Agreement Relating To Opening Of An Inland Irrevocable Letter Of Credit Negotiable Instruments Act 1315 - Legal Draft

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Category : Negotiable Instruments Act

Agreement Relating to Opening of an Inland Irrevocable
(Without Recourse)
Letter of Credit

This Agreement is made at...........this ... day of ... between M/s. A B
& Co. Ltd.. a company registered under the Companies Act. 1956 and having its registered office at... hereinafter called "the Company" of the One Part and ... Bank of... a Banking Corporation, constituted by the Banking Companies (Acquisition and Transfer of Undertakings) Ad. 1970 and having its Head Office at ... and a branch office at ... hereinafter called the Bank' of the Other Part.
WHEREAS
1. The Company is carrying on the business of manufacturing ... and in course of its business has placed orders for supply of certain machinery and spare parts particulars of which arc set out in the Schedule hereunder written (and hereinafter referred to as the said goods) with M/s ... carrying on business at ...
2. The machinery and spare parts are to be supplied by instalments against payment of the price thereof to the said suppliers.
3. To secure the payment of the price the suppliers have insisted on the Company opening a Letter of Credit with its Bankers.
4. A true copy of the agreement between the Company and the suppliers has been furnished to the Bank.
5. At the request of the Company made by its application dated ... the Bank has agreed to open an Inland Letter of Credit in favour of the said M/ s ... for the sum of Rs... on the terms and conditions contained in the said application of the Company to the Bank for the purchase of the said machineries and spare parts more particularly described in the

SCHEDULE
hereundcr written upon the Company executing this agreement, which the Company has agreed to do.

