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PETITIONER: THE NAIHATI JUTE MILLS LTD.

       Vs.

RESPONDENT: HYALIRAM JAGANNATH

DATE OF JUDGMENT: 19/10/1967

BENCH: SHELAT, J.M. BENCH: SHELAT, J.M. SHAH, J.C. SIKRI, S.M.

CITATION:  1968 AIR  522            1968 SCR  (1) 821

ACT: Contract-frustration  impossibility  of performance  due  to intervening circumstances-Whether contract discharged on  an implied  term or on Court deciding  performance  impossible- Contract Act ss. 32 and 56-Scope of-Whether damages could be awarded   on  the  basis  of  public  policy   of   Pakistan Government.

HEADNOTE: The  appellant entered into a contract on July 7, 1958  with the respondent to purchase from him 2000 bales of jute to be imported from Pakistan.  The contract, inter alia.  provided that  shipment  of  the consignment would  be  made;  during August-November,  1958,  that the buyers  would  obtain  the necessary import licence, that if they failed to obtain  the licence  by November 1958, the period of shipment  would  be extended upto December 1958 and that if it was not  obtained by.   December  1958, the contract would be settled  at  the market  price prevailing on January 24, 1959.  The  contract also contained an arbitration clause hereunder all  disputes under  the  con-tract  including the  question  whether  the contract  had  been  terminated  or  completed  were  to  be referred to the arbitration of an Arbitration Tribunal.  The appellants applied to the Jute Commissioner on August 8 for  an  import licence but this was refused on  the  ground that  the  appellants had sufficient stock to carry  on  for some months more.  ’They applied again on Nov-ember 29, 1958 when  their  stock  was reduced but  the  Jute  Commissioner refused  to issue the licence and ,asked them to meet  their requirements from purchases of Indian jute.  The respondents thereafter claimed damages from the appellants on the ground that  the  appellants  had failed  to  furnish,  the  import licence  as  provided  in  the  contract.   The   appellants disclaimed  their  ’liability and  thereupon  the  ’disputes between  the  parties  were  referred  to  the   Arbitration Tribunal.   The  Tribunal passed an award holding  that  the appellants  had  failed  to carry out  their  part  ’of  the contract  and Were liable to pay damages to  the  respondent assessed at Rs. 34,000 and interest. The  appellants  thereafter applied the High  Court  to  set aside  the  award and contended (a) that they could  not  be

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held  to have committed breach of the contract as they  had done  all  that  could be expected of  them  to  obtain  the licence;  (b) that owing to the intervening causes, i.e.,  a change  in the policy of the Government, which  the  parties could  not foresee when they entered into the contract,  the contract became impossible of performance and ought to  have been  treated as void under s. 56 of the Contract  Act;  and (c)  that  the  arbitrators  had  no  jurisdiction  as   the arbitration clause in the said contract perished along  with the  contract.  A Single Bench of the  High  Court-dismissed the application and an appeal to a Division.  Bench was also dismissed. On appeal to this Court. 822      Held, dismissing the appeal: (i) The provision in the contract that whereas the delay  to provide  a  licence in November 1958 was to be  excused  but that  the  contract  was to be settled at  the  market  rate prevailing  on January 2, 1959 if the appellants  failed  to deliver the licence in December1958  clearly meant  that the appellants had taken upon themselvesthe    absolute burden  of  furnishing  the licence, latest by  the  end  of December  1958 and had stipulated that in default  theywould pay   damages  on the basis of price prevailing  on  January 2,1959. That being the position the defence of impossibility of performance or of the contract being void for that reason or  that the court should spell out an implied term  in  the contract   to  that  effect  was  not.  available   to   the appellants. [832 B-C]. Since under the Contract Act a promise may be express or  im plied,  in  cases  where the court gathers as  a  matter  of construction that the contract itself contains 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 Although in English law such cases might be treated  as  cases of frustration, in India  they  would  be dealt  with under s. 32.  In a majority of  cases,  however, the  doctrine  of frustration is not applied on  the  ground that  the parties had agreed to an implied term;  the  court grants  relief under the positive rule enacted in s.  56  by pronouncing  the contract to be frustrated and at an end  if it finds that the whole purpose or the basis of the contract was  frustrated by the intrusion or occurrence of  an  unex- pected  event  or  change of  circumstances  which  was  not contemplated by the parties at the date of the contract.  In such cases there would be no question of finding an  implied term  embodying,  a  provision  for  discharge  because  the parties  did  not think about the matter at  all  nor  could possibly halve an intention, regarding it.. Case law reviewed. [829 C-G]. Even if the appellants had established frustration, it would not  be as if, the contract was ab initio void.  In cases of frustration  it  is the performance of  the  contract  which comes to an end but the contract would still be in existence for  purposes  such as the resolution  of  disputes  arising under  or in ’connection with it: and the  question  whether the   contract   was  discharged  under  the   doctrine   of frustration  would  still  have  to  be  decided  under  the arbitration  clause  which  operates  in  respect  of   such purposes. [832 E],      Union  of  India v. Kishorilal, [1960]  1  S.C.R.  514, referred to. (ii) If the arbitrators awarded damages on the  basis of the

