Sushila Devi & ANR Vs. Hari Singh
& Ors  INSC 144 (5 May 1971)
CITATION: 1971 AIR 1756 1971 SCR 671
Contract Act (9 of 1872), s.
56-Frustration-Applicability to leases.
The appellants were legal representatives of
the owner of a village. In January, 1947, the previous owner called for tenders
for taking the property on lease for a period of three years. The respondents'
tender was accepted and they deposited along with the tender earnest money and
security for the payment of rent. The terms of the tender required that the
lease deed should be got registered by the lessee and that the lessee alone
would be personally responsible for taking possession of the lands.
As a result of the partition of India the village became a part of Pakistan. Even before actual partition, because of
serious communal troubles, it was not possible for the respondents to go to the
village either to cultivate the lands or to collect the rent from those who
were cultivating. No lease deedwas executed or registered.
Under those circumstances the respondents
filed a suit claiming a decree for the refund of the amounts deposited and
damages. The lower courts held that the contract had become impossible of
performance and decreed the suit in part.
In appeal to this Court,
HELD:(1) The law of frustration as embodied
in s. 56 of the Contract Act applies only to a contract that is, an agreement
to lease, and does not apply to leases. [674A;
675A-B] Raj Dhruv Dev Chand. v. Harmohinder
Singh,  3 S.C.R.
339, referred to.
(2)But in this case there was no lease. Since
lease was to be for a period of three years it could have been validly made
only under a registered instrument, and therefore, there was only an agreement
to lease and not a lease. Such an agreement comes within the scope of s. 56 of
the Contract Act. [675D-E] (3)The impossibility contemplated by s. 56 is not
confined to something which is not humanly possible. If the performance of a
contract becomes impracticable or useless having regard to the object and
purpose of the parties then it must be held that the performance of the
contract became impossible. But the supervening events should take away the
very basis of the contract and it should be of such a character that it strikes
at the root of the contract.
[676C-D] In the present case, the respondents
sought to take on lease the properties with a view to enjoy the properties
either by personally cultivating them or by sub-leasing them to others. That
object became impossible because of supervening events. Under the terms of the
agreement the 672 lessor was not expected to deliver the actual possession of
the properties but because of the prevailing circumstances it was impossible
for the respondents to either take possession of the properties or even to
collect rent from the cultivators. Therefore, the contract had become
impossible of performance. [676D-F] Satyabrata Ghose v. Mugneeram Bangur and
Co.,  S.C.R.
310, referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1225 of 1966.
Appeal by special leave from the judgment and
decree dated December 14, 1964 of the Jammu & Kashmir High Court in Civil
First Appeal No. 1 of 1960.
S. T. Desai and P. C. Bhartari for the
Hardev Singh and Hiral Lal Kapoor, for
respondents Nos. 12A to 12C.
The Judgment of the Court was delivered by
Hegde, J.-The appellants are the legal representatives of Dewnani Vidya Wati.
The said Vidya Wati was the owner of the village known as Kotli Delbagh Rai in
Tehsil Gujranwalla. It appears that she used to give the lands in that village
on lease for a term of years by calling for tenders and accepting the highest
tender. In about January 1947, she published a notice inviting tenders from
interested persons for taking those lands on lease for a period of three years
beginning from kharif 1947 to Rabi 1950. The tenders had to be submitted before
January 1, 1947. Clause (3) of the tender notice stated that "the terms of
lease can be perused in the Dewan estates office Jammu before filing of the
tenders. No excuse of ignorance as to the time will be entertained after the
acceptance of the lease." A note containing the terms on which the lands
would be, leased was exhibited for the information of the tenderers in the
office of the lessor. For our present purpose the only terms that are relevant
are those contained in Clauses 4 and 5 of the note. Clause 4 reads :
"According to the terms of the tender,
the lessee shall be the essence of contract. In case the lessee is 15 days from
the date of the acceptance of. the lease. The expenses of the completion and
Registration of the deed shall be borne by the lessee. The period of 15 days
fixed for the completion and registration of the lease deed shall be the
essence of contract. In case the lessee is negligent to get the lease deed
registered, the lease shall 673 stand cancelled. The earnest money and the
security, shall also be forfeited.
