Satyabrata Ghose Vs. Mugneeram Bangur
& Co. & ANR [1953] INSC 70 (16 November 1953)
MUKHERJEA, B.K.
BOSE, VIVIAN BHAGWATI, NATWARLAL H.
CITATION: 1954 AIR 44 1954 SCR 310
CITATOR INFO :
R 1958 SC 328 (25) RF 1959 SC 135 (20) R 1965
SC1523 (1) R 1968 SC1024 (8) R 1971 SC1756 (11) F 1977 SC1019 (1,11) A 1980
SC1717 (26) A 1980 SC1717 (26)
ACT:
Indian Contract Act (IX of 1872), s. 56Agreement
to sell land-Doctrine of frustrationApplicability-Doctrine whether applicable
in IndiaScope of s. 56 Impossible meaning ofAgreement for sale of land-Buyer's
rights-English and Indian law.
HEADNOTE:
The doctrine of frustration is really an
aspect or part of the law of discharge of contract by reason of supervening
impossibility or illegality of the act agreed to be done and hence comes within
the purview of S. 56 of the Indian Contract Act.. The view that s. 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. English cases can have only a persuasive value,
and are only helpful in showing how English courts decided cases under similar
circumstances.
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.
According to the Indian Contract Act. a
promise may be express or implied. In cases, therefore, where the court gathers
as a matter of construction that the contract itself contained impliedly or
expressly a term, according to which it would stand discharged on the happening
of certain circumstances, the dissolution of the contract would take place
under the terms of the contract itself and such cases would be outside the
purview of S. 56 altogether. Although in English law these cases are treated as
cases of frustration, in India they would be dealt with under s. 32 of the
Indian Contract Act which deals with contingent contracts or similar other
provisions contained in the Act.
In the large majority of cases however the
doctrine of frustration. is applied not on the ground that the parties
themselves agreed to an implied term which operated to release 311 them from
the performance of the contract. The relief is given by the court on the ground
of subsequent impossibility when it finds that the whole purpose or basis of a
contract was frustrated by the intrusion or occurrence of an unexpected event
or change of circumstances which was beyond what was contemplated by the
parties at the time when they entered into the agreement. Here there is no
question of finding out an implied term agreed to by the parties embodying a
provision for discharge, because the parties did not think about the matter at
all nor could possibly have any intention regarding it. When' such an event or
change of circumstance occurs which is so, fundamental as to be regarded by law
as striking at the root of the contract as a whole, it is the court which can
pronounce the contract to be frustrated and at an end. The court undoubtedly
has to examine the contract and the circumstances under which it was made. The
belief, knowledge and intention of the parties are evidence, but evidence only
on which the court has to form its own conclusion whether the changed circumstances
destroyed altogether the basis of the adventure and its underlying object. This
may be called a rule of construction by English Judges but it is certainly not
a principle of giving effect to the intention of the parties which underlies
all rules of construction. This is really a rule of positive law and as such
comes within the purview of s. 56 of the Indian Contract Act.
The reason underlying the rule of English law
that the doctrine of frustration does not apply to contracts for the sale of
land. is that under the English law, ,is soon as the agreement to sell is
complete the buyer becomes the owner of the land in equity. As a mere agreement
to sell does not confer any rights of ownership on the buyer under the Indian
law, the doctrine of frustration is as applicable in India to agreements for
sale of land as in the case of other agreements.
In 1940 as an integral part of a development
scheme of an extensive area of landstarted by the defendant company, it entered
into a contract with the plaintiff's predecessor for the sale of a Plot of land
to the latter accepting a small sum of money as earnest. It undertook to
construct roads and drains and the conveyance was to be completed soon after
the completion of tile roads on payment of the balance of the Price. As a
considerable portion of the area comporised in the scheme was requisitioned by
the Government for military Purposes in 1941, the company wrote to the
defendant that the road construction could not be taken up for an indefinite
period and required him to treat the agreement as cancelled and receive back
his earnest: Held.
that having regard to the nature and terms of
the contracts the actual existence of war condition at the time when it was
entered into the extent of the work involved in the scheme fixing no time limit
in the agreement for the construction of the roads etc., and the fact that the
order of requisition was in its very nature of a temporary character, the
requisition did not affect the fundamental basis of the contract; nor 312 did
the performance of the contract become illegal by reason of the requisition,
and the contract had not therefore become impossible within the meaning of s.
