Aapka Consultant Judgment Series- In this series, we are providing case analysis of Landmark Judgments of Hon’ble Supreme Court of India.
Satyabrata Ghose v. Mugneeram Bangur and Company & Anr.
AIR 1954 SC 44
JUDGES: B.K. Mukherjea, Vivian Bose and N.H. Bhagwati
Date of Decision: 16-11-1953
FACTS:-
The defendant company started a scheme for the development of a tract of land into a housing colony. The plaintiff was granted a plot on payment of earnest money. 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 was to be called upon to complete the conveyance by payment of the balance of the purchase money. But before anything could be done, a considerable portion of the land was requisitioned by the State during the Second World War for the military purposes. The company attempted to rescind the contract on the ground of supervening impossibility. Hence the present matter.
ISSUE:-
Whether the contract was discharged by reason of certain supervening circumstances which affected the performance of a material part of it as envisaged under Section 56 of the Indian Contract Act, 1872?
JUDGMENT:-
The Hon’ble Supreme Court has observed that the central idea upon which the doctrine of frustration rests is that of impossibility of the performance of the contract, in fact, the expressions impossibility and frustration are often used as interchangeable expressions. The changed circumstances make the performance of the contract impossible and the parties were discharged from further performance thereof. The doctrine of frustration is unequivocally a part of the discharge of contract by reason of supervening impossibility or illegality of the act and hence it comes under the purview of Section 56 of the Indian Contract Act, 1872. The provisions of the Indian Contract Act are exhaustive upon every matter and it is impermissible to import the English provisions which dehors the statutory provisions of the Indian law. The Apex Court noted that the decisions of the English courts possess only a persuasive value and while deciding cases in India, we have to go through the doctrine of supervening impossibility or illegality as laid down in Section 56 of the said act by taking the word “impossible” in its practical and not literal sense. Section 56 lays down a rule of positive law and does not leave the matter to be decided as per the intention of the parties. In cases, where the court gathers that the contract itself contains expressly or impliedly a term, according to which it would stand discharged on the happening of any event then such dissolution of contracts are outside the purview of Section 56 and they were being dealt separately under Section 32 of the said act. The relief is given by the courts on the ground of supervening impossibility or illegality when it finds that the whole purpose of the contract was frustrated by the intrusion or occurrence of an unexpected event which was beyond what was contemplated by the parties at the time of entering into the contract. When such an event occurs which is so fundamental as to be regarded by law as striking at the root of the contract as a whole, then it is the court which pronounce the contract to be frustrated at the end.
The Court further observed that- “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 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 between 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”.
HELD:-
The Court held that the requisition orders were of temporary nature and there was a total absence of any definite period of time within which the work was to be completed under the contract. The contract has therefore not been discharged by supervening impossibility. The doctrine of frustration is an aspect and 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, 1872.
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