JUDGMENT

K. RAMASWAMY, J.- Special leave granted.

2. The solitary question is whether the first respondent M/s Calcutta Steel Co. Ltd., plaintiff, for short "CSC" is the drawee-acceptor of the impugned bills of exchange. The admitted facts are that the appellant/first defendant is the banker. The CSC, obtained licence No. OGL 6/86, dated April 1, 1986 to import steel billets. The Government of Indias import policy for 1985-88 was that iron and steel etc. should be imported through canalised agency i.e. M/s Minerals and Metals Trading Corpn. of India Ltd., for short "MMTC", the 3rd defendant/3rd respondent. By letter dated November 12, 1986 CSC approached MMTC for letter of authority to import the goods and by letter dated November 18, 1986, copy addressed to M/s Harlow & Jones Ltd., London, the supplier, the latter permitted CSC to draw draft on "MMTC A/c Calcutta Steel Co. Ltd., 20, Hemanta Basu Sarani, Calcutta-700001 for a sum not exceeding US $ 1,456,000 (US Dollars one million four hundred fifty-six thousand only), payable to the beneficiary on presentation of a separate draft... at 180 days from the date of bill of lading drawn for 100 of the invoice value and accompanied by ...." It was further stated that the material imported was as per the requirement of the end user and sold to them on high seas basis against back to back letter of credit established by end user. In order to reduce the financial burden of the end user it had been decided that the end user would open letter of credit directly in favour of the foreign suppliers with the condition that its name as opener of the letter of credit by the end user in favour of the foreign suppliers will be shown as MMTC. It had expressed no objection to open letter of credit by CSC (end user) in favour of M/s Harlow & Jones Ltd. strictly as per pro forma enclosed. The material part reads thus:

"In this connection, please note that our name will be shown as openers of the proposed L/C to meet the requirements of exchange control only, and we are not in any way responsible for the failure of the end user to comply with the requirements of the L/C. This L/C is required to be established at the expense and L/C limit of the end user viz. M/s Calcutta Steel Company Ltd. who would accept the draft(s) and make payment on due date at Calcutta."

3. Pursuant thereto CSC opened an Irrevocable Letter of Credit No. 166/86 on November 18, 1986 for the said sum in favour of M/s Harlow & Jones Ltd./2nd defendant/2nd respondent. On December 31, 1986 about 7 tonnes of steel billets were shipped by the second respondent to CSC under invoice No. 710231 dated December 31, 1986 and the bill of lading No. 1 dated December 31, 1986. On February 3-4, 1987 the second respondent presented to the London Branch of the appellant, three bills of exchange dated December 31, 1986 for a sum of U.S. $ 1,498,694.56 with interest for 180 days at 7 per annum on the price of the goods. The bills of exchange were addressed to:

MMTC of India Ltd.,

A/c M/s Calcutta Steel Co. Ltd.,

20, Hemanta Basu Sarani,

Calcutta-700001.

4. The cargo sent under bill of lading reached at Calcutta port in the month of February 1987 and was presented to CSC, who received the documents, executed a trust receipt in favour of the appellant and endorsed its acceptance on the said three usance bills of exchange duly accepting with the following crucial endorsements:

"Drawn under irrevocable letter of credit No. 166/86, dated December 18, 1986;"

"MMTC of India Ltd. for and on behalf of Harlow & Jones Ltd."

"Accepted by Calcutta Steel Company Ltd."

signature and stamp of the company were put on them.

5. On acceptance of the bills of exchange by CSC, the appellant released the documents of title to the goods. On March 3, 1987 CSC obtained necessary endorsement from MMTC confirming thus:

"We enclose herewith bill of lading No. 1, dated December 31, 1986 in respect of shipment of 6965.950 M.T. of billets from Gilon. You are requested to kindly endorse the