# INDIAN BANK v. M/S. SATYAM FIBRES (INDIA) PVT. LTD

- **Citation:** [1996] Supp. 4 S.C.R. 464
- **Court:** Supreme Court of India
- **Decided:** 1996-08-09
- **Case number:** Civil Appeal No. 1737 of 1995
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/indian-bank-v-m-s-satyam-fibres-india-pvt-ltd-14556
- **Pages:** 32

## Headnote

•
A
INDIAN BANK
v.
M/S. SATYAM FIBRES (INDIA) PVT. LTD.
AUGUST 9, 1996
B
[KULDIP SINGH ANDS. SAGHIR AHMAD, JJ.[
Consumer Protection Act, 1986: Sections 2(J)(g). 13(4) & (5) and 22.
National Commission's judgment-Review of-On grounds of forge1y
C
a11d fraud by complai11a11t-Co1111nission ignored questio11 of forge1ylfraud
and di.unissed review 11etition-lfe/d : Conunission bound to decide question
of f01ge1y/fraud by recordi11g evide11ce-It had i11here11t power to recall its
judgment if/it was obtained by forge1y/fraud-Fraud amounted to abuse of
process of Commission-Evidence of p01ties already on record and vital facts
either stood admilled or proved-Hence, Supreme Cowt in appeal could itself
D decide that question--Complai11a11t committed forge1y a11d practised fraud 011
the Con11nission-7J1erefore, Conunission en·ed in disn1issing revieiv petition.
Code of Civil Procedure, 1908: Sections I 14 a11d 151.
Inherent power of Cowt-Nature and exercise of-Decree obtai11ed by
E practising fraud on Court-Review petition alleging fraud dismissed without
deciding question of fraud-Held : Court bound to decide question of fraud
by recording evidence and in appropliate cases it could recall its decree.
Penal Code, 1960: Sections 463, 464, 465, 470 and 471.
F
Forge1y/fraud-Fraud an essential ingredient of forgery.
Words and Phrases: "F01ge1y" and Fraud"-Meaning of-In the context
of Sections 463 and 464 of Penal Code, 1860.
The respondent entered into a contract for supply of goilds to a buyer
G in France. In due course, the goods were shipped. The respondent drew
two Bills of Exchange and forwarded the same to the Buyer through the
appellant-Bank. In the covering letter accompanying the Bills of Exchange
the respondent merely directed the appellant to present the documents to
the buyer through French Bank. In the covering letter no instruction was
H given for securing co-acceptance of the Bills of Exchange by the French
464
•
INDIAN BANKv .. SA1YAMFIBRES(I) PVT.LTD.
465
Bank. The documents were sent by the appellant to the French Bank but A
the same were returned unpaid. The respondent forwarded a fresh set of
Bills of Exchange for being sent to the French Bank. The Bills of Exchange,
on their face, specifically provided for acceptance by the buyer and co-acceptance by the French Bank. The B~nks were governed by the Uniform
Rules for collection made by the International Chamber of Commerce. B
Subsequently the Buyer went under lic1uidation, the French Bankintimated
that payment could not be made and the liquidator asked the respondent
to tile its claim for payment to the Buyer. Thereupon, the respondent tiled
a complaint before the National Consumer Disputes Redressal Commission claiming the value of the goods supplied to the Buyer in France from
the appellant on ground of negligence which amounted to deficiency in
service. The respondent's claim was based upon a second letter said to
have been issued by it directing the appellant to obtain co-acceptance of
the French Bank. The Commission allowed the claim and directed appel-
!ant to make the payments. The appellant filed a review petition before the
Commission alleging that the respondent played fraud inasmuch as the
second letter was never issued to the appellant and was forged by the
respondent to obtain a decree in its favour. The Commission dismissed
the review petition ignoring the question of forgery.
Allowing the appeal, this Court,
c
D
E
HELD : 1. The parties had to act in accordance with the Uniform
Rules for collection made by the International Chamber of Commerce (ICC
Rules) which specify the parties to the transaction for purpose of "Collection' as defined in Clause B(l)(i). These parties are the "Principal" who
entrusts the operation of "Collection" to his Bank. This, in the instant case, F
would be the respondent as the respondent entrusted the operation of
"Collection' to the appellant. The other party is the "Remitting Bank',
namely, a Bank to whom the operation of "Collect

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•
A
INDIAN BANK
v.
M/S. SATYAM FIBRES (INDIA) PVT. LTD.
AUGUST 9, 1996
B
[KULDIP SINGH ANDS. SAGHIR AHMAD, JJ.[
Consumer Protection Act, 1986: Sections 2(J)(g). 13(4) & (5) and 22.
National Commission's judgment-Review of-On grounds of forge1y
C
a11d fraud by complai11a11t-Co1111nission ignored questio11 of forge1ylfraud
and di.unissed review 11etition-lfe/d : Conunission bound to decide question
of f01ge1y/fraud by recordi11g evide11ce-It had i11here11t power to recall its
judgment if/it was obtained by forge1y/fraud-Fraud amounted to abuse of
process of Commission-Evidence of p01ties already on record and vital facts
either stood admilled or proved-Hence, Supreme Cowt in appeal could itself
D decide that question--Complai11a11t committed forge1y a11d practised fraud 011
the Con11nission-7J1erefore, Conunission en·ed in disn1issing revieiv petition.
