Law:

Section:

(a) Negotiable Instruments Act (XXVI of 1881)-------S. 5---Letter of Credit---Object and, scope---Letter of Credit is invariably irrevocable in nature and is made to ensure the payments of goods to vendor without any reference to the buyer---Contract is necessary between two Banks, one of them issuing a Letter of Credit, on the other Bank authorising release of payment on production of appropriate documents evidencing the shipment of goods by the seller without any reference to the buyer---Such contracts are of international character---Any restraint upon the encashment of negotiable instrument creates serious complications, hardships and anomalies in the international trade and shatter confidence of traders in international banking system---Only exception is act of fraud, mischief or injustice in relation to document of shipment evidencing the shipment of goods to the knowledge of Bank---Letter of Credit lays down an absolute unconditional obligation on the Bank irrespective of any dispute between the parties whether they have pursued their part of contract or there was some breach in the discharge of their respective obligations. Central Textile Mills Ltd. v. Industrial Development Bank of Pakistan 1989 CLC 1194; Ajaz Anis v. Tariq Isa and 6 others 1999 CLC 259 and Svenska Handels Banken v. Messrs Indian Charge Chrome and others 1995 PSC 1276 ref. (b) Civil Procedure Code (V of 1908)--- ----O. XXXIX, Rr. 1 & 2---Negotiable Instruments Act (XXVI of 1881), S.5---Interim injunction, grant of---Obligation arising under Letter of Credit---Restraining from release of amount of Letter of Credit---Plaintiff sought restraint on the ground that the defendant did not supply the goods as per contract and was not liable to release of amount against substandard gods---Both the Courts below declined to grant interim injunction in favour of the plaintiff---Validity---Unless there was a strong case .of forgery, irretrievable injury, injustice or gaining wrongful advantage from contract with regard to establishment of Letter of Credit, no restraint order could be passed on an obligation arising under a Letter of Credit which laid down an absolute unconditional obligation…

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