# SATYABRATA GROSE v. MUGNEERAM BANGUR & CO., AND ANOTHER

- **Citation:** [1954] 1 S.C.R. 310
- **Court:** Supreme Court of India
- **Decided:** 1954
- **Case number:** Civil Appeal No. 80 of 1952
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/satyabrata-grose-v-mugneeram-bangur-co-and-another-267
- **Pages:** 20

## Headnote

310
SUPRkME COURT REPORTS
[1954]
1953
appeal is allowed and we award to the Commissioner
-:--:-
of Income-tax the costs of this appeal and those of
Comm?SBioner of th
d'
· th H' h C
t
Income-tax,
e procee mgs m
e
1g
our _
Bo1nbay CUy
v.
]loyal Western
India Turf
Club Ltd.
195J
November 16.
Appeal allowed.
Agent for the appellant: G. H. Bajadhyaksha.
Agent for the respondent: Bajinder Narain.
SATYABRATA GROSE
v.
MUGNEERAM BANGUR & CO., AND ANOTHER.
MuKHERJEA, V1vrAN BosE and BHAGWATI JJ.]
Indian Contract Act (IX of 1872), s. 56-Aareement to sell lct·nd
-Doctrine of frnstratio,.-Applicetbility-Doctrine whether a.ppvicable ir1i India-'-Scope of s. 56-"Inipossible," nwaning of-Agree.
inent for sale of land-B11yer's rights-English and Indian law.
The doctrine of frustration is really an aspect or part of the
law of discharge of contract by reason of supervening impossibility
or illegality of the act agreed to be done and hence comes within
the purview of s. 56 of the Indian Contract Act.
'rhe view that
s. 56 applies only to cases of physical impossibility and that where
this section is not applicable recourse can be had to the principles
of English law on the subject of frustration is not correct. English
cases can have only a persuasive value, and are only helpful in
showing how English courts decided cases under similar circum·
stances.
·
Section 56 of the Indian Contract Act lays down a rule
of positive law and does not leave the matter to be determined
according to the intention of the parties.
According to the Indian Contract Act, a promise n1ay be express or implied.
In_ cases, therefore, where the court gathers as
a matter of construction that the contract itself contained impliedly or expressly a term, according to which it would stand
discharged on the happening of certain circumstances, the dissolution of the contract would take place under the terms of the
contract itself and such cases would be outside the purview of
s. 56 altogether. Although in English law these cases are treated
as cases of frustration, in India they would be dealt with under
s. 32 of the Indian Contract Act which deals with contingent
contracts or similar other provisions contained in the Act. In the
large majority of cases however the doctrine of frustration is
applied nol on the sround that the parties themselves'ogreed to ap
.;
j
" 1
s.c.:R.
SUPREME COUR'l' REPORi'S
311
implied term which operated to release them from the performance
1953
of the contract. The relief is given by the court on the ground of
--
subsequent impossibility when it finds that the whole purpose or Satyabrata Ghost
basis of a contract was frustrated by the intrusion or occurrence
v.
of an unexpected event or change of circumstances which was beMugneeram
yond what was contemplated by the parties at the time when they Bangur and Oo.,
entered into the agreement. Here there is no question of finding
and Another.
out an implied term agreed to by the parties embodying a provision for discharge, because the parties did not think about the
matter at all nor could possibly have any intention regarding it.
When such an event or change of circumstance occurs which is so
fundamental as to be regarded by law as striking at the root of the
contract as a whole, it is the court which can pronounce the contract to be frustrated and at an end.
The court undoubtedly has
to examine the contract and the circumstances under which it was
made.
The belief, know ledge and intention of the parties are
evidence, but evidence only on which the court has to form its own
conclusion whether the changed circumstances destroyed altogether
the basis of the adventure and its underlying object. This may be
called a rule of construction by English Judges but it is certainly
not a principle of giving effect to the intention of the parties which
underlies all rules of construction. This is really a rule of positive
law and as such comes within the purview of s. 56 of the Indian
Contract Act.
.
The reason underly

## Text

_Characters 0–39,942 of 45,284. This is a partial read: ask again with offset=39942 for what follows._

310
SUPRkME COURT REPORTS
[1954]
1953
appeal is allowed and we award to the Commissioner
-:--:-
of Income-tax the costs of this appeal and those of
Comm?SBioner of th
d'
· th H' h C
t
Income-tax,
e procee mgs m
e
1g
our _
Bo1nbay CUy
v.
]loyal Western
India Turf
Club Ltd.
195J
November 16.
Appeal allowed.
Agent for the appellant: G. H. Bajadhyaksha.
Agent for the respondent: Bajinder Narain.
SATYABRATA GROSE
v.
MUGNEERAM BANGUR & CO., AND ANOTHER.
MuKHERJEA, V1vrAN BosE and BHAGWATI JJ.]
