# MUGNEERAM BANGUR & CO v. SARDAR GURBACHAN SINGH

- **Citation:** [1965] 2 S.C.R. 630
- **Court:** Supreme Court of India
- **Decided:** 1964-12-16
- **Bench:** K. N. Wanchoo, J. R. Mudholkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mugneeram-bangur-co-v-sardar-gurbachan-singh-3429
- **Pages:** 9

## Headnote

B
Contract Act, s. 56-Contract to purchase plot-Subject to comp~-
twn of development work-Government requisitioning
/and-Rendering
completion temporarily unlawful-Whether contract disc.harged.
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 c
transaction within one 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 comD
pany to ascertain when it would complete development work after the
de-requisitioning of the land, so that be might complete the transaction
within one :nonth thereafter. The company claimed that the contract
1tood cancelled since the respondent had failed to comply with the terms
of a circular Jetter issued by it in December 1943, offering all purchasers
an option between' accepting refund of the earnest money or completing
the transaction immediatoly by accepting the land in an undeveloped state.
The respondent denied having received the circular letter and filed a auit
E
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 performance was premature, because, under the contract the respondent did
F
not get the right to obtain a sale deed till after the development work wu
complete.
HELD : (i) It cannot be said 'ihat 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 HJ
If time is of the essence of the contract, or if the time for the perforG
mance 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-CJ
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
H
the Contract Act.
When the parties entered
into
the
contract,
they
k.nc:;;1.v 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-HJ
•
•
·..,..
'-..
•MUGNEERAM co. v. GURBACHAN · (Mudholkar, l.)
631
. . ': .. '•
. ::.
A
,· Denny Mott & Dicks~n Ltd. ',;;l~',n~j B."F;:isser & Co. Ltd. [1944)
A.C. 265 and Satyabrata Ghose and Ors. v. Mugneeram Bangur & Co.
_&c A.nr. [1954] S.C.R. 310. referred to. ,
(ii) Tue contention that the suit was prematnre could not be accepted
because the development work had been completed when the appeal was
heard by the High Conrt. ln such a case the conrt would be justified in
taking notice of subsequent events in moulding its relief accordingly. [638
B .A-BJ
_
c
Civn.: 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.
·

