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PETITIONER: I.T.C. LIMITED

       Vs.

RESPONDENT: THE DEBTS RECOVERY APPELLATE TRIBUNAL & ORS.

DATE OF JUDGMENT:       19/12/1997

BENCH: SUHAS C. SEN, M. JAGANNADHA RAO.

ACT:

HEADNOTE:

JUDGMENT:                THE 19TH DAY OF DECEMBER, 1997 Present:               Hon’ble Mr. Justice Sushas C.Sen               Hon’ble Mr. Justice M.Jagannadha Rao Soli J.  Sorabjee, Sr.  Adv., S.Ganesh, Ravinder Narain, Ms. Punitta, Ms.  Juhi, Advs.  for M/s. J.B.D. & Co., Advs. with him for the appellant M.J. Rupal,  U.A. Rana,  Sudhanshu Tripathi,  Advs. for M/s. Fox Mandal & Co., and S.N. Bhat, Advs. for the Respondents                       J U D G M E N T      The following Judgment of the Court was delivered: M. JAGANNADHA RAO., J      Leave granted.      The appellant  has preferred  this appeal  against  the judgment of  the High  Court of Karnataka dated 14.8.1997 in Writ Appeal  No. 2876  of 1997.   The  Writ Appeal was filed against the  judgment of  the  learned  Single  Judge  dated 9.4.1997 dismissing the Writ Petition filed by the appellant against the  orders  of  the  Debt  Recovered  Tribunal  and Appellate  Tribunal   rejecting  the   application  of   the appellant filed  under Order  7 Rule 11 of the Code of Civil Procedure.      The appellant  was the  5th defendant in the suit filed by the  3rd respondent, namely, the Corporation - Bank which has its  zonal office  at Bangalore.   The suit was filed in the year  1985 by  the said Bank against at Guntur in Andhra Pradesh and  against the  appellant  I.T.C.  Limited.    The relief  claimed   in  the   suit  was   for  a  sum  of  Rs. 52,59,639.66.   The defendants  1 to  4 above  mentioned are respondents 4  to 7 in this appeal.  The first respondent is the Debt  Recovery Appellate Tribunal and the 2nd respondent is the  Debt Recovery Tribunal.  After the suit was filed in the Civil  Court it  was transferred  to the  Debt  Recovery Tribunal  on  9.10.1995.    Before  the  said  Tribunal  the appellant filed  an application under order 7 Rule 11 of the Civil Procedure  Code for rejecting the plaint so far as the appellant was concerned on the ground that no valid cause of action had  been shown  against the  appellant.    The  said application was  rejected  by  the  Tribunal  on  12.12.1996 holding as follows:-

