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As regards the second lot comprising of 27 sets of documents, 19 sets were presented by the plaintiffs on July 3, 1978, with sight drafts of Rs. 1,82,648 each along with bills of exchange together with the relevant documents. On July 5, 1978 the appellant addressed a letter to the plaintiffs refusing to make any payment under the letter of credit due to `discrepancies' as well as some of the railway receipts being `stale'. It was clearly stated by the appellant "We are unable to negotiate the documents and are returning the same to you. However, if you so desire, we shall send the documents on collection basis and shall remit the amount to you on receipt of proceeds". Admittedly, the discrepancies remained till July 12, 1978 as the description of goods in the railway receipts still remained "Sizola Brand Pure Mustard Oil `Unrefined"' till the plaintiffs made a request to the Central Railways for the deletion of the word `Unrefined'.

Glasgow, for shipment to Calcutta. Two instalments of the machinery were manufactured and shipped and duly paid for by the bank. A third instalment was also manufactured and shipped, but the bank in this case refused to take up the shipping documents and honour the draft on the ground that items for extra cost of labour were included in the invoice price of the goods and that the bank had been instructed by Benjamin Jute Mills to refuse payment in those circumstances. Rowlatt J. held that in such a case, the banker must accept and pay for the documents irrespective of any defence which there may be to a claim under the contract of sale and that such defence is solely a matter to be fought out between the buyer and the seller.

It is elementary to say that a person who ships in reliance on a letter of credit must do so in exact compliance with its terms. It is also elementary to say that a bank is not bound or indeed entitled to honour drafts presented to it under a letter of credit unless those drafts with the accompanying documents are in strict accord with the credit as opened. As Lord Sumner said in Equitable Trust Co. of New York v. Dawson Partners Ltd., approving the dictum of Bailhache J.:

Mackinnon, L.J. after quoting Bailhache, J., in English, Scottish and Australian Bank Ltd. v. Bank of South Africa (supra) and Lord Summer in Equtiable Trust Co. of New York v. Dawson Partners Ltd. (supra) laying down that a person who ships in reliance on a letter of credit must do so in exact compliance with its terms, observed : The defendant bank were told by their Danish principals to issue a letter of credit under which they were to accept documents-an invoice and bills of lading-covering "Coromandel groundnuts in bags". They were offered bills of lading covering "machine-shelled groundnut "kernels". The country of origin was stated to be British India. The words in that bill of lading clearly are not the same as those required by the letter of credit. The whole case of the plaintiffs is, in the words of Lord Sumner, that "they are almost the same, or they will do just as well". The bank, if they had accepted that proposition, would have done so at their own risk. I think on pure principle that the bank were entitled to refuse to accept this sight draft on the ground that the documents tendered, to bill of lading in particular, did not comply precisely with the terms of the letter of credit which they had issued. The learned Judge dealing with that part of the judgment of Atkinson, J., in which he said that "a sale of Coromandel groundnuts is universally understood to be a sale of machine-shelled kernels", said: