PETITIONER:
MUGNEERAM BANGUR & CO.
Vs.
RESPONDENT:
SARDAR GURBACHAN SINGH
DATE OF JUDGMENT:
16/12/1964
BENCH:
MUDHOLKAR, J.R.
BENCH:
MUDHOLKAR, J.R.
WANCHOO, K.N.
CITATION:
1965 AIR 1523 1965 SCR (2) 630
ACT:
Contract Act, s. 56-Contract to purchase plot-Subject to
completion of development work-Government requisitioning
land-Rendering completion temporarily unlawful-Whether
contract discharged.
HEADNOTE:
In May 1941, the respondent had entered into a contract with
the appellant company for the purchase of a plot of land in
a Colony Scheme. He had paid the earnest money and had
undertaken to complete the transaction within on month from
the date of completion of certain development work by the
appellant. Thereafter, the land in question was
requisitioned by the Government under the Defence of India
Rules and the company was therefore unable to undertake the
development work during the continuance of the war.
On learning that the Government proposed to de-requisition
the lands taken over by them, in May 1946, the respondent
approached the company to ascertain when it would complete
development work after the de-requisitioning of the land, so
that he might complete the transaction within one month
thereafter. The company claimed that the contract stood
cancelled since the respondent had failed to comply with the
terms of a circular letter issued by it in December 1943,
offering all purchasers an option between accepting refund
of the earnest money or completing the transaction
immediately by accepting the land in an undeveloped state.
The respondent denied having received the circular letter
and filed a suit in August 1946, which was decreed by the
trial court and the decree was upheld by the High Court in
appeal.
In the Supreme Court it was contended on behalf of the
company that the contract was discharged by reason of
frustration because its performance was rendered unlawful as
a result of the requisitioning orders made by the
Government, and furthermore, that the suit for specific per-
formance was premature,, because, under the contract the
respondent did not get the right to obtain a sale deed till
after the development work was complete.
HELD : (i) It cannot be said that because of the
requisitioning orders which had the effect of making the
entry by or on behalf of the company on the land illegal,
during the subsistence of the period of requisitioning, the
contract stood discharged by frustration. [637 H]
If time is of the essence of the contract, or if the time
for the performance is set out in the contract, the contract
would stand discharged even though its performance may have
been rendered unlawful for an indeterminate time, provided
unlawfulness attached to the performance at the time when
the contract ought to have been performed. [637 A-C]
In the present case, it could not be said that time was of
the essence of the contract or that the contract had been
discharged because it had not been performed in a reasonable
time within the meaning of s. 46 of the Contract Act. When
the parties entered into the contract, they knew the
prevailing circumstances and must have borne in mind the
possibility of difficulties in obtaining the necessary
material or the possibility of the land being requisitioned
by the Government. [637 E-H]
631
Denny Mott & Dickson Ltd. v. James B. Frasser & Co. Ltd.
[1944] A.C. 265 and Satyabrata Ghose and Ors. v. Mugneeram
Bangur & Co. & Anr. [1954] S.C.R. 310. referred to.
(ii) The contention that the suit was premature could not be
accepted because the development work had been completed
when the appeal was heard by the High Court. In such a
case the court would be justified in taking notice of
subsequent events in moulding its relief accordingly. [638
A-B]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 180 of 1962.
Appeal by special leave from the judgment and decree dated
January 28, 1959, of the Calcutta High Court from original
Decree No. 226 of 1952.
B. Sen and S. N. Mukherjee, for the appellant.
Hem Chandra Dhar, S. S. Khanduja and Ganpat Rai, for the
respondent.
The Judgment of the Court was delivered by
Mudholkar, J. This appeal, like Satyabrata Ghose v. Mugnee-
ram Bangur & Co. and another(1) relates to the effect of
requisitioning orders made by the Government during the last
war under which they took possession of land belonging to
the appellant company which had been divided into building
plots by them in pursuance of what is known as the Lake
Colony Scheme, by constructing roads and drains. The
plaintiff-respondent was one of the various persons who had
entered into contracts with the company for purchase of
plots, in pursuance of the public offers made by the
company. This he did by addressing the following letter to
the company and paying Rs. 202/- by way of earnest money.
“To
Mugneeram Bangur and Company
Land Department.
Russa Road, South,
Tollygunge, Calcutta.
No. 499, Phone: South 135.
Through Babu-
Re : Plots Nos. New Nos. 245 and 246 on 30 feet road in the
premises No. Lake Colony Scheme No. 1, Northern: Block.
Area measuring-10 ks. x ch. x sqr. ft more or less.
(1) [1954] S.C.R. 310.
632
Dear Sir,
I am willing to purchase the above plot of land from you at
the average rate of Rs. 1,075/- (Rupees one thousand and
seventyfive only) per katta irrespective of the condition of
the soil and I am ready to deposit Rs. 202/- of the actual
value as an earnest money at once. I undertake to complete
the transaction within one month from the date on(?) (of)
completion of road on payment of the balance of the
consideration money and time must be deemed as essence of
the contract. If I fail to do so within the said period the
earnest money deposited by me will be forfeited and you will
be free to resell the land and I shall be liable for all
damages that may result thereby. I also agree to sign a
formal agreement in the form required by you if you so
desire.
Yours faithfully,
Name, Gurbachan Singh,
Address: 48/ 1, Chakraberia Road, North.
Dated the 19 ….
Witness : (Illegible)
Address ………………
N.B. I agree to pay half of the value at the
time of registration of the deeds and the
balance within 6 years bearing interest at the
rate of 6 per cent per annum with half yearly
rests and the said plots Nos : 245 and 246
purchased by me shall remain charged for the
payment of the balance of the purchase money
in manner as aforesaid and the necessary
security deed charged should be executed and
registered by me at my own cost.
Name: Gurbachan Singh
Address :
Witness (Illegible)
4, Baktiar Shah Road, Tollygunge.
The letter does not bear any date; but probably it was
written on May 14, 1941 which is the date on which the
company issued a receipt in his favour. Different portions
of the land covered by the scheme were requisitioned by
Government between November 12, 1941 and July 25, 1944. The
plots which the respondents had contracted to purchase are
said to form part of the land which was requisitioned by
virtue of an order made by the Government on February 18,
1944.
633
According to the company, on December 24, 1943, a circular
notice was sent to all those persons who had entered into
contracts for purchase of plots from them stating that a
considerable portion of the land comprised in the Lake
Colony Scheme area had been requisitioned under the Defence
of India Rules and was taken into possession by the
Government. It was not possible to say how long the
Government would continue to be in possession and,
therefore, it was not possible for the company to carry on
the work of the construction of roads and drains during the
continuance of the war and possibly for many years even
after the termination of the war. The circular then
proceeded to state as follows :-
“In these circumstances we have decided to
treat the agreement as cancelled and give you
the option of taking of the refund of the
earnest money deposited by you within one
month from the receipt of this letter.
In the event of your refusal to treat the
contract as cancelled, we are offering you, in
the alternative, to complete the registration
of the conveyance of the sale deed within one
month from the receipt of this letter. In
such a case you have to take the lands as it
is now, the road and drain will be made by us
as soon as circumstance will permit after the
termination of the War.
If you do not exercise your option in any of
the two ways mentioned above the agreement
will be deemed to have been cancelled and your
earnest money forfeited.”
On May 8, 1946 the respondent’s attorneys, acting under
instructions, wrote to the company saying that the
respondent had learnt from the company’s office that the
government would be de-requisitioning lands taken over by
them and inquiring of the company as to when it would be
possible for the company to deliver possession of the plots
to the respondent. In reply to that letter the company
wrote on May 29, 1946 drawing his attention to their
circular letter and said that by reason of the failure of
the respondent to exercise the options given by them therein
the agreement stood cancelled and the earnest money had been
forfeited.
On June 13, 1946, the respondent’s attorneys expressed sur-
prise at the company’s reply and stated that the respondent
had not received the circular referred to in the company’s
reply and ended by saying as follows :
“That my said client, therefore, now hereby
asks you as to when you are going to complete
the roads, so that he may do the needful for
completion of the conveyances
634
within one month from such date of completion
of the roads.
