Order
1. By this petition the plaintiff in a pending suit for damages for an alleged breach of contract of sale of goods, seeks special leave to appeal to this Court from the order dated 11th/12th February, 1992 of the High Court of Gujarat dismissing the petitioner's appeal preferred against an interlocutory order dated 31st December, 1990 of the Trial Judge — the Civil Judge Senior Division at Bhuj — declining to interdict the operation and incidents of a letter of credit issued at petitioner's instance and on its behalf in favour of the fourth respondent-Bank, a collecting Bank for the foreign seller.
2. Both the trial court and the High Court in appeal found no justification to grant an interlocutory injunction to freeze the letter of credit pending suit.
3. We have heard learned counsel on both sides. The principles guiding the administration of this form of interlocutory remedy in relation to letters of credit or Bank guarantees are well-settled. See United Commercial Bank v. Bank of India (1981) 2 SCC 766, (1981) 3 SCR 300 and U.P Coop. Federation Ltd. v. Singh Consultants and Engineers (P) Ltd. (1988) 1 SCC 174 Having regard to these settled principles it is not possible at the interlocutory stage to interdict the course of the rights and obligations flowing from the letter of credit. The refusal of the injunction by the High Court does not call for interference. The special leave petition, insofar as it relates to this relief, requires to be dismissed.
4. However, Sri Salve for the petitioner points out that the High Court had, upon an appreciation of the facts and circumstances placed before it even at the interlocutory stage, found it necessary to observe:
“In order that faith in the international commerce is not shaken, the parties, namely the plaintiff and the first defendant should follow up their negotiations so that the problem can be sorted out and if it is found ultimately that the goods are not in accordance with the specifications as contracted for between the parties, Respondent 1 can forthwith approach the manufacturer for making good the loss or for replacing the material as the case may be, as per the ultimate solution that might be reached at the conclusion of such negotiations. To reiterate, what is important is to see that the faith of the traders dealing in international transactions is not shaken. These observations are made because Mr Buch made it clear that Respondent 1 was open to consider the proposal that might be made from the side of the plaintiff. What is important is that that process should be hastened up.”
5. Sri Salve said that a substantial part of the 200 tonnes of aluminium rods supplied by Respondent 1 were not in accordance with the stipulated specifications and were useless for purposes of the petitioner and that if the litigation takes its normal course the petitioner would be exposed to an irreparable and uncompensatable hardship. Sri Salve made a suggestion — of course without prejudice — that consistent with the observations of the High Court, Respondent I should find it possible to agree to have any reputed surveyor in India to inspect the goods and make a report as to their conformability with the stipulated specifications and if such inspection confirms petitioner's allegations, Respondent 1 should agree to take back the goods or such part of it as may be found not answering the specifications and substitute the same with goods of the appropriate specifications. Sri Salve said this could be the basis for the possibility of a final settlement of the litigation which has since proliferated into multiplicity of proceedings and suits.
6. Sri Nariman for Respondent 1 is not in a position immediately to respond to this suggestion as according to him his client is based in London and that it would take some time for him to ascertain its views on the proposal. We direct this matter be listed sometime in the last week of July 1992 so as to enable Sri Nariman to ascertain the possibilities of an agreed solution if one can be reached.
7. However, on the question of interlocutory injunction against Respondents 3 and 4, the order of the High Court is left undisturbed, which means that there shall be no interlocutory injunction against the operation of the letter of credit.
8. Call in the last week of July 1992.
Court Master