Code of Civil Procedure, 1908: Sections I 14 a11d 151.
Inherent power of Cowt-Nature and exercise of-Decree obtai11ed by
E practising fraud on Court-Review petition alleging fraud dismissed without
deciding question of fraud-Held : Court bound to decide question of fraud
by recording evidence and in appropliate cases it could recall its decree.
Penal Code, 1960: Sections 463, 464, 465, 470 and 471.
F
Forge1y/fraud-Fraud an essential ingredient of forgery.
Words and Phrases: "F01ge1y" and Fraud"-Meaning of-In the context
of Sections 463 and 464 of Penal Code, 1860.
The respondent entered into a contract for supply of goilds to a buyer
G in France. In due course, the goods were shipped. The respondent drew
two Bills of Exchange and forwarded the same to the Buyer through the
appellant-Bank. In the covering letter accompanying the Bills of Exchange
the respondent merely directed the appellant to present the documents to
the buyer through French Bank. In the covering letter no instruction was
H given for securing co-acceptance of the Bills of Exchange by the French
464
•
INDIAN BANKv .. SA1YAMFIBRES(I) PVT.LTD.
465
Bank. The documents were sent by the appellant to the French Bank but A
the same were returned unpaid. The respondent forwarded a fresh set of
Bills of Exchange for being sent to the French Bank. The Bills of Exchange,
on their face, specifically provided for acceptance by the buyer and co-acceptance by the French Bank. The B~nks were governed by the Uniform
Rules for collection made by the International Chamber of Commerce. B
Subsequently the Buyer went under lic1uidation, the French Bankintimated
that payment could not be made and the liquidator asked the respondent
to tile its claim for payment to the Buyer. Thereupon, the respondent tiled
a complaint before the National Consumer Disputes Redressal Commission claiming the value of the goods supplied to the Buyer in France from
the appellant on ground of negligence which amounted to deficiency in
service. The respondent's claim was based upon a second letter said to
have been issued by it directing the appellant to obtain co-acceptance of
the French Bank. The Commission allowed the claim and directed appel-
!ant to make the payments. The appellant filed a review petition before the
Commission alleging that the respondent played fraud inasmuch as the
second letter was never issued to the appellant and was forged by the
respondent to obtain a decree in its favour. The Commission dismissed
the review petition ignoring the question of forgery.
Allowing the appeal, this Court,
c
D
E
HELD : 1. The parties had to act in accordance with the Uniform
Rules for collection made by the International Chamber of Commerce (ICC
Rules) which specify the parties to the transaction for purpose of "Collection' as defined in Clause B(l)(i). These parties are the "Principal" who
entrusts the operation of "Collection" to his Bank. This, in the instant case, F
would be the respondent as the respondent entrusted the operation of
"Collection' to the appellant. The other party is the "Remitting Bank',
namely, a Bank to whom the operation of "Collection' is entrusted ·by the
'Principal". In the instant case, the "Remitting Bank" would be the appellant
as it was this Bank to whom the respondent had entrusted the job of
"Collection". Another Bank which is involved in the whole transaction is the G
'Collecting Bank". According to the definition, this would be a Bank other
than the 'Remitting Bank". There is, yet, a third Bank, namely the "Presenting Bank" which, according to the definition, is, in fact, the "Collecting
Bank' making presentation to the "Drawee". "Drawee' has been defined in
Clause B(3) as the person to whom presentation is made according to the H
466
SUPREME COURT REPORTS (1996] SUPP. 4 S.C.R.
A collection order. Although, in the definition, there are three banks, namely,
the "Remitting Bank", the "Collecting Bank" and the "Presenting Bank" is
the same as the "Collecting Bank" not only collects the documents from the
nRemitting Bank
11, it also presents those documents to the "Drawee" for
payment. The "Remitting Bank" cannot be the "Collecting Bank" or the
B
"Presenting Bank" as the "Collecting Bank" has been defined in the ICC
Rules as a Bank OTHER THAN THE "REMITTING BANK". The "Remitting Bank" in the instant case was the French Bank. Clause C of the ICC
Rules requires that the documents sent for "Collection" must be accompanied by a collection order. The collection order has to contain complete ·
and precise instructions so as to enable the Bank to act in accordance with
C the instructions contained in the collection order and in accordance with
the ICC Rules. The principal has to give instructions separately (in addi·
tion to the documents) to the Remitting Bank to enable it to instruct the
collecting Bank accordingly. Article 15 of the ICC Rules indicates that the
responsibility of seeing that the Bill of Exchange is accepted, completely
and correctly, is that of the "Presenting Bank". [476-G-H; 477-A-G]
D
2.1. By filing the original covering letter along with the review peti-
~ion that the other letter of the even date was never written or issued by
the respondent, the appellant, in fact, raised the plea before the Commission that its judgment (under review), which was based on the second letter
E was obtained by the respondent by practising fraud not only on the
appellant but on the Commission too as the second letter was forged by
the respondent. Since under the ICC Rules, it is the responsibility of the
"Principal" to give or send specific and precise instructions to the Bank
besides sending the "Commercial/Financial Documents", Commission was
F
under a duty to decide as to whether the appellant had issued the letter
containing the requirement of co-acceptance by the French Bank. The
Commission could not legally avoid to decide this question in view of the
specific allegation of forgery made by the appellant. [479-G-H; D-E]
2.2. The Authorities, be they Constitutional, Statutory or Ad· 1
G ministrative, (and particularly those who have to decide a lis) possess the
power to recall their judgments or orders if they are obtained by fraud as
Fraud and Justice never dwell together (Fraus et jus nunquam cohabitant).
