The HUB POWER COMPANY LTD. vs CHINA POWER HUB GENERATION COMPANY (PRIVATE) LIMITED Letter of credit

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The HUB POWER COMPANY LTD. VS CHINA POWER HUB GENERATION COMPANY (PRIVATE) LIMITED Letter of credit---Principle of autonomy---Applicability---In Letter of Credit transaction, Principle of autonomy is a cardinal principle---Principle of autonomy governs international trade through commitments of financial institutions as undertaken---Such undertaking makes the documentary credit as a powerful tool in financing international trade---In contract between issuer Bank and beneficiary, the bank is obliged to pay the beneficiary if documents are presented for credit drawing, regardless of any dispute between the beneficiary and the applicant. Citation Name: 2023 CLD 1220 KARACHI-HIGH-COURT-SINDHBookmark this Case The HUB POWER COMPANY LTD. VS CHINA POWER HUB GENERATION COMPANY (PRIVATE) LIMITED Ss. 42 & 54---Civil Procedure Code (V of 1908), O. XXXIX, Rr. 1 & 2---Suit for declaration and injunction---Interim injunction, refusal of---Encashing Standby Letter of Credit---Principle of autonomy---Plaintiff company was aggrieved by a call to encash Standby Letter of Credit (SBLC) by defendant company---Contention of plaintiff company was that the project was essentially completed in year 2019 when its commercial operation started and despite such fact the lenders refused to acknowledge date of completion of project and in consequence whereof plaintiff company was open to risk of encashment of subject SBLC---Validity---Principle of autonomy stemed from the fact that system of documentary credits in international trade was developed to give to seller on assurance that no sooner the holder of such credit documents presented the conforming documents, he would be paid before he parted with control of goods/services/performances, regardless of any dispute that one might have with the buyer regarding performance of contract---SBLC evolved as one of the kind of Letter of Credit and formed an independent guarantee such as performance bond/suretyship guarantee---If a document was labeled as standby and beneficiary presented it for encashment, it was unlikely that a judicial interference is made to investigate any extraneous facts, not in the court's jurisdiction---Rules in relation to independent guarantee were similar to those of commercial Letter of Credit---It was the autonomy of credit that governed events and governing principle was that independent guarantee just like commercial credit was an irrevocable undertaking of Bank and was to be dealt with independently under law--- High Court declined to grant interim injunction in favour of plaintiff company--- Application was dismissed, in circumstances.

The HUB POWER COMPANY LTD. vs CHINA POWER HUB GENERATION COMPANY (PRIVATE) LIMITED Letter of credit — 2023 CLD 1220 KARACHI-HIGH-COURT-SINDH

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