TARAPORE AND COMPANY MADRAS V O TRACTORS EXPORT Vs. V O TRACTORS EXPORT IN C A MOSCOW AND:TARAPORE

JUDGEMENT

(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:

(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: