Cosy (India) Limited v. Vijaya Bank — 1990 DIGILAW 328 (CAL)

JUDGMENT Sengupta, J. 1. The present appeal is directed against the judgment; and order dated 12th April, 1989 passed by the court of the first instance dismissing the interlocutory application of the appellant, Cosy (India) Limited filed in the suit. The suit filed by the appellant relates to a letter of credit dated 10th June, 1988 opened by Vijaya Bank at the instance of the appellant in favour of a foreign seller, namely, BHP Trading (S.E. Asia) Pvt. Ltd. The appellants interlocutory application was for obtaining an order of injunction restraining the foreign seller from receiving any money under the said letter of credit as also for an order of injunction restraining Vijaya Bank from making any payment thereunder. 2. The order sought for by the appellant in its interlocutory application was intended to prevent the parties to the letter of credit both from exercising and enforcing the right and from performing the obligations under the said letter of credit. The appellant was not a party to the contract evidenced by the said letter of credit. 3. In the instant case, the letter of credit was opened by the respondent, Vijaya Bank at the Instance of the appellant, Cosy (India) Limited in favour of the respondent No.2, BHP Trading (S.E. Asia) Pvt. Ltd. The Chase Manhatton Bank, N.A. was the negotiating banker authorised by the Vijaya Bank to negotiate the documents under the letter of credit. Vijaya Bank undertook to reimburse the negotiating banker in the event of the negotiating banker negotiating the documents under the letter of credit. The negotiating banker has negotiated the documents under the said letter of credit. It has also forwarded the negotiable copies of the documents negotiated under the said letter of credit to the Vijaya Bank claiming reimbursement from the Vijaya Bank. Thus, it will appear that the beneficiary of the letter of credit has received the benefit receivable under the said letter of credit. Only the negotiating banker remains to be reimbursed by the opener banker, namely, Vijaya Bank. Before such reimbursement could be made, the appellant filed the above suit. 4. Thus, it will appear that the beneficiary of the letter of credit has received the benefit receivable under the said letter of credit. Only the negotiating banker remains to be reimbursed by the opener banker, namely, Vijaya Bank. Before such reimbursement could be made, the appellant filed the above suit. 4. The grounds on which the appellant has sought the intervention of the court may be summarised as follows :- (a) Non-negotiable copies of the documents sent by the seller to the buyer (the appellant) were not in conformity with the negotiable copies of the documents sent by the negotiating banker, viz.. The Chase Manhattan Bank, N.A. to the respondent, Vijaya Bank. (b) Non-negotiable copies of the documents as also the negotiable copies of the documents under the letter of credit did not conform and/or comply with the requirements of the terms of the letter of credit in question. (c) The seller of the goods under the contract underlying the letter of credit committed fraud. (d) There are special equities warranting passing of an order of Injunction prayed for in favour of the appellant. 5. The appellant has strongly relied upon the decision in (1) United Commercial Bank v. Bonk of India reported in AIR 1981 SC 1426 in support of its contention that firstly, the banker is not bound or entitled to honour the bill of exchange drawn by the seller unless they, and such accompanying documents as may be required thereunder, are in exact compliance with the terms of credit (emphasis supplied); and secondly, such documents must be scrutinished with meticulous care. If the seller has complied with the terms of the letter of credit, however, there is an absolute obligation upon the banker to pay, irrespective of any dispute there may be between the buyer and the seller as to whether the goods are upto contract or not. 6. Before I deal with the contentions. It is necessary to set out the nature of Bankers' Commercial credit, commonly known as Letter of credit :- (i) The main object of the banker’s commercial credit is to provide a means of payment for goods and services supplied by a seller to a buyer, usually to facilitate dealings between merchants domiciled in different countries, by ensuring payment to the seller for the contract goods or services on the one hand and their delivery to the buyer on the other. A trader requiring finance for such a transaction my resort to his bank for a documentary credit. A bank’s commercial credit is described broadly by the Uniform Customs and Practice for Documentary Credits formulated by the International Chamber of Commerce to which most credits are made subject as an agreement, however named or described, whereby a Bank (the issuing bank), acting at the request and in accordance with the instructions of a customer (the applicant for the credit) is to pay accept or negotiate. (ii) The act by which the beneficiary of an irrevocable documentary credit entitles himself to payment according to the promise embodied in the credit is the tender by him within the validity period of the credit of documents