Summary
An exporter shipped messenger bags worth about Rs 13.8 lakh FOB New Delhi to a US buyer, with payment by letter of credit. The buyer's forwarding agents issued a cargo receipt that wrongly named JNPT Bombay as the port of loading. The buyer's bank cited that discrepancy, among others, in refusing the documents, and the exporter was never paid. The State Commission awarded the full value. The National Commission cut the award to Rs 10,000, blaming the exporter for not spotting the error. The Supreme Court restored the State Commission's award. The agents admitted the error despite clear shipping instructions, and that was the deficiency that led to non-payment. The exporter could not be faulted for lack of vigilance.
Issues
- Whether, the forwarding agents having admittedly entered the wrong port of loading in the Forwarder Cargo Receipt, the National Commission was justified in reducing compensation to the exporter on the ground that it should have noticed the mistake.
Provisions considered
- Section 2(1)(d)(ii), Consumer Protection Act, 1986The exporter, having availed the services of the forwarding agents, was a consumer. (¶¶ 16, 33)
- Section 2(1)(g), Consumer Protection Act, 1986The agents' negligent entry of the port of loading, contrary to clear shipping instructions, was a deficiency in service causing non-payment under the letter of credit. (¶¶ 36, 37)
Held
- Under an FOB contract the seller's obligation ends on putting the goods on board, and an irrevocable letter of credit is independent of the underlying sale; payment depends on presentation of compliant documents. (¶¶ 30, 31, 34, 35)
- Despite the exporter's shipping instructions of 11.02.1999 showing FOB New Delhi to Baltimore, the agents recorded JNPT Bombay as the port of loading; because of this negligence and deficiency in service the issuing bank refused to honour the documents, and the exporter lost the sale consideration and suffered harassment. (¶¶ 37, 38)
- When the agents' mistake was admitted and the National Commission itself found deficiency in service, it was wrong to fault the exporter for not noticing the error and to reduce the compensation; the State Commission's award was restored. (¶¶ 39, 40, 41)
Result
Civil Appeal No. 8298 of 2022 allowed; the National Commission's order dated 30.04.2015 in First Appeal No. 6 of 2010 set aside and the State Commission's award of Rs 13,79,901, Rs 50,000 compensation and Rs 10,000 costs restored, payable jointly and severally within two months.