Rigoss Exports International (P) ... vs Tartan Infomark Ltd. And Ors.
2002 Latest Caselaw 109 Del

JUDGMENT

O.P. Dwivedi, J.

1. This order shall govern the disposal of OMP No. 335/99 titled Rigoss Exports International (P) Limited v. Tartan Infomark Limited and Ors. filed by the petitioner and IA. No. 12075/99 under Order 39 Rule 4 CPC for vacation of the ad interim ex parte order dated 25.11.99 filed by the respondent No. 1.

2. Briefly stated the facts leading to this petition are that petitioner is engaged in the business of ready-made garments of different specifications whereas respondent No. 1 Tartan Infomark Limited are agents of various garment importers at Singapore and other countries. Mr.

company, represented to the petitioner that they would be able to procure Letter of Credit from various foreign buyers and would be able to arrange the export of ready made garments by the petitioner to such foreign buyers and for this purpose, respondent No. 1 would be charging commission on each deal. On this representation of respondent No. 1, the petitioner entered into three agreements in the form of MOUs. The first MOU dated 28.7.99 was for export of 22,000 pieces of jeans for a total value of USD 2,20,000/- for which respondent No. 1 was entitled to commission of Rs. 18,92,000/-. This commission was payable 15 days after the expiry of Letter of Credit No. SL. 218128 dated 18.6.99 subject to the condition that the respondent No. 1 will provide the required extension of the said Letter of Credit and also provide inspection certificate so as to enable the petitioner to export the goods and receive payments under the Letter of Credit. The said MOU stipulated that the petitioner shall furnish bank guarantee in favor of the respondent No. 1 to secure the payment of the commission but actually no bank guarantee was given by the petitioner in favor of the respondent No. 1 in respect of the said deal. It is pleaded by the petitioner that respondent No. 1 was unable to get the extension of Letter of Credit No. 218128 dated 18.6.99 in terms of the agreement. So no commission was payable in respect thereof. According, to the petitioner the goods in respect of the said Letter of Credit were ready for shipment. Later on another Letter of Credit bearing No. 990981 dated 15.10.99 was given to the petitioner by respondent No. 1 and the consignment was shipped but the documents sent for negotiation were rejected by the buyer's bank on the grounds, inter alia, that the inspection certificate provided by respondent No. 1 to the petitioner was a forged document. The second MOU dated 29.7.99 was signed between the parties for export of 18,000 pieces of shirts for total value of USD 1,27,620/- and a sum of Rs. 17,21,250/- was payable as commission to the respondent No. 1 for which a bank guarantee dated 12.8.99 was also given by the petitioner's banker, respondent No. 2, in favor of the respondent No. 1.

3. The third MOU dated 12.8.99 was signed between the parties for export of 54,000 pieces of shirts for a total value of USD 3,82,860 on which the commission payable to the respondent No. 1 was 51,63,750/- and a bank guarantee dated 13.9.99 for Rs. 25 lac was issued by the respondent No. 2 in favor of respondent No. 1.

