Case Note & Summary
The appellant, M/s Plazma Technologies Pvt. Ltd., filed a suit for perpetual injunction against the respondents, including JSM Technologies and others, to restrain invocation of a letter of credit. The appellant had placed a purchase order on 29 March 2007 with respondent no.1 for software and caused a letter of credit for Rs.26,88,687 to be established through its banker. On 30 May 2007, the appellant received two compact discs, but claimed delivery was incomplete as the goods needed installation and viewing. The appellant relied on conditions in Annexure VI to the purchase order, asserting a negative covenant that the letter of credit could not be invoked until goods were installed and functioning. On 16 November 2007, the appellant was informed that respondent no.4 had submitted documents for invocation. The appellant challenged the invocation on two grounds: non-compliance with the letter of credit terms (invoices not certifying goods as per order, and no certificate of compliance from the negotiating bank) and fraud. The trial court partly decreed the suit, granting a perpetual injunction restraining invocation. The District Court allowed the appeal and set aside the decree. The High Court, in second appeal, restored the trial court's decree, holding that the appellant had established fraud and non-compliance with the terms of the letter of credit, and the injunction was justified.
Headnote
A) Letter of Credit - Fraud Exception - Injunction - The court considered whether a perpetual injunction can be granted to restrain invocation of a letter of credit on grounds of fraud and non-compliance with terms. The trial court had decreed the suit partly, restraining invocation. The District Court set aside the decree. The High Court restored the trial court's decree, holding that the plaintiff had established fraud and non-compliance with the terms of the letter of credit, and the injunction was justified. (Paras 1-9) B) Letter of Credit - Strict Compliance - The court examined the requirement of strict compliance with the terms of a letter of credit. The plaintiff argued that the invoices did not certify that the goods were as per order, and the negotiating bank did not issue a certificate of compliance. The High Court held that the failure to comply with the terms of the letter of credit, coupled with fraud, justified the injunction. (Paras 2-9)
Issue of Consideration
Whether the trial court was justified in granting a perpetual injunction restraining invocation of a letter of credit on grounds of fraud and non-compliance with the terms of the letter of credit.
Final Decision
The High Court allowed the second appeal, set aside the order of the District Court, and restored the judgment and decree of the trial court granting perpetual injunction restraining invocation of the letter of credit.
Law Points
- Letter of credit
- fraud exception
- strict compliance
- injunction
- perpetual injunction
- civil procedure
- appeal