56 of the Indian Contract Act.
Joseph Constantine Steamship Co. v. Imperial
Smelting Corporation Ltd. ([1942] A.C. 154), Tamplin Steamship Co. Ltd. v.
Anglo American Products Co. Ltd. ([1916] A.C. 397), Kesari Chand v. Governor
General in Council (I.L.R. 1949 Nag. 718), Ganga Saran v. Ram Charan ([1952]
S.C.R. 36), Taylor v. Caldwell (3 B. and S. 826), Robinson v. Davison (L.R. 6
Ex. 269) Denny Mott and Dickson Ltd. v. James B.
Frazer & Co. Ltd. [1944] A.C. 265)
referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 80 of 1952.
Appeal from the Judgment and Decree dated the
6th September, 1950, of the High Court of Judicature at Calcutta (Das Gupta and
Lahiri JJ.) in Appellate Decree No. 318 of 1949 from the Judgment and Decree
dated the 25th February, 1949. of the Court of the District Judge of Zillah 24
Parganas in Title Appeal No. 8 of 1948 arising out of the Judgment and Decree
dated the 10th October, 1947, of the Court of the Additional Subordinate Judge,
7th Court, Alipore.
M.C. Setalvad, Attorney-General for India
(Aurobindo Guha and Gobinda Mohan Roy, with him) for the appellant.
Atul Chandra Gupta (Bijan Behari Das Gupta,
with him) for respondent No. 1 1953. November 16. The Judgment of the Court was
delivered by MUKHERJEA J.The facts giving rise to this appeal are, for the most
part, uncontroverted and the dispute between the parties centres round the
short point as to whether a contract for sale of land to which this litigation
relates, was discharged and came to an end by reason of certain supervening
circumstances which affected the performance of a material part of it.
To appreciate the merits of controversy, it
will be necessary to give a brief narrative of the material facts.
The defendant company, which is the main
respondent in this appeal, is the owner of a large tract of land situated, in
the vicinity of the Dhakuria Lakes within Greater Calcutta.
The 313 company started a scheme for
development of this land for residential purposes which was described as Lake
Colony Scheme No. I and in furtherance of the scheme the entire area was
divided into a large number of plots for the sale of which offers were invited
from intending purchasers. The company's plan of work seemed to be, to enter
into agreements with different purchasers for sale of these plots of land and
accept from them only a small portion of the consideration money by way of
earnest at the time of the agreement. The company undertook to construct the
roads and, drains necessary for making the lands suitable for building and
residential purposes and as soon as they were completed.
the purchaser would be called upon to
complete the conveyance by payment of the balance of the consideration money.
Bejoy Krishna Roy, who was defendant No. 2 in the suit and figures as a pro
forma respondent in this appeal, was one of such purchasers who entered into a
contract with the company for purchase of a plot of land covered by the scheme.
His contract is dated the 5th of August, 1940, and he paid Rs. 101 as earnest
money. In the receipt granted by the vendor for this earnest money, the terms
of the agreement are thus set out:-"Received with thanks from Babu Bejoy
Krishna Roy of 28 Tollygunge Circular Road, Tollygunge, the sum of Rs. 101
(Rupees one hundred and one only) as earnest money having agreed to sell to him
or his nominee 5 K. more or less in plot No. 76 on 20 and 30 ft. Road in
Premises No. Lake Colony Scheme No. 1, Southern Block at the average rate of
Rs. 1,000 (Rupees one thousand only) per Cotta.
The conveyance must be completed within one
month from the date of completion of roads on payment of the balance of the
consideration money, time being deemed as the Essence of the Contract. In case
of default this agreement will be considered as cancelled with forfeiture of
earnest money.
Mokarari Mourashi 314 Terms of payment:One
third to be paid at the time of registration and the balance within six years
bearing Rs. 6 per cent. interest per annum".