4. As regards second MOU dated 29.7.99 for export of 18,000 pieces of shirts, the goods were kept ready for export and a request was made to the respondent No. 1 vide letter dated 8.10.99 to inspect the goods and issue requisite Inspection Certificate. The said letter was acknowledged by the Respondent No. 1 through their reply dated 9.10.99 but respondent No. 1 did not inspect the goods nor issued the Inspection Certificate. Rather they came forward with a new condition that the petitioner should get a report of the fabric issued by SGS India Limited which was not a requirement under the MOU. Since the Inspection Certificate was not received in respect of consignment of jeans covered under the first MOU dated 28.7.99 and the consignment of shirts covered under second MOU dated 29.7.99, a fourth MOU dated 29.10.99 was signed between the parties for setting the existing disputes regarding the working of earlier MOUs. Under the MOU dated 29.10.99 it was argued between the parties that respondent No. 1 shall issue Inspection Certificate in respect of supply of 22,000 pieces of jeans covered by the first MOU dated 28.7.99 and will get the remaining two LCs relating to 2nd and third MOUs for supply of 18,000 and 54,000 shirts extended. Respondent No. 1 further agreed not to encash the bank guarantees under Clause 8 of the MOU dated 29.10.99 and petitioner agreed to pay Rs. 5 lac to the respondent No. 1 within 3 to 4 days against the export of jeans. Besides the petitioner agreed to pay Rs. 6,70,000/- more in two Installments. The first Installment of Rs. 5 lac was to be paid on 1.11.99 and the second Installment was to be paid on 3.11.99. It is alleged that the petitioner paid a sum of Rs. 5 lac to the respondent No. 1 on 1.11.9 against receipt and another sum of Rs. 1.70 lac on 4.11.99 against receipt. According to the petitioner besides the said payment of Rs. 6,70,000/- through receipts, the petitioner also made a further payment of Rs. 5 lac on 16.11.99 in cash for which no receipt was issued. As per MOU dated 29.10.99, respondent No. 1 was required to provide Inspection Certificate by 30.10.99 in respect of jeans and the Inspection Certificate was in fact provided by respondent No. 1 on 30.10.99. The said Inspection Certificate purported to have been issued by Transworld Corporation Pvt. Limited, Singapore signed by Tikamdas R. Mulani. Some passport number was also mentioned in this letter. Goods were shipped and the documents were presented for negotiations but the documents were rejected by the buyer's banker on the ground that the Inspection Certificate was forged one and the signatures have not been verified by their banker. Petitioner received a fax message dated 18.11.99 from their banker regarding the rejection of the documents on account of various discrepancies. Thus according to the petitioner, due to rejection of documents by buyer's bank on the ground that the Inspection Certificate provided by respondent No. 1 in respect of the supply of 22,000 pieces of jeans was a forged document, the petitioner had to suffer heavy monetary loss as he had already made the shipment to Singapore. The consignment of 18,000 pieces of shirts which was ready for export was never inspected by the respondent No. 1 nor any Inspection Certificate was arranged in respect thereof. so the same could not be shipped. Since the conduct of the respondent No. 1 in procuring Inspection Certificate in respect of first consignment had been found to be fraudulent and evasive in respect of 2nd consignment of 18,000 pieces of shirts although both consignments were ready, the petitioner did not send any intimation to the respondent No. 1 for issue of Inspection Certificate in respect of third MOU dated 12.8.99 regarding 54,000 pieces

had wrongfully and illegally received commission of Rs. 11.70 lacs under MOU dated 29.10.99. This conduct of the respondent No. 1 was indicative of the fact that he was only interested in somehow extracting the money from the petitioner in the name of the commission by making false promises and by issuing fake documents. So the petitioner did not offer the third consignment of 54,000 pieces of shirts for inspection. Instead of refunding the amount of Rs. 11.70 lac which the respondent No. 1 had received as commission, they proceeded to invoke the bank guarantees dated 12.8.99 for Rs. 17,21,250/- and dated 13.9.99 for Rs. 25,00,000/- in respect of MOU dated 29.7.99 and 12.8.99 which is patently unjust and illegal. All the three MOUs contain an arbitration clause for resolution of the disputes. The petitioner has, therefore, filed this petition under Section 9 of the Arbitration and Conciliation Act, 1996 seeking an injunction order restraining respondent No. 1 from enforcing/encashment of the said two bank guarantees. A similar restraint order is sought against the petitioner's banker, respondent No. 2 also.

5. While issuing notice of the petition to the respondent on 25.11.99, J.B. Goel, J. stayed the invocation of the said two bank guarantees subject to the conditions that the bank guarantee shall be kept alive.

filed their written statement wherein they admitted having signed the MOU dated 28.7.99 for export of 22,000 pieces of jeans, MOU dated 29.7.99 for export of 18,000 pieces of shirts and MOU dated 12.8.99 for export of 54,0000 shirts of shirts with the petitioner. As regards MOU dated 28.7.99, respondent's version is that the petitioner was unable to fulfill the terms and conditions as stipulated in the said MOU, therefore the said MOU was cancelled under the signatures of the parties and in this regard letter dated 10.10.99 was also issued by the petitioner acknowledging the cancellation of the MOU dated 28.7.99. Thus according to the respondent No. 1 it had nothing to do with the shipment of 22,0000 pieces of jeans made by the petitioner. It is alleged that the petitioner procured the some other Letter of Credit No. 990981 dated 15th October, 1999 from their own source for the shipment of 22,000 pieces of jeans and the respondent No. 1 had nothing to do with the procurement of Letter of Credit No. 990981 or the export made by the petitioner in connection with it. The allegation that the respondent No. 1 had procured a forged Inspection Certificate in respect of consignment of 22,000 pieces of jeans has been denied.

7. As regards MOU dated 29.7.99 regarding the shipment of 18,000 pieces of shirts under Letter of Credit No. 990468 dated 20.08.99, the respondent's stand is that on receipt of petitioner's letter dated 8.10.99 for inspection of the consignment, respondent wrote letter dated 9.10.99 asking the petitioner to intimate the time of inspection and the address where inspection was to be done but the petitioner sent no reply thereto. Further vide letter dated 29.11.99, the petitioner requested the respondent to extend the validity period up to 31.12.1999 which was clearly in violation of Clause 10 of MOU dated 29.7.99 and therefore it was beyond the scope of the respondent No. 1 to provide such an extension.

8. As regards third MOU dated 12.8.99 for export of 54,000 pieces of shirts, it is pleaded that the petitioner completely failed to keep its commitment. The petitioner never asked for inspection of the goods, although they had been asking for extension of validity period. Thus according to the respondent No. 1 they are not at fault in any of their dealings with the petitioner.

9. As regards MOU dated 29.10.99, the stand of the respondent is that no such understanding was ever arrived at and the said MOU is a forged document. The receipt of Rs. 11.70 lac as commission under MOU dated 29.10.99 and execution of receipt for Rs. 6,70,000/- is vehemently denied. In nutshell, the respondent's plea is that they had nothing to do with the shipment of 22,000 pieces of jeans made by the petitioner against Letter of Credit No. 990981 dated 15.10.99 which Letter of Credit had been procured by the petitioner from their own resources as the MOU dated 28.7.99 between the parties had already been cancelled. The petitioner completely failed to fulfill its commitment in respect of the remaining two MOUs dated 29.7.99 and 12.8.99 about which Letter of Credit had been procured by the respondent and therefore the respondent is entitled to invoke/encash the bank guarantees in question.

10. In replication, petitioner has denied that MOU dated 28.7.99 was cancelled. It is also denied that any letter dated 10.10.99 acknowledging the cancellation of MOU dated 28.7.99 was issued by the petitioner. The said letter is alleged to be forged one. Petitioner reiterated that the second Letter of Credit No. 990981 dated 15.10.99 for export of 22,000 pieces

only. In support of this plea, the petitioner in their replication have further pleaded that Luv Bhardwaj, Director of respondent No. 1 had visited the fabricator namely, M/s Act Enterprises for inspection of jeans under the said Letter of Credit and also visited the C&F Agent namely, M/s Global Alliance to inspect the consignment of jeans. The petitioner has placed on record the correspondence exchanged between the petitioner, the jeans fabricator and petitioner's C&F agents to show that Mr. Luv Bhardwaj, Director of respondent No. 1 was actually involved in the transaction relating to the shipment of 22,000 pieces of jeans and was instrumental in procuring the Letter of Credit No. 990981 dated 15.10.99 as also in procuring the Inspection Certificate on the basis of which the petitioner made the shipment but certificate was found to be forged. As regards second MOU dated 29.7.99 regarding export of 18,0000 pieces of shirts, the petitioner has reasserted in the replication that consignment was ready and was

vide letter dated 8.10.99 but the respondent No. 1 avoided inspection on the pretext that some report from SGS India Limited was required which was never stipulated under the MOU or under the terms and conditions of Letter of Credit. On noticing the evasive conduct of the respondent in respect of MOU dated 29.7.99 and out right fraudulent conduct in procuring a forged Inspection Certificate in respect of first MOU dated 28.7.99, the petitioner never offered third consignment of 54,0000 pieces of shirts for inspection although consignment was nearly complete. It is contended that the petitioner's stock of 22,000 pieces of jeans and 18,000 pieces of shirts was ready and it would have been total loss to the petitioner if the shipment was not made. It is alleged that respondent No. 1 took undue advantage of this helpless situation as the petitioner was unable to export the goods for want of inspection certificate, so in order to extract some money in the name of commission, respondent No. 1 forced the petitioner to sign the MOU dated 29.10.99 under which the petitioner was compelled to pay Rs. 11.70 lac to respondent No. 1 but the receipts were issued for Rs. 6,70,000/- only. It is alleged that respondent No. 1 took away the original MOU dated 29.10.99 and also the receipts. The petitioner had to sign the MOU dated 29.10.99 under compelling circumstances because there seemed to be no other possible way to obtain Inspection Certificate from respondent No. 1 in respect of consignment of jeans. It is submitted that as a result of fraudulent and evasive conduct of the respondent No. 1, the petitioner had suffered heavy losses and the respondent should not be allowed to take undue advantage of his own wrong by encashing bank guarantees.

11. During inquiry made at Singapore, the petitioner came to know that this Letter of Credit regarding 22,000 pieces of jeans was actually issued at the instance of Ramdas Nair who in turn got it issued at the instance of Lokesh Bhatia of M/s VPL Services Pvt. Limited, 50 Regal Building, Parliament Street, New Delhi and it was only an accommodating letter of credit. At the request of the petitioner M/s VPL Services Pvt. Limited and Mr. Lokesh Bhatia

respectively in this petition. However, they did not appear despite service of notice.

12. Feeling aggrieved by the ad interim stay regarding encashment of the bank guarantees, respondent No. 1 filed an application under Order 39 Rule 4 CPC being IA. No. 12075/99 for vacation of the ex parte stay order which has been contested by the petitioner on similar grounds.

