LexM/S. MILLENIUM WIRES (P) LTD. versus THE STATE TRADING CORPORATION OF INDIA LTD. AND ORS.
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[2015] 3 S.C.R. 963 M/S. MILLENIUM WIRES (P) LTD. v. THE STATE TRADING CORPORATION OF INDIA LTD. AND ORS. (Civil Appeal No.3103 of 2015 Etc.) MARCH 23, 2015 [M.Y. EQBAL AND PINAKI CHANDRA GHOSE, JJ.] A B Code of Civil Procedure, 1908- 0. VII r. 11 - Rejection c of plaint - Injunction against banks to honour their guarantees - Suit seeking injunction against the Company from claiming any benefit .under the Letters of Credit and against the Confirming Foreign Bank to prevent any action or release of funds under the Letters of Credit - Meanwhile D application u/O. VII r. 11 CPC by the Confirming Bank - High Court allowed the application but dismissed the plaint as no cause of action was shown against the Confirming Bank - Appeal thereagainst also dismissed - On appeal, held: No cause of action, whatsoever, could be deduced E against the Negotiating Bank from the two extracts which formed part of the plaint as also the other facts - Thus, the order of rejection of the plaint by the High Court is upheld. Dismissing the appeals, the Court F HELD: 1.1 Nothing in the plaint except the two extracts even come close to being an allegation against the Negotiating Banks. In the two extracts, there is expression of mere apprehension of the Plaintiffs that G Negotiating Banks were in active collusion with the Synergic Companies. No explanation or justification has been made in the plaint as to how this active 963 H 964 SUPREME COURT REPORTS [2015] 3 S.C.R. A collusion came about or what makes the plaintiff suspect so. In the plaint not all the evidence with respect to allegations is to be adduced however, a comprehensive narration of facts that constitute cause of action has to be given in the plaint. It is plain and B clear that no cause of action, whatsoever, may be deduced against the Negotiating Bank from the extracts which form part of the plaint. [Para 10] [972-A-D] 1.2 The law on injunction against honouring letter C of credit by a Bank as summed up by the Single Judge of the High Court is upheld. The Court must be slow in granting an order of injunction restraining the realisation of a bank guarantee or Letter of Credit. There are two exceptions to the said rule that it must D be clearly shown that a fraud of a grievous nature has been committed and to the notice of the Bank; and that injustice of the kind which would make it impossible for the guarantor to reimburse himself, or would result in irretrievable harm or injustice to one of the parties E concerned, should have resulted. It is not enough to allege fraud but there must be clear evidence both as to the fact of fraud as well as to the bank's knowledge of such fraud. [Para 12] [972-G-H; 973-A-C] F 1.3 Injunctions against the negotiating banks for making payments to the beneficiary must be given cautiously as constant judicial interference in the normal practices of market can have disastrous consequences as it affects the trustworthiness of the G Indian banks and markets. Furthermore, it appears that the Confirming Bank had forwarded the documents presented by the Company to the Issuing Bank. Out of four Letters of Credit, Issuing Bank had accepted the H presentation of documents in two Letters of Credit with MILLENIUM WIRES (P) LTD. v. THE STATE TRADING 965 CORP. OF INDIA LTD. the consultation of the STC. Only one of the A presentation was rejected while there is no information with respect to the response of the Issuing Bank on presentation of documents of the fourth Letter of Credit. Even on the Letter of Credit for which the presentation was rejected, the response was made after B 19 days while UPC-600 provides that rejection or any objection against the presentation must be communicated to the negotiating bank of the beneficiary within 5 days. [Paras 13, 14] [973-0-G] c Saleem Bhai v. State of Maharashtra (2003) 1 SCC 557: 2002 (5) Suppl. SCR 491; Popat Kotecha Property v. State Bank of India Association (2005) 7 SCC 510: 2005 (2) Suppl. SCR 1030; Sopan Sukhdeo Sable v. Asst .. Charity Commissioner (2004) 3 SCC 137: 2004 (1) SCR D 1004 - referred to. R.D. Harbottle (Mercantile) Ltd. v. National Westminster Bank (1977) 3 WLR 752 - referred to. Case Law Reference 2002 (5) Suppl. SCR 491 referred to Para 8 2005 (2) Suppl. SCR 1030 referred to Para 8 2004 (1) SCR 1004 referred to Para 8 CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3103 of 2015 etc. E F From th
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