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2009 DIGILAW 418 (GUJ)

BANK OF INDIA v. VIMAL SERVICES LTD

2009-06-26

AKIL KURESHI, K.S.RADHAKRISHNAN

body2009
JUDGMENT (Per : HONOURABLE THE CHIEF JUSTICE MR. K.S.RADHAKRISHNAN) This appeal has been preferred by the Bank of India, Nehru Place Branch, New Delhi, the first respondent, challenging the judgment of the learned Single Judge directing the appellant-Bank to discharge its obligation under Irrevocable Revolving Letter of Credit bearing No. NP/Revolving LC/35/51 of June 01, 2005 (for short `IRLC') and Amendment to L.C. of June 13, 2005, and to make payment of the outstanding amount as on August 14, 2006, and to continue to make payments of the rental and also to pay the costs of Rs.10,000/-. Learned Single Judge, it was contended, has not properly appreciated the various provisions of IRLC and their legal effect and consequences, and also failed to note that there were lot of discrepancies in the documents submitted to the Bank, and therefore, the issuing Bank is not legally obliged to honour the IRLC when it was presented by the 2nd respondent-State Bank of Saurashtra. Further, it is also stated that the 2nd respondent-Bank had failed to carry on negotiations with M/s. A.K. Enterprise (the applicant) to honour the bills produced by Vimal Services Limited, the petitioner (the beneficiary) and then seeking for collection from Bank of India. Further, it was also pointed out that High Court of Gujarat has no jurisdiction to entertain the present writ petition, since head office of the appellant-Bank is situated at New Delhi and the cause of action arose at New Delhi. Original Petitioner-Vimal Services Limited is engaged in the business of providing low-cost fuel (furnace oil) for operating power plant machinery on rental basis for generating electricity. Generating plant is manufactured by importing certain machinery from foreign countries. M/s. A.K. Enterprise, having its office at New Delhi, was desirous of getting such power plant installed at M/s. Ved Cellulose Limited at Ghaziabad. For that purpose, A.K. Enterprise placed an order dated 7th June 2005 on the petitioner, and Memorandum of Understanding (MOU) was arrived at on 07.06.2005 at Vadodara in the State of Gujarat. Agreement provided for executing an Irrevocable Revolving Letter of Credit or financial bank guarantee. Such guarantee would be for Rs.240 lakhs and was valid for 27 months. For that purpose, A.K. Enterprise placed an order dated 7th June 2005 on the petitioner, and Memorandum of Understanding (MOU) was arrived at on 07.06.2005 at Vadodara in the State of Gujarat. Agreement provided for executing an Irrevocable Revolving Letter of Credit or financial bank guarantee. Such guarantee would be for Rs.240 lakhs and was valid for 27 months. Further, it was also stated that M/s. A.K. Enterprise and Ved Cellulose Limited had agreed and guaranteed that the proprietors and partners, in their financial capacity as well as in their personal capacities, would remain liable for monthly rental payments for the entire contractual period even in the event of closure or dissolution of M/s. A.K. Enterprise and M/s. Ved Cellulose Limited. Based on the contract, A.K. Enterprise had, through Bank of India, caused the issuance of IRLC dated 01.06.2005, produced at Annexure B along with the petition. Original petitioner has taken up the stand that as per the agreement, it had installed the machinery at 16th km. stone on Hapur Road, VIII Lakhan, O.P. Galan, District Ghaziabad (U.P.), and for the purpose of installation a part of land/property was taken on lease by the lessor-petitioner-company, and the lessee-company is utilizing the power generated through the machinery installed by the petitioner-company. Petitioner is having its accounts with the 2nd respondent-Bank, and pursuant to the IRLC, petitioner-company had sent the invoices/bills to the appellant-Bank for realization. A total of 18 invoices/bills were sent and they were not honoured by the appellant-Bank, on the ground of alleged discrepancies in the documents, but without giving any explanation as to what were the discrepancies. Petitioner had, therefore, addressed a letter dated 24.05.2006 to the appellant-Bank and petitioner was advised to resubmit the bills vide letter dated 28.06.2006. On 14.08.2006, petitioner addressed another letter to the appellant-Bank in respect of the outstanding payment, which