LexFEDERAL BANK LTD. versus V.M. JOG ENGINEERING LTD. AND ORS.
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I A FEDERAL BANK LTD. v. V.M. JOG ENGINEERING LTD. AND ORS. SEPTEMBER 29, 2000 B [M. JAGANNADHA RAO AND U.C. BANERJEE, JJ.] Code of Civil Procedure, 1908: Order 39 Rules 1 and 2. Temporary injunction-Grant of-Principles-Letter of Credit (UC)- C Buyer entered into contract with sellers for supply of reinforced steel bars and structural steel-Buyer opened UC with "Issuing Bank" which required certain documents to be produced by seller for payment by "Negotiating Bank"-After delivery of the goods seller asked "Negotiating Bank" to make payment against UC and endorse required documents-"Negotiating Bank" D sent UC and documents to "Issuing Bank"-"Issuing Bank" certified genuineness of UC and documents and assured reimbursement to "Negotiating Bank" on due date-Accordingly, "Negotiating Bank" made payment to seller after deduction of its commission-Subsequently, "Issuing Bank" found on scrutiny non-submission of certain documents-Buyer also informed "hsuing Bank" of forgery by some person-Buyer filed suit for injunction- £ "Negotiating Bank" imp_leaded, but no specific relief against it claimed- "Jssuing Bank" restrained from releasing payment-Validity-Held: Once the "Issuing Bank" certifies the genuineness of the UC and documents it is bound reimburse the "Negotiating Bank"-Jt cannot take the plea that on fresh scrutiny the documents were not in.conformity with the UC-Temporary F injunction vacated Temporary injunction-Grant of-Principles-Letter of Credit (UC)- Buyer opened UC with "Issuing Bank"-Buyer alleged fraud against seller- No allegation of fraud or knowledge of fraud against "Negotiating Bank"- "Negotiating Bank" made payment to seller against UC after confirming G genuineness of documents from "Issuing Bank"-However, "Issuing Bank" refused to reimburse "Negotiating Bank" on the ground that documents were - not in conformity with UC-Temporary injunction restraining "Issuing Bank" ~,, from making payment granted-Validity-Held: Temporary injunction can be issued only where there is (i) fraud or (ii) irretrievable damage-If there . is no allegation of fraud or knowledge of fraud on the part of "Negotiating fl 542 FEDERAL BANK LTD. v. V.M. JOG ENGINEERING LTD. 543 Bank", it is not permissible for "Issuing Bank" to refuse payment-However, A "Negotiating Bank" should not be a mere Collecting Bank or agent but should be holder in due course-Hence, "Issuing Bank" bound to reimburse "Negotiating Bank"-Temporary injunction vacated Uniform Customs and Practice of Documentary Credits, 1983 : Articles B JO, 11, 15, 16 and 17. Credit Operations-Nature and principles of-Held : All parties deal in documents and not in goods-If the "Negotiating Bank" is satisfied that documents which appear on their face are as per Letter of Credit and then makes the payment, "Issuing Bank" is bound to reimburse "Negotiating C Bank"-However, "Negotiating Bank" is required to take reasonable care with which the documents have to be examined. Words and Phrases: "Appear on their face" and "reasonable care "-Meaning of-In the D context of Arts. I I ( d) and I 5 of Uniform Customs and Practice of Documentary Credits, 1983. The respondent-plaintiff (buyer) entered into a contract with the sellers for purchase of reinforced steel bars and structured steel. The Letter of Credit E (IJC) opened by the respondent-plaintiff with the "Issuing Bank" required various documents to be produced by the seller for payment in accordance with the Uniform Customs and Practice of Documentary Credits, 1983. The appellant-defendant, the Negotiating Bank, received documents from the sellers, which included five delivery challans signed by the buyer's officers F acknowledging receipt of goods. The seller sent a Bill of Exchange for encashment against the LJC taken out by the buyer. The appellant sent the BiU of Exchange, with endorsement of the buyer and the LJC and the connected documents including the 'delivery challan' - as received from the seller - to the Issuing Bank and got the genuineness of the documents confirmed. The G Negotiating bank then released a certain sum in favour of the sellers after • deducting its commission. The Issuing Bank found on scrutiny non- submission of certain documents. The respondent-buyer also informed Issuing Bank offorgery by some person. Thereafter, the respondent-buyer filed a suit for permanent injunction against the sellers, the Issuing Bank and the Negotiating b
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