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2017 Supreme(Bom) 1205
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
S.C. Gupte, J.
M/s. Plazma Technologies Pvt. Ltd. - Appellant
Versus
JSM Technologies and Ors. - Respondents
Second Appeal No. 849 of 2016
Decided On : 05-06-2017
For the Appellant : Mr. Mustafa Doctor, Mr. Narayan Sahu, Yogesh Chawak, Chirag Dave I/b. Legasis Partners
For the Respondent: Mr. S.S. Kulkarni, Mr. Naveen B. Khaire
Headnote:Civil Procedure Code, 1908-Order XXXIX, Rule 1-Contract Act, 1872, Section 17-Grant of injunction.-Since alleged fraud not vitiates very foundation of letter of credit hence injunction cannot be granted against invocation of letter of credit.
The lower Appellate Court, in the premises, cannot be said to have committed any error of law in appreciating evidence or applying the correct principles of law. The lower appellate Court found that as far as Instruction No. 3 for the negotiating bank, i.e. production of certificate of compliance, is concerned, there was fulfilment of the same in the facts of the case. There is, as the lower appellate Court rightly observed, no instruction to the negotiating bank that, unless the software is implemented, there is no complete delivery. It also correctly applied the law of bank guarantees and letters of credit to the facts of the present case.
It held that the subject letter of credit was an independent and separate contract, which was absolute in nature, and unless a fraud, of the nature referred to by the Supreme Court in the case of Himadri Chemicals Industries Ltd. v. Coal Tar Refining Company, 2007 Mh LJ Online (SC) 18 : (2007) 8 SCC 110, is established, which vitiates the letter of credit, injunction could not be granted against invocation of the letter of credit. The Court did not find any such fraud in the present case. The impugned order, in the premises, does not suffer from any infirmity. No substantial question of law arises in the facts of the case.
Civil Procedure Code, 1908-Order XXXIX, Rule 1-Contract Act, 1872, Section 17-Grant of injunction.-Since Bank has to honour letter of credit hence injunction cannot be granted against invocation of letter of credit.
Under the Uniform Customs and Practice for Documentary Credits, ICC Publication No. 500 ("UCP") applicable to the letter of credit in the present case, the issuing bank, the confirming bank, if any, or a nominated bank acting on their behalf, is required to examine stipulated documents for their compliance with the letter of credit by international standards, within a reasonable time, not to exceed seven banking days following the day of the receipt of the documents. It must determine whether to take up or refuse documents. If in its opinion, the documents appear on their face not to be in compliance with the terms and conditions of credit, it has to in its sole judgment approach the applicant for waiver of the discrepancy(ies) within the aforesaid time. And if it does refuse the documents, it must give notice to that effect, within the aforesaid time, to the bank from which it received the documents, or to the beneficiary, if it received the documents directly from him. In the present case, the issuing bank admittedly did not find any discrepancy in the documents. It never refused the documents or give any notice in that behalf to the negotiating bank. Under the UCP, it is, in that case, bound to honour, and pay on, the letter of credit.
S.C. Gupte, J.
The second appeal challenges an order passed by the District Court, Pune in a civil appeal. By the impugned order, the learned District Judge allowed the first Respondent's appeal and set aside the judgment and decree passed by the court of Civil Judge, Junior Division, Pune in favour of the Appellant.
2. The Appellant (original Plaintiff) filed the present suit against Respondent No.1 and three others for a perpetual injunction restraining invocation of a letter of credit. According to the Plaintiff, it had placed a purchase order with Respondent No.1 (original Defendant No.4) on 29 March 2007 for purchase of one THINK 3 Plazma Software Solution and one Microsoft Software. For payment of price of these goods, the Plaintiff caused to establish a letter of credit through its banker, namely, Defendant No.3. Defendant No.1 was the issuing bank for this letter of credit, whereas Defendant No.2 was a negotiating bank. The letter of credit was for a sum of Rs.26,88,687/-. On 30 May 2007, the Plaintiff received two compact discs from Defendant No.4 towards the delivery of the contracted goods. It is the Plaintiff's case that this delivery was merely a part delivery and that unless and until the goods, which were optical device, were installed and viewed, the delivery could not be said to be complete. The Plaintiff relies on conditions mentioned in Annexure VI to the purchase order. It is the Plaintiff's case that Defendant No.4 was bound by a negative covenant not to invoke the letter of credit, unless and until the goods were installed and implemented to function properly. The Plaintiff relies upon a status report of implementation dated 13 November 2007 in this behalf. On 16 November 2007, Defendant No.3 informed the Plaintiff that Defendant No.4 had submitted documents to the negotiating bank, i.e. Defendant No.2, for invocation of the letter of credit and the negotiating bank had, in turn, written to Defendant No.1, the issuing bank, to arrange for payment of the bill under the letter of credit. According to the Plaintiff, none of the invoices was in accordance with the terms of the contract, since there was failure to certify that the "goods are as per order". According to the Plaintiff, the invocation of the letter of credit, in the premises, was fraudulent, without completing the delivery of the goods. It is also the case of the Plaintiff that the negotiating bank did not issue any certificate of compliance of credit, as required under the contract. The Plaintiff, accordingly, challenged the invocation on two grounds, firstly, on the ground of such invocation not being in strict compliance with the terms of the letter of credit and secondly, on the ground of fraud committed by Defendant No.4.
3. The trial court allowed the Plaintiff's suit partly decreeing the same inter alia by a declaration that Defendant No.4 was not entitled to invoke the letter of credit and Defendant Nos.1 and 3 banks were not bound to honour such invocation unless and until the goods were delivered as per the purchase order. The court also declared that the action of Defendant No.4, supported by Defendant Nos.1 and 2, in invocation of the letter of credit was contrary to the contract. The court, accordingly, restrained Defendant Nos.1, 2 and 4 by a perpetual injunction from invoking the letter of credit till compliance of the purchase order and delivery and implementation of the software as per the terms of the purchase order. Defendant No. 4 came in appeal before the District Court. The District Court by its impugned order set aside the judgment and decree passed by the trial court and allowed the civil appeal with costs.
4. Learned Counsel for the Appellant (original Plaintiff) submits that the invocation of the letter of credit, in the present case, was not in accordance with the terms thereof. Learned Counsel submits that the letter of credit was established against documents, which included invoices signed by the beneficiary or