That my said client hereby calls upon you to
intimate to him within seven days from date
the expected exact date of completion of roads
to enable him to complete the conveyance as
per agreement, failing which he will be forced
to take legal steps against you in the matter
as he may be advised in the matter, without
further reference which please note.”
Apparently the company did nothing with the result that the
present suit was instituted by the respondent on August 8,
1946 in the court of the Second Subordinate Judge at
Alipore. The company resisted the suit on various grounds
but only two are material for the purpose of this appeal
because Mr. Sen has confined his argument only to those
matters. One is that the contract has been discharged by
reason of frustration and the second is that the suit was
premature. The suit was decreed and that decree was upheld
by the High Court in appeal. A certificate that the case
was fit for appeal to this Court having been refused by the
High Court the company sought and obtained from this court
special leave to appeal. That is how the matter comes up
before us.
This case would really appear to be covered by the decision
of this court to which we have referred at the outset. Mr.
Sen, however, points out that the question as to whether the
contract could be said to have been discharged because of
the fact that its performance was rendered unlawful as a
result of the requisitioning orders made by the Government
which was sought to be raised before this Court in that case
was not permitted to be raised by it and has been left open.
He admits that certain observations made by this Court
towards the concluding portion of the judgment would
indicate that this Court was not prepared to accept the con-
tention sought to be urged before it. But, Mr. Sen says
that as the contention was not permitted to be raised, the
observations of this Court could be said to have been made
merely in passing and at best be regarded as a tentative
expression of its views. We think Mr. Sen is right in the
sense that the question has been actually left open by this
Court. But even so, we will have to consider whether the
grounds upon which the previous decision rests would not be
relevant for consideration in connection with the argument
advanced by Mr. Sen.
635
In so far as discharge of contract by reason of frustration
is concerned there is no question of implying a term in the
contract a term fundamental for its performance, as is done
by the courts in England because we have here the provisions
of s. 56 as well as those of s. 32 of the Contract Act.
This is what was held by this Court in the earlier case and
that decision binds us. No doubt, a contract can be
frustrated either because of supervening impossibility of
performance or because performance has become unlawful by
reason of circumstances for which neither of the parties was
responsible. In the earlier case this Court has held that
where the performance of an essential condition of the
contract has become impossible due to supervening
circumstances the contract would be discharged. This Court
has further held that the impossibility need not be an
absolute one but it is sufficient if further performance
becomes impracticable by some cause for which neither of the
parties was responsible. It, however, held that the mere
fact that the performance of an essential term of the
contract that is to say, of undertaking development of the
area under the scheme could not be undertaken because the
land had been requisitioned, did not have the effect of
frustrating the contract. For though the term regarding
development was an essential term of the contract, the
requisitioning of the land was only for a temporary period.
Further the parties had deliberately not placed any time
limit within which roads and drains had to be made
apparently because they were aware of the difficulties in
carrying on the work on account of scarcity of materials and
the various restrictions which the Government had placed on
such activities. This Court also pointed out:
“Another important thing that requires notice
in this connection 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.” (pp.
326-327).
Though these observations were made while dealing with the
argument that the contract has been frustrated by reason of
impossibility of performance they would not be wholly out of
place while considering the argument based upon the ground
that continued performance of the contract had been rendered
unlawful.
What s. 56 speaks of is a contract, the performance of which
has become unlawful. Now, it is true that no order was made
under the Defence of India Rules prohibiting the company
from carrying on the work of construction of roads and
drains. The
636
actual order served upon the company, among other things,
provides :
“The owner/occupier of the said land:
(a) shall place the said land at the
disposal and under the control of the Military
Estates Officer Bengal Circle on and from the
14th November, 1941 at 1 P.M. Bengal time
until six months after the termination of the
present war unless relinquished earlier.”
