Grains and Industrial Products Trading Pte Ltd v Bank of India: Letter of Credit Dispute

Grains and Industrial Products Trading Pte Ltd sued Bank of India and Indian Bank in the High Court of Singapore on 30 December 2014, claiming sums allegedly owing under a letter of credit issued by Indian Bank, with Bank of India named as "Nominated Bank." The court dismissed the claim against Bank of India, finding no agreement to confirm or negotiate the letter of credit. However, the court allowed the claim against Indian Bank as the issuing bank, holding them liable for failing to honor the letter of credit after a complying presentation of documents was made to the Nominated Bank within the validity period. The second defendant's counterclaim against the first defendant was dismissed, and no order was made on the first defendant's claim against the second defendant.

1. Case Overview

1.1 Court

High Court

1.2 Outcome

Plaintiff's claim against the first defendant dismissed; plaintiff's claim against the second defendant allowed; second defendant's counterclaim against the first defendant dismissed; no order on the first defendant's claim against the second defendant.

1.3 Case Type

Civil

1.4 Judgment Type

Grounds of Decision

1.5 Jurisdiction

Singapore

1.6 Description

Grains and Industrial Products Trading sued Bank of India and Indian Bank over a letter of credit. The court dismissed the claim against Bank of India but allowed it against Indian Bank.

1.7 Decision Date

2. Parties and Outcomes

Party NameRoleTypeOutcomeOutcome TypeCounsels
Indian BankDefendantCorporationJudgment for PlaintiffLost
Grains and Industrial Products Trading Pte LtdPlaintiffCorporationClaim against first defendant dismissedLost
Bank of IndiaDefendantCorporationClaim DismissedWon

3. Judges

Judge NameTitleDelivered Judgment
Lee Kim ShinJudicial CommissionerYes

4. Counsels

Counsel NameOrganization
Tan Teng MuanMallal & Namazie
Loh Li QinMallal & Namazie
Max LimRajah & Tann Singapore LLP
Winston KwekRajah & Tann Singapore LLP
Winston WongRajah & Tann Singapore LLP
Sarjit Singh GillShook Lin & Bok LLP
Probin DassShook Lin & Bok LLP
Ng WenlingShook Lin & Bok LLP

4. Facts

  1. Grains and Industrial Products Trading Pte Ltd claimed sums under a letter of credit issued by Indian Bank.
  2. Bank of India was named as the "Nominated Bank" under the letter of credit.
  3. The Indian Bank LC was issued on 24 February 2012 and amended twice, reaching a final amount of US$9,993,239.54.
  4. The Indian Bank LC had an expiry date of 25 March 2012.
  5. The plaintiff presented the required documents to Bank of India on 16 March 2012.
  6. Bank of India transmitted the documents to Indian Bank on 18 April 2012, after the expiry date.
  7. Indian Bank rejected the documents on 19 April 2012, citing late negotiation and expiry of the letter of credit.
  8. The plaintiff alleged that Bank of India had orally agreed to confirm the letter of credit during a telephone conversation on 24 February 2012.
  9. The plaintiff attempted to open a current account with Bank of India but was initially unsuccessful.

5. Formal Citations

  1. Grains and Industrial Products Trading Pte Ltd v Bank of India and another, Suit No 802 of 2012, [2014] SGHC 274

6. Timeline

DateEvent
Indian Bank LC issued by the second defendant
Initial credit amount amended to US$8,299,995.51
Credit amount amended to US$9,993,239.54
Plaintiff sent LC Documents for presentation to the first defendant
First defendant received the LC Documents
Expiry date of the Indian Bank LC
First defendant transmitted the LC Documents to the second defendant
Second defendant notified the first defendant that it was rejecting the LC Documents
Plaintiff demanded that the second defendant notify the first defendant of its acceptance of the compliant documents
Plaintiff asked Standard Chartered Bank to request the first defendant to send their acceptance at the earliest
Plaintiff asserted that the first defendant was deemed to have accepted the draft and document presented under the Indian Bank LC
LC Documents returned to the plaintiff
Plaintiff alleged for the first time that the first defendant had negotiated the Indian Bank LC
Plaintiff instituted S 802 against the first and second defendants
Oral judgment delivered
Decision on pre-judgment interest and costs delivered
Decision Date