Indian Contract Act (IX of 1872), s. 56-Aareement to sell lct·nd
-Doctrine of frnstratio,.-Applicetbility-Doctrine whether a.ppvicable ir1i India-'-Scope of s. 56-"Inipossible," nwaning of-Agree.
inent for sale of land-B11yer's rights-English and Indian law.
The doctrine of frustration is really an aspect or part of the
law of discharge of contract by reason of supervening impossibility
or illegality of the act agreed to be done and hence comes within
the purview of s. 56 of the Indian Contract Act.
'rhe view that
s. 56 applies only to cases of physical impossibility and that where
this section is not applicable recourse can be had to the principles
of English law on the subject of frustration is not correct. English
cases can have only a persuasive value, and are only helpful in
showing how English courts decided cases under similar circum·
stances.
·
Section 56 of the Indian Contract Act lays down a rule
of positive law and does not leave the matter to be determined
according to the intention of the parties.
According to the Indian Contract Act, a promise n1ay be express or implied.
In_ cases, therefore, where the court gathers as
a matter of construction that the contract itself contained impliedly or expressly a term, according to which it would stand
discharged on the happening of certain circumstances, the dissolution of the contract would take place under the terms of the
contract itself and such cases would be outside the purview of
s. 56 altogether. Although in English law these cases are treated
as cases of frustration, in India they would be dealt with under
s. 32 of the Indian Contract Act which deals with contingent
contracts or similar other provisions contained in the Act. In the
large majority of cases however the doctrine of frustration is
applied nol on the sround that the parties themselves'ogreed to ap
.;
j
" 1
s.c.:R.
SUPREME COUR'l' REPORi'S
311
implied term which operated to release them from the performance
1953
of the contract. The relief is given by the court on the ground of
--
subsequent impossibility when it finds that the whole purpose or Satyabrata Ghost
basis of a contract was frustrated by the intrusion or occurrence
v.
of an unexpected event or change of circumstances which was beMugneeram
yond what was contemplated by the parties at the time when they Bangur and Oo.,
entered into the agreement. Here there is no question of finding
and Another.
out an implied term agreed to by the parties embodying a provision for discharge, because the parties did not think about the
matter at all nor could possibly have any intention regarding it.
When such an event or change of circumstance occurs which is so
fundamental as to be regarded by law as striking at the root of the
contract as a whole, it is the court which can pronounce the contract to be frustrated and at an end.
The court undoubtedly has
to examine the contract and the circumstances under which it was
made.
The belief, know ledge and intention of the parties are
evidence, but evidence only on which the court has to form its own
conclusion whether the changed circumstances destroyed altogether
the basis of the adventure and its underlying object. This may be
called a rule of construction by English Judges but it is certainly
not a principle of giving effect to the intention of the parties which
underlies all rules of construction. This is really a rule of positive
law and as such comes within the purview of s. 56 of the Indian
Contract Act.
.
The reason underlying the rule of English law that the
doctrine of frustration does not apply to contracts for the sale of
land, is that under the English law, as soon as the agreement to
sell is complete the buyer becomes the owner of the land in equity.
As a mere agreement to sell does not confer any rights of ownership on the buyer under the Indian law, the doctrine of frustration is as applicable in India to agreements for sale of land as in
the case of other agreements.
·
In 1940, as an integral part of a development scheme of an
extensive area of land, started by the defendant company, it
entered into a contract with the plaintiff's predecessor for the sale
of a plot of land to the latter accepting a small sum of money as
earnest. It undertook to construct roads and drains .and the
conveyance was to be completed soon after the completion of the
roads on payment of the balance of the price.
As a considerable
portion of the area comprised in the scheme was requisitioned by
the Government for military purposes in 1941, the company wrote
to the defendant that the road construction could not be taken up
for an indefinite period and requested him to treat the agreement
as cancelled and receive back his earnest: Helcl, that having regard
to the nature and terms of the contract, the actual existence of
war conditions at the time when it was entered into, the extent of
the work involved in the scheme fixing no time limit in the agreement for the construction of the roads etc., and the fact that t.he
order of requisition was in its very nature of a temporary
cha1·acter, the relJuisition did not affect the fundamental basis of
312
StJPREME COURT REPORTS
[l954j
1953
the contract; nor did the performance of the contract become illegal
by reason of the requisition, and the contract had not therefore
Satyabrata Ghose become impossible within the meaning of s. 56 of the Indian
v.
Contract Act.
ll'Iugneera·m
Joseph Oonstant,ine Steamship Co. v. Irnperial Srnelting OorBangur and Oo., poration Ltd. ( [1942] A.O. 154), Tamplin Steamship Co. Ltd. v.
and Another.
