The 11th-Hour Injunction and the Last Day of Service
"A law degree is not a certificate of the past, but a weapon for the future." — Anonymous
At nineteen, I finished my B.Com with no grand ambitions. My father urged me towards Chartered Accountancy, but the prospect of four years of gruelling study didn't suit my playful spirit. I joined Law College almost by default, thinking it might help if I ever pursued the IAS. I finished with flying colors but joined Indian Overseas Bank (IOB) soon after. Colleagues often asked, "Why banking? Why not practice law?" My answer was simple: I had the degree, and I didn't yet know how to use it.
However, my law studies did prove to be useful in my banking career. As a GM of IOB, I was put incharge of the Legal Dept. More than 30 law officers reported to me. To interact with them, guide them and accord approval of complaint in big cases all over India I had to be involved. The legal qualification came handy. I had the privilege of convening a seminar of all law officers all over India and our legal consultants from our Regional and Zonal offices
Decades later, as an Executive Director at Vijaya Bank, I found the answer. I realized that banking law doesn't just support banking practice—it precedes it.
The Multi-Crore Fraud
Near the end of my career in the year 2000, Vijaya Bank was on the cusp of a major milestone. We had recovered from losses, regained our autonomy, and were preparing for a massive Public Issue. Then, a "legal landmine" threatened to blow it all apart.
One of our Bangalore branches got involved in an Export –Import Transaction with a Swiss counterpart. The buyer/seller NEXUS showed up later after our bank had opened a Confirmed Irrevocable Documentary Letter of Credit (LC) for a multi-crore export of goods to Switzerland. Our Swiss bank counterpart also fell into the trap of funding the local customer with the comfort of our bank’s letter of credit. Under the terms of the UCPDC (Uniform Customs and Practice for Documentary Credits), an LC is a sacred contract. If the documents are in order, the bank must pay, regardless of the quality of the goods.
We soon discovered the "goods" were third-rate junk—mud and soil thrown midway into the sea. The exporter was untraceable. Every legal council and fellow banker we consulted gave us the same grim verdict: "You have opened a confirmed LC. You must pay on the due date. There is no way out." I had reasons the exporter, importer and the importer’s bank were in collusion for a multi-score swindling. If we pay, I knew we will not recover the money and everybody will take shelter under Uniform customs and practice. I knew that the L C arrangement protects buyers, sellers and the UCPDC shelters every one including the LC handling banks . I definitely did not want these to aid and shelter the INVOLVED BANKS, perpetrators of fraudulent transactions. I somehow wanted to buy time to safeguard our banks interest
I was also looking to buy time to tide over March year end balance sheet, to get time to trace the missing culprits, trying to recover if they are apprehended and lastly not to fall into legal trap in Switzerland but make the other party file a case in India so we can defend comfortably.
So, we did not pay on due date. I was told that the Swiss bank had filed a suit compelling us to pay the amount. THE NEED OF THE HOUR WAS TO OBTAIN AN INJUNCTION. Orally informing our CMD, I had deputed the Branch manager and our banks approved Lawyer to proceed to Switzerland to do the needful
The "Eureka Moment”: Documents vs. Goods
We refused to surrender. I summoned the files and scoured the UCPDC rules. Our lawyer and our manager now at Switzerland were told to examine the papers filed by the Swiss bank in court, obtain copies of the exhibits and send them to me. When the copies arrived, I noticed a tiny, crucial detail that everyone else had missed
The Swiss bank had not just relied on the shipping documents; they had also taken a Hypothecation Document pertaining to the goods .
Under UCPDC, banks deal only in documents, not in goods. By taking a hypothecation of the physical cargo, the Swiss bank had stepped out of the protected "Summary Disposal" of the LC and into the realm of a "Civil Suit." They had relegated their status from a protected negotiator to a common litigant.
Our lawyer was briefed and use them to aid in obtaining an Injunction, restraining us from paying the amount on due date. The lawyer succeeded in obtaining a temporary injunction. This was a mini break through.
The Final Count Down: March 31, 2000
On my very last day at Vijaya Bank, the auditorium was packed with staff, managers, and the Chairman, all waiting to give me a farewell. I sat in my office, refusing to join the stage. "Please wait," I told them. "I am waiting for a call from Switzerland. Only then will I have the peace of mind to say goodbye."
The Chairman was terrified. He warned me that if we defaulted, the RBI, the IBA, and the international banking community would come down on us. I told him: "If this goes wrong, put the blame entirely on me. I will own the responsibility."
At the very last moment, the phone rang. Our legal counsel in Switzerland was jubilant: "The temporary injunction has been made absolute!"
A Farewell Like No Other
I walked into that auditorium with a heart full of joy. We had deferred a fraudulent liability that would have wiped out our profits and stopped our Public Issue. We had bought the bank time to trace the fraudsters and defend the case on its merits in India.
The retirement which should have been a sad occasion turned into a victory celebration. My legal knowledge, which I had stumbled into at age nineteen, had fructified exactly when the bank needed it most.
This final victory taught me that a banker’s duty is to protect the institution’s integrity as much as its balance sheet. While many urged me to follow the "rules of the game" and pay the fraudulent claim, my legal background taught me that the law also provides a shield for the honest.
We didn't just save money; we saved the bank’s future. By deferring the payment, we allowed the bank to close its books on March 31, 2000, with pride and solvency. I left my cabin that day knowing that while I was missing my colleagues, I was leaving them a bank that was sound, solvent, and safe. My law degree was no longer just a piece of paper; it allowed me to serve one last time to the world of banking.