M.S. Menon, J.
The 2nd defendant in O.S. No. 48 of 1950 of the District Court of Quilon is the appellant before us. A partnership, Messrs. Hidayathul Cashew Company, Quilon, of which he is at present the sole surviving member purchased from the plaintiff 700 cases of cashew kernels for a gross price of $16672.50. It is now agreed that the sale took place on 19-9-1949 and that the only controversy is as to the rate at which the price fixed in American dollars should be converted into Indian rupees. According to the appellant conversion should be at Rs. 329 per 100 dollars and not at Rs. 473-12-0 as claimed by the plaintiff and found, by the trial Court.
2. Paragraph 6 of the plaint reads as follows:
''The invoice for the aforesaid sale of 700 cases cashews was given to the defendants on 19-9-1949. But, by the oversight of the ,clerk concerned in the matter of calculation, the exchange rate was wrongly calculated at Rs. 329 per dollars 100.00 instead of Rs. 473-12-0 per dollars 100.00 the buying rate fixed by the Reserve Bank of India.'
3. It is common ground that the rate of conversion should be the rate authorised by the Reserve Bank of India under Section 4(2) of the Foreign Exchange Regulation Act, 1947. Section 4(2) reads as follows:
'Except with the previous general or special permission of the Reserve Bank, no person whether an authorised dealer or otherwise, shall enter into any transaction which provides for the conversion of Indian currency into foreign currency or foreign currency to Indian currency at rates of exchange other than the rates for the time being authorised by the Reserve Bank.'
It is not contended that any other rate was in the contemplation of the parties at the time they entered into the contract on 19-9-1949 land so the only question that has to be resolved relates to the rate authorised by the Reserve Bank of India under the sub-section extracted above and in force on 19-9-1949.
4. Paragraph 12 of the Exchange Control Manual -- 3rd Edition -- which deals with the subject reads as follows:
''Section 4(2) of the Foreign Exchange Regulation Act, 1947, lays down that all transactions in foreign exchange in India shall be done at rates authorised by the Reserve Bank of India. The rates of exchange which the Reserve Bank has been pleased to authorise in this behalf are those published by the Exchange Banks' Association, Calcutta.'
This paragraph has since been cancelled and another paragraph substituted; but that substitution (and other subsequent changes) are not material to this case as they were made only after June, 1955.
5. There can be no doubt that the rate of conversion published by the Exchange Banks* Association and current on 19-9-1049 is the rate given in Ex. XI, that is, Rs. 329 per 100 dollars. Exhibit XI is a communication of the Exchange Banks' Association dated 11-10-1948.
6. The International Monetary Fund wag established on 27-12-1945 as a result of the U. N. Monetary and Financial Conference held at Bretton Woods in July 1944. India joined the Organisation (and the International Bank of Reconstruction and Development) as an original member. In September 1947 the Fund notified its members to communicate the par value of their currencies and the Government of India communicated the par value of the rupee expressed in gold as 0.268601 grammes; and U.S. dollars, as 30.2250 cents.
In September 1949, England devalued sterling and brought down its value in terms of the U.S. dollars from 4.03 to 2.80 and India devalued the rupee by reducing its value from 30.225 cents to 21 cents (while retaining its sterling value at 1 Section 6 d.) with the consent of the Fund. Exhibit U dated 19/20 September 1949 is a copy of the Press Communique on the subject issued by the Government of India.
7. It cannot be disputed that the devaluation was announced by the Government of India prior to the contract on 19-9-1949. The sequence of events immediately preceding the devaluation is part of the history of the Indian rupee and will be clear from the following extract from the 'Capital' dated 27-9-1949:
'The British Prime Minister is said to have communicated to India the decision to devalue sterling in terms of dollars on Friday, the 16th September. On the same day the Dominion High Commissioners were called to a conference in London by the British Treasury, when they were informed of the decision. According to reports here the Pakistan High Commissioner in London did not attend this Conference.