On 30th November, 1941, the plaintiff
appellant was made a nominee by the purchaser for purposes of the contract and although
he brought the present suit in the character of a nominee, it has been held by
the trial judge as well as by the lower appellate court, that he was really an
assignee of Bejoy Krishna Roy in respect to the latter's rights under the
contract. Some time before this date, there was an order passed by the
Collector, 24-Parganas, on 12th of November, 1941 under section 79 of the
Defence of India Rules, on the strength of which a portion of the land covered
by the scheme was requisitioned for military purposes. Another part of the land
was requisitioned by the Government on 20th of December, 1941. while a third
order of requisition, which related to the balance of the land comprised in the
scheme, was passed sometime later. In November, 1943, the company addressed a
letter to Bejoy Krishna Roy informing him of the requisitioning of the lands by
the Government and stating inter alia that a considerable portion of the
land-appertaining to the scheme was taken possession of by the Government and
there was no knowing how long the Government would retain possession of the
same.
The constructs of the proposed roads and
drains, therefore, could not be taken up during the continuance of the war and
possibly for many years after its termination. In these circumstances,, the
company decided to treat the agreement for sale with the addressee as cancelled
and give him the option of taking back the earnest money within one month from
the receipt of the letter. There was offer made in the alternative that in case
the purchaser refused to treat the contract as cancelled, he could, if he
liked, complete the conveyance within one month from the receipt of the letter
by paying the balance of the consideration money and take the land in the
condition in which it existed at that time, the company undertaking to
construct the roads and the drains, as circumstances might permit, after the
termination of the war.
315 The letter ended by saying that in the
event of the addressee not accepting either of the two alternatives, the agreement
would be deemed to be cancelled and the earnest money would stand forfeited.
This letter was handed over by Bejoy Krishna to his nominee, the plaintiff, and
there was some correspondence after that, between the plaintiff on the one hand
and the company on the other through their respective lawyers into the details
of which it is not necessary to enter. It is enough to state that the plaintiff
refused to accept either of the two alternatives offered by the company and
stated categorically that the latter was bound by the terms of the agreement
from which it could not, in law, resile. On 18th of January, 1946, the suit,
out of which this appeal arises, was commenced by the plaintiff against the
defendant company, to which Bejoy Krishna Roy was made a party defendant and
the prayers in the plaint were for a two-fold declaration, namely, (1) that the
contract dated the 5th of August, 1940, between the first and the second
defendant, or rather his nominee, the plaintiff, was still subsisting; and (2)
that the plaintiff was entitled to get a conveyance executed and registered by
the defendant on payment of the consideration money mentioned in the agreement
and in the manner and under the conditions specified therein.
The suit was resisted by the defendant company
who raised a large number of defences in answer to the plaintiff's claim, most
of which are not relevant for our present purpose. The principal contentions
raised on behalf of the defendant were that a suit of this description was not
maintainable under section 42 of the Specific Relief Act and that the plaintiff
had no locus standi to institute the suit. The most material plea was that the
contract of sale stood discharged by frustration as it became impossible by
reason of the supervening events to perform a material part of it. Bejoy
Krishna Roy did not file any written statement and he was examined by the
plaintiff as a witness on his behalf.
316 The trial judge by his judgment dated
10th October, 1.947, overruled all the pleas taken by the defendant and decreed
the plaintiff's suit. An appeal taken by the defendant to the Court of the
District Judge of 24-Parganas was dismissed on the 25th February, 1949, and the
judgment of the trial court was affirmed. The defendant company thereupon
preferred a second appeal to the High Court which was heard by a Division Bench
consisting 'of Das Gupta and Lahiri JJ.
The only question canvassed before the High
Court was, whether the contract of sale was frustrated by reason of the
requisition orders issued by the Government? The learned Judges answered this
question in the affirmative in favour of the defendant and on that ground alone
dismissed the plaintiff's suit. The plaintiff has now come before us on the
strength of a certificate granted by the High Court under article 133(I)(c) of
the Constitution of India.
The learned Attorney General, who appeared in
support of the appeal, has put forward a three-fold contention on behalf of his
client. He has contended in the first place that the doctrine of English law
relating to frustration of contract, upon which the learned Judges of the High
Court based their Decision has no application to India in view of the statutory
provision contained in section 56 of the Indian Contract Act. it is argued in
the second place, that even if the English law Applies, it can have no
application to contracts for sale of land and that is in fact the opinion
expressed by the English ,judges themselves. His third and the last argument is
that on the admitted facts and circumstances of this case there was no
frustrating event which could be said to have taken away the basis of the
contract or tendered its performance impossible in any sense of the word.