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    "Objections filed.  Heard. Cause of      action is  a mixed question of fact      and law.   Hence  I.A. 3  cannot be      entertained at  this stage.    Post      for evidence".      Against the  said order,  the appellant filed an appeal before the  Appellate Tribunal  which was  dismissed by  the said Tribunal  on 3.3.1997  holding  that  in  view  of  the averments in  the  plaint  and  particularly  para  12,  the question about  the liability  of the  appellant was  to  be determined at  the trial  on merits.   It  stated  that  the appellant had  admittedly received  Rs. 32  lacs  under  the Bills of  Exchange or  Letters of  Credit and  the  question whether the  appellant was  justified in  receiving the said amount or  not and  whether plaintiff-Bank  was entitled  to recover the  said amount  from the  appellant -  were to  be determined only  at the  trial.   Accordingly the appeal was dismissed in limine.      The appellant  filed Writ  Petition  9564/1997  in  the Karnataka High  Court which  was again dismissed by an order dated 9.4.1997  holding that  the question has to be decided at the  trial and that it could not be stated that there was no cause  of action  at all  disclosed in the plaint against the appellant.   Against  the said  judgment  the  appellant filed Writ Appeal 2876/1997 which was dismissed on 14.8.1997 holding that  at the  stage of  an application under Order 7 Rule 11  C.P.C. in  order to find out whether the plaint did not disclose  a cause  of action,  the Court should not look into anything  else except  the plaint.   Further, after the issues were  framed and the case was posted for evidence, it was not  desirable to  consider the  application filed under Order 7 Rule 11, C.P.C.      Was shall  refer to the facts of the case as set out in the plaint.   The  first defendant  belonging  to  Tadikonda family (hereinafter  called  the  buyers)    approached  the plaintiff Bank in December 1979 for the issue of a Letter of credit in  favour of  the appellant-Company for an amount of Rs. 32  lacs for the purpose of securing the payment towards supply of  Cigarettes manufactured  by the appellant and for certain other  facilities.   The  plaintiff-Bank  sanctioned L.C. facility  for the  said sum and agreed to open the L.C. and issued  a "revolving  Letter" of Credit No. 1/1980 dated 12.11980  in  favour  of  the  appellant  for  Rs.  32  lacs available against  demand bills  of the  appellant at sight, "without recourse"  to the  full invoice  value of the goods purporting to  be supply of Cigarettes by the appellant.  At the request  of the  buyers the Letter of Credit was renewed from time  to time  and the  last one  was on 20.1.1983 till 20.1.1984.    Thereafter  the  buyer  again  approached  the plaintiff -  Bank for  additional Letter of Credit in favour of the  appellant -  Company and this was in August 1983 and the plaintiff  Bank agreed  to open  an additional Letter of Credit in  favour of  the appellant and did so in April 1983 and issued a "revolving Letter" of Credit 1/883 in favour of the appellant  for Rs.  18 lacs  against demand bills of the appellant on  the buyers at sight "without recourse" for the full invoice  value of the goods purporting to the supply of Cigarettes manufactured by the appellant.  In respect of the above Letters  of Credit  the buyers executed necessary loan documents in  favour of  the Bank  for  issue  of  confirmed irrevocable  Letter   of  Credit,  Letter  of  General  Lien relating to  immovable properties,  etc.  Demand  Promissory Notes were also executed by the buyers.      The plaint  then states  that the appellant availed the benefits of drawing various sums on several dates purporting

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to be for despatch of goods (Cigarettes) by the appellant to the buyers  (defendants 1  to  4)  and  that  was  hose  the appellant appropriated  the amounts  drawn as  against goods purportedly despatched  by the  appellant to the buyers.  It stated in  para 6  of the  plaint, that  "the 5th  defendant misrepresented  to   the  plaintiff   that  the  goods  were despatched while  presenting the  relevant demand  bills for negotiation under  L.C. and fraudulently obtained payments." After referring  to the  refusal of  the buyers to make good the payment  made by the Bank to the appellant to the extent of the money already paid by the bank to the appellant under the L.Cs,  the plaint  proceeded to state that the plaintiff demanded reimbursement of the said amounts by the buyers and that the  buyers informed  the plaintiff that in fact, there was no  movement of  the goods  by the  appellant  and  that unless there  was such  a movement,  the appellant  was  not entitled to draw any amount under the L.C. facility from the plaintiff -  Bank.   It was  stated in  para 8 of the plaint that the  buyers by  letter dated  23.1.1984 stated that the appellant had  drawn the  bills for  an amount  of  18  lacs without support of actual movement of stock of Cigarettes on 1.9.1983.   It was  stated in  para 8  that the Bank has now realised that  the appellant  had drawn monies from the Bank without movement  of goods  to the  buyer and  had therefore acted fraudulently.   The  plaint than  proceeds to state in para 9, that the appellant had committed breach of faith and acted contrary  to the  terms of  the Letters  of Credit and that the  plaintiff issued  registered notices  to  all  the parties.   The appellant stated in its reply dated 18.4.1984 that the  payments had  been received  by it  only  for  the supplies made  and towards  monies definitely  due  thereby. This according  to the  Bank implied that the goods were not despatched  under  the  terms  of  the  Letters  of  Credit. Plaintiff them  stated that  appellant had  appropriated the monies from  the Bank  under the guise of L.C. facilities to adjust some other liabilities incurred by the buyers towards the appellant under different transactions than envisaged in the L.C. facilities.  The plaint referred to in para 10 to a reply dated  13.4.1984 of  the buyers to the effect that the bills were  drawn by  the appellant  and money  appropriated towards the  trading balance dues of the buyers.  The plaint then stated that both the appellants as well as buyers acted contrary to  the terms  of the  Letters of Credit and monies were drawn wrongly by the appellant misrepresenting the fact as to  despatch of  goods and  the amount  was  appropriated towards  other   liabilities  of   the  buyer   towards  the appellant.  Both the buyers as well as the appellant had the benefit of  these illegal  drawings and  therefore both were liable to reimburse the plaintiff with interest.  In para 12 of the plaint it was then stated as follows:      "The 5th  defendant has  drawn  the      amounts contrary  to the  terms  of      Letters of Credit.  The payments by      the plaintiff  to the 5th defendant      was due  to the mistaken assumption      that  the     5th   defendant   had      despatched  the   cigarettes  which      entitled the  5th defendant  to the      payments  under   the   Letter   of      credit.   The plaintiff  discovered      the mistake  when it  received  the      letter of the first defendant dated      23.1.1984 as  also the reply of the      defendants 1  and 5 dated 13.4.1984      and 18.4.1984  respectively.    The

