avoid the payments of the dues of the Complainants. When the Bill of Lading was not yet discharged and the foreign buyer took delivery of the consignment without payment, the act of the Opposite Party amounts to deficiency of service in as much as the Complainant had handed over these documents to the Bank which is a Nationalised Bank for collection in accordance with law  and paid all the dues sums that were charged for the services. 

9.       It was pleaded that  the Bank wrongly debited the Complainants  accounts for a total sum of Rs.13,24,691/- between February and April 2001 only to cover their deficiency  of  service  and as such the Complainant  is entitled to claim the reimbursement of the said amount along with interest  thereon at a commercial rate of interest from the respective dates of debits till the same are credited back or realised by the Complainant. It was averred that the Bank owes the Complainant the overdue interest charged i.e. Rs.5,89,334/- together with all the traveling expenses, boarding and lodging incurred by the Complainant for his travel to Australia  and stay there, in addition to the payment of the Solicitor fees of approximately Rs.7,00,000/-.

10.     It was pleaded that the Complainant is a well established exporter of various kinds of goods and faced humiliation in the business circles along with financial stress and harassment and therefore approached the State Commission seeking the following directions to the Bank:

a. Direction upon the Opposite Party to pay the sum of Rs.72,24,691/-. O so much as may be deemed fit and proper.

b. Interest on or from May 2003, interest pendent lite and interest on the relief that may be granted at the rate of 18% p.a. till the final realization.

c. Costs and incidentals to this proceedings etc.

d. such further orders and/or directions as may seem fit and proper.

11.     The Bank filed their Written Version stating that the Complainant is a proprietary concern, called Calico India Exports which has an account with the Bank and deposited three Export Bills in respect of export of certain goods to M/s Phone Book Covers of Australia and requested them to discount the said Export Bills and deposited the export invoices, Bills Of Lading etc. It was stated that the three export bills with  certain documents were discounted by the Complainant with their Bank and the Bank credited the discounted amount of the three Export Bills to the account of the Complainant. It was averred that according to the Banking Rules  the said three Bills were sent through DHL Courier to the Foreign Bank the banker to the importer for collection at the request of the Complainant with the instruction to deliver the documents to the importer against acceptance and the collection was subject to the Uniform Rules for collection (ICC Brochure No. 522). The Foreign Bank is the foreign buyer’s collecting Bank. The collection Bank should present the shipping documents and other commercial documents and Bill of Exchange to the buyers, Phone Book Covers who after examined the documents, used to pay or agrees to pay the price  of the draft to the collecting Bank in order to obtain possession of the documents. The collecting Bank thereafter has to send the money to the remitting Bank of the opposite party, but in the present case the collecting Bank did not collect the money from the foreign buyer.

12.     It was averred that after lapse of  a reasonable period of time, the Foreign Bank stated that by courier service they received the envelope and after opening the same it found an envelope in the name of Phone Book Covers and delivered the same to Phone Book Covers without opening the said envelope. The Bank made several correspondences with the Foreign Bank and the said Bank had taken the stand that it acted as a post office. The inner envelope contained the name of Phone Book Covers and it handed over the envelope to Phone Book Covers by its letter dated 28.06.2001 addressed to Mr. Khurshidul Hasan, Proprietor of Calico India Exports stated that the Foreign Bank on all the three occasions concerning the three exports informed Phone Book Covers to take delivery of the said documents and the Phone Book Covers through its employees picked up the unsealed documents without the envelope addressed to Phone Book Covers by the Bank. The Phone Book Covers also did not sign any receipt nor the Foreign Bank asked for such receipt and there was no correspondence with Phone Book Covers by the Foreign Bank except sometime in the middle of May 2001. The employees of the Foreign Bank visited the office of Phone Book Covers and collected some photo copies of all the documents that was handed over by Phone Book Cover. The Foreign Bank admitted that  the documents received  by the said Bank had no knowledge of the functioning of a collecting Bank. Phone Book Covers took delivery of the goods in question without making any payment   to the Foreign Bank or to the Bank.

