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Calcutta High Court Restrains Payment to German Supplier as Lux Industries Flags Insolvency Risk, Cites Urgent Business Concerns

Vivek G.

Calcutta High Court halts Letter of Credit payment to German supplier after Lux Industries warns of insolvency risk; interim injunction granted till Oct 31.

Calcutta High Court Restrains Payment to German Supplier as Lux Industries Flags Insolvency Risk, Cites Urgent Business Concerns

In a swift move during the vacation bench sitting, the Calcutta High Court on Thursday temporarily restrained payment under a Letter of Credit (LoC) to a German machinery supplier after Lux Industries Limited warned of an imminent financial risk due to the seller’s ongoing insolvency proceedings in Germany.

The order came from Justice Aniruddha Roy, who noted that premature payment might cause “irreparable prejudice” to the Indian company if the goods never arrive or turn out defective.

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Background

Lux Industries, a leading innerwear manufacturer, had placed a purchase order on June 11, 2025 with Mayer & Cie. GmbH & Co. KG, a German company, for certain industrial articles. To facilitate the transaction, Lux opened a Letter of Credit through its Indian bank (respondent no. 2).

According to the company’s counsel, Mr. Suddhasatva Banerjee, the goods were already shipped and expected to reach Kolkata Port around November 21, 2025. Trouble arose when Lux discovered—through documents annexed to its petition-that Mayer & Cie. was facing insolvency proceedings in Germany, a fact that had not been disclosed at the time of the order or even afterward.

Banerjee informed the Court that the German firm had already written to the Indian bank seeking release of the payment under the LoC. “If the money is transferred before the goods reach or are inspected, and the seller becomes insolvent, my client will have to chase remedies under German law,” he argued.

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Court’s Observations

Taking note of the situation, Justice Roy remarked that the case carried “extreme urgency” since the payment could be released any time before the arrival of goods.

“The bench observed, ‘If the amount under the Letter of Credit is released in favour of the respondent, who is already under insolvency proceedings, the petitioner may suffer irreparable prejudice if the articles do not reach or are found defective,’” the order noted.

The Court found merit in Lux’s plea that it would otherwise have to participate in foreign insolvency litigation - an expensive and uncertain process. Importantly, no one appeared for the respondents during this hearing, leaving Lux’s apprehensions unchallenged.

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Decision

The Court granted temporary injunction relief, restraining payment under the LoC till October 31, 2025, when the matter will return before the regular commercial bench for detailed hearing.

The judge also directed Lux to keep the Letter of Credit valid and active as undertaken and allowed its counsel to communicate the gist of the order to the respondents immediately.

In short, the High Court’s interim order acts as a protective pause - giving the Indian buyer breathing space before any funds cross borders amid the German supplier’s insolvency uncertainty.

Case Title: Lux Industries Ltd. vs Mayer & Cie. GmbH & Co. KG & Anr.

Case No.: CS-COM/154/2025 | IA No. GA-COM/1/2025

Petitioner/Plaintiff: Lux Industries Limited (India)

Respondents/Defendants: Mayer & Cie. GmbH & Co. KG (Germany) and an Indian Bank (Respondent No. 2)

Date of Order: 16 October 2025

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