Legal Opinion regarding release of payment of Import Bill for US$ 10,900/- under PAD No. ……….. drawn against L/C No. ………… A/C. COMPANY 1.

Mr. Z

Address….

Re:      Legal Opinion regarding release of payment of Import Bill for US$ 10,900/- under PAD No. ……….. drawn against L/C No. ………… A/C. COMPANY 1.

Dear Sir,

We refer to your letter No. ……………. dated 06.11.2004 (received on 08.11.2004) on the above subject.

We have perused the papers/documents referred to us.

We understand that at the request of COMPANY 1 (the “Applicant”), BANK 1opened L/C No. ………… dated 22.09.2003 for US$ 10,900/- in favour of COMPANY 2, India (the “Beneficiary”). Subsequently, BANK 1 received discrepant documents from the Beneficiary’s bank, Vijaya Bank Kolkata, India. BANK 1 referred the discrepancies to the Beneficiary’s bank and to the Applicant.

The Applicant accepted the discrepancies vide their letter dated 08.12.2003 against which BANK 1endorsed/delivered the shipping documents to them and they released the goods from the port. Subsequently, BANK 1received several letters from BCIC requesting not to make payment as the supplier allegedly could not ship the goods as per the purchase order.

By SWIFT message dated 26.01.2004 and 12.08.2004, BANK 1informed the Beneficiary’s bank about the contentions raised by the Applicant and to request the Beneficiary to settle the issue with the Applicant as per Additional Condition Nos. 4 and 5 of the L/C. In reply, BANK 1received SWIFT message dated 18.08.2004 and 09.09.2004 from the Beneficiary’s Bank requesting to make payment.

Subsequently, BANK 1received a legal notice from COMPANY 1, legal adviser of BCIC requesting not to make payment against the Bill. They also informed BANK 1that BISF has filed Title Suit No. 284 of 2004 on 20.09.2004 against the Beneficiary and other concerned including the Bank. In the said suit, BISF prayed for temporary injunction against BANK 1restraining it to make payment of the amount under the L/C.

BANK 1received a show cause notice from the Court as well as summons for appearing in the Court on 19.10.2004. However, BANK 1has till date not received any injunction order from the Court. The next date of the suit has been fixed on 29.11.2004 for hearing.

By message dated 05.10.2004, BANK 1informed the Beneficiary’s bank about its inability to release payment as the matter is sub judice. In reply, BANK 1has received a SWIFT message dated 31.10.2004 from the Beneficiary’s bank again requesting to make payment.

In such a situation, you have requested us to provide legal opinion regarding release of payment of the import bill for US$ 10,900/- under PAD No. 03/285 drawn against L/C No. 0432 03 01 0455.

Our Opinion

From the papers/documents, it appears that BISF has filed Title Suit No. 284 of 2004 in the 4th Court of Assistant Judge, Dhaka against COMPANY 1 and others (General Manager, BANK 1being defendant No. 4) praying for declaration that the defendant Nos. 1 and 2 (i.e. COMPANY 2 and COMPANY 3) are bound to replace 10,000 set steel pin (short sank) within the stipulated period as per the purchase order.

In the said suit, the plaintiff i.e. BISF also filed an application under Order 39 Rules 1 and 2 of the Code of Civil Procedure, 1908 praying for temporary injunction against BANK 1restraining it from making payment of UD$ 10,900 under L/C No. 0432 03 01 0455 dated 22.09.2003 to COMPANY 2.

Upon hearing, the learned Court issued notice upon the defendant Nos. 1, 2 and 4 to show cause within 7(seven) days from the date of receipt of the notice as to why order of temporary injunction shall not passed. BANK 1received the show cause notice from the Court as well as summons for appearing in the Court on 19.10.2004. We understand that BANK 1has not yet received any order of injunction from the Court.

Since notice of show cause has been issued against BANK 1, it should appear in the suit and explain its position to the Court as per Uniform Customs and Practice for Documentary Credits (1993 Revision, ICC Publication No. 500) (“UCP 500”).

With regard to release of payment of the amount under the L/C, please note that since BANK 1 has endorsed and released the shipping documents to the Applicant upon its acceptance of the discrepancies, BANK 1 is legally obliged under UCP 500 to make payment of the L/C amount to the Beneficiary’s bank.

In so far as the show cause notice is concerned, it has been decided by the High Court Division of the Supreme Court in BANK 2 & Others vs. MR. X reported in 8 MLR (HC) (2003) 361 as follows:

“No authority of any jurisdiction could be placed before this Court from the side of plaintiff-opposite party that in the absence of any order of ad-interim injunction or maintenance of status quo and only on the basis of a show cause notice an act had been done by a party and in respect of the commission of that act status quo ante in the form of mandatory injunction had been recorded. It can be well said that on the strength of a mere notice of show cause as to why injunction would not be granted not followed by a legal command/order a mandatory interlocutory injunction cannot be justified.”

Thus, show cause notice does not amount to injunction. Since BANK 1is legally obliged to make payment of the L/C amount to the Beneficiary’s bank and as there is no injunction or prohibitory order from the Court restraining BANK 1from making payment under the L/C in question, we are of the opinion that BANK 1may release payment of the L/C amount to the Beneficiary’s bank.

If you have any further query, please do not hesitate to contact the undersigned.

Thanking you.

Yours faithfully,

………………….

For: “The Lawyers & Jurists”