Fraud and deceit defend or excuse no man (Fraus et do/us nemilli
patroci1tari debe1tt). The judiciary in India also possesses inherent power,
H specially under Section 151 of the Code of Civil Procedure, 1908, to recall
INDIAN BANKv. SATYAMFIBRES (!) PVf. LTD.
467
its judgment or order if it is obtained by Fraud on Court. In the case of A
fraud on a party to the suit or proceedings, the Court may direct the
affected party to tile a separate suit for setting aside the Decree obtained
by fraud.· Inherent power are powers which are resident in all courts,
especially of superior jurisdiction. These powers spring not from legislation but from the nature and the constitution of the Tribunals or Courts
themselves so as to enable them to maintain their dignity, secure obedience
to its process and rules, protect its officers from indignity and wrong and
B
to punish unseemly 'behaviour. This power is necessary for the orderly
administration of the Court's business. Since fraud affects the solemnity,
regularity and orderlines~ of the proceedings of the Court and also
amounts to an abuse of the process of Court, the Courts have been held C
to have inherent power to set aside an order obtained by fraud practised
upon that Court. Similarly, where the Court is misled by a party or the
court itself commits a mistake which prejudices a party, the Court has the
inherent power to recall its order. [480·B·G]
Benoy Krishna Mukheijee v. Mohan/a/ Goenka, AIR (1950) Cal. 287;
Gajanand Sha & Ors. v. Dayanand Thakur, AIR (1943) Pat 127; Krishna
Kumar v. Jawand Singh, AIR (1947) Nag 236; Devendra Nath Sarkar v. Ram
Rachpal Singh, ILR (1926) 1 Luck 341 =AIR (1926) Oudh 315; Saiyed
Muhammad Raza v. Rani Saroop & Ors., ILR (1939) 4 Luck 562 =AIR
(1929) Oudh 385 (FB); Bankey Behari Lal & Anr. v.Abdul Rahman & Ors.,
ILR (1932) 7 Luck 350 =AIR 1932 Oudh 63; Kekshmi Amma Chacld Amma
v. Mammen Mammen, (1955) Ker LT 459; Ishwar Mahton & Anr. v. Sitaram
Kumar & Ors., AIR (1954) Pat 450; Bindeshwari Pd. Choudhary v. Debendra
Pd. Singh & Ors., AIR (1958) pat 618 and Smt. Tara Bai v. V.S. Krislmaswamy Rao, AIR (1985) )\arn. 270, approved.
Smith v. East Elloe Rural District Council, (1950) AC 736 and Lazarus
Estate Ltd. v. Beasley, (1956) 1 QB 702, referred to.
D
E
F
2.3. Forgery is the false making of any written instrument, for the
purpose of fraud or deceit. Thus fraud is an essential ingredient of forgery. G
[481·G]
Rembert v. State,25 Am. Rep. 639 and State v. Phelps, 34 Am. Dec. 672,
referred to. Stroud's Judicial Dictionary, Fifth Edition Vol. 2, Webster's
Comprehensive Dictionary, International Edition and Tomlin's Law Dictionary, refereed to.
H
468
SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.
A
3. Forgery and fraud are essentially matters of evidence which could
B
be proved as a fact by direct evidence or by inferences drawn from proved
facts. The Privy Council in Satish Chandra Chatterjee laid down thus :
"Suspicions and surmises and conjecture are not permissible substitutes
for those facts or those inferences, but that by no means requires that every
puzzling artifice or contrivance resorted to by one accused of fraud must
necessarily be completely unravelled and cleared up and made plain before
a verdict can be properly found against him. If this were not so, many a
clever and dexterous knave would escape." This principle will apply not
only to courts of law but also to statutory tribunals which, like the
Commission, are conferred power to record evidence by applying certain
C provisions of the Code of Civil Procedure 1908, including the power to
enforce attendance of the witnesses and are also given the power to receive
evidence on affidavits. The Commission under the Consumer Protection
Act, 1986 decides the dispute by following the procedure indicated in
Section 22 read with Section 13(4) and (5) of the Act. The Commission
D has, thus, jurisdiction not only to examine a witness on oath but also to
receive evidence in the form of affidavits . [ 482-C-F]
Satish Chandra Chatterjee v. Kumar Satish Kantha Roy & Ors., AIR
(1923) PC 73, referred to.