## Text

630
MUGNEERAM BANGUR & CO.
v.
SARDAR GURBACHAN SINGH
December 16, 1964
A
(K. N. WANCHOO AND J. R. MUDHOLKAR, JJ.]
B
Contract Act, s. 56-Contract to purchase plot-Subject to comp~-
twn of development work-Government requisitioning
/and-Rendering
completion temporarily unlawful-Whether contract disc.harged.
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 c
transaction within one 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 comD
pany to ascertain when it would complete development work after the
de-requisitioning of the land, so that be might complete the transaction
within one :nonth thereafter. The company claimed that the contract
1tood cancelled since the respondent had failed to comply with the terms
of a circular Jetter issued by it in December 1943, offering all purchasers
an option between' accepting refund of the earnest money or completing
the transaction immediatoly by accepting the land in an undeveloped state.
The respondent denied having received the circular letter and filed a auit
E
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 performance was premature, because, under the contract the respondent did
F
not get the right to obtain a sale deed till after the development work wu
complete.
HELD : (i) It cannot be said 'ihat 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 HJ
If time is of the essence of the contract, or if the time for the perforG
mance 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-CJ
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
H
the Contract Act.
When the parties entered
into
the
contract,
they
k.nc:;;1.v 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-HJ
•
•
·..,..
'-..
•MUGNEERAM co. v. GURBACHAN · (Mudholkar, l.)
631
. . ': .. '•
. ::.
A
,· Denny Mott & Dicks~n Ltd. ',;;l~',n~j B."F;:isser & Co. Ltd. [1944)
A.C. 265 and Satyabrata Ghose and Ors. v. Mugneeram Bangur & Co.
_&c A.nr. [1954] S.C.R. 310. referred to. ,
(ii) Tue contention that the suit was prematnre could not be accepted
because the development work had been completed when the appeal was
heard by the High Conrt. ln such a case the conrt would be justified in
taking notice of subsequent events in moulding its relief accordingly. [638
B .A-BJ
_
c
Civn.: 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
D
Mudholkar, J. This appeal, like Satyabraia Ghose v. Mugneeram 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 purE
suance 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.
F
"To
G
H
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. l, Northern
Block.
Area measuring-IO ks. x ch. x sqr. ft more or less.
(I) [1954] S.C.R. 310.
632
SUPllEl\O COtll.T
llEPOllTS
(1965)2 S.Cll.
Dear Sir,
A
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. 2'f2/- of the actual value as an earnest
money at once. I undert.ike to complete the transaction within
B
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
C
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 : (lllegible)
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 NovemD
F
G
ber 12, 1941 and July 25, 1944. The plots which the respondents had contracted to purchase are said to form part of the
ff;
land whii:h was requisitioned by virtue of an order made by the
Government on February 18, 1944.
MUGNEERAM co. v. GURBACHAN (Mudholkar, I.)
633
A
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
B
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 :-
c
D
"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 yous 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 )'ou 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-requiF sitioning lands taken ove~ 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 tbe failure of the respondent to exercise the opti9ns given by them therein the agreeG ment stood cancelled and the earnest money had been forfeited.
On June 13, 1946, the respondent's attorneys expressed surprise at the company's reply and stated tbat the respondent had
not received the circular referred to in the company's reply and
ended by saying as follows :
H
"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 conveyi\)lces
634
SUPREME
COURT
REPORTS
(1965] 2 S.C.R.
within one month from such date of completion of the
A
roads.
That my said client hereby calls upcn you to intimate to him within seven days from date the expected
exact date of completion of roads to enable him to com-
. plete the conveyance as per agreement, failing which he
B
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 C
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 con-
. fined his argument only to those matters.
One is that the contract has been discharged by reason of frustration and the second
0
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
E
be said to have been discharged because of the fact that its performance was rendered unlawful as a result of the requisitioning
F
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 contention sought to be urged before it. But, Mr. Sen says that as
G
the contention was not permitted to be raised, the observations of
this Court could be said to havti 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
H
rests would not be relevant for consideration in connection with
the 'argument advanced by Mt. Sen.
A
B
MUGNEERAM co. v. GURBACHAN (Mudholkar, I.)
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
C become in,:ipossible 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
0
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
E 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:
F
"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).
G Though these observations were made while dealing with the
argument that the contract has been frustrated by reason of impossibility of performanqe they would not be wholly out of place
while considering the argument based upon the ground that continued performanc~ of the contract had been rendered unlawful.
What s. 56 speaks of is a contract, the performance of which
H
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 consb 11ction of roads and drains. The
636
SUPllEMB
COUllT
llEPOllTS
[1965] 2 S.C.ll.
actual order served upon the company, among other things, proA.
vides:
"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 r P.M. Bengal
B
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 c
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 subr. (7) of r. 75 (a) of the Defence of India Rules and also the comD
pany. 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 I.
during the continuance in fore.:: 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
1
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
G
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.,( 1 )
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 B
a period of one month.
Would that operate as discharge of the
(I) [1944) A.C. 26S, 274.
MUGNEERAM co. v. GURBACHAN (Mudholkar, 1.)
&37
A 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
B
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 disc charged 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
D 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
E 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
F
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 borne
in mind the possibility that something like what actually happened
may happen and, therefore, did not specify the time within which
G 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 nnd 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 makH
ing 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.
USup.Sl-7
638
SUPREME
COURT
REPORTS
[1965) 2 S.C.ll.
Then remains the other point argued by Mr. Sen.
He said
A
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 tiling
B
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 dismis$ed with costs.
Appeal dismissed.