Anglo-American
Prod1lcts Co. Ltd. (ll916] A. 0. 397), Kewri
Chand v. Governor-General in Co1wcil (I.L.R. 1949 Nag. 718),
Mukherjea J. Ganga Sara1' v. Bani Charan ( [1952] S.C.R. 36), Taylor v. Caldwell
(3 B. and S. 826), Robinson v. Davison (L.R. 6 Ex. 269), Denny
Mott and Dickson Ltd. v. J arnes B. Frazer & Go. Ltd. ([1944] A. 0.
265) referred to.
CIVIL APPELLATE
JURISDICTION:
Civil Appeal
No. 80 of 1952'
Appeal from the Judgment and Decree dated the
6th September, 1950, of the High Court of Judicature
at Calcutta (Das Gupta and Lahiri JJ.) in Appellate
Decree No. 318 of 1949 from the Judgment and Decree
dated the 25th February, 1949, of the Court of the
District Judge of Zillah 24 Parganas in Title Appeal
No. 8 of 1948 arising out of the Judgment and Decree
dated the 10th October, 1947, of the Court of the
Additional Subordinate Judge, 7th Court, AJipore. ·
]Jf. C. Setalvad, Attorney-General for India (Aurobinda
Guha and Gobinda Mohan Roy, with him) for the
appellant.
Atul Chandra Gupta (Bijan Behari Das Gupta, with
him) for respondent No. 1.
1953. November 16.
The Judgment of the Court
was delivered by
MuKRERJEA J.-The facts giving rise to this appeal
are, for the most part, uncontroverted and the dispute
between the parties centres round the short point as to
whether a contract for sale of land to which this litigation relates, was. discharged and came to an end by
reason of certain supervening circumstances which
affected the performance of a material part of it.
To appreciate the merits of the controversy, it will
be necessary to give a brief narrative of the material
facts.
The defendant company, which is the main
respondent in this appeal, is the owner of a large tract
~f land situated in the vicinity of the Dhakuria Lal-es
•
)
•
;.
S.C.R.
SUPREME COURT REPORTS
313
within Greater Calcutta. The company started a
1963
scheme for development of this land for residential
-
purposes which was described as Lake Colony Scheme Satyabrata Ghose
No. 1 and in furtherance of the scheme the entire area
Mug;;
was divided into a large number of plots for the sale Bangur a~;~o.,
of which offers were invited from intending purchasers.
and Another.
The company's plan of work seemed to be, to enter
into agreements with different purchasers for sale of MukherjeaJ.
these plots of land and accept from them only a small
portion of the consideration money by way of earnest
at the time of the agreement. The company undertook
to construct the roads and drains necessary for making
the lands suitable for building and residential purposes
and as soon as they were completed, the purchaser
would be called upon to complete the conveyance by
payment of the balance of the consideration money.
Bejoy Krishna Roy, who was defendant No. 2 in the
suit and figures as a pro f orma respondent in this
appeal, was one of such purchasers who entered into a
contract with the company for purchase of a plot of
land covered by the scheme.
His contract is dated
the 5th of August, 1940, and he paid Rs. 101 as earnest
money. In the receipt granted by the vendor for this
earnest money, the terms of the agreement are thus
set out:-
"Received with thanks from Babu Bejoy Krishna
Roy of 28 Tollygunge · Circular Road, Tollygunge,
the sum of Rs. 101 (Rupees one hundred and one only)
as earnest money having agreed to sell to him or his
nominee 5 K. more or less in plot No. 76 on 20 and 30
ft. Road in Premises'No. Lake Colony Scheme No. 1,
Southern Block at the average rate of Rs. 1,000
(Rupees one thousand only) per Cotta.
The conveyance must be completed within one
month from the date of completion of roads on payment of the balance of the consideration money, time
being deemed as the Essence of the Contract. In case
of default this agreement will be considered as cancelled with forfeiture of earnest money.
l\folrnrari Mourashi
314
SUPREME COURT REPORTS
[1954]
1953
Terms of payment :·--One-third to be paid at the
Satyabrata Ghose time of registration and the balance within six years
v.
bearing Rs. 6 per cent. interest per annum".
Mngne<ram
On 30th November, 1941, the plaintiff appellant was
Bangnr and Oo., made a nominee by the purchaser for purposes of the
and Another. contract and although he brought the present suit in
MHkherjea J, the character of a nominee, it has been held by the trial
judge as well as by the lower appellate court, that he
was really an assignee of Bejoy Krishna Roy in respect
to the latter's rights under the contract.
Some time
before this date, there was an order passed by the
Collector, 24-Parganas, on 12th of November, 1941,
under section 79 of the Defence of India Rules, on the
strength of which a portion of the land covered by the
scheme was requisitioned for military purposes. Another part of the land was requisitioned by the Government on·20th of December, 1941; while a third order
of requisition, which related to the balance of the land
comprised in the scheme, was passed sometime later.