13.     It was averred that the Complainant wrongly protested against debiting the account because the Bank under the circumstances had no alternative but to debit the account. It is pertinent to mention that the Complainant engaged a Solicitor in Australia for discussion with the Foreign Bank. But the said Bank took the stand that it acted merely as a post office in violation of Banking norms for discount of Bills. The goods were released to Phone Book Covers by the shipping company without the endorsement of the Foreign Bank, despite the bills of lading being consigned to the said Bank. The shipping company should have insisted on the proper endorsement of the Bills of lading from consignee, i.e. the Foreign Bank, prior to their wrongful release of the goods to Phone Book Covers. The Bills of lading were consigned to the Foreign Bank by the Complainant. Hence, claim if any has to be realised by the Complainant directly from the shipping company and the Foreign Bank jointly and severally.

 14.    It was denied that the Bank failed to realise the payment from the Foreign Bank in respect of the said three Bills. The Bank stated that the dispute was referred to Australian Banking Industry Ombudsman for settlement. The Ombudsman after considering the matter stated that it needed to have evidence and was not prepared to settle the dispute. It is denied that the Foreign Bank is an agent of the Bank as alleged.

15.     It is emphatically denied by the Bank that the collecting Bank is the agent of the Bank for collection of the said Bills. It is pertinent to mention that the Bank took up the matter with the Foreign Bank and made correspondence with the Foreign Bank to investigate the mishandling of the documents by the Fremantle Branch of the Foreign Bank but the Foreign Bank did not take any steps. It is an admitted fact that the Bills were received by the Foreign Bank , who failed to discharge the duty of a collecting banker for which the Bank cannot be made responsible. The story made out by the Foreign Bank cannot be accepted without proper evidence. The Bank emphatically denied that the Complainant is entitled to any reimbursement by the Bank arising apart from losses in business and  to indemnify the Complainant against any penal action imposed by any authority upon the Complainant or his organization by the Reserve Bank of India for non realisation of the export proceeds as alleged.

16.     The Bank stated that the case is bad for non joinder of necessary parties. The Fremantle Branch of the Foreign Bank  and the shipping company for the wrongful release of the goods without collecting payment. Both the parties have been intricately involved  in the delivery  and collection of the goods for which  the Complainant did not receive the payment. The Complainant intentionally did not implead them though they are necessary party and in their absence the matter cannot be tried and adjudicated by the Commission.

17.     Based on the evidence adduced, the State Commission partly allowed the Complaint with the aforenoted directions, observing that the Complainant is a ‘Consumer’  as defined under Section 2 (1)(d)(ii) of the Act; that the Bank committed an act of deficiency of service  in reversing the credit without concurrence of the customer; that I.C.C. U.N. rules for collection has not been followed at all; according to article  I (c) of U.R.C. 522 if a Bank elects for any reason  not to handle a collection or any related instruction received by it, it must advice the party for whom it received the collection or the instructions by delivery communication or if that is not possible  by other expeditious means, without delay. The Bank referred the matter to the Australian  Banking Ombudsman but when the Ombudsman expressed their inability to settle the dispute some positive steps should have been taken by the Bank. In any case, for the fault on the part of the Bank or the Foreign Bank, the Complainant must not suffer  in view of the fact that the Complainant was a ‘Consumer’ under the Bank being service provider of the Complainant. Finally Complainant had to travel to Australia  and engaged a Solicitor and suffered mental agony and harassment for which he is entitled to compensation of Rs.10,00,000/- and expenses of Rs.5,00,000/-.

