FACTS:

Mr. Tony stark and Mr. Hulk are partners of M/S Stark Exports Pvt. Ltd., Delhi. Both of them
qualified from IIM, Bengaluru in the year 2010. They declined their lucrative corporate jobs as
they decided to enter into the business of international trade and marketing.

M/S Stark Exports Pvt. Ltd. is registered as a partnership firm, with Mr. Tony stark and Mr. Hulk
sharing the profit in the ratio of 60:40.

The partners did conduct a detailed SWOT analysis of different players in the market in domestic
as well as international level regarding the demand of robotics and AI technology. They got
assistance from various European countries regarding the same.

They were knowledgeable in foreign trade, so they got quickly access that Indian exporters were
not able to enter the foreign trade into the huge market of robotics. They found out reason that
there was improper marketing, improper quality control and shipping rules. Mr. Tony focused on
the manufacturing whereas Mr. Hulk on marketing the products.

The firm focused on every minute detail and business was running efficiently. They had a strict
quality check over its export item and delivery schedules as per the orders.

The firm was achieving a steady growth as per the efficiency of the firm. This made them exceed
their credit facility in the market for which they approached the M/S World Bank of India, Delhi
branch. They mortgaged their residential house as security to get a loan of Rs. 85 lacks and Mr.
Robert Jr. stood as guarantee for the facility sanctioned to the firm.

M/S Stark Exports Pvt. Ltd. used the credit to adjust the same by purchasing and negotiating
export bills were drawn on their European buyers. Generally the bill carries a tenor period of 60
days. Most of the export bills were drawn and send for collection through M/S World Bank,
based on the confirm purchase of the buyer. The bill were paid on the due dates and the conduct
of the accounts were good. The banks increased the credit limit on good conduct.

On July15, 2015 the firm submitted a export document to M/S World Bank for Euro 55,000.00
drawn on M/S Earth Bank. M/S World Bank received the communication from M/S World Bank
that M/S Robotics Technology has accepted the document. M/S Stark were informed about this
by their bank and they communicated about not receiving the payment. The bank send a SWIFT
message to check the same. It came into notice that M/s Robotics Technology has become
bankrupt and they were unable to pay the bill.

They argued that it was clearly mentioned in the bill the documents were to be released only
on co-acceptance of M/S Earth bank. Immediately M/S World Bank informed about this to M/S
Earth bank and they were liable to pay even if importer is bankrupt.

They M/S Earth Bank that they have acted in uniform rule of collection payment under
ICC( International Chamber of commerce). M/S world bank took support of Section 47A of
Banking Regulation Act 1949.

M/S world bank acted negligently and did not mention about the CO- Acceptance clause in their
cover letter. They put forward the argument of being in deficiency in service. M/S Stark Exports
Pvt. Ltd. would have found any other buyer.

Legal Issue
1. The deficiency in service in the part of the bank in the uniform rules for collection of

payment as per ICC publication No. 522? How does banking regulation Act has a part to

saveguard the interest?

2. What are the precautions the firm should have taken to avoid such colossal business loss?

3. Discuss the remedies which bank should take to avoid damages?

4. Elaborate the Supreme Court guidelines regarding the same?

Law Applicable
1. Banking Regulation Act, 1949
2. International Chamber of Commerce
 3. Reserve Bank of India ACT, 1934

Remedies
1. Argument for M/S Earth Bank
All the documentary collection bills are governed by the uniform rules by the ICC
publication 522. As per article 4(a) of the URC ICC 522 states that all document send for
collection must have instruction regarding the same as per the collection rules. It should
be give complete and precise instruction in accordance with the rules. There is no fault in
part of M/S Earth Bank as they have complied with the instructions received to them it
was fault on the part of M/S World Bank. They were not able to properly scrutiny the
document received by them.
Argument for M/S World Bank
It was stated in S.47A that no complaint can be filed against the banking company in
respect of any contravention or default irrespective of any action taken by the Reserve
Bank of India.
Argument For M/S Stark Exports Pvt. Ltd.
It has been noticed that Reserve Bank of India has taken strict strict action for not
scrutinizing the documents and an action can be brought against the banks for not
following the instruction. As reported on March 5,2019 that RBI has fined Bank of
Baroda and Canara Bank for not compliance of SWIFT operations. The banks at fault in
our present case can be taken into consideration.

2. The exporters should not impose a unilateral direction without any underlying agreement
regarding the same. The co-acceptance agreement was not accepted/consented by the
importers or his bank. The exporters should have taken a Export Credit Guarantee
Corporation of India buyer wise credit limit which helps in case of bankruptcy of the
buyer
.
3. The bank trade finance desk should have qualified trained official who can be caught
accountable for any wrong. The person will be responsible to take care of such
instruction so he can bring into further notice so it can be amended, removed or
complied. The bank would not have to suffer mental or financial agony.
4. Article 4(a)(2) 0f ICC 522 states that Banks will not examine documents in order to
obtain instructions. This clause is not binding on the remitted bank or the collection bank.
There is no express instruction regarding the same. There is no express undertaking for it.
On this note forgery or deficiency of service cannot be charged. RBI has been following
strict rules regarding the SWIFT rules so it might impose a penal provision against it.