NOW IT IS AGREED BY AND BETWEEN THE COMPANY AND THE BANK AS FOLLOWS:
1. In consideration of the terms and conditions hereinafter mentioned and agreed to by the Company, the Bank agrees to issue a confirmed irrevocable Letter of Credit (without recourse to demur) to the said suppliers M/s... or to their authorised Bankers at ... authorising the said suppliers to draw, on the Company, Bills of Exchange from time to time but for a sum not exceeding in the aggregate a sum of Rs... at sight drawn for hundred per cent of the invoice value and accompanied by (i) the Railway or Truck transport receipts to order and endorsed in blank showing the items of machinery and spare parts transported and with freight prepared or paid, (ii} insurance policy or Certificate of Insurances for not less than the invoice value, (iii) signed invoices issued by the said suppliers in quadruplicate. The Bank also agrees and guarantees to protect the drawers land the said suppliers) of the Dills of Exchange and endorsers and bona fide holders thereof from any consequences which may arise in the event of non-acceptance or non payment of drafts drawn in accordance with the Letter of Credit Provided that the Letter of Credit will remain in force for a period of ... months.
2. The Company hereby agrees and undertakes to accept and pay all Bills of exchange/Drafts drawn pursuant to the terms of the said credit and/or to take up and pay for all the documents negotiated thereunder in accordance with the terms thereof on presentation, as also for any disbursement made or liability incurred by the Bank for the Company's account under the said credit, together with interest, costs, charges and
expenses due to the Bank in respect thereof as hereinafter mentioned.
3. The Company agrees to pay interest to the Bank on the amount/s payable in respect of the Company's liability under the credit, at the rate of Rs... per cent per annum or at such other rate as may be prescribed by Reserve Bank of India from time to time. Interest at the aforesaid rate shall be payable from the date of negotiation of the bills/documents under Credit upto and inclusive of the date of expiry of a period of 7 days after receipt of the documents by the Bank and thereafter, at the rate of Rs... per cent per annum with quarterly rests until payment or at such other rate as may be notified to the Company by the Bank from time to time.
4. The Company further agrees to pay to the Bank on demand commission and other charges that may be levied as per the Bank rules in force from time to time.
5. The Company also agrees to pay to the Bank on demand all costs, charges and expenses Including penalty, demurrage, storage charges and all other charges and expenses which the Bank may suffer or incur in connection with the goods and or the documents of title to goods, covered by the Credit or in the exercise or enforcement of any right or power hereby conferred or otherwise however, in the premises, and further agrees and undertakes to hold the Bank safe and harmless and keep the Bank indemnified against any claim, action, proceeding made or brought against the Bank or its agents as also against any liability or loss incurred or suffered by the Bank or its agents by reason of any defect or discrepancy in the documents and/or the goods covered under the Credit or by reason of having established the credit pursuant to the Company's application or otherwise howsoever.
6. The Company further agrees with the Bank that all the goods and documents of title to goods and other documents covered under the said Credit which may have been already delivered or shall be hereafter delivered into the Bank's possession or into the possession of its agents by the Company or by any person, firm or company on the Company's behalf as a result of the Bank opening the Credit or in connection with the transaction thereunder shall be deemed to be pledged with the Bank. The said goods and the documents shall be deemed to be so delivered in pursuance of the Company's agreement herein, to pledge them to the Bank as security for all payments which may be made by the Bank or its agents under the said Credit for the Company's account as also for any liability whatsoever, incurred or which may hereafter be incurred by the Bank or its agents as a result of the opening of this Credit, together with interest, costs, charges and expenses as hereinabove mentioned.
7. In the event of the Company committing a default in making due payment of any bill drawn under the Credit or in making reimbursement on demand of any payment made by the Bank thereunder for the Company's account or any amount due to the Bank in respect thereof, then the Bank shall be entitled without prejudice to any of its rights and without notice to the Company (which the Company hereby expressly waives) to sell the goods covered under the credit (hereinafter called the said goods) whether before or after their arrival, either by public auction, or tender or by private contract and subject to such conditions as the Bank may deem fit to impose, or otherwise dispose off or deal with the said goods or any part thereof and or with the relative documents of title to goods in any manner whatsoever, without being bound to exercise any of these powers or liable for any loss in the exercise or non-exercise thereof. The net proceeds realised from sale of the said goods or transfer of any documents of title, remaining after deducting therefrom the costs and expenses of and incidental to such sale or transfer, shall be applied in or towards payment or satisfaction of the amount/s due to the Bank in respect of any payment or disbursement made by the Bank under the said Credit for the Company's account, and interest thereon and all costs, charges, and expenses as hereinabove mentioned. The Company agrees to accept Bank's account of sale or realisation as conclusive evidence both in and out of Court as to the amount/s realised and expenses incurred, and to pay forthwith any shortfall or deficiency remaining after such application. The Company further agrees that the Bank shall not be liable for any loss which may occur pending sale or disposal of the goods and/or documents of title to goods, whether by reason of deterioration or depreciation in the value of the goods or otherwise howsoever.
8. The Company agrees to keep the said goods further insured from the time of expiry of insurance cover under the initial policy or policies of insurance, against all risks which are normally covered for goods of the nature purchased under the Credit as also against such other risks as may be required by the Bank and in the event of the Company failing to do so, the Bank shall be at liberty to insure the said goods at the Company's costs and expenses without prejudice to the Bank's rights hereunder. Until all the dues of the Bank in respect of the Credit are paid in full, the Company agrees to pay to the Bank forthwith all moneys if received by the Company under any policy or policies of insurance and until payment to the Bank of such insurance moneys, the Company undertakes to hold the same in trust for the Bank.
9. The Company further agrees and undertakes to sign, execute and deliver to the Bank from time to time on demand made by the Bank, such further or other deeds, documents and writing and do all such acts, matters and things as may be required by the Bank for better perfecting its title to the said goods and the documents covered under the said Credit and or to render the same readily saleable or transferable by the Bank to any
purchaser(s) at all times.
10. It is understood that the transmission of all instruments and communications under the above Credit and the despatch of documents and goods thereunder is entirely at the Company's risk. The Bank and its agents shall not be responsible for any error or delay in such transmission or loss or delay in delivering of the documents or the goods nor shall the Bank or its agents be liable in any respect beyond ensuring that the bills drawn under the Credit and the relative documents covered thereunder purport to comply with the terms and conditions of Credit.
11. The Company represents that it has made adequate arrangement for retiring the bills under the Credit and does not contemplate to seek any financial assistance from the Bank for the purpose.
12. The Company agrees to the negotiations of the drafts drawn under the Credit being confined to the Banks branches or agencies or to any other bank acceptable to the Bank.
13. The Company agrees and confirms that this Credit may be amended and/or modified by the Bank in its absolute discretion, including for an increased limit/amount on the Company giving to the Bank written instructions for the same and in such an event, such amendment/modification will be deemed to form part of the Company's application for the Letter of Credit and will be governed by the terms hereof and the Company agrees and confirms that the Company shall be bound by the same as If such amendment/modification including the increased limit amount had originally constituted a term of the Letter of Credit.
14. If this agreement is terminated or revoked by operation of law as to the Company, the Company will indemnify and save the Bank harmless from any loss which may be suffered or incurred by the Bank acting hereunder prior to the receipt by the Bank, a notice in writing of such termination or revocation.
15. No change whatsoever in the constitution of the Company during the continuance of this Agreement shall impair or discharge the liability of the Company hereunder.
Any demand or notice to be made or given to the Company may be made or given by leaving the same at or posting the same by post under Certificate of posting addressed to the Company at the registered office and every such demand or notice shall be deemed to be received as the case may be at the time at which it is left or at which it should have been delivered in the ordinary course of post, Except as otherwise expressly stated the Letter of Credit is to be opened by the Bank subject to the uniform customs and practice for
documentary credits as amended from time to time.

SCHEDULE
(Description of goods/machinery)

IN WITNESS WHERE OF THE COMPANY HAS EXECUTED THESE PRESENTS. THE DAY AND YEAR FIRST HEREINBEFORE WRITTEN.
Signed and delivered for and on )
behalf of the withinnamed        )
M/s. A 13 & Co.Ltd., by its Managing )
Director duly authorised by      )
Resolution of the Board of Directors     )
dated ... in the presence of     )
Signed and delivered for and     )
on behalf of the Bank of ... by )
its General Manager/Manager, duly        ]
authorised, in the presence of ...       )