# BOOTHALINGA AGENCIES v. V. T. C. PORIASWAMI NADAR

- **Citation:** [1969] 1 S.C.R. 65
- **Court:** Supreme Court of India
- **Decided:** 1968-04-22
- **Bench:** J. C. Shah, V. Ramaswami, G. K. Mitter
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/boothalinga-agencies-v-v-t-c-poriaswami-nadar-4463
- **Pages:** 15

## Headnote

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Indian Cont1·act Act (9 of 1872) s. 56--Contract entered in contravention of licence terms-Doctrine of frusitration .. "self induced frustration"-!! applies t<>-lmports and Exports (Control) Act (18 of 1947)
s. 5-Contract entered in contravention of licence terms before amend1nent in 1960-Whether statutory order breached-Sale if contravening
cl. 5(4) of 1955 order.
The appellant entered into a contract to sen certain goods to the
respondent which he was importing under ·actual users' licence. Under
the terms of the licence the sale of the, goods was prohibited and was to
be
utilised for consumption by •he importer. The goods arrived. and
were cleared by the appellant. The respondent filecl a suit, which was
contested by the appellant on the· ground that the contract was illegal,
and, therefore, void.
The trial court decreed the suit holding thait the
contravention of the terms of licence entailed only an administrative
penalty, the sale could not be held to be prohibited by law and the
contract was a legal contract The High Court upheld the decree. In
appeal, this Court :
HELD : The appeal must be allowed.
(i) The licence was granted by virtue of a statutory notification issued
under the Defence of India Rules. The
n.otificaition
authorises
the
licensing officer to impose one or more conditions prescribed by that order
and the 1icensing officer has therefore power to impose conditions in the
licence issued by him, but if the licensee contravenes the condi1tions imposed by the licence it is merely a contravention of the conditions of a
licence and not a contravention of the provisions of s. 5 of the JmpoI11s
and Exports (Control) Act, Section 5 of Act was amended by the Amend·
ing Act 4 of 1960 much after the present controversy, so as ito include
contravention of a condition of a liccn.ce. granted under any order as an
offence under s. 5 of the Act. Therefore on the material date a breach
of the condi1tion of a licence was not tantamount to a breach of
the
statutory orde' within the meaning of s. 5 of the Act 18 of 1947.
[73H; 74A-Dl
East India Con1ni.::rcial Co. Ltd., Calcutta, v. The Collector of CustonJ.<, Calcutra, [1963] 3 S.C.R. 338. followed.
(ii) The goods which arrived at the Indian Port on 13th December
1955 were governed by the provisions of lm9orts (Control) Order, 1955
which came into force on 7th De.ccmber 1955.
Clause 5(4) of the 1955
order expressly provided that the licensee shall comply wiith all the conditions imposed or deemed to be imposed under that
clause~ Therefore
the <;ale of the
imported goods would be a
direct contravention of
cl. 5 ( 4) and under s. 5 of the Act an.y coT11travention of the Act or any
order made or deemed to have. been made under the Act was punishable with imprisonment or :fine or both. In consequence, even though
the contract \Vas enforceable when it was entered, the performance of the
contract became' impossible or unlawful when the 1955 Order came into
force. and so the contract became void under s. 5'6 of the Indian Contract
Act. [75B-D]
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66
SUPREME COURT REPORTS
[1969] I S.C.R.
The doctrine of fru~~ration of contract is really an aspect or part
of the law of discharge of contract b)r reason of supervening impossibility
or illegality of the act · agr°ced to be done and hence comes within the
purview of s. 56 of the 'Jndian Contract Act1 It should be noticed that
s. 56 lays down a rule of positive law and does not ]eave the matter to
be determined ·according to the intention of ithe parties.
In Engli!ijl l:l\v
the question of a frustration of contract bas been treated by courts as n
question of cons!ruCtiOn depending upcn the true intention of tho parl ics.
In Contrast, the statut6ry
provisions coi;itained in s. 5,6 of the Indian
\_,0ntrar-t Act laY down a positive rule of la\v and English authoritici;
cannot therefore be of direct nssistance, though they h;ive persuasive value
in sho\\fug how English courts have approached and decided cases ur\der
simifar c

## Text

A
BOOTHALINGA AGENCIES
v.
V. T. C. PORIASWAMI NADAR
April 22, 1968
B
[J. C. SHAH, V. RAMASWAMI AND G. K. MITTER. JJ.]
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H
Indian Cont1·act Act (9 of 1872) s. 56--Contract entered in contravention of licence terms-Doctrine of frusitration .. "self induced frustration"-!! applies t<>-lmports and Exports (Control) Act (18 of 1947)
s. 5-Contract entered in contravention of licence terms before amend1nent in 1960-Whether statutory order breached-Sale if contravening
cl. 5(4) of 1955 order.
The appellant entered into a contract to sen certain goods to the
respondent which he was importing under ·actual users' licence. Under
the terms of the licence the sale of the, goods was prohibited and was to
be
utilised for consumption by •he importer. The goods arrived. and
were cleared by the appellant. The respondent filecl a suit, which was
contested by the appellant on the· ground that the contract was illegal,
and, therefore, void.
The trial court decreed the suit holding thait the
contravention of the terms of licence entailed only an administrative
penalty, the sale could not be held to be prohibited by law and the
contract was a legal contract The High Court upheld the decree. In
appeal, this Court :
HELD : The appeal must be allowed.
(i) The licence was granted by virtue of a statutory notification issued
under the Defence of India Rules. The
n.otificaition
authorises
the
licensing officer to impose one or more conditions prescribed by that order
and the 1icensing officer has therefore power to impose conditions in the
licence issued by him, but if the licensee contravenes the condi1tions imposed by the licence it is merely a contravention of the conditions of a
licence and not a contravention of the provisions of s. 5 of the JmpoI11s
and Exports (Control) Act, Section 5 of Act was amended by the Amend·
ing Act 4 of 1960 much after the present controversy, so as ito include
contravention of a condition of a liccn.ce. granted under any order as an
offence under s. 5 of the Act. Therefore on the material date a breach
of the condi1tion of a licence was not tantamount to a breach of
the
statutory orde' within the meaning of s. 5 of the Act 18 of 1947.
[73H; 74A-Dl
East India Con1ni.::rcial Co. Ltd., Calcutta, v. The Collector of CustonJ.<, Calcutra, [1963] 3 S.C.R. 338. followed.
(ii) The goods which arrived at the Indian Port on 13th December
1955 were governed by the provisions of lm9orts (Control) Order, 1955
which came into force on 7th De.ccmber 1955.
Clause 5(4) of the 1955
order expressly provided that the licensee shall comply wiith all the conditions imposed or deemed to be imposed under that
clause~ Therefore
the <;ale of the
imported goods would be a
direct contravention of
cl. 5 ( 4) and under s. 5 of the Act an.y coT11travention of the Act or any
order made or deemed to have. been made under the Act was punishable with imprisonment or :fine or both. In consequence, even though
the contract \Vas enforceable when it was entered, the performance of the
contract became' impossible or unlawful when the 1955 Order came into
force. and so the contract became void under s. 5'6 of the Indian Contract
Act. [75B-D]
·.:~
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66
SUPREME COURT REPORTS
[1969] I S.C.R.
The doctrine of fru~~ration of contract is really an aspect or part
of the law of discharge of contract b)r reason of supervening impossibility
or illegality of the act · agr°ced to be done and hence comes within the
purview of s. 56 of the 'Jndian Contract Act1 It should be noticed that
s. 56 lays down a rule of positive law and does not ]eave the matter to
be determined ·according to the intention of ithe parties.
In Engli!ijl l:l\v
the question of a frustration of contract bas been treated by courts as n
question of cons!ruCtiOn depending upcn the true intention of tho parl ics.
In Contrast, the statut6ry
provisions coi;itained in s. 5,6 of the Indian
\_,0ntrar-t Act laY down a positive rule of la\v and English authoritici;
cannot therefore be of direct nssistance, though they h;ive persuasive value
in sho\\fug how English courts have approached and decided cases ur\der
simifar circumstances. [750; 77H; 78A-BJ
Denny. Mott and Dickson Ltd. v. James B. Fraser & Co,, Ltd., [l944]
A.C. 265~ British· Movietonews Ltd. v. London
and
District
Cinemas
Ltd., [1951] 1 K.B. 190; House of Lords,
[19521
A.C. 166 at 185,
referred to.
(iii) The licens.ing authod!y could have given written permission for
disposal of goods under cl. 1 of the notification but the condition imposed
in the IiCence, -in the present case was a special condition jmposed under
c1. (v) o'f paragraph (a) of the nOtification and there was no optlion giVCJl
under this clause for the licensing authority to modify the condition of
t!10 licence prohibiting d,isposa! of the goods. [78D--E]
(iv) The appellant was no1 under obligation. to· have purchased the
good~ from the open marl"et and supplied it to the respondent.
Under
the contract the quality of the goods to be sold was of specific description
as described therein.
The doctrine of frustration of contract cannot apply
where the event which is alleged to have frustrated the contract arises
from the act or election of a party, i.e., to a .. self induced frustration".
This principle could no¢ be applied. to the pre'Sent case for there \Vas no
choice or election. left to the ·appellant to supply the goods other' than
under the terms of the contract. [78G; 79C--'D]
Maritilne National Fish, Litnited v. Ocean Traw!qrs', Li'mUed,
[1935]
A.C. 524, referred to.
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CIVIL APPELLATE JURISDICTION:
Civil Appeal No. 479 of
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1965.
Appeal from the judgment and decree dated March 16, 1962
of the Madras High Court in Appeal No. 367 of 1958.
H. R. Gokhale and S. Balakrishnan, for the appellant.
R. Thiagarajan and T. R. Sangameswaran,
for respondent
G
No. 2.
The Judgment of the Court was delivered by
Ramaswami, J.
This appeal is brought, by certificate, from
the judgment of the ·Madras High Court dated March 16, 1962
in A.S. No. 367 of 1958.
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The appellant c.arr,es on business in the manufacture and sale
of coffee powder.
He was for this purpose importing chicory
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BOOTHALINGA AGENCIES v. POR!ASWAMI (Ramaswami, J.)
61
under actual user's licence issued by the Government.
The consignment of chicory in question was a consignment of 24~- tons495 cases which arrived at Madras port by "S. S. Alwaki" in
December, 1955. Exhibit B-9 was the licence under which the
consignment was imported.
The goods were cleared by the
appellant on December 20, 1955.
The case of the respondent
wa.s that the appellant agreed to sell the consignment to him under
Ex. A-l dated November 26, 1955 after ·taking an advance of
Rs. 7,500/-. The contract was, however, entered into in the
name of the first defendant and. P.W. 2 acted as a broker in the
transaction.
The respondent paid another sum of Rs. 20,000/-
on December 23, 1955 after the goods arrived and were cleared
on the representation that the delivery would be given in one
month. Defendant No. 1 executed a letter, Ex. A-2 in this connection but thereafter owing to rise in prices the appellant committed a default.
The suit was contested by the first defendant
on the ground that the contract was illegal and therefore void.
The case of the second defendant was that he had nothing to do
with the contract entered into between the plaintiff and the first
defendant and, in any case, the contract for sale of chicory was
illegal and void ab initio as contravening the provisions of the
licence granted to him for the import of chicory. The trial court
held, upon examination of the evidence, that both defendants 1
and 2 undertook with the plaintiff to fulfil the terms of the contract.
On the question of legality of the contract the trial court
held that as the contravention of the terms of the licence by the
sale of the imported goods would entail only an administrative
penalty, the sale cannot be held to be prohibited. by law and the
contract was therefore a legal contract binding on j:Joth the parties.
The trial court found that the date of the breach of the contract
was February 14, 1956 and granted a decree in favour of the
plaintiff ngainst both the defendants for a sum of Rs. 35,640/-.
Two appeals were filed in the Madras High Court against the
judgment of
the
trial
court-A.S.
No.
3.67
of
1958
by the second defendant and A.S. No. 363 of 1959 by the first
defendant
The appeals were heard together by the H1gh Court
which by its judgment dated March 16, 1962 allowed the appeal
of the first defendant-AS. No. 363 of 1959 and dismissed the
suit as against him.
As regards the appeal filed by the 2nd
defendant the High Court reduced the amount of damages to the
sum of Rs. 23,265 /-. The High Court agreed with the finding
of the trial Judge that the contract for the sale of imported
chicory was entered into by the respondent directly with the second
defendant and the second defendant was liable for its breach. As
regards the legality of the contract, the High Court took the view
that it could not be regarded as a contract prohibited by any law
and so it was valid and binding between tJte parties and the plaintiff could properly sustain an action for damages for its breach .
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SUPREME COURT REPORTS
!1969) I S.C.R.
The High Court further held that the real contract which the
plaintiff had entered ill'!o was with the second defendant and the
first defendant was only a dummy in whose name the contract was
entered into for ulterior reasons.
The first question to be considered in this appeal is whether
the contract was in violation of the restrictions placed by the
Imports and Exports (Control) Act, 1947 and the notifications
issued thereunder and in consequence whether it was void and
illegal and whether a claim for breach of such
a contract is
maintainable.
It is necessary a1 this stage lo refer to the terms of the licence,
Ex. B-9 and to the relevant provisions of the statutes and the
notifications.
Exhibit B-9 was issued on September 29, 1955 and reads as
fol!ows :
'Messrs. Boothalinga Agencies, of 2/21, Dr. Vasudevan Road, Madras-I 0, arc hereby authorised to imA
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port the goods of which particulars are given below :-
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I. Country from which consigned.
Soft currency
licensing.
2. Country of origin.-Area/Not valid for South
Africa.
3. Description of goods.-Chicory.
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4. Serial number and part of the I .T.C. Schedule
79. V /IV.
5. Quantity.-24i tons.
6. Approximate value c.i.f. (in words) rupees thirty
two 1housand and two only (in figures) Rs. 32,002.
7. Period of shipment: Valid up to 31st March 1956
from the date of issue.
8. Limitin.g
factor
for
purposes
of
clearance
through Customs.
Quantity /value
Both.
This licence is granted under Government of India,
late Ministry of Commerce Notification No. 23-ITC/43,
dated the 1st July 1943, as continued in force by the
Imports and Exports _(Control) 194? <:XVIII of 1947)
and is without prejudice to the apphca110~ of any_ other
prohibition or regulation affecting the 1mportatton of
the ooods which may be in force at the· tune of thclf
,,
arrival.
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BOOTHALINGA AGENCIES v. PORIASWAMI (Ramaswami, J.)
69
This licence is issued subject to the condition that
the goods will be utilised only for consumption as raw
ma1erial or accessories in the licence holder's factory
and that no portion thereof will be sold to any party.
(Signed)
For Chief Controller of Imports.
This licence was granted under Government of India, late Commerce Department Notification No. 23. ITC/ 43 dated July l,
1943 made under Rule 84 ( 3) of the Defence of India Rules
which was intended to "prohibit bringing into British India by
sea, land or air from any place outside India of any goods of the
description specified in 'the schedule (hereto annexed) except the
following ........ :
Sub-Clause XII :-Any goods
of the description
specified in Part IV of the Schedule which are covered
by a special licence issued by. an Import Trade Controller appointed in this behalf by the Central Government."
Imported chicory is one of the goods described in Part IV. The
effect of the notification is that if there is a special licence for
the importing of chicory there would be no prohibition against
its import.
Sections 3, 4 and 5 of the Imports and Exports
(Control) Act, 194 7 provided for the continuance of the notifications previously issued under the Defence of India Rules.
sections 3, 4 and 5 of that Act are to the following effect :
"3. Powers to prohibit or restrict imports and exports.-( 1) The Central Government may, by order
published in the Official Gazette, make provision for
prohibiting, restricting or otherwise controlling, in all
cases or in specified classes of cases,
and subject to
such exceptions, if any, as may be made by or under
the order,-
( a) the import, export, carriage coastwise or shipment as ships' stores 9f goods of any specified
description;
(b) the bringing into any port or place in British
India of goods of any specified description intended to be taken out of British India without
being removed from the ship or conveyance in
which they are being carried.
(2) All goods to which any order under sub-section ( 1) applies shall be deemed to be goods of which
the import or expprt has been prohibited or restricted
under section 19 of the Sea Customs Act, 1878, and all
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SL:PREME COURT REPORTS
[1969] I S.C.R.
the provisious of that Act shall haw effect accordingly,
A
except that section 183 thereof shall have effect as if
for the word 'shall' therein the word 'mav' were substituted.
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( 3) Notwithstanding anything
contained
in
the
aforesaid Act. the Central Government may, by order
published in the Oflicial Gazette, prohibit, restrict or
impose conditions on the clearance, whether for home
consump·tion or for shipment abroad, of any goods or
.cJass of goods imported into British India.
4. All orders made under rule 84 of 1hc Defence
of India Rules or that rule as continued in force by the
Emergency Provisions (Continuance) Ordinance, 1946.
and in force immediately before the ·commencement of
this Act shall, so far as thcv arc not inconsis'lcnt with
the provisions of 1his Act, ·continue in force and be
·deemed to have been made under this Act.
5. If any person contravenes any order made or
deemed to have been made under this Act, he shall,
without prejudice to any confiscation
or penalty
to
which he may be liable under the provisions of the Sea
Customs Act. 1878, as applied by sub-section (2) of
scclion 3, be punishable with imprisonment for a tem1
which may extend to one year, or with tine. or with
both."
·On March 6, 1948 the Central Government issued a notification
under sub-r. (3) of r. 84 of the Defence of Jnclja Rules which
reads as follows :
"No. 2-ITC/ 48-ln exercise of the powers conferred
by sub-s. (I) and sub-s. (3) of s. 3 of the Imports and
Exports (Control) Act, 1947 (XVIII of 1947)
the
Central Government is pleased to make the following
order, namely,
•
(a) Any officer issuing a licence under clauses VIII
to XIV of the Notification of the Government of
India in the late Department of Commerce No.
23-ITC./43 dated the !st July 1943 may issue
the same subject to one or more of the conditions stated below :
(i) That goods covered by the licence shall not
b~ disposed of or otherwise dealt with or
without the written pennission of the Iicensin2 authority or any person duly authorised
b): it.