complying in all respects within the credit terms and conditions that are a pre-requisite to payment. The contract for the sale of the goods in foreign trade usually includes a provision that payment of the price shall be made by a bank, preferably a bank carrying on business in the country of export. The bank acting on behalf of the buyer either directly with the beneficiary, seller or other contractor through the intervention of a bank in the seller’s country, assumes liability for payment of the price, in consideration, perhaps, of the security afforded by the implied pledge or the documents of title tendered in compliance with the terms of the credit or of being placed by the buyer in funds in advance or of his undertaking to reimburse and of a commission. (iii) In essence a banker's documentary credit is based on an antecedent contract for the sale of goods, payment of the price being made by a Bank. The duty of arranging for payment to be made in this way rests on the buyer. The usual practice is for the buyer to fill up a printed form of application supplied by his bank, which sets out in detail the terms and conditions on which the bank is to issue the credit. It specifies the documents against which payment may be made by the bank and by implication, or express inclusion of a hypothecation clause or a separate letter of obligation, provides that the documents are to be held by it as security for advances (payments) and gives it a power of sale. It specifies the documents against which payment may be made by the bank and by implication, or express inclusion of a hypothecation clause or a separate letter of obligation, provides that the documents are to be held by it as security for advances (payments) and gives it a power of sale. The buyer agrees also to indemnify the bank in respect of such advances and of any claim arising from the issue of the credit. The document constitutes a memorandum of the buyer's instructions to the bank and the detail in which it is framed is intended to avoid misunderstanding. In most respects it is the controlling factor in the situation between the buyer and his bank. When the Bank acts upon the application, the contract between it and the applicant is complete. - (iv) The credit, in its simplest form, is addressed to and sent to the beneficiary, but it may take the form of a request to an intermediary bank which is asked : (a) merely to advise the beneficiary; (b) to negotiate the beneficiary's draft; or (c) to advise the credit and to add its confirmation, thus binding itself also to the beneficiary. This document notifies the beneficiary that the issuing bank or its correspondent will accept or honour drafts drawn/or the price of the goods, when the documents of title and other documents specified in the credit are presented. The credit may, moreover, authorise the intermediary bank, or any bank, to negotiate the beneficiary's drafts or to pay against (or negotiate) prescribed documents. (v) On receipt of the credit the beneficiary insures and ships the goods, obtaining a transport document such as a bill of lading normally made out to his order but perhaps to that of the bank and a policy or marine insurance. He then draws for the price of the goods and with the documents, i.e. the bill of lading, policy and invoice and, in certain cases also, certificates of origin, certificates of quality, consumer certificates, etc., as specified in the credit, and presents the draft for acceptance, payment or negotiation. He then draws for the price of the goods and with the documents, i.e. the bill of lading, policy and invoice and, in certain cases also, certificates of origin, certificates of quality, consumer certificates, etc., as specified in the credit, and presents the draft for acceptance, payment or negotiation. The draft, if a time draft, is not invariably presented by the beneficiary for acceptance, because under a negotiation credit he may before it is accepted sell it together with the documents to a bank, his own perhaps, which will purchase it, if for no other reason, on the faith of the issuing bank's undertaking given in the credit. When the issuing, or the intermediary, bank as the case may be, has accepted or paid the draft and detached the shipping documents, it is in the position of a pledge of the goods represented by them. (vi) The marketing of the goods is in the hands of the importer, and the position on arrival of the goods in the country of import varies. The goods may have been sold by the importer before arrival, so that delivery has to be made to a purchaser; in which case the bank may deliver the shipping documents to the ultimate buyer against payment of the price, though in practice, in the interests of the importer, delivery to a sub-purchaser should be made by him and not by the bank. In such a case the bank may allow the importer to take possession of the documents on his signing what is called a letter of trust, by which he undertakes to hold the goods or their proceeds on behalf of and in trust for the bank. (vii) Attempts have from time to time been made to standardise the conditions on which bankers are prepared to issue and to act on commercial credits. The Uniform Customs and Practice for Commercial Documentary