The duty of the issuing bank to honor the commitment under U.C.C. Article 10.

1. Civil Revision Petition is directed against the order dated 28.10.2002 passed in I.A. No. 246/2001 in C.M.A. No. 36 of 1999 on the file of Principal District Court at Srivilliputhur.

2. The Revision Petitioner is the plaintiff, who had engaged in the manufacture of various counts of yarn. The first defendant is a company incorporated in London and engaged in the business of sale of cotton and the second defendant is a Banking Institution. The Plaintiff placed orders with the first defendant for supply 530 tonnes of CIS UZBEK original cotton with an assured 50% span length of 13 mm and trash content not exceeding 15%. Based upon such contract, the plaintiff opened three Letters of Credit in the second defendant, viz., Canara Bank (the Letters of Credit are dated 23.10.98, 23.10.98 and 6.11.98) for the value of the cotton. The first defendant failed to supply cotton as per order. But it supplied useless, trashy and waste cotton and not complying with the terms of contract and thereby played fraud on the plaintiff. The first defendant offered to settle the issue but has not done so. The plaintiff gave a fax message to the first defendant on 13.2.1999 calling upon them not to invoke Letters of Credit and also take back the consignment which they are holding only as bailee.

3. Plaintiffs claim is that usually the Letters of Credit cannot be revoked but when an element of fraud has been played in the goods supplied, other than one which was ordered, the Letters of Credit can be revoked and only on that account, the plaintiff instituted the suit for permanent injunction not to invoke the Letters of Credit and also not to honour the Letters of Credit by the second defendant, and obtained interim orders in the same line. As against the said orders the Banker namely, Canara Bank preferred C.M.A. and the same is pending.

4. Feeling that the second defendant is not properly conducting the appeal, the first respondent herein viz., Bankque de commerce et de Placements has filed an application to implead itself as a party to the appeal and the same was allowed. Aggrieved by the same, the plaintiff has preferred this revision.

5. The first respondent in the affidavit filed in support of the application in the Court below, has stated that the plaintiff had opened three irrevocable negotiable Letters of Credit through the second defendant in favour of the first respondent towards the payment for the cotton to be supplied by the first defendant to the plaintiff. The said Letters of Credit, namely L.C. No. 1801 FLC 18398 for U.S. Dollars 1,53,276.20 and for L.C. No. 1801 FLC 18498 for U.S. Dollars 1,52,118,78 and for L.C. 1801 FLC 19098 for U.S. Dollars 2,35,923,70 were negotiable. The supplier, namely, first defendant supplied the requisite cotton and the same was received by the plaintiff and the second defendant negotiated the said three Letters of Credit with the Negotiating Bank, the first respondent herein, on the explicit acceptance by the plaintiff of all the documents, under the said three Letters of Credit and the same were conveyed to the first respondent herein by the second defendant, namely, Canara Bank vide their telex message dated 5.1.99. The second defendant being issuing banker of the Letters of Cre dit also confirmed the date of acceptance and the maturity dates for payment to the first respondent herein. It is stated that on the effective communication made by the second defendant, the first respondent negotiated the said three Letters of Credit and paid the amount mentioned in the Letters of Credit to the first defendant. It is further stated that the business of these kind are being done as per the “Uniform Customs and Practice for Documentary Credits I.C.C. NO. 500” U.C.C. Article 3 of U.C.C. provides that credits by their natureare separate transactions from the sales or other contracts on which they may be based and banks are in no way concerned with or bound by such contracts, even if their reference whatso