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    payments to the 5th defendant being      under/due  to   the   mistake,   as      aforesaid,   the   plaintiff   will      entitled to  be repaid  of the said      amounts by  the 5th defendant.  The      5th defendant has unjustly enriched      itself by the several payments."      In para  14 of  the plaint again there is an allegation that the  appellant was  guilty of false representation that goods in  question had  been despatched when in fact the 5th defendant received the payments towards other claims against the buyers.      As already  stated, the Tribunal and the High Court, on the above  averments in  the plaint,  refused to  reject the plaint.      Learned counsel  for the  appellant - Company Shri Soli J. Sorabjee  contended that the Court was entitled to reject the plaint  under Order 7 Rule 11 C.P.C. at any stage of the suit even  if the  issues were framed and even if the matter was posted  for evidence.   Learned  counsel also  contended that it is well settled that in regard to payment under Bank Guarantees or  irrevocable Letters  of Credit,  the contract between the sellers (appellant) and the Bank was independent of the contract between the buyers and sellers in respect of the goods  and that  the Bank  had no  authority  to  refuse payment on  the ground  of any alleged breach of contract by the sellers  in their  contract with  the buyers.   The only exceptions which  have been  recognised by  the Courts  were cases of  fraud or  irretrievable injury.   In  the case  of those exceptions,  the  buyers  could  seek  and  injunction against the  Bank before the Bank paid money to the sellers. No such  injunction was  sought by the buyers.  Further, the exceptions   relating    to    forgery    or    fraud    and misrepresentation recognised  by the  Courts relate  to  the forgery or fraudulent presentation of the documents tendered to the  Bank.  The case on hand did not come within the said exceptions and,  therefore, there  was no  cause  of  action against the appellant.  Learned counsel also contended, that merely because the word fraud or misrepresentation were used in the  plaint, the  Bank could  not  claim  that  the  said allegations have  to be  accepted as  true for  purposes  of Order 7 Rule 11 C.P.C.      On the other hand, learned counsel for the respondent - Bank submitted  that in  view of the averments in the plaint relating to  misrepresentation and  fraud by  the appellant, the said  allegations have  to be  taken to be true when the appellant’s application  under Order  7 Rule 11 was taken up for consideration  and it  was not permissible for the court to refer  to any  other material for the purpose of deciding whether thee was any cause of action against the appellant.      The first point here is whether the power to reject the plaint under  Order 7  Rule 11  C.P.C. can be exercised even after the  framing of  issues, and when the matter is posted for evidence.   This  point has  arisen because the Division Bench of  the High  Court has  referred to this aspect while dismissing the appeal.      We may  stated that  in the  context of Order 7 Rule 11 C.P.C., a  contention that once issues have been framed, the matter has  necessarily to  go to  trial  has  been  clearly rejected by  this Court  in Azhar  Hussain vs.  Rajiv Gandhi [1986 (Supp.) SCC 315] (p.324] as follows:      "In substance, the argument is that      the Court  must  proceed  with  the      trial,  record  the  evidence,  and      only    after    the    trial....is

