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Note: To pay for the purchase of goods, Applicant Hira Lall and Sons of India caused Lakshmi Commercial Bank of India to issue an LC for US$205,992.51 in favor of Seller/Beneficiary, Palmex Enterprises of Singapore. The LC was payable by an unnamed Negotiating Bank on presentation of documents reflecting delivery of goods. Seller shipped the goods and presented documents to Negotiating Bank, which honored the presentation and was reimbursed by Issuer through debiting Issuer's account at its New York office. Applicant then informed Issuer that the ship carrying the goods had sunk, and refused to reimburse Issuer.

Meanwhile, the Indian government had created the Debts Recovery Tribunal to handle cases brought by banks and financial institutions to recover debts. As a result, Issuer's suit against Applicant for reimbursement was moved to the tribunal. In the case at bar, Applicant petitioned to re-transfer the suit back to the High Court, arguing that there were so many cases in which importers were being sued by banks on their LC obligations that the issue was of interest for the High Court.

Deciding to deny Applicant's petition to retransfer the case, the court underscored the independence of an LC from the underlying contract, saying "the settled legal position is that a letter of credit constitutes sole contract with the banker and [the LC's authorization of] the bank issuing [a] letter of credit has no concern with any question that may arise between the seller and the purchaser of goods in respect of the purchase price." The court also noted that "there should however, be strict compliance both by the customer at whose instance letter of credit was issued and by the banker, with his instruction." Because of the specific applicability of a letter of credit dispute to a tribunal designed to handle claims by banks and financial institutions, the court concluded that the tribunal was equipped to consider all the claims and defenses in a letter of credit case and that "it [was not] expedient for the ends of justice to direct transfer of [the] case to the High Court."

[JEB/llh]

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