In consequence of this order the company lost possession of
the land and automatically lost access thereto. Without
getting on to the land the company could not carry out its
obligation to the purchasers of constructing the roads and
drains. If, in disobedience of this order, the company’s
servants, agents or contractors were to carry on the work of
construction of the roads and drains by entering on the land
of which the possession was with the government, they would
have been liable to punishment under sub r. (7) of r. 75 (a)
of the Defence of India Rules and also the company. We were
informed that the land was used by the Government for
military purposes. It is, therefore, possible that the land
might have been declared as a protected place under r. 7 of
the Defence of India Rules. Even, however, without such a
declaration, we agree with Mr. Sen that it would not have
been possible for the company, its agents, servants or
contractors to go on the land during the continuance in
force of the order of requisition without being rendered
liable at law.
Even so it is clear that all that had become unlawful was to
construct roads and drains while the land was bound to be
given up by the Government sometime or other and, therefore,
in essence the activities which were rendered unlawful were
not forbidden for all time but only temporarily. It may be
that the duration of the embargo was uncertain but not
permanent. It would, therefore, be relevant to enquire
whether a contract could properly be held to be frustrated
because for a certain period of time its performance has
become unlawful. According to Mr. Sen the moment it became
unlawful for one of the parties to the contract to continue
with the performance, the contract was discharged and in
this connection he referred us to certain observations of
Lord Wright in Denny Mott & Diskson Ltd. v. james B. Fraser
& Co. Ltd.,() and certain other portions of the report. We
put to him the question as to what would be the. effect of a
requisitioning, say, for a period of one month. Would that
operate as &charge of the
(1) [1944] A.C. 265, 274.
637
contract ? To that his answer was in the negative and we
think that the answer was right. The question then would be
: would it make any difference if unlawfulness would attach
to the performance of the contract for an indeterminate
period ? In our judgment if time is of the essence of the
contract or if time for performance is set out in the
contract it may be that the contract would stand discharged
even though its performance may have been rendered unlawful
for an indeterminate time provided unlawfulness attached to
the performance of the contract at the time when the
contract ought to have been performed. Thus, where the
performance of a contract had been rendered unlawful by
reason of some subsequent event the contract would stand
discharged but such discharge will take place not
necessarily from the date on which the further performance
was rendered unlawful, unless further performance was
rendered unlawful for all time. If the performance of the
contract is rendered unlawful either for a determinate
period of time or for an indeterminate period of time the
contract would not stand discharged unless the ban on its
performance existed on the day or during the time in which
it has to be performed. Here it is pointed out by Mr. Sen
that the respondent had made time the essence of the
contract but that only applies to the grant of conveyance
after the completion of the roads and drains. As already
pointed out, parties were wholly silent as to the time
within which the roads and drains were to be completed.
Therefore, in so far as this aspect of the contract is
concerned time was in no sense made the essence of the
contract. According to Mr. Sen, however, where the parties
have failed to specify in the contract time within which it
has to be performed s. 46 of the Contract Act comes in and
the parties may be presumed to have agreed that the contract
will be performed within reasonable time. To that the
answer would-be the same as that given in the earlier case,
that is, the parties when they entered into the contract,
knew the prevailing circumstances and must have home in mind
the possibility that something like what actually happened
may happen and, therefore, did not specify the time within
which the land had to be developed. In other words, the
parties intended to exclude from the computation of
reasonable time such time as was taken up in procuring the
necessary material which was not easy to obtain and such as
may be taken up if the land were requisitioned by
government. Thus, in our view it cannot be said that
because of the requisitioning orders which had the effect of
making the entry by or on behalf of the company on the land
illegal during the subsistence of the period of
requisitioning the contract stood discharged.
p.55-7
638
Then remains the other point argued by Mr. Sen. He said that
the suit for specific performance was premature because
under the agreement the respondent did not get a right to
obtain a sale deed till after the development of the land
comprised in the scheme was completed. That is perfectly
true. But the fact remains that this work had been
completed when the appeal was heard by the High Court. The
Court would in such a case be justified in taking notice of
subsequent events in moulding its relief accordingly.
In our judgment the courts below were right in upholding the
respondent’s claim. The apeal is dismissed with costs.
Appeal dismissed.