(ii) That tlic goods covered b.y the licence on
importation shall nat be sold or distributed
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BOOTHALINGA AGENCIES \'. PORIASWAMI (Ramaswami, J.)
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at a price more than that which may be
specified in any directions attached to the
licence.
(iii) That the applicant
for a licence shall
execute a bond for complying 1he terms
subject to which a licence may be granted.
(iv) That the licence shall not be· transferable
except in accordance with the permission of
the licensing authority or a person duly
authorised by it
( v) That such other conditions may be imposed
which the licensing authority considers to
be expedient from the administrative point
of view and which are not inconsisterrt
with the provisions of the said Act.
(b) Where a licensee is found to have contravened
the order or the terms and conditions embodied
in or accompanying a licence, the appropriate
licensing authori1y or the Chief Controller of
Imports may notify him that, without prejudice
to any penalty to which he may be liable under
the Imports and Exports (Control) Act 194 7
(XVUI of 1947) or any other enactment for
the time being in force, he shall either permanently or for a specified period, be refused any
further licence for import of goods.
( c) Where an Importer is found guilty of contravention of the proviso to the said notification or of
any orders or terms or conditions embodied in
or accompanying a licence or an application for
a license or any other import trade control rules
or regulations duly promulgated the appropriate
licensing authority or the Chief Controller of
Imports may natify him that, without prejudice
to any penalty to which he may be liable under
the Imports & Exports (Control)
Act
1947
(XVIII of 194 7) or any other enactment for
the time being in force, he shall either permanently or for a specified period be refused any
license for import of goods."
By s. 4, of Act 4 o.f 1960 there was an amendment of certain
provisions of the Imports and Exports (Control) Act, 1947 (Act
XVIII of 194 7). By s. 4 of the Amending Act the words
"Or any condition of a licence gran1ed under any such order"
were introduced after the clause "any orde~ made or deemed to
have been made under this Act."
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SUPRDIE COURT REPORTS
[1969] I S CR.
On December 7, 1955, the Imports (Control)
Order was
promulgated by 1he Central Government in exercise of the powers
conferred by ss. 3 and 4A of the Imports and Ex pons (Control)
Act, 1947.
Clause 3 of this Order prohibited import of goods
except in accordance with a licence issued by specified authorities.
Clause 5 authorised imposition of conditions under which
goods could be imported. Clause 5 provides as follows :
•
"Conditions of Licence.-(!) The licensin_g authority issuing a licence under this Order may issue
the
same subject to one or more of the conditions stated
below:
(i) that the goods covered by the licence shall not
be disposed of, except in the manner prescribed
by the licensing authority,
or otherwise dealt
with, without the written permission of the licensing authority or any person duly authorised by
it;
(ii) that the goods covered by the licence on importation shall not be sold or distributed at a price
exceeding that which may be specified in any
directions attached to the licence;
(iii) that the applicant for a licence shall execute a
bond for complying with the tcnns subject to
which a licence may be granted.
(2) A licence ~ranted under this Order may contain such ather conditions. not inconsistent with
the
Act or this Order, as the licensing authority may deem
fit.
(3) It shall be deemed to be a condition of every
such licence, that :
( i) no person shall transfer and no
person
shall
acquire
by transfer any licence issued by the
licensin~ authority except under and in accordance with the written permission of the authority
which granted the licence or of any other person
empowered in this behalf by such authority;
(ii) that the goods for the impon of which a licence
is granted shal! be the property of the licensee
at the time of import and thereafter upto the
time of clearance through Customs:
(iii) the ooods for the import of which a licence is
aranted shall be new goods unless
otherwise
~tated in the licence.
··
( 4) The liC<111see shall comply with all conditior
imposed or deemed to be imposed under this clause.~
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BOOTHALINGA AGENCIES v. PORIASWAMI (Ramaswami, J.) 7 3
Notification No. 23. ITC/43 dated July 1, 1943 was repealed
under clause 12 but the proviso to that clause saved the operation
of all licences previously issued and stated that they must be
deemed w be issued under the 1955 Order.
Clause 12 reads
as follows:
"12. Repeals.-The Orders contained in the notifications specified in Schedule IV are hereby repealed :
Provided that anything done or any action taken,
including any appointment made or licence issued
under any of the aforesaid Orders, shall be deemed to
have been done or taken under the corresponding
provision of this Order.
Schedule IV .
Notifications repealed
1. Notification No. 23-ITC/ 43, dated the !st July,
1943 issued by the late Department of Commerce, as
amended.