E
4.1. The parties, in the instant case, have filed their aliidavits annexing therewith a host of documents. These affidavits and documents were
treated as evidence in the case. It was on the basis of this evidence that
the main case, as also the Review Petition, were decided by the Commission. Since the evidence of the parties is already on record and all vital
F
facts either stands admitted or proved, this court, in appeal, can proceed
to consider whether forgery and fraud were established in this case. This
is being done here in view of the facts and circumstances of this case;
otherwise this court would have either remanded the case to the Commission or directed the respondent to approach the Civil Court. (483-D-E]
G
4.2. The circumstances, in the instant case, are glaring and the
intrinsic evidence available on the record is clinching, so mnch so, that no
other inference is possible except to hold that the second Idler was forged
by the respondent in order to obtain a decree from the Commission for a
huge amount of French Francs. If the second letter (forge<! by the responH dent) is excluded from the evidence, there remains only the first letter in
·I
INDIANBANKv. SATYAM FIBRES(!) PVf. LID. [S. SAGHIRAHMAD,J.[
469
which it was not indicated by the respondent to the appellant to write to A
the French Bank to deliver the documents only on co-acceptance by it. The
appellant, in the circumstances, was justified in not mentioning co-acceptance by the French Bank. The case of the respondent being false and based
on fabricated evidence has to be dismissed. [492-F-G; 495-B)
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1334 of B
1995.
From the Judgment and Decree dated 13.12.94 and 15.11.95 of the
National Consumer Disputes Redressal Commission, New Delhi in O.P.
No. 1~7/92 and R.A. No. 889 of 1993.
C
WITH
Civil Appeal No. 1737 of 1995.
From the Order dated 16.11.93 of the National Consumer Disputes D
Redressal Commission, New Delhi in O.P. No. 187 of 1992.
H.N. Salve, P.H. Parekh and Ms. Bina Madhavan for the Appellant.
Mrs. Ferzana Z. Behramkamdin, Pratap Venugopal, K.J. John and
Thomas Joseph fcir the Respondent.
E
The Judgment of the Court was delivered by
S. SAGHIR AHMAD, J. These are two appeals against the judgments
of the Nati.anal Consumer Disputes Redressal Commission, New Delhi.
2. The facts on record indicate that the respondent had entered into
Contract No. 31/89 with a French Firm M/s. STE Kolori (for short, 'Buyer')
for supply of 1 lac ·metres of cotton grey sheeting of the value of French
Francs 4,37,500. In due course, the goods were shipped to the Buyer and
F
on 09.06.90, respondent drew two Bills of Exchange on the Buyer for
French Franc 3,50,000 and French Franc 87,500. The draft mentioned at G
the top that the Bills of Exchange had to be co-accepted by the Buyer's
bank. These documents were sent by the appellant to that Bank on 18.6.90
as requested by the respondent but on 9.7.90, the documents were returned
unpaid. However, on the instructions of the respondent, the documents
were re-presented to Banque Leumi, Paris on 13.7.90. On 9.4.91, on the H
470
SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.
A instructions of the respondent, a telex was sent to Banque leumi, Paris to
transfer the documents to another French Bank, namely, Societe Lyonnaise
de Banque, Lyon, France, and on the same day, fresh bills of Exchange
dated 6.3.91 were sent to the French Bank at the request of the respondent.
In these Bills of Exchange, there was no clause for co-a'cceptance by the
B
c
D
French Bank which, however, returned the documents unpaid on 9.8.91.
3. On 26th August, 1991, respondent forwarded a fresh set of Bills
of Exchange for being sent to the French Bank. The Bills of Exchange, on
their face, specifically provided for acceptance by the Buyer and co-acceptance by the French Bank.
4. It appears that the Buyer, namely, M/s. STE Kolori went under
liquidation and an order was passed by the Commercial Court at Lyon,
France for winding up the firm. The Court also appointed a Liquidator
who wrote to the respondent to file its claim.
5. On 1st January, 1992, Napean Sea Road .Branch of the appellant
at Bombay wrote a letter to the French Bank that payment of the Bills of
Exchange forwarded to it earlier may be made. The French Bank wrote on
9.1.92 that the Bills of Exchange had not been paid as the Buyer was under
liquidation. The Bank also, during course of correspondence, wrote that
E under French Law, co-acceptance by the Bank, was not permissible non
would it have given the Bank Guarantee, even if a request was made in
that regard by the appellant for and on behalf of the respondent. ,It was,
at this stage, that respondent gave a notice dated 26.3.92 to the appellant
claiming the entire amounts of the Bills of Exchange and subsequently filed
F
a complaint before the National Consumer Disputes Redressal Commission at New Delhi (for short, 'Commission') claiming the value of the goods
shipped to the Buyer at France, from the appellant. The Commission by
its judgment and order dated 16.11.93 allowed the claim with the direction
to the appellant to pay to the respondent French Francs 4,10,000 with
interest (in rupees) at the rate of 18% on the rupee equivalent of the above
G amount with effect from 31st December, 1989 together with a sum of Rs.
10,.000 as costs to the respondent. It was against this judgment that the
claimant filed, in this Court, Civil Appeal No. 1737 of 1995. The connected
Civil Appeal No. 1334 of 1995 has been filed against the judgment and
order dated 13.12.94 by which the Commission has rejected the Review
H Petition filed by the appellant. Both the appeals were admitted by this
INDIANBANKv. SATYAMfiBRES (I) PVT.LID. [S.SAGHIRAHMAD,J.]
471
Court on 20.2.95 and are being disposed of by this judgment.
A
6. It may be stated that the Commission, while decreeing the claim
of the respondent, had relied upon the Uniform Rules for Collection made
by the International Chamber of Commerce as also the covering letter of
the respondent dated 26th August, 1991 accompanying the two Bills of
Exchange, which according to the Commission, on the face of it, indicated B
that co-acceptance of the French Bank had to be obtained and since the
appellant, while forwarding the Bills of Exchange to the French Bank, had
not indicated in its letter that the Bills had also to be co-accepted by the
French bank, it acted negligently. This omission was also treated by the
Commission as deficiency in service.
7. Review of this judgment was sought by the appellant on the ground
that the respondent's letter dated 26th August, 1991 accompanying the Bills
of Exchange did not mention that co-acceptance of the French Bank had
c
to be obtained. It was pointecl. out to the Commission that the letter dated
26th August, 1991 which was placed on the record by the respondent and D
in which a specific mention was made that co-acceptance from French
Bank had to be obtained, was letter forged by the respondent to obtain a
decree in its favour. The appellant contended that this letter was never
issued to the appellant. The letter dated 26.8.91 which was actually issued
to them did not contain any direction for obtaining co-acceptance by the E
French Bank. The Commission in its judgment dated 13.12.94 (disposing
of the review application) has considered both the letters and has
reproduced the contents thereof but it did not go into the question whether
the letter filed by the respondent was a forged letter or not.
8. The relevant portion of the findings recorded by the Commission F
in its judgment passed on the review application is quoted below :
"The Opposite Party - Bank - has alleged that the letter of 26th
August, 1991 from the Complainant to the Opposite Party - Bank
which was the letter with which the Bills of Exchange were subG
mitted to the Opposite Party - Bank - for collection, did not
specifically direct the Bank to secure co-acceptance of the Bills of
Exchange by the French Bank. The Opposite Party - Bank - has
alleged that the letter of 26th August, 1991 submitted as Annexure
'A' to the Complaint petition bearing No. 2776 was not the true
letter sent by Complainant; it is a forgery & fabrication. The true H
A
B
c
D
E
F
G
H
472
SUPREME COURT REPORTS (1996] SUPP. 4 S.C.R.
letter of the same date (i.e. 26th August, 1991} was No. 2775 which
was the covering letter of Bills of Exchange and this letter did not
contain the material instructions regarding co-acceptance by the
French Bank. For facility the two letters are reproduced below :
(i) Letter No. 2776 of 26th August, 1991 from the Complainant to
the Opposite Party - Bank :
"We refer your letter dated 14.8.1991 informing us about
return of documents Nos. 0005207 (FOBC 17794} and
0005208 (FOBC 17795} for Rs. 3,50,000 and FF 87,000
respectively.
In this connection we are enclosing fresh sets of Bills· of
Exchange with a request to kindly represent the documents
immediately to our buyer through M/s. Societe Lyonnaise De
Banque, Lyon, France. Kindly note that the Bills of Exchange
have to be accepted by our buyer and co-accepted by the
bank viz; Societe Lyonnaise De Banque for payment on
31.12.1991."
(ii) The letter No. 2775 of 26th August, 1991 from the Complainant
to the Opposite party - Bank :
"We refer your letter dated 14.8.1991 informing us about
return of documents Nos. 0005207 (FOBC 17794) and
0005208 (FOBC 17795} for Rs. 3,50,000 and FF 87,000
respectively.
In this connection, we are enclosing fresh sets of Drafts with
a request to kindly represent the documents immediately to
our buyer through M/s. Societe Lyonnaise De Banque, Lyon,
France."
It will be noticed from the letters reproduced above that the
material instruction regarding co-acceptance of the Bills of Exchange by the French Bank is absent in the letter No. 2775 whereas
it is specifically recorded in the letter No. 2776. According to the
Opposite Party - Bank the letter or 26th August No. 2776 is a
forgery created by the Complainant for the purpose of this case.
During the hearing there was considerable effort on the part of
INDIANBANKv. SAlY AM FIBRES (I) PVT. LID. (S.SAGHIRAHMAD,J.J
473
the Opposite Party - Bank to prove that the letter No. 2776 was A
never issued and this has been forged to support the case of the
complainant whereas the Complainant vehemently maintained that
this was a genuine letter and that there was evidence to support
its contention. We did not think it necessary to go into this
question. We only pointed out to the Complainant that in the
ordinary course of correspondence, in its letter of No. 2776 the
Complainant should have stated that this was in continuation of its
previous letter No. 2775 and that the letter No. 2776 was necessitated by the omission in the letter No. 2775 of the vital directions
regarding co-acceptance of the Bills of Exchange. We did not get
a satisfactory answer to this question.
B
c
We have also once again gone through the records of the case,
the oral arguments and the written submission made by the parties
at the rehearing limited to the question of the letter No. 2776 being
a forgery and its effect on the findings recorded in the order of
this Commission of 16th November, 1993.