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    concluded that the powers under the      Code of Civil Procedure for dealing      with  a  defective  petition  which      does not  disclose cause  of action      should be  exercised.  With respect      to the  learned counsel,  it is  an      argument which  it is  difficult to      comprehend.   The whole  purpose of      conferment of  such  powers  is  to      ensure that  a litigation  which is      meaningless  and   bound  to  prove      abortive should not be permitted to      occupy the time of the Court"      The above  said judgment  which related  to an election petition  is  clearly  applicable  to  suits  also  and  was followed in  Samar Sing  vs. Kedar  Nath [1987  (Supp.)  SCC 663].  We therefore hold that the fact that issues have been framed in  the suit  cannot come in the way of consideration of this  application filed  by the  appellant under  Order 7 Rule 11 C.P.C.      We shall  next  deal  with  the  question  whether  the allegations in  the plaint  prove a  cause of action against the appellant  for recovery  by the  bank,  of  the  amounts already paid under the irrevocable letter of Credit.      The principles  regarding the payment of amount covered by bank  guarantees or  Irrevocable Letters  of  Credit  are fairly well  settled.  They have been discussed in detail in several cases  and there  is an exhaustive discussion of the principles in  U.P Cooperative  Federation  Ltd.  vs.  Singh Consultants &  Engineers [1988  (1) SCC  174]. Reference was also made  by the  learned counsel before us to the judgment of the  Calcutta High  Court in  United Commercial  bank cs. Human Synthetics  Ltd. [AIR  1985 Cal. 961] (to which one of us, Suhas  C. Sen, J. was a party).  It will be noticed that the above  cases do say that the bank has to honour the Bank guarantee or  Letter of Credit subject of course to the case of two  exceptions where  there was  fraud or  irretrievable injury.  In the present case, the contention for the Bank is based on  fraud or misrepresentation by the appellant.  That is stated to be the cause of action in the plaint.      Question is whether a real cause of action has been set out in  the plaint  or something  purely illusory  has  been stated with  a view  to get  out of  Order 7  Rule 11 C.P.C. Clever drafting  creating illusions  of cause  of action are not permitted  in law  and a  clear right  to sue  should be shown in the plaint.  (See T. Arivandandam vs. T.V. Satyapal & Another [1977 (4) SCC 467]).      It is  now well settled that the question whether goods were supplied  by the  appellant or not is not for the Bank. This point  has already been decided by the decision of this Court in U.P. Cooperative Federation case referred to above. In that case it was stated (at p. 193) by Jagannatha Shetty, J. as follows:      "The bank must pay if the documents      are  in  order  and  the  terms  of      credit are  satisfied.   The  Bank,      however,   was   not   allowed   to      determine whether  the  seller  had      actually  shipped   the  goods   or      whether the  goods conformed to the      requirements of  the contract.  Any      dispute between  the buyer  and the      seller  must   be  settled  between      themselves.   The courts,  however,      carved out  an  exception  to  this