The first argument advanced by the learned
Attorney General raises a somewhat debatable point regarding the true scope and
effect of section 56 of the Indian Contract Act and to what extent, if any, it
incorporates the English rule of frustration of contracts.
317 Section 56 occurs in Chapter IV of the
Indian Contract Act which relates to performance of contracts and it purports
to deal with one circumstances under which performance of a, contract is
excused or dispensed with on the ground of the contract being-void. The section
stands as follows:
"An agreement to do an act impossible in
itself is void.
A contract to do an act which after the
contract is made, becomes impossible, or, by reason of some event which the
promiser could not prevent, unlawful, becomes void when the act becomes
impossible or unlawful.
Where one person has promised to do something
which he knew, or, with reasonable diligence, might have known, and which the
promisee did not know to be impossible or unlawful, such promisor must make
compensation to such promisee for any loss which such promise sustains through the
non-performance of the promise".
The first_paragraph of the section lays down
the law in the same way as in England. It speaks of something which is
impossible inherently or by its very nature, and no one can obviously be
directed to an act. The second paragraph enunciates the law relating to
discharge of contract by reason of supervening impossibility or illegality of
the act agreed to be done. The wording of this paragraph is quite general, and
though the illustrations attached to it are not at all happy, they
cannotderogate from the general words used in the enactment. This much is clear
that the word "impossible" has not been used here in the sense of
physical or literal impossibility. The performance of an act may not be
literally impossible but it may be impracticbale and useless from the point of
view of the object and purpose which the parties had in view and if an untoward
event or change of circumstances totally upset the very foundation upon which
the parties rested their bargain, it can very well be said that the promisor
L/B(D)2SCI-6(a) 318 found it impossible to do the act which he promised to do.
Although various theories have been
propounded by the Judges and jurists in England regarding the juridical basis
of the doctrine of frustration, yet the essential idea upon which the doctrine
is based is that of impossibility of performance of the contract: in fact
impossibility and frustration are often used as interchangeable expressions.
The changed circumstances, it is said, make
the performance of the contract impossible and the parties are absolved from
the further performance of it as they did not promise to perform an
impossibility The parties shall be excused, as Lord Loreburn says(1), "if
substantially the whole contract becomes impossible of performance or in other
words impracticable by some cause for which neither was responsible,." In
Joseph Constantine Steamship Line Limited v. Imperial Smelting Corporation
Ltd.(2), Viscount Maugham observed that the "doctrine of frustration is
only a special case of the discharge of contract by an impossibility of
performance arising after the contract was made." Lord Porter agreed with
this view and rested the doctrine on the same basis.
The question was considered and discussed by
a Division Bench of the Nagpur High Court in Kesari Chand v. Governor General
in Council(3) and it was held that the doctrine of frustration comes into play
when a contract becomes impossible of performance, after it is made, on account
of circumstances beyond the control of the parties. The doctrine is a special
case of impossibility and as such comes under section 56 of the Indian Contract
Act. We are in entire agreement with this view which is fortified by a recent
pronouncement of this court in Ganga Saran v. Ram Charan(4), where Fazl (1) See
Tamplin Steamship Co. Ltd. v. Anglo-Mexican Petroleum Products Co. Ltd.[1916] 2
A.C. 397, 403.
(2) [1942] A.C. 154 at 168.
(3) I.L.R. 1949 Nag. 718.
(4) [1952] S.C.R. 36 at 52.
319 Ali J., in speaking about frustration,
observed in his judgment as follows:
"It seems necessary for us to emphasise
that so far as the courts in this country are concerned, they must loot
primarily to the law as embodied in sections 32 and 56 of the Indian Contract
Act, 1872." We hold, therefore, that the doctrine of frustration is really
an aspect or part of the law of discharge of contract by reason of supervening
impossibility or illegality of the act agreed to be done and hence comes within
the purview of section 56 of the Indian Contract Act. It would be incorrect to
say that section 56 of the Contract Act 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. It must be
held also that to the extent that the Indian Contract Act deals with a
particular subject, it is exhaustive upon the same and it is not permissible to
import the principles of English law dehors these statutory provisions. The
decisions of the English courts possess only a persuasive value and may be helpful
in showing how the courts in England have decided cases under circumstances
similar to those which have come before our courts.