A fresh tender for the lands shall be called
for and any loss caused in this connection shall be home by the lessee."
Clause 5 says "The lessee shall, be personally responsible to get the
possession of the lands under Patta after the registration of lease deed. On
getting the possession of the land the lessee shall get the counter part of the
lease deed executed from his cultivators and deposit the same in the estates
office. And shall furnish a certificate for any part of land which he keeps for
his self-cultivation. He shall inform and deposit fresh counter lease deed in
case of any change in his cultivators and shall get a written receipt from the
Manager for the same." The respondents tendered in response to the notice
calling for tenders. Their tender was accepted. Alongwith the tender they
deposited a sum of Rs. 1,000 as earnest money.
Later on they deposited a sum of Rs. 34,000
as security for the payment of rent.
No lease was executed or registered. From the
material on record, it is that possible to find Out as to who was responsible
for the non-execution of the lease. But that aspect is not material for our
present purpose. The landlord has not sought to cancel the contract. The
agreement to lease continued to be in force even after the period within which
the lease deed had to be registered.
Tehsil Gujiranwalla became a part of Pakistan
as a result of partition of India on August 15, 1947. Even before the partition
Vidya Wati as well as the respondents had migrated to India because of the
communal disturbances. Considerable evidence was led in the case to establish
that even before the actual partition of India took place, because of the
serious communal troubles, it was not possible for the respondents to go to
Gujranwalla either to cultivate the lands or even to collect the rent from
those who were cultivating the lands. Under those circumstances the respondents
called upon Vidya Wati to refund the, amount deposited as security for the
payment of rent as well as to pay them a sum of Rs. 2,000 as damages. She
declined to comply with that demand. Thereafter they filed the suit from which
this appeal arises claiming a decree for Rs.
36,000, Rs. 34,000 as refund of the amount
deposited and Rs. 2,000 as damages. Vidya Wati 43--1 S.C.India/71 674 resisted
the suit on various grounds. She pleaded that she had done all that she was
expected to do under the contract.
Therefore the claim made against her was not
According to her the lands sought to be
leased were in the possession of the actual cultivators ; she was not required
to evict those cultivators and deliver physical possession to the respondents.
She was only required to deliver the landlord's possession of the lands
proposed to be leased.
According to her she had given to the
respondents such possession as she could have given under the circumstances.
She further pleaded that the doctrine of frustration
is not applicable to leases. In addition she pleaded that the suit was barred
by limitation. She also contended that under the contract she was entitled to
forfeit the amount deposited as security.
At the trial most of the contentions advanced
by Vidya Wati were given up. The only issue on which the parties went to trial
was whether the contract was frustrated because of the supervening
circumstances mentioned earlier. The trial court rejecting the contention of
the plaintiffs came to the conclusion that Vidya Wati was not expected to
deliver physical possession of the properties intended to be leased.
She had only to give such possession as she
had. But at the same time it upheld the contention of the plaintiffs that the
agreement to lease was frustrated. In appeal a Division Bench of the High Court
of Jammu and Kashmir agreed with the trial court that the contract referred to
in the plaint was frustrated because of the supervening circumstances. It
opined that the doctrine of frustration applied to leases as well. It further
held that under the contract Vidya Wati was expected to deliver actual
possession of the property to the plaintiffs and that she had neither delivered
physical nor even symbolic possession of the same to the plaintiffs.
In the result it affirmed the decision of the
Thereafter this appeal has been brought by
During the pendency of the appeal to the High
Court Vidyawati died and the present appellants were brought on record as her
The only question that falls for decision in
this appeal is whether the contract referred to in the plaint has become void
in view of the circumstances established. In other words had the performance of
the contract become impossible in view of the prolonged and widespread communal
troubles and the long drawn out tension that prevailed between India and
Pakistan. The law of frustration is embodied in Section 56 of the Contract Act.