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market,  price  prevalent in Calcutta on  January  2.  1959, there Could be no objection to their adopting that Irate for adjudicating the quantum of damages on the ground that  such a  basis was contrary to the public policy laid down by  the Government of Pakistan. [832 H]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 44 of 1965. Appeal  by special leave from the judgment and order  dated’ August 22..1962 of the Calcutta High Court in Appeal No.  35 of 1960. 823 B.   Sen,  B.  P. Maheshwari and R. K.  Chaudhuri,  for  the appellant. Niren De, Addl.  Solicitor-General and D. N. Mukherjee,  for the respondent. The Judgment of the Court was delivered by  Shelat, J.-This appeal by special leave is directed against the  judgment  and  order  of the  High  Court  of  Calcutta rejecting  the  application by the  appellants  for  setting aside  the award in Award Case No. 70 of 1959 passed by  the Arbitration  Tribunal constituted by the Bengal Chamber  of Commerce. The  said Arbitration arose out of a contract dated July  7, 1958  whereunder the appellants agreed to purchase  and  the respondents  agreed  to sell two thousand bales  of  Saidpur N.C.  Cuttings.   The  contract was  in  the  standard  form prescribed by the India Jute Mills Association.  It provided that shipment or rail despatch from agencies was to be  made during   August  and/or  September  and/or  October   and/or November, 1958.  As the import of Pakistan jute required  an import licence the contract  provided:               "’Buyers  to  provide  the  sellers  with  the               letters  of  authority  and  sellers  to  open               letters %A credit.  If buyers fail to  provide               the sellers with import licence within  Novem-               ber 1958 then the period of shipment would  be               upto December, 1958 and the price mentioned in               the contract would be increased by 50 nP.   If               buyers  fail  to provide licence  by  December               1958  then the contract would, be ,settled  at               the market price prevailing on January 2, 1959               for   goods  of  January  and  February   1959               shipment."               One of the printed terms provided:-               "’Buyers shall not however be held responsible               for  delay in delivering letters of  authority               or opening letters of credit where such  delay               is directly or indirectly caused by  sod by  I               or  due  to  act  of  God,  war   mobilisation               demobilization  ’breaking off trade  relations               between   Governments,   requisition   by   or               interference from government or force majeure.               In any of the aforesaid circumstances where-by               buyers  are prevented from delivering  letters               of  authority  or opening  letters  of  credit               within   one  month  from  the  date  of   the               contract, there may be a further extension  of               time  (the  delivery  period  to  be  extended               accord, ingly) by mutual agreement between the               buyers and the :sellers otherwise the contract               shall  be deemed to be cancelled  and  sellers               shall  have  no claim whatsoever  against  the