was required to be collected from M/s. A.K. Enterprise towards rental charges for providing 1378 KVA (1.5 MW) power. Appellant-Bank has addressed letters dated 03.08.2006 and 24.08.2006 to 2nd respondent-Bank and returned the documents stating `The payment is not forthcoming'. Petitioner, therefore, approached this Court through the present writ petition seeking a direction to the appellant-Bank to honour IRLC. A detailed counter affidavit has been filed on behalf of the appellant-Bank placing reliance on Uniform Customs and Practice for Documentary Credits (UCPDC ICC No.500). Petitioner, therefore, approached this Court through the present writ petition seeking a direction to the appellant-Bank to honour IRLC. A detailed counter affidavit has been filed on behalf of the appellant-Bank placing reliance on Uniform Customs and Practice for Documentary Credits (UCPDC ICC No.500). Reference was made to Article 10 of the UCPDC. Reference was also made to Special Provisions in the IRLC. Instruction No.2 in the Special Provisions of IRLC provides that the IRLC was available for negotiation with any bank in India. Instruction No.4 was to the effect that credit was to be reinstated for the original L/C Value automatically by the opening bank on submission of the negotiated invoice. It was contended that when both the instructions are juxtaposed, the one and only inescapable conclusion is that unless there is prior negotiation and other instructions too are scrupulously followed and complied with, no reimbursement needs to be made under the conditions of IRLC. Further, referring to letters dated 03.08.2006 and 24.08.2006, it was contended that there was no negotiation prior to the transmission of documents to appellant-Bank. Further, referring to the letter dated 02.07.2006, it was also stated that, in fact, bills were sent for collection, but they could not have been paid unless collection was forthcoming from M/s. A.K. Enterprise. Further, it is also stated that documents were received by 2nd respondent for collection only and hence under Article 24 of ICC 522, the same could not be paid unless collected. It is further contended that the contention that payment is to be made nonetheless, is not well conceived and deserves to be discarded. Further, it is also stated in the counter affidavit that Article 14 of UCPDC would suffice to clinch the crux of the matter as if the documents appear on their face not to be in compliance with the terms and conditions of the IRLC. It was pointed out that appellant-Bank refused to take up documents as they ex-facie were not in compliance with the conditions of the IRLC and such documents were rejected commencing from 16.05.2005 to 13.04.2006 and reasons were pointed out in each of such case in writing, within the stipulated time frame of seven banking days. It was pointed out that appellant-Bank refused to take up documents as they ex-facie were not in compliance with the conditions of the IRLC and such documents were rejected commencing from 16.05.2005 to 13.04.2006 and reasons were pointed out in each of such case in writing, within the stipulated time frame of seven banking days. The reasons inter alia are (i) the documents were received late, (ii) negotiation not advised by telex or fax, (iii) bills of exchange not drawn as per L.C. and (iv) description of goods not as per L.C. Further, it was stated that rejection was based on the premises of non-fulfillment of conditions of the L.C. read with UCPDC 500. A detailed affidavit-in-rejoinder was submitted by the petitioner-respondent no.1 stating that the appellant-Bank is trying to mislead the Court by giving wrong interpretation of IRLC and the provisions of UCPDC 500. It was stated that earlier appellant-bank honoured some of the payments, without raising any objection and without waiting for prior negotiations, and consequently disbursed the amounts to respondent no.2-Bank. No provision either in UCPDC 500 or in IRLC imposed any condition for making negotiation by respondent no.2-Bank with the appellant-Bank. On the other hand, from the face of IRLC, it is crystal clear that payment under the same would be available `at sight'. It is stated that role of 2nd respondent-Bank is merely intermediary, through whom petitioner-respondent no.1 routed the documents to the appellant-Bank. The statement that appellant-Bank could not make payments because they had not received any payment from