13. I have heard learned counsel for the parties and perused the record.

14. From the above narration of the averments made by the parties in their pleadings, the core issue which emerges for determination is whether respondent No. 1 had played any role in the procurement of second LC No. 990981 dated 15.10.99 for supply of 22,000 piece of jeans and in the procurement of inspection certificate dated 28.10.99 purporting to have been issued by Transworld Corporation Limited which was found to be forged. According to the respondent they had absolutely no role to play in the procurement of the said LC or the inspection certificate dated 28.10.99. It was contended on behalf of the respondent No. 1 that MOU dated 28.7.99 in respect of 22,000 pieces of jeans had already been cancelled and in this regard the petitioner himself had issued a letter dated 10.10.99 confirming the cancellation of the said MOU and further intimating that the petitioner will arrange some other order from their own sources. Petitioner has denied the cancellation of the MOU dated 28.7.99 and the issuance of letter dated 10.10.99 referred to above. On the contrary their stand is that in order to sort out the difference between the parties regarding these three MOUs, fourth MOU dated 20.10.99 was executed whereunder respondent No. 1 undertook to issue inspection certificate for the supply of 22,000 pieces of jeans by the morning of 30th October, 1999 and also get the LC extended up to 14.11.99 and the petitioner paid a sum of Rs. 11.70 lac, Rs. 6,70,000/- through receipts and Rs. 5 lac in cash. The signing of MOU dated 29.10.99 is denied by respondent No. 1, according to whom it is a forged document and so are the receipts. Both parties have obtained reports from hand writing experts who have given opinion in favor of the irrespective clients. At this stage when the Court has to take only a prima facie view of the matter, it is not possible to give a definite finding as to the genuineness or otherwise of these disputed documents. Apart from these questioned documents, the petitioner has placed on record ample material to show that respondent No. 1 was instrumental in procuring the LC dated 15.10.99 and the inspection certificate dated 28.10.99 in respect to of consignment of 22,000 pieces of jeans. The petitioner has placed on record letters dated 12.8.99, 18.10.99, 20.10.99, 22.10.99, 30.10.99 and 1.11.99 exchanged between the petitioner and the fabricator of jeans M/s Act Enterprises. Vide letter dated 12.8.99 (page 39 of the compilation) written by the petitioner, the petitioner had intimated M/s Act Enterprises, the fabricator of jeans that respondent No. 1 is the buying agent for this order. Farbicater was asked to contact respondent No. 1, through Mr. Luv Bhardwaj on the address given in the letter for the purpose of the inspection. Though letter dated 18.10.99 written by the petitioner to M/s Act Enterprises (page 40 of the compilation), the petitioner intimated the fabricator of jeans that a fresh LC has been provided to the petitioner by Mr. Luv Bhardwaj and the material is to be dispatched to new buyer viz. M/s Transworld Corporation PTE Limited, Singapore instead of M/s Oxford's who were the buyer in the first LC No. 218128 which had already expired. The petitioner through this letter asked M/s Act Enterprises that due to the change of the buyer, all the labels on the boxes will have to be changed and the buyer wants to put a polythene on the boxes with strapping. The fabricator M/s Act Enterprises were requested to change the packing accordingly and to contact Mr. Luv Bhardwaj for detailed specifications and for issuance of inspection certificate. Letter dated 18.10.99 indicates that during the period from 12.8.99 to 18.10.99, the petitioner got a fresh LC through Mr. Luv Bhardwaj and the new buyer was Transworld Corporation PTE Limited, Singapore. The second LC 990981 is dated 15.10.99. This indicates that petitioner had received the said LC through Mr. Luv Bhardwaj before writing letter dated 18.10.99 to the jeans fabricator. On receipt of these letters from petitioner, the fabricator M/s Act Enterprises wrote letter dated 20.10.99 expressing their happiness on petitioner having received a fresh LC for the material namely 22,000 pieces of jeans. The fabricator also conveyed their readiness for re-packing of material as per the requirement of the new buyer but the extra cost will have to be met by the petitioner. Then on 22.10.99 M/s Act Enterprises again wrote to the petitioner that they have contacted Mr. Luv Bhardwaj, Director of respondent No. 1 for the purpose of inspection and the date of inspection has been fixed as 25.10.99. However, it seems that Mr. Luv Bhardwaj did not carry out inspection on 25.10.99. Instead the inspection was carried out on 30.10.99 and in this regard M/s Act Enterprises wrote their letter dated 30.10.99 (page 41 of the compilation) whereby they intimated the petitioner that Mr. Luv Bhardwaj carried out inspection on 30.10.99 and was satisfied with the qualify of the material. The fabricator further insisted for clearance of his dues. In response thereto petitioner wrote a letter dated 1.11.99 (page 45 of the compilation) expressing gratitude to the jeans fabricator for having done the job of fabrication of 22,000 pieces of jeans to the satisfaction of Mr. Luv Bhardwaj. Through this letter the petitioner also conveyed to the jeans fabricator that the inspection certificate has been received and the goods will be dispatched shortly. The fabricator was requested to wait for sometime more till the realisation of the payments in their bank. There is another letter dated 5.10.99 written by the fabricator M/s Act Enterprises to the petitioner (page 48 of the compilation) wherein fabricator had complained about the non payment of dues although the consignment of 22,000 piece of jeans was ready. Vide this letter fabricator had insisted for release of payment by saying that he is not at fault for nor extension of the LC. These letters exchanged between the petitioner and the fabricator of jeans clearly indicate that the consignment of 22,000 pieces of jeans had been prepared by M/s Act Enterprises but could not be exported because of the expiry of the first LC which could not be extended and the 2nd LC was procured through Mr. Luv Bhardwaj who carried out inspection on 30.10.99. Besides, the involvement of Mr. Luv Bhardwaj in the export of the said consignment of 22,000 pieces of jeans is also evidenced by letters dated 30.10.99 and 2.11.99 (page 46 & 47 of the compilation). These letters were written by C&F Agent namely M/s Global Alliance to the petitioner. The letters indicate that Mr. Vinay Mehta of the petitioner company, Mr. Luv Bhardwaj buying agent and C&F agent had gone to Navkriti warehouse to carry out inspection of the consignment and had met Mr. Rastogi Dy. Commissioner Custom for clearing the shipment.