Credits were formulated in 1933 by the International Chamber of Commerce. The Uniform Customs have since been revised in 1962, 1974 and 1983. The Customs are the result of collaboration between the International Chamber, the United Nations and the Foreign Trade Banks of the Socialist countries. The Uniform Customs and Practice for Commercial Documentary Credits were formulated in 1933 by the International Chamber of Commerce. The Uniform Customs have since been revised in 1962, 1974 and 1983. The Customs are the result of collaboration between the International Chamber, the United Nations and the Foreign Trade Banks of the Socialist countries. They are today by express reference embodied in virtually all applications for credits and in the credits themselves and are thus a factor in the credit contract except in so far as they are expressly excluded or are contradicted by specific terms of the credit. They are a body of rules of behaviour binding on those banks and applicants who have adopted them. They are not law, as have sometimes been suggested, but where appropriate, are binding on the parties. (See The Law of Bankers' Commercial Credits-(7th Edition) - H.C. Gutteridge and Maurice Megrah). 7. The method of operation of such Letter of credit is as under :- (i) The buyer (who has to pay for the goods), makes an application (the application is on a standard printed form) to his bank (called "the issuing Bank") to issue a letter of credit in favour of the seller. (ii) The seller (who is called "the beneficiary") under the credit, instructs his bank to receive the funds in payment of the goods. (iii) The issuing bank then arranges with a bank (called "the advising bank") in the seller's country to "advise" the seller that the credit is open and on what terms. (iv) The advising bank may do no more than "advise" the existence of the credit, and If so, It has no further responsibility in the transaction than to take reasonable care to check the apparent authenticity of the credit. (v) It may be, however, that the advising bank has been asked ("nominated" is the word used) by the issuing bank, not only to advise the existence of the credit, but also to effect payment to, the seller's bank. (v) It may be, however, that the advising bank has been asked ("nominated" is the word used) by the issuing bank, not only to advise the existence of the credit, but also to effect payment to, the seller's bank. In which case the advising bank, will also become "the nationalised bank," and if is accepts the responsibility to pay, the advising nominated bank will also become "the paying Bank." (vi) What frequently happens in practice is that the seller asks the issuing bank to arrange with a bank in the seller', country to 'confirm the letter of credit, thus enabling the seller to have confirmation from a bank in his own country that payment will be forthcoming, rather than relying on the standing of the issuing bank in the buyer's country. (vii) It often happens that the advising/nominated bank will also be invited to 'confirm' the credit, and if it accepts. It will also become 'the confirming bank', (viii) Sometimes another bank in the seller's country is invited to confirm, and in such a case, it will become "the confirming bank". If a credit is 'confirmed', the confirming bank will be the bank which effects payments, and, hence, "the paying bank' also. (ix) All payments under letters of credit are effected either by a straightforward transfer of funds between the banks, once the goods are shipped; or by the drawing of a bill of exchange either to be accepted by the paying bank (thereby becoming "the accepting bank" as well) ; or by that bank negotiating the bill (it would then be "the negotiating bank") on behalf of the seller. In either case, the seller-using a bill of exchange-will get his money without waiting for the goods to arrive. (x) The paying bank will not, of course, pay until it is satisfied that it has in its possession the various documents of title to the goods (bill of lading, insurance policy and so forth), as agreed between the buyer and the seller as being the trigger mechanism for payment, since these will, ultimately, be sent to the Issuing bank as its security while the goods are in transit. (xi) When the documents are received by the issuing bank, it will re-imbrues the paying bank for the money paid out to the seller. (xi) When the documents are received by the issuing bank, it will re-imbrues the paying bank for the money paid out to the seller. The documents give title to the goods so that the buyer can receive delivery of them, and, at the same time, the documents also give the issuing bank security for any money or finance it has extended to its customer, the buyer. 8. In this background we have to consider the law relating to Bankers' Commercial Credit. Reliance has been placed on the decisions in United Commercial Bank v. Bank of India (Supra) and (2) United Commercial Bank v. Hanuman Synthetic, Limited reported in AIR 1985 Calcutta 96. It appears to us that the following principles may be culled out : (a) The bankers do not deal with goods contracted for sale or purchase under the contract, payment wherefor is ensured by the opening of the letter of credit by the banker. The banker is not concerned with the relationship between the seller and the buyer, nor with the question whether the seller had performed its contracted obligations or not. The banker is also not concerned with the question whether the seller is in default in any way or' not. The banker is not concerned with the contract underlying the letter of credit. (b) The bankers are concerned only with the documents presented by the seller to the banker for negotiation with a view to obtaining payment under the letter of credit. The bankers are not and cannot be concerned with any other documents. (c) The dispute as to the sufficiency of the performance of obligations as between the buyer and the seller cannot be the reason for withholding payment under the letter of credit. The banker is required to see whether the event has happened on which its obligation to pay has arisen. (d) The banker is not bound and entitled to honour the bill of exchange drawn by the seller unless the same and such accompanying documents as may be required thereunder are in 'exact compliance' with the terms of the letter of credit and such documents must be scrutinised with meticulous care. (e) If the seller has complied with the terms of the letter of credit. (e) If the seller has complied with the terms of the letter of credit. however, there is an absolute obligation upon the banker to pay irrespective of any disputes there may be between the buyer and the seller as to whether the goods are upto the contract or not. 9. At this stage it is also necessary to emphasise the distinction between the Negotiable copies of documents and Non-negotiable copies of documents. 10. Negotiable copies of documents are those documents which are presented by the seller to the banker for obtaining payment under the letter of credit. A practice of convenience has developed in course of trade that the seller intimates the buyer in advance about the probable date or dates of arrival of goods at the destination. The object is to see that the buyer gets ready to obtain release of the goods at the buyer's country upon compliance of the requisite pre-conditions to the release of goods. Advance intimation thus enures to the benefit of the buyer as it helps the buyer to avoid incurring costs, charges and expenses in obtaining release of the goods. The delayed preparation to obtain release of the goods may involve the buyer in unnecessary expenses on account of demurrage, penalty etc. payable to the Port and/or Customs Authority. This advance intimation often is given by the seller to the buyer by forwarding certain documents which are commonly known as "non-negotiable copies of documents". They mayor may not be facsimile copies of the documents actually presented by the seller to the banker for negotiation to obtain payment under the letter of credit. The negotiating banker in the country of export is not concerned with those non-negotiable copies of documents. 11. To determine as to whether the documents presented for negotiation did or did not comply with the terms or conditions of the letter of credit, the relative documents are the letter of credit and the negotiable copies of the documents presented for negotiation. 12. While dealing with the concept of "Strict/Exact Compliance" at page 120 of its Seventh Edition. Gutteridge in The Law of Bankers' Commercial Credits, has said- “The strict compliance to which Lord Sumner drew attention in (3) Equitable Trust Co. 12. While dealing with the concept of "Strict/Exact Compliance" at page 120 of its Seventh Edition. Gutteridge in The Law of Bankers' Commercial Credits, has said- “The strict compliance to which Lord Sumner drew attention in (3) Equitable Trust Co. New York v. Dawson Partners, (1927) 27 Lloyds Law Reports 49 does not extend to the doting of i's and the crossing of t’s or to obvious typographical errors either in the credit or the documents." 13. Further at page 123 of the said Edition, It has also been said that - “It is clear from both judgments that the compliance must relate to the conditions actually embodied in the credit, that ordinarily, no external factor is to be taken into consideration and that the very mention of a requirement of the credit not included as a condition must nevertheless be taken as such.” 14. At pages 122-123, it has further been said that – “Thus, as ‘already stated, it is impossible to standardise the nature and extent of the bank’s duty with regard to documents tendered to it under a credit, because each case must be decided on its merits in the light of the language of the credit and the circumstances in which it has been established. It was argued in (4) Banque de L' Indochine et de Suez S. A. v. J. H. Rayner (Mincing Lane) Ltd. that compliance of documents with those called for by the credits must entail some licence in favour of a tender, for otherwise most credits would be defective in this sense. However, Parker, J. although accepting that some margin must be allowed, yet found that the documents did not comply. It is clearly impossible to be dogmatic." (See also Banque de L' Indochine et de Suez S. A. v. J. H. Rayner (Mincing Lane) Ltd. reported in (1983) 1 All ER 469). 