Case of fraud or causing irretrievable damage on the basis of bank guarantee or letters of credit.

ORDER: In all these original applications and the connected applications, the common question involved is as to, “whether ‘the order of interim injunction granted earlier restraining the respective issuing banks from allowing letters of credit issued by them on behalf of the applicant in favour of the third respondent to be encashed through the second respondent should be confirmed or not” Therefore, all these original applications along with connected applications are disposed on by this common order.

2. Spices Trading Corporation Limited (in short, “STCL”) is the fourth respondent in the applications filed in C.S.No.417 of 2005. The first respondent-first defendant in the three suits, is the issuing bank, while the second respondents are stated to be negotiating foreign banks on behalf of the third respondent. The third respondent is the supplier of the applicant. The parties will be hereinafter to as “the applicant”, first respondent-issuing bank, second respondent-negotiating bank and the third respondent-seller respectively. The fourth respondent-fourth defendant in C.S.No.417 of 2005 will be referred to as ‘STCL’.

3. Mr.P.S.Raman, learned senior counsel appearing on behalf of the applicants narrated the facts by referring to the documents filed in C.S.No.417 of 2005 and stated that since the issue involved is common, such narration of facts will hold good and can be applied for other suits and the connected applications as well. Such facts are that there was a Memorandum of Understanding dated 30.7.2004 between the applicant and the fourth respondent ‘STCL’, who agreed to facilitate import of Heavy-Light Melting Scrap for and on behalf of the applicant, that there was a sales contract entered into between the applicant and the third respondent on 1.10.2004 on the terms agreed to between both of them, that the respective first respondents issued irrevocable letter of credit at the instance of the fourth respondent in favour of the third respondent to be negotiated through the second respondent, that while issuing such letters of credit, an additional document required to be submitted was pre-shipment inspection certificate issued by S.G.Agency or any other Agency approved by the Government of India to the effect that the consignment does not contain any type of arms, ammunition, mines, shells, cartridges, explosive shells, bombs or other hazardous materials in any form either used or otherwise, that such additional document was necessitated in view of the restriction imposed by the Government of India to ensure that the goods which are agreed to be imported as per the contract alone are brought into this country, that necessary commercial invoices in respect of the containers with reference to which the present controversy has arisen, were issued by the third respondent in favour of the fourth respondent on behalf of the applicant wherein, it is noted that as per the terms of the sales contract, the payment would be within 120 days from the date of negotiation, that all the containers were issued with necessary pre-shipment inspection certificates by an institution called “Alex Stewart International Corporation B.V.” (in short, “Alex Stewart”) certifying that the containers consisting of consignments were inspected both before and during stuffing into the containers and that all cargoes were safe for normal use and free from all types of radioactive material or otherwise, etc., that the same will not have any harmful effect to the environment. It is also stated that after the containers were unloaded in the Chennai Port and were weighed, it came to light that net contents of the consignment was far below than what was said to have been contained as per the packing list furnished by the third respondent, that on suspicion, when the containers were opened in the presence of the representatives of the applicant as well as the third respondent, the insurance surveyors and the fourth respondent, it was detected that the contai

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