D
It will be observed from the order that the Bills of Exchange
clearly specified that the same were to be co-accepted by the
foreign bank besides being accepted by the buying French Firm.
In these circumstances it was the duty of the Opposite Party Bank E
to ensure co-acceptance by the foreign Bank. The responsibility of
the Bank to obtain co-acceptance of the Bills of Exchange is also
manifest from the Rules of Collection laid down by the International Chamber of Commerce. As the collecting bank on behalf of
its customer (Complainant) who had entrusted the task of collection of Bills of Exchange to it the Opposite Party - Bank, the latter
is responsible for seeing that the form of acceptance of Bills of
Exchange is complete and correct.
The Rules require that "all documents sent for collection must
F
be accompanied by collection order which is to be made by the G
Bank in accordance with the instructions of the client or the
principal."
The instructions for co-acceptance by the foreign bank on the
Bills of Exchange were clear and unambiguous and as such even
if we ignore the covering letter No. 2776 of 26th August, 1991 said H
474
A
SUPREME COURT REPORTS (1996] SUPP. 4 S.C.R.
to have been sent by the Complainant to the Bank on the ground
that this is a forged document, it will not affect the decision already
arrived at in any manner .
11
9. As pointed out earlier, the Commission did not decide the question whether the letter dated 26th August, 1991 filed by the respondent
B was a forged letter as it was of the opinion that even if both the letters,
namely the letter filed by the appellant in Review Petition as also the letter
filed by the respondent in the original proceedings, were ignored, the
appellant was still under a liability to have mentioned in its letter to the
French Bank to whom the Bills of Exchange were forwarded, that the
C French Bank had also to co-accept the Bills before delivering the documents to the Buyer as the respondent had specifically mentioned this
requirement in the Bills of Exchange drawn on and addressed to M/s. STE
Kolori and their Bankers, namely, Societe Lyonnaise De Banque, Lyon,
France. This finding, like the findings recorded by the Commission in its
original judgment dated 16.11.93, is based on the interpretation of certain
D Clauses of the Rules of the International Chamber of Commerce.
E
F
G
H
10. There are two Banks, namely, the Indian Bank, Bombay (appellant) through whom the Bills of Exchange were forwarded and the French
Bank, qamely Societc Lyonnaise De Banque, Foreign Department, Lyon,
France. for payment. It is not disputed that the Banks had to act in
accordance with the Uniform Rules .for Collection made by the International Chamber of Commerce (hereinafter referred to as ICC Rules). The
extent of liability, default, negligence or _deficiency in service, on the part
of either of the Banks would, therefore, depend on a correct reading and
interpretation of the ICC Rules which, we unhesitantly say, at the outset,
were misread, misunderstood and misinterpreted by the Commission.
11. Clause B of the ICC Rules which came into force with effect from
January 1, 1979 contains Definitions some of which (which are relevant for
this case) are reproduced below :
"1. (i) "Collection" means the handling by banks' on instructions
received of documents as defined in (ii) below, in order to (a)
obtain acceptance and/or, as the case may be, payment, or (b)
deliver commercial documents against acceptance and/or, as the
case may be, against payment, or (c) deliver documents on other
terms and conditions.
•
INDIAN BANKv. SA1YAMFIBRES (I) PVT. LID. (S. SAGHIRAHMAD,J.J
475
(ii) "Documents" means financial documents and/or commercial A
documents:
(a) "financial dowments" means bills of exchange, promissory
notes, cheques, payment receipts or other similar instruments used
for obtaining the payment of money;
(b) "Commercial documents" means invoices, shipping documents, documents of title or other 'similar documents, or any other
documents, whatsoever, not being financial documents .
2. The "pa1tieS thereto
11 are :
(i) the "p1incipal" who is the customer entrusting the operation
of collection to his bank;
(ii) the "remitting bank" which is the bank to which the principal
has entrusted the operation of collection;
(iii) the "collecting bank" which is any bank, other than the
remitting bank, involved in processing the collection order;
(iv) the ''presenting bank" which is the collecting bank making
B
c
D
presentation to the drawee.
E
3. The
11drawee
11 is the one to whom· presentation is to be made
according to the collection order."
Clause C provides as under :
"All documents sent for collection must be accompanied by a
collection order giving complete and precise instructions. Banks
are only permitted to act upon the instructions given in such
collection order, and in accordance with these Rules.
F
If any bank cannot, for any reason, comply with the instructions G
given in the collection order received by it, it must immediately
advise the party from whom it received the collection order."
Article 2, 3 as also Article 15 provide as under :
"Article 2
H
476
A
B
c
D
E
F
SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.
Banks must verify that the documents received appear to be as
listed in the collection order and must immediately advise the party
from whom the collection order was received of any documents
m1ssmg.
Banks have no further obligation to examine the documents.
For the purpose of giving effect to the Instructions of the
principal, the remitting bank will utilise as the collecting bank :
(i) the collecting bank nominated by the principal, or in the
absence of such nomination,
(ii) any bank, of its own or another bank's choice, in the country
of payment or acceptance, as the case may be.
The documents and the collection order may be sent to the
collecting bank directly or through another bank as intermediary.