M/s. A.K. Enterprises is misleading. Further, it is also stated that petitioner-company is having its registered office at Baroda and the business transaction was carried out from Baroda, and the bills and IRLC were signed by the petitioner-company at Baroda, and the documents were submitted by the petitioner-company to 2nd respondent-Bank, which is situated at Baroda for onward submission to appellant-Bank. Appellant-Bank is a body corporate having wide branch network throughout the country, including different parts of Gujarat, and the Branch Office of the Bank of India at Baroda was the confirming Bank, through which IRLC was executed, and hence Gujarat High Court has jurisdiction to entertain the writ petition, especially when Bank of India is a nationalized Bank. Learned Single Judge after examining various contentions raised by the parties elaborately came to the conclusion that appellant-Bank cannot shirk its responsibility to honour the IRLC. Learned Single Judge after examining various contentions raised by the parties elaborately came to the conclusion that appellant-Bank cannot shirk its responsibility to honour the IRLC. Reasons stated by appellant-Bank not to honour the IRLC, according to learned Single Judge, cannot be sustained in law. Learned Single Judge took the view that even if there are some discrepancies, it would not make the dispute a dispute of complex facts, especially when the bills were drawn under the IRLC and the conditions thereof are complied with. Learned Single Judge further noticed that the IRLC specifically refers to Bank of India, Ilorapark Branch, Baroda, under the column `Advising Bank/Available with Beneficiary' and the IRLC was also confirmed through the Office of Bank of India situated at Baroda. That being the factual situation, learned Single Judge took the view that the writ petition is perfectly maintainable before this Court and there is no justification for Bank of India not honouring the Letter of Credit. We have heard Mr. Mihir Thakore, learned Senior Advocate for the appellant-Bank and Mr. D.D. Vyas, learned Senior Advocate for the original petitioner-respondent no.1-Company. Learned Senior Counsel for the appellant-Bank placed reliance on the decisions of the Apex Court reported in Delhi Cloth & General Mills Co. Ltd. v. Harnam Singh and others ( AIR 1955 SC 590 ) and Morgan Stanley Mutual Fund vs. Kartick Das (1994.4 SCC 225) and submitted that this Court has no territorial jurisdiction to entertain the writ petition against the appellant-Bank, which is having its head office at New Delhi. Learned Counsel also referred extensively to various provisions of UCPDC and also the various terms and conditions of IRLC. Learned Counsel also referred to the judgment of Court of Appeal in Banque De L'Indochine Et De Suez S.A. vs. J.H. Rayner (Mincing Lane) Ltd. (1983.1 Queen's Bench 711). Reference was also made to the decision of Kings Bench Division reported in Lloyd's List Law Reports Vol.22 1925 532 and the decision of House of Lords reported in Lloyd's List Law Reports Vol. 27.2. Learned Senior counsel also submitted that there were lot of discrepancies in the documents submitted, and only if those discrepancies were waived by A.K. Enterprise, the applicant-Bank was expected to honour its commitment under the Letter of Credit. 27.2. Learned Senior counsel also submitted that there were lot of discrepancies in the documents submitted, and only if those discrepancies were waived by A.K. Enterprise, the applicant-Bank was expected to honour its commitment under the Letter of Credit. Further, it was also pointed out that unless there was prior negotiation by the negotiating Bank State Bank of Saurashtra, and payment effected, there was no question of Bank of India honouring its commitment by paying the amount to the petitioner-company or to the negotiating Bank. Learned counsel appearing for the petitioner-respondent no.1, however, submitted that there is no reason to interfere with the judgment of the learned Single Judge on law as well as on facts. Reference was made to the decisions of the Apex Court in U.P. Cooperative Federation Ltd. Vs. Singh Consultants and Engineers (P) Ltd. (1988.1 SCC 174) and Federal Bank Ltd. Vs. V.M. Jog Engineering Ltd. and others (2001.1 SCC 663) to explain the scope of the terms of IRLC and UCPDC. Learned counsel submitted that the attempt of Bank of India is to wriggle out of its commitment