The main legal point established in the judgment is the interpretation of the Indian Carriage of Goods by Sea Act, 1925, in conjunction with Article IX, which determined the maximum liability of the carrier based on the value in rupees of 100 gold sovereigns, and the relevance of the Foreign Exchange Regulation Act, 1847, and the concept of gold clause obligation in international contracts.

1. The plaintiffs in O.S.No.159 of 1952 of the District Court of Anjikaimal, Ernakulam, are the appellants before us. The suit was for the recovery of the value of one bale of cloth short delivered by the defendant, the Great Eastern Shipping Company Limited, Bombay.

2. The bale short delivered was one of sixty-one bales shipped by S.S. JAG GANGA from Bombay to Cochin. The bill of lading is Ext. A dated 26-7-1951.

3. The lower court has found that the short delivery alleged is true, and that the value of the missing bale is Rs. 2,514-9-6. These findings are not questioned by the respondent.

4. The lower Court, however, restricted the award to Rs. 1,331-4-0 on the basis of the provision embodied in Article IV, R.5 of the Schedule to the Indian Carriage of Goods by Sea Act, 1925. The relevant portion of Article IV, R.S, reads as follows:

"Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with goods in an amount exceeding £100 per package or unit or the equivalent of that sum in other currency unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading."

It is common ground that the nature and value of the goods have not been declared by the shipper before shipment and inserted in the bill of lading that if Article IV, R.S, stood by itself the maximum amount recoverable from the respondent will be £ 100 and that the said sum in Indian currency will amount only to Rs. 1,331-4-0, the amount awarded by the Court below.

5. The contention on behalf of the appellants is that the provision has to be interpreted in the light of Article IX of the Schedule which is in the following terms:

"The monetary units mentioned in these Rules are to be taken to be gold value." As pointed out by Scrutton:

"The construction of this Article is difficult, The only reference to a monetary unit in the Rules is contained in Art. IV, R.S, where reference is made to a maximum liability of '£100.' If any effect is to be given to the present Article, it would seem that '£100' must be construed as T100 gold', that is to say, the current market value [presumably at the date of breach] of the gold content of a hundred sovereigns of the weight and fineness specified under the Coinage Act 1870. In as much as Art, IV, R.5 deals with the measure of the carrier's liability and not with the mode of discharging that liability, this is probably the construction which would be adopted by the English Courts" [Charterparties and Bills of Lading, 16th Edition, Page 496].

Carver says that the construction of the Article is "very difficult", and that where it is necessary to compute the equivalent of £ 100 in a currency other than that of the United Kingdom as in the case before us - the courts of this country can give judgment only in terms of Indian currency - Article IX "clearly requires the amount of the foreign currency which would be equal in value to 100 gold sovereigns to be computed." (Carriage of Goods by Sea, 9th Edition, Page 205).

6. The controversy before us has been avoided in Canada by substituting $ 500 for £ 100 in Article IV, R.S, and making Article IX read as follows:

"The monetary units mentioned in these Rules are to be taken to be lawful money of Canada."

In New Zealand where the unit of currency is a pound, there was no need to alter Article IV, R.S. They altered Article IX as follows and produced the same result:

"The monetary units mentioned in the Rules are to be taken to be New Zealand currency."

7. Halsbury deals with the construction of references to foreign currency and to gold generally as follows:

"Where a debt is expressed in terms of a foreign currency, the reference to that currency may indicate the mode in which the debt is to be discharged or the means by which the amount of the debt is to be measured or both." [Laws of England, 3rd Edition, Vol. XXVII, Page 5].

What Article IX imports is certainly not an obliga