It seems necessary however to clear up some
misconception which is likely to arise because of the complexities of the English
law on the subject. The law of frustration in England developed, as is well
known, under the guise of reading implied terms into contracts. The court
implies a term or exception and treats that as part of the contract.
In the case of Taylor v. Caldwell(1),
Blackburn J. first formulated the doctrine in its modern form. The court there
was dealing with a case where a music hall in which one of the contracting
parties had agreed to give concerts on certain specified days was accidentally
burnt by fire. It was held that such a contract must be regarded "as
subject to an implied condition that the parties shall be excused, in case,
before breach, performance becomes impossible from perishing of the thing
without (1) 3 B & S. 826.
320 default of. the contractor." Again
in Robinson v. Davison(1) there was a contract between the plaintiff and the
defendant's wife (as the agent of her husband) that she should play the piano
at a concert to be given by the plaintiff on a specified day. On the day in
question she was unable to perform through illness. The contract did not
contain any term as to what was to be done in case of her being too ill to
perform. In an action against the defendant for breach of contract, it was held
that the wife's illness and the consequent incapacity excused her and that the
contract was in its nature not absolute but conditional upon her being well
enough to perform. Bramwell B. pointed out in course of his judgment that in
holding that the illness of the defendant in capaciated her from performing the
agreement the court was not really engrafting a new term upon an express
contract. It was not that the obligation was absolute in the original agreement
and a new condition was subsequently added to it; the whole question was
whether the original contract was absolute or conditional and having regard to
the terms of the bargain, it must be held to be conditional.
The English law passed through various stages
of development since then and the principles enunciated in the various decided
authorities cannot be said to be in any way uniform.
In many of the pronouncements of the highest
courts in England the doctrine of frustration was held "to be a device by
which the rules as to absolute contracts are reconciled with a special
exception which justice demands"(2). The court, it is said, cannot claim
to exercise a dispensing power or to modify or alter contracts. But when an
unexpected event or change of circumstance occurs, the possibility of which the
parties did not circumstance occurs, the possibility contract is taken to be
not what the parties actual intended, but what they as fair and reasonable men
would presumably have intended and agreed upon, if having such possibility in
view they had made express provsion as to their rights and liabilities in the
event of such occurrence(1). As Loard Wright (1) (1871) L.R. 6 Exch. 269.
(2) Vide Hirji Mulji v. Cheong Yue Steamship
Co. Ltd. [1926] A.C. 497 at 510.
(3) Vide Dahl v. Nelson, Donkinand Co. (1881)
6 App. Cas. 38 at 59.
321 observed in Joseph Constantine Steamship
Co. v. Imperial Smelting Corporation Ltd.(1).
"In ascertaining the meaning of the
contract and its application to the actual occurrences, the court has to
decide, not what the parties actually intended but what as reasonable men they
should have intended. The court personifies for this purpose the reasonable
man." Lord Wright clarified the position still further in the later case
of Denny, Mott and Dickson Ltd. v. James B.
Fraser & Co. Ltd.(1), where he made the
following observations:
"Though it has been constantly said by
high authority, including Lord Sumner, that the explanation of the rule is to
be found in the theory that it depends on an implied condition of the contract,
that is really no explanation. It only pushes back the problem a single stage.
It leaves the question what is the reason for implying a term. Nor can I
reconcile that theory with the view that the result does not depend on what the
parties might, or would, as hard bargainers, have agreed. The doctrine is
invented by the court in order to supplement the defects of the actual
contract...... To my mind the theory of the implied condition is not really
consistent with the true theory of frustration. It has never been acted on by
the court as a ground of decision, but is merely stated as a theoretical
explanation." In the recent case of British Movietonews Ltd. v. London and
District Cinemas Ltd.(1), Denning L. J. in the Court of Appeal took the view
expressed by Lord Wright as stated above as meaning that "the court really
exercises a qualifying power-a power to qualify the absolute., literal or wide
terms of the contract in order to do what is just and reasonable in the new
situation". "The day is gone," (1) [1942] A.C. 154 at 185.
(2) [1944] A.C. 265 at 275.
(3) [1951] 1 K. B. 190.