under the Letter of Credit. We are, in this case, primarily concerned with the enforceability of the IRLC admittedly issued by the appellant-Bank in favour of the respondent no.1, the beneficiary. IRLC was issued on an application preferred by M/s. A.K. Enterprise to the appellant-Bank. Relevant terms of the IRLC are given below for easy reference. We hereby issue this irrevocable documentary credit subject to UCPDC 1993 Revision ICC Brochure 500. The terms and condition of this credit shall prevail, wherever they differ from UCPDC. Your drafts must be accompanied by documents listed in page no.2 which forms an integral part of this credit. Negotiations must be marked separately on the back hereof and this doc. credit should accompany the drafts which exhausts this credit and provided such drafts are drawn and presented in accordance with terms of this credit. We hereby engage with drawers, endorsers and bonafide holders that the said drafts shall be honoured on presentation/maturity. INSTRUCTIONS FOR NEGOTIATING BANK: (A) Original documents must be sent by courier on same day of negotiation to us at above address. Duplicate documents to be sent by next air mail. (B) Negotiating Bank should convey details of negotiation to us by swift/telex/fax and copy thereof should accompany documents. INSTRUCTIONS FOR NEGOTIATING BANK: (A) Original documents must be sent by courier on same day of negotiation to us at above address. Duplicate documents to be sent by next air mail. (B) Negotiating Bank should convey details of negotiation to us by swift/telex/fax and copy thereof should accompany documents. (C) In case negotiation exceeds USD 50,000/- or equivalent, please advice our .... Branch. The details of negotiation & value date of debit by TLX/SWIFT/Fax No. .... Reimbursement Instructions - 1. On receipt of documents complying with terms and conditions of doc credit we shall cover you as per your instructions. 2. After 3 working days of your swift/tlx/fax or advising negotiation of documents to us. Please claim reimbursement from our A/c. No. ......... with .................. your covering schedule of documents must provide confirmation of having obtained reimbursement. SPECIAL INSTRUCTIONS: 1. Draft at sight along with the invoice to be presented within the validity of this credit. 2. This credit is available for negotiation with any bank in India. 3. All bank charges are for opener's account including interest @ 24% p.a. If bill is not paid within 15 days from the date of invoice. 4. This credit is to be reinstated for the original L/c Value automatically by the opening bank on submission of the negotiated invoice. 5. Total drawing under this credit must not exceed Rs.2,40,00,000. 6. The Amount of any one month bill should not exceed 10,00,000. 7. The draft at sight in duplicate along with invoice for the payment of rental charges shall be submitted on fortnightly basis for the payment and payment for the said invoice will be released within next fortnight from the date of Invoice. SPECIAL INSTRUCTIONS TO NEGOTIATING BANK: 1. Negotiation should be marked separately on the back of the first page of this documentary credit and this credit should accompany the draft, which exhausts the credit. The negotiating bank must send the full set of documents to us in one lot by first class courier. 2. Total turnover under LC should not exceed Rs.2,40,00,000. SPECIAL INSTRUCTIONS TO ADVISING BANK: We request you to notify the credit to the beneficiary. Without adding you confirmation Adding your confirmation. Since specific reference is made to the UCPDC 1993, Revision ICC Brochure 500, we have to refer to that document, which is produced at page 151 of S.C.A compilation. 2. Total turnover under LC should not exceed Rs.2,40,00,000. SPECIAL INSTRUCTIONS TO ADVISING BANK: We request you to notify the credit to the beneficiary. Without adding you confirmation Adding your confirmation. Since specific reference is made to the UCPDC 1993, Revision ICC Brochure 500, we have to refer to that document, which is produced at page 151 of S.C.A compilation. Part A deals with General provisions and Definitions and Part B deals with Form and Notification of Credits. Article 6 refers to Revocable Vs. Irrevocable Credits. Article 9 deals with Liability of Issuing and Confirming Banks. Article 9 has some relevance, hence, we extract Article 9 in its entirety: Article 9 Liability of Issuing and Confirming