X (BD) Ltd. -Versus- Z Co. Ltd. & Others

IN THE COURT OF ASSISTANT JUDGE, 3RD COURT, DHAKA

TITLE SUIT NO. 245 OF 2006

X (BD) Ltd.

PLAINTIFF-PETITIONER

-Versus-

Z Co. Ltd. & Others

DEFENDANTS – OPPOSITE PARTIES

WRITTEN OBJECTION ON BEHALF OF DEFENDANTS/OPPOSITE PARTIES NOS. 2 & 3 AGAINST THE APPLICATION UNDER ORDER 39 RULE 1 & 2 READ WITH SECTION 151 OF THE CODE OF CIVIL PROCEDURE FOR TEMPORARY INJUNCTION:

01. That the plaintiffs-petitioner have filed this application seeking relief of temporary injunction restraining the defendant No. 2 from making payment against the confirmed Letter of Credit No. 3035-05-02-0036 dated 03.12.2006 (the “Letter of Credit”) to the Proforma defendant No. 4. It has been decided by the Higher Courts of Bangladesh in many cases that there can be no injunction on a bank prohibiting it to make payment under an Irrevocable Letter of Credit and as such this application is liable to be rejected.

02. That it is submitted that the Letter of Credit incorporated the terms and conditions of the Uniform Customs and Practice for Documentary Credits (1993 Revision, ICC Publication No. 500) (hereafter “UCPDC”). According to the provisions contained in UCPDC, the Letter of Credit transaction creates a contract between the Opening or Issuing Bank (in this instance the defendant No. 2) and the Advising or Negotiating Bank which is completely autonomous and separate from the underlying contract of supply of goods. The Issuing Bank of a Letter of Credit is completely unconcerned with the performance of the underlying contract. As soon as the documents tendered by the Beneficiary of the Letter of Credit are in conformity with the mandate of the Letter of Credit, the Issuing Bank is under an absolute obligation to reimburse the Bank that has negotiated and/or made payment against such documents. Therefore, no injunction can lie in law to restrain the Issuing Bank from making payment in such circumstances where the relevant allegation lies solely with regard to short delivery/inferior quality of the goods. There is no law which states that because of short delivery/inferior quality of the goods, payment under Letter of Credit can be cancelled. As such, the application of the plaintiffs is not maintainable in law.

03. That Article 3(a) of the UCPDC 500 reads as follows:

“Credits, by their nature, are separate transactions from the sales or other contract(s) on which they may be based and banks are in no way concerned with or bound by such contract(s), even if any reference whatsoever to such contract(s) is included in the credit”.

Article 4 of UCPDC 500 provides as follows:

“In Credit operations all parties concerned deal with documents, and not in goods, services and or other performances to which the documents may relate.”

Therefore, at all stages of the relevant transaction, the defendant/opposite parties Nos. 2 and 3 (hereinafter referred to as “these defendants/opposite parties) were concerned only with documents and can in no way be held responsible for the goods for which the L/C was opened. There was no contract between these defendants/opposite parties and the plaintiff-petitioner stipulating that if goods delivered under L/C would appears to short or inferior quality, these defendants/opposite parties would not make payment of the L/C amount. These defendants/opposite parties were unable to stop payment under the L/C despite the subsistence of the injunction order as the defendant No. 4 has debited the L/C amount from the Nostro Account of these defendants/opposite parties maintained with them. Therefore, the plaintiff is under the obligation to reimburse these defendants/opposite parties for the L/C amount which has already been paid to the defendant No. 4. Instead of paying the L/C amount, the plaintiff has filed this suit and application to harass these defendants/opposite parties and to make illegal gain from it.

04. That there is series of decision of the High Court Division as well as Appellate Division of the Supreme Court of Bangladesh that no injunction shall be granted in letter of credit transaction restraining the letter of credit opening Bank from making payment under the letter of credit, namely:

(i) Unimarine SA Panama Vs. Bangladesh 31 DLR (AD) 112

(ii) Uttara Bank Vs. Macneil and Kilburn and others 33 DLR (AD) 298

(iii) Sarhind Garments Vs. Glory Truth 49 DLR 260

(iv) Zyta Garments Ltd. Vs. Union Bank Limited and another 55 DLR (AD) (2003) (May issue)

(v) M/S. Tanni Knit Wear Limited Vs. Deputy General Manager, Sonali Bank and others 2 MLR (1997) (AD) 396

05. That the suit filed by the plaintiff-petitioner is not maintainable in its present form and nature and hence the application for injunction is liable to be rejected in limine.