18.     Aggrieved by the said order the Bank preferred this Appeal.

19.     Learned counsel for the Appellant vehemently argued that the Complaint was bad for non joinder of the Foreign Bank which is a necessary party; that there is no relationship  of any principal and agent between the Appellant Bank and the Foreign Bank, which could unable the Appellant Bank to take any direct action against the Foreign Bank; that the documents were addressed and send to the Foreign Bank for collection based on the Complainant’s specific instructions and admittedly the said  documents were released by the Foreign Bank to the Importer, however, without insisting on the acceptance of payment and therefore there is a collusion  between the Importer and his Bank for which action the Appellant Bank cannot be made liable; the remedy of the Complainant lies only against the Foreign Bank; that article 1(c) of the U.R.C. 522 clearly stipulates that the Banks assume no liability or responsibility for consequences arising out of delay and/or loss in transit of any massages/ letters or documents, or for delay, mutilation or other errors arising for the transmission  and therefore contended that there is no deficiency of service adopted by the Bank while transecting the subject documents.

20.     The facts not in dispute are that three shipments were made on 20.10.2009, 08.11.2000 and 04.12.2000  by the Complainant and all the relevant documents were handed over to the Bank with specific instruction for collection as per the then rate of Australian dollar; that the Bank purchased the Bills on 03.11.2000, 01.12.2000 and 20.12.2000 respectively and credited the Complainant’s account after discounting the Bills; the Bank reversed the credit entry in respect of the aforenoted three Bills without any notice to the Complainant on 16.02.2001, 06.03.20011 and 30.04.2001 respectively. It is the Complainant’s case that the Bank becomes the purchaser of the Bills when it received the documents and credited the amount into the account of the Complainant.

21.     Learned counsel appearing for the Complainant contended that once the Bank so purchased  the Bills, it was not entitled to debit the amount on non realisation of proceeds  when it failed to realise the amount due to its own negligence; that the transaction between the Bank and the Foreign Bank falls within the definition of ‘Collection’ under article 2 of the provisions of URC-522; that the Bank acted in contravention to the provision of article 4 (a)(i) and 4(a)(ii) by sending the documents without sending instructions to the Foreign Bank; the Complainant fulfilled the requirement under article 5 (d) by nominating the Foreign Bank as the collecting Bank and once the provision itself empowers the Complainant to nominate the collecting Bank, the contention of the Bank that since Calico Indian Exports chose the Foreign Bank, they cannot be made liable, is untenable; that this Complaint cannot be said to be bad for non joinder of the Foreign Bank as it was the Appellant Bank which was given the documents with specific instructions; that the Bank was deficient in not putting the Complainant to notice  before debiting his account with the aforenoted amounts.

22.     The material on record namely the Invoice establishes that the consignee was M/s Phone Book Covers, Western Australia and the consignee  Bank was Commonwealth Bank of Australia, Fremantle, Western Australia. It is an admitted fact that in all the three Invoices the buyer and the consignee name are one and the same. For better understanding of the case the instructions to the collecting Bank and the payment instructions are herewith reproduced for the transactions dated 03.11.2000:

BANK OF MAHARASHTRA

3, N.G. Road, Calcutta: 700 001 (India)

Telex: 0212192

SWIFT: MAHBINBBA                                                                 Fax: 243 0287

          It is evident from the aforenoted documents that the documents for collection were subject to uniform rules for collection ICC Brochure-522. Article 1, 10 and 11  of URC-522 which detailed as hereunder:

URC 522 - Article 1

1. The Uniform rules for collections, 1995 Revision, ICC Publication No. 522, shall apply to all collections as defined in Article 2 where such rules are incorporated into the text of the “collection instruction” referred to in Article 5 and are binding on all parties thereto unless otherwise expressly agreed or contrary to the provisions of a national, state or local law and/or regulation which cannot be departed from.

2. Banks shall have no obligation to handle either a collection or any collection instruction or subsequent related instructions.

3. If a bank elects, for any reason, not to handle a collection or any related instructions received by it, it must advisethe party from whom it received the collection or the instructions by telecommunication or, if that isnot possible, by other expeditious means, without delay.