639
MUGNEERAM BANGUR & CO.
Vs.
RESPONDENT:
SARDAR GURBACHAN SINGH
DATE OF JUDGMENT:
16/12/1964
BENCH:
MUDHOLKAR, J.R.
BENCH:
MUDHOLKAR, J.R.
WANCHOO, K.N.
CITATION:
1965 AIR 1523 1965 SCR (2) 630
ACT:
Contract Act, s. 56-Contract to purchase plot-Subject to
completion of development work-Government requisitioning
land-Rendering completion temporarily unlawful-Whether
contract discharged.
HEADNOTE:
In May 1941, the respondent had entered into a contract with
the appellant company for the purchase of a plot of land in
a Colony Scheme. He had paid the earnest money and had
undertaken to complete the transaction within on month from
the date of completion of certain development work by the
appellant. Thereafter, the land in question was
requisitioned by the Government under the Defence of India
Rules and the company was therefore unable to undertake the
development work during the continuance of the war.
On learning that the Government proposed to de-requisition
the lands taken over by them, in May 1946, the respondent
approached the company to ascertain when it would complete
development work after the de-requisitioning of the land, so
that he might complete the transaction within one month
thereafter. The company claimed that the contract stood
cancelled since the respondent had failed to comply with the
terms of a circular letter issued by it in December 1943,
offering all purchasers an option between accepting refund
of the earnest money or completing the transaction
immediately by accepting the land in an undeveloped state.
The respondent denied having received the circular letter
and filed a suit in August 1946, which was decreed by the
trial court and the decree was upheld by the High Court in
appeal.
In the Supreme Court it was contended on behalf of the
company that the contract was discharged by reason of
frustration because its performance was rendered unlawful as
a result of the requisitioning orders made by the
Government, and furthermore, that the suit for specific per-
formance was premature,, because, under the contract the
respondent did not get the right to obtain a sale deed till
after the development work was complete.
HELD : (i) It cannot be said that because of the
requisitioning orders which had the effect of making the
entry by or on behalf of the company on the land illegal,
during the subsistence of the period of requisitioning, the
contract stood discharged by frustration. [637 H]
If time is of the essence of the contract, or if the time
for the performance is set out in the contract, the contract
would stand discharged even though its performance may have
been rendered unlawful for an indeterminate time, provided
unlawfulness attached to the performance at the time when
the contract ought to have been performed. [637 A-C]
In the present case, it could not be said that time was of
the essence of the contract or that the contract had been
discharged because it had not been performed in a reasonable
time within the meaning of s. 46 of the Contract Act. When
the parties entered into the contract, they knew the
prevailing circumstances and must have borne in mind the
possibility of difficulties in obtaining the necessary
material or the possibility of the land being requisitioned
by the Government. [637 E-H]
631
Denny Mott & Dickson Ltd. v. James B. Frasser & Co. Ltd.
[1944] A.C. 265 and Satyabrata Ghose and Ors. v. Mugneeram
Bangur & Co. & Anr. [1954] S.C.R. 310. referred to.
(ii) The contention that the suit was premature could not be
accepted because the development work had been completed
when the appeal was heard by the High Court. In such a
case the court would be justified in taking notice of
subsequent events in moulding its relief accordingly. [638
A-B]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 180 of 1962.
Appeal by special leave from the judgment and decree dated
January 28, 1959, of the Calcutta High Court from original
Decree No. 226 of 1952.
B. Sen and S. N. Mukherjee, for the appellant.
Hem Chandra Dhar, S. S. Khanduja and Ganpat Rai, for the
respondent.
The Judgment of the Court was delivered by
Mudholkar, J. This appeal, like Satyabrata Ghose v. Mugnee-
ram Bangur & Co. and another(1) relates to the effect of
requisitioning orders made by the Government during the last
war under which they took possession of land belonging to
the appellant company which had been divided into building
plots by them in pursuance of what is known as the Lake
Colony Scheme, by constructing roads and drains. The
plaintiff-respondent was one of the various persons who had
entered into contracts with the company for purchase of
plots, in pursuance of the public offers made by the
company. This he did by addressing the following letter to
the company and paying Rs. 202/- by way of earnest money.
