9911796707
TMI Blog1953 (11) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ribed 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 ₹ 101 as earnest money. In the receipt granted by the vendor for this earnest money, the terms of the agree- ment are thus set out:-- Received with thanks from Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The letter ended by saying that in the event of the addressee not accepting either of the two alternatives, the agreement would be deemed to be cancelled and the earnest money would stand forfeited. This letter was handed over by Bejoy Krishna to his nominee, the plaintiff, and there was some correspondence after that, between the plaintiff on the one hand and the company on the other through their respective lawyers into the details of which it is not necessary to enter. It is enough to state that the plaintiff refused to accept either of the two alternatives offered by the company and stated categorically that the latter was bound by the terms of the agreement from which it could not, in law, resile. On 18t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Attorney-General raises a somewhat debatable point regarding the true scope and effect of section 56 of the Indian Contract Act and to what extent, if any, it incorporates the English rule of frustration of contracts. 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 perform ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Steamship Co. Ltd. v. Anglo-Mexican Petroleum Products Co. Ltd.[1916] 2 A.C. 397, 403.), 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.( [1942] A.C. 154 at 168.), 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(I.L.R. 1949 Nag. 718.) and it was held that the doctrine of frustration comes into play when a contract becomes impossible of performance, after it is made, on account of 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 agreement with this view which is fortified by a recent pronouncement of this court in Ganga Sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 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 Engla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alify 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, the learned Judge went on to say, when we can excuse an unforeseen injustice by saying to the sufferer 'it is your own folly, you ought not to have passed that form of words. You ought to have put in a clause to protect yourself'. We no longer credit a party with the foresight of a Prophet or his lawyer with the draftsmanship of a Chalmers. We realise that they have their limitations and make allowances accordingly. It is better thus. The old maxim reminds us that he who clings to the letter clings to the dry and barren shell and misses the truth and substance of the matter. We have of late paid heed to this warning, and we must pay like heed now. This decision of the Court of Appeal was reversed by the House of Lords and Viscount Simon in course of his judgment expressed disapproval of the way in which the law was stated by Denning L.J. It was held that there was no change in the law as a result of which the courts could exercise a wider power in this regard than they used to do previously. The principle remains the same , th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... majority of cases however the doctrine of frustration is applied not on the ground that the parties themselves agreed to an implied term which operated to release them from the performance of the contract. The relief is given by the court on the ground of subsequent impossibility when it finds that the whole purpose or basis of a contract was frustrated by the intrusion or occurrence of an unexpected event or change of circumstances which was beyond what was contemplated by the parties at the time when they entered into the agreement. Here there is no question of finding out an implied term agreed to by the parties embodying a provision for discharge, because the parties did not think about the matter at all nor could possibly have any intention regarding it. When such an event or change of (1) Vide section 9. (a) 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 ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has already accrued in favour of a contracting party. According to the Indian law, which is embodied in section 54 of the Transfer of Property Act, a contract for sale of land does not of itself create any interest in the property which is the subject-matter of the contract. The obligations of the parties to a contract for sale of land are, therefore, the same as in other ordinary contracts and consequently 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 do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at that time because of the scarcity of materials and the various restrictions which the Government had imposed in respect of them. That there were certain risks and difficulties involved in carrying on operations like these, could not but be in the contemplation of the parties at the time when they entered into the contract, and that is probably the reason why no definite time limit was mentioned in the contract within which the roads and drains are to be completed. This was left entirely to the convenience of the company and as at matter of fact the purchaser did not feel concerned about it. It is against this background that we are to consider to what extent the passing of the requisition orders affected the performance of the contract in the present case. The company, it must be admitted, bad not commenced the development work when the requisition order was passed in November, 1941. There was no question, therefore, of any work or service being interrupted for an indefinite period of time. Undoubtedly the commencement of the work was delayed but was the delay going to be so great and of such a character that it would totally upset the basis of the bargain and commercial obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 to be completed, it cannot be said that the requisition order vitally affected the contract or made its performance impossible. Mr. Gupta, who appeared for the respondent company. put forward an alternative argument that even if the performance of the contract was not made impossible. it certainly became illegal as a result of the requisition order and consequently the contract became void under section 56 of the Indian Contract Act as soon as the requisition order was made. In support of his contention the learned counsel placed reliance upon certain provisions of the Defence of India Rules and also upon illustration (d) to section 56 of the Contract Act. All that the Defence Regulations show is that the violation of a requisition order could be punished as a criminal offence. But no matter in whichever way the requisition order could be enforced, in substance it did n ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
