http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 13  

PETITIONER: SATYABRATA GHOSE

       Vs.

RESPONDENT: MUGNEERAM BANGUR & CO., AND ANOTHER

DATE OF JUDGMENT: 16/11/1953

BENCH: MUKHERJEA, B.K. BENCH: 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. 56- Agreement to  sell  land-Doctrine of frustration- Applicability-Doctrine whether  applicable  in India- Scope of s. 56 Impossible meaning  of-  Agreement 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 13  

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  circum- stances 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 land- started 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  cons- truction  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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 13  

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  Cor- poration 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.

JUDGMENT: 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  agree- ments  with different purchasers for sale of these plots  of land  and accept from them only a small portion of the  con- sideration money by way of earnest at the time of the agree- ment.   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  con- veyance  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  agree-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 13  

ment 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 13  

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  faacts  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  AttorneyGeneral 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 13  

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 obseryed 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 impossi- ble of performance, after it is made, on account of  circum- stances 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 13  

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 plaintifl  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  incapaciated  her  from performing the agreement the court was not really engrafting a  new term upon an express contract.  It was not  that  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 13  

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 con- dition  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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 13  

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  accor- dingly.   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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 13  

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  em- bodying  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  re- garded  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  cir- cumstances  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  con- template  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 no 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 13  

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 abso- lutely 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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 13  

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 comercial 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  bet- ween  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  fulfil   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

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 13  

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  con- sequently  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. 330