    

   URC 522 - Article 10

   Article 10 documents Vs. Goods, Services, Performances

    

4. Goods should not be dispatched directly to the address of a bank or consigned to or to the order of a bank without prior agreement on the part of that bank.

   Nevertheless, in the event that goods are dispatched directly to the address of a bank or consigned to or to the order of a bank or release to a drawee against payment or acceptance or upon other terms and conditions without prior agreement on the part of that bank, such bank shall have no obligations to take delivery of the goods, which remain at the risk’ and responsibility of the party dispatching the goods.

5. Bank have no obligation to take any action in respect fo the goods to which a documentary collection relates, including storage and insurance of the goods even when specific instructions are given to do so. Banks will only take such action if, when, and to the extent that they agree to do so in each case. Notwithstanding the provision of sub- Article 1(c) this rule applies even in the absence of any specific advice to this effect by the collecting bank.

    

   URC 522 - Article 11

Article 11 disclaimer for acts of an instructed party

1. Bank utilizing the services of another bank or other banks for the purpose of giving effect to the instructions of the principal, do so for the account and at the risk of such principal.

2. Banks assume no liability or responsibility shouldtheinstructions they transmit no be carried out, even if they have themselvestaken the initiative in the choice of such other bank (s).

3. A party instructing another party to perform services shall be bound by and liable to indemnify the instructed party against all obligations and responsibilities imposed byforeign laws and usages.

From the documents which is reproduced it is understood that the documents for collection are subject to the rules for collection under URC-522 and as per article 11 which the counsel for the Appellant  Bank  is relying upon, it is clear that the Bank assumes no liability or responsibility, and the instructions they transmit not to be carried out even if they have themselves taken the initiative  in the choice of such other Banks. In the instant case  it is evident  from the material on record that the Appellant Bank had not issued clear cut instructions as it can be seen that the Bank acted in contravention  to the provision of Article 4 (a)(i) and 4(a)(ii) by sending the documents without clear cut instructions to the Foreign Bank. It is not in dispute that the Foreign Bank admitted to receipt of the courier  containing the documents, but stated that they have given away the same  to the importer M/s Phone Book Cover, stating that the envelope contained another envelope which was addressed to the importer and therefore the same was just forwarded to the importer. It is the stand of the Bank that they had sent telex massages to the Foreign Bank which was rebutted by the Complainant on the ground that despite having Swift facility, the Bank chose to send telex massages on incorrect contact numbers and that in his visit to Australia the Foreign Bank stated that they had never received the instructions for handling  the collection. The Foreign Bank in their reply letter to the Solicitor with respect to collection of Bills of Exchange stated as follows:

“I refer to your letter of 14 May 2001 concerning the above. In your letter you advise that on the face of instructions from the Bank of Maharashtra, Commonwealth Bank of Australia (Fremantle Branch) was appointed as collecting bank in relation to a transaction between your client and the Bank’s client, Phone Book covers WA Pt. Ltd.

Unfortunately it appears that the instructions to the Bank from the Bank of Maharashtra were contained in an envelope addressed to the client. i.e. within an envelope addressed to the Fremantle Branch of the bank. The Branch did not open the envelope addressed to its client; it merely passed it on (as thought it were a post office) and did not, as a result, know that the contents of the envelope contained the instructions to act as a collecting bank or the bills of lading. The Fremantle branch does not handle trade transactions – they are handled by a specialist central group within the Bank where all instructions should be addressed by remitting banks and is generally known to them (the group has been in operation for a number of years).

Under these circumstances the Bank could not “elect” reject the instructions, because it did not know it had received any- it had handed them over to its client.

It is noted that despite the Bank of Maharashtra  requiring the Bank to acknowledge its acceptance of the instructions and provide a reference number, the Bank never did so and the Bank of Maharashtra  did not attempt to follow that up until much later (when  payment appears to have been overdue). The Bank’s records disclose that telexes  allegedly sent by the Bank of Maharashtra  were sent to the Bank’s head office telex number, and were no with one exception, received. The telexes were sent to the areas of the Bank dealing with trade transactions but the initial instructions were not sent there.

