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1 - 7 of 7 (0.26 seconds)Federal Bank Ltd vs V.M Jog Engineering Ltd. And Ors on 29 September, 2000
8. The law on invocation of the bank guarantees or letters of credit is
well settled. The Supreme Court in Federal Bank Ltd. Vs. V.M.Jog
Engineering Ltd. and Ors., (2001) 1 SCC 663 observed that the Court
ought not to grant injunction, to restrain invocation of bank guarantees or
letters of credit. The Supreme Court carved out two exceptions to this
rule, viz. fraud and irretrievable damage. It further observed that the
contract of bank guarantee or letter of credit is independent of the main
OMP(I) 85/2015 Page 8 of 12
contract between the seller and the buyer. In case of an irrevocable bank
guarantee or letter of credit, the buyer cannot obtain injunction against
the final payment on the ground that there was a breach of the contract
by the seller. The bank is to honour the demand for encashment if the
seller, prima facie, complies with the terms of the bank guarantee or the
letter of credit namely, if the seller produces the documents enumerated
in the bank guarantee or the letter of credit. If the bank is satisfied on the
basis of the documents that they are in conformity with the list of
documents mentioned in the bank guarantee or the letter of credit and
there is no discrepancy, it is bound to honour the demand of the seller for
encashment. It is not permissible for the bank to refuse the demand on
the ground that the buyer is claiming that there is a breach of contract.
The obligation of the bank under the documents has nothing to do with
any dispute as to breach of contract between the seller and the buyer.
The Supreme Court also observed that in order to obtain injunction
against the issuing bank that it is necessary to prove that the bank had
knowledge of fraud.
Lalit Kumar Bagla vs Karam Chand Thapar & Bros. (Cs) Ltd. on 9 September, 2013
In Lalit Kumar Bagla (supra) also the learned Single Judge of
this Court was considering an appeal impugning the judgment of learned
Additional District Judge who had decided disputes between the parties
on merits. The petitioner would be within its right to urge the proposition
OMP(I) 85/2015 Page 11 of 12
which has been urged now, before the Arbitrator. The issue in this lis
being very limited, this judgment is also not applicable.
Section 33 in The Arbitration Act, 1940 [Entire Act]
Section 73 in The Indian Contract Act, 1872 [Entire Act]
Section 74 in The Indian Contract Act, 1872 [Entire Act]
Section 30 in The Arbitration Act, 1940 [Entire Act]
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