1061

IN THE
HONOURABLE DISTRICT COURT OF HONDURUS

CIVIL SUIT NO: XXX/2014
[UNDER SECTIONS 6, 9, 16 and 14 OF THE CODE OF CIVIL PROCEDURE, 1908]

-IN THE MATTER OF-
GOVERNMENT AND ORS.PLAINTIFF
v.
LOVELY SUGAR COMPANY.DEFENDANT





MEMORIAL SUBMITTED ON BEHALF OF THE PLAINTIFF
ii

TABLE OF CONTENTS

INDEX OF AUTHORITIES.......................................................................................................... iv
STATEMENT OF JURISDICTION............................................................................................... v
SUMMARY OF FACTS ............................................................................................................... vi
1. Whether The Relief Sought By Government Of Hondurus For Seeking An Order In The
Nature Of Injunction Restraining Lovely Sugar Company From Invoking The Bank Guarantee
Is Sustainable? .......................................................................................................................... viii
SUMMARY OF ARGUMENTS ................................................................................................... ix
1. Whether The Relief Sought By Government of hondurus For Seeking An Order In The
Nature Of Injunction Restraining Lovely Sugar Company From Invoking The Bank Guarantee
Is Sustainable? ............................................................................................................................ ix
ARGUMENTS ADVANCED ........................................................................................................ 1
1. The relief sought by Government of hondurus for seeking an order in the nature of
injunction restraining Lovely Sugar Company from invoking the bank guarantee is sustainable.
1
1.1 There Was Fraud Committed By The Defendant.................................................................. 1
PRAYER ......................................................................................................................................... 4

iii


iv

INDEX OF AUTHORITIES
Cases
Bank of Baroda v Ruby Sales Corporation AIR 2006 SC 1786 ...................................................... 2
Federal Bank Ltd. v V.M. Jog Engineering Ltd. AIR 2000 SC 3166 ............................................. 2
Uttar Pradesh Co-op Federation Ltd Singh Consultants and Engrs Pvt Ltd ................................. 2
Treatises
Dr. R. K. Bangia, Contracts II, p. 41, (Faridabad: Allahabad Law Agency, 2009) ........................ 1
Pollock & Mulla, Indian Contract and Specific Relief Acts, Vol.II, 13ed., ................................... 1

v

STATEMENT OF JURISDICTION

The counsel for the plaintiff most humbly submits that this Learned District Court of Hondurus
has the requisite jurisdiction to admit and adjudicate the present matter under Section 6, 9, and
20 of the Civil Procedure Code, 1908.

vi

SUMMARY OF FACTS
The counsel for the plaintiff most humbly and respectfully showeth that:
-I-
Lovely Sugar Company got the authorization for sugar business from Rationing Authority,
Government of Hondurus. The company gets bank guarantee of Rs. 50,00,000/- from the State
Bank of Hondurus.
-II-
One Dharma Bank advanced Rs 20,00,000/- to Lovely Sugar Company on the security of sugar
bags. The sugar bags were in Lovely Sugar Companys godown, which was locked and key was
surrendered to Dharma bank.
-III-
The Government broke and open the lock and seized 5000 maunds of sugar under the seizure
order of Rationing Authority because Lovely Sugar Company got business authorization from
the Rationing Authority with forged documents.
-IV-
The sale proceeds of sugar was adjusted for recovery of arrears of Cane Cess due from Lovely
Sugar Company to the Cane Commissioner.


vii

-V-
Government of Hondurus and Cane Commissioner filed an application before the judge praying
for an order restraining Lovely Sugar Company from realising the amount covered by the Bank
Guarantee.
Hence the present matter before this learned district court.

viii

ISSUES FOR CONSIDERATION
1. WHETHER THE RELIEF SOUGHT BY GOVERNMENT OF HONDURUS FOR SEEKING AN
ORDER IN THE NATURE OF INJUNCTION RESTRAINING LOVELY SUGAR COMPANY
FROM INVOKING THE BANK GUARANTEE IS SUSTAINABLE?

ix

SUMMARY OF ARGUMENTS

1. WHETHER THE RELIEF SOUGHT BY GOVERNMENT OF HONDURUS FOR SEEKING AN
ORDER IN THE NATURE OF INJUNCTION RESTRAINING LOVELY SUGAR COMPANY
FROM INVOKING THE BANK GUARANTEE IS SUSTAINABLE?
Since, Lovely Sugar Company obtained the authorization for business from Rationing
Authority, Government of Hondurus by providing forged documents, it is sufficient to establish
the fact that fraud has been committed therein. Performance guarantees given by banks are, in
essence, exceptionally stringent contracts of indemnity. Expections in case of fraud, or in case
where irretrievable injustice would be done if bank guarantee is allowed to be encashed, that the
court would interfere. Therefore, since the object for which the bank guarantee was taken by the
defendant is vitiated by fraud and en-cashing the bank guarantee would do irretrievable
injustice, Defendant cannot realize the amount covered under bank guarantee.






