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Injuction - order vii - viii - reject - suit - Letter of credit - Bank guarantee

1) UPC-600 (Uniform Customs and Practice for Documentary Credits, Sixth Edition) published by International Chambers of Commerce
2) Saleem Bhai v. State of Maharashtra, (2003) 1 SCC 557, Popat Kotecha Property v. State Bank of India Association, (2005) 7 SCC 510
3) Sopan Sukhdeo Sable v. Asst. Charity Commissioner, (2004) 3 SCC 137
4) R.D. Harbottle (Mercantile) Ltd. v. National Westminster Bank, (1977) 3 WLR 752

IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 3103 OF 2015
(Arising out of SLP (C) No.9689 of 2014)
M/S. MILLENIUM WIRES (P) LTD. ...APPELLANT
 :versus:
THE STATE TRADING CORPORATION
OF INDIA LTD. AND ORS. ...RESPONDENTS


“Banks must be allowed to honour their guarantees without interference except in clear cases of notice of fraud to the bank. The merchants take risk which are
not to be imposed on the banks. Such interference will deter trust in international commerce.”


(1) The Court must be slow in granting an order of injunction restraining the realisation of a bank guarantee or Letter of Credit.
(2) There are two exceptions to the above rule. The first is that it must be clearly shown that a fraud of a grievous nature has been committed and to the notice of the Bank. The second is that injustice of the kind which would make it impossible for the guarantor to reimburse himself, or would result in irretrievable harm or injustice to one of the parties concerned, should have resulted.
(3) It is not enough to allege fraud but there must be clear evidence both as to the fact of fraud as well as to the bank's knowledge of such fraud.



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