L/ B(D) 2SCI-7 322 the learned Judge went on
to say, "when we can excuse an unforeseen injustice by saying to the
sufferer 'it is your own folly, you ought not to have passed that form of
words.
You ought to have put in a clause to protect
yourself'. We no longer credit a party with the foresight of a Prophet or his
lawyer with the draftsmanship of a Chalmers. We realise that they have their
limitations and make allowances accordingly. It is better thus. The old maxim
reminds us that he who clings to the letter clings to the dry and barren shell
and misses the truth and substance of the matter. We have of late paid heed to
this warning, and we must pay like heed now." This decision of the Court
of Appeal was reversed by the House of Lords and Viscount Simon in course of
his judgment expressed disapproval of the way in which the law was stated by
Denning L.J. It was held that there was no change in the law as a result of
which the courts could exercise a wider power in this regard than they used to
do previously. "The principle remains the same", thus observed his
Lordship.
"Particular applications of it may
greatly vary and theoretical lawyers may debate whether the rule should be
regarded as arising from implied term or because the basis of the contract no
longer exists. In any view, it is a question of construction as Lord Wright
pointed out in Constantine's case and as has been repeatedly asserted by other
masters of law."(1) These differences in the way of formulating legal theories
really do not concern us so long as we have a statutory provision in the Indian
Contract Act. In deciding cases in India the only doctrine that we have to go
by is that of supervening impossibility or illegality as laid down in section
56 of the Contract Act taking the word "Impossible" in its practical
and not literal sense. It must be borne in mind, however, that section 56 lays
down a rule of positive law and does not leave the matter to be determined
according to the intention of the parties.
(1) [1952] A.C. 166 at 184.
323 In the latest decision of the House of
Lords referred to above, the Lord Chancellor puts the whole doctrine upon the
principle of construction. But the question of construction may manifest itself
in two totally different ways. In one class of cases the question may simply
be, as to what the parties themselves had actually intended and whether or not
there as a condition in the contract itself, express or implied, which
operated, according to the agreement of the Parties themselves to release them
from their obligations;
this would be a question of construction pure
and simple and the ordinary rules of construction would have to be applied to
find out what the real intention of the parties was.
According to the Indian Contract Act, a
promise may be express or implied(1). In cases, therefore, where the court
gathers as a matter of construction that the contract itself contained
impliedly or expressly a term, according to which it would stand discharged on
the happening of certain circumstances the dissolution on of the contract would
take place under the terms of the contract itself and such cases would be
outside the purview of section 56 altogether.
Although in English law these cases are
treated as cases of frustration, in India they would be dealt with under
section 32 of the Indian Contract Act which deals with contingent contracts or
similar other provisions contained in the Act.
In the large majority of cases however the
doctrine of frustration is applied not on the ground that the parties
themselves agreed to an implied term which operated to release them from the
performance of the contract. The relief is given by the court on the ground of
subsequent impossibility when it finds that the whole purpose or basis of a
contract was frustrated by the intrusion or occurrence of an unexpected event
or change of circumstances which was beyond what was contemplated by the
parties at the time when they entered into the agreement. Here there is no
question of finding out an implied term agreed to by the parties embodying a provision
for discharge, because the parties did not think about the matter at all nor
could possibly have any intention regarding it. When such an event or change of
(1) Vide section 9.
L/B(D)2SCI-7(a) 324 circumstance occurs which
is so fundamental as to be regarded by law as striking at the root of the
contract as a whole, it is the court which can pronounce the contract to be
frustrated and at an end. The court undoubtedly has to examine the contract and
the circumstances under which it was made. The belief, knowledge and intention
of the parties are evidence, but evidence only on which the court has to form
its own conclusion whether the changed circumstances destroyed altogether the
basis of the adventure and its underlying object(1). This may be called a rule
of construction by English Judges but it is certainly not a, principle of
giving effect to the intention of the parties which underlies all rules of
construction. This is really a rule of positive law and as such comes within
the purview of section 56 of the Indian Contract Act.