1

ARGUMENTS ADVANCED
1. THE RELIEF SOUGHT BY GOVERNMENT OF HONDURUS FOR SEEKING AN ORDER IN THE
NATURE OF INJUNCTION RESTRAINING LOVELY SUGAR COMPANY FROM INVOKING THE
BANK GUARANTEE IS SUSTAINABLE.
The counsel humbly submits that the Government can restrain Lovely Sugar Company from
realizing the amount under bank guarantee.
1.1 THERE WAS FRAUD COMMITTED BY THE DEFENDANT.
An irrevocable commitment, either in the form of confirmed bank guarantee, or irrevocable letter
of credit, cannot be interfered with except when a case of fraud or apprehension injustice is made
out. In order to restrain the operation either of irretrievable letter of credit or of confirmed letter
of credit or of bank guarantee, there should be serious dispute and there should be good prima
facie case of fraud and special equities in the form of preventing irretrievable injustice between
the parties.
1

It has been impressed that the Courts should be slow in granting an injunction to restrain the
realization of such a bank guarantee. Commitments of banks, it is said, must be honored free
from interference by the courts; otherwise, trust in commerce internal and international would be
irreparably damaged.
2



1
Pollock & Mulla, Indian Contract and Specific Relief Acts, Vol.II, 13ed., p.1787.
2
Dr. R. K. Bangia, Contracts II, p. 41, (Faridabad: Allahabad Law Agency, 2009).
2

Therefore, in the present matter, when the Bank of Hondurous gave the bank guarantee of Rs.
50,00,000 to the defendant with the presumption that it was given under good faith and later on it
was found that the documents were forged to defraud the Government and the Bank.
It is settled that the court ought not to grant injunction to restrain encashment of bank guarantee
or letters of credit. Two exceptions have been mentioned: (i) fraud, and (ii) irretrievable damage.
If the plaintiff is primae facie able to establish that the case comes within these two exceptions,
temporary injunction under Or. 39, r.1, CPC can be issued.
3

The nature of the fraud that the court talks about is fraud of an egregious nature as to vitiate the
entire underlying transaction. It is the fraud of the beneficiary and not the fraud of somebody
else. A very strong primae face case, in support of the contention that there is fraud or special
equity must be made out, and the courts will not interfere with the enforcement of the bank
guarantees or the letters of credit on mere allegation of fraud or special equity.
4

The bank may refuse payment under the guarantee, if there is a fraud on the part of the
beneficiary, or where the documents tendered for invoking the guarantee are not according to the
terms of the guarantee, or are forged. The bank may refuse the payment if it detects the
fraudulent actions with minimal investigation.
5

In Bank of Baroda v. Ruby Sales Corporation,
6
the court held that:
Unless it was a case of fraud, bank was bound to discharge bank guarantee.

3
Federal Bank Ltd. v V.M. Jog Engineering Ltd. AIR 2000 SC 3166.
4
Uttar Pradesh Co-op Federation Ltd Singh Consultants and Engrs Pvt Ltd (1988) 1 SCC.
5
Pollock & Mulla, Indian Contract and Specific Relief Acts, Vol.II, 13ed., p.1785.
6
Bank of Baroda v Ruby Sales Corporation AIR 2006 SC 1786.
3

Therefore, in the present case it can be observed that the defendant obtained the authorization for
the business with forged documents and fraud has been committed therein. So the defendant is
not entitled to realize the amount under the bank guarantee.
Even if the defendant is allowed for the en-cashment under bank guarantee, it would be
irretrievable injustice made out to the bank which is giving the bank guarantee, and any such
person who is taking the bank guarantee as any person taking bank guarantee for fraudulent
activities, unknown to the bank may be obliged to honor the commitment and this would be
against the principle of natural justice.
It is most humbly submitted that in the present case it is clear that the authorization was taken by
forged documents which amounts fraud, thereby breaching the contract, can restrain the
defendant from en-cashing the money from the bank.

4

PRAYER

Wherefore in the light of the facts stated, issues raised, arguments advanced and authorities cited
it is most humbly and respectfully prayed before this Learned District Court of Hondurus that it
may please to:
Allow the suit.
And further grant any other order that this honorable court may deem fit in the ends of justice,
equity and good conscience.

And For This The Plaintiff Shall Duty Bound Ever Pray.
All of which is respectfully submitted.





DATE- XX/XX/ 2014 COUNSEL NO- 1061
COUNSEL FOR THE PLAINTIFF
5