Mr. Z
Address….
Re: Legal Opinion regarding payment against L/C. No. …………… dated 30.10.2005, A/C. COMPANY 1.
Dear Sir,
We refer to your letter No. ……………… dated 09.06.2005 on the above subject.
We have perused the papers/documents including plaint of Title Suit No. 78 of 2005 and application for mandatory injunction referred to us. We understand that BANK 1 (BANK 1) at the request of its client, COMPANY 1, a proprietorship concern of Mr. X (the buyer), opened various Letters of Credit including L/C No. …………….. dated 30.10.2005 (the L/C) in favour of COMPANY 2 (the supplier). The Bank vide its letter dated 12.03.2005 communicated the maturity date of payment of bill on 12.06.2005 under the L/C.
It appears that the buyer filed Title Suit No. 78 of 2005 against the supplier and other impleading BANK 1 as defendant Nos. 3 & 4. In the said suit the plaintiff (buyer) filed an application for temporary injunction against BANK 1 restraining payment of the amount under the L/C being No. ……………… dated 29.12.2004 and the learned Court only issued show cause notice upon the defendants.
Now, the matter has been referred to us and we are requested to advise as to whether BANK 1 has to pay the bill under L/C No. ……….. dated 30.10.2004.
Our opinion is as follows:
The Letter of Credit is governed by Uniform Customs and Practice for Documentary Credits, ICC Publication No. 500 (“UCP”).
Article 9 of the UCP runs as follows:
“Article 9
Liability of Issuing and Confirming Banks
a. An irrevocable Credit constitutes a definite undertaking of the Issuing Bank, provided that the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and that the terms and conditions of the Credit are complied with;
i. if the Credit provides for sight payment – to pay at sight;
ii. if the Credit provides for deferred payment – to pay on maturity date(s) determinable in accordance with the stipulations of the Credit;
iii. if the Credit provides for acceptance:
a. by the Issuing Bank – to accept Draft(s) drawn by the Beneficiary on the Issuing Bank and pay them at maturity.”
It appears that BANK 1 accepted the documents, confirmed maturity date of payment under L/C No. ………………. dated 30.10.2004, which has already expired on 12.06.2005. In light of above provisions of the UCP, since BANK 1 accepted the documents under the L/C and communicated the maturity date to the beneficiary’s bank, we are of the view that BANK 1 being the issuing and confirming Bank is under legal obligation to pay the bill amount under the L/C in question.
Further, please note that the L/C No. ……………. dated 30.10.2005 for which the BANK 1 confirmed the maturity date of payment is not subject matter of the Suit No. ……………….. In the said Suit the plaintiff (buyer) sought injunction against the payment under the L/C No. ……………… dated 29.12.2004 which is different from the L/C in question.
Yours faithfully,
………………….
For: “The Lawyers & Jurists”