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             buyers." 824 The contract also contained an arbitration clause whereunder all  disputes and differences and/or claims arising  out  of and/or  concerning  and/or  in  connection  with  and/or  in consequence  of  or relating to, the  contract  whether  the contract  has been terminated or purported to be  terminated or  completed were to be referred to the arbitration of  the Bengal  Chamber of Commerce under their rules for the  time being in force.  On August 8, 1958 the appellants applied to the Jute Commissioner, Calcutta, for an import licence.   On August  19,  1958  the  Administrative  Officer  refused  to certify  the licence on the ground that the appellants.  had sufficient  stock to carry on their factory for some  month& more.  On August 26, 1958 the Licensing Authority refused to issue  the  licence.  On November 29,  1958  the  appellants requested  the Jute Commissioner to certify the issue  of  a licence  stating  that  by that time their  stock  had  been considerably  reduced.   On  December  11,  1958  the   Jute Commissioner  refused  to issue the licence  and  asked  the appellants  to  meet  their requirements  from  purchase  of Indian jute.  The respondents thereafter by their attorney’s letter  claimed  damages from the appellants on  the  ground that  the appellants had failed to furnish the licence  pro- vided  by  the  contract.   The  appellants  disclaimed  any liability under the said contract and thereupon the disputes between the parties were referred to the said Tribunal.  The Tribunal passed an award holding that the appellants  failed to carry out their part of the contract and were liable  to, pay  damages assessed at Rs. 34,000/- and interest  thereon. Thereupon  the appellants filed the said application to  set aside the award. In  their  said  application,  the  appellants  raised   the following  contentions; (a) that they could not be  held  to have  committed breach of the contract as they had done  all that  could be expected of them to obtain the  licence;  (b) that owing to the intervening causes, in the present case  a change  in the policy of-the Government, which  the  parties could  not foresee when they entered into the contract,  the contract became impossible of performance and that therefore under  S. 56 of the Contract Act the contract ought to  have been  treated’ as void and (c) that the arbitrators  had  no jurisdiction as the arbitration clause in the said  contract perished  along with the contract.  The respondents, on  the other  hand,  denied that the performance  of  the  contract became  impossible,  and  asserted that  in  any  event  the appellants had taken upon themselves the absolute obligation to procure the licence and lastly that even if the  contract was discharged by frustration, the arbitration clause  would still  survive  as there would be disputes  and  differences between the parties as to whether (i) there was  frustration and  (ii) even if so, the consequences thereof they  pleaded that  the  contract could not be construed to mean  that  an unilateral  allegation by one of the parties hat  there  was frustration  would put an end to the contract.  It would  be for the Arbitrators to decide whether the said contract  was discharged by frustration. 825 The  learned  Single Judge who heard the  application  found that the contract could not be said to have been  discharged by frustration, that the arbitration clause was wide  enough to include the dispute whether there was frustration or not, and that the arbitrators were competent to adjudicate such a dispute.   He  also  found  in  answer  to  the  appellants’ allegation  that  the  arbitrators  were  guilty  of   legal

