GARWARE-WALL ROPES LIMITED Vs. MARG LIMITED

JUDGEMENT

(1.) THIS appeal has arisen from the order of the learned Single Judge of this Court allowing an application in O.A.No.1202 of 2008 filed by the first respondent/plaintiff seeking for interim injunction restraining the appellant/first defendant from claiming or demanding any amount under the letter of credit No.MDSC/INLC/ML/I/08-09 dated 14.7.2008 or under its amended one dated 4.8.2008 issued by the second respondent without delivery of materials at the site and consequently restraining the second respondent from effecting any payment to the appellant under the letter of credit.

(2.) THE above application has been filed by the first respondent/plaintiff with the following averments:(a) THE first respondent, a construction company, called offers from several contractors for various works at the proposed Port including construction of a reinforced wall around the Port. THE appellant submitted its offer on 16.6.2008 for supply of Soil reinforcement consisting of Tensar Geogrids, Polymer Connectors, Geotextile, etc., for the Reinforced Soil Retaining Wall System. As per Clause III of the offer, the payment was to be made through an irrevocable letter of credit payable in thirty days from the date of invoice and bill of lading with lorry receipt. As per Clause VI, the supplies were to be commenced within 8 weeks and completed within 12 weeks from the date of opening of the letter of credit. THE first respondent issued a letter of award on 17.6.2008. THE value of the order was Rs.2,04,08,700/- As per Clause 2 of Annexure I to the Letter of Award, 95% of the order value was required to be paid through irrevocable letter of credit. THE balance 5% of order value was to be retained by the plaintiff as retention money which was to be released on expiry of defects liability period. As per Clause 4 of Annexure I, the appellant agreed to complete the total supply of materials within 8 weeks from the date of receipt of the order. On 23.6.2008, the letter of award was modified, and the time schedule for completion of the supplies was extended to 12 weeks. THE payment terms was also amended to 100% of the order value to be paid through irrevocable letter of credit on the appellant furnishing a bank guarantee for 5% of the order value. (b) THE appellant submitted a proforma invoice for supply of materials on 28.6.2008. On 14.7.2008, the second respondent issued an inland irrevocable letter of credit for an aggregate sum of Rs.2,03,84,373/- In terms of the letter of credit, the appellant was required to submit certain documents for negotiating payment under the letter of credit. THE second respondent agreed that payment would be effected only in the event of compliance with the terms and conditions of the letter of credit and presentation and delivery of documents specified in the letter of credit. (c) On 22.7.2008, at the request of the appellant, the conditions with regard to the time schedule for supply was modified. On 4.8.2008, the letter of credit was modified. THE appellant failed to supply the materials in accordance with the terms of the work order. Payments have been effected with regard to supplies that were made by the appellant upto 12.9.2008. After 12.9.2008, no materials have been delivered by the appellant at the Port site. With regard to the work of construction of the reinforced wall, the appellant submitted its offer dated 18.6.2008. THE first respondent has awarded the same to the appellant under the letter of award dated 19.6.2008. On 30.10.2008, the first respondent was surprised to receive a request from the second respondent to accept a bill of exchange drawn by the appellant and negotiated for payment under the letter of credit. As no materials had been delivered by the appellant after 12.9.2008 and all payments for materials delivered at site had been effected, the first respondent immediately requested the second respondent to provide the documents furnished by the first respondent for claiming payment under the letter of credit. On perusal of the documents, the first respondent was surprised to note that the appellant had alleged that certain materials were despatched on 15/16.10.2008 and had furnished the lorry receipts singed by its engineer purportedly at the Port site acknowledging delivery of materials. But, the said materials have not been actually delivered till date at the first respondent's project site. THE appellant is playing a fraud on the first respondent by claiming payment under the letter of credit for materials which have not been delivered till date. (d) THE first respondent wrote a letter to the appellant on 3.11.2008. THE first respondent has found several discrepancies in the documents submitted by the appellant and it was also brought to the notice of the second respondent vide letter dated 4.11.2008. THE first respondent is given to understand that the second respondent bank despite being fully aware of the aforesaid facts may not reject the fraudulent claim made by the appellant. THE appellant has also set up a ground that the goods had been delivered. On verification of the entry register maintained at the Karaikkal Port, the first respondent found that neither the appellant's materials nor any of their lorries/vehicles had entered the Port on 16.10.2008. THE appellant is clearly making a false and fraudulent claim under the letter of credit. In the event of the second respondent being compelled to effect payment under the letter of credit in respect of a claim which is based not only on fraudulent documents but also on discrepant documents, the first respondent would suffer irretrievable injury and hardship. THE appellant has not only failed to complete the delivery of materials but also completely failed in execution of the work. Irreparable hardship and great prejudice would be caused to the first respondent, if the appellant is not restrained from perpetuating a fraud on the first respondent and to restrain the second respondent bank from effecting any payment contrary to the terms and conditions of the letter of credit dated 14.7.2008 and as amended on 4.8.2008. Hence the application.

(3.) THE learned Senior Counsel Mr.T.V.Ramanujun appearing for the appellant would submit that the order of the learned Single Judge is erroneous that even after the proforma invoice was issued, no letter of credit was opened by the plaintiff and hence the appellant was constrained to send a letter dated 7.7.2008 that thereafter only, the letter of credit was opened on 14.7.2008 that the plaintiff issued another letter of award dated 18.6.2008 which is a separate one that the appellant had complied with all the terms and conditions set forth in the letter of credit dated 14.7.2008 and so also had complied with its duties and responsibilities and is thus entitled to negotiate the letter of credit for payments that the finding of the learned Single Judge that physical delivery to the plaintiff was a pre-condition for negotiating the irrevocable letter of credit is erroneous since no such condition ever existed in the terms of the said letter of credit that all the documents including the lorry receipt consignor copy certified by Garware Engineer at Karaikkal Site were submitted to the second defendant by the appellant and the terms in the letter of credit were complied with that under the circumstances, the appellant is entitled to negotiate the letter of credit that in fact the appellant has negotiated the letter of credit only after complying with the terms of the letter of credit that it is pertinent to note that when the appellant delivered the goods at the Karaikkal Port site, it was the plaintiff who refused to accept the same that the lorry receipts with the seal of Tarangambadi Check Post and subsequent letter and email sent to the appellant by its carriers M/s.Dhoble Good Carriers would clearly establish that the goods were in fact transported and tendered for delivery to the first respondent/plaintiff at the destination project site Karaikkal Port that the fact that the transporter has transported the goods to the destination port site at Karaikkal and also the fact that all the vehicles were standing outside the destination port site for four days and also the affidavit of the transporter namely M/s.Praveen Transport, that the goods were transported from Karaikkal to their godown in Pondicherry would make it clear that the appellant completed its part of delivery of transporting the goods to the destination port site at Karaikkal that under the circumstances, the appellant company was proper in negotiating the letter of credit dated 14.7.2008 and the amended one dated 4.8.2008 and that the fact that the appellant having transported and made available the goods at the doorsteps at the destination port site would amount to delivery of materials at the site.