IMPORTANT POINT
Injunctions against the negotiating banks for making payments to the beneficiary must be given cautiously as constant judicial interference in the normal practices of market can have disastrous consequences as it affects the trustworthiness of the Indian banks and markets.

Headnote:Code of Civil Procedure, 1908 – Order VII Rule 11 r/w UPC-600 – Appellants alleging only apprehension – Not established – Negotiating Bank for beneficiary submitting documents against LOC – Documents against two LOC accepted, one rejected, no information about the fourth – Response in respect of the rejected presentation was made after 19 days I stead of 5 days as required – Well settled that courts should be slow in granting injunction in such matters – No error in impugned judgment. (Para 14, 15)
       (1977) 3 WLR 752 – Relied upon
       (2003) 1 SCC 557; (2005) 7 SCC 510; (2004) 3 SCC 137 – Referred
       Facts of the case:
       M/s. Millenium Wires (P) Ltd. and State Trading Corporation of India Limited entered into an Associateship Agreement, for importing continuous cast copper wire rods from Synergic Material Services PTE Limited, Singapore and Synergic Industrial Material Services, Malaysia. The STC opened 4 Letters of Credit with the Allahabad Bank being Issuing Bank and the Malayn Banking BHD, Malaysia being the Confirming Bank.
       Under the said Agreement, STC was to import the said copper wire rods for Millenium Wires from the Synergic Companies. The agreement stipulated that Millenium Wires shall provide STC with margin money as advance of 25% of the value of Letter of Credit to be opened by STC (clause 4 of the Agreement) along with 25% cash advance and a post dated cheque 102.5% of the value of consignment in favour of STC along with an undertaking.
       In pursuance to the Agreement, STC opened four Letters of Credit with the Allahabad Bank.
       With respect to all these Letters of Credit the Malayn Bank had released the payment to the Synergic Companies after the documents were presented by them. It was at this stage that the Millenium Wires and STC approached the Delhi High Court by filing a suit seeking permanent, mandatory and perpetual injunction against the Synergic Companies from claiming any benefit under the Letters of Credit in question and against the Confirming Foreign Bank being Malayn Bank to prevent any action or release of funds under the Letters of Credit.
       The Malayn Bank filed an application under Order VII Rule 11 of the Code of Civil Procedure, 1908. The learned Single Judge of the Delhi High Court allowed the application thereby dismissing the plaint
       Against the order of the learned Single Judge, both the appellants filed separate appeals before the Division Bench of the High Court. The Division Bench also dismissed both the appeals on same grounds as that of the learned Single Judge.
       Finding of the Court:
       There is no error in the impugned judgment.
       Result: Appeals dismissed.

JUDGMENT

Pinaki Chandra Ghose, J.

1. Leave granted in both the matters.

2. These appeals, by special leave, have been preferred against the judgment and order dated 17.12.2013 in RFA (OS) No.142/2013 and judgment and order dated 10.12.2013 in RFA (OS) No.139/2013, passed by the Division Bench of the Delhi High Court by which the High Court dismissed the appeals filed by the appellants. RFA (OS) Nos.142/2013 and 139/2013 were filed by M/s. Millenium Wires (P) Ltd. and the State Trading Corporation of India Ltd., respectively, against the judgment and order of the learned Single Judge of the Delhi High Court in Original Suit, being CS (OS) No.545/2012. The learned Single Judge rejected the plaint of the appellants herein under Order VII Rule 11 of the Code of Civil Procedure, 1908. Since these appeals are arising from same factual matrix and involve same questions of law and fact, they are being disposed of by this common judgment.

3. Briefly stated, the facts of the case are that M/s. Millenium Wires (P) Ltd. (hereinafter referred to as “Millenium Wires”) and State Trading Corporation of India Limited (hereinafter referred to as “STC”) entered into an Associateship Agreement (hereafter referred to as “the Agreement”), for importing continuous cast copper wire rods from Synergic Material Services PTE Limited, Singapore and Synergic Industrial Material Services, Malaysia (hereinafter referred to as “Synergic, Singapore” and “Synergic, Malaysia” severally and collectively as the “Synergic Companies”). The STC opened 4 Letters of Credit with the Allahabad Bank being Issuing Bank and the Malayn Banking BHD, Malaysia being the Confirming Bank.

4. Under the said Agreement, STC was to import the said copper wire rods for Millenium Wires from the Synergic Companies. The agreement stipulated that Millenium Wires shall provide STC with margin money as advance of 25% of the value of Letter of Credit to be opened by STC (clause 4 of the Agreement) along with 25% cash advance and a post dated cheque 102.5% of the value of consignment in favour of STC along with an undertaking. The mode of effecting the transaction between the Millenium Wires and STC on one hand and the Synergic Companies on other hand, was this: Oral orders were placed by the Millenium Wires on the two Synergic Companies and the latter sent sales contract/proforma invoices to STC. The proforma invoices were to be issued by Synergic, Singapore in favour of STC, specifically mentioning Millenium Wire's name as “A/c-Millenium Wires Pvt. Ltd.”. On acceptance of the said proforma invoice, final invoice was to be issued by the two Synergic Companies, which on acceptance by Millenium Wires was to be sent back to the Synergic Companies. This would constitute the contract between STC/Millenium Wires on one side and the Synergic Companies on the other. At this stage Letters of Credit were to be opened by STC through Allahabad Bank payable to the Synergic Companies through the Malayn Bank.

5. In pursuance to the Agreement, STC opened four Letters of Credit with the Allahabad Bank being:

L.C. No.	Opened On	Bill of Lading	Documents forwarded by Malayn Bank to Allahabad Bank	Response of the Allahabad Bank
0189111FLU000150	07/12/11	08/12/11	14/12/11	Accepted on 23/12/11
0189111FLU000151	07/12/11	09/12/11	12/12/11	Rejected on 31/12/11
0189111FLU000154	17/12/11	31/12/11	22/12/11	No information
0189111FLU000159	02/01/12	07/01/12	06/01/12	Accepted on 16/01/12

With respect to all these Letters of Credit the Malayn Bank had released the payment to the Synergic Companies after the documents were presented by them. It was at this stage that the Millenium Wires and STC approached the Delhi High Court by filing a suit seeking permanent, mandatory and perpetual injunction against the Synergic Companies from claiming any benefit under the Letters of

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2015 Supreme(SC) 263

IMPORTANT POINTInjunctions against the negotiating banks for making payments to the beneficiary must be given cautiously as constant judicial interference in the normal practices of market can have disastrous consequences as it affects the trustworthiness of the Indian banks and markets.

Cases Referred (3)

IMPORTANT POINT
Injunctions against the negotiating banks for making payments to the beneficiary must be given cautiously as constant judicial interference in the normal practices of market can have disastrous consequences as it affects the trustworthiness of the Indian banks and markets.