2. Notification No. 2-ITC/ 48, dated
6th March,
1948, issued by the late Ministry of Commerce.
E
On the basis of these provisions it was c:Ontended by Mr.
Gokhale on behalf of the appellant that the contract which is the
subject-matter of the suit was unlawful and the respondent cannot
claim damages for breach of such a contract. It was not disputed
by Mr.
Qok:hale that the contract between the parties
was entered into on November 26, 1955 before the coming into
F
force of the Imports (Control) Order. It was nevertheless argued
that a breach of the conditions of the licence was
punishable
under s. 5 of Act XVllI of 194 7 as it stood at the relevant time
and therefore the contract was illegal and no claim for the breach
thereof was maintainable.
The contention of the appellant was
that the contravention of the terms of the licence issued nnder
the notification dated March 6, 1948 was a contravention of the
G
notification itself within the meaning of s. 5 of Act XVllI of 1947
and was punishable.
We are unable to accept this argument as
correct. It is clear that s. 5 before its amendment only penalised
the contravention of any order made or deemed to have been
made under the Act. It is true that a licence was granted by
virtue of a stat\ltory notification dated March 6, 1948 issued under
H
the Defence of India Rules and later deemed to have been issued
under Act XVIII of 1947.
Notification No. 23-ITC/43, dated
July 1, 1943 merely provides that. no gOO<ls shall be imported
eKcept the goods covered by special licences issued by an authorised
1 OSup. C. T./68--6
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SUPREME COURT REPORTS
[1969] I S.CR.
officer.
Notification No.
2-ITC/48,
dated March
6,
194:l
authorises the licensing ofhcer to impose one or more conditions
prescribed by that order and the licensing officer has therefore
power to impose conditions in U1c licence issued by him, but if
the licensee contravenes the conditions imposed by th~ licence it
is difficult to hold that it is no1 merely a contravention of the
conditions of a licence but there ;, contravention of the terms of
the notification and so the
provisions of s. 5 of Act XVIII of
1947 are attracted.
Reference was made on behalf of the appellant to the amendment made of s. 5 of Act XVIJI of 1947
bv
the Amendin~ Act 4 of I 960. By tl1c
Amending Act s.
5 of
Act XVIII of 194 7 was :u11endcd so as to include con1ravcntion
of a condition of a licence granted under any order as an offence
under s. 5 of the Act.
It is not. however permissible, in the circurnstanccs (~~ the present case. to construe the language \)f s. )
of the parent Act with the aid of the Amending Act (Act 4 of
1960).
It is not possible for us to accept the contention of Mr.
Gokhale that the Amending Act of 1'160 i.s something in the nature
of a Parliamentary exposition of th" meaning of s. :; as it stood in
the parent Act.
It follows therefore that on the material date a
breach of the conditiOn of a licence was not tantamount to a
breach of the statutory order within the meaning o.f s. 5 of Ac1
XVIII of 1947. The view that we haYe expressed is borne out bY
the decision of this Coun in
Fas1 Tndia Commercial Co. Ltd.
Calcutta v. The Collector of Customs, Calcutta(') in which it was
held by the majority judgment that an infringement of the condition of a licence was not equivalent to an infringement of the two
orders dated July I, 1943 and March 6, 1948 i.e .. N~. 23-ITC/41
and 2-JTC/48 made under the lmpons and Exoons (Control)
Act, 1947 and therefore the provisioQs of s. 167(8) of the Se:i
Custom.s Act were not attracted. We accordingly reject the argument of Mr. Gokhale on this aspect of the case.
We pass on io consider the next contention put forward on
behalf of the appellant, namely, that in any event the Imports
(Control) Order, 1955 had come into force on
December 7,
l 955 and the pcrfonnance of the contract became illegal after
1hat date. It was pointed out that the goods arrived at the Madras
port on December 13, 1955 and were cleared on December 20.
1955.
Reference was made to the conditions imposed
in
the
licence, Ex. B-9 that "the goods will be utilised only for con.sump1 ion as raw material or aceessories in the licence holder's factory
and that no ponion thereof will be sold to any par'ly".
It wa.s
contended 1hat the appellant would be committing
an offence
under s. 5 of Act XVITI of 1947 if he sold the goods to tho res-
. pondent in pur.;uance of the contract as the
condition of the
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BOOTHAL!NGA AGENCIES I'. PORIASWAMI (Ramaswami, J.) 7 5
licence would be violated.
In
our opinion, the argument of
the appellant is well,founded and must be accepted as correct. It
is manifest that •the disposal of the imported chicory which arrived
at Madrns port on December 13, 1955 was governed by the provisions of the Imports (Control) Order, 1955
which came into
force on December 7, 1955. Clause 5 ( 4) of the 1955 Order
expressly provides that the licensee shall comply with all 1he conditions imposed or deemed to be imposed
under that clause.
