A court in Singapore has ordered an Italian bank to honour two fraudulent letters of credit used as security by a colourful Indian businessman. Industrial and Commercial Bank (ICB) of Singapore had demanded that Italy's Banco Ambrosiano Veneto (BAV) honour the L/Cs worth approximately US$12 million.

The L/Cs were used to secure credit facilities from ICB for Amarendra Nath Ghosh and his Singapore-based company, Global Trade and Consultancy (GTC). The Italian bank refused ICB's demands to honour the L/Cs, claiming they were fraudulent.

L/Cs fraudulently created

Lawyers for ICB told the hearing at the Singapore high court that a first L/C with a US$3-million limit, was issued in June 1999 by BAV. The Italian bank subsequently issued a second credit with an initial limit of US$4 million in the following September. The limit was subsequently raised to US$12 million on GTC's request.

Counsel for ICB told the court that the Italian bank knowingly authorised the L/Cs but BAV denied liability, claiming the credits fraudulently created by three people, including a former ICB vice-president.

Principal plus interest

The Singapore-based bank then requested repayment by Ghosh and his company of the principal sum plus interest of US$12.8 million they had borrowed. ICB successfully sued the Indian national and his firm for payment which has not yet been received.

During the hearing, lawyers for the Italian bank told the court that BAV had informed ICB that Ghosh had previously used ICB accounts to perpetrate several frauds.

The court upheld ICB's claim that it was also entitled to demand the Italian bank honour the two L/Cs, even if they were fraudulently issued. Ruling in favour of ICB, judicial commissioner Tay Yong Kwang said BAV must pay the principal sum plus interest.

The views in this article are those of the author and not necessarily those of ICC or the other partners in DC-PRO.