06. That there is no cause of action to file the suit and as such the suit as well as the application for injunction is liable to be rejected.

07. That the suit has been filed with mala fide intention to make illegal gain from these defendants/opposite parties. Since the suit has been filed with malafide motive, the suit and application for injunction both are liable to be rejected.

08. That no injunction can be granted prohibiting a bank to disburse any sum under a Irrevocable Letter of Credit and thereby compel the bank to violate its obligation under the said credit.

09. That the statements made in the paragraphs of the application for temporary injunction that are not hereinafter admitted shall be deemed to have been denied by these defendants/opposite parties.

10. That the statements made in paragraphs 1 to 7 of the application are mostly matters of record. The burden of proving the statements lies strictly upon the petitioner and therefore, these defendants/opposite parties refrains from making any comments.

11. That the statements made in paragraph 9 of the application are matters related to quality and quantity of goods. As per Article 4 of UCPDC 500 in Credit operations all parties concerned deal with documents, and not in goods, services and or other performances to which the documents may relate. Therefore, at all stages of the relevant transaction, these defendants/opposite parties were concerned only with documents and can in no way be held responsible for the goods for which the L/C was opened. There was no contract between these defendants/opposite parties and the plaintiff-petitioner stipulating that if goods delivered under L/C would appears to short delivery/inferior quality, these defendants/opposite parties would not make payment of the L/C amount.

12. That the statements made in paragraph No. 10 to 12 of the application are matters not related to these defendants/opposite parties the proof of which lies strictly on the plaintiffs/petitioner and as such require no comments.

13. That the statements made in paragraph No. 13 to 16 of the application are incorrect, misleading and misconstrued. It is submitted that as per terms and conditions of the L/C, these defendants/opposite parties are bound to make payment the L/C amount upon receipt of the documents. It may be mentioned in this regard that since “Add Confirmation” was given to the letter of credit by the defendant No. 4 at the request of the plaintiff, it had a duty to pay to the supplier if the documents were in order. It is necessary to mention here that as per terms of UCPDC Banks in credit transaction deal with documents only. They are not concerned with the goods. Since the documents were found in order, the said defendant made payment to the supplier. After making payment by the defendant No. 4 to the supplier, the defendant No. 4 got reimbursement of the L/C amount on 08.02.2007 by way of debiting these defendants/opposite parties’ Nostro Account maintained with Standard Chartered Bank, New York, U.S.A.

14. That it is submitted that as the issuing bank of a letter of credit governed by the provisions of the Uniform Customs and Practice for Documentary Credit (UCPDC), these defendants/opposite parties are only concerned with documents and are not involved in any way with the underlying contract or L/C to supply the goods and its performance. The defendant No. 4 debited the L/C amount from the Nostro Account of these defendants/opposite parties and therefore the plaintiffs/petitioners are under the obligation to reimburse these defendants/opposite parties. So the suit and the petition for temporary injunction filed by the plaintiff/petitioner is liable to be rejected.

In the circumstances, the order of ad interim temporary injunction granted may be vacated and the application for temporary injunction filed by the plaintiffs/petitioners may be dismissed with costs in favour of the defendants/opposite parties Nos. 2 & 3.

And for this act of kindness these defendants as in duty bound shall ever pray.

AFFIDAVIT

I, __________________________, son of ___________________, aged about ______________ years, by occupation Service, by faith Muslim, Nationally Bangladeshi by birth, do hereby solemnly affirm and say as follows:

1) That I am an officer of the defendants/opposite parties Nos. 2 and 3 and fully acquainted with the facts and circumstances of the case and competent to swear this Affidavit.

2) That the statements made above are true to my knowledge and belief and the rest are submission before the Hon’ble Court.

DEPONENT

The deponent is known to me and identified by me.

ADVOCATE

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