SATYABRATA GROSE v. MUGNEERAM BANGUR & CO., AND ANOTHER.
Citation: [1954] 1 S.C.R. 310; 1953 INSC 71
Court: Supreme Court of India
Bench: BIJAN KUMAR MUKHERJEA , VIVIAN BOSE, NATWARLAL HARILAL BHAGWATI
Judgment date:
Case summary
1953 INSC 71. Supreme Court of India judgment dated 1953-11-16. SATYABRATA GROSE v. MUGNEERAM BANGUR & CO., AND ANOTHER. Read the judgment and case details...
Judgment text
S. C. R. SUPREME COURT REPORTS 313 310 SUPRkME COURT REPORTS [1954] appeal is allowed and we award to the Commissioner of Income-tax the costs of this appeal and those of th d' · th H' h C t e procee mgs m e 1g our _ Appeal allowed. Agent for the appellant: G. H. Bajadhyaksha. Agent for the respondent: Bajinder Narain. SATYABRATA GROSE v. MUGNEERAM BANGUR & CO. , AND ANOTHER. MuKHERJEA, V1vrAN BosE and BHAGWATI JJ. ] Indian Contract Act (IX of 1872), s. 56-Aareement to sell lct·nd -Doctrine of frnstratio,. -Applicetbility-Doctrine whether a. ppvic-able ir1i India-'-Scope of s. 56-"Inipossible," nwaning of-Agree. inent for sale of land-B11yer's rights-English and Indian law. 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. 'rhe 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 circum· stances. · 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 n1ay be express or implied. In_ cases, therefore, where the court gathers as a matter of construction that the contract itself contained impliedly or expressly a term, according to which it would stand discharged on the happening of certain circumstances, the dissolution of the contract would take place under the terms of the contract itself and such cases would be outside the purview of s. 56 altogether.
Although in English law these cases are treated as cases of frustration, in India they would be dealt with under s. 32 of the Indian Contract Act which deals with contingent contracts or similar other provisions contained in the Act. In the large majority of cases however the doctrine of frustration is applied nol on the sround that the parties themselves'ogreed to ap s. c. :R. SUPREME COUR'l' REPORi'S 311 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 Satyabrata 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 Bangur and 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, know ledge and intention of the parties are evidence, but evidence only on which the court has to form its own conclusion whether the changed circumstances destroyed altogether the basis of the adventure and its underlying object. This may be called a rule of construction by English Judges but it is certainly not a principle of giving effect to the intention of the parties which underlies all rules of construction.
This is really a rule of positive law and as such comes within the purview of s. 56 of the Indian Contract Act. . The reason underlying the rule of English law that the doctrine of frustration does not apply to contracts for the sale of land, is that under the English law, as 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 owner-ship 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 the roads on payment of the balance of the price. As a considerable portion of the area comprised 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 requested him to treat the agreement as cancelled and receive back his earnest: Helcl, that 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 scheme fixing no time limit in the agreement for the construction of the roads etc. , and the fact that t.
he "1 order of requisition was in its very nature of a temporary cha1·acter, the relJuisition did not affect the fundamental basis of 312 StJPREME COURT REPORTS [l954j the contract; nor did the performance of the contract become illegal by reason of the requisition, and the contract had not therefore Satyabrata Ghose become impossible within the meaning of s. 56 of the Indian Contract Act. Joseph Oonstant,ine Steamship Co. v. Irnperial Srnelting Oor- Oo. , poration Ltd. ( [1942] A. O. 154), Tamplin Steamship Co. Ltd. v. Anglo-American Prod1lcts Co. Ltd. (ll916] A. 0. 397), Kewri Chand v. Governor-General in Co1wcil (I. L. R. 1949 Nag. 718), Ganga Sara1' v. Bani 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. J arnes B. Frazer & Go. Ltd. ([1944] A. 0. 265) referred to. CIVIL APPELLATE JURISDICTION: Civil Appeal No.