Banks (a) An irrevocable Credit constitutes a definite undertaking of the Issuing Bank, provided that the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and that the terms and conditions of the credit are complied with. (i) if the Credit provides for sight payment to pay at sight; (ii) if the Credit provides for deferred payment to pay on the maturity date(s) determinable in accordance with the stipulations of the Credit; (iii) if the Credit provides for acceptance: (a) by the Issuing Bank to accept Draft(s) drawn by the Beneficiary on the Issuing Bank and pay them at maturity, or (b) by another drawee bank to accept and pay at maturity Draft(s) drawn by the Beneficiary on the Issuing Bank in the event the drawee bank stipulated in the Credit does not accept Draft(s) drawn on it, or to pay Draft(s) accepted but not paid by such drawee bank at maturity; (iv) if the Credit provides for negotiation to pay without recourse to drawers and/or bona fide holders, Draft(s) drawn by the Beneficiary and/or document(s) presented under the Credit. A Credit should not be issued available by Draft(s) on the Applicant. If the Credit nevertheless calls for Draft(s) on the Applicant, banks will consider such Draft(s) as an additional documents(s). A Credit should not be issued available by Draft(s) on the Applicant. If the Credit nevertheless calls for Draft(s) on the Applicant, banks will consider such Draft(s) as an additional documents(s). (b) A confirmation of an irrevocable Credit by another bank (the Confirming Bank ) upon the authorization or request of the Issuing Bank, constitutes a definite undertaking of the Confirming Bank, in addition to that of the Issuing Bank, provided that the stipulated documents are presented to the Confirming Bank or to any other Nominated Bank and that the terms and conditions of the Credit are complied with: (i) if the Credit provides for sight payment to pay at sight; (ii) if the Credit provides for deferred payment to pay on the maturity date(s) determinable in accordance with the stipulations of the Credit; (iii) if the Credit provides for acceptance: (a) by the Confirming Bank to accept Draft(s) drawn by the Beneficiary on the Confirming Bank and pay them at maturity, or (b) by another drawee bank to accept and pay at maturity Draft(s) drawn by the Beneficiary on the Confirming Bank, in the event the drawee bank stipulated in the Credit does not accept Draft(s) drawn on it, or to pay Draft(s) accepted but not paid by such drawee bank at maturity; (iv) if the Credit provides for negotiation to negotiate without recourse to drawers and/or bona fide holders, draft(s) drawn by the Beneficiary and/or document(s) presented under the Credit. A Credit should not be issued available by Draft(s) on the Applicant. If the Credit nevertheless calls for Draft(s) on the Applicant, banks will consider such Draft(s) as an additional document(s). (c) (i) If another bank is authorised or requested by the Issuing Bank to add its confirmation to a Credit but is not prepared to do so, it must so inform the Issuing Bank without delay. (ii) Unless the Issuing Bank specifies otherwise in its authorization or request to add confirmation, the advising Bank may advise the Credit tot he Beneficiary without adding its confirmation. (d) (i) Except as otherwise provided by Article 48, an irrevocable Credit can neither be amended nor cancelled without the agreement of the Issuing Bank, the Confirming Bank, if any, and the Beneficiary. (ii) the Issuing Bank shall be irrevocably bound by an amendment(s) issued by it from the time of the issuance of such amendment(s). (d) (i) Except as otherwise provided by Article 48, an irrevocable Credit can neither be amended nor cancelled without the agreement of the Issuing Bank, the Confirming Bank, if any, and the Beneficiary. (ii) the Issuing Bank shall be irrevocably bound by an amendment(s) issued by it from the time of the issuance of such amendment(s). A Confirming Bank may extend its confirmation to an amendment and shall be irrevocably bound as of the time of its advice of the amendment. A Confirming Bank may, however, choose .. Article 10 of ICC No.500 deals with Types of Credit, which is also extracted for easy reference: (a) All Credits must clearly indicate whether they are available by sight payment, by deferred payment, by acceptance or by negotiation. (b) (i) Unless the Credit stipulates that it is available only with