In football, the goalie is the last line of defence. If the defenders blunder and the opposing striker gets the ball near the goal, only the goalie can prevent it from landing in the net. Sometimes, the only way the goalie can save the goal is to bluff.
The boss is also the last defender of the organisation’s interest after his staff has blundered.
One fine Monday morning, I was sitting in my office, sipping tea, browsing magazines and reminiscing about the wonderful weekend I had at the bank’s private cottage at Marve beach, building sandcastles with my two small daughters.
The peace was shattered by the abrupt entry of my head peon.
This character will appear in a few stories and, hence, a little bit about him would not be irrelevant.
The head peon was the chief amongst the bank’s grade-4 employees, called ‘subordinated staff’ or ‘sub-staff’ in brief. He was somewhat like the havaldar major in an infantry company, the undisputed boss and leader to his jawans.
In the old days, he would wear a resplendent livery, complete with a red cummerbund, and sit on a raised platform next to the manager’s office. Of late, these fripperies had disappeared, but the grandeur remained.
The current incumbent, Rambharose, was the son of the late Ramlakhan, the son of Ramavtar. He was the third-generation head peon in the branch, and his son Ramcharan was a peon, too, waiting in the wings for his turn when his venerated father retired.
Rambharose was a union spy, a fact I well knew and indeed judiciously used to pass covert messages to the union leaders by letting slip an apparently incautious word or two, or keeping an important document lying on my desk so that Rambharose could read it while shuffling the other papers on my desk.
You may not be aware that head peons have the unique ability to read English upside down, better than they could read right-side up. Generations of carefully nurtured skill, you know!
Oops, I digress! To return to the story, then…
“Neeche bahut dhamal ho raha hai, Saab,” (A big commotion is going on downstairs, Sir) reported the head peon with a worried look. “Aap zara jaakey dekhiye.” (Please go and have a look.)
Rambharose was rarely perturbed; but, apparently, whatever was going on in the banking hall downstairs was clearly very much out of the ordinary. I hastened to the troubled spot.
An elderly gentleman was throwing his hands around and yelling at the top of his voice, “Main barbad ho gaya. Lekin main chodunga nahi. Main dekh lunga.” (I am finished. But I won’t leave it. I will see to it.)
The first rule in handling an irate customer is: Sit him down in a quiet place, let him vent his anger, and listen patiently while planning how to handle the situation.
I took him to my office, gave him a glass of water, called for tea and let him spout his grievance.
What emerged was this: the bank had cancelled his LC (letter of credit), he was facing a huge loss and wanted redress.
I heard him out, noted the details, assured him that I would do everything possible to make amends, and took him down to his car to send him away. Then I went back to find out what had actually happened.
Disaster, I am told, is rarely the consequence of one single drastic event such as a tsunami. More often, a number of small errors and minor misfortunes, which individually do not matter much, create a deadly sequence of events that ultimately causes the disaster. This was the case here.
The aggrieved party was an exporter of non-perishable foodstuff, mainly rice and onions, to the Middle East. He was not a customer of my branch or even my bank. He did not even have an account with us, but banked with several nationalised banks, which gave him extensive export finance facilities. Our only role in his business was that we were the advising bank for LCs, which came to him from banks in the Middle East.
(Bankers may please ignore the next four paras – you would be in the know of this stuff. Others – please do read because this whole affair hinges on a technicality.)
To explain, an LC is an irrevocable commitment between two principals – buyer and seller. The buyer undertakes to buy a certain quantity of a particular item(s), of a specific description and quality, at a certain price if the goods are delivered at a certain time at a certain place. The buyer’s bank provides credence to this undertaking by issuing an LC which stipulates all the agreed terms and conditions of the sale/purchase transaction. If the buyer backs out or does not pay, the buyer’s bank will fulfil his obligations under the LC.
Once the LC is issued, the seller is protected. As long as he fulfils each and every stipulation in the LC, he is sure to get payment from the buyer’s bank. The buyer is protected too, because if the seller tries to supply goods that do not meet the exact specifications stipulated in the LC, the buyer is not obliged to accept the goods and make payment.
This structure, which protects both the buyer and the seller, works extremely well even when the two parties do not have complete confidence in each other! The entire mechanism is codified under a set of norms which all banks follow, and which courts rely on when deciding on any dispute that may arise.
You may wonder why I have written the word ‘issued’ in italics. You see, the whole structure begins to work when an LC is ‘born’, so to speak, i.e., when it is issued.
In the story at hand, a bank had issued an LC on behalf of a buyer and had advised it to the seller through my branch. Our role was strictly limited to that of a postman. The buyer’s bank sent us an LC, we handed it over to the seller, got a tiny fee, and that was it. We had no obligations other than to do just this.
On a Thursday evening, just before closing for business before the (Middle Eastern) weekend, a bank in Jeddah had sent us, through telex, an LC for Rs3 crore covering 10,000 tonnes of onions. The buyer had also faxed a copy of the LC to the seller.
The LC lay in our telex room for most of Friday. We were short-handed and it was mid-afternoon by the time it reached the LC department. The seller had called several times to ask for his LC and had been told that he would be informed in due course. Just before day-end, our LC officer called the seller to inform him that the LC had come and that he could have it picked up the next day.
