# THE NAIHATI .JUTE MILI.S LTD v. KBYALIRAMJAGANNATB

- **Citation:** [1968] 1 S.C.R. 821
- **Court:** Supreme Court of India
- **Decided:** 1967-10-19
- **Bench:** J. C. Shah, S. M. Sikiu, J.M. Shelat
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/the-naihati-jute-mili-s-ltd-v-kbyaliramjagannatb-4291
- **Pages:** 12

## Headnote

October 19, 1967
Co11tract-frustratio11-impossibllit11 of performa11Ce due to l11teTvening circumstances-Whether .contract discharged on an implied
term or on Court deciding performance impossible-Contract Act
ss. 32 and 56-Scope of-Whether damages could be awarded on the
A
B
basis of public poliCI/ of Pakistan Government.
O
The appellant entered into a contract on July 7, 1958 with the
respondent to ;>urchase from him 2000 bales of jute to be imported
from ~akistan. The cont1'aet, inter alia, provided that shipment of
the consignment would be made during August-November, 1958,
that the buyers would obtain the necessary import licence, that if
they failed to obtain the licence by November 1958, the period of D
shipment would be eixtended upto December 1958 and that if it was
not obtained by December 1958, the contract would be settled at the
market price prevailing on January 2, 1959. The contract also contained an arbitration clause whereunder all disputes under the contract including the question whethe- the contract had been terminated or completed were to be referred to the arbitration of an
Arbitration Tribunal.
The appellants applied to the Jute Commissioner on August 8
B
for an import licence but this was refused on the ground that the
appellants had sufficient stock to carry on for some months more.
Tuey applied again on November 29, 1958 when their stock was reduced, but the Jute Commissioner refused to issue the licence and
asked them to meet their requirements from purchases of Inclim
jute. The respondents thereafter claimed damages from the appelI
lants on the ground that the appellants had failed to furnish the
import licence as provided in the contract. 'Elle appellants disclaimed their liability and thereupon the disputes between the parties
-were referred to the Arbitration Tribunal. The Tribunal passed an
'award holding that the appellants had failed to can-y out their part
of the contract and were liable to pay damages to the respondent
assessed at Rs. 34,000 and interest
G
The appellants thereafter applied to the High Court to set aside
the award and contended (a) that they could not be held to have
committed breach of the contract as they had done all that could
'!>e expec:ted of them to, obtain the licence; (b) that owing to the
mtervenmg causes, i.e., a change in the policy of the Government,
which the parties could not foresee when they entered into the contract, the contract became impossible of performance and ought to
have been treated as void under s. 56 of the Contract Act; and (c) B
that the arbitrators had no jurisdiction as the arbitration clause in
the said. contract perished along with the contract. A Single Bench
of the High Court dismissed the application and an appeal to a· Division Bench was also dismissed.
On appeal to this Court.
L;1'(N)7BCI-ll(a)
321
822
SUPREME COURT _BEPO!l'I'~
[1968] I s.o.R.
A
Held, dismissing the sppeal:
(i) The provision in the contract that whereas the delay to provide a licence in November 1958 was to be excused but that the contract was to be settled at the market rate prevailing on January 2,
1959 if the appellants failed to deliver the licence in December
1958 clearly meant that the appellants had taken upon themselves
the absolute burden of furnishing the licence latest by the end of
B December 1958 and had stipulated that in default they would pay
damages on the basis of price prevailing on- January 2, 1959. That
being the position the defence of impossibility of perfQrmance or
of the contract being void for· that reason or that the court should.
spell out an implied term·fu the contract to that effect was not
available to the appellants. (832 B-C].
Since under the Contract Act a promise may be express or im--
C plied, in cases where the court gathers as a matter of construction
that the contract itself contains impliedly or expressly a term according to which it would stand discharged on the happening
of
certain circumstances, the dissolution of the contra

## Text

THE NAIHATI .JUTE MILI.S LTD.
v.
KBYALIRAMJAGANNATB
[J. C. SHAH, S. M. SIKIU AND J.M. SHELAT, JJ.)