It must be pointed out here that if the
parties do contemplate the possibility of an intervening circumstance which
might affect the performance of the contract, but expressly stipulate that the
contract would stand despite such circumstances, there can be no case of
frustration because the basis of the contract being to demand performance
despite the happening of a particular event, it cannot disappear when that
event happens. As Lord Atkinson said in Matthey v. Curling(1), "a person
who expressly contracts absolutely to do a thing not naturally impossible is
not excused for nonperformance because of being prevented by the act of God or
the King's enemies......... or vis major". This being the legal position,
a contention in the extreme form that the doctrine of frustration as recognised
in English law does not come at all within the purview of section 56 of the Indian
Contract Act cannot be accepted..
The second contention raised by the Attorney
General can be disposed of in few words. It is true that in England the
judicial opinion generally expressed is, that the doctrine of frustration does
not operate in the case of contracts for (1) Vide Morgan v. Manser (1947] 2 AU
E.R. 666.
(2) [1922] 2 A.C. 180 at 234.
325 sale of land(1). But the reason
underlying this view is that under the English law as soon as there is a
concluded contract by A to sell land to B at certain price, B becomes in
equity, the owner of the land, subject to his obligation to pay the purchase
money'. On the other hand, A in spite of his having the legal estate holds the
same in trust for the purchaser and whatever rights he still retains in the
land are referable to his right to recover and receive the purchase money. The
rule of frustration can only put an end to purely contractual obligations, but
it cannot destroy an estate in land which has already accrued in favour of a
contracting party. According to the Indian law, which is embodied in section 54
of the Transfer of Property Act, a contract for sale of land does not of itself
create any interest in the property which is the subject-matter of the contract.
The obligations of the parties to a contract for sale of land are, therefore,
the same as in other ordinary contracts and consequendy there is no conceivable
reason why the doctrine of frustration should not be applicable to contracts
for sale of land in India. This contention of the Attorney General must,
therefore, fail.
We now come to the last and most important
point in this case which raises the question as to whether, as a result of the
requisition orders, under which the lands comprised in the development scheme
of the defendant company were requisitioned by Government, the contract of sale
between the defendant company and the plaintiff's predecessor stood dissolved
by frustration or in other words became impossible of performance.
It is well settled and not disputed before us
that if and when there is frustration the dissolution of the contract occurs
automatically. It does not depend, as does rescission of a contract on the
ground of repudiation or breach, or on the choice or election of either party.
It depends on the effect (1) Vida Billington Estates Co. v. Stonfield Estate
Ltd.
[1952] 1 All E.R.853.
326 of what has actually happened on the
possibility of performing the contrat (1). What happens generally in such cases
and has happened here is that one party claims that the contract has been
frustrated while the other party denies it. The issue has got to be decided by
the court "ex post facto, on the actual circumstances of the
case"(2).
We will now proceed to examine the nature and
terms of the contract before us and the circumstances under which it was
entered into to determine whether or not the disturbing element,which is
allowed to have happened here, has substantially prevented the performance of
the contract as a whole.
It may be stated at the outset that the.
contract before us cannot be looked upon as an ordinary contract for sale and
purchase of a piece of land; it is an integral part of a development scheme
started by the defendant company and is one of the many contracts that have
been entered into by a large number of persons with the company. The object of
the company was undoubtedly to develop a fairly extensive area which was still
undeveloped and make it usable for residential purposes by making roads and
constructing drains through it. The purchaser. on the other hand, wanted the
land in regard to which he entered into the contract to be developed and make
ready for building purposes before he could be called upon to complete the
purchase. The most material thing which deserves notice is, that there is absolutely
no time limit within which. the roads and drains are to be made. The learned
District Judge of Alipore, who heard the appeal, from the trial court's
judgment found it as a fact, on the evidence in the record, that there was not
an understanding between the parties on this point. As a matter of fact, the
first requisition order was passed nearly 15 months after the contract was made
and apparently no work was done by the defendant company in the meantime.
Another important thing that requires notice
in this con (1) Per Lord Wright in Denny, Mott and Dicksom Ltd. v.
Jameso B. Fraser and Co., Ltd. [1944] A.C.
265, 274, (2) Ibid.
327 nection is that the war was already on,
when the parties entered into the contract. Requisition orders for taking
temporary possession of lands for war purposes were normal events during this
period. Apart from requisition orders there were other difficulties in doing
construction work at that time because of the scarcity of materials and the
various restrictions which the Government had imposed in respect of them. That
there were certain risks and difficulties involved in carrying on operations
like these, could not but be in the contemplation of the parties at the time
when they entered into the contract, and that is probably the reason why no
definite time limit was mentioned in the contract within which the roads and
drains are to be completed. This was left entirely to the convenience of the
company and as at matter of fact the purchaser did not feel concerned about it.