15. In the Instant case, there is no dispute between the appellant and the respondent No. 1 that :- (a) The subject letter of credit was opened by the respondent No.1 at the instance of the appellant on its instructions. (b) After opening of the letter of credit, amendments were effected to the letter of credit by the respondent No. 1 on the instructions of the appellant. (c) The letter of credit was subject to "Uniform Custom and Practice for Documentary Credit" (1983) Revision, International Chamber of Commerce publication. (b) After opening of the letter of credit, amendments were effected to the letter of credit by the respondent No. 1 on the instructions of the appellant. (c) The letter of credit was subject to "Uniform Custom and Practice for Documentary Credit" (1983) Revision, International Chamber of Commerce publication. (d) The Chase Manhatton Bank, N.A., Singapore was the negotiating banker. (e) Upon negotiation by the said The Chase Manhatton Bank, N.A. of the documents presented for negotiation by the seller the respondent No.1 was and is to reimburse the said The Chase Manhatton Bank, N.A. upon maturity. (f) The Chase Manhatton Bank, N.A. has negotiated the documents presented by the seller upon its being satisfied that the terms and conditions of the letter of credit have been complied with. 16. The subject matter of credit dated 10th June, 1988 was available for an aggregate sum not exceeding U.S. Dollars 266, 200. The letter of credit provided that the Bill of lading must be dated not later than 15th August, 1988. It also provided that the bill of exchange must be negotiated within 21 days from the date of the bill of lading, but before 7th September, 1988. The appellant by its letter dated 12th July, 1988 requested Vijaya Bank for arranging amendment to the following effect in the said letter of credit :- "MERCHANDISE TO READ 'ROUGHLY SQUARED TIMBER LOGS' INSTEAD EXISTING. CLAUSE TO READ MEASUREMENT LIST AND GRADING CERTIFICATE IN TRIPLICATE." The said Instructions were duly carried out by Vijaya Bank. By a further letter dated 19th August, 1988, the appellant also required Vijaya Bank to cause further amendment to the letter of credit to the following effect :- "L/C EXPIRY UPTO 31ST AUGUST, 1988 FOR SHIPMENT AND UPTO 14TH SEPTEMBER FOR NEGOTIATION. REST OF TERMS AND CONDITIONS REMAIN UNCHANGED." The said Instructions were also duly carried out by Vijaya Bank. The net effect of the amendments to the said letter of credit was that :- i) The first clause of the letter of credit was to read "Roughly Squared Timber Logs" instead of original or existing "Roughly Square Logs" ; and ii) the validity period of the letter of credit for shipment was extended till 31st August, 1988 and for negotiation was extended till 14th September, 1988. 17. 17. It is necessary at this stage to set out the narration of events from 1st September to 6th October, 1988 in the instant case. 18. On 1st September, 1988, the appellant received from the seller through telefax invoice, bill of lading and packing list relating to the consignment as will appear from the heading of the chart of alleged discrepancy prepared by the Appellant. On 3rd September, 1988, the vessel 'Pioneer Sembilan' carrying the goods arrived at the Port of Calcutta. On 5th September, 1988, the appellant informed the respondent bank of the arrival of the vessel enclosing therewith a xerox copy of the telefax copy of bill of lading bearing No. KTN/CAL/01 dated 15.8.88. On 5th September, 1988, the appellant executed a document undertaking and authorising the respondent Vijaya Bank to accept the relative documents as presented by the seller whether the document complied with the terms of the letter of credit or not. On 7th September, 1988, the appellant is said to have received the non-negotiable copies of the documents. On 10th September, 1988, upon obtaining the document (Indemnity) executed by the appellant on 5th September, 1988, the respondent Bank issued local delivery order guarantee for the goods. On 16th September, 1988, the respondent Vijaya Bank received a letter dated 9th September, 1988 along with original negotiable copies of the documents from The Chase Manhatton Bank, N.A., the negotiating banker. On 19th September, 1988, the respondent Vijaya Bank by its letter informed the appellant of the receipt of the original negotiable copies of the documents by it from the negotiating banker. On 20th September, 1988, the appellant caused part of the goods cleared from the Port of Calcutta. On 26th September, 1988, the appellant sent a telex to the seller of the goods. By the said telex the appellant made certain complaints about the goods. On 27th September, 1988 the appellant wrote to Vijaya Bank that they had observed from the non-negotiable copies or the documents that the consignment was not in accordance with the terms of the contract and hence was not acceptable to them. On 30th September, 1988, at the instance of the appellant, the respondent bank communicated the contents of the letter dated 27th September, 1988 of the appellant to the negotiating banker. On 30th September, 1988, at the instance of the appellant, the respondent bank communicated the contents of the letter dated 27th September, 1988 of the appellant to the negotiating banker. On 6th October, 1988, the appellant caused clearance to be made of the balance portion of the goods from the port of Calcutta. 