80 of 1952' Appeal from the Judgment and Decree dated the 6th September, 1950, of the High Court of Judicature at Calcutta (Das Gupta and Lahiri JJ. ) in Appellate Decree No. 318 of 1949 from the Judgment and Decree dated the 25th February, 1949, of the Court of the District Judge of Zillah 24 Parganas in Title Appeal No. 8 of 1948 arising out of the Judgment and Decree dated the 10th October, 1947, of the Court of the Additional Subordinate Judge, 7th Court, AJipore. · ]Jf. C. Setalvad, Attorney-General for India (Aurobinda 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 MuKRERJEA 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 litiga-tion 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 the 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 ;. • ~f land situated in the vicinity of the Dhakuria Lal-es within Greater Calcutta. The company started a 1963 scheme for development of this land for residential -purposes which was described as Lake Colony Scheme Satyabrata Ghose No. 1 and in furtherance of the scheme the entire area Mug;; was divided into a large number of plots for the sale Bangur a~;~o. , of which offers were invited from intending purchasers. and Another. The company's plan of work seemed to be, to enter into agreements with different purchasers for sale of MukherjeaJ.
these plots of land and accept from them only a small portion of the consideration money by way of earnest at the time of the agreement. The company undertook to construct the roads and drains necessary for making the lands suitable for building and residential purposes and as soon as they were completed, the purchaser would be called upon to complete the conveyance by payment of the balance of the consideration money. Bejoy Krishna Roy, who was defendant No. 2 in the suit and figures as a pro f orma respondent in this appeal, was one of such purchasers who entered into a contract with the company for purchase of a plot of land covered by the scheme. His contract is dated the 5th of August, 1940, and he paid Rs. 101 as earnest money. In the receipt granted by the vendor for this earnest money, the terms of the agreement are thus set out:- "Received with thanks from Babu Bejoy Krishna Roy of 28 Tollygunge · Circular Road, Tollygunge, the sum of Rs.
101 (Rupees one hundred and one only) as earnest money having agreed to sell to him or his nominee 5 K. more or less in plot No. 76 on 20 and 30 ft. Road in Premises'No. Lake Colony Scheme No. 1, Southern Block at the average rate of Rs. 1,000 (Rupees one thousand only) per Cotta. The conveyance must be completed within one month from the date of completion of roads on payment of the balance of the consideration money, time being deemed as the Essence of the Contract. In case of default this agreement will be considered as cancelled with forfeiture of earnest money. l\folrnrari Mourashi Terms of payment :·--One-third to be paid at the Satyabrata Ghose time of registration and the balance within six years v. bearing Rs. 6 per cent. interest per annum". Mngne ) Ibid. • ' requires notice in this connection is that the war was already on, when the parties entered into the contract. Requisition orders for taking temporary possession of Satyabr~.
a 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 . h h G h d. d. restrictions wh ic t e overnment a impose m 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 wa8 left entirely to the convenience of the company and as a 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, had 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 inter-rupted for an indefinite period of time. Undoubtedly the commencement of the work was delayed but was the delay going to be so great and of such a character that it would totally upset the basis of the bargain and commercial object which the parties had in view ? The requisition orders, it must be remembered, were, by their very nature, of a temporary character and the requisitioning authority could, in law, occupy the posi-. tion 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 terminat-ed. If there was a definite time limit agreed to by the parties within which the construction work was t. o be finished, it could . be said with.
perfect propriety that delay for an indefinite period would make th. e : : ' ' '" . ' \- '' ~ .. 328 SUPREME COUR'f REPOR'fS [1954) 1953 performanue of the contract impossible within the ,. Gh specified time and this would seriouslv affect the object Datyabrata oec d f h • . v. an purpose o t e venture. But when there 1s no . \fogncerain time limit whatsoever in the contract, nor even Bang«r and Go. , an understanding between the parties on that and Anoth ny 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. 0. Banerjee. Agent for the respondent No. 1: R. R. Biswas.
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