Case Note & Summary
The plaintiff, Malayan Banking Berhad, a Malaysian bank, filed a summary suit against Indusind Bank Limited, an Indian bank, claiming Rs. 3,47,87,865.42 with interest. The dispute arose from an irrevocable letter of credit (LC) issued by the defendant at the instance of MMTC Ltd. (buyer) in favour of M/s. Synergic Industrial Marketing Services SDN. BHD. (seller). The LC was available for negotiation with the plaintiff and governed by UCP600. The seller submitted documents to the plaintiff, which negotiated and paid the seller on 12 December 2011. The plaintiff forwarded documents to the defendant, who on 6 January 2012 accepted the documents and undertook to pay on maturity date (5 March 2012). However, on 1 February 2012, the defendant informed the plaintiff that the buyer alleged some documents were forged, and on 7 February 2012, the defendant stated it would not pay on maturity. The plaintiff filed a summary suit under Order 37 of the CPC. The defendant sought leave to defend, arguing that the documents were forged and that the plaintiff had not verified the documents properly. The court considered whether the defendant could refuse payment after acceptance. The court held that under UCP600, once the issuing bank accepts documents, it is bound to pay on maturity. The independence principle of letters of credit prevents the issuing bank from relying on disputes in the underlying contract. The defendant's allegations of forgery were not supported by any evidence and did not constitute a valid defence against the negotiating bank which acted in good faith. The court found no triable issue and allowed the summons for judgment, directing the defendant to pay the claimed amount with interest at 12% per annum from the date of suit until payment.
Headnote
A) Banking Law - Letter of Credit - Independence Principle - UCP600 - The issuing bank accepted documents under an irrevocable letter of credit and undertook to pay on maturity. Later, it sought to avoid payment alleging forgery of documents. The court held that once documents are accepted, the issuing bank cannot unilaterally revoke its acceptance or refuse payment based on allegations of fraud by the applicant, as the LC is independent of the underlying contract. (Paras 1-16) B) Civil Procedure - Summary Suit - Order 37 CPC - Triable Issue - The defendant failed to raise any triable issue or disclose any valid defence. The court held that the defendant's allegations of forgery were not supported by any evidence and did not constitute a defence against the negotiating bank which acted in good faith. Summary judgment was granted. (Paras 17-20)
Issue of Consideration
Whether the defendant (issuing bank) can refuse payment on a letter of credit after having accepted the documents, on the ground that the documents were allegedly forged, and whether the plaintiff (negotiating bank) is entitled to summary judgment.
Final Decision
Summons for Judgment is allowed. The defendant is directed to pay the plaintiff a sum of Rs. 3,47,87,865.42 with interest at 12% per annum from the date of filing of the suit until payment. The suit is decreed accordingly.
Law Points
- Letter of credit is independent of underlying contract
- Issuing bank's acceptance of documents is irrevocable
- UCP600 governs LC transactions
- Summary judgment appropriate when no triable issue raised