October 19, 1967
Co11tract-frustratio11-impossibllit11 of performa11Ce due to l11teTvening circumstances-Whether .contract discharged on an implied
term or on Court deciding performance impossible-Contract Act
ss. 32 and 56-Scope of-Whether damages could be awarded on the
A
B
basis of public poliCI/ of Pakistan Government.
O
The appellant entered into a contract on July 7, 1958 with the
respondent to ;>urchase from him 2000 bales of jute to be imported
from ~akistan. The cont1'aet, inter alia, provided that shipment of
the consignment would be made during August-November, 1958,
that the buyers would obtain the necessary import licence, that if
they failed to obtain the licence by November 1958, the period of D
shipment would be eixtended upto December 1958 and that if it was
not obtained by December 1958, the contract would be settled at the
market price prevailing on January 2, 1959. The contract also contained an arbitration clause whereunder all disputes under the contract including the question whethe- the contract had been terminated or completed were to be referred to the arbitration of an
Arbitration Tribunal.
The appellants applied to the Jute Commissioner on August 8
B
for an import licence but this was refused on the ground that the
appellants had sufficient stock to carry on for some months more.
Tuey applied again on November 29, 1958 when their stock was reduced, but the Jute Commissioner refused to issue the licence and
asked them to meet their requirements from purchases of Inclim
jute. The respondents thereafter claimed damages from the appelI
lants on the ground that the appellants had failed to furnish the
import licence as provided in the contract. 'Elle appellants disclaimed their liability and thereupon the disputes between the parties
-were referred to the Arbitration Tribunal. The Tribunal passed an
'award holding that the appellants had failed to can-y out their part
of the contract and were liable to pay damages to the respondent
assessed at Rs. 34,000 and interest
G
The appellants thereafter applied to the High Court to set aside
the award and contended (a) that they could not be held to have
committed breach of the contract as they had done all that could
'!>e expec:ted of them to, obtain the licence; (b) that owing to the
mtervenmg causes, i.e., a change in the policy of the Government,
which the parties could not foresee when they entered into the contract, the contract became impossible of performance and ought to
have been treated as void under s. 56 of the Contract Act; and (c) B
that the arbitrators had no jurisdiction as the arbitration clause in
the said. contract perished along with the contract. A Single Bench
of the High Court dismissed the application and an appeal to a· Division Bench was also dismissed.
On appeal to this Court.
L;1'(N)7BCI-ll(a)
321
822
SUPREME COURT _BEPO!l'I'~
[1968] I s.o.R.
A
Held, dismissing the sppeal:
(i) The provision in the contract that whereas the delay to provide a licence in November 1958 was to be excused but that the contract was to be settled at the market rate prevailing on January 2,
1959 if the appellants failed to deliver the licence in December
1958 clearly meant that the appellants had taken upon themselves
the absolute burden of furnishing the licence latest by the end of
B December 1958 and had stipulated that in default they would pay
damages on the basis of price prevailing on- January 2, 1959. That
being the position the defence of impossibility of perfQrmance or
of the contract being void for· that reason or that the court should.
spell out an implied term·fu the contract to that effect was not
available to the appellants. (832 B-C].
Since under the Contract Act a promise may be express or im--
C plied, in cases where the court gathers as a matter of construction
that the contract itself contains 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 Although in English law such cases
might be treated as cases of frustration, in India they would be
D dealt with under s. 32. In a majority of cases, however, the doctrine
of frustration is not applied on the ground that the parties had agreed to an implied term; the court grants relief under the positive
rule enacted in s. 56 by pronouncing the contract to be frustrated
and at an end if it finds that the whole purpose or the basis Of the
contract was frustrated by the intrusion or occurrence of an unexpected event or change of circumstances which was not contemE plated by the parties at the date of the contract. In such cases
there would be no qu·estion of finding an implied term embodying
a provi~ion for discharge because the parties did not think about
tbe. matter at all nor could possibly have an intention regarding it.
Case law reviewed. [829 C-GJ.
Even if the appellants had established frustration. it would not
F be as if the contract was ab initio void. In cases of frustration it
is the performance of the contract which comes to an end but tho
contract would still be in existence for purposes such as the resolution of disputes arising under or in connection with it: and the
question whether the contract was discharged undP.r the doctrine of
frustration would still have to be decided under the arbitration
G
B
clause which operates in respect of such purposes. [832 El
Union of India v. Kis.horilal. (19601 1 S.C.R. 514. referred" to.