19. From the aforesaid narration of events it will appear that the appellant executed the document dated 5th September, 1988 undertaking and authorising the Vijaya Bank to accept the relative document in respect of the goods covered by the letter of credit being consignment of 'R.S. Timber Logs.' dispatched/shipped per Pioneer Sembilan. Though the appellant received the non-negotiable copies of the documents pertaining to the consignment on 7th September, 1988, it did not raise or make any complaint that the non-negotiable copies of the documents did not comply with the terms of the letter of credit, nor did it complain on receipt of copies through telefax on 1st September, 1988. The appellant instead of raising or making any complaint of any alleged discrepancy between the non-negotiable copies of the documents and the terms of the letter of credit, took first delivery of a portion of the consignment on 20th September, 1988. 20. The complaint made by the appellant on 26th September, 1988, i.e. after part clearance of the consignment and inspection thereof, pertained to non-conformity of the contractual specifications of the good only. The complaint was not about any discrepancy between the non-negotiable copies of the documents and the terms of the letter of credit or between the original negotiable copies of the documents and the terms of the letter of credit, though Vijaya Bank by its letter dated 19th September, 1988 duly informed the appellant about the arrival of the original negotiable copies of the document from the negotiating banker. On 6th October, 1988, the balance of the consignment was caused to be cleared by the appellant. 21. Upon scrutiny of the negotiable copies of the documents with the terms of the letter of credit it appears that there is no discrepancy within the meaning and the scope of the principle of law enunciated and the grounds on which the appellant has sought the intervention of the Court all stated earlier cannot be sustained. Discrepancies between non-negotiable copies and negotiable copies are not relevant. Discrepancies between non-negotiable copies and negotiable copies are not relevant. The negotiating banker negotiated the negotiable copies of the documents and certified that the terms of the letter of credit had been complied with. In this context two telex communications of the negotiating banker dated 11th October, 1988 and 18th November, 1988 would further make the position clear and the alleged discrepancies do not and cannot affect the negotiability of the documents under the terms of the letter of credit within the meaning of the various provisions of Uniform Customs and Practice for Documentary Credit (1983 Revision) with reference to its relevant Articles, namely, 7, 15, 16, 17 and 22 to 43. For the purpose of scrutinising the documents under the letter of credit, the negotiating banker is required to take care, but it is not required to take care to place the documents as against the light (as was sought to be demonstrated at the time of hearing by holding the negotiable copy of the bill of lading to show that the original date 15.8.88 had been deleted and the date 26.8.88 had been overwritten thereon after using a white chemical substance) to find out if there has been or has not been any alleged interpolation or discrepancy. The term 'ETD' is the abbreviation of 'expected lime of departure'. The date is liable to be altered on the basis of exact date of departure. The bill of lading was signed by the Master of the vessel on 26th August, 1989. There cannot be any complaint that the goods carried were not covered by the insurance policy valid for the period required for the purpose of the terms of the letter of credit. There cannot be any complaint with regard to the fact that the bill of lading was clean as Donaldson, J. explained in (5) M. Golodetz &. Co. Inc. v. Czarnikow-Rinde Co. Inc., reported in (1979) 2 All England Law Reports 726. All that was needed for a bill of lading to be within the description 'clean' was that there should be nothing in it to qualify the admission that at the time of shipment the goods were in apparent good order and condition and that the ship-owners had no claim against the goods except in relation to freight. All that was needed for a bill of lading to be within the description 'clean' was that there should be nothing in it to qualify the admission that at the time of shipment the goods were in apparent good order and condition and that the ship-owners had no claim against the goods except in relation to freight. Since the bill of lading did not cast any doubt on the condition of the goods at the time of shipment and did not assert that at that time the ship-owner had any claim against the goods, the bill was 'clean'. Reference in this context may also be made to pages 142 & 143 of the Law of Bankers' Commercial Credits by Gutteridge & Megrah (7th Edition) and Article 34 of the Uniform Customs and Practice for Documentary Credits (1983 Revision). The expression 'Yellow Balau' was not required to be mentioned in the bill of lading as it was not required by the terms of the letter of credit. The alleged discrepancy or discrepancies do not in any event go to the root standing in any way in the matter of operation of the letter of credit. 