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    rule of  absolute independence. The      courts held  that if there has been      "Fraud in the transaction" the bank      could    dishonour    beneficiary’s      demand for  payment.    The  courts      have generally  permitted dishonour      only   on    the   fraud   of   the      beneficiary,  not   the  fraud   of      somebody else."      It will  be noticed  from the underlined portion in the above passage  that there  will be  no cause  of  action  in favour of the Bank in cases where the seller has not shipped the goods  or where  the goods  have not  conformed  to  the requirements of  the contract. the Bank, in the present case before us,  could not, by merely stating that there was non- supply of  goods by  the appellant,  use the words "fraud or misrepresentation"  for   purposes  of   coming  under   the exception.  The dispute as to non-supply of goods was matter between the  seller and  buyer and did not, as stated in the above decision,  provide any  cause of  action for  the Bank against the seller.      Learned counsel  for the  respondent then  relied  upon Bank Russo-Iran  vs. Gordon  Woodroffe &  Co. Ltd. [1972 The Times, 4th  Oct] (Reported  in (1972)  116 Sol Jo 921) where Browne, LJ stated as follows:      "In my  judgment, if  the documents      are presented  by  the  beneficiary      himself,   and    are   forged   or      fraudulent, the   bank  is entitled      to refuse payment if the bank finds      out before payment, and is entitled      to recover  the money as paid under      a mistake  of fact  if it finds out      after payment"      The above  passage was  quoted with  approval  by  Lord Denning M.R.  in Edward Owen vs. Barclays Bank International [1978 (1) All ER 976 (CA) (at 982)].      It is  to be  noted that  the above  passage  from  the judgment  of Browne,  LJ speaks  of ’forged’ or ’fraudulent’ documents. If  the documents  presented by the seller before the Bank  were forged or were fraudulent to the knowledge of the seller,  surely the Bank would have an independent cause of action against the seller for it was an act of the seller which was  responsible for  inducing the Bank to release the funds.   But here,  in the          case before us, there is no question  of the appellant having presented any presented any forged documents or fraudulent documents.      We may, illustrate this aspect - relating to fraudulent documents’ -  by referring  to the  well- known  case of UCM (Investments) vs.  Royal Bank of Canada [1982 (2) All ER 720 (HL) decided  by the  House of Lords which has been referred to by  this Court  in the  U.P.Cooperative  Federation  case (supra).   In that  case the  date 15th  December, 1976  was falsely and  fraudulently entered  on the Bill of Loading as the date  on which  the goods  were shipped  even though the goos were  actually shipped  on 16th  December, 1976 and the Bank which came to know about this fact refused to pay.  The House of  Lords held  that the  bank could  have justifiably refused to pay because the Bill of Loading, which was one of the documents  to be  presented before the Bank, was there a fraudulent document.   Having  laid down  the  principle  as stated above,  the House of Lords however held on facts that the said false statement on the bill of loading was not made by the  seller but  was  made  by  the  shipping  agent  and inasmuch as the sellers were not responsible, the Bank could

