CASE STUDY
FOREIGN TRADE
M/S Taneja Exports, Mumbai
Mr. Gurmeet Taneja and Mr. Rahul Khatri
are
partners
of
M/S
Taneja
exports,
Mumbai.
M/S Taneja Exports is registered as a
partnership firm, with Mr. Gurmeet Taneja
and Mr. Rahul Khatri sharing the profits in
the ratio of 60: 40.
APPARELS IN COTTON
Assistance of Apparel export promotion
council
Marketing agencies in various countries of
European Union.
Mr. Gurmeet concentrated on marketing of
the cotton apparels abroad
Mr. Rahul ensured on the procurement of
the raw materials and timely execution of
shipments.
INDUSTRIAL GALA
700 sq ft, at 501, Mangal Das market,
Lower Parel, Mumbai. They were paying a
monthly rent of Rs. 35,000/- for the office
premises and the stock of garments was
kept in a godown in the same gala area,
for which the rent payable was Rs.
15,000/- pm
RAW MATERIALS FROM SOUTH
From Tiruppur and Coimbatore
The firm had employed 2 accounts staff and 3
contract workers to attend to daily office and
godown activities.
The
firm
was
able
to
achieve
steady
improvement in export sales due to the stringent
quality control measures and timely execution of
shipment schedules.
CREDIT FACILITIES
M/S International Bank of India, Fort branch,
Mumbai
The firm had mortgaged the residential
house, valued at Rs 85 lakhs, belonging to
Mr. Vikram Taneja, father of Mr. Gurmeet
Taneja, and stocks valued at Rs 15 lakhs
was also hypothecated to the Bank. Mr.
Vikram Taneja stood guarantee for the
facilities sanctioned to the firm.
CASE INFORMATION
M/S Taneja exports used to avail the export
packing credit facility from International
Bank of India and adjust the same by
purchase or negotiation of the export bills
drawn on their European buyers.
Generally the bills carried a tenor period of
60 days. Most of the export bills were
drawn and send for collection through
international Bank of India,
CASE INFORMATION
Based on the past history and the increase
in sales turnover achieved by the firm, the
bankers were happy to increase the credit
limits from Rs 7 lakhs in 2003 to Rs 17
lakhs in 2005.
CASE INFORMATION
On June 17, 2005, the firm submitted an
export document to International Bank of
India, Fort Branch, for Euro 53000.00,
drawn on M/S St Laurn Fashions, Paris. The
documents were drawn on 60 days DA
terms as per the contract
CASE INFORMATION
In the covering letter of the firm to the bank,
they had instructed the bank to present the
documents to St Laurn, Paris, through their
bankers viz, Credit Lyonnais, Paris. The
exporter had submitted bills of exchange,
bills of lading, commercial invoice, packing
list, inspection certificate, certificate of origin
and in the bill of exchange it was typed as
to be co-accepted by credit Lyonnais.
The
CASE INFORMATION
International Bank of India
documents
in
its
books
and
took
the
sent
the
documents for collection to Credit Lyonnais,
Paris.
In
due
course,
they
received
communication from Credit Lyonnais that the
documents were accepted by St Laurn and due
date of the documents were August 25, 2005.
CASE INFORMATION
The bankers informed the due date of the bill to
Taneja exports. On August 30, 2005, Taneja
Exports informed the bankers that they are yet
to receive the payment of the bill for Euro
53000.00 in their books. The bank sent a swift
message enquiring about the fate and payment
of the bill. Two days later the bank received a
message from Credit Lyonnais saying that the
importer, St Laurn, had become bankrupt
and they were unable to pay the bill.
CASE INFORMATION
International Bank of India informed the same to
Taneja Exports. They argued with the bank that
they had clearly mentioned in the bills of
exchange
that
the
documents
were
to
be
released against the co-acceptance of the French
bank only. Immediately the Indian bank send a
message to Credit Lyonnais that since the bill of
exchange contained the co-acceptance clause by
the French bank, they are liable to pay even
though the importer had become bankrupt
CASE INFORMATION
The French bank refuted the claim of the Indian
Bank and intimated that the banks collection
instruction did not contain any co-acceptance
clause by the French bank and they had acted as
per the provisions in the uniform rules for collection
in the ICC publication No 522.
Since payments were not forthcoming, Taneja
Exports filed a suit with the National Consumer
Forum, New Delhi for deficiency of services by
International Bank of India, Mumbai, on November
10, 2005.
CASE INFORMATION
This negligence on the part of the bank had
caused them total financial loss. After hearing
the arguments of both the parties, The
National
Consumer
Forum
gave
the
judgement, on February 6, 2006, that the
International Bank of India was deficient and
negligent in their services and ordered them
to compensate the value of the export bill of
Euro 53000.00 (approx Rs 24 lakhs) along
with 15% interest, till the date of payment.
CASE INFORMATION
The bank went on appeal against the order
of the consumer forum in the Supreme
Court on March 20, 2006. The bankruptcy
of the importer is the reason for loss to the
exporter and not the deficiency of service
by the bank. The Supreme Court set aside
the judgment of the National consumer
forum and passed the judgment in favour
of the bank, with costs, on March 15, 2007.
QUESTIONS
Elaborate the deficiency of service on the part
of the bank, pointed out by the National
consumer redressal forum, in the light of the
uniform rules for collection ICC publication.
Discuss the remedial measures the bank in
India should take to avoid such damaging
judgments by the consumer forums.
Elaborate the Supreme Court judgment in the
context of the international banking rules and
practices, as guided by the ICC publications.