7. Legal Issues

  1. Liability under Letter of Credit
    • Outcome: The court held that the issuing bank (Indian Bank) was liable to honor the letter of credit because a complying presentation of documents was made to the nominated bank (Bank of India) within the validity period of the letter of credit.
    • Category: Substantive
    • Sub-Issues:
      • Complying presentation of documents
      • Obligations of issuing bank
      • Obligations of nominated bank
      • Confirmation of letter of credit
  2. Oral Agreement to Confirm Letter of Credit
    • Outcome: The court held that there was no oral agreement by Bank of India to confirm, honor, or negotiate the letter of credit. The court found the plaintiff's evidence of a second alleged telephone conversation to be fabricated and that the subsequent conduct of the parties did not support the existence of such an agreement.
    • Category: Substantive
    • Sub-Issues:
      • Contract formation
      • Evidence of subsequent conduct
      • Materiality of issuing bank identity
  3. Interpretation of UCP 600
    • Outcome: The court interpreted the relevant articles of UCP 600 to determine the obligations of the issuing bank and the nominated bank. The court held that a nominated bank did not become a confirming bank merely by not informing the issuing bank of its unwillingness to confirm the letter of credit.
    • Category: Substantive
    • Sub-Issues:
      • Article 7(a)(iv)
      • Article 8(d)
      • Article 12(a)
      • Article 14(a) and (b)

8. Remedies Sought

  1. Monetary Damages
  2. Interest
  3. Costs

9. Cause of Actions

  • Breach of Contract
  • Failure to Honour Letter of Credit

10. Practice Areas

  • Commercial Litigation
  • Banking
  • Trade Finance

11. Industries

  • Finance
  • Commodities Trading

12. Cited Cases

Case NameCourtAffirmedCitationJurisdictionSignificance
Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte LtdCourt of AppealYes[2008] 3 SLR(R) 1029SingaporeCited for the relevance of the contracting parties’ subsequent conduct on the issue of contractual interpretation.
Bridgeman Pte Ltd v Dukim International Pte LtdHigh CourtYes[2013] SGHC 220SingaporeCited for the principle that the relevance of evidence of subsequent conduct can be properly applied to the issue of contract formation.
OCBC Capital Investment Asia Ltd v Wong Hua ChoonCourt of AppealYes[2012] 4 SLR 1206SingaporeCited for the principle that the court must determine whether the objective facts demonstrate that the parties had entered into a binding oral contract.
Kredietbank NV v Sinotani Pacific Pte Ltd (Agricultural Bank of China, third party)High CourtYes[1999] 1 SLR(R) 274SingaporeCited to explain the difference between discounting and negotiation in the context of letters of credit.
Ng Swee Kin v Ng Tian Hock and other appealsCourt of AppealYes[1992] 1 SLR(R) 266SingaporeCited for the principle that it is not necessary to specifically plead interest for the court to exercise its discretion to award it.

13. Applicable Rules

Rule Name
Uniform Customs and Practice for Documentary Credits (2007 Revision) (International Chamber of Commerce Publication No 600)
UCP 600, Art 2
UCP 600, Art 7(a)(iv)
UCP 600, Art 8(d)
UCP 600, Art 12(a)
UCP 600, Art 14(a)
UCP 600, Art 14(b)

14. Applicable Statutes

Statute NameJurisdiction
Civil Law Act (Cap 43, 1999 Rev Ed), s 12Singapore

15. Key Terms and Keywords

15.1 Key Terms

  • Letter of Credit
  • Nominated Bank
  • Issuing Bank
  • Confirming Bank
  • Negotiating Bank
  • UCP 600
  • Complying Presentation
  • Discounting
  • Oral Agreement
  • Current Account

15.2 Keywords

  • letter of credit
  • UCP 600
  • nominated bank
  • issuing bank
  • confirmation
  • negotiation
  • documentary credits
  • international trade
  • banking
  • oral agreement

17. Areas of Law

Area NameRelevance Score
Letter of Credit Law90
Documentary Credits85
Commercial Law75
Contract Law70
Banking and Finance65
Trade Finance60
Evidence Law30
Estoppel30

16. Subjects

  • Documentary Credits
  • International Trade
  • Contract Law
  • Banking