“To
Mugneeram Bangur and Company
Land Department.
Russa Road, South,
Tollygunge, Calcutta.
No. 499, Phone: South 135.
Through Babu-
Re : Plots Nos. New Nos. 245 and 246 on 30 feet road in the
premises No. Lake Colony Scheme No. 1, Northern: Block.
Area measuring-10 ks. x ch. x sqr. ft more or less.
(1) [1954] S.C.R. 310.
632
Dear Sir,
I am willing to purchase the above plot of land from you at
the average rate of Rs. 1,075/- (Rupees one thousand and
seventyfive only) per katta irrespective of the condition of
the soil and I am ready to deposit Rs. 202/- of the actual
value as an earnest money at once. I undertake to complete
the transaction within one month from the date on(?) (of)
completion of road on payment of the balance of the
consideration money and time must be deemed as essence of
the contract. If I fail to do so within the said period the
earnest money deposited by me will be forfeited and you will
be free to resell the land and I shall be liable for all
damages that may result thereby. I also agree to sign a
formal agreement in the form required by you if you so
desire.
Yours faithfully,
Name, Gurbachan Singh,
Address: 48/ 1, Chakraberia Road, North.
Dated the 19 ….
Witness : (Illegible)
Address ………………
N.B. I agree to pay half of the value at the
time of registration of the deeds and the
balance within 6 years bearing interest at the
rate of 6 per cent per annum with half yearly
rests and the said plots Nos : 245 and 246
purchased by me shall remain charged for the
payment of the balance of the purchase money
in manner as aforesaid and the necessary
security deed charged should be executed and
registered by me at my own cost.
Name: Gurbachan Singh
Address :
Witness (Illegible)
4, Baktiar Shah Road, Tollygunge.
The letter does not bear any date; but probably it was
written on May 14, 1941 which is the date on which the
company issued a receipt in his favour. Different portions
of the land covered by the scheme were requisitioned by
Government between November 12, 1941 and July 25, 1944. The
plots which the respondents had contracted to purchase are
said to form part of the land which was requisitioned by
virtue of an order made by the Government on February 18,
1944.
633
According to the company, on December 24, 1943, a circular
notice was sent to all those persons who had entered into
contracts for purchase of plots from them stating that a
considerable portion of the land comprised in the Lake
Colony Scheme area had been requisitioned under the Defence
of India Rules and was taken into possession by the
Government. It was not possible to say how long the
Government would continue to be in possession and,
therefore, it was not possible for the company to carry on
the work of the construction of roads and drains during the
continuance of the war and possibly for many years even
after the termination of the war. The circular then
proceeded to state as follows :-
“In these circumstances we have decided to
treat the agreement as cancelled and give you
the option of taking of the refund of the
earnest money deposited by you within one
month from the receipt of this letter.
In the event of your refusal to treat the
contract as cancelled, we are offering you, in
the alternative, to complete the registration
of the conveyance of the sale deed within one
month from the receipt of this letter. In
such a case you have to take the lands as it
is now, the road and drain will be made by us
as soon as circumstance will permit after the
termination of the War.
If you do not exercise your option in any of
the two ways mentioned above the agreement
will be deemed to have been cancelled and your
earnest money forfeited.”
On May 8, 1946 the respondent’s attorneys, acting under
instructions, wrote to the company saying that the
respondent had learnt from the company’s office that the
government would be de-requisitioning lands taken over by
them and inquiring of the company as to when it would be
possible for the company to deliver possession of the plots
to the respondent. In reply to that letter the company
wrote on May 29, 1946 drawing his attention to their
circular letter and said that by reason of the failure of
the respondent to exercise the options given by them therein
the agreement stood cancelled and the earnest money had been
forfeited.
On June 13, 1946, the respondent’s attorneys expressed sur-
prise at the company’s reply and stated that the respondent
had not received the circular referred to in the company’s
reply and ended by saying as follows :
“That my said client, therefore, now hereby
asks you as to when you are going to complete
the roads, so that he may do the needful for
completion of the conveyances
634
within one month from such date of completion
of the roads.