15. When the documents were sent for negotiation, the buyer's bank namely Bank of India, Singapore, rejected the document vide their letter dated 18.11.99 ((page 53 of the compilation) on the following grounds:-

Documents under our LC No. 990981 rejected due to the following discrepancies and is held at your disposal.

1.A) Insurance policy- claims payable in Singapore not mentioned.

(b) Currency of insurance inconsistent with invoice/credit.

(c) Port of discharge inconsistent with bill of lading.

2. Add. Cl. No. 10 not complied with.

3. Transhipment effected.

4. Add. Cl. No. 11 not strictly complied as per LC terms.

5. Inspection cert. not strictly complied as per LC terms.

A. Passport no differs

B. Signature not verified by us.

Documents held at your risk and responsibility.

16. Petitioner's bank namely Corporation Bank also wrote a letter dated 25.11.99 (page 54 of the compilation) to the petitioner detailing therein that the documents were rejected, inter alia, on the ground that inspection certificate is a fraudulent document and the The attestation appearing thereon has not been done by buyer's bank. Even the rubber stamp used on inspection certificate was not of buyer's bank. On coming to know about the rejection of documents, petitioner contacted various persons connected with the deal at Singapore. Petitioner wrote letter to M/s Transworld Corporation PTE Limited, Singapore who were named as buyer in LC No. 990981 in connection with which the shipment of 22,000 pieces of jeans was made by the petitioner. The said buyer namely M/s Transworld Corporation PTE Limited wrote a letter dated 3.12.99 to the petitioner intimating thereby that LC No. 990981 was opened by them at the request of Mr. Ramdas Nair of M/s Narena Inter - Trade with the understanding that no shipment will be made effected under the said LC until all the terms and conditions were clarified. It was further clarified through this letter that there was no sales/purchase contract with the petitioner for shipment under this LC directly or indirectly. However, their bank had noticed several discrepancies including false signatures on the inspection certificate with the forged passport copy of Tikamdas R. Mulan, Managing Director of M/s Transworld Corporation PTE Limited and also the forged signatures of bank officials. The buyers expressed their displeasure in the manner the goods were shipped without an agreement and also about the negotiations of the documents on the basis of forged inspection certificate. It was further clarified through this letter that M/s Transworld Corporation PTE Limited had no connection with any one except Mr. Ramdas Nair and they had no dealing with any agent or representative in New Delhi for the said transaction. This letter indicates that the said LC 990981 was meant to be only on accommodating LC and no sale-purchase or shipment of goods was really intended. Petitioner's representative also met Mr. Ramdas Nair of Narera Inter - Trade at whose instance the said LC was opened by M/s Transworld Corporation PTE Limited. In connection with the said meeting Mr. Ramdas Nair wrote a letter (page 61 of the compilation) to the petitioner informing that he had arranged the said LC on the request of Mr. Lokesh Bhatia of VPL Trade Pvt. Limited, Delhi on the understanding that full amount shall be paid in advance to the LC opener prior to shipment. As already stated Mr. Lokesh Bhatia of VPL Trade Pvt. Limited have not appeared despite service. Mr. Ramdas Nair wrote another letter dated 18.11.99 to Mr. Lokesh Bhatia of VPL Trade Pvt. Limited regarding the rejection of documents sent for negotiation. In this letter. Mr. Ramdas Nair clearly asserted that no inspection was carried by the opener and the inspection certificate is forged. The displeasure of opener of LC was conveyed to Mr. Lokesh Bhatia in no uncertain terms with the threat of lodging police report. Yet another letter dated 19.11.99 was written by Ramdas Nair to Mr. Lokesh Bhatia expressing surprise at the forged documents as this has put him in very bad light with the opener. Vide another letter dated 19.11.99, Mr. Ramdas Nair asked Mr. Lokesh Bhatia to clarify his position in the matter. Then Mr. Lokesh Bhatia wrote letter dated 19.11.99 to Mr. Ramdas Nair (page 66 of the compilation) expressing his surprise at the forged inspection certificate. According to Mr. Lokesh Bhatia inspection certificate was probably meant to cheat sellers own banker. On 26.11.99 Mr. Ramdas Nair of Narera Inter - Trade wrote another letter to Mr. Lokesh Bhatia informing that LC opener i.e. M/s Transworld Corporation PTE Limited had received a phone call from the beneficiary intimating that beneficiary would be coming to Singapore within 3 days. Through this letter Mr. Lokesh Bhatia was asked to reach Singapore within next 2/3 days so that a meeting could be arranged for sorting out the matter. Vide letter dated 29.11.99 (page 71 of the compilation) Mr. Ramdas Nair insisted upon Mr. Lokesh Bhatia to reply urgently and thereupon Mr. Lokesh Bhatia of VPL Pvt. Limited sent a letter dated 20.11.99 to Mr. Ramdas Nair which reads as under:-

