Criminal Trident Pack: IPC, CrPC and IEA by Sr. Adv. G.S Shukla and Adv. Raghav Arora
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Bhavita   08 September 2015

Sarfasai act, drt, negotiating bank negligence


I had made exports under 90 days Usance LC to a foreign buyer. My export bills ( three in total )were discounted by bank as per my existing limits with them. However on due date, the LC issuing bank refused to honour/ Pay citing that they had negotiated the documents under “URC 522 (collection basis)” for all the three shipment / documents negotiated. Now, on taking up the issue with my banker here, my Indian bank says that they had negotiated and discounted the bill because they had received Acceptance on all three occasions from the LC issuing bank, and are asking me to pay up instead of accepting their fault in MISHANDLING OF DOCUMENTS and demanding the rightful dues from the LC issuer. On asking for the communication of swift exchanges between the two or the email exchanges, my bank here had always denied providing me the documents citing some reason or the other despite several reminders via email, msgs and orally to them for nearly 4 months. Only after sending them a notice under RTI, they provided me the communications between them and the LC issuing bank. To my utter shock, the contentions of the LC issuing bank were found to be true . Every swift communication sent by then to our bank here mentions “MSG UNDER URC 522”. This clearly shows the Blunder committed by my negotiating bank in handling documents and reading the swift communication / ACCEPTANCE messages properly causing ultimate losses to me. Had they noticed it in the first instance itself, we would have been in a position of not accepting their contention and would have been in a position to recall the goods back. Not to mention that further shipments would never have been sent. You will agree that it’s just because of their foolishness if i may call it; they have put me in this situation of heavy loss.

Fortunately for me (I guess), I had taken an SSI individual shipment policy from ECGC against the LC issuing bank and the exports. The claim for which is still pending with ECGC and is under process and review.

Now, they (my bank) have approached the DRT and have filed a case against me and they have issued me a notice under Sarfasai Act asking me to pay up all the bills discounted with huge interest, close the existing OD limit with them and have marked my account NPA. Or else they will seize auction off my property mortgaged with them.

My questions are:

  1. Is my negotiating bank’s action justified in ignoring the swifts sent under URC 522 and now claiming upon me?
  2. Is there any action I can take against the negotiating bank for its Blunder committed which has caused me heavy loss?
  3. Is there any action we can take against the LC issuing bank ?
  4. Is the negotiating bank justified in filing claim with DRT even if the fault is on their part?
  5. Can the negotiating bank file a case , mark my account NPA and issue me notice even when a claim is still under process/ pending with ECGC ?

(In a smilar query of Sarfasai notice when ECGC claim is still pending on this forum Lawyer Club of India ( some two years back) on an query from one Mr Mehta Harish, Experts – Mr Raj Kumar Makkad and Devjyoti Bhramman had replied that the notice is illegal).

Kindly advice further.


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