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1998 Supreme(Cal) 18
High Court Of Calcutta
UMESH CHANDRA BENERJEE, SIDHESWAR NARAYAN
POPULAR JUTE EXCHANGE LIMITED - Appellant
Versus
MURLIDHAR RATANLAL EXPORTS LTD. - Respondent
Suit 240a Of 1996
Decided On : 01/15/1998
The Court held that the Civil Court can intervene in the matter of an irrevocable letter of credit only in the event of a very grave cause, such as fraud or special equity.
Headnote:
MAREVA INJUNCTION - IRREVOCABLE LETTER OF CREDIT - FRAUD - SPECIAL EQUITY - JURISDICTION - ORDER 38 RULE 5 CPC - SECTION 60 CPC - MAINTAINABILITY OF APPEAL - DISPENSATION OF FORMALITIES - LIMITATION - INTERIM ORDER OF INJUNCTION - STATUS QUO - INTERNATIONAL TRADE AND COMMERCE - WRIT SUMMONS.
Fact of the Case:
Murlidhar Ratanlal Exports Ltd., an exporter of jute goods, entered into a contract with Golden Fibre for the purchase of different grades of raw jute. Murlidhar caused a letter of credit to be opened by Golden Fibre Trade Centre Ltd. in favor of ANZ Grindlays Bank, Dhaka. The plaintiff alleged that the goods supplied were of inferior quality and claimed a decree for Rs. 11,36,000/- against the defendants jointly and/or severally. The plaintiff filed a suit and obtained an ex parte injunction restraining payment under the letter of credit. The defendant appealed.
Finding of the Court:
1. The Court held that the intervention of the Civil Court in the matter of an irrevocable letter of credit is only justified in the event of a very grave cause, such as fraud or special equity. 2. The Court observed that the irrevocable letters of credit and bank guarantees are the lifeblood of commerce and interference by the Courts would undermine their value. 3. The Court found that the plaintiff had not made out a case of fraud or special equity to warrant an order of injunction. 4. The Court held that the claim for damages was not a liquidated sum and therefore did not warrant the grant of security. 5. The Court held that Order 38 Rule 5 of the Code of Civil Procedure cannot be used to attach properties beyond the country. 6. The Court held that the appeal was maintainable as the dispensation of all formalities included the undertaking to file a list of dates pertaining to limitation. 7. The Court held that the order of the learned Trial Judge as regards the maintenance of status quo was vacated, but the observation regarding the expeditious disposal of the suit was allowed.
Issues: 1. Whether the Civil Court can intervene in the matter of an irrevocable letter of credit? 2. Whether the plaintiff had made out a case of fraud or special equity to warrant an order of injunction? 3. Whether the claim for damages was a liquidated sum and warranted the grant of security? 4. Whether Order 38 Rule 5 of the Code of Civil Procedure can be used to attach properties beyond the country? 5. Whether the appeal was maintainable in the absence of a certified copy of the order? 6. Whether the order of the learned Trial Judge as regards the maintenance of status quo should be vacated?
Ratio Decidendi: 1. The Court held that the Civil Court can intervene in the matter of an irrevocable letter of credit only in the event of a very grave cause, such as fraud or special equity. 2. The Court held that the plaintiff had not made out a case of fraud or special equity to warrant an order of injunction. 3. The Court held that the claim for damages was not a liquidated sum and therefore did not warrant the grant of security. 4. The Court held that Order 38 Rule 5 of the Code of Civil Procedure cannot be used to attach properties beyond the country. 5. The Court held that the appeal was maintainable as the dispensation of all formalities included the undertaking to file a list of dates pertaining to limitation. 6. The Court held that the order of the learned Trial Judge as regards the maintenance of status quo was vacated, but the observation regarding the expeditious disposal of the suit was allowed.
Final Decision: The appeal was allowed. The order of the learned Trial Judge as regards the maintenance of status quo was vacated, though however, the observation of the learned Trial Judge in regard to the expeditious disposal of suit ought to be allowed.
( 1 ) 'mareva' Injunction is an established feature of English Law and the English Court has been categorical enough to record that there should not be any hesitation in the matter of such a grant where it appears likely that the plaintiff would recover judgment against the defendant for a certain or approximate sum and there is reason to believe that the defendant has the assets within the jurisdiction to meet the judgment but may deal with the same, so that they would not be available or traceable when the judgement is given against him. One of the basic criteria for the grant of Mareva Injunction is that the assets must be located within the jurisdiction to confer jurisdiction on the Court to grant a Mareva injunction. Be it noted that this concept of grant of Mareva Injunction is not different from the power of the High Court to grant interlocutory or final order of an injunction and under tis general power of jurisdiction to grant an ex parte injunction the English Court has developed a principle that the court has power to restrain the defendant from removing assets from the jurisdiction pending the trial of action whenever it was just and convenient to do so. This power was originally exercised when the defendant was out of the jurisdiction but has subsequently been extended so as to be available against a defendant even though he is based within the jurisdiction. This extension of power has its due statutory recognition in the Supreme Court act, 1981 and in particular, reference may be made to section 37.
( 2 ) HAVING discussed the broad principles and the basic features of Mareva injunction let us now at this juncture advert to the contextual facts briefly. The respondent, Murlidhar Ratanlal Exports Ltd. (hereinafter referred to as 'murlidhar') is an exporter of jute goods. The records depkt that Murlidhar entered into a contract with one Golden Fibre for purchase of different grades of raw jute of various quantities as specified in the sale contract dated 23rd April, 1996. In terms of the agreement, the said Murlidhar caused a letter of credit to be opened by one Golden Fibre Trade Centre Ltd. incorporated under the appropriate laws of Bangladesh in favour of its corresponding bank in Bangladesh viz. , ANZ Grindlays Bank, Dhaka. Relevant contextual facts further reveal that there was amendment to the letter of credit by reason of a subsequent assignment. On arrival, however, of the goods it has been alleged by the plaintiff that there was difference in quality and as such the price of the goods was far less than what was agreed to be sold to the plaintiff-respondent herein. It has been stated that the value of the goods actually sold and delivered by the defendant to the plaintiff -respondent is US dollar 1,81,344 equivalent to Indian currency of Rs. 65,28,456/ -. A definite assertion has been made that the plaintiff-respondent was supplied with a very inferior quality of goods and the factum of which has only been made known to the defendant and it is on this perspective the respondent No. 1 filed a suit claiming a decree for Rs. 11,36,000/- against the defendants jointly and/or severally together with a claim for interim interest and interest on judgment.
( 3 ) DURING the course of hearing Mr. Pratap Chatterjee, appearing for the respondent, contended that the shipment has been completed on 23rd May, 1996 and the letter of credit is negotiable arter 90 days from the shipment which has expired on 22nd August, 1996. In the affidavit before the learned single Judge it has been specifically averred :
"the plaintiff is therefore reasonably apprehended that payment would be made by the bank immediately until and unless appropriate order is passed. "
( 4 ) IN paragraph 27 of the petition there is an averment to the following effect :
"27. Your petitioner states that -. the defendant Nos. 1 and 2 do not have any assets and/or properties in India and have no place of business in india. The only