Dear Mr. Ramdas

Further to our discussions, I have had meetings with all the people involved, trying to sort out the things and see if we can find a amicable solution but in vain.

There are two parties involved Rigoss and a guy named LUV Bhardwaj (owner of TRATRANS) now both of them are blaming each other. Rigoss says that LUV had promised them a genuine L/C and they had done this complete order and done all manufacturing and all etc. while LUv says that Rigoss always know that this was a accommodation L/C and they wanted to fool their bankers and take money etc from their bank (I am enclosing a copy of letter from Rigoss to Luv.

The last I heard that both of them have filed police complaints against each other and going to the court.

I think we should detain ourselves from this totally. We should request Bank of India Singapore to file a Police complaint against this (because it is their certificate which they have forged) and if you can send me a copy of the same. This would be to ensure that we are out of it.

I am requesting this for the following reasons:-

(1) So that tomorrow nothing falls back on us.

(2) In India it is absolutely illegal if one ships and does not get the payment of goods released, they would be involved in FERA and DRI (Foreign exchange and Directorate of revenue).

(3) What ever is the dispute or action the only it can be solved would be to pay is the money and we pay them back.

I hope the above is clear.

17. This letter makes it abundantly clear that Luv Bhardwaj of respondent No. 1 had arranged this LC for the petitioner through Mr. Lokesh Bhatia who in turn arranged it through Ramdas Nair. This letter of Mr. Lokesh Bhatia further indicates that the petitioner had honest intentions as he wanted to make shipment against a genuine letter of credit but the respondent gave him only an accommodating letter of credit only to extract his commission. Further it appears that the representatives of the petitioner and Mr. Luv Bhardwaj of respondent No. 1 had gone to the office of the petitioner's bankers namely Corporation Bank Overseas, New Delhi in the connection and in the said meeting Mr. Luv Bhardwaj had represented that the discrepancies in this inspection certificate would be rectified within 2/3 days. Vide letter dated 12.2.01, petitioner sought confirmation from their bankers about the said meeting and vide letter dated 12.2.01, Senior Manager of Corporation Bank, wrote back to the petitioner that M/s Girish Gulla of the petitioner and Mr. Luv Bhardwaj of respondent No. 1 had met in the office of bank and Mr. Luv Bhardwaj assured the bank that the discrepancies shall be rectified shortly. From these letters exchanged between the petitioner and Mr. Ramdas Nair, between Mr. Ramdas Nair and Mr. Lokesh Bhatia, between the petitioner and it its bankers, the involvement of Mr. Luv Bhardwaj of respondent No. 1 in the procurement of LC No. 990981 for 22,000 pieces of jeans and in arranging inspection certificate for the shipment of said consignment is clearly indicated. Likewise the letters exchanged between the parties, between petitioner and fabricator of jeans M/s Act Enterprises as also between the petitioner and their C&F agents already referred to point to the involvement of Mr. Luv Bhardwaj of respondent No. 1 in the procurement of the LC for shipment of 22,000 pieces of jeans and in the procurement of inspection certificate dated 30.10.99. In face of this overwhelming evidence, it is not possible to accept respondent's denial of their involvement in the procurement of LC No. 990981 regarding 22,000 pieces of jeans and in the procurement of inspection certificate which was found to be forged. Viewed in this perspective the petitioner's assertion that this inspection certificate was issued in pursuance of MOU dated 29.10.99 signed between the parties cannot be said to be without substance, at least on a the prima facie view of the material on record.