In November, 1943, the company addressed a letter to
Be joy Krishna Roy informing him of the requisitioning
of the lands by the Government and stating inter alia
that a considerable portion of the land appertaining to
the scheme was taken possession of by the Government
and there was no knowing how long the Government
would retain possession of the same. The construction of the proposed roads and drains, therefore,
could not be taken up during the continuance of
the war and possibly for many years after its
termination. In these circumstances, the company
decided to treat the agreement for sale with the
addressee as cancelled and give him the option of taking
back the earnest money within one month from the
receipt of the letter. There was offer made in the
alternative that in case the purchaser refused to treat
the contract as cancelled, he could, if he liked, complete
the conveyance within one month from the receipt of
the letter by paying the balance of the consideration
money and take the land in the condition in which it
existed at that time, the company undertaking to con-
.struct the roaqs and the drains1 as circumstances might
~
)
r
S.C.R.
SUPREME COURT REPORTS
315
permit, after the termination of the war.
The letter
1953
ended by saying that in the event of the addressee not 8
b-Gho
,
. h
f h
l
t.
th
t
at ya rata
ae
acceptmg e1t er o t e two a terna ives,
e agreemen
v.
would be deemed to be cancelled and the earnest money
Mugneeram
would stand forfeited.
This letter was handed over Bangur and Oo.,
by Be joy Krishna to his nominee, the plaintiff, and
and Another.
there was some correspondence after that, between the
h
Mukherjea J.
plaintiff on the one hand and t e company on the other
through their respective lawyers into the details of
which it is not necessary to enter. It is enough to
state that the plaintiff refused to accept either of the
two alternatives offered by the company and stated
categorically that the latter was bound by the terms of
the agreement from which it could not, if!- law, resile.
On 18th of January, 1946, the suit, out of which this
appeal arises, was commenced by the plaintiff against
the defendant company, to which Bejoy Krishna Roy
was made a party defendant and the prayers in the
plaint were for a two-fold declaration, namely, (1) that
the contract dated the 5th of August, 1940, between the
first and the second defendant, or rather his nominee,
the plaintiff, was still subsisting; and (2) that the
plaintiff was entitled to get a conveyance executed and
registered by the defendant on payment of the consideration money mentioned in the agreement and in the
manner and under the conditions specified therein.
The suit was resisted by the defendant company who
ra:sed a large num her of defences in answer to the plaintiff's claim, most of which are not relevant for our present purpose.
The principal contentions raised on
behalf of the defendant were that a suit of this description was not maintainable under section 42 of the
Specific Relief Act and that the plaintiff had no locus
standi to institute the suit. The most material plea
was that the contract of sale stood discharged
by frustration as it became impossible by reason of
the supervening events to perform a material part of it.
Bejoy Krishna Roy did not file any written statement
and he was examined by the plaintiff as a witness on .
his behalf.
42
316
SUPREME COURT REPORTS
(1954)
1941
The trial judge by his judgment dated 10th October,
8 . ,- Gh
1947, overruled all the pleas taken by the defendant
atya '~." '
0
" and decreed the plaintiff's suit. An appeal taken by
Mugnmmn
the defendant to the Court of the District Judge of 24
B'anm1r and co., Parganas was dismissed on the 25th February,. 1949,
and Another. and the judgment of the trial court was affirmed. The
defendant company thereupon preferred a second
Jl,fukhrrjea J.
1
J H" h C
h' h
h
d b
D"
appea to tie
ig
ourt w JC
was ear
y a
ivision Bench consisting of Das Gupta and Lahiri JJ.
The only question canvassed before the High Court was,
whether the contract of sale was frustrated by reason
of the requisition orders issued by the Government?
The learned Judges answered this question in the affirmative in favour of the defendant and on that ground
alone dismissed the plaintiff's suit. The plaintiff
has now come before us on the strength of a certificate
granted by the High Court under article 133(1) (c) of
the Constitution of India.
The learned Attorney-General, who appeared in
support of the appeal, has put forward a three-fold
contention on behalf of his client.
He has contended
in the first place that the doctrine of English law relating to frustration of contract, upon which the learned
Judges of the High Court based their decision, has no
application to India in view of the statutory provision
contained in section 56 of the Indian Contract Act. It
is argued in the second place, that even if the English
law applies, it can have no application to contracts for
sale ofland and that is in fact the opinion expressed
by the English Judges themselves. His third and the
last argument is that on the admitted facts and
circumstances of this case there was no frustrating
event which could be said to have taken away the basis
of the contract or rendered its performance impossible
in any sense of the word.
The
first
argument advanced by the learned
Attorney-General raises a somewhat debatable point
regarding the true scope and effect of section 56 of
the Indian Contract Act and to what extent, if
any, it incorporates the English rule of frustration
of contracts.
)
s.c.u.
SUPREME ·COURT REPORTS
317
I
Section 56 occurs in Chapter IV of the Indian Con1953
tract Act which relates to performance of contracts 8
-- Gh
d .
t d l
'th
l
f .
t
atyabrata
o,.
an it purports o ea w1
one c ass o 01rcums ances
v.
under which performance of a contract is excused or
Mttgnee·ram
dispensed with on the ground of the contract being void. Bangur and Oo.,
The section stands as follows :-
and Another.
"An agreement to do an act impossible in itself is Mukherjca J.
void.
A contract to do an act which after the contract 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, with reasonable diligence, might
have known, and which the
promisee did not
know to be impossible or unlawful, such promisor must
make compensation to such promiseefor any loss which
such promisee sustains through the non-performance
of the promise."
The first paragraph of the section lays down the law
in the same way as in England. It speaks of something which is impossible inherently or by its very
nature, and no one can obviously be directed to perform such an act. The second paragraph enunciates
the law relating to discharge of contract by reason of
supervening impossibility or illegality of the act agreed
to be done.
The wording of this paragraph is quite
general, and though the illustrations attached to it are
not at all happy, they cannot derogate from the general
words used in the enactment. This much is clear that
the word "impossible" has not been used here in the
sense of physical or literal impossibility. The performance of an act may not be literally impossible but it
may be impracticable and useless from the point of
view of the object and purpose which the parties had
in view; and if an untoward event or change of circumstances totally upsets the very foundation upon
which the parties rested their bargain, it can very well
318
SUPREME COURT REPORTS
[1954]
1963
be said that the promisor found it impossible to do the
~ , b-,- Gh
act which he promised to do.
oa ya ra a
ose
v.
Although various theories have been propounded by
Muyn,,ram
the Judges and jurists in England regarding the juridiBa';::;'~ and Oo .• cal basis of the doctrine of frustration, yet the essential
a
nother. idea upon which the doctrine is based is that of imposMukher;ea J. sibility of performance of the contract; in fact impossibility and frustration are often used as interchangeable
expressions. The changed circumstances, it is said,
make the performance of the contract impossible and
the parties are absolved from the further performance
of it as they did not promise to perform an impossibility.
The parties shall be excused, as Lord
Loreburn says('),
"if substantially the whole contract becomes
impossible of performance or in other words impracticable by some cause for which neither was responsible."
In Joseph Constantine Steamship Line
Limited
v. Imperial Smelt·ing Corporation Ltd.('), Viscount
Maugham observed that the "doctrine of frustration is
only a special case of the discharge of contract by an
impossibility of performance arising after the contract
was made." Lord Porter agreed with this view and
rested the doctrine on the same basis. The question
was considered and discussed by a Division Bench of
the Nagpur High Court in Kesari Chand v. GovernorGeneral in Council(") and it was held that the doctrine
of frustration comes into play when a contract becomes
impossible of performance, after it is made, on account
of circumstances beyond the control of the parties.
The doctrine is a special case of impossibility and as
such comes under section 56 of the Indian Contract
Act. We are in entire agreement with this view which
is fortified by a recent pronouncement of this court in
Ganga Saran v. Ram Charan('), where Faz! Ali J., in
(1) See Ta1nplin Steam,ship Co. Ltd. v. Anglo-Mexican Petroleinn P·roducts
·Oo. Ltd. [1916] 2 A.C. 397, -403,
(2) [194•] A.c. 154 at 168.
(3) I.L.R. 1949 Nag. 718 .
. (4) [1952] s.c.R. 36 at 52.
.Ir {
. '
S.C.R.
SUPREME COURT REPORTS
319
speaking about frustration, observed in his judgment as
1953
follows :-
·
,
,
. ,
.
Satyabrata Gho8'
"It seems necessary for us to emphasise that so far
v.
as the courts in this country are concerned, they must
Mugneeram
look primarily to the law as embodied in sections 32 Bangur and Co.,
and 56 of the Indian Contract Act, 1872."
and Another.
We hold, therefore, that the doctrine of frustration Mukherjea J.
is really an aspect or part of the law of discharge of
contract by reason of supervening impossibility or
illegality of the act agreed to be done and hence comes
within the purview of section 56 of the Indian Contract
Act. It w·ould be incorrect to say that section 56 of
the Contract Act applies only to cases of physical
impossibility and that where this section is not
applicable, recourse can be had to the principles of
English law on the subject of frustration. It must be
held also that to the extent that the Indian Contract
Act deals with a particular subject, it is exhaustive
upon the same and it is not permissible to import the
principles of English law dehors these statutory provisions. The decisions of the English courts possess only
a persuasive value and may be helpful in showing how
the courts in England have decided cases under circumstances similar to those which have come before
our courts.
It seems necessary however to clear up some misconception which is likely to arise because of the complexities of the English law on the subject. The law
of frustration in England developed, as is well known,
under the guise of reading implied terms into contracts.
The court implies a term or exception and treats that
as part of the contract. In the case of Taylor v. Caldwell('), Blackburn J. first formulated the doctrine in
its modern form.