On Saturday, the seller’s man did come to collect the LC, but he arrived late due to some mishap on the suburban train service. By the time he reached the cash counter to pay the Rs150 fee that we charged, it was 1.05pm and the cash counter was closed. Since the fee had not been paid, the LC could not be handed over, and the man was told to come back on Monday morning to collect it.
With the fax copy of the LC in hand, the seller was 100% certain that all was in order. He spent Saturday afternoon and all of Sunday at Mumbai port, personally supervising the loading of 10,000 tonnes of onions onto a ship scheduled to sail for Jeddah on Monday evening.
At this point, our operations manager Vinay Gupta entered the scene, the chap who had mismanaged the bills fiasco several months earlier. He was a D/S type, good sportsman, genial and very helpful, but rather clueless, as evidenced by the fact that he was two grades junior to me in the bank, though he had joined as a management trainee seven years before me.
Vinay reached his office at exactly 8.30am on Monday morning, and at 8.35am he got a call from the bank in Jeddah asking about the LC. The LC officer had not yet reached the bank, so Vinay used a duplicate key to open the filing cabinet where the LCs were kept and fished out the LC in question, as yet undelivered to the seller.
He returned to the phone and, on hearing that the LC was still in the bank, the voice from Jeddah asked, “So, the LC is still with you?”
“Yes,” replied Vinay.
“Can you cancel it, please?”
“Sure, no problem,” replied the ever-obliging Vinay.
There was a brief silence and a muttered exchange of words at the other end.
The voice returned, “Can you please send us a tested telex confirming that the LC has been cancelled?”
“Sure, I will get that done,” replied Vinay.
“When can you do it?”
“In an hour or so, as soon as the telex room opens.”
With a sigh of relief and profuse thanks, the Jeddah guy hung up.
Dutifully, just as promised, Vinay had the tested telex sent at 9.35am.
(To explain, a “tested” message is one that is authenticated by incorporating a secret bank-to-bank code that banks use to exchange very important messages. A tested message is irrevocable, and no bank can back out of it.)
Upon hearing this account from Vinay, my heart sank.
An LC, once issued, cannot be cancelled.
A tested message cannot be withdrawn.
Nevertheless, I decided to make a last try to save the situation. I telexed Jeddah and pointed out that we could not cancel an LC.
Back came the terse reply: “You have confirmed, by tested telex, that the LC has been cancelled. So, all we have to say is: What LC?”
This door was firmly shut.
Later, I found out that the price of onions had dropped sharply in the Jeddah market over the weekend, due to which the buyer had sought a way to wriggle out of his commitment under the LC. Vinay had given it to him on a platter.
In the meantime, the seller was devastated. The LC had evaporated but his onions were on board ship already.
Legally speaking, once goods have been loaded onto a ship they are deemed to have been exported. If he tried to unload the onions and put them back on the jetty, it would be a deemed import.
Import of onions was not allowed.
The seller returned to the bank and confronted me. What was to be done?
I advised him that the only course of action was to fly to Jeddah immediately, sell the onions at a discount, and salvage whatever he could.
Reluctantly, he agreed.
Seven days later, he turned up again, this time to inform me that he had lost Rs1.1 crore on the deal, a huge amount in those days.
He also handed over a 29-page letter from an eminent law firm citing international law and demanding compensation and damages.
I read through the letter in dread. The lawyer seemed to be right.
The next day, Crawford Bayley, Bombay’s No1 law firm at the time, confirmed it.
An LC was considered to have been 'issued' the moment it left the premises of the issuing bank, whether in paper form (by mail or courier) or electronic form (telex or telegram). It did not matter whether the seller had actually received the LC or not. Once issued, it could not be cancelled except by the explicit consent of the seller.
Hence, the liability for the cancellation, and the resultant loss, sat squarely on my bank. If this matter came to court, the verdict would definitely be against us.
I mused over the matter for several days. There seemed to be no way out, except…
I summoned the seller to my office.
He walked in with a triumphant look, probably expecting to receive an apology and due compensation.
“XXX-ji, how old are you, if you don’t mind? Fifty, fifty-five?” I asked.
Mystified, the seller nodded.
“If you take this matter to court,” I told him, “we will fight the case. Sure, you have a strong case, but we do not care.
“We are a bank. You are an individual.
“We will drag this case in court – ten, twenty, thirty years, maybe more. Sure, we will pay substantial legal fees, but our bank has very deep pockets. You don’t.
“You will go bankrupt fighting the case in your lifetime. Then your son will fight it, maybe even your grandson.
“You don’t believe me? Go and ask your lawyer. He will tell you how our legal system works.
“I suggest you bear your loss and move on. Forget what has happened. You can survive this loss, but you will not survive a court battle.
“Please think deep and decide. Up to you – fight or forget.”
He looked at me for a very long time, and I stared right back. Then he got up and left without a word.
A week later, he called me to say that he was not going to file a case.
Rightly or wrongly, dear reader?
Epilogue: This episode shook poor Vinay to the core. He finally realised that banking was not for him. He took voluntary retirement, did a PhD in Sociology and became an HR consultant specialising in advising companies that provided financial services.
We remained good friends.
(Deserting engineering after a year in a factory, Amitabha Banerjee did an MBA in the US and returned to India. Choosing work-to-live over live-to-work, he joined banking and worked for various banks in India and the Middle East. Post-retirement, he returned to his hometown Kolkata and is now spending his golden years travelling the world (until Covid, that is), playing bridge, befriending Netflix & Prime Video and writing in his wife’s travel blog.)