laid great emphasis on the fact that the two bank guarantees in question have nothing to do with the consignment of jeans. The two bank guarantees dated 12.8.99 and 13.9.99 were in respect of LC Number 990468 dated 20.8.99 and dated 31.8.99 in respect of 18,000 pieces of shirts and 54,000 pieces of shirts respectively. So even if some discrepancies in the documents pertaining to the shipment of jeans were noticed that will be no justification for the petitioner to dishonour the commitment made in respect of these two subsequent LCs. Learned counsel for the respondent No. 1 vehemently stressed that the three contracts namely the first for supply of jeans and other two for supply of shirts were all independent of each other. Therefore, encashment of the bank guarantees in respect of two latter contracts for supply of shirts could not be stopped because the documents in respect of the shipment of first consignment of jeans were found to be not in order. It is true that the three agreements were independent of each other but the fact remains that the contracting parties were same. It is important to bear in mind that petitioner had no direct dealings with the foreign buyers who had issued the LCs. He got the LCs through respondent No. 1 and his dealings with the foreign buyers were only through respondent No. 1 so his response to these LCs would depend upon the faith that he could repose in respondent No. 1 who represented himself to be the agent of the foreign buyers. Mutual trust and confidence between the petitioner and respondent No. 1 formed the bed-rock of the dealings with the foreign buyers. Petitioner invested huge sums of money in the fabrication and shipment of the first consignment of 22,000 pieces of jeans but the documents were rejected by the buyers Bank on the ground that inspection certificate was forged. For the petitioner, this experience must have been traumatic. When the seller had been duped in the very first deal, it is too much to expect that he will continue to invest huge sums of money in honour subsequent commitments, more so when the other side goes to the extent of fabricating documents only to earn commission. In this connection, it is important and worthwhile to refer to the letters exchanged between the petitioner and M/s Wiraha PTE Limited regarding two LCs for export of shirts. It seems that from their experience in the export of jeans, the petitioner got alarmed so they thought it proper to check up the things with the buyers named in the two LCs which pertain to the supply of shirts. The petitioner therefore wrote a letter dated 02.12.99 (page 80 of the compilation) to M/s Wirana PTE Limited asking them to confirm their relationship with respondent No. 1 and also whether they would like to extend the LC. In response thereto the foreign buyers M/s Wirana PTE Limited wrote a letter dated 4.12.99 (page 81 of the compilation) informing the petitioner that they do not know respondent No. 1. Rather they have no relationship with respondent No. 1. M/s Wirana PTE Limited further stated that the said two LCs were opened through Mr. Lokesh Bhatia of New Delhi and that they had no intention whatsoever to extend the letters of credit. Under the MOU dated 29.10.99, respondent No. 1 was obliged to get the extension of these LCs. It seems that the respondent No. 1 was not sure of extension of these LCs for the export of shirts and that is why despite his letter dated 9.10.99 (page 78 of the compilation) to the petitioner seeking information regarding the name and address of the fabricaters where inspection may be carried out and the petitioner's reply dated 11.10.99 (page 79 of the compilation) thereto furnishing the requisite details, respondent No. 1 did not purse it and never turned up for inspection. Rather they evaded inspection by insisting on a report from SGS India Limited which was not stipulated either in the Mou or in the LC. From the petitioner's letter dated 8.10.99, (page 77 of the compilation) and letter dated 11.10.99 (page 79 of the compilation)) it appears that the consignment of 18,000 pieces of shirts was also ready but the respondent No. 1 failed to carry out the inspection and to obtain extension of LC. In this background the petitioner never offered the third consignment for inspection and I think, in view of his past experience he had ample justification for this.

