CENTAX INDIA LIMITED Vs. VINMAR IMPEX INC

JUDGEMENT

(1.) The short and narrow point involved in this appeal by special leave is whether upon the principles laid down in United Commercial Bank v. Bank of India, (1981) 3 SCR 300 the Court should not interfere in a transaction between a banker and a beneficiary of a letter of guarantee or indemnity by grant of an injunction at the instance of the buyer restraining the beneficiary from enforcing the liability under the letter of indemnity executed by the banker which was absolute and upon a demand being made by the beneficiary the bank became liable to honour the same, regardless of any controversy between the parties i.e. the appellant who is the buyer, and respondent No. 1, the sellers, as to whether the contract of sale had been performed.

(2.) Briefly stated, the facts are that the appellant, the buyer, covenanted to purchase and respondent No. 1 Messrs Vinmar Impex Inc., Singapore, the sellers, agreed to sell and supply 100 M.T. of High Density Polythene Powder called HDPE @ $ 565 per M.T. CIF, Calcutta on an irrevocable letter of credit being opened by the appellant in favour of respondent No. 1, the sellers. One of the terms of the contract as per the letter of intent dated April 29, 1985 signed by both the parties pertained to the 'shipping mark' and was to the effect:

(3.) It appears that the parties entered into a correspondence due to the failure on the part of respondent No. 1 to forward, through Bank, the original bills of lading, marine insurance policy, signed invoices etc. to enable the appellant to take delivery. Since the Shipping Company was refusing to release the cargo for want of the original bills of lading and other documents, respondent No. 1 instructed them to release the said cargo upon the appellant furnishing bank guarantee for release of the goods in lieu of the original bills of lading and other documents. Accordingly, the Allahabad Bank, at the instance of the appellant, executed four letters of indemnity, variously described as letters of guarantee or letters of indemnity or both, and each of the documents has been countersigned by the appellant in favour of the Shipping Company. On the strength of the said letters of indemnity, the Shipping Company delivered the goods to the appellant without production of the original bills of lading, marine insurance policy. signed invoices etc. After taking delivery of the goods, the appellant sold them in the market and realised the proceeds amounting to Rs. 17,50,000. The Shipping Company having made a demand upon the Allahabad Bank to honour the letters of indemnity and the Bank having called upon the appellant to pay the amount due, the appellant brought a suit in the Original Side of the Calcutta High Court seeking to recover Rs. 9,25,020.80 p. as damages from respondent No. 1, the sellers. alleging that they were in breach in that the goods despatched by respondent No. 1 were of inferior quality and not the goods contracted for i.e. not of grade 5202 but of grade 5502, and also because they had failed to forward the original shipping documents. The appellant applied for grant of a temporary injunction under Order XXXIX, R. 1 of the Civil P. C. 1908 restraining the Allahabad Bank from making any payment to the Shipping Company in terms of the letters of indemnity and also restraining respondent No. 1 from recovering the amount due thereunder.