the issuing Bank, all Credits must nominate the bank (the Nominated Bank ) which is authorised to pay, to incur a deferred payment undertaking, to accept Draft(s) or to negotiate. In a freely negotiable Credit, any bank is a Nominated Bank. Presentation of documents must be made to the issuing Bank or the confirming Bank, if any, or any other Nominated Bank. (ii) Negotiation means the giving of value for Draft(s) and/or document(s) by the bank authorised to negotiate. Mere examination of the documents without giving of value does not constitute a negotiation. (c) Unless the Nominated Bank is the Confirming Bank, nomination by the issuing Bank does not constitute any undertaking by the Nominated Bank to pay, to incur a deferred payment undertaking, to accept Draft(s), or to negotiate, except where expressly agreed to by the Nominated Bank and so communicated to the Beneficiary, the Nominated Bank's receipt of and/or examination and/or forwarding of the documents does not make that bank liable to pay, to incur a deferred payment undertaking, to accept Draft(s), or to negotiate. (d) By nominating another bank, or by allowing for negotiation by any bank, or by authorising or requesting another bank to add its confirmation, the Issuing Bank authorizes such bank to pay, accept Draft(s) or negotiate as the case may be, against documents which appear on their face to be in compliance with the terms and conditions of the Credit and undertakes to reimburse such bank in accordance with the provisions of these Articles. Article 14 deals with Discrepant Documents and Notice, which is reproduced below for easy reference: Article 14 Discrepant Documents and Notice (a) When the Issuing Bank authorizes another bank to pay, incur a deferred payment undertaking, accept Draft(s), or negotiate against documents which appear on their face to be in compliance with the terms and conditions of the Credit, the Issuing Bank and the Confirming Bank, if any, are bound: i. to reimburse the Nominated Bank which has paid, incurred a deferred payment undertaking, accepted Draft(s), or negotiated. ii. to take up the documents. (b) Upon receipt of the documents the Issuing Bank and/or Confirming Bank, if any, or a Nominated Bank acting on their behalf, must determine on the basis of the documents alone whether or not they appear on their face to be in compliance with the terms and conditions of the Credit. If the documents appear on their face not to be in compliance with the terms and conditions of the Credit, such banks may refuse to take up the documents. (c) If the Issuing Bank determines that the documents appear on their face not to be in compliance with the terms and conditions of the Credit, it may in its sold judgment approach the Applicant for a waiver of the discrepancy(ies). This does not, however, extend the period mentioned in sub-Article 13(b). (d)(i) If the Issuing Bank and/or Confirming Bank, if any, or a Nominated Bank acting on their behalf, decides to refuse the documents, it must give notice to that effect by telecommunication, or, if that is not possible by other expeditious means, without delay but no later than the close of the seventh banking day following the day of receipt of the documents. Such notice shall be given to the bank from which it received the documents, or to the Beneficiary, if it received the documents directly from him. (ii) Such notice must state all discrepancies in respect of which the bank refuses the documents and must also state whether it is holding the documents at the disposal of, or is returning them to the presenter (iii) The Issuing Bank and/or Confirming Bank, if any, shall then be entitled to claim from the remitting bank refund with interest, of any reimbursement which has been made to that bank. (e) If the Issuing Bank and/or Confirming Bank, if any, fails to act in accordance with the provisions of this Article and or fails to hold the documents at the disposal of, or return them to, the presenter, the Issuing Bank and/or Confirming Bank if any, shall be precluded from claiming that the documents are not in compliance with the terms and conditions of the Credit. (f) If the remitting bank draws the attention of the Issuing Bank and/or Confirming Bank, if any, to any discrepancy(ies) in the document(s), or advises such banks that it has paid, incurred a deferred payment undertaking, accepted Draft(s) or negotiated under reserve or against an