In New Delhi the Prime Minister held an emergency meeting of his Cabinet at 10 p.m. at his residence to discuss the situation before leaving on the East Punjab tour next morning. The Cabinet held further meetings on the following day and finally decided to devalue the Indian rupee to twenty-one cents. An attempt to elucidate Pakistan's views, as required under the Indo-Pakistan payments agreement, was made by a telegram on Sunday morning. No reply was received from Karachi, however, and India announced her decision at 2-30 a.m. on Monday, the deadline fixed by the British Government.' (p. 521).
The fact that the devaluation was announced prior to the contract on 19-9-1949, however, has nothing to do with the case as presented before us, the only question we have been called upon to decide being the rate of conversion authorised by the Reserve Bank of India under Section 4(2) of the Foreign Exchange Regulation Act, 1947, and in force on 19-9-1949. That rate as we have already stated is the rate given in Ex. XI, namely, Rs. 329 per 100 dollars.
8. The 18th September 1949, was a Sunday. The 19th, 20th and 21st September 1949 were declared Bank Holidays by the Government of Travancore-Cochin in exercise of the powers conferred on them by Section 24 of the Travancore Negotiable Instruments Act, II of 1076, and Section 24 of the Cochin Negotiable Instruments Act, IX of 1097, as continued in force by the United State of Travancore and Cochin Administration and Application of Laws Ordinance, 1124. The notification concerned is Notification No. C. 4-6183/49/D.D., dated 19-9-1949 and published in a Gazette Extraordinary of the same date. The 22nd September 1949 (Mahalaya Amavasi) was also a Bank Holiday.
9. Exhibit XII dated 22-9-1949 is the communication of the Exchange Banks' Association after the announcement of the devaluation. It cancelled the previous schedule relating to U.S. dollars issued by the Association and stated that the rates specified in Ex. XII 'will be effective from 10-30 a.m. on 23rd September 1949 until further notice.'
10. By Ex. IV dated 14-10-1949 the Hidayathul Cashew Company sought information from the banks regarding the rate of exchange during the relevant period. Exhibit V dated 18-10-1949 is the reply of the Central Bank of India, Limited, Alleppey. That Bank said:
'In reply to your letter of the 14th instant, the dollar purchasing rate from 17th to 23rd September was 329 for sight bills drawn under Letters of Credit.'
11. As it is agreed that the rate of conversion contemplated by the parties when they entered into the contract on 19-9-1949 was the rate authorised by the Reserve Bank of India under Section 4(2) of the Foreign Exchange Regulation Act, 1947, and in force on that date; and as it is clear from what has been stated above that the said rate was Rs. 329 per hundred dollars, the decision of the trial Court cannot be sustained and this appeal has to be allowed.
12. The Exchange Control Manual -- 3rd Edition -- makes it quite clear that the types of transactions which are affected by the Foreign Exchange Regulation Act. 1947, are, in general, all those having international financial Implications and in particular
(a) Purchases and sales of, and other dealings in, foreign exchange;
(b) Payments in Rupees by residents to, or to accounts in India of, non-residents;
(c) Exports of currency, cheques, draft, travellers' cheques, etc.;
(d) Exports of securities; and
(e) Sales or transfer of securities by residents to non-residents and purchases of securities in India by non-residents from residents.
We are not called upon to decide in this case whether the Foreign Exchange Regulation Act, 1947, is, as a matter of fact, applicable to the transaction in question and we express no opinion on the point. We have referred to Section 4(2) of the Act only because it was agreed that the rate of conversion contemplated by the parties at the time they entered into the contract on 19-9-1949 was the rate authorised by the Reserve Bank of India under that section and in force on that date.
13. We may add, however, that even if we are to decide the case without any reference to the Foreign Exchange Regulation Act, 1947, our conclusion will still be the same, namely, that the rate of conversion contemplated by the parties when they entered into the contract on 19-9-1949 was Rs. 329 per 100 dollars and not Rs. 473-12-0 per 100 dollars. That such was the case is abundantly clear from the evidence before us.
14. In the light of what is stated above this appeal has to be allowed and it is hereby allowed with costs, here and in the Court below.