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Issues Involved:
1. Enforceability of an irrevocable letter of credit. 2. Allegations of fraud and modification of the original contract. 3. Jurisdiction and maintainability of appeals. Issue-wise Detailed Analysis: 1. Enforceability of an Irrevocable Letter of Credit: The primary issue in this case revolves around the enforceability of an irrevocable letter of credit. The Indian Firm opened a confirmed, irrevocable, and divisible letter of credit with the Bank of India for the entire value of the equipment supplied by the Russian Firm. According to the Uniform Customs and Practice for Documentary Credits (1962 Revision), an irrevocable credit constitutes a definite undertaking by the issuing bank to the beneficiary, binding the bank to fulfill the payment provisions as long as the terms and conditions of the credit are complied with. The Court emphasized the importance of this mechanism in international trade, stating that "any interference with that mechanism is bound to have serious repercussions on the international trade of this country." The court referred to several authoritative texts and cases, including Halsbury's Laws of England and Chalmers on "Bills of Exchange," which underscore that banks deal in documents and not in goods, and their obligation to pay is absolute if the terms of the credit are met. 2. Allegations of Fraud and Modification of the Original Contract: The Indian Firm alleged that the performance of the machinery supplied by the Russian Firm was not as efficient as represented, leading to considerable loss. However, the Court found that these allegations did not amount to a plea of fraud. The Indian Firm also contended that the original contract was modified by a subsequent agreement (Delhi agreement) and correspondence, which purportedly altered the payment obligations. The Court rejected this contention, noting that the Delhi agreement merely provided for an attempt to settle disputes amicably and did not modify the original contract. The Court stated, "The Delhi agreement merely provided that the parties will try and settle the dispute out of court, if possible." The letter from the Russian Firm stating that "the final amount payable will be in accordance with the settlement" was interpreted as being conditional upon reaching a settlement, failing which the original contract terms would prevail. 3. Jurisdiction and Maintainability of Appeals: The Indian Firm questioned the maintainability of the appeals filed by the Russian Firm before the Appellate Bench of the Madras High Court, arguing that the orders appealed against were not judgments within the meaning of Clause 15 of the Letters Patent of the Madras High Court. The Appellate Bench had overruled this objection, following earlier decisions of the High Court. The Supreme Court granted special leave to appeal against the interim orders of the trial judge, thereby rendering it unnecessary to decide on the maintainability of the appeals before the High Court. The Court noted, "In view of the appeals filed by the Russian Firm in this Court against the interim orders made by the trial judge it is not necessary to decide whether the appeals filed by the Russian Firm before the Appellate Bench of the Madras High Court were maintainable." Conclusion: The Supreme Court allowed the appeals filed by the Russian Firm (Civil Appeals Nos. 2305 and 2306 of 1968) and set aside the temporary injunctions granted by the trial judge, emphasizing the importance of upholding the autonomy of irrevocable letters of credit in international trade. The other appeals (Civil Appeals Nos. 2251 and 2252 of 1968) filed by the Indian Firm were dismissed. The costs were to be borne by the Indian Company.
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