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PETITIONER:

GANGA SARAN

Vs.

RESPONDENT:

RAM CHARAN RAM GOPAL

DATE OF JUDGMENT:

01/11/1951

BENCH:

FAZAL ALI, SAIYID

BENCH:

FAZAL ALI, SAIYID

KANIA, HIRALAL J. (CJ)

MAHAJAN, MEHR CHAND

CITATION:

1952 AIR 9 1952 SCR 36

CITATOR INFO :

R 1954 SC 44 (10)

R 1959 SC 135 (20)

R 1968 SC 522 (7)

ACT:

Indian Contract Act (1 of 1872), s. 56--Contract for

delivery of goods manufactured by particular Mill as soon as

they are supplied --Construction of contract--Non-receipt of

goods from Mill within time--Whether excuses

performance--Doctrine of frustration.

HEADNOTE:

The respondents agreed to deliver 61 bales of cloth to

the appellant by the 17th November, 1941. The agreement

provided "we shall continue sending the goods as soon as

they are prepared to you up to Magsar Badi 15, Sambat

1998 ...... We shall go on supplying goods to you of the

Victoria Mills as soon as they are supplied to us by the

said Mills ......We shall go on delivering the goods to

you ...... out of the goods noted above which will be

prepared by the Mill." In a suit for damages for non-deliv-

ery of the goods the respondents pleaded that as they had

not received the goods from the Victoria Mills before the

17th of November, 1941, performance of the contract had

become impossible by reason of an event which they could not

prevent and the contract had therefore become void under

Sec. 56, Indian Contract Act:

Held, (i) that, on a proper construction of the con-

tract, delivery of the goods was not made contingent on

their being supplied to the respondents by the Victoria

Mills. The words "prepared by the Mills" were only a de-

scription of the goods to be supplied, and the expressions

"as soon as they are prepared" and "as soon as they are

supplied to us by the said Mill "simply indicated the proc-

ess of delivery. This was not therefore a case in which the

doctrine of frustration of contract could be invoked. (ii)

Even apart from the construction of the agreement, as the

respondents had not shown that they had placed an order for

the goods with the Victoria Mills and yet the Mills had

failed to supply, there was a clear breach of contract to

deliver and the appellant was entitled to recover damages.

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Harnandrai v. Pragdas (L. R. 15 I.A. 9) and British

Movietone News v. London Cinemas [1951] 2 A.E.R. 617) relied

on.

JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 56 of

1951.

Appeal from a judgment and decree of the High Court of

Allahabad (Malik and Wali Ullah JJ.) dated 14th February

1946, in Appeal No. 240 of 1943 which

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arose out of a decree dated 19th January, 1943, of the Court

of the Civil and Sessions.Judge, Kanpur, in Original Suit

No. 34 of 1942.

Achhru Ram (P. S. Safeer, with him) for the appellant.

S.P. Sinha (K. N. Aggarwala, with him) for the respond-

ent.

1951. November 1. The Judgment of the Court was deliv-

ered by

FAZL ALI J.--This is an appeal by special leave against

a decision of the High Court at Allahabad, reversing the

decision of the trial court, in a suit instituted by the

appellant to recover damages from the respondent-firm for

breach of a contract.

It appears that between the 10th and 18th April, 1941,

the parties entered into 5 contracts, by which the respond-

ent-firm undertook to supply to the appellant 184 bales of

cloth of certain specifications manufactured by the New

Victoria Mills, Kanpur, and the Raza Textile Mills, Ramput.

Only 99 bales were taken up and there was a dispute about

the remaining 85 bales. On the 17th October, 1941, a settle-

ment was arrived at between the parties, and it was agreed

that the respondent-firm should deliver to the appellant 61

bales, and that the goods should be delivered by the 17th

November, 1941. The actual text of the agreement (exhibit

4) was as follows:---

" 61 bales as noted below are to be given to you by us.

We shall continue sending goods as soon as they are

prepared to you upto Magsar Badi 15 Sambat 1998. We shall go

on supplying goods to you of the Victoria Mills as soon as

they are supplied to us by the said Mill.

