Dispute Resolution & Arbitration Monthly Update

Background facts

• On January 17, 1992, a Hypothecation Agreement was executed between Glitter Overseas & others (Petitioners) and MMTC Ltd (Respondent) in respect of which the Respondent agreed to extend financial facility up to a limit of INR 25 lakhs to the Petitioners, carrying interest at the rate of 15.5% per annum. In consideration of the Hypothecation Agreement, on even date, Petitioner Nos. 2 and 3 signed and executed a Demand Promissory Note of a sum of INR 25 lakh.
• In furtherance of Clause 20 of the Hypothecation Agreement, an Export Agreement was executed between the parties in terms of which the Petitioners agreed to export goods worth INR 20 crore through the Respondent over a period of three years. It is pertinent to note that Clause 3 of the Export Agreement specified that to effect payment against delivery of the goods, the foreign buyers must open a Letter of Credit in the name of the Respondent. Also, in terms of Clause 6 of the Export