indemnity in respect of such discrepancy(ies), the Issuing Bank and/or Confirming Bank, if any, shall not be thereby relieved from any of their obligations under any provisions of this Article. Such reserve or indemnity concerns only the relations between the remitting bank and the party towards whom the reserve was made, or from whom, or on whose behalf, the indemnity was obtained. It is unnecessary to elaborate much on the scope of various terms and conditions of the IRLC as well as terms and conditions of UCPDC, since Supreme Court had an occasion to deal with the scope of IRLC as well as UCPDC in U.P. Cooperative Federation (supra) and had spoken on them. The Apex Court referred to several decisions, i.e., United City Merchants (Investments) Ltd. Vs. Royal Bank of Canada (1982.2 All ER 720), Texmaco Ltd. Vs. State Bank of India ( AIR 1979 Cal 44 ), Tarapore & Co., Madras Vs. M/s. V/O Tractors Export, Moscow (1969.1 SCC 233), United Commercial Bank Vs. Bank of India (1981.2 SCC 766), Centax (India) Ltd. Vs. Vinmar Impex Inc. (1986.4 SCC 136) and stated that the opening of a confirmed letter of credit constituted a bargain between the banker and the seller of the goods which imposed on the banker an absolute obligation to pay, and the banker was not bound or entitled to honour the bills of exchange drawn by the seller, unless they and such accompanying documents as might be required thereunder, were in exact compliance with the terms of the credit. In the concurring judgment in U.P. Cooperative Federation (supra) Justice Jagannatha Shetty has stated as follows:- The Court, however, should not lightly interfere with the operation of irrevocable documentary credit. In the concurring judgment in U.P. Cooperative Federation (supra) Justice Jagannatha Shetty has stated as follows:- The Court, however, should not lightly interfere with the operation of irrevocable documentary credit. I agree with my learned brother that in order to restrain the operation of the irrevocable letter of credit, performance bond or guarantee, there should be serious dispute to be tried and there should be good prima facie acts of fraud. This decision was quoted with approval by another Bench of Supreme Court in Federal Bank (supra) wherein the Apex Court examined various articles of UCPDC (1983), many provisions of which are para materia with UCPDC (1993). Article 10(a) of ICC No. 500 says that all credits must clearly indicate whether they are available by sight payment, by deferred payment, by acceptance or by negotiation. Article 9 refers to liability of issuing and confirming banks. Article 9(a) says that an irrevocable Credit constitutes a definite undertaking of the Issuing Bank, provided that the stipulated documents are presented to the Nominated Bank or to the Issuing Bank and that the terms and conditions of the credit are complied with and Article 9(a)(i) provides that if the Credit provides for sight payment to pay at sight, then it has to be honoured at site. Article 9(b) says that a confirmation of an irrevocable Credit by another bank (the Confirming Bank ) upon the authorization or request of the Issuing Bank, constitutes a definite undertaking of the Confirming Bank, in addition to that of the Issuing Bank, provided that the stipulated documents are presented to the Confirming Bank or to any other Nominated Bank and that the terms and conditions of the Credit are complied with. In U.P. Cooperative Federation (supra) case, the Apex Court clearly says that Courts must examine with reasonable care if the documents on the face of it conform to the terms and conditions of the IRLC. In Federal Bank (supra) case, the Apex Court was examining the claim of a negotiating Bank. So far as the present case is concerned, the negotiating bank, i.e., respondent no.2, did not negotiate the documents. There is no compulsion on the part of the negotiating bank to negotiate the documents. So far as IRLC is concerned, the negotiating Bank is a third party. So far as the present case is concerned, the negotiating bank, i.e., respondent no.2, did not negotiate the documents. There is no compulsion on the part of the negotiating bank to negotiate the documents. So far as IRLC is concerned, the negotiating Bank is a third party. Negotiating Bank is not bound to honour the commitment of the appellant-Bank and there is no obligation on the part of negotiating Bank to negotiate the documents. In case the