Banks should honor letters of credit if the documents presented are in compliance with the letter of credit terms and should not refuse payment based on frivolous pleas.

PRATHIBA M. SINGH, J.

1. The Plaintiff Iris Computers Ltd. (hereinafter, "Plaintiff") has filed the present suit for recovery of Rs.1,05,61,556/- along with interest, pendente lite and future against three defendants State Bank of India, Canara Bank and Click Telecom Pvt Ltd. The suit was listed on 17th January, 2018, on which date a Ld. Single Judge of this Court decreed the suit qua Defendant No.3 i.e., Click Telecom Pvt. Ltd., who was the consignee of the computers and other hardware supplied by the Plaintiff. Thereafter, the suit was treated as an ordinary suit in respect of Canara Bank and the parties were permitted to file evidence. The Plaintiff filed its affidavit by way of evidence, as also the original documents relied upon by it. For the sake of convenience, the order dated 17th January, 2018 is extracted herein below:

"1. Present Suit has been filed under Order XXXVII of CPC for recovery of Rs.1,05,61,556/-. At the outset, learned counsel for the plaintiff states that he does not wish to claim any relief against defendant No.1.

2. As per the plaint, defendant No.3 had placed a purchase order dated 15.6.2013 upon the plaintiff for sale and supply of various IT related goods. The value of the goods were Rs. 1,05,61,556/-. Defendant No.3 offered to open a letter of credit (LC) for 100% of the Invoice Value (CIF) at 90 days from the date of the accompanying bill of exchange and furnish it to the plaintiff.

3. In accordance with the assurances, defendant No.3 furnished LC bearing No. 075IOUU31750003 dated 24.6.2013 issued by defendant No.2 on the necessary bill of exchange.

4. The plaintiff pleads that in view of the irrevocable letter of credit the defendants No.2 and 3 have refused to make the payment and hence this court should pass a decree as none of the defendants have taken steps under Order 37 CPC.

5. As far as defendant No.2 Canara Bank is concerned learned counsel had entered appearance on 16.4.2015. Learned counsel for defendant No.2 also appeared before Joint Registrar on 5.10.2015 where Joint Registrar noted that there is delay in entering of appearance of defendant No.2. Thereafter none has appeared for defendant No.2.

6. As far as defendant No.3 is concerned, it entered appearance on 18.4.2016. Thereafter steps were taken by the plaintiff under Order 37 CPC. Defendant No.3 was served with summons for judgment on 19.7.2016. However, defendant No.3 has not filed an application for leave to defend. This is evident from the order of Joint Registrar dated 26.8.2016.

7. As far as defendant No.3 is concerned, in view of the fact that defendant No.3 has not entered appearance, I pass a decree in favour of the plaintiff and against defendant No.3 for Rs.1,05,61,556/-. The plaintiff shall also be entitled to pendent lite simple interest @ 10% per annum from the date of filing of the suit till recovery. Plaintiff shall also be entitled to costs.

8. As far as defendant No.2 Canara Bank is concerned, a perusal of the documents would show that as per letter of credit the list of documents required are clearly stipulated. Canara Bank on 10.7.2013 sent a communication to the defendant No.1 State Bank of India, banker of the plaintiff indicating discrepancies in the documents submitted by the plaintiff as follows:-

1. "Date of Bill of Exchange is 01 Jul 2013 and 27 Jun 2013.

2. Shipment Terms as per LC is CIF But LR shows freight to pay

3. Original LR as per LC terms not enclosed

4. Delivery challan should be accepted by party stating that goods received in good condition."

9. Learned counsel for the plaintiff submits that the discrepancies are an eyewash and in fact there is no discrepancy in the eyes of law.

10. In my opinion, in view of the fact that Canara Bank has communicated discrepancies in the document a suit under order 37 would not survive against defendant No.2. It would be for the plaintiff to prove that discrepancies noted by the defendant No.2 are not as per law. Accordingly, I consider the suit against Canara B