A Dubai court has ordered the Bank of Baroda to pay up on a letter of credit (L/C) guarantee that has been in dispute for around six years.

The case involves the bank refusing to pay after the customer changed the name on the credit order.

Consistent verdicts

The Dubai branch of the Bank of Baroda must pay US$103,869 or its equivalent in local currency plus four per cent interest since January 2000 to an Indian company, Clutch Durgos.

The case has already dragged through all levels of Dubai's commercial courts, with each court reaching a similar verdict and asking the bank to pay up.

Payment schedule

In April 1999, Clutch Durgos asked the bank to open an L/C in favour of Lico Engineers Company of South Korea for merchandise to be supplied by them for the total amount of US$240,000.

The documents stated that the bank could pay 60 per cent of the total amount or US$144,000 on viewing the merchandise and 40 per cent when Clutch Durgos presented the required certificate on completion of orders.

Name change

Clutch Durgos deposited US$103,869 in cash as a guarantee so that the bank could release 60 per cent of the amount.

The name on the credit meanwhile was changed from the original supplier, Lico Engineers Company, in favour of Devia International.

Bank of Baroda apparently then sent the L/C to the wrong bank under the new arrangements as far as the Indian company was concerned and told Clutch Durgos it was about to transfer the 40 per cent to a bank in South Korea.

Appeals

The Indian company then filed its case in a Dubai court forcing the bank to stop the payment. The bank meanwhile refused to pay back to Clutch Durgos the US$103,869 it had put up as guarantee.

Bank of Baroda appealed against all of the previous Dubai court verdicts that found in favour of Clutch Durgos.

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