Autonomous letter of credit obligations remain enforceable despite SICA moratorium when documentary compliance is shown.

Section 22(1) of SICA protects a sick industrial company from specified coercive proceedings, but it does not suspend a bank's independent obligation under an irrevocable letter of credit. Where the beneficiary presents conforming documents, the bank must honour the credit because its liability arises from its own undertaking and is separate from the underlying transaction. The existence of SICA proceedings or possible recovery difficulty does not justify non-payment. The ordinary limits on interference with letters of credit therefore apply, and the bank cannot invoke SICA to resist liability under a compliant credit.

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Issues: Whether the moratorium under section 22(1) of the Sick Industrial Companies (Special Provisions) Act, 1985 could be invoked by a bank to resist liability under an irrevocable letter of credit when the beneficiary had complied with the documentary terms.

Analysis: Section 22(1) protects a sick industrial company from coercive proceedings of the kind specified in the provision, but the liability under an irrevocable letter of credit is independent of the underlying transaction and rests on the bank's own undertaking to pay on presentation of conforming documents. The protection available to the sick company cannot be transposed to the bank where the bank's obligation is de hors the sick company and is governed by the credit itself. The usual limits on interference with letters of credit also apply, and mere existence of SICA proceedings or anticipated difficulty in recovery does not alter the bank's duty to honour a compliant credit.

Conclusion: The bank could not rely on SICA to avoid payment under the letters of credit, and leave to defend was rightly declined. The suit was decreed against the bank and its co-defendant remained outside the bank's independent liability.

Final Conclusion: The decision affirms the autonomous character of an irrevocable letter of credit and holds that SICA moratorium does not suspend a bank's contractual obligation under such a credit.

Ratio Decidendi: An irrevocable letter of credit creates an independent and autonomous obligation of the issuing bank, and section 22(1) of SICA does not extend to defeat that obligation merely because the customer or beneficiary is a sick industrial company.

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