(Specifications of cloth given here). We shall go on deliv-

ering the goods to you upto Magsar Badi 15 out of the goods

noted above which will be prepared by the Mill."

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As the 61 bales were not supplied, the appellant sent a

telegraphic notice to the respondent-firm on 20th November,

1941, to the following effect

"Give delivery of our 61 bales through Bank.

Otherwise suing within a days."

The appellant did not receive any reply to this notice, and

so he instituted the suit which has given rise to this

appeal, on the 23rd April, 1942, claiming a sum of Rs. 9,808

and odd, which, according to him, represented the loss

sustained by him on account of the rise in the market rate

of the contracted goods, and he also claimed costs and

interest. The respondent-firm resisted the suit on a number

of grounds, but their main plea, with which alone we are

concerned in this appeal, was that the performance of the

contract had been frustrated by circumstances beyond their

control and hence the appellant's claim must fail. This plea

was negatived by the trial court, but it was upheld by the

High Court, and hence this appeal.

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The only point which arises in this appeal is whether

the circumstances of the case afford any basis for the

application of the doctrine of frustration of. contract, a

doctrine which is embodied, so far as this country is con-

cerned, in sections 32 and 56 of the Indian Contract Act,

1872.

The main grounds of attack against the judgment of the

High Court are :--

(1) that it has misread the agreement (exhibit 4) dated

the 17th October, 1941, on which both parties rely; and

(2) that it has paid more attention to an abstract legal

doctrine than to the facts of the case.

In our opinion, both these contentions are correct.

The construction placed by the High Court upon the agree-

ment and its conclusion based thereon, are set out in the

following passage in the leading judgment of Wali Ullah J.

:--

"It seems to me that the parties clearly intended that

the defendant was to supply the goods to the

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plaintiff' if and when--and only in that event--the particu-

lar goods were prepared by the Victoria Mills and were

supplied to the defendant between the 17th of October, 1941,

and 17th of November, 1941. As the fundamental assumption on

which the contract was made ceased to exist during the time

of performance and consequently it became impossible for the

defendant to fulfil the contract, it must be held that the

contract was discharged by supervening impossibility."

The construction suggested by the High Court is precise-

ly the construction which was attempted to be put on a

similar contract by the defendant-respondents in the case of

Harnandrai v. Pragdas (1) but the Privy Council negatived

it.' In that case, the provision as to delivery of goods ran

as follows :--

"The said goods are to be taken delivery of as and when

the same may be received from the Mills."

The Mills failed to perform their contract with the

defendants as they were engaged in fulfilling certain con-

tracts with the Government, and consequently the defendants

could not supply the goods to the plaintiffs. The questions

raised before the Privy Council were as to the meaning of

the contract and whether its performance had been frustrat-

ed, and the Privy Council disposed of them in these words

:--

"It was also suggested that the words 'as and when the

same may be received from the Mills' should be construed, as

if they were ' if and when the same may be received from the

Mills.' This is to convert words, which fix the quantities

and times for deliveries by instalments into a condition

precedent, to the obligation to deliver at all, and virtual-

ly makes a new contract. The words certainly regulate the

manner of performance, but they do not reduce the fixed

quantity sold to a mere maximum, or limit the sale to such

goods, not exceeding 864 bales, as the Mills might deliver

to the defendants during the remainder of the year."

Their Lordships then proceeded to observe:--

(1) (1888) L.R. 15 I.A. 9.

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"The Mills, from which the goods were to come, no doubt

were contemplated as continuing to exist, though it does'

not follow that, in a bargain and sale such as this, the

closing or even the destruction of the Mills would affect a

contract between third parties, which is in terms absolute;

but the Mills did continue to exist and did continue to

manufacture the goods in question, only they were made for

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and delivered to somebody else."

