Satyabrata Ghose v. Mugneeram Bangur and Co.
Supreme Court of India · 16 November 1953 · 3 judges · 1954 AIR 44; 1954 SCR 310
The Court held that frustration in India is governed by Section 56 of the Contract Act, reading 'impossible' in a practical sense, and that wartime requisition of the land did not frustrate a contract to sell a plot.
Facts
In 1940 the defendant company, developing land near the Dhakuria Lakes in Calcutta into plots, agreed to sell a plot to Bejoy Krishna Roy, taking Rs. 101 as earnest. The company undertook to build roads and drains, and the conveyance was to be completed within a month of their completion; no time was fixed for the work. From November 1941 parts of the scheme land were requisitioned for military purposes under the Defence of India Rules. In 1943 the company wrote that the work could not be taken up during the war and treated the agreement as cancelled. The plaintiff, Roy's nominee, sued for declarations that the contract subsisted. The trial court and District Judge decreed the suit; the High Court held the contract frustrated and dismissed it. The plaintiff appealed on a certificate.
Questions before the Court
- Does the English doctrine of frustration apply in India, and how does it relate to Section 56 of the Indian Contract Act?
- Can the doctrine of frustration apply to a contract for the sale of land in India?
- Did the requisition orders make the contract impossible of performance, or illegal, so that it stood discharged?
What the Court held
- Frustration is an aspect of discharge of contract by supervening impossibility or illegality and falls within Section 56 of the Contract Act. Where the Act deals with a subject it is exhaustive; English decisions have only persuasive value.
- 'Impossible' in Section 56 is not limited to physical or literal impossibility. Performance may become impracticable and useless having regard to the object and purpose of the parties if an untoward event upsets the very foundation of the bargain. Section 56 is a rule of positive law, not a matter of the parties' intention.
- Where the contract itself, expressly or impliedly, provides for discharge on certain events, the case falls under Section 32 or similar provisions, not Section 56.
- Because under Section 54 of the Transfer of Property Act a contract for sale creates no interest in land, the doctrine applies to such contracts in India.
- With no time limit for the work, war conditions existing when the contract was made and requisition being temporary, the requisition did not strike at the root of the contract. It was not frustrated; the appeal was allowed and the decrees of the courts below restored.
Why it matters
The judgment places the law of frustration in India within Section 56 of the Contract Act and rejects recourse to English theories of implied terms outside the statute. It reads 'impossible' in a practical sense, so that a contract is discharged when its foundation is destroyed, while separating cases of discharge under the contract's own terms (Section 32). It holds that frustration can apply to agreements to sell land in India, and that a temporary requisition did not frustrate a contract fixing no time for the work.
In the Court's words
Copied from the official judgment; each passage links to its page.
“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.”
“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”
“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.”
“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 to be completed, it cannot be said that the requisition order vitally affected the contract or made its performance impossible.”
Provisions interpreted
Case and bench
- Parties
- Satyabrata Ghose v. Mugneeram Bangur & Co., and Another
- Case
- Civil Appeal No. 80 of 1952
- Decided
- 16 November 1953
- Bench
- Mukherjea, B.K., Bose, Vivian, Bhagwati, Natwarlal H.
- Opinions
- Unanimous. The Judgment of the Court was delivered by Mukherjea, J.
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