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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

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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

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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-

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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.

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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

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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.

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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.

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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

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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.

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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

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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

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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

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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.

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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

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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

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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

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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.

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