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PETITIONER: SUSHILA DEVI AND ANR.

       Vs.

RESPONDENT: HARI SINGH AND ORS.

DATE OF JUDGMENT05/05/1971

BENCH: HEGDE, K.S. BENCH: HEGDE, K.S. GROVER, A.N.

CITATION:  1971 AIR 1756            1971 SCR  671

ACT: Contract Act (9 of 1872), s. 56-Frustration-Applicability to leases.

HEADNOTE: 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 deed- was 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, [1968] 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

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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., [1954]  S.C.R. 310, referred to.

JUDGMENT: 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 appellants. 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.

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             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  sustainable. 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

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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 trial  court. Thereafter  this appeal has been brought by  special  leave. During  the  pendency  of  the  appeal  to  the  High  Court Vidyawati  died and the present appellants were  brought  on record as her legal representatives. 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

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56 of the Contract Act. We agree with the trial court that under the terms of agree- ment   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) [1968] 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  im- practicable  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 performance. in  the result this appeal fails and the same is  dismissed. 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) [1954] S. C. R. 310. 677