That my said client hereby calls upon you to
intimate to him within seven days from date
the expected exact date of completion of roads
to enable him to complete the conveyance as
per agreement, failing which he will be forced
to take legal steps against you in the matter
as he may be advised in the matter, without
further reference which please note.”
Apparently the company did nothing with the result that the
present suit was instituted by the respondent on August 8,
1946 in the court of the Second Subordinate Judge at
Alipore. The company resisted the suit on various grounds
but only two are material for the purpose of this appeal
because Mr. Sen has confined his argument only to those
matters. One is that the contract has been discharged by
reason of frustration and the second is that the suit was
premature. The suit was decreed and that decree was upheld
by the High Court in appeal. A certificate that the case
was fit for appeal to this Court having been refused by the
High Court the company sought and obtained from this court
special leave to appeal. That is how the matter comes up
before us.
This case would really appear to be covered by the decision
of this court to which we have referred at the outset. Mr.
Sen, however, points out that the question as to whether the
contract could be said to have been discharged because of
the fact that its performance was rendered unlawful as a
result of the requisitioning orders made by the Government
which was sought to be raised before this Court in that case
was not permitted to be raised by it and has been left open.
He admits that certain observations made by this Court
towards the concluding portion of the judgment would
indicate that this Court was not prepared to accept the con-
tention sought to be urged before it. But, Mr. Sen says
that as the contention was not permitted to be raised, the
observations of this Court could be said to have been made
merely in passing and at best be regarded as a tentative
expression of its views. We think Mr. Sen is right in the
sense that the question has been actually left open by this
Court. But even so, we will have to consider whether the
grounds upon which the previous decision rests would not be
relevant for consideration in connection with the argument
advanced by Mr. Sen.
635
In so far as discharge of contract by reason of frustration
is concerned there is no question of implying a term in the
contract a term fundamental for its performance, as is done
by the courts in England because we have here the provisions
of s. 56 as well as those of s. 32 of the Contract Act.
This is what was held by this Court in the earlier case and
that decision binds us. No doubt, a contract can be
frustrated either because of supervening impossibility of
performance or because performance has become unlawful by
reason of circumstances for which neither of the parties was
responsible. In the earlier case this Court has held that
where the performance of an essential condition of the
contract has become impossible due to supervening
circumstances the contract would be discharged. This Court
has further held that the impossibility need not be an
absolute one but it is sufficient if further performance
becomes impracticable by some cause for which neither of the
parties was responsible. It, however, held that the mere
fact that the performance of an essential term of the
contract that is to say, of undertaking development of the
area under the scheme could not be undertaken because the
land had been requisitioned, did not have the effect of
frustrating the contract. For though the term regarding
development was an essential term of the contract, the
requisitioning of the land was only for a temporary period.
Further the parties had deliberately not placed any time
limit within which roads and drains had to be made
apparently because they were aware of the difficulties in
carrying on the work on account of scarcity of materials and
the various restrictions which the Government had placed on
such activities. This Court also pointed out:
“Another important thing that requires notice
in this connection 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.” (pp.
326-327).
Though these observations were made while dealing with the
argument that the contract has been frustrated by reason of
impossibility of performance they would not be wholly out of
place while considering the argument based upon the ground
that continued performance of the contract had been rendered
unlawful.
What s. 56 speaks of is a contract, the performance of which
has become unlawful. Now, it is true that no order was made
under the Defence of India Rules prohibiting the company
from carrying on the work of construction of roads and
drains. The
636
actual order served upon the company, among other things,
provides :
“The owner/occupier of the said land:
(a) shall place the said land at the
disposal and under the control of the Military
Estates Officer Bengal Circle on and from the
14th November, 1941 at 1 P.M. Bengal time
until six months after the termination of the
present war unless relinquished earlier.”