The court there was dealing with a
case where a music hall in which one of the contracting
parties had agreed to give concerts on certain specified
days was accidentally burnt by fire. It was held that
such a contract must be regarded "as subject to an
implied condition that the parties shall be excused, in
case, before breach, performance becomes impossible
(I) 3 B & S. 826
320
SUPREME COURT REPORTS
[i954]
195•
from perishing of the thing without default of the cons t
b-ta- ,-h
tractor." Again in Robinson v. Davison(') there was a
ayara
vosc
.
,
·
v.
contract between the plamt1ff and the defendant's
Mur1nmam
wife (as the agent of her husband) that she should play
Bangur and Go., the piano at a concert to be given by the plaintiff on a
and Another. specified day.
On the day in question she was unable
MnkherjcaJ. toyerform through illness.
The contract d~d not con:
, tam any term as to what was to be done m case of
her being too ill to perform. In an action against
the defendant for breach of contract, it was held that
the wife's illness and the consequent incapacity excused
her and that the contract was in its nature not
absolute but conditional upon her being well enough
to perform.
Bramwell B. pointed out in course
of his judgment that in holding that the ilh!ess
of the defendant incapacitated her from performing
the agreement the court was not really engrafting a
new term upon an express contract. It was not that
the obligation was absolute in the original agreement
and a new condition was subsequently added to it;
the whole question was whether the original contract
was absolute or conditional and having regard to the
terms of the bargain, it must be held to be conditional.
The English law passed through various stages of
development since then and the principles enunciated
in the various decided authorities cannot be said to be
in any way uniform. In many of the pronouncements
of the highest courts in England the doctrine of frustration was held "to be a device by which the rules as
to absolute contraots are reconciled with a special
exception which justice demands"('). The court, it is
said, cannot claim to exercise a dispensing power or to
modify or alter contracts. But when an unexpected
event or change of circumstance occurs, the possibility
of which the parties did not contemplate, the meaning
of the contract is taken to be not what the parties
actually intended, but what they as fair and reasonable men would presumably have intended and agreed
upon, if having such possibility in view they had made
express provision as to their rights and liabilities in the
(1) (1871) L.R. 6 Exch. z69.
(2) Vide Hirji Mulji v. Cheong Yue Steamship Co. Ltd, [1926] A.C. 497
at 510.
•
)
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SUPREME COURT REPORTS
321
event of such occurrence(').
As Lord Wright observ1asa
ed in Joseph Constantine Steamship Go. v. Imperial 8 1 b-t Gh
•
•
·
· .
a .ya ra a
oBe
Smelting Corporation Ltd.(2):
v.
" In ascertaining the meaning of the contract and
its application to the actual occurrences, the court
has to decide, not what the parties actually intended
but, what as reasonable men they should have intended. The court personifies for this purpose the reasonable man."
Lord Wright clarified the position still further in the
later case of Denny, llfott and Dickson Ltd. v . .James B.
Fraser & Go. Ltd.("), where he made the following observations:
"Though it has been constantly said hy high
authority, including Lord Sumner, that the explanation
of the rule is to he found in the theory 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 the reason for implying a term. Nor can I reconcile that theory with the
view that the result does not depend on what the
parties might, or would, as hard bargainers, have agreed.
The doctrine is invented hy the court in order to
supplement the defects of the actual contract ...... To
my mind the theory of the implied condition is not
really consistent with the true theory of frustration.
It has never been acted on by the court as a ground
of decision, hut is merely stated as a theoretical explanation."
In the recent case of British Movietonews Ltd. v.
London and District Cinemas Ltd.( 4 ), Denning L .• J. in
the Court of Appeal took the view expressed by Lord
\Vright as stated above as meaning that "the court
really exercises a qualifying power-a power to qualify
the absolute, literal or wide terms of the contract-in
order to do what is just and reasonable in the new
(1) Vide Dahl v. Nelson, Don/cin and Oo., (r88r) 6 App. Cas. 38 at 59.
(2) [1942] A.C. 154 at 185.
(3) [1944] A.C. 265 at 275.
(4) [1951] l K.B. 190.
Mugneeram
Bangur and Oo.,
and A not her.
M u/cherjea J.
322
SUPREME COURT REPORTS
[1954]
1963
situation". "The day is gone," the learned Judge went
0
b- GI
on to say, "when we can excuse an unforeseen injustice
.,atya rata
.ase b
.
t th
f""
'.
.
1' 11
v.
y saymg o
e su 1erer it is your own 10 y, you
M 11gneeram
ought not to have passed that form of words.
You
Bang11r and Oo .. ought to have put in a clause to protect yourself.' 'Ve
and Another. no longer credit a party with the foresight of a Prophet·
or his lawyer with the draftsmanship of a Chalmers.