Under Article 4 (a)(ii) of UCR 522 the bank is not obliged to examine documents in order to obtain instructions – it is not required to open envelopes addressed to its client in order to find  the Bank of Maharashtra’s instructions.” 

          From this letter it is evident that the Bank did not “elect” to reject the instructions because it did not receive any and therefore  handed over the envelope to its client. The Foreign Bank did not open  the envelope addressed to its client and merely passed it on  (as though it were a post office) and did not know the contents of the envelope and were not in the knowledge that the envelope contained the instructions to act as a collecting Bank. It was specifically stated that the Fremantle Branch does not handle trade transactions, they are handled by a Specialist Central Group within the Bank where all instructions should be addressed by remitting Banks. It is pertinent to mention here that the Foreign Bank denies the receipt of any telexes sent by the Appellant Bank.

23.     It is relevant to reproduce Articles 4 (a) (1) &  (2), 5(d) to (f)

4 (a)(1). All documents  sent for collection must be accompanied by a collection instruction indicating that the collection is subject to URC 522 and giving complete and precise instructions. Banks are only permitted to act upon the instruction given in such collection instruction, and in accordance with these Rules.

4 (a)(2). Banks will not examine documents in order to obtain instructions.

5(d). For the purpose of giving effect to the instructions of the principal, the remitting bank will utilise the bank nominated by the principal as the collecting bank, In the absence of such nomination, the remitting bank will utilise any bank of its own, or another bank’s choice in the country of payment or acceptance or in the country where other terms and conditions have to be complied with.

5(e). The documents and collection instruction may be sent directly by the remitting bank to the collecting  bank or through another bank as intermediary.

5(f). if a the remitting bank does not nominate a specific  presenting bank, the collecting bank may utilise a presenting bank or its choice.

24.     It is clear from article 4 (a) (1) & (2) that all documents sent for collection must be accompanied by a collection instruction  indicating that the collection is subject to URC 522 and giving complete and precise instructions. It is relevant to note that from the response received by the Foreign Bank that no such instructions were given by the Appellant Bank in compliance with article 4 (a) (1) &  (2) of the URC 522.

25.     The Hon’ble Supreme Court in Corporation Bank & Anr. Vs. Navin J. Shah, Manu/SC/0040/2000, has observed as follows:

10. When a bank, after purchasing or discounting an instrument from a customer, credits the customer with the amount of the instrument and allows the customer to draw against the amount as credited before the bill or instrument is cleared, then the bank would be collecting the money not for the customer but chiefly for itself. If the bills and the relevant documents presented by its drawer are accepted by a banker with endorsement in its favour and the same are immediately discounted by the banker without waiting for its collection, by giving full credit for the entire amount of the document, so presented, the banker itself becomes a purchaser and the holder thereof for full value. A banker discounts a bill as opposed to taking it for collection or as security for advances, when he takes it definitely and at once as transferee for value and that it does not matter that the amount of the bill, less discount, is carried to current account as in the case of a customer that is the usual course and where the transaction is really one of discounting, the banker is of course at liberty to deal with the bill as he pleases rediscounting or transferring it.

11……. We have adverted to the agreement between the parties. The consignee and the consignor have clearly indicated that the documents had to be negotiated through the foreign bank and the mode of payment was through the foreign bank. If that is so, the appellants were acting for and on behalf of the respondent when they sent the documents to the named bank for negotiations and collection of the money due under the agreement the appellants could not have sent the documents to any other agent inasmuch as payments had to be made only through that foreign bank and that foreign bank as was the usual practice realise the documents against payment in local currency which was hitherto convertible in foreign exchange in U.S.Dollars.”