22. The third ground of the appellant is that fraud has been committed by the seller on the appellant as buyer. In the English decision reported in (6) (1978) 1 All England Law Reports 976 (Edward Owen v. Barclays Bank International), Lord Denning held that in the matter of operation of letter of credit opened by banker and a guarantee given by a banker there is no difference. Both of them are in the nature of demand promissory note and the banker is required to honour the same according to its terms and was not concerned whether either party to the contract which underlay the guarantee was in default. The Court of appeal, however introduced an exception to the said proposition to the effect that where fraud by one of the parties to the underlying contract had been established and the bank had notice of such fraud, then in that event, the court may intervene to grant such relief to the party on whom such fraud has been committed. In our view, the allegations made in the petition of the appellant do not amount to fraud. In our view, the allegations made in the petition of the appellant do not amount to fraud. Moreover, the requirements of law are that (i) fraud must be committed by one of the parties to the underlying contract; and (ii) such fraud must be established and the concerned bank had notice of such fraud. Neither of the said requirements appear to have been fulfilled. There is not even an allegation that the negotiating banker had notice of the alleged fraud. 23. Any complaint with regard to quantity of goods in the matter of operation of a letter of credit is, in our view, irrelevant. 24. It cannot be said in the facts and circumstances of the case that any special equities have arisen entitling the appellant to an order of injunction restraining the parties to the letter of credit. On the other hand, if Vijaya Bank is allowed to reimburse the negotiating banker, any damage to the appellant cannot be said to be irreparable. The appellant, we are informed, has filed a second suit in this Court against the foreign seller claiming certain damages. Vijaya Bank is also a party to the said suit and as such the loss to incur, if any, in the even of Vijaya Bank being permitted to reimburse the negotiating banker, it would not be difficult for the appellant to claim and recover the loss on appropriate steps being taken by the appellant for that purpose. 25. The negotiating banker has made payments to the seller on negotiation of the documents. The negotiating banker is required to be reimbursed by Vijaya Bank. In the event of Vijaya Bank's failure to discharge its part of the obligation to reimburse the negotiating banker, its credibility as a banker in the international market will be seriously affected. The bank guarantee and the letter of credit are really the life-lines of international commerce. 26. In (7) Texmaco Limited v. State Bank of India reported in AIR 1979 Calcutta 44, Sabyasachi Mukherjee, J. as His Lordship then was, observed al follows : "I venture to suggest that there may be another exception in the form of special equities arising from a particular situation which might entitle the party to an injunction restraining the performance of bank guarantee. But in the absence of such special equities and in the absence of any clear fraud, the bank must pay on demand, if so stipulated, and whether the terms are such must have to be found our from the performance guarantee as such." 27. No Court has since then ventured to define or even describe the expression "special equities". We also do not venture to do so. Each case will depend upon its facts and circumstances. There does not appear to be any precedent cited before us wherein an order of injunction restraining the performance either of a bank guarantee or of a letter of credit has been granted on the ground that there exists special equities in the facts and circumstances of the case entitling the party at whose instance either the bank guarantee or the letter of credit was issued by a banker to an order of injunction restraining the performance of a bank guarantee or a letter of credit. 28. The argument that unless an order of injunction is granted the suit will become infructuous had been forwarded earlier in (8) Bird & Co. Vs. Tripura Jute Mills reported in 33 CWN 802. But the Division Bench of this Court repelled the said submission by holding that the consideration that suit will become infructuous cannot be taken to be a ground for granting an order of injunction in the matter of a bank guarantee or letter of credit. 29. For the reasons aforesaid, this appeal fails and is dismissed. All interim order will stand vacated. Let the hearing of the suit be expedited. Let the written statement be filed, If not already filed, within four weeks after the long vacation, cross-order for discovery within two weeks thereafter, inspection forthwith thereafter. Liberty to mention for early hearing before the appropriate bench. The filing of paper book is dispensed with. The undertakings given in that behalf will stand discharged. There will be no order as to costs. Banerjee, J.: I agree.