!11ukherjeaJ. W
!'
h
J
h
h
1 '
d
k
e rea.1se t at t iey ave t eir imitations an
ma e
allowances accordingly. It is hetter 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.
vVe have of late paid
heed to this warning, and we must.pay like heed now."
This decision of the Court of Appeal was reversed
by the House of Lords and Viscount Simon in course
of his judgment expressed disa.pproval of the way in
which the law was stated by Denning L.J. It was
held that there was no change in the law as a result of
which the courts could exercise a wider power in this
regard than they used to do previously. "The principle
remains the same", thus observed his Lordship.
"Particular applications of it may greatly vary and
theoretical lawyers may debate whether the rule should
be regarded as arising from implied term or because
the basis of the contract no longer exists. In any view,
it is a question of construction as Lord 'Vright pointed
out in Constantine's case and as has been repeatedly asserted by other masters of law.''(')
These differences in the way of formulating legal
theories really do not concern us so long as we have a
statutory provision in the Indian Contract Act. In
deciding cases in India the only doctrine that we have
to go by is that of supervening impossibility or illegality as laid down in section 56 of the Contract Act,
taking the word "impossible" in its practical and not
literal sense. It must be borne in mind, however, that
section 56 lays down a rule of positive law and does
not leave the matter to be determined according to the
intention of the parties.
\I) (1952) A.?. 166 at 184.
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)
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S.C.R.
SUPREME COURT REPORTS
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In the latest decision of the House of Lords referred
1953
to above, the Lord Chancellor puts the whole doctrine Satyab-;;;,;; Ghose
upon the principle of construction. But the question·
v.
of construction may manifest itself in two totally
Mugneeram
different ways. In one class of cases the question may Bangur and ao.,
simply be, as to what the parties themselves had actuand Another.
ally intended; and whether or not there was a condiMuk-;:;;ea J.
tion in the contract itself, express or implied, which
operated, according to the agreement of the parties
themselves, to release them from their obligations;
this would be a question of construction pure and
simple and the ordinary rules of construction would
have to be applied to find out what the real intention
of the parties was. According to the Indian Contract
Act, a promise may be express or implied('). In cases,
therefore, where the court gathers as a matter of construction that the contract itself contained impliedly
or expressly a term, according to which it would stand
discharged on the happening of certain circumstances,
the dissolution of the contract would take place under
the terms of the contract itself and such cases would
be outside the purview of section 56 altogether.
Although in English law these cases are treated as cases
of frustration, in India they would be dealt with under
section 32 of the Indian Contract Act which deals with
contingent contracts or similar other provisions contained in the Act. In the large majority of cases however the doctrine of frustration is applied not on the
ground that the parties themselves agreed to an implied
term which operated to release them from the
performance of the contract. The relief is given by the
court on the ground of subsequent impossibility when
it finds that the whole purpose or basis of a contract
was frustrated by the intrusion or occurrence of an
unexpected event or change of circumstances which
was beyond what was contemplated by the parties at
the time when they entered into the agreement. Here
there is no question of finding out an implied term
agreed to by the parties embodying a provision for
discharge, because the parties did not think about the
matter at all nor could possibly have any intention
(I) Vide section 9.
13
324
SUPREME COURT REPORTS
[1954)
1963
regarding it. When such an event or change of circumSatyabrata Chose stance occurs which is so fundamental as to be regardv.
ed by law as striking at the root of the contract as a
M11gnmam
whole, it is the court which can pronounce the contract
Ban.?'" and Oo., to be frustrated and at an end. The court undoubtedly
and Another. has to examine the contract and the circumstances
Mukher)ea J. under which it was made. The belief, knowledge and
intention of the parties are evidence, but evidence only
on which the court· has to form its own conclusion
whether the changed circumstances destroyed altogether the basis of the adventure and its underlying
object('). This may be called a rule of construction
by English Judges but it is certainly not a principle of
giving effect to the intention of the parties which
underlies all rules of construction. This is really a rule
of positive law and as such comes within the purview
of section 56 of the Indian Contract Act.
It must be pointed out here that if the parties do
contemplate the possibility of an intervening circumstance which might affect the performance of the
contract, but expressly stipulate that the contract
would stand despite such circumstance, there can be
no case of frustration because the basis of the contract
being to demand performance despite the happening
of a particular event, it cannot disappear when that
event happens. As Lord Atkinson said in Matthey v.
Curling('), "a person who expressly contracts absolutely
to do a thing not naturally impossible is not excused
·for non-performance because ofbeing prevented by the
act of God or the King's enemies ......... or vis major."
This being the legal position, a contention in the
extreme form that the doctrine of frustration as recognised in English law does not come at all within the
purview of section 56 of the Indian Contract Aot cannot be accepted.
The second contention raised by the AttorneyGeneral can be disposed of in few words. It is true
that in England the judicial opinion generally expressed is, that the doctrine of frustration does not operate
(1) Vide 14organ v. Manser [1947) z All E.R, 666,
(2) (1922] 2 A.C. r8o at 234,
..
