STATE BANK OF MYSORE Vs. MACHADO COMPUTER SERVICES

JUDGEMENT

(1.) THIS appeal challenges the order of injunction restraining the appellant bank from encashing a letter of Credit (LC) from the respondent No. 3 bank pending the suit filed by the respondent No. 1 herein inter alia against the respondent Nos. 2, 3 and the appellant as the defendant Nos 1,2 and 3 respectively. There were two letters of credit applied for by the plaintiff in the suit (the respondent No. 1 herein) from its banker respondent No. 3. These have been discounted by the appellant bank. The appellant bank called upon the respondent No. 3 bank to make payment in terms of the bill of exchange drawn by the respondent No. 2 and accepted by the respondent No. 1 under the transaction.

(2.) THE transaction between the parties was the sale of certain computer parts which were delivered by the respondent No. 2 to the respondent No. 1 and accepted by the respondent No. 1 upon taking inspection and stating that they were received in full and in satisfactory working condition.

(3.) IT is settled position in law that no injunction can be granted against enforcing or invocation of bank guarantees or letters of credit as these documents ensure commercial expediency which cannot be jeopardised by injunction orders. The only exception for grant of injunction restraining the enforcement of bank guarantees or letters of credit are the cases of fraud and irretrievable injury. Hence, the plaintiff in the suit was required to show the Court either fraud or irretrievable injury in the contract of sale of goods under which the plaintiff would be required to make payment to injunct the appellant bank who discounted the LC from enforcing it through the banker of the party who applied for the LC.