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misconduct that the appellants had failed to prove any  such legal  misconduct.  The Division Bench who heard the  appeal from  the  said order agreed with the learned  Single  Judge and,dismissed the appeal.  Hence this appeal. Section  56 of the Contract Act inter alia provides  that  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.  It also provides  that 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 a  promiser must make compensation to such promisee for  any loss   which  such  promisee  sustains  through   the   non- performance.   As  envisaged  by  s.  56,  impossibility  of performance would be inferred by the courts from the  nature of  the contract and the surrounding circumstances in  which it  was made that the parties must have made  their  bargain upon  the basis that a Particular thing or state  of  things would  continue to exist and because of the altered  circum- stances  the bargain should nolonger be held  binding.   The courts would also infer that the foundation of the  contract had  disappeared  either by the destruction of  the  subject matter or by reason of such long interruption or delay  that the  performance  would  really  in  effect  be  that  of  a different  contract  for which the parties had  not  agreed. Impossibility  of performance may also arise  where  without any  default of either party the contractual obligation  had become  incapable  of  being  performed  because  the   cir- cumstances in which performance was called for was radically different  from  that undertaken by the contract.   But  the common  law  rule  of contract is that a  man  is  bound  to perform  the obligation which he has undertaken  and  cannot claim  to be excused by the mere fact that  performance  has subsequently  become  impossible.  Courts  in  England  have however evolved from time to time various theories to soften the  harshness  of the aforesaid rule and for  that  purpose have  tried to formulate the true basis of the  doctrine  of discharge   of  contract  when  its  performance   is   made impossible  by intervening causes over which the parties  to it had no control.   One of such theories is what  has  been called the theory of     implied term as illustrated in F.A. Tomplin Steamship Co. Ltd. v. Anglo--Mexican       Petroleum Products Co. Ltd.(1) where Lord    Lorebum stated: (1) [1916] 2 A.C. 397. 826                     "A  court can and ought to  examine  the               contract and the circumstances in which it was               made,  not  of  course to vary,  but  only  to               explain  it,  in order to see whether  or  not               from  the nature of it the parties  must  have               made  their  bargain  on the  footing  that  a               particular  thing or a state of  things  would               continue to exist.  And if they must have done               so,  then  a  term to  that  effect  would  be               implied;  though  it be not expressed  in  the               contract".               He further observed:               "It  is in my opinion the true principle,  for               no  court has an absolving power, but  it  can               infer from the nature of the contract and  the               surrounding  circumstances  that  a  condition               which  was not expressed was a  foundation  on               which  the  parties  contracted...............               Were  the  altered conditions such  that,  had

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             they  thought of them, they would  have  taken               their chance of them, or such that as sensible               men they would have said, "if that happens, of               course, it is all over between us."                The same theory in a slightly different  form               was  expressed  by  Lord  Watson  in  Dahl  v.               Nelson,  Donkin  &  Co.(1)  in  the  following               words:               "The meaning of the contract must be taken  to               be, not what the parties did intend (for  they               had  neither thought nor  intention  regarding               it),  but that which the parties, as fair  and               sensible  men,  would presumably  have  agreed               upon  if, having such possibility  view,  they               had  made.  express  provision  as  to   their               several rights and liabilities in the event of               its occurrence." In the first case the term is a genuine term, implied though not  expressed;  in the second( it is a  fiction,  something added  to the contract by the law.(2) It appears  that,  the theory   of  implied  term  was  not  found  to   be   quite satisfactory  as  it contained  elements  of  contradiction. For, if the parties foresaw the circumstances which  existed at  the date of performance they would provide for  them  in the  contract; if they did not, that meant that  they  deli- berately  took  the risk and therefore ’no  question  of  an implied term could really arise.  In Russkoe V. John Strik & Sons   Ltd.(3)   Lord  Atkin  propounded   the   theory   of disappearance of the foundation of contract stating that  he could see no reason why if certain circumstances, which  the court would find, must have been contemplated by the parties as being of the essence of the contract and the  continuance of  which  must  have been deemed to  be  essential  to  the performance of the contract, the court cannot say (1)  [1881] 6 A.C. 38. (2)  Anson, Principles of the English Law of Contract,  22nd ed. 464. (3)  [1922] 10 LI.L.R. 214 (quoted at p. 466 in Anson’s  Law of Contract, 22nd ed.) 827 that  when these circumstances cease to exist, the  contract ceases  to  operate.  The third theory is,  that  the  court would  exercise  power  to qualify  the  absolutely  binding nature  of  the  contract in order to do what  is  just  and reasonable  in the new situation.  Denning L. J. in  British Movietones  Ltd.  v. London and  District  ,Cinemas  Ltd.(1) expounded this theory as follows:-               "Even if the contract is absolute in its term,               nevertheless, if it is not absolute in intent,               it  will not be held absolute in effect.   The               day  is done 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  lawyers with the draftsmanship  of  a               Chalmers." This   theory  would  mean  that  the  Court  has   inherent jurisdiction to go behind the express words of ’the contract and  attribute  to the Court the absolving  power,  a  power consistently  held not to be inherent in it.  The  House  of Lords  in  the appeal from that decision [reported  in  1952 A.C.  166] discarded the theory.  In more recent  times  the theory of a change in the obligation has come to be more and