We agree with the reasoning of the Privy Council, and it

seems to us that the considerations which prevailed with

them must govern the construction of the agreement with

which we are concerned in this case. The agreement does not

seem to us to convey the meaning that the delivery of the

goods was made contingent on their being supplied to the

respondent firm by the Victoria Mills. We find it difficult

to hold that the parties ever contemplated the possibility

of the goods not being supplied at all. The words "prepared

by the Mill" are only a description of the goods to be

supplied, and the expressions "as soon as they are prepared"

and "as soon as they are supplied to us by the said Mill"

simply indicate the process of delivery. It should be remem-

bered that what we have to construe is a commercial agree-

ment entered into in a somewhat common form, and, to use the

words of Lord Sumner in the case to which reference has been

made, "there is nothing surprising in a merchant's binding

himself to procure certain goods at all events, it being a

matter of price and of market expectations." Since the true

construction of an agreement must depend upon the import of

the words used and not upon what the parties choose to say

afterwards, it is unnecessary to refer to what the parties

have said about it.

Even apart from the construction of the agreement, it

seems to us that the plea of the respondents must fail on

their own admissions. The defendant has stated in his

evidence that he had not sold the 61 bales of cloth to any

other person at the time he received the telegraphic notice

of the 20th November, 1941, (exhibit 1). On his own admis-

sion, therefore, he was

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in a position to supply 61 bales of the contracted goods at

the time when the breach of the agreement is alleged to have

happened. That being so, we are unable to hold that the

performance of the contract had become impossible. The

matter however does not rest there. Guruprasad, a clerk of

the Mills Company, who is the second witness for the defend-

ants, has made an important statement to the following

effect

"The customers all place their requirements before the

sales manager. If the goods required are ready, they are

sold to the customers and if they are not ready and if the

customer wants them to be manufactured they are delivered to

the customers after manufacture. An order book is main-

tained at the Mills."

Such being the practice which prevailed in the Victoria

Mills, it was for the defendants to show that an order for

the manufacture of the contracted goods was placed with the

Mills and yet the Mills failed to supply the goods. No such

evidence has however been offered by the defendants- The

High Court has surmised that it might not have been possible

to supply the goods within the period mentioned in the

agreement, but there is no material to support that state-

ment.

In these circumstances, this is obviously not a case in

which the doctrine of frustration of contract can be in-

voked. That doctrine has been explained in a number of

cases, some of which are referred to in the judgment of the

High Court, but the latest pronouncement with regard to it

is to be found in the speech of Viscount Simon in British

Movietone News v. London Cinemas(1), in which the Lord

Chancellor referred with approval to the following enuncia-

tion of the doctrine by Earl Loreburn in a previous case

F.A. Tamplin S.S. Co. Ltd. v. Anglo-Mexican Petroleum

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Products Co., Ltd(2):-

"...a court can and ought to examine the contract and

the circumstances in which it was made, not of course

(1) [1951] A.E.L.R. 617. (2) [1916] 2 A.C. 403,

404.

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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 state of

things would continue ,to exist. And if they must have done

so, then a term to that effect will be implied, though it be

not expressed in the contract ...... no court has an

absolving power, but it can infer from the nature of the

contract and the surrounding circumstances that a condition

which is not expressed was a foundation on which the par-

ties contracted,"

It seems necessary for us to emphasize that so far as

the courts in this country are concerned, they must look

primarily to the law as embodied in sections 32 and 56 of

the Indian Contract Act, 1872. These sections run as fol-

lows :--

"32. Contingent contracts to do or not to do anything

if an uncertain future event happens cannot be enforced by

law unless and until that event has happened.

If the event becomes impossible such contracts become void."

"56. 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 promisor could not prevent, unlawful, becomes void when

the act becomes impossible or unlawful.........

The enforcement of the agreement in question was, as we

have already pointed out, not contingent on the happening of

an uncertain future event, nor does the present case fall

within the second paragraph of section 56, which is the only

provision which may be said to have any relevancy to the

plea put forward by the respondents. Clearly, the doctrine

of frustration cannot avail a defendant, when the non-per-

formance of a contract is attributable to his own default.

We accordingly allow the appeal, set aside the judgment

of the High Court, and restore the decree of the trial

court. The appellant will be entitled to his costs through-

out.

Appeal allowed.

Agent for the appellant: R.S. Narula. Agent for the respond-

ent: S.S. Sukla.

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