Therefore the sale of the imported goods would be a direct contravention of cl. 5 ( 4) and under s. 5 of the Imports and Exports
(Control) Act, 194 7 any contravention of the Act or any order
made or deemed to have been made under the Act is punishable
with imprisomnent up to one year or fine or both. In consequence,
even though the contract was enforceable on November 26, 1955
when it was entered into, the performance of the contract bec.ame
impossible or unlawful after December 7, 1955 and so ihe contract became void under s. 56 of the fndian Contract Act after
the coming into force of the Imports (Control)
Order,
1955.
Section 5G of the Indian Con1ract Act states :
"An agreement to do an Act impossible in itself is
void.
A contract to do an Act which, after the contracl· ·
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.
Where one person has promised to do something
which he knew,
or, wi'lh 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
promisee sustains through the non-performance of the
promise."
The doctrine of frustration of contract is really an aspect or
part of the law of discharge of contract by reason of supervenincr
impossibility or illegality of the -act agreed to be done and .henc~
comes within 'the purview of s. 56 of the Indian Contract Act.
lt should be noticed that s. 56 lays down a rule of positive Jaw
and does not leave 1he matter to be determined according to the
inten'tion of the parties.
In English Law a case of supervening illegality is . treated as
an instance of frustration of contract.
In Metropolitan
Water
Board v. Dick, Kerr & Co .. Ltd(1 ), under a contract made ill
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SUPREME COURT REPORTS
[1969) IS.CR.
July 1914, a reservoir was to be constructed and to be completed
in six years from 1914 subject to a proviso that if the contractors
should be impeded or obstructed by
any cause the engineer
should have power to grant an extension of time.
Under the
powers conferred by the Defence of 1hc Realm Acts and Regulations. the contractors were obliged to cease work on the reservoir by order of the Ministry of Munitions in 1916. The House
of Lurds held that the contract was frustrated
by supervening
impossibility, and 1hat the provision for extending the time did
not apply to the prohibition by the Ministry. Lurd Finlay, L.C.
said that the interruption was "of such a character and. duration.
tha·t it vitally and fundamentally changed the conditions of the
contract, and could not possibly have been in the contemplation
of the parties to the contract when it was made."
In a subsequent
case-Denny, Motr and Dickson Ltd. v. James B, Fraser & Co.,
Ltd.(') a contract for the sale and purchase of timber contained
an option for the appellants to purchase a timber-yard (which
wa_, meanwhile let to them) if the contract was terminated on
no:1cc given by either party. By the Control of Timber (No. 4)
Order. 1939, further trading transaction' under the contract became illegal, but in 1941 the appellants gave notice to terminate
the contract, and also to exercise their option to purcha'c the
timber-yard.
The House of Lords held that the option to purchase was dependent on the trading agreement, that the 1939
Order had operated
to frustrate the contract, and that, consequently, the option to purchase lapsed upon the frustration since
it arose only if the contract was tem1inated by notice.
At pa~c
274 of the Report. Lord Wright made the following observations :
"It is now I think well settled that where there is
frustration a dissolution of a contract occurs automati-.
cally.
It does not depend, as does rescission of a contract on the ground of repudiation or breach, on the
choice or election of either party. It depends on what
actually has happened on its effect on the possibility
of perfomiing the ·contract.
Where. as generally happc1Ls. and actually happened in the present case. one
pa11y claims that there has been frustration
and
the
other party contests it. the court decides the issue and
decides it ex pnst facln on the actual circumstances of
~he case.
The dat3 for decision are. on the one hand,
the temis and construction of the contract. read in the
light of the then existing circumstances. and on the other
hand 1he events which have occurred.
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I find the theory of the basis of the rule in Lord Sumner'<
pregnant statement (Joe. cit.) that the doctrine of frustration i~ really-a device by which the rules as to abso-
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BOOTHALINGA AGENCIES v. PORIASWAMi (Ramaswami, J.) 77
lute c0ntracts are reconciled with the special exception
which justice demands. Though it has been constantly
said by high authority, including Lord Sumner, that the
explanation of the rule is to be found in .the theorv that
it depends on an implied condition of the contract,. that
is really no explanation. It only pushes back the problem a single stage. It leaves the question what is 1he
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.
The parties did not anticipate fully and completely, if
at all, or provide for what actually happened."
In
the
recent
case
of
British
Movietonews
Ltd.
v. London and District Cinemas Ltd.('), Denning, L.J. in the
Court of Appeal took the view that "the court really exercises a
qualifying power-a power to qualify the absolute, lrteral or wide
terms of the contract-in order to do what is just and reasonable
in the new situation".
