Rajaram v Ganesh trading as Golden Harvest Trading Corp and Others

• Jurisdiction: Singapore
• Judge: Kan Ting Chiu J
• Judgment Date: 25 July 1994
• Neutral Citation: [1994] SGHC 190
• Date: 25 July 1994
• Subject Matter: Credit and Security,Banker's obligation to pay,Civil Procedure,Injunctions,Guarantees and indemnities,Bank knew it would be fraudulent for beneficiary to receive payment,Balance of convenience test not applicable,Interlocutory injunction restraining payment under a bank guarantee,Relevant principles in considering application for discharge,Bank guarantee,Injunction to restrain payment
• Docket Number: Suit No 2000 of 1993 (Summons In Chambers Nos 6621 and 6584 of 1993)
• Published date: 19 September 2003
• Defendant Counsel: Sarjit Singh Gill and Gan Kam Yuin (Shook Lin & Bok)
• Court: High Court (Singapore)
• Plaintiff Counsel: K Shanmugam and Andrew Ho (Allen & Gledhill)

The application before me was by a bank to discharge an injunction restraining it from acting on a bank guarantee it issued.

The parties and their roles in this matter are:

(1) the plaintiff, Mr M Rajaram, is a lawyer practising in Singapore at whose request the bank guarantee was issued,

(2) the first defendant, Mr V Ganesh, is a businessman carrying on a business in India, for whose benefit the bank guarantee was issued,

(3) the second defendant, Indian Bank, is a bank constituted in India which branch in Singapore issued the bank guarantee, and

(4) the third defendant, Oriental Bank of Commerce (OBC), is a bank constituted in India to which the bank guarantee was delivered.

The bank guarantee

As the construction of the guarantee was a matter of contention between the plaintiff and OBC, I set out its terms in full:

Re: Bank Guarantee No M6930132 for US$2m

1 Indian Bank is a body corporate constituted under the Banking Companies (Acquisition and Transfer of Undertakings) Act 1970 having its head office at Rajaji Salai, Madras, and branch office at 3 Raffles Place, Bharat Building, Singapore, hereinafter called `the bank` (which expression shall unless it be repugnant to the subject or meaning thereof include its successors and assigns) having at the request of M Rajaram (hereinafter called `the constituent` (which expression shall, unless it be repugnant or (sic) meaning thereof include its successors and administrators and assigns) agreed to issue an unconditional and irrevocable guarantee to remit a sum of US$2m on 8 October 1993 via tested telex for credit of the amount to the account of Oriental Bank of Commerce New Delhi with Amex Bank, Amex Plaza, New York, A/c No 00222729 for further credit of Oriental Bank of Commerce, 769 Mount Road, Madras; beneficiary Golden Harvest Trading Corp.

2 We Indian Bank do hereby undertake to pay the amount due and payable under this guarantee without any demur on due date, ie 8 October 1993, without any demand being made on the bank and this guarantee itself shall be conclusive as regards to the amount due and payable by the bank under this guarantee on 8 October 1993. However, our liability under this guarantee shall be restricted to amount not exceeding US$2m to be paid on 8 October 1993.

3 This guarantee will not be discharged due to the change in the constitution of the bank or the contractor(s)/supplier(s). Further this guarantee shall not be amended in any manner without prior written consent of beneficiary under any circumstances.

4 We Indian Bank under any circumstances are liable to pay the said amount on due date. Not withstanding anything contrary contained herein above the liability of the bank is restricted to US$2m, which shall be unconditionally paid on 8 October 1993 in the manner stated at S/No 1.

The plaintiff`s case

The plaintiff instituted proceedings against the three defendants seeking a declaration that the bank guarantee had expired and was null and void and orders restraining the defendants from taking any action on it.

In the amended statement of claim, the plaintiff set out all the matters he relied on against the defendants. The main grounds are:

(i) the plaintiff agreed to arrange for the issuance of the bank guarantee on the condition that the first defendant would not use it until he had arranged for US$2m to be paid to the plaintiff;

(ii) when the plaintiff delivered the bank guarantee to OBC`s representatives on 11 September, they acknowledged on the covering letter that `We confirm the BG will not be used until settlement made as per our letter dated 10 September 1993 issued on 11 September 1993.` At the same time, the representatives handed to the plaintiff two letters dated 10 September guaranteeing payment to the plaintiff of six cheques for the aggregate sum of US$2m;

(iii) by a letter of 16 September, OBC again confirmed to the plaintiff that the bank guarantee would not be used before the first defendant paid the plaintiff;

(iv) on 27 September, in consideration to the plaintiff agreeing to allow the first defendant an extension to 5 October to make payment, the first defendant by a letter of the same date pledged seven time deposits of about US$2.5m with OBC in favour of a nominee of the plaintiff, and OBC placed its acknowledgement on the letter;

(v) by a letter of 1 October the first defendant confirmed to the plaintiff that he will not use the bank guarantee before paying the plaintiff; and

(vi) the first defendant had failed to pay the plaintiff the US$2m, and no money was received by the plaintiff`s nominee under the time deposits pledged.

The interim orders obtained

The plaintiff obtained ex parte interim injunctions against the defendants from dealing with the bank guarantee. The order against OBC was made on 19 October restraining it from invoking, encashing or calling on the bank guarantee, but gave liberty to OBC to apply to discharge it.

The judgment obtained

The plaintiff applied for summary judgment against the first defendant. Although the first defendant had entered appearance in the proceedings and was represented by counsel, no affidavits were filed and no submissions were made in opposition to the application, his counsel stating that he had not received instructions on the matter.

The plaintiff`s application was granted on 26 February 1994 and orders were made against the first defendant declaring that the bank guarantee had expired and was null and void and of no effect and restraining him from invoking, encashing or calling on it.

OBC`s application

OBC and Indian Bank applied to discharge the interim injunction against them. OBC`s application was heard first while Indian Bank`s application was stood down pending the outcome.

OBC disputed the factual underpinnings of the plaintiff`s claim. Essentially it said that its representatives had only acknowledged receipt of the bank guarantee on the covering letter and the other words appearing on it were added without its knowledge. It denounced the letters of 10 September and 16 September as forgeries, and denied that it had agreed that the...