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State Bank of Hyderabad v. Rabo Bank

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 8194 of 2015)Decided 1 Oct 2015
Civil Appeal No. 8194 of 2015
Justice Ranjan Gogoi · Justice N.V. Ramana

Background

A Singapore bank, on behalf of an exporter of chickpeas, sent shipping documents to State Bank of Hyderabad for collection of payment from Indian buyers. The State Bank accepted bills of exchange by telex and fax, but did not pay. It later said the telexes had been issued without authority by officials who were acting with outsiders, and the CBI had registered a case. The Singapore bank filed a summary suit and obtained a decree without the State Bank being allowed to defend it.

Decision Breakdown

The Supreme Court allowed the appeal and set aside the decree. It held that the State Bank had raised real, triable issues: whether the telexes were authorised, whether the bills were properly accepted, whether the suit was time-barred, and whether the CBI and RBI material supported its case. Following settled principles, a defendant who raises a triable issue or a reasonable defence must be given leave to defend, and a summary decree can be passed only where the defence is illusory or sham. The State Bank was therefore granted unconditional leave to defend. The trial court was directed to decide all issues afresh, and the Court expressed no view on the merits, and there was no order as to costs.

Lesson Learnt

A quick "summary" judgment for money cannot be given where the defendant shows a genuine, arguable defence; that dispute must go through a full trial. Parties in large cross-border banking transactions should make sure that any acceptance of a bill is properly documented under the law.

Official source (sci.gov.in)View Judgment (PDF)

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