It is against this background that we are to consider to what extent the
passing of the requisition orders affected the performance of the contract in
the present case.
The company, it must be admitted, bad not
commenced the development work when the requisition order was passed in
November, 1941. There was no question, therefore, of any work or service being
interrupted for an indefinite period of time. Undoubtedly the commencement of
the work was delayed but was the delay going to be so great and of such a
character that it would totally upset the basis of the bargain and commercial
object which the parties had in view? The requisition orders, it must be
remembered, were' by their very nature, of a temporary character and the
requisitioning authorities could, in law, occupy the position of a licensee in
regard to the requisitioned property. The order might continue during the whole
period of the war and even for some time after that or it could have been
withdrawn before the war terminated. If there was a definite time limit agreed
to by the parties within which the construction work was to be finished, it
could be said with perfect propriety that delay for an indefinite period would
328 make the performance of the contract impossible within the specified time
and this would seriously affect the object and purpose of the venture. But when
there is no time limit whatsoever in the contract, nor even an understanding
between the parties on that point and when during the war the parties could
naturally anticipate restrictions of various kinds which would make the
carrying on of these operations more tardy and difficult than in times of
peace, we do not think that the order of requisition affected the fundamental
basis upon which the agreement rested or struck at the roots of the adventure.
The learned Judges of the High Court in
deciding the case against the plaintiff relied entirely on the time factor.
It is true that the parties could not
contemplate an absolutely unlimited period of time to fulfill their contract.
They might certainly have in mind a period of time which was reasonable having
regard to the nature and magnitude of the work to be done as well as the
conditions of war prevailing at that time. Das Gupta, J., who delivered the
judgment of the High Court, says first of all that the company had in
contemplation a period of time not much exceeding 2 or 3 years as the time for
performance of the contract; the purchaser also had the same period of time in
contemplation. The learned Judge records his finding on the point in the
following words:
"My conclusion on a consideration of the
surrounding circumstances of the contract is that the parties contemplated that
the roads and drains would be constructed and the conveyance would be completed
in the not distant future." This finding is inconclusive and goes contrary
to what has been held by the District Judge who was undoubtedly the last court
of facts. In our opinion, having regard to the nature and terms of the contract,
the actual existence of war conditions at the time when it was entered into,
the extent of the work involved in the development scheme and last though not
the least the total absence of any definite period of time agreed to by the
parties within which the work was 329 to be completed, it cannot be said that
the requisition order vitally affected the contract or made its performance
impossible.
Mr. Gupta, who appeared for the respondent
company. put forward an alternative argument that even if the performance of
the contract was not made impossible. it certainly became illegal as a result
of the requisition order and consequently the contract became void under
section 56 of the Indian Contract Act as soon as the requisition order was
made. In support of his contention the learned counsel placed reliance upon
certain provisions of the Defence of India Rules and also upon illustration (d)
to section 56 of the Contract Act. All that the Defence Regulations show is
that the violation of a requisition order could be punished as a criminal
offence. But no matter in whichever way the requisition order could be
enforced, in substance it did nothing else but impose a prohibition on the use
of the land during the period that it remained in force. The effect of such
prohibition on the performance of the contract, we have discussed above, and we
do not think that the mere fact that the requisition order was capable of being
enforced by a criminal sanction made any difference in this respect. In any
view this question was not raised in any of the courts below and has not been
indicated even in the respondent's statement of the case. We do not think that
it would be proper to allow this question to be raised for the first time
before us, as it requires consideration of the different provisions of the
Defence of India Act and also of the implication of illustration (d) appended
to section 56 of the Contract Act. In our opinion, the events which have
happened here cannot be said to have made the performance of the contract
impossible and the contract has not been frustrated at all. The result is that
the appeal is allowed, the judgment and decree of the High Court of Calcutta
are set aside and those of the courts below restored. The plaintiff will have
his costs in all the courts.
Appeal allowed.
Agent for the appellant: S. C. Banerjee.
Agent for the respondent No. I : R. R.
Biswas.
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