;
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S.C.R. .:
SUPREME COURT REPORTS
32!5
in the case of contracts for sale of land(').
But the
1953
reason underlying this view is that under the English
-
Gh
l
h
.
l d d
b
A
SatyabYata
ose
aw as soon as t ere is a cone u e
contract
y
to
sell land to B at certain price, B becomes, in equity,
Alug;:e·eram
the owner of the land subject to his obligation to pay BangurandGo.,
the purchase money.
On the other hand, A in spite
and Another.
of his having the legal estate holds the same in trust
for the purchaser and whatever rights he still retains
Mitkhcrjca J.
in the land are referable to his right to recover and
receive the purchase money.
The rule of frustration
can only put an end to purely contractual obligatiqns,
but it cannot destroy an estate in land which has
already accrued in favour of a contracting party.
According to the Indian law, which is embodied in
section 54 of the Transfer of Property Act, a contract
for sale of land does not of itself create any interest in
the property which is the subject-matter of the contract. The obligations of the parties to a contract for
sale of land are, therefore, the same as in other ordinary contracts and consequently there is no conceivable
reason why the doctrine of frustration should not be
applicable to contracts for sale of land in India. This
contention of the Attorney-GeneraJ must, therefore,
fail.
We now come to the last and most important point
in this case which raises the question as to whether, as
a result of the requisition orders, under which the lands
comprised in the development scheme of the defendant
company were requisitioned by Government, the
contract of sale between the defendant company
and the plaintiff's predecessor stood dissolved by
frustration or in other words became impossible of
performance.
It is well settled and not disputed before us that if
and when there is frustration the dissolution of the
contract occurs automatically. It does not depend,
as does rescission of a contract, on the ground of
repudiation or breach, or on the choice or election
of either party. It depends on the effect of what
(I) Vide Billingdcn Estates Oo: v. Stoacfield Estate• Ltd. [1952) I All
E.R. 853.
I
326
SUPREME1 COURT REPOR1's o [1954]
195.J
has actually happened on the possibility of performing
s
b- Gh
the contract(').
What happens generally in such
· atya :~'"
ose cases and has happened here is that one party claims
Mugneeram
that the eontract has been frustrated while the other
Bangur and co., party denies it. The issue has got to be decided by
and Another. the court "ex post facto, on the actual circumstances of
the case"(').
Mukherjea J.
We will now proceed to examine the nature and
terms of the contract before us and the circumstances
under which it was entered into to determine whether
or .not the disturbing element, which is alleged to have
happened here, has substantially prevented the performance of the contract as a whole.
It may be stated at the outset that the contract before us cannot be looked upon as an ordinary contract
'for sale and purchase of a piece of land; it is an integral part of a development scheme started by the
defendant company and is one of the many contracts
that have been entered into by a large number of
persons with the company. The object of the company
was undoubtedly to develop a fairly extensive area
which was still undeveloped and make it usable for
residential purposes by making roads and constructing
drains through it. The purchaser, on the other hand,
wanted the land in regard to which he entered into the
contract to be developed and made ready for building
purposes before he could be called upon to complete
the purchase. The most material thing which deserves
notice is, that there is absolutely no time limit within
which the roads and drains are to be made. The
learned District Judge of Ali pore, who heard the appeal,
from the trial court's judgment found it as a fact, on
the evidence in the record, that there was not even an
understanding between the parties on this point. As a
matter of fact, the first requisition _order was passed
nearly 15 months after the contract was made and
apparently no work was done by the defendant company in the meantime. Another important thing that
(r) Per Lord Wright in Denny, Mott and nickson Ltd. v.Ja1nes B. Fraser
. and Co. Ltd. [1944] A. C. 265, ~74·
(>) Ibid.
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327
requires notice in this connection is that the war was
um
already on, when the parties entered into the contract.
-
Requisition orders for taking temporary possession of Satyabr~.a Ghosc
lands for war purposes were normal events during this
Mugneeram
period. Apart from requisition orders there were other Bangur a.nd Go.,
difficulties in doing construction work at that time beand Another.
cause of the scarcity of materials and the various
h. h h G
h d.
d.
JfukherjcaJ.
restrictions w ic t e overnment a impose m respect of them. That there were certain risks and
difficulties involved in carrying on operations like
these, could not but be in the contemplation of the
parties at the time when they entered into the contract, and that is probably the reason why no definite
time limit was mentioned in the contract within which
the roads and drains are to be completed. This wa8
left entirely to the convenience of the company and as
a matter of fact the purchaser did not feel concerned
about it. It is against this background that we are to
consider to what extent the passing of the requisition
orders affected the performance of the contract in the
present case.
The company, it must be admitted, had not commenced the development work when the requisition
order was passed in November, 1941. There was no
question, therefore, of any work or service being interrupted for an indefinite period of time.