EXCHANGE OF LETTERS BETWEEN THE GOVERNMENT OF INDIA AND THE
GOVERNMENT OF THE UNITED KINGDOM REGARDING MILITARY
MINISTRY OF DEFENCE
GOVERNMENT OF INDIA
I have the honour to acknowledge the receipt of your letter of 20th November, 1964, which reads as follows :
(1) “I have the honour to inform you that in pursuance of discussions between our two Governments, the Government of the United Kingdom
of Great Britain and Northern Ireland will make to the Government of India a special Defence Credit (hereafter referred to as the
“loan”) of up to £ 4,700,000 to meet payments due under contracts entered into between the Government of India and persons
or corporations in the United Kingdom and approved by the United Kingdom Government, in respect of the reconstruction of the Mazagon
Dockyard at Bombay, and the construction there of Leander Class Frigates.
2. The loan shall be used only for goods or equipment wholly manufactured in the United Kingdom or services supplied by persons or
corporations resident in the United Kingdom.
3. The United Kingdom Government, on receipt from the Government of India of a request for the payment of sums due under the said
contracts with details identifying the contract under which the goods and services in respect of which the payment is due and with
a certificate by the contractor that the goods have been wholly manufactured in the United Kingdom or the services have been supplied
by persons or corporations resident in the United Kingdom and accompanied where required by the United Kingdom Government by a certificate
from the consulting engineers that the payments are so due, will make these payments out of the loan on behalf of the Government
of India. No payment out of the loan will be made after 3lst March, 1971.
4. Interest will be payable by the Government of India on each payment out of the loan by the United Kingdom Government at the rate
currently applied by the United Kingdom Treasury at the date of each such payment to a loan for a comparable period out of the
Consolidated Fund under Section 3(2) of the Export Guarantees Act, 1949. Interest will be payable on each payment from the date
upon which the payment was made. The United Kingdom Government will notify the Government of India on the occasion of each such
payment by the United Kingdom Government giving the amount of the payment, the rate of interest chargeable and the terms for payment.
Interest due on the amount of the loan outstanding will be paid half yearly on 30th April and 3lst October in each year.
5. The Government of India will repay to the United Kingdom Government the amount of each payment made by them in pursuance of paragraph
1 of this letter by 10 equal yearly instalments, the first instalment being paid on 30th April in the second financial year (lst
April to 3lst March) following that in which the payment out of the loan was made.
6. The Government of India may at any time repay the loan to the United Kingdom Government by paying to them the amount then outstanding
with interest due thereon.
7. I would be glad to have your confirmation that the Government of India accept the loan on the terms and conditions proposed
in this letter and that this letter and your reply in that sense should be regarded as constituting an agreement between the two
I confirm that the Government of India accept the loan referred to in your letter on the terms and conditions proposed therein and
that your letter and this reply should be regarded as constituting an Agreement between the two Governments.
Minister of Defence
The Rt. Hon’ble
ARTHUR GEORGE BOTTOMLEY
Secretary of State for Commonwealth Relations
Commonwealth Relations Office,
Downing Street, London, SW1