BANK OF INDIA Vs. VIMAL SERVICE LTD

JUDGEMENT

(1.) THIS appeal has been preferred by the bank of India, Nehru Place Branch, New Delhi, the first respondent, challenging the judgment of the learned Single Judge directing the appellant-Bank to discharge its obligation under Irrevocable Revolving Letter of Credit bearing No. N. P. / revolving L. C. /35/51 of June 1, 2005 (for short 'i. R. L. C. ') and Amendment to L. C. of June 13, 2005, and to make payment of the outstanding amount as on August 14, 2006, and to continue to make payments of the rental and also to pay the costs of Rs. 10,000/ -. Learned Single Judge, it was contended, has not properly appreciated the various provisions of I. R. L. C. and their legal effect and consequences, and also failed to note that there were lot of discrepancies in the documents submitted to the Bank, and therefore, the issuing Bank is not legally obliged to honour the I. R. L. C. when it was presented by the 2nd respondent-State Bank of Saurashtra. Further, it is also stated that the 2nd respondent-Bank had failed to carry on negotiations with M/s. A. K. Enterprise (the applicant) to honour the bills produced by Vimal Services Ltd. , the petitioner (the beneficiary) and then seeking for collection from Bank of India. Further, it was also pointed out that High Court of Gujarat has no jurisdiction to entertain the present writ petition, since head office of the appellant-Bank is situated at new Delhi and the cause of action arose at New Delhi.

(2.) ORIGINAL Petitioner-Vimal Services Ltd. is engaged in the business of providing low-cost fuel (furnace oil) for operating power plant machinery on rental basis for generating electricity. Generating plant is manufactured by importing certain machinery from foreign countries. M/s. A. K. Enterprise, having its office at New Delhi, was desirous of getting such power plant installed at M/s. Ved Cellulose Ltd. at Ghaziabad. For that purpose, A. K. Enterprise placed an order dated 7th June, 2005 on the petitioner, and Memorandum of understanding (M. O. U.) was arrived at on 7-6-2005 at Vadodara in the State of Gujarat. Agreement provided for executing an Irrevocable Revolving Letter of Credit or Financial Bank Guarantee. Such guarantee would be for Rs. 240 lakhs and was valid for 27 months. Further, it was also stated that M/s. A. K. Enterprise and Ved Cellulose Ltd. had agreed and guaranteed that the proprietors and partners, in their financial capacity as well as in their personal capacities, would remain liable for monthly rental payments for the entire contractual period even in the event of closure or dissolution of M/s. A. K. Enterprise and M/s. Ved Cellulose Ltd. Based on the contract, A. K. Enterprise, had through Bank of India, caused the issuance of I. R. L. C. dated 1-6-2005, produced at Annexure 'b' along with the petition.

(3.) ORIGINAL-PETITIONER has taken up the stand that as per the agreement, it had installed the machinery at 16th km. stone on Hapur Road, VIII Lakhan, o. P. Galan, District Ghaziabad (U. P.), and for the purpose of installation a part of land/property was taken on lease by the lessor-petitioner-Company, and the lessee-Company is utilizing the power generated through the machinery installed by the petitioner-Company. Petitioner is having its accounts with the 2nd respondent-Bank, and pursuant to the I. R. L. C. , petitioner-Company had sent the invoices/bills to the appellant-Bank for realisation. A total of 18 invoices/ bills were sent and they were not honoured by the appellant-Bank, on the ground of alleged discrepancies in the documents, but without giving any explanation as to what were the discrepancies. Petitioner, had therefore, addressed a letter dated 24-5-2006 to the appellant-Bank and petitioner was advised to resubmit the bills vide letter dated 28-6-2006. On 14-8-2006, petitioner addressed another letter to the appellant-Bank in respect of the outstanding payment, which was required to be collected from M/s. A. K. Enterprise towards rental charges for providing 1378 K. V. A. (1. 5 M. W.) power. Appellant-Bank has addressed letters dated 3-8-2006 and 24-8-2006 to 2nd respondent-Bank and returned the documents stating : 'the payment is not forthcoming'.