In consequence of this order the company lost possession of
the land and automatically lost access thereto. Without
getting on to the land the company could not carry out its
obligation to the purchasers of constructing the roads and
drains. If, in disobedience of this order, the company’s
servants, agents or contractors were to carry on the work of
construction of the roads and drains by entering on the land
of which the possession was with the government, they would
have been liable to punishment under sub r. (7) of r. 75 (a)
of the Defence of India Rules and also the company. We were
informed that the land was used by the Government for
military purposes. It is, therefore, possible that the land
might have been declared as a protected place under r. 7 of
the Defence of India Rules. Even, however, without such a
declaration, we agree with Mr. Sen that it would not have
been possible for the company, its agents, servants or
contractors to go on the land during the continuance in
force of the order of requisition without being rendered
liable at law.
Even so it is clear that all that had become unlawful was to
construct roads and drains while the land was bound to be
given up by the Government sometime or other and, therefore,
in essence the activities which were rendered unlawful were
not forbidden for all time but only temporarily. It may be
that the duration of the embargo was uncertain but not
permanent. It would, therefore, be relevant to enquire
whether a contract could properly be held to be frustrated
because for a certain period of time its performance has
become unlawful. According to Mr. Sen the moment it became
unlawful for one of the parties to the contract to continue
with the performance, the contract was discharged and in
this connection he referred us to certain observations of
Lord Wright in Denny Mott & Diskson Ltd. v. james B. Fraser
& Co. Ltd.,() and certain other portions of the report. We
put to him the question as to what would be the. effect of a
requisitioning, say, for a period of one month. Would that
operate as &charge of the
(1) [1944] A.C. 265, 274.
637
contract ? To that his answer was in the negative and we
think that the answer was right. The question then would be
: would it make any difference if unlawfulness would attach
to the performance of the contract for an indeterminate
period ? In our judgment if time is of the essence of the
contract or if time for performance is set out in the
contract it may be that the contract would stand discharged
even though its performance may have been rendered unlawful
for an indeterminate time provided unlawfulness attached to
the performance of the contract at the time when the
contract ought to have been performed. Thus, where the
performance of a contract had been rendered unlawful by
reason of some subsequent event the contract would stand
discharged but such discharge will take place not
necessarily from the date on which the further performance
was rendered unlawful, unless further performance was
rendered unlawful for all time. If the performance of the
contract is rendered unlawful either for a determinate
period of time or for an indeterminate period of time the
contract would not stand discharged unless the ban on its
performance existed on the day or during the time in which
it has to be performed. Here it is pointed out by Mr. Sen
that the respondent had made time the essence of the
contract but that only applies to the grant of conveyance
after the completion of the roads and drains. As already
pointed out, parties were wholly silent as to the time
within which the roads and drains were to be completed.
Therefore, in so far as this aspect of the contract is
concerned time was in no sense made the essence of the
contract. According to Mr. Sen, however, where the parties
have failed to specify in the contract time within which it
has to be performed s. 46 of the Contract Act comes in and
the parties may be presumed to have agreed that the contract
will be performed within reasonable time. To that the
answer would-be the same as that given in the earlier case,
that is, the parties when they entered into the contract,
knew the prevailing circumstances and must have home in mind
the possibility that something like what actually happened
may happen and, therefore, did not specify the time within
which the land had to be developed. In other words, the
parties intended to exclude from the computation of
reasonable time such time as was taken up in procuring the
necessary material which was not easy to obtain and such as
may be taken up if the land were requisitioned by
government. Thus, in our view it cannot be said that
because of the requisitioning orders which had the effect of
making the entry by or on behalf of the company on the land
illegal during the subsistence of the period of
requisitioning the contract stood discharged.
p.55-7
638
Then remains the other point argued by Mr. Sen. He said that
the suit for specific performance was premature because
under the agreement the respondent did not get a right to
obtain a sale deed till after the development of the land
comprised in the scheme was completed. That is perfectly
true. But the fact remains that this work had been
completed when the appeal was heard by the High Court. The
Court would in such a case be justified in taking notice of
subsequent events in moulding its relief accordingly.
In our judgment the courts below were right in upholding the
respondent’s claim. The apeal is dismissed with costs.
Appeal dismissed.
639