Banks utilising the services of other banks for the purpose of
giving effect to the instructions of the principal Uu so for the
account of and at the risk of the latter.
The principal shall be bound by and liable to indemnity the
banks against all obligations and responsibilities imposed by
foreign laws or usages.
Article 15
The presenting bank is responsible for seeing that the form of
the acceptance of a bill of exchange appears to be complete and
correct, but is not responsible for the genuineness of any signature
or for the authority of any signatory to sign the acceptance."
12. Clauses 2 and 3 specify the parties to the transaction for purpose
G of "Collection" as defined in Sub-clause l(i) of Clause B. These parties are
the "P1 incipal" who entrusts the operation of Collection" to his Bank. This,
in the instant case. would be the respondent as the respondent entrusted
the operation of "Collection" to the appellant. The other party is the
"Remitting Bank", namely, a Bank to whom the operation of "Collection"
H is entrusted by the "Principal". In the instant case, the "Remitting Bank"
•
"
_,
INDIANBANKv. SATYAM FIBRES(!) PVT.LID. [S. SAGHIRAHMAD,J.)
477
would be the appellant as it was this Bank to whom the respondent had A
entrusted the job of "Collection". Another Bank which is involved in the
whole transaction is the "Collecting Bank". According to the definition, this
would be a Bank other the "Remitting Bank". There is, yet, a third bank,
namely the "Presenting Bank" which, according to the definition, is, in fact,
the !!Collecting Bankr' making presentation to the
11Dra\vee
11
• "Dra\vee
11 has
been defined in Sub-clause 3 of Clause B as the person to whom presentation is made according to the collection order. Although, in the definition, there are three banks namely, the "Remitting Bank", the "Collecting
Bank" and the "Presenting Bank", the identity of "Collecting Bank" and the
"Presenting Bank" is the same as the "Collecting Bank" not only collects the
documents from the "Remitting Bank", it also presents those documents to
the "Drawee" for payment. The "Remitting Bank" cannot be the "Collecting
Bank" or the "Presenting Bank" as the "Collecting Bank" has been defined
in the ICC Rules as a Bank OTHER THAN THE "REMITTING BANK".
B
c
13. Clause C which has already been extracted above requires that D
the documents sent of "Collection" must be accompanied by a collection
order. The collection order has to contain complete and precise instructions so as to enable the Bank t~ act in accordance with the instructions
contained in the collection order and in accordance with the ICC Rules.
This will also be clear from the definition of "Collection" as set out in Subclause l(i) of Clause B, which means "the handling by Banks, ON INE
STRUCTIONS RECEIVED, of documents", which are either "Commercial
or Financial" as defined in Sub-clause (ii)(a) and (b). The definition of
"Financial Documents" also includes Bills of Exchange. The words "for the
purpose of giving effect to the INSTRUCTIONS OF THE PRINCIPAL"
occurring in Article 3 also make it clear that the Principal has to give F
instructions separately (in addition to the documents) to the Remitting
Bank to enable it to instruct the Collecting Bank accordingly.
14. ''.Acceptance" is dealt with in Article 15 which indicates that the
responsibility of seeing that the Bill of Exchange is accepted, completely
and correctly, is that of the "Presenting Bank".
G
15. The Commission, while disposing of the complaint of the respondent by its original order dated 16.11.93, had held that not only the Bill of
Exchange but the covering note accompanying those Bills clearly indicated
that the Bill was to be accepted by the buyer and co-accepted by the H
478
SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.
A Foreign Bank. It, then, proceeded to say as under :
B
c
D
"The Rules for Collection laid down by the International Chamber of Commerce leave no room for doubt that as per Article 3
of the said Rules, for giving effect to the instructions of the
principal, i.e., the customer entrusting the operation of collection
to his Bank, the remitting bank (viz. the Bank to which the principal
has entrusted the operation of collection) is the collecting Bank.
As observed earlier, under Article 15 it is the presenting Bank
which is responsible for seeing that the form of acceptance of a
Bill of Exchange appears to be complete and correct. Under Item
C "General Provisions and Divisions" of the above Rules "All
documents sent for collection must be accompanied by a collection
order which has to be made by the Bank in accordance with the
instructions of the client or the principal''. The opposite party Bank
failed to do so. We reject its plea that it was not responsible to
obtain the co-acceptance of the Bank and there was no deficiency
of service on its part.
11
16. A mere perusal of the above passage of the Commission's judgment indicates that the Commission fell into a serious error in treating the
"Remitting Bank" as the "Collecting Bank" and, then, fastening liability on
E the appellant by observing that the appellant had not acted in accordance
with Article 15 of the ICC Rules under which it was the responsibility of
the "Presenting Bankn to see that the
11Docun1ents
11 were accepted in accordance with the instructions of the "Principal". The Commission thus treated
appellant not only only as the "Remitting Bank" but also as the "Collecting
Bank" and "Presenting Bank" which is not permissible as the identity of
F
"Remitting Bank" is different and distinct from that of the "Collecting Bank"
and/or the "Presenting Bank".
17. As pointed out earlier, the main judgment of the Commission is
based on the ground that there was letter dated 26.8.91 which contained
G specific instruction that there had to be co-acceptance by the Foreign
Bank.