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not refuse  payment.   We are referring to this case only to illustrate what  could be  a ’fraudulent document’ presented before the  Bank by  the sellers.   We  shall also  refer  a little later  to another case in Sztejn vs. H.Henry Schroder Banking Corporation [(1941) 31 NYS (2d) 631] which is also a case of presentation of ’fraudulent documents’.      Likewise in the ’Cement scandal Case’ in Establissement Esefka International  Anstalt vs.  Central Bank  of  Nigeria [1979 (1) LLoyds Law Reports 445 (CA)], Lord Denning pointed out that  the shipping  documents,  the  bills  of  loading, certificates etc. were there forged and were all "moonshine" and there wee no such shipping vessels at all.  That case is an example of forged documents.      What is  necessary for  the Bank to refuse payment is a case of  clear "fraud"  and the  Banks knowledge  as to such fraud (Bolivinter  Oil S.A.  vs. Chase  Manhattan Bank N.A.) [1984 (1)  (1) LLR 392]. As pointed by Lord Denning and Lord Lane in  Edward Owen  the Bank  cannot refuse payment merely because  according  to  it  the  claim  was  "dishonest"  or "suspicious" or  it appeared  to be  a sharp practice but it must be  established as  ’fraud’.   Lord  Ackner  in  United Trading Corporation  S.A. &  Murray Clayton  Ltd. vs. Allied Arab Bank  Ltd. &  Others [1985  (2) LLR 554 (CA)] held that the Bank  could object to pay not because the demand was not "honestly" made  but was  made fraudulently.  Waller, J.  in Turkiye vs.  Bank of China [1996 (2) LLR 611 (617-618)] said that the  question was  whether the  demand for  payment was "fraudulent".   Mere  allegations  and  counter  allegations between the parties as to breach of contract, non-payment of advances or non-supply of machinery did not amount to fraud.      In the  result we hold that an allegation of non-supply of goods  by the  sellers to  the buyers  did not  by itself amount, in  law, to  a plea of ’fraud’ as understood in this branch of the law and hence by merely characterising alleged non-movement of goods as ’fraud’, the Bank cannot claim that there  was   a  cause   of  action   based   on   fraud   or misrepresentation.  Nor is the case before us one where thee is an  allegation of  presentation of  forged or  fraudulent documents.      Learned counsel for the respondent then relied upon the judgment in  Discount Records  Ltd. vs.  Barclay’s bank Ltd. [1975 (1)  All ER 1071].  In that case, Megarry, J. referred to the American case in Sztejn vs. J. Henry Schroder Banking Corporation [(1941) 31 NYS (2d) 631] decided by the New York Court of  Appeals.   In that case Shientag, J. distinguished cases of  breaches of  warranty as  to quality from cases of deliberate failure to supply goods and said:      "In such  a  situation,  where  the      seller’s fraud  has been  called to      the  bank’s  attention  before  the      drafts  and   documents  have  been      presented    for    payment,    the      principle of  the  independence  of      the  bank’s  obligation  under  the      letter  of  credit  should  not  be      extended     to     protect     the      unscrupulous seller"      Megarry,J. then  distinguished the American Case on the ground that      "It was important to notice that in      the Sztejn  case,  the  proceedings      consisted of  a motion  to  dismiss      the formal  complaint on the ground      that  it   disclosed  no  cause  of      action.   That being  so, the Court

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    had to assume that the facts stated      in the complaint were true".      ’’fraud’’, the Bank cannot claim that there was a cause of action  based on  fraud or  misrepresentation.  Nor s the case  before   us  one  where  there  is  an  allegation  of presentation of forged or fraudulent documents.      Learned counsel for the respondent then relied upon the judgment in  Discount Records  Ltd. vs.  Barclay’s Bank Ltd. [1975 (1)  All ER 1071].  In that case, Megarry, J. referred to the American case in Sztejn vs. J. Henry Schroder Banking Corporation [(1941) 31 NYS (2d) 631] decided by the New York Court of  Appeals.   In that  case Shientag,J. distinguished cases of  breaches of  warranty as  to quality from cases of deliberate failure to supply goods and said;      "In such  a  situation,  where  the      seller’s fraud  has been  called to      the  bank’s  attention  before  the      drafts  and   documents  have  been      presented for payment the principle      of the  independence of  the banks’      obligation  under   the  letter  of      credit should  not be  extended  to      protect the unscrupulous seller"      Megarry,j. then  distinguished the American Case on the ground that      "It was important to notice that in      the Sztejn  case,  the  proceedings      consisted of  a motion  to  dismiss      the formal  complaint on the ground      that  it   disclosed  no  cause  of      action.   That being  so, the Court      had to assume that the facts stated      in the complaint were true".      Learned counsel  for the respondent Bank contended that the case  before us  which is  concerned with an application under Order  7 Rule  11(a) CPC for rejecting a plaint on the basis of  "absence of  cause of action from a reading of the plaint" was  identical with  the Sztejn  case and hence what Megarry, J. stated Discount Records Ltd. directly applies.      It is true, we are also dealing with a question whether the plaint  disclosed a  cause of  action.    But  here  the allegation in  the plaint is only one relating to absence of movement of  goods by  the seller. As pointed in the decided cases and  in particular  in the U.P. Cooperative Federation Case and  other cases  decided by this Court and also Courts elsewhere, mere  absence of movement has never been, in this branch of  law, treated  as amounting  to fraud,  Such  non- movement, event  if the allegation is to be treated as true, could be  for goods  reasons or  for reasons  which were not good.  But that is not ’fraud’.  In Sztejn (See law relating to commercial  credit by  A.G. Davis (2nd Ed, 1954) (p160-61 for facts  of this  case) the position was different.  There the  complaint  was  that  the  sellers  who  were  to  ship complaint was  that the  sellers who were to ship ’bristles’ deliberately  placed   50  cases  of  material  on  board  a steamship, procured  a bill  of  loading  from  a  steamship company and  obtained customary  invoices.    The  documents described the goods as bristles as per the letter of credit. In fact,  the Indian  sellers had  filled the 50 crates with ’Cowhair’ and  other worthless  material  and  rubbish  with intent to  simulate genuine merchandise and so ’defraud’ the plaintiff, the buyers - who has instructed the defendants to issue the  letter of  credit.  The sellers then drew a draft under the  letter of  credit to  the order  of the Chartered bank of  India, Australia  and China and delivered the draft