(ii) If the arbitrators awarded damages on the basiS of the
market price prevalent in Calcutta on January 2. 1959, there could
be no objection to their adopting that rate for adjudicating the
quantum of damages on the ground that such a basis was contrary
to the public policy laid down by the Government of Pakistan.
[832 HJ.
C'IVIL APPELLATE
JURISDICTION: Civil Appear No. 44. of
1965.
Appeal by special leave from the judgment and order dated
August 22. 1962 of the Calcutta High Court in Appeal No. 3'5 of
1960,
XAIHA'l'l JU'rE )ULLS 1;ro. v. KHYALIRAM (S!telat, J.)
823·
B. Sen, B. P. Maheshwari and R. K. Chaudhuri, for the appelA
lant.
Niren De, Addi. Solicitor-General and D. N. Mukherjee, for
the respondent.
The Judgment of the Court was delivered by
Shelat, J.-This appeal by special leave is directed against the
judgment and order oil the High Court of Calcutta rejecting the
application by the appellants for setting aside the award in
Award Case No. 70 of 1959 passed by the Arbitration Tribunal
constituted by the Bengal Chamber of Commerce.
B
The said Arbitration arose out of a contract dated July 7, C
J 958 whereunder the appellants agreed to purchase and the respondents agreed to sell two thousand bales of Saidpur N.C. Cuttings. The contract was in the standard form prescribed by the
Indian Jute Mills Associationc It provided that shipment or rail
despatch from agencies was to be made during August and/or D
September and/or October and/or November, 1958. As the
import of Pakistan jute required an import licence the contract
provided:~-
"Buyers to provide the sellers with the letters of authority and sellers to open letters of credit. If buyers fail
to provide the sellers with import licence within November 1958 then the period of shipment would be upto
December, 1958 and the price mentioned in the contract
would be increased by 50 nP. If buyers fail to provide
licence by December 1958 then the contract would be
settled at the market price prevailing on January 2. 1959
for goods of January and February 1959 shipment."
)ne of the printed terms provided:-
''Buyers shall not however be held responsible for delay
in delivering letters of authority or opening letters of
credit where such delay is directly or indirectly caused by
G
or due to act of God, war, mobilisation, demobilisation,
breaking off trade relations between Governments,
requisition by or interference from Government or force
majeure. In any of ihe aforesaid circumstances whereby buyers are prevented from delivering letters of authority or opening letters of credit within one month from
the date of the contract, there may be a further extenH
" sion of time (the delivery period to be extended accord·
ingly) by mutual agreement between the buyers and the
sellers otherwise the contract shall be deemed to be cancelled .rnd sellers shall have no claim whatsoever against
the huyers.''
SUPREME COURT REPORT•
(1968] 1 S.C.R.
A The contract also contained an arbitration clause whereunder all
disputes and differences and I or claims arising out of and/ or concerning and I or in connection with and I or in consequence of or
relating to the contract whether the contract has been terminated
or purported' to be terminated or completed were to be referred
to the arbitration of the Bengal Chamber of Commerce under
their rules for the time being in foroe. On August 8, 1958 the
B appellants applied to the Jute Commissioner, Calcutta, for an
import licence. On August 19, 1958 the Administrative Officer
refused to certify the licenet; on the ground that the appellants
had sufficient stock to carry on their factory for some months
more. On August 26, 1958 the Licensing Authority refused to
issue the licence. On November 29, 1958 the appellants re.quested
the Jute Commissioner to certify the issue of a licence stating
that by that time their stock had been considerably reduced. On
December 11, 1958 the Jute Commissioner refused to issue the
licence and asked the appellants to meet their requirements from
purchase of Indian jute. The respondents thereafter by their
attorney's letter claimed damages from the appellants on the
D ground that the appellants had failed to furnish the licence P.1'0vided by the contract. The appellants disclaimed any liability
under the said contract and! thereupon the disputes between the
p'l!'ties were referred to the said Tribunal. The Tribunal passed
an award holding that the appellants faliled to carry out their
part of the contract and were liable to pay damages assessed at
E Rs. 34,000 /- and interest thereon. Thereupon the appellants filed
the said application to set aside the award.
