K.S Hegde, J. - (1.) These are connected appeals. They arise from Civil Suit No. 118 of 1967 on the original side of the High Court of Judicature at Madras. Herein the essential facts are few and simple though the question of law that arises for decision is of considerable importance.
(2.) The suit has been brought by M/s. Tarapore and Co., Madras (hereinafter referred to as the "Indian Firm"). That firm had taken up on contract the work of excavation of a canal as a part of the Farakka Barrage Project. In that connection they entered into a contract with M/s. V/O Tractors Export, Moscow (which will hereinafter be referred to as the "Russian Firm") for the supply of construction machinery such as Scrapers and Bulldozers. In pursuance of that contract, the Indian Firm opened a confirmed irrevocable and divisible letter of credit with the Bank of India, Limited for the entire value of the equipment i.e. Rs. 66,09,372/- in favour of the Russain Firm negotiable through the Bank for Foreign Trade of the U. S. S. R., Moscow. Under the said letter of credit the Bank of India was required to pay to Russain Firm on production of the documents particularised in the letter of credit along with the drafts. One of the conditions of the letter of credit was that 25 per cent of the amount should be paid on the presentation of the specified documents and the balance of 75 per cent to be paid one year from the date of the first payment. The agreement entered into between the Bank of India and the Russain Firm under the letter of credit was "subject to the Uniform Customs and Practice for Documentary Credits (1962 Revision), International Chamber of Commerce Brochure No. 222." Article 3 of the brochure says that: "An irrevocable credit is a definite undertaking on the part of an issuing bank and constitutes the engagement of that bank to the beneficiary or, as the case may be, to the beneficiary and bona fide holders of drafts drawn and/or documents presented thereunder, that the provisions for payment, acceptance or negotiation contained in the credit will be duly fulfilled, provided that all the terms and conditions of the credit are complied with. An irrevocable credit may be advised to a beneficiary through another bank without engagement on the part that other bank (the advising bank), but when an issuing bank authorises another bank to confirm its irrevocable credit and the latter does so, such confirmation constitutes a definite undertaking on the part of the confirming bank either that the provisions for payment or acceptance will be duly fulfilled or, in the case of a credit available by negotiation of drafts, that the confirming bank will negotiate drafts without recourse to drawer. Such undertakings can neither be modified nor cancelled without the agreement of all concerned." Article 8 of the Brochure says:- "In documentary credit operations all parties concerned deal in documents and not in goods. Payment, acceptance or negotiation against documents which appear on their face to be in accordance with the terms and conditions of a credit by a bank authorised to do so, binds the party giving the authorisation to take up the documents and reimburse the bank which has effect the payment, acceptance or negotiation .........". The only other Article in that brochure which is relevant for our present purpose is Article 9 which reads: "Banks assume no liability or responsibility for the form, sufficiency, accuracy, genuineness, falsification or legal effect of any documents, or for the general and/or particular conditions stipulated in the documents or superimposed thereon; nor do they assume any liability or responsibility for the description, quantity, weight, quality, condition, packing, delivery, value or existence of the goods represented thereby, or for the good faith or acts and/or or omissions, solvency, performance or standing of the consignor, the carriers or the insurers of the goods or any other person whomsoever." On the strength of the aforementioned contract, the Russian Firm supplied all the machinery it undertook to supply by about the end of December 1960, which were duly taken possession of by the Indian Firm and put to work at Farakka Barrage Project. They are still in the possession of the Indian Firm. After the machinery was used for sometime, the Indian Firm complained to the Russain Firm that the performance of the machinery supplied by it was not as efficient as represented at the time of entering into the contract and consequently it had incurred and continues to incur considerable loss. In that connection there was some correspondence between the Indian Firm and the Russian Firm. Thereafter the Indian Firm instituted a suit on the original side of the High Court of Madras seeking an injunction restraining the Russain Firm from realizing the amount payable under the letter of credit. During the pendency of that suit the parties arrived at an agreement on August 14, 1966 at Delhi (which shall be hereinafter referred to as the Delhi agreement). The portion of that agreement which is relevant for our present purpose reads as follows: Tarapore and Co., Madras agree to withdraw immediately the court case filed by them against "Tractoroexport" Moscow, in the Madras High Court. 2. Immediately on Tarapore withdrawing the case, V/O "Tractoroexport" agree to instruct the Bank for Foreign Trade of the USSR in Moscow, not to demand any further payment against I. C. established by Tarapore and Co., Madras, for a period of six months from the due dates in the first instance. During this period both the parties shall do their best to reach an amicable settlement. 3. In case the settlement between the two parties is not completed within this period of six months V/O Tractoroexport shall further extend the period of payment to further period of six months for the settlement to be completed. 