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and the  ’fraudulent documents’  to the  chartered  Bank  at Cawnpore for  collection on  account of  the sellers.    The buyer brought  the action  which succeeded,  to restrain the defendants from  paying the  draft.   The Learned Judge said (p.634):      "It must be assumed that the seller      has intentionally  failed  to  ship      any gods  ordered by the buyer.  In      such   a   situation,   where   the      seller’s fraud  has been  called to      the  bank’s  attention  before  the      draft  and   documents  have   been      presented    for    payment,    the      principle of  the  independence  of      the  bank’s  obligation  under  the      letter  of  credit  should  not  be      extended     to     protect     the      unscrupulous seller.   It  is  true      that even  though the documents are      forged  or   fraudulent,   if   the      issuing bank  has already  paid the      draft before  receiving  notice  of      the  seller’s  fraud,  it  will  be      protected    if     it    exercised      reasonable diligence  before making      such  payment.    However,  in  the      instant   action    Schroder    had      received notice of Transea’s active      fraud before  it accepted  or  paid      the draft.    The  Chartered  Bank,      which stands  in no better position      than Transea,  should not  be heard      to complain because Schroder is not      forced to pay the draft accompanied      by documents covering a transaction      which it  has reasons to believe is      fraudulent"      It will  be  noticed  that  Sztejn  was  a  case  where ’fraudulent  documents’   were  presented   which  simulated shipping of goods which were not only not shipped but on the other hand  the seller  shipped some  rubbish  deliberately. Therefore the  allegations in  the complaint  filed  by  the buyers in  that case were based upon the above facts - which as per  the legal  position in  this branch  of law  -  i.e. presentation of  ’fraudulent  document’s  where  goods  were deliberately not shipped and an attempt was made to pass off ’rubbish’ as the goods ordered for - amounted to ’fraud’.      As stated  above non-movement  of goods  by the  seller could be  due to  a variety of tenable or untenable reasons, the seller  may be  in breach  of the  contract but  that by itself does not permit a plaintiff to use the word ’’fraud’’ in the plaint and get over any objections that may be raised by way  of filing  an application under Order 7 Rule 11 CPC. As pointed  out by Krishna Iyer,J. in T.Arivandandam’s case, the ritual of repeating a word or creation of an illusion in the plaint  can certainly  be unravelled  and exposed by the Court while  dealing with  an application under Order 7 Rule 11(a).   Inasmuch as the mere allegation of drawal of monies without movement  of goods  does not  amount to  a cause  of action based  on ’fraud’, the Bank cannot take shelter under the words ’fraud’ or ’misrepresentation’ used in the plaint.      Learned counsel  for the  appellant also contended that this was  a case  where  a  letter  of  credit  was  without recourse to the invoice value.      For the  aforesaid reasons,  we hold  that there  is no

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cause of  action even  from the  plaint allegations, against the appellant.   Appeal  allowed and  the plaint is rejected under Order  7  Rule  11(a)  as  against  the  appellant-5th defendant.   Appeal is  allowed accordingly  to the  extent. Thee will be no order as to costs.