          Though in the aforenoted case the Hon’ble Supreme court has held that the Appellant Bank could not be held to be responsible, the Apex court observed that it was only because of the peculiar facts of that case as the conversion in foreign exchange  could not be done on account  of the Sudan Government Policy. But the ratio  that was laid down was that the Appellant Bank was acting for and on behalf of the Complainant,  when they sent the documents to the Foreign Bank for negotiations and collection of the money.

26.     In Dena Bank, Buhanpur Vs. Madhya Pradesh National Textiles Corporation Ltd., AIR 1982 MP 85, in para 16 the Court  while addressing a similar question has laid down the principle as follows:

“ A somewhat similar question also came up for consideration before a Division Bench of this court in The Commissioner of Income-tax, M. P. v. Laxmichand Muchhal, Indore, 1966 MP LJ 720, in which it was held that if a Bank, after purchasing or discounting an instrument from a customer, credits the customer with the amount of the instrument and allows him to draw against the amount as credited before the bill or instrument is cleared, then the bank would be collecting the money not for the customer but chiefly for itself. From the above discussion, it is clear that if the bills and the relevant documents presented by its drawer are accepted by a banker with endorsement in its favour and the same are immediately discounted by the banker without waiting for its collection, by giving full credit for the entire amount of the document, so presented, the banker itself becomes a purchaser and the holder thereof for full value. But at page 226 in paragraph 421 itself in the Halsbury's Laws, it has been stated that whether the bill is taken from a customer for collection or as security or discounted for him, is a question of fact. We shall, therefore, advert to the evidence in this behalf.”

        In this case it was held that the Bank was not entitled to reverse the credit entry without returning back the documents to the drawer.

27.     From all the aforenoted catena of judgements of the Hon’ble Supreme Court it can be said that  it is a well settled principle  that the Bank becomes the purchaser of the Bills when it receives the documents and credits  the amounts into the account of the Complainant. Once the Bank so purchases  a Bill it collects money not only of a consumer but also for itself. At the cost of repetition, in the instant case when the Bills and the relevant documents were accepted by the Bank and immediately discounted without waiting for the collection, giving full credit for the entire amount  of the documents presented, it is held that the Bank itself becomes purchaser and the holder thereof for the full value.

28.     Learned Counsel relied on the decision of the High Court of Jammu and Kashmir High Court in J and K Bank Ltd. and Anr. Vs. Srinagar Carpet Company, MANU/JK/0249/2003, wherein it was held that a Branch office of a Banking institution in a particular country  or  area having business relations with a branch  office of another banking institution in another country or area namely the Foreign Bank is not a correspondent Bank of the Appellant Bank and therefore not an agent of the Appellant Bank. The facts in the instant case are different in the sense that a letter was addressed by the Complainant to the Appellant Bank and instructions were strictly given with respect to collection, which was not adhered to by the Appellant in contravention to the Articles of URC 522. The documentary evidence establishes that the uniform rules of URC 522 shall be followed and these uniform rules of URC are not addressed to in the aforenoted judgement.

29.     Learned counsel for the Bank relied on the Judgement of this Commission in Sun Pharmaceutical Industries Ltd. Vs. State Bank of India & Anr., III (2007) CPJ 239 (NC), in which the Bank had reversed the credit  given to the Complainant and no objection was raised to the reversal of credit and therefore the negligence was not proved. The ratio in this case does not apply to the instant case as the facts are entirely different. In the cited case, discrepancies were found in the documents by the collecting Bank and the same was returned to the forwarding Bank and therefore no objection was raised by the Complainant regarding reversal of credit. The ratio in M.O.H. Leathers Vs. United Commercial Bank, II (2012) CPJ 694 (NC),  relied upon by the learned counsel for the Appellant, also does not apply as the Bank in the cited case, had sincerely followed each and every  instruction given by the Complainant and it was held that the role of the collecting Bank was very limited and that the Complainant had failed to establish  any deficiency of service on behalf of the Bank.