4. Tarapore and Co., shall authorise their Bank to keep the unpaid portions L. C. valid for the extended period as stated above." At this stage it may be mentioned that the Russain Firm had received from the Bank of India 25 per cent of the money payable under the letter of credit very soon after it supplied to the Indian Firm the machinery mentioned earlier. In pursuance of the aforementioned agreement the Indian Form withdrew the suit. Thereafter there were attempts to settle the dispute. In the meantime the Indian Rupees was devalued. The contract between the Indian Firm and the Russain firm contains the following term: "Payment for the delivered goods shall be made by the Buyers in Indian Rupee in accordance with the Trade Agreement between the USSR and India dated 10th June, 1963. All the prices, are stated in Indian rupee. One Indian Rupee is equal to 0.186621 grammes of pure gold. If the above gold content of Indian Rupee is changed the prices and the amount of this contract in Indian Rupees shall be revalued accordingly on the date of changing the gold parity of the Indian Rupee." This clause will be hereinafter referred to as the 'Gold Clause'. In view of that clause, the price fixed for machinery supplied stood revised. Consequently under the contract the Indian Firm had to pay to the Russian firm an additional sum of about rupees twenty-six lacs. Accordingly the bankers of the Russain Firm called upon the Indian Firm to open an additional letter of credit for payment of the extra price payable under the contract. They also intimated the Indian Firm that the extension of time for the payment of the price of the machinery supplied, agreed to at Delhi will be given effect to only after the Indian Firm arrange for the additional letter of credit asked for. The Indian Firm objected to this demand as per its letter of 20th September, 1966. The relevant portion of that letter reads: "We are rather surprised to see this, because, by our arrangement dated the 14th August, 1966, at New Delhi you had agreed to give further time for the payments on the withdrawal of the Madras High Court case. That was the only condition that was talked abut and incorporated in our written agreement. If you will be good enough to refer to the agreement dated the 14th Aug., 1966, you will find that we were obliged to withdraw the Madras suit pending talks of settlement and immediately on our withdrawing this suit, you agreed to instruck your Bankers not to demand any further payment under the letter of credit. There is absolutely no reference in that agreement to our having to open any additional letter of credit in view of the devaluation of the Indian rupee . . . . . We would therefore request you to immediately instruct your Bankers in Moscow to advice our Bankers regarding the extension of time for payment under the letter of credit without any reference to any additional letters of credit in view of devaluation . . . . . Moreover, when the entire question is open for amicable settlement between us, it is not possible to determine what exactly will be amount payable and unless that amount is known, it is not possible to open additional letters of credit to give effect to the gold clause . . . . ."
(3.) On November 1, 1966, the Russain Firm sent to the Indian Firm addendum No. 1 modifying the original contract in accordance with the gold clause. The last clause of that addendum recited that "all other terms and conditions are as stated in the above mentioned contract" (original contract). The Indian Firm objected to the addendum as well as to the demand for opening an additional letter of credit. In that connection the Russian Firm wrote a letter to the Indian Firm on November 29, 1966. As considerable arguments were advanced on the basis of that letter we shall quote the relevant portion of that letters: ". . . . . We confirm that you have signed with us the addendum No. 1 to our Contract No. 61/Tarapore - 220/65 dated the 2nd Feb., 1965, at our request for the sole and specific purpose of satisfying our bankers. We confirm further that this addendum will not in any manner prejudice the arrangement we have come to in Delhi on the 14th August, 1966, and is without prejudice to your claims and points of controversy regarding which we shall have further discussions with a view to reach an amicable settlement. Under the addendum, the company will extend the letter of credit for one year and accept the drafts for the difference in value of 57.5% due to devaluation. The final amount payable will be in accordance with the settlement." Thereafter the Russain Firm appears to have drawn drafts on the Indian firm for the excess amount payable under the gold clause. For one reason or the other, no settlement as contemplated by the Delhi agreement was reached. The Indian firm complained that the Russain Firm never made any serious attempt to resolve the dispute whereas the Russain Firm alleged that it found no substance in the complaint made by the Indian Firm as regards the machinery supplied. In the suit as brought, as well as in these appeals that controversy is not open for examination. Suffice it to say that the parties did not amicably settle the dispute in question. When the extended time granted under the Delhi agreement was about to come to a close, the Indian Firm instituted the suit from which these appeals have arisen. In that suit the only substantive relief asked for is that the Bank of Indian as well as the Russain Firm should be restrained from taking any further steps in pursuance of the letter of credit opened by the Indian Firm in favour of the Russain Firm. Therein temporary injunctions were asked for in the very terms in which the permanent injunction were prayed for. At a subsequent stage a further injunction restraining the Russain Firm from enforcing its right under the gold clause was also prayed for. The Russain Firm opposed those applications but the trial Judge granted the temporary injunctions asked for. The Russain Firm took up the matter in appeal to the Appellate Bench of that High Court which reversed the order of the trial judge by its Order dated October 9, 1968 but it certified that they are fit cases for appeal to this Court. When the applications in the appeals seeking interim orders came up for consideration by this Court the Russain Firm entered its caveat. It not only opposed the interim reliefs prayed for it further challenged the validity of the certificate granted by the High Court on the ground that the orders appealed against are not final orders within the meaning of Article 133 of the Constitution. Evidently as a matter of abundant caution, the Indian firm had filed two separate applications seeking special leave to appeal against the orders of the Appellate Bench of the Madras High Court. After bearing the parties this Court revoked the certificates granted holding that the orders appealed against are not final orders but at the same time granted special leave to the Indian Firm to appeal against the orders of the Madras High Court. Civil Appeals Nos. 2051 and 2052 of 1968 are appeals filed by the Indian Firm.;