18. As against this, there is, admittedly, another letter of 26th August,
1991 from the respondent to the appellant which does nnt contain this
instruction. When this letter was filed before the Commission and a review
H of the judgment was sought on the ground that the letter containing the
.,
I
-(
INDIANBANKv. SA1YAMFIBRFS(l)PVT.L1D",.SAGHIRAHMAD,J.]
479
instruction for obtaining co-acceptance of the French Bank was never A
issued to the appellant and that the only letter issued on that date was the
letter in which this instruction was not mentioned, the Commission, instead
of deciding the controversy as to whether the other letter relied upon by
the respondent was, at all, sent or issued to the appellant, proceeded to
decide the controversy on the ground that even if no such letter was issued, B
the recital in the Bill of Exchange about co-acceptance by the French Bank
was enough and the- appellant having not acted in terms of the Bill of
Exchange and having not obtained the co-acceptance of the French Bank,
was liable to pay to the respondent the entire price of the goods supplied
to the Buyer to whom the documents would not have been delivered had
it been mentioned that before delivering the documents to the Buyer, C
co-acceptance by the French Bank was necessary, as in that event, the
documents would have been either returned, as was done on previous
occasions, or the French Bank would have given co-acceptance and thus
made payment of the entire amount to the respondent.
19. In view of the findings recorded by us that under the ICC Rules,
it is the responsibility of the "Principal" to give or send specific and precise
instructions to the Bank besides sending the "Commercial/Financial Documents", Commission was under a duty to decide as to whether the respondent had issued the letter containing the requirement of co-acceptance by
D
the French Bank. The Commission could not legally avoid to decide this E
question particularly as the appellant had contended before the Commission that the letter No. 2776 of 26th August, 1991 was forged and fabricated
by the respondent and that the only letter issued by the respondent was
letter No. 2775 dated 26th August, 1991. The contents of both the letters
have already been reproduced by the Commission in its judgment by which F
the review application has been disposed of which would indicate that in
the letter No. 2775, there is no requirement to obtain co-acceptance by the
French Bank whereas in the other letter, namely, letter No. 2776, this
condition has been specifically mentioned.
20. By filing letter No. 2775, of 26.8.91 along with the Review Petition G
and contending that the other letter, namely, letter No. 2776 of the even
date, was never written or issued by the respondent, the appellant, in fact,
raised the plea before the Commission that its judgment dated 16.11.93,
which was based on letter No. 2776, was obtained by the respondent by
practising fraud not only on the appellant but on the Commission too as H
480
SUPREME COURT REPORTS [1996] SUPP. 4 S.C.R.
A
letter No. 2776 dated 26.8.91 was forged by the respondent for the purpose
of this case. This plea could not have been legally ignored by the Commission which needs to be reminded that the Authorities, be they Constitutional, Statutory or Administrative, (and particularly those who have to
decide a !is) possess the power to recall their judgments or orders if they
B
are obtained by fraud as Fraud and Justice never dwell together (Fraus et
just nunquam cohabitant). It has been repeatedly said that Fraud and deceit
defend or excuse no man (Fraus et do/us nemini patrocinari debent).
21. In Smith v. Easi Elloe Rural District Council, (1950) AC 736, the
House of Lords held that the effect of fraud would normally be to vitiate
C any act or order. In another case. Lazams Estate Ltd. v. Beasley, (1956) 1
QB 702 at 712, Denning Ll said :
D
E
"No judgment of a court, no order of a Minister, can be allowed
to stand if it has been obtained by fraud. Fraud unravels everything."
22. The judiciary in India also possesses inherent power, specially
under Section 151 CPC, to recall its judgment or order if it is obtained by
Fraud on Court. In the case of fraud on a party to the suit or proceedings,
the Court may direct the affected party to file a separate suit for setting
aside the Decree obtained by fraud. Inherent power are powers which are
resident in all courts, especially of superior jurisdiction. These powers
spring not from legislation but from the nature and the Constitution of the
Tribunals or Courts themselves so as to enable them to maintain their
dignity, secure obedience to its process and rules, protect its officers from
indignity and wrong and to punish unseemly behaviour. This power is
F
necessary for the orderly administration of the Court's business.
23. Since fraud effects the solemnity, regularity and orderliness of the
proceedings of the Court and also amounts to an abuse of the process of
Court, the Courts have been held to have inherent power to set aside an
order obtained by fraud practised upon that Court. Similarly, where the
G Court is misled by a party or the Court itself commits a mistake which
prejudices a party, the Court has the inherent power to recall its order.
(See : Benoy Krishna Mukherjee v. Mohan/a/ Goenka, AIR (1950) Cal. 287;
Gajanand Sha & Ors. v. Dayanand Thakur, AIR (1943) Patna 127; Krishna
Kumar v. Jawand Singh, AIR (1947) Nagpur 236; Devendra Nath Sarkar v.
H Ram Rachpal Singh, ILR (1926) 1 Lucknow 341 = AIR 1926 Oudh 315;
..
I
INDIANBANKv. SATYAMFIBRES(J) PVT. LID. (S. SAGHIRAHMAD,J.]
481
Saiyed Muhammad Raza v.