"The day is gone," 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 accordingly.
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." The decision of the Court of Appeal was reversed
by the House of Lords(') and Viscount SirrC'n expressed disapproval of the view taken by Denning, L.J. At page 184 of the
Report, Viscount Simon said :
"The principle remains the same. Particular applications of it may greatly vary and theoretical lawyers
G
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."
H
In English Law therefore the question of frustration of contract has been treated by courts as a ques1;,ion of construction
fl) {1951] 1K.B.190
· !2) [1957] A.C. 166 at 184 .
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depending upon the true intention of the parties.
lu contrast,
A
the statutory provisions contained in s. 56 of the Indian Contract
Act lay down a positive rule of Jaw and English authorities cannot therefore be of direct assistance, though they have persuasive
Yalue.in showing how English courts have approached and decided cases under similar circum~cances.
Cow1sel on behalf of U1e respondent,
however,
contended
that the contract was not impossible of performance and the
appellant cannot •take recourse to the provisions of s. 56 of the
Indian Contract Act.
It was contended that under cl. 1 of the
lmpon Trade Control Order No. 2-lTC/48, dated March
6,
I 948 it was open to ~he· appellant to apply for a written perrnis·
sion of the licensing authority to sell the chicory.
It is not shown
by the appellant that he applied for such permission and the
licensing authority had refused such permission.
It was therefore
maintained on behalf of the respondent that the contract was not
impossible of performance.
We do not think there is any substance in this argument.
It is true that the licensing authority
could have given written pcrmis.,ion for disposal of th" chicury
under cl. I of Order No. 2-ITC/48. dated March 6, 1948 but the
condition imposed in Ex. B-9 in the present case is
a special
condition imposed ,under cl. (v) of paragraph (a) of Order No.
2-ITC/48, dated March 6, 1948 and there was no option given
under ·this clause for the Jicensin~ authority to modify the condition of liccnec that " the goods will be utilised only for consump·
tion as raw material or accessories in the licence holder's factor)
and that no portion thereof will be sold to any party...
H was
further argued on behalf of the respondent that, in any event,
the appellant could have purchased chicory from the open market
and supplied it to the respondent in terms of the contract. There
is no substance in this argument also.
Under the contract the
quality of chicory to be sold was chicory of specific description-
"Egbcrts Chicory. packed in 495 wooden cases, each case containing 2 tins of 56 lb. nett". The delivery of the chicory was to
be <>iven by ·•s. S. Alwaki" in December. 1955.
It is manifes'I
that the contract, Ex. A-1 was for sale of certain specific J!OOds
as described therein and it was not open to the appellant to supply
chicory of anv other description.
Reference was made on behalf
of the respondent to the decision in . Maritime National Fish.
Limited v. Ocean Trawlers, Limited(').
In that case. the respondents chartered to the appellants a steam trawler fittc-0 with
an oiter trawl.
Both parties knew at the time of the contract
that it was ·illegal to use an otter trawl without a licence from ~e
Canadian government.
Some n_10nths later the app~llant:s appl!ed
for licences for five irawlers which they were operatmg. mcludmg
(I) (19Jj] A.C. 524.
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the respondents' trawler.
They were informed that only three
licences would be granted, and were requested to state for which
of the three trawlers they desired to have licences. They named
three trawlers other than the respondents'; and then claimed that
they were no longer bound by the· charter-party as its object had
been frustrated.
It was held by the Judicial Committee that the
failure of the contract was the result of the appellants' own election, and that there was therefore no frustration of the contract.
We think the principle of this case applies to the Indian law and
the provisions of s. 56 of the Indian Contract Act cannot apply
to a case of "self-induced frustration". In other words, the doctrine of frustration of contract cannot apply where the evenrwhich
is alleged to have frustrated the contract arises from the act or
election of a party.
But for the reasons already given, we hold
that this principle cannot be applied to the present case for there
was no choice or election left to the appellant to supply chicory
other than under the tenns of the contract. On the other hand,
fuere was a positive prohibition imposed by the licence upon the
appellant not to sell the imported chicory to any other party but
he was pennitted to utilise it only for consumption as raw material in his own factory.
We are accordingly of the opinion that
Counsel for 1he respondent has been unable to make good his
argument on this aspeot of the case.
For the reasons expressed we hold that this appeal should be
allowed and the decree of the Madras High Court in A.S. No. 367
of 1958 should be set aside and the suit brought by the respondent should be dismissed in its entirety.
We do not propose to
make any order as to costs in this appeal.
Y.P.
Appeal allowed_
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