In their said application, the appellants raised the following
contentions: (a) that they could not be held to have committed
breach of the contract as they had done all that could be expectF ed of them to obtain the licence; (b) that owing to the intervening
causes, in the present case a change in the policy of the Government, which the parties could not foresee when they entered int!>
the contract, the contract became impossible of performance and
that therefore under s. 56 of the Contract Act the contract ought
to have been treated as void and (c) that the arbitrators had no
G jurisdiction as the arbitration clause in the said contract perished
along with the contract. The respondents, on the other hapd,
denied that the performance of the contract became impossible, .
and asserted thait in any event .the appellants had taken upon
themselves the absolute obligation to procure the licence and lastly
that even if the contract was discharged by frustration, the arbi·
tration clause would still survive as there would be disputes and
B differences between the parties as to whether (i) there was frustration and (ii) even if st>, the consequences. thereof. They pleadll!1
that the contract could not be oonstrued to me11n that an umlateral allegation by one of the parties that there was frustration
would put an end to the contract. It would be for the Arbitrators
to decide whether the said contract was discharged by frustration.
NAIRATI JUTB 111LLS LTD. ti, EHYALIIWI (Shtlal, J.)
8'.ll
The learned Single Judge who heard the application found A
that the oontract oould not be said to have been discharged by
frustration, that the arbitration clause ~
wide enough to include
the dispute whether there was frustration or not, and that the
arbitrators were competent to adjudicate such al dispute. He also
found in answer to the appellants' allegation that the arbitrators
were guilty of legal misct>nduct that the appellants bald failed to
prove any such legal misconduct. The Division Bench who heard
B
the appeal from the said order agreed with the learned Single
Judge and dismissed the appeal. Hence this appea1.
Section 56 of the Contract Act inter alia provides that a contract to do an act which, after the contract is made, becomes
impossible, or by reason of some event which the promisor oould O ·
not prevent, unlalWful, becomes void when the act becomes
impossible oc unlawful. It also provides that 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 a promisor must
make compensation to such promisee foc any loss which such D
promisee sustains through the non-performance. As envisa~ by
s. 56, impossibility of performance would be inferred by the
courts from the nature of the contract and the surrounding circumstances in which it was made that the parties must have made
their bargain upon the basis that a partiCIUlar ·tiring or state of B
things ·would continue to exist and because of the altered circumstances the bargain should no longer be held binding. The courts
would also infer that the foundation of the contract had disappear·
ed either by the destruction of the subject matter or by reason
of such long interruption or delay that the performance would
really in effect be that of a different contract for which the parties
had' not agreed. Impossibility of · performance may also arise P
where without any default of either party the contractual obligation had become incapable of being performed because the circumstances in which performance . was called for was radically
different from that undertaken by the contract. But the oommon
law rule of contract is that a man is bound to perform the obligaG
tion which he has undertaken aml c.tnnot claim to be excused
by the mere fact that performance has subsequently become
impossible. Courts in England have, however, evolved from time
to time various theories to soften the harshness of the aforesaid
rule and for that purpose have tried to formulate the true basis of
the dbctrine of discharge of contract when its performance is made
impossible by intervening causes over which the parties to it had R
no control. One of such theories is what has been ,called the theory
of implied term as illustrated in F.A. Tamplin Steamship Co. Ltd.
v. Anglo-Mexican Petroleum
Products Co. Ltd.(') where Lord
Loreburn stated:-
(') [1916] 2 A.C. ·397.
8UP111D1E OOUBT IIJIPOBTS
(1968) 1 B.C.R.
A
"A court can and ought to examine the contract and
the circumstances in which it was made, not of course
to vary, but only to explain it, in order to see whether
or not from the nature of it the parties must have made
their bargain on the footing that a particular thing or a
state of things would continue to exist And if they must
have done so, then a term to that effect would be
B
implied; though it be not expressed in the contract".
He further observed:-
"It is in my opinion the true principle, for no court has
an absolving power, but it can infer from the nature of
the contract and the surrounding circumstances that a
O
condition which was not expressed was a foundation on
which the parties contraieted .. .. .. . .. . .. .. . Were the
altered conditions such that, had they thought of them,
they would have taken their chance of them, or such
that as .sensible men they would have said, "if that happens. of course, it is all over between us."