negotiating Bank negotiates the documents and pays the amount to a beneficiary, then it can make a request to the issuing Bank to honour its commitment towards the negotiating bank. The law is well settled in Federal Bank (supra) case. We are in this case concerned with the liability of the issuing Bank itself while dealing with IRLC. Law is well settled that the same can be averted only if the issuing Bank can establish fraud. No fraud has been alleged or proved and there is nothing to show that the terms and conditions of the IRLC have been violated apart from the appellant Bank's submission that there are some discrepancies in the documents and that the negotiating Bank, i.e., respondent no.2-Bank, did not negotiate the documents. We are also not impressed with the arguments of the appellant-Bank that this Court has no jurisdiction to entertain the writ petition. Column two of IRLC specifically refers to Advising Bank/Available with Bank of India, Ellora Park, Branch, Elorra Park, Baroda and that IRLC has been confirmed by that Branch of the appellant-Bank. Article 9(b) says that a confirmation of an irrevocable Credit by another bank (the Confirming Bank ) upon the authorization or request of the Issuing Bank constitutes a definite undertaking of the Confirming Bank in addition to that of the Issuing Bank, provided that the stipulated documents are presented to the Confirming Bank or to any other Nominated Bank and that the terms and conditions of the Credit are complied with. In the instant case, the confirming Bank is the Branch Office of Bank of India at Baroda. IRLC specifically states that IRLC has been confirmed by the Branch Office of Bank of India at Baroda. Therefore, on a technical plea of territorial jurisdiction, the appellant-Bank cannot shirk or escape from their liability, especially when their Branch Office figures very much in the IRLC. IRLC specifically states that IRLC has been confirmed by the Branch Office of Bank of India at Baroda. Therefore, on a technical plea of territorial jurisdiction, the appellant-Bank cannot shirk or escape from their liability, especially when their Branch Office figures very much in the IRLC. That being the factual and legal situation, we are not impressed with the argument of learned counsel for the appellant that this Court has no jurisdiction to entertain the writ petition. We fully concur with the learned Single Judge that the alleged discrepancies pointed out by Bank of India have no basis and in our view is an `after thought intended only to wriggle out of the commitment under the Letter of Credit. Bank of India had not pointed out what were the discrepancies at any point of time either to the 2nd respondent Bank or to the petitioner or even to A.K. Enterprise. Further, the petitioner is not concerned with the alleged discrepancies, and the petitioner is also not informed of any discrepancies in the invoice or the bill or other documents produced. We fully concur with the view of the learned Single Judge that all documents tendered by the petitioner to the 2nd respondent and forwarded to Bank of India were strictly in terms with the Letter of Credit. 2nd respondent-Bank also indicated the same to the Bank of India in their communication. The issuance of Irrevocable Letter of Credit constitutes an agreement between the issuing Bank and the beneficiary and when the beneficiary intends to invoke its privileges, the issuing Bank is bound to honour its commitment, unless a case of fraud is established. There is no allegation of any fraud being practiced by the petitioner, and all the defences raised by the issuing Bank are unsustainable when pitted against the clear terms of the Letter of Credit and the UCPDC ICC 500. The stand taken by the issuing Bank is not befitting to the status of a nationalized Bank, and is nothing but malafide, defeating the credibility of a Letter of Credit and if upheld the customers will lose their faith in the banking system. We are in full agreement with the view taken by the learned Single Judge. Letters Patent Appeal and the Civil Applications stand dismissed accordingly. Interim relief stands vacated. We are in full agreement with the view taken by the learned Single Judge. Letters Patent Appeal and the Civil Applications stand dismissed accordingly. Interim relief stands vacated. Request of the learned counsel for the appellant to stay operation of this judgement and order is rejected.