The main legal point established in the judgment is that fraud on the part of the beneficiary could vitiate the entire transaction, impacting the obligations under the SBLC.

Mukta Gupta, J.

1. By these applications Defendant Nos. 1 and 2 seek leave to defend the suit filed by the Plaintiff under Order XXXVIICPC for recovery of USD 180921.35 equivalent to Rs. 83,26,000/- along with pendent lite and future interest till actual realization. The Plaintiff is a company incorporated under the laws of China and is having one of its office at Shenzhen, China. Defendant No. 1 is State Bank of Patiala having its Head Office at Patiala with various branches including the branch at Darya Ganj, New Delhi. Defendant No. 2 is a Company registered under the Companies Act, 1956 having its registered office at 37, Netaji Subhash Marg, Darya Ganj, New Delhi-110002 and is carrying on the business of manufacturing and sale of copper tube made from copper cathode which is the raw material. Defendant No. 3 Company in Hongkong entered into an agreement with Defendant No. 2 Company for supply of copper cathodes. At the instance of Defendant No. 2, Defendant No. 1 issued irrevocable Standby Letter of Credit (in short 'SBLC') in favour of Plaintiff bank, the beneficiary in order to extend General Banking Facility to Defendant No. 3 at Shenzhen, China. Thereafter, the SBLC was extended twice at the instance of Defendant No. 2 on the same terms and conditions as mentioned in the principal SBLC dated 23rd December, 2006 vide swift code messages dated 5th September, 2006 and 4th December, 2006 thus extending the validity of the SBLC till 7th February, 2007. Since Defendant No. 3 did not repay for the banking facility extended by the Plaintiff, the Plaintiff vide its swift message dated 26th January, 2007 invoked the SBLC and submitted the drafts drawn at sight, that is, the Bills of Exchange. Pursuant thereto Defendant No. 1 vide its swift message dated 15th February, 2007 acknowledged the invocation and agreed to pay to the Plaintiff under the SBLC by 19th February, 2007. However, on 20th February, 2007 the Plaintiff received another swift message from Defendant No. 1 wherein the Defendant No. 1 intimated to the Plaintiff that it had received the Bill of Exchange at sight dated 26th February, 2007 for USD 133032.35; had not received swift message from the Plaintiff and that the claim of the Plaintiff was incomplete as per the SBLC terms. The fact that the claim was incomplete was never intimated by Defendant No. 1 in its earlier message dated 15th February, 2007. Further in its message dated 20th February, 2007 Defendant No. 1 did not specify the discrepancy in the documents submitted. Since Defendant No. 1 failed to make the payment, the Plaintiff sent further swift message on 3rd March, 2007 demanding payment however, Defendant No. 1 did not honour the same. Defendant No. 3 is stated to have admitted the breach of terms of the contract entered into between Defendant Nos. 2 and 3 and in view thereof Defendant No. 1 had stopped the payment to be made pursuant to the SBLC. Defendant No. 2 also instituted a suit before this Court being CS (OS) No. 448/2007 seeking mandatory injunction against Defendant No. 1 herein. On the statement of Defendant No. 1 herein that they were not making the payments to the Plaintiff, this Court dismissed the suit being based on no cause of action with liberty to file the same as and when the cause of action arises. Hence the present suit.

2. Learned counsel for Defendant No. 2 states that since number of triable issues arise, the Defendants are entitled to be granted leave to defend. It is contended that the suit has been filed by the wrong Plaintiff. The Plaintiff is a separate legal entity. The beneficiary of the SBLC dated 24th June, 2006 is a branch of Standard Chartered (U.K.) Ltd. and an independent legal entity. Reliance is placed on Vodafone International Holding vs. Union of India, 2012 (6) SCC 613. It is the case of Defendant No. 2 that Defendant No. 3 failed to fulfill the contract and did not supply the copper cathodes as agreed and thus the Plaintiff is not entitled to encash the