19. The law regarding bank guarantees is by now will settled. In the course of commercial dealings when unconditional bank guarantees are given or accepted, the beneficiary is entitled to realise such bank guarantee, notwithstanding any disputes. The Court should therefore be slow in granting injunction restraining realisation of the bank guarantees. But there are two well accepted exceptions to this rule. A fraud in connection with such a bank guarantee would vitiate the very foundation of such bank guarantee. Therefore, if a fraud is played whereby the seller was induced to furnish bank guarantee of which the beneficiary wants to take unjust advantage, he can be restrained from doing so. Reference in this connection may be had to the case of U.P. State Sugar Corporation v. Sumac International Limited - . The second exception relates to cases where allowing the encashment of an unconditional bank guarantee would result in irretrievable harm or injustice to one of the parties concerned.

contended with reference to the case of Hindustan Steelworks Construction Ltd. v. Tarapore & Co. and Anr. - that the contract of bank guarantee between the bank and the beneficiary is independent of the primary contract between the party furnishing the bank guarantee and the buyer. Therefore, encashment of an unconditional bank guarantee does not depend upon adjudication of dispute between the parties to the primary contract. In support of this argument, the following cases were also referred:-

1. U.P. Cooperative Federation Ltd. v. Singh Consultants and Engineers (P) Limited. Reported in .

2. General Electric Technical Services Company Inc. v. Punj Sons (P) Limited and Anr. Reported in .

3. State Trading Corporation of INdia Limited v. Jainsons Clothing Corporation and Anr. Reported as .

4. Ansal Engineering Project Limited v. Tehri Hydro Development Corporation Limited and Anr. Reported as .

5. Centax (India) Limited v. Vinmar Impex Inc. and Ors. -- Reported in .

20. There is no dispute with the proposition of law that the encashment of unconditional bank guarantee cannot be interfered with except in cases of fraud of egregious nature and in case where such encashment may cause irretrievable injustice to the party at whose instance the bank guarantee is given. Applying these principles to the factual perspective of the present case, I think, the petitioner's case falls under the first exception namely fraud. As already discussed the material on record prima facie indicates that respondent No. 1 was instrumental in obtaining LC 990981 from M/s Transworld Corporation PTE Limited through Mr. Lokesh Bhatia, Ramdas Nair etc and he has been participating in the said deal almost at every important stage namely inspection of the consignment after fabrication, procurement of hte inspection certificate which was found to be forged and clearance of the consignment for shipment. The fact that the respondent procured a forged inspection certificate is proof enough of his intention to secure commission by all means fair and foul. Petitioner, therefore had every justification to suspect his intention and the fairness of his dealings in respect of the other two LCs also.

21. On inquiry the LCs were found to be only accommodating LCs. As already noted, the petitioner had no direct dealing with the foreign buyers. He was dealing with them through respondent No. 1 only on the basis of documents provided by him. So if these documents are found to be forged in one case the very basis for future dealing is eroded. Moreover respondent never provided inspection certificate in respect of consignment of 18,000 pieces of shirts despite petitioner conveying him that the consignment is ready. The name and address of the fabrication unit where inspection was to be carried out was also conveyed to respondent No. 1 vide letter dated 11.10.99. But the respondent No. 1 did not pursue it further. Rather he evaded it by insisting on a report of SGS India Limited which was never stipulated in the MOU or LC. This prima facie indicates that the respondent No. 1 knew from the beginning that these LCs are only accommodating LCs to enable some parties to draw money from their Bank with a share to the respondent No. 1 and no shipment was intended to be made. Had the petitioner know this or had he intended to cheat his Bank he would not have invested a huge sum of money is getting the consignment fabricated and shipped to Singapore. This is borne out from a letter dated 11/20/99 (page 72 of the compilation) written by Mr. Lokesh Bhatia to Mr. Ramdas Nair. In the said letter Mr. Lokesh Bhatia states that the petitioner wanted a genuine LC and that is why he had done the complete order while the respondent No. 1 insisted that it was only a accommodating LC and they wanted to fool their bank and take money from the bank. It is thus manifest that from the very beginning, respondent No. 1 had fraudulent intention but that was not the case with the petitioner who took the LC to be genuine and acted accordingly and was thus duped. The obvious inference is that in inducing the petitioner to give the bank guarantees, the respondent No. 1 had fraudulent intention from the very beginning.

22. So, on a prima facie view of the material on record, I am inclined to hold that the two bank guarantees were obtained by fraud and, therefore, they stand vitiated. Therefore, in view of the settled law on the subject, this Court can intervene to prevent encashment of such bank guarantees.

23. Accordingly, IA. No. 12075/99 under Order 39 Rule 4 CPC filed by the respondent No. 1 for vacation of the ad interim ex parte order dated 25.11.99 is rejected. OMP. No. 335/99 is allowed. Respondent No. 1 is restrained from invoking/encashing bank guarantees in question till the conclusion of arbitral proceedings. The petitioner, shall keep the bank guarantees alive till then.

24. Observation made herein are only tentative in nature, not to be taken as an expression of opinion on the merits of the case.