D The same theory in a slightly different form was expressed by Lord
Wallion in Dahl v. Nelson, Donkin & Co.(') in the following
words:-
"The meaning of the contract must be taken to be, not
what the parties did intend (for they had neither thought
B
nor intention regarding it), but that which the parties,
as fair and sensible men, would presumably have agreed
upon if, having such possibility in view, they had made.
express provision as to their several righlli and liabilities
in the event of illi occurrence."
In the first case the term is a genuine term, implied though not
r .expressed; in the ·second it is 81 fiction, something added to the
rontract by the law.(') It appears that the theory of implied term
was ·not found to be quite satisfactory as it contained elemenlli
of contradiction. For, if the parties foresaw the circumstances
which existed at the date of performance they would provide for
them in the contract; if they did not, that meant that they. deli9 berately took the risk and therefore no question of an implied
term could really arise: In Russkoe v. John Strik & Sons Ltd.(')
Lord Atkin propounded the theory of disappearance of the foundation of oontra~ stating thalt he could see no reason why if certain
circumstances, which the court would find, must have been oontetnplated by the. parties as being of the essence. of the contract
and the continuance Of which must have been deemed to be
B e8$e11tial to the perfdrniance of the contract, the court cannot say
(') [1881] 6 A.C. 38.
(') Anso'I, Principles of the English Law of Controct, 22nd ed.
464.
(') [1922] 10 Ll.L.R. 214 (quoted at p. 466 in Anson's Law of Con.-
%1'act, 22nd ed.)
NAIHA'J'l JUTE JIIWI LTD. V. xBYALllWl (She/at, J.)
827
.that when thei;e circumstances cease to exist, the contract ceases A
to operate. The third theory is that the court would exercise
power to qualify the absolutely binding nature of the contract in
order to do what is just and reasonable in the new situation.
Denning L. J. in British Movietones Ltd. v. London and District
·Cinemas Ltd.(') expounded this theory as follows: -
"Even if the contract is absolute in its term, neverthelei;s,
if it is not absolute in intent, it will not be held absolute
in effect The day is done when we can excuse an unfore..
seen 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 lawyers with the draftsmanship of a
Chalmers."
·This theory would mean that the Court has inherent jurisdiction
to go behind the express words of the contract and attribute to
B
c
the Court the absolving power, a power consistently held not to D
be inherent in it The House of Lords in the appeal from that
decision [reported in 1952 A.C. 166] discarded the theory. In
more recent times the theory of a change in the obligation has
come to be more and more generally accepted. Lord Radcliffe,
.the author of this theory, in Davis Contractors
v.
Fareham
U.D.C.(') formulated it in the following words:-
"Frustration 'OCQUrs whenever the law recognises that
without default of either party a contractual obligation
bas · become incapable of being performed because the
circumstances in which performance is called for would
render it a thing radically different from that which was
undertaken by the contract"
It is not hardship or incOnvenience or material loss which brings
about the principle of frustration into play. There must be a.
. change in the significance of obligation that the thing undertaken
would, if performed, be a different thing from that which was
contracted for.
·
B
F
G
These theories have been evolved in the main to adopt a
realistic approach to the problem Of performance of contract when
it is found that owing. to causes unforeseen and beyond the control of the parties intervening between the date of the contract
and the date of its performance it would be both unreasonable
and unjust to exact its performance in the clianged circumstances.
Though none of them was fuHy accepted and the court construed B
the contracts coming before them applying one or the other of
th~ as aI1PC3ring to be more rational than the other, the conclUSIOns arrived at were the same. The necessity of evolving one
{'~ !1951] 1 K.B. 190.
(') [1956] A.C. 166.
828
SuPREJIE COllBT REPORTS
[1968) 1 8.C.R.
A or the other theory was due to the common law rule that courts
have no power to absolve a party to the contract from his obligation. On the one hand, they were anxious to preserve intact the
sanctity of contract while on the other the courts could not shut
their eyes to the harshness of the situation in cases where performance became impossible by causes which could not have been
foreseen and which were beyond the control of parties.
