Kar HC | Writ of Mandamus filed against Canara Bank in respect of deferment of payments for LoCs issued by Bank rejected

Karnataka High Court: P.S. Dinesh Kumar, J. ordered against the petitioner who filed the Writ of Mandamus against Canara Bank in deferment of payment of Letters of Credit issued by the Bank at petitioner’s request in the light of Pandemic situation prevailing due to the COVID-19.

Petitioner was in the business of import and export of gold and ornaments, and had been regularly obtaining Letters of Credit from Canara Bank for the last 20 years. His business had come to a ‘stand-still’ due to the lockdown imposed by the Government of India, and hence, petitioner approached the beneficiary of Letters of Credit (‘L/Cs’) and requested for deferment by 90 days which was granted. Canara Bank continued to make payment of the L/Cs despite informing them of getting the approval of beneficiary to not make payment.

The petitioner was represented by G.S. Kannur, Senior Advocate and the respondents were represented by K. Arun Kumar, Senior Advocate, R.V.S. Naik, Senior Advocate.

The petitioner’s case was, due to COVID pandemic, he was not in a position to export and earn foreign exchange. Canara Bank, in order to make payment would purchase foreign exchange at prevalent market price and this would cause loss to the petitioner.  The counsel for Reserve Bank of India, contended that due to their extended guidelines, Reserve Bank of India could not accede to petitioner’s request. Canara Bank’s counsel contended, due to the issuance of L/Cs in favour of petitioner’s own subsidiary Company called Valcambi SA.,(‘Valcambi’) and Valcambi has discounted the L/Cs from Canara Bank’s branches in London and Hongkong, therefore, petitioner was duty bound to honour its commitment and make payment.

The High Court dismissed the writ petition on two major grounds. Firstly, the Court found that Canara Bank had to continue with the payments of L/Cs on behalf of the petitioner as the bank was duty-bound to do so and since Canara Bank is fully bound by the RBI guidelines which permit only 90 days in respect of usance L/Cs issued for import of Gold. Secondly, the Court found that the petitioner had not made out a case that it had a legal right over the performance of a legal duty by the Canara Bank which is a necessary requirement for issuing a writ in the nature of Mandamus.

Therefore, the Court held that the petitioner was not entitled for a Writ of Mandamus and dismissed the petition.[Rajesh Export Ltd. v. Canara Bank, 2020 SCC OnLine Kar 923 , decided on 22-07-2020]

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