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more generally accepted.  Lord Radcliffe, the author of this theory, in Davis Contractors v. Fareham U.D.C.(2) formulated it in the following words:-               "Frustration    ocours   whenever   the    law               reoognises  that  without  default  of  either               party  a  contractual  obligation  has  become               incapable  of  being  performed  because   the               circumstances  in which performance is  called               for   would  Tender  it  a   thing   radically               different  from that which was  undertaken  by               the contract." It  is not hardship or inconvenience or material loss  which brings about the principle of frustration into play.   There must  be a, ,change in the significance of  obligation  that the  thing  undertaken would, if performed, be  a  different thing from that which was ,contracted for. These  theories  have been evolved in the main  to  adopt  a realistic approach to the problem of performance of contract when it is found that owing to causes unforeseen and beyond the  control of the parties intervening between the date  of the  contract  and the date of its performance it  would  be both unreasonable and unjust to exact its performance in the changed  circumstances.   Though  none  of  them  was  fully accepted and the court construed the contracts coming before them  applying one or the other of them as appearing  to  be more  rational  than the other, the conclusions  arrived  at were the same.  The necessity of evolving one [1951] 1 K.B. 190. [1956] A.C. 166. 828 or  the  other theory was due to the common  law  rule  that court& have no power to absolve a party to the contract from his  obligation.   On  the one hand, they  were  anxious  to preserve intact the sanctity of contract while on the  other the courts could not shut their eyes to the harshness of the situation  in cases where performance became  impossible  by causes  which  could not have been foreseen and  which  were beyond the control of parties. Such  a,  difficulty has, however, not to be  faced  by  the courts  in  this country.  In Ganga Saran v.  Ram  Charan(1) this  Court  emphasized that so far as the  courts  in  this country are concerned they must look primarily to the law as embodied  in  secs.  32  and 56 of  the  Contract  Act.   In Satyabrata  Ghose v. Mugneeram(2) also, Mukherjee J. (as  he then  was) stated that sec. 56 laid down a rule of  positive law and did not leave the matter to be determined  according to  the intention of the parties.  Since under the  Contract Act  a promise may be expressed or implied, in  cases  where the court gathers as a matter of construction that the  con- tract   itself  contains  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  sec. 56.  Although in English law such cases would be treated  as cases  of  frustration, in India they would  be  dealt  with under  sec.  32.   In  a 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 performance of the  contract. The  Court  can  grant relief on the  ground  of  subsequent impossibility  when it finds that the whole purpose  or  the basis  of  the contract was frustrated by the  intrusion  or occurrence of an unexpected event or change of circumstances which,  was not contemplated by the parties at the  date  of