That section to the extent material for our present purpose reads "A contract
to do an act which, after the contract is made, becomes impossible, or, by
reason of some event 675 which the promisor could not prevent, unlawful,
becomes void when the act becomes impossible or unlawful." The conclusion
of the Division Bench of the Jammu and Kashmir High Court that Section 56 of
the Contract Act applies to leases as well cannot be accepted as correct.
Section 56 applies only to a contract. Once a
valid lease comes into existence the agreement to lease disappears and its
place is taken by the lease. It becomes a completed conveyance under which the
lessee gets an interest in the property. There is a clear distinction between a
completed conveyance and an executory contract. Events which discharge a
contract do not invalidate a concluded transfer see Raja Dhruv Dev Chand v.
Harmohinder Singh and anr(1).
In view of that decision the view taken by
some of the High Courts that Section 56 of the Contract Act applies to leases
cannot be accepted as correct. Further the English decisions bearing on the
point can have no further relevance.
But in this case there was no lease. There
was only an agreement to lease. As seen earlier, the agreement between the
parties was that the properties in question should be leased to the plaintiffs
for a period of three years. Such a lease could not have been validly made
except under a registered instrument. As seen earlier the contract between the
parties provided that the lease deed should be registered within 15 days from
the date of the acceptance of the tender. For one reason or the other, the
contemplated lease deed was neither executed nor registered. Therefore we have
before us only an agreement to lease and not a lease. Such an agreement comes
within the scope of Section 56 of the Contract Act.
We agree with the trial court that under the
terms of agreement Vidya Wati was not expected to deliver actual possession of
the properties sought to be leased. The contract between the parties provided
that "The lessee shall be personally responsible to get the possession of
the lands under Patta after the registration of lease deed".
In our opinion on this point the conclusion
of the appellate court is not sustainable. But in fact as found by the trial
court as well as by the appellate court, it was impossible for the plaintiffs
to even get into Pakistan. Both the trial court as well as the appellate court
have found that because of the prevailing circumstances, it was impossible for
the plaintiffs to either to take possession of the properties intended to be
leased or even to collect rent (1)  3 S. C. R. 339.
676 from the cultivators. For that situation
the plaintiffs were not responsible in any manner. As observed by this Court in
Satyabrata Ghose v. Mugneeram Bangur and Co. and anr (1), the doctrine of
frustration is really an aspect or part of the law of discharge of contract by
reason of supervening unpossibility or illegality of the act agreed to be done
and hence comes within the purview of Section 56 of the Indian Contract Act.
The view that Section 56 applies only to cases of physical impossibility and
that where this section is not applicable recourse can be had to the principles
of English law on the subject of frustration is not correct. Section 56 of the
Indian Contract Act lays down a rule of positive law and 'does not leave the,
matter to be determined according to the intention of the parties.
The impossibility contemplated by Section 56
of the Contract Act is not confined to something which is not humanly
possible., If the performance, of a contract becomes impracticable or useless
having regard to the object and purpose the parties had in view then it must be
held that the performance of the contract has become, impossible. But the
supervening events Should take &way the basis of the contract and it should
be of such a character that it strikes at the root of the contract.
From the facts found in this case it is clear
that the plaintiffs sought to take On lease the properties in question with a
enjoy those properties either by personally cultivating sub-leasing them to
others. That object became because of the supervening events. Further the terms
of the agreement between the parties relating to taking possession of the
properties also become impossible of performance.
Therefore we agree with the trial court as
well as the appellate court that the contract had become impossible of
in the result this appeal fails and the same
But taking into consideration the fact that
both the plaintiffs as well as the defendant had become the victim of
circumstances which were beyond their control, we direct the parties to bear
their own costs in this appeal.
V. P. S. Appeal dismissed.
(1)  S. C. R. 310.