Grant of Injunction against Letters of Credit: An examination of scope under English and Indian Laws

Abstract

This thesis examines the scope of injunction against payment of letter of credit under English and Indian jurisprudence. The payment / finance instruments that employ the principles governing letters of credit constitute about 62% of payment obligations in international trade. Thus, their importance and relevance to international trade remains enduring for last century. The two jurisdictions considered in this thesis are leading economies in the world. Both the countries are common law jurisdictions and have evolved their jurisprudence from same set of legal principles. The thesis focuses on the question as to how and when the Courts would intervene in preventing the payment obligations arising under such instruments.

The English law in last century has remained the focal point for study of letter of credit jurisprudence. This is on account of certainty afforded by the law as well as large share of international finance relying upon English banks or employing English law to govern their transactions.

Indian law has also borrowed from the very same starting point as the English law. However, in last forty or so years, it has evolved a distinctly different set of tests and formulations. This becomes important as India embarks upon a development policy where international trade is expected to play an increasingly larger role. Thus, the evolution of the jurisprudence as well as discussion on its current state is relevant and timely.

The thesis examines the scope under which the Courts in these two jurisdictions will interfere with payment obligations by discussing various principles and tests evolved by the Court. Also, it will reflect upon the extent of each of such principles.