the letters of credit being an independent transaction would not be concerned with any dispute between buyer and seller.

Abhinav Mishra| Kirit P. Mehta School of Law| 17th June 2020

Case Name: Standard Retail Pvt. Ltd. v. M/s G.S Global Corp & Ors.

Introduction

The above petition have been filed in Bombay High Court under section 9 of the Arbitration And Conciliation Act seeking direction restraining the respondent- Bank from negotiating the letters of credit. The Bench Comprises of Justice A.A Sayed.

Facts

• The petitioner contends according to the section 56 of Indian contract Act,1972 and in view of the COVID-19 pandemic and the lockdown declared by the central govt. its contract with Respondent No.1 was terminated on account of frustration, and impracticability.
• Under the contract Respondent No.1 which is based in South Korea was to supply certain steel products which were to be dispatched from South Korea to the petitioners in Mumbai.
• The Contract were subject to General Terms of condition including an article on Force Majeure and Governing law & Arbitration Jurisdiction.

Rules and Laws Used

Section 9 of the arbitration and conciliation Act.

Section 56 of Indian contract Act,1972.

Holding

The court after hearing from all the learned counsel for both the petitioner and the respondents held that the petitioners are not entitled to any ad-interim reliefs .

Brief Analysis

The court rejected the petitioner request for any ad-interim reliefs arguing the following-

1. The letters of credit are and independent transaction with the bank which is not concerned with disputes between buyer and seller.
2. The force Majeure clause in the contract is only applicable to the Respondent No.1 (Seller).
3. There are no restriction on the movement of goods and all ports and port related activities have been declared essential service. The Director General of Shipping, Mumbai states that there would be no container detention charges on import and export.
4. The lockdown would be for a limited period and the lockdown cannot come to the rescue of the Petitioners so as to resile from its contractual obligations with the Respondent No. 1 of making payments.

Conclusion

The primary issue here being dealt is whether due to impossibility of the contract whether the court can restrain bank from negotiating the letters of credit and the court held that the letters of credit being an independent transaction is not concerned with any dispute between buyer and seller.