B
Such a, difficulty has, however, not to be faced by the courts
in this country. In Ganga Saran v. Ram Charan(') this Court
emphasised that so far as the courts in this country are concerned they must look primarily to the law as embodied in secs. 32
and 56 of the Contract Act. In Satyabrata Ghose v. Mugneeram(')
C also, Mukherjee J. (as he then was) stated that sec. 56 laid down
a rule of positive law and did not leave the matter to be determined according to the intention of the parties. Since under the
Contract Act a: promise may be expressed or implied, in cases
where the court gathers as a matter of construction that the contract itself contains impliedly or expressly a term according to
D which it would stand discharged on the happening of certain cir·
cumstances the dissolution of the contract would take place
under the terms of the contract itself and such cases would be
outside the purview of sec. 56. Although in English law such cases
would be treated as cases of frustration, in India they would be
dealt with under sec. 32. In a majority of cases, however, the
E doctrine of frustration is applied not on the ground that the parties
themselves agreed to an implied term which operated to release
them from performance of the contract. The Court can grant
relief on the ground of subsequent impossibility when it finds that
the whole purpose or the basis of the contract was frustrated by
the intrusion or occurrence of an unexpected event or change of
F circumstances which was not contemplated by the parties at the
date of the contract. There would in such a case be 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
regarding it. When such an event or change of circumstances
G which is so fundamental as to be regarded by law as striking at
the root of the contract as a whole occurs it is the court which can
pronounce the contract to be frustrated and at an end. This is
really a positive rule enacted in sec. 56 which governs such situations.
The question then is, was there a change in the policy of the
H Government of India of a total prohibition of import of ]:>akistan
jute as contended by the appellants which was not foreseen by
the parties and which i.ntervened at the time of performance and
which made the performance of their stipulation to obtain a
(') [1952) S.C.R. 36.
I') [1954) S.C.R. 310.
J
NAIBATI JUTE MILLS LTD v. ltJIYALIRAH (Shelat, J,)
829
licence impossible? It is clear from the circulars produced during
A
the trial that as eaily as March 1958 the Government of India
had issued warnings that import of Pakistan jute would be per·
mitted to the absolute minimum and that the jute mills should
satisfy theiI needs by purchasing Indian jute. It appears that at
the time when the parties entered into the contract the policy
was to giant licences in the ratio of 5 : l. that is, if an importer
had bought 500 maunds of Indian jute he would be allowed a B
licence to import 100 maunds of Pakistan jute. This policy is
in\:licated by the Ciicular dated July 17, 1958 issued by the Indian
Jute Mills Association to its members. Such licences would be
issued to mills who had stock of less than two months' consumption. As already stated, the appellants applied on August 8, 1958
for an import licence for 14.900 maunds and the Jute Commis0
sioner declined to certify that application on the giound that they
held stock sufficient to last them for some months. In November
1958, they applied again, this time stating that theiI stock had
been reduced and in December 1958 they were told to buy Indian
jute. The said Ciicular appears to show that the Government
had not placed a total embargo on import of Pakistan jute. At D
any rate, such an embargo was not proved by the appellants. It
appears, on the contrary, from the documents on record tha.t the
policy of the Government was that the licensing authorities would
scrutinise the case of each applicant on its own merit
What is however important in cases such as the one before B
us is to ascertain what the parties themselves contemplated at the
time of entering the contract. That the appellants were aware
that licences ,were not issued freely is evident by the provisions
of the contract themselves which provide that if the appellants
failed to furnish to the respondents the import licence in November 19 58 the period of shipment was to be extended upto DecemF
ber 1958 and the price in that event would be enhanCed by 50 nP.
The contract further provided that if the appellants were not able
to furnish the licence by December 1958 they would pay damages
at the market rate prevailing on January 2, 1959 for January.
February shipment goods. These clauses clearly indicate that the
appellants were conscious of the difficulty of getting the licence G
in time and had therefore provided in the contract for excusing
delay from November to December 1958 and for the appellants'
liability to pay damages if they failed to procure it even in
December 1958. The contract, no doubt, contained the printed
ter-m that the !myers would not be responsible for dela,y in delivering the licence but