30.     Learned counsel for the Appellant Bank argued that the Complainant was not a Consumer, but relied on the judgement of this Commission in Geekay Agropack (P) Ltd. Vs. State Bank of Mysore & Anr., II (2006) CPJ 204 (NC), in which case the Complainant was a Private Limited company and was engaged in the business of export of spices. On merits, the basic principle laid down in that case was that though the Complainant filed for recovery of value of goods with interest and expenses, the Bank was not liable to reimburse the Complainant for the entire value of goods and services, as the consignee in that case had refused payment on the ground that the goods were not sent in accordance with the contract between the parties and that the Complainant was involved in a  law suit  with the consignee for non payment. However, the Complaint was partly allowed and both the respondents were directed to pay a compensation of Rs.5,00,000/- to the Complainant. The facts in the instant case are different  as there is no allegation that the goods were not in accordance with any contract entered into between the parties. Therefore, the principle of law laid down by this judgement regarding deficiency of service does not squarely apply to the facts of this case. However, it is pertinent to note that the Complainant was a Private Limited Company and was held a ‘Consumer’ and was awarded Rs.5,00,000/- towards compensation.

31.     Keeping in view all the material on record,  the correspondence of the Foreign Bank, the Articles of URC 522, the ratio laid down by the Hon’ble Supreme Court in the aforenoted judgements,  I  am of the view that there is deficiency of service on the part of the Bank in not complying with the Articles of URC 522, for which act the Complainant had to suffer financial losses.

32.     Now I address myself to the question whether the State Commission was justified in awarding Rs.5,00,000/- towards expenses incurred by the Complainant for his travel to Australia and hiring a Solicitor and Rs.10,00,000/- towards compensation for the loss incurred. It is the Complainant’s case that the value  of money involved  in the transactions amounts to Rs,13,24,691/- in the year 2001 and that the complainant suffered losses. The learned counsel for the Complainant argued that the Complainant’s business was extremely small depending upon timely receipt of payments from its clients and the loss of almost 13,00,000/- crippled the Complainant’s business apart from loss of reputation in the trading community. From the material on record it is seen that the fact that the Complainant had hired a Solicitor to support his case was not rebutted by the Bank and in fact the Bank apart from sending telex massages did not take any coercive steps   against the Foreign Bank which, necessitated the Complainant to pursue his case himself, for which he had to travel all the way to Australia and hire a Solicitor to assist him in a foreign land. It is also seen that the cause of action took place in the year 2000 and 2001 and the Complainant  had to run from pillar to post all the way to Australia and suffered mental agony and harassment on account of the deficiency of service on the part of the Bank. While I concur with the finding of the State commission with respect to the finding of deficiency of service and the awarding of Rs.5,00,000/- towards  expenses incurred by the Complainant, I am of the view that having also awarded  interest @ 9% p.a., awarding further compensation of Rs.10,00,000/- is excessive  and the same is being set aside.

33.     In the result, this Appeal is allowed in part setting aside the compensation of Rs.10,00,000/-, while confirming the rest of the order of the State Commission. In compliance of the order of this Commission dated 06.06.2016, the Appellant Bank deposited a sum of Rs.13,24,691/- in addition to Rs.5,00,000/-  which already stands deposited  in the State Commission. Thereafter vide  order dated 09.11.2016 the Complainant was given liberty to withdraw the said amount on furnishing a Bank Guarantee of Rs.10,00,000/- in favour of the Appellant. However, the office report states that the said amount has not been withdrawn. Needless to add, the Complainant is at liberty to withdraw the amounts so deposited before this Commission and also the State commission and the same shall stands adjusted from the decretal amount. Time for compliance for payment of the balance amount is four weeks from the date of receipt of the order. The statutory amounts deposited by the Bank at the time of filing of the First Appeal, shall stand transferred to Consumer Legal Aid Account.