IMPORTANT POINT
Strict compliance with the terms of a letter of credit is essential for payment; any discrepancies in the documents presented invalidate the entitlement to payment.

JUDGMENT :

PRAYER: Plaint filed under Order IV Rule I of Madras High Court Original Side Rules and Order VII Rule 1 of C.P.C. for the following reliefs:

a) For a Declaration that the Defendants 2 & 3 are not entitled to claim payment of any sum under the letter of Credit bearing No.0702408IM0000782 dated 10-09-2008 issued by the 1st Defendant; and

b) For Consequential Permanent Injunction restraining the Defendants 2 & 3 from claiming payment of any sum under the letter of Credit bearing No.0702408IM0000782 dated 10-09-2008 issued by the 1st Defendant ; and

c) For Consequential Permanent Injunction restraining the 1st Defendant from making payment of any sum under the letter of Credit bearing No.0702408IM0000782 dated 10-09-2008 issued by the 1st Defendant;

d) for costs of the suit.

This suit has been filed, seeking the following reliefs:

a) For a Declaration that the Defendants 2 & 3 are not entitled to claim payment of any sum under the letter of Credit bearing No.0702408IM0000782 dated 10-09-2008 issued by the 1st Defendant; and

b) For Consequential Permanent Injunction restraining the Defendants 2 & 3 from claiming payment of any sum under the letter of Credit bearing No.0702408IM0000782 dated 10-09-2008 issued by the 1st Defendant ; and

c) For Consequential Permanent Injunction restraining the 1st Defendant from making payment of any sum under the letter of Credit bearing No.0702408IM0000782 dated 10-09-2008 issued by the 1st Defendant;

d) for costs of the suit.

2. The plaintiff has entered into a sales contract with the third defendant on 28.08.2008 and as per the sales contract, the plaintiff agreed to purchase salt washery plant manufactured by the third defendant for a total sales consideration of Euro.3,70,000/-. As per the sales contract, the plaintiff paid 20% as advance to the third defendant by way of bank transfer and for the balance 80%, the plaintiff committed to open a letter of credit as per the terms and conditions of the sales contract dated 28.08.2008. In the sales contract dated 28.08.2008, the third defendant had to conduct certain performance test runs. The third defendant was also obligated to provide a performance bank guarantee in favour of the plaintiff.

3. As per the terms of the sales contract dated 28.08.2008, the plaintiff on 12.09.2008 approached the first defendant and sought for a letter of credit. The third defendant has also provided a draft performance bank guarantee obtained from the third defendant's banker on 08.09.2008.

4. The machineries agreed to be purchased by the plaintiff from the third defendant were shipped by the third defendant from Spain on 13.02.2009 for delivery to the plaintiff. According to the plaintiff, the third defendant ran performance test runs of the machineries which were erected in the plaintiff's factory which were the imported machineries sold by the third defendant to the plaintiff on 30.04.2009. According to the plaintiff, the test runs could not be completed because one of the main components was not functioning properly. Therefore, according to the plaintiff, the third defendant failed to discharge its obligations under the sales contract dated 28.08.2008.

5. On 04.05.2009, the first defendant bank handed over a performance bank guarantee issued by the 2nd defendant on behalf of the 3rd defendant as per the sales contract dated 28.08.2008. According to the plaintiff, since the bank guarantee issued by the 2nd defendant was not in the approved format, the plaintiff by its letter dated 09.05.2009 sent to the first defendant bank and requested them not to disburse the sums as per the letter of credit. However, according to the plaintiff, the first defendant bank by its reply dated 12.05.2009 rejected the stand taken by the plaintiff and informed the plaintiff that payment will be made to the 3rd defendant as per the letter of credit. On 15.05.2009, the plaintiff replied to the first defendant bank, reiterating that the first defendant bank should not disburse the sums to