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the contract.  There would in such a case be no question  of finding  out  an  implied term ;%greed  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 circumstances  which is so fundamental as to be regarded  by law  as  striking  at the root of the contract  as  a  whole occur$  it is the court which can pronounce the contract  to be frustrated and at an end.  This is really a positive rule enacted in sec. 56 which governs such situations. The  question then is, was there a change in the  policy  of the Government of India of a total prohibition of import  of Pakistan  jute as contended by the appellants which was  not foreseen by the parties and which intervened at the time of, performance   and  which  made  the  performance  of   their stipulation to obtain a, (1) [1952] S.C.R. 36. (2) [1954] S.C.R. 310. 829 licence impossible?  It is clear from the circulars produced during the trial that as early as March 1958 the  Government of  India had issued warnings that import of  Pakistan  jute would be permitted to the absolute minimum and that the jute mills should satisfy their needs by, purchasing Indian jute. It  appears that at the time when the parties  entered  into the  contract the policy was to grant licences in the  ratio of  5 : 1, that is, if an importer had bought 500 mounds  of Indian  jute  he would be allowed a licence  to  import  100 mounds  of Pakistan jute.  This policy is indicated  by  the Circular dated July 17, 1958 issued by the Indian Jute Mills Association  to its members.  Such licences would be  issued to mills who had stock of less than two months’ consumption. As already stated, the appellants applied on August 8,  1958 for an import licence for 14,900 maunds and the Jute Commis- sioner  declined to certify that application on  the  ground that  they  held  stock sufficient to  last  them  for  some months.   In  November 1958, they applied again,  this  time stating  that their stock had been reduced and  in  December 1958  they were told to buy Indian jute.  The said  Circular appears  to show that the Government had not placed a  total embargo  on import of Pakistan jute.  At any rate,  such  an embargo  was not proved by the appellants.  It  appears,  on the  contrary, from the documents on record that the  policy of  the Government was that the licensing authorities  would scrutinize the case of each applicant on its own merit. What is however important in cases such as the one before us is to ascertain what the parties themselves contemplated  at the  time  of entering the contract.  That’  the  appellants were  aware that licences were not issued freely is  evident by  the provisions of the contract themselves which  provide that if the appellants failed to furnish to the  respondents the  import licence in November 1958 the period of  shipment was to be extended upto December 1958 and the price in  that event  would  be enhanced by 50 nP.   The  contract  further provided that if the appellants were not able to furnish the licence  by  December  1958 they would pay  damages  at  the market  rate  prevailing  on January 2,  1959  for  January- February  shipment  goods.  These clauses  clearly  indicate that  the  appellants were conscious of  the  difficulty  of getting  the licence in time and had therefore  provided  In the  contract for excusing delay from November  to  December 1958  and  for the appellants’ liability to pay  damages  if they  failed  to  procure it even  in  December  1958.   The contract,  no  doubt, contained the printed  term  that  the buyers would not be responsible for delay in delivering  the

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licence but such delay as therein provided was to be excused only  if it occurred by such reasons as an act of God,  war, mobilization etc., and other force majeure.  It is  nobody’s case  that  the performance became impossible by  reason  of such  force majeure.  As already stated when the  appellants applied for the licence, the authorities refused to  certify their  application because they held at that time stock  for more than 2 months.  It is therefore 830 manifest  that  their application was refused because  of  a personal  disqualification  and not by reason of  any  force majeure.   Since this was the position there is no  question of  the  performance becoming impossible by  reason  of  any change in the Governments policy which could not be foreseen by  the parties.  No question also would arise of  importing an implied term into the contract. Assuming,  however,  that there was a change of  policy  and that the Government in the intervening period had decided to place  an  embargo on import of Pakistan jute  the  question would  still  be whether the appellants were  relieved  from liability  for  their  failure to deliver  the  licence.   A contract is not frustrated merely because the  circumstances in  which  it  was made are altered.   The  Courts  have  no general power to absolve a party from the performance of his part  of  the contract merely because  its  performance  has become   onerous  on  account  of  an  unforeseen  turn   of events.(1)  The  question  would  depend  upon  whether  the contract  which  the appellants entered into was  that  they would  make  their  best endeavors to  get  the  licence  or whether  the contract was that they would obtain it or  else be liable for breach of that stipulation.  In a case falling under  the  former  category, Lord Reading  C.I.  in  Anglo- Russian  Merchants-Traders  v. John Batt &  Co.(2)  observed that  there  was  no  reason why the  law  should  imply  an absolute  obligation to do that which the law  forbids.   It was so said because the Court construed the contract to mean only that the sellers there were to make their best  efforts to  obtain the requisite permits.  As a contrast to ’such  a case  there are the cases of Pattahmull Rajeshwar v.  K.  C. Sethia(3)  and Peter Cassidy Seed Co. v.  Osuustickaanppa(4) where  ’the  courts  have observed  that  there  is  nothing improper  or  illegal for a party to take  upon  himself  an absolute  obligation to obtain a permit or a licence and  in such a case if he took the risk he must be held bound to his stipulation.  As Lord Sumner in Bank Lime Ltd. v. Capel  (A) Co. Ltd.(5) said:-               "Where the contract makes provision (that  is,               full and complete provision, so intended)  for               a given contingency it is not for the court to               import into the contract some other  different               provisions for the same contingency called  by               different name. In  such  a case the doctrine of  discharge  by  frustration cannot  be available, nor that of an implied term  that  the existing state of (1)  M/s  Alopi  Parshad & Sons v. Union of India  [1960]  2 (1) S.C.R. 2,0.6 793 at p. 808. (2) [1917] 2 K.B. 679. (4) [1957]     W.L.R. 273. (3)  [1951] 2 All.  E.R..352. (5) [1919] A.C. 435 at p, 455. 831 affairs  would  continue at the date  of  performance.   The reason  is  that where there is an express  term  the  court cannot find on construction of the contract an implied  term

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inconsistent with such express term. In our view, the provision in the contract that whereas  the delay  to  provide  a licence in November  1958  was  to  be excused  but  that  the contract was to be  settled  at  the market rate prevailing on January 2, 1959 if the  appellants failed to deliver the licence in December 1958 clearly meant that the appellants had taken upon themselves absolutely the burden  of  furnishing  the licence latest  by  the  end  of December 1958 and had stipulated that in default they  would pay  damages on the basis of price prevailing on January  2, 1959.  That being the position the defence of  impossibility of performance or of the contract being void for that reason or  that the court should spell out an implied term  in  the contract would not be available to them. In  the view that we take that the said contract  cannot  be said  to be or to have been void and that in any  event  the stipulation as to obtaining the import licence was absolute, the question that the arbitration clause perished along with the  contract  and  consequently  the  arbitrators  had   no jurisdiction cannot arise.  But assuming that the appellants had established frustration even then it would not be as  if the  contract  was  ab  initio void  and  therefore  not  in existence.  In cases of frustration it is the performance of the  contract which comes to an end but the  contract  would still be in existence for purposes such as the resolution of disputes  arising  under  or in  connection  with  it.   The question  as  to whether the contract became  impossible  of performance  and  was  discharged  under  the  doctrine   of frustration  would  still  have  to  be  decided  under  the arbitration  clause  which  operates  in  respect  of   such purposes. (Union of India v. Kishorilal(1). Mr.  B.  Sen  for  the  appellants  also  raised  two  other questions,  as  to the legal misconduct on the part  of  the arbitrators  and as regards interest on damages  awarded  by them.   We  need not however say anything  about  these  two questions as ultimately they were not pressed by him. The  last contention raised by him was that the  arbitrators awarded  damages on the basis of the market rate at  Rs.  51 per maund instead of Rs. 65 which was the export price fixed by the Government of Pakistan.  The argument was that such a basis  was  contrary to the public policy laid down  by  the Government of Pakistan and it would not be expedient on  our part  to  give  our imprimatur to  an  infringement  by  the arbitrators  of  such a policy.  There is, in our  view.  no merit  in the argument.  The Government of  Pakistan  cannot lay down any public or economic policy for this country.  If the arbitrators found the prevalent rate [1960] 1 S.C.R. 514. 832 A on January 2, 1959 in Calcutta to be Rs. 51 a maund  there can  be  no  objection  to  their  adopting  that  rate  for adjudicating the quantum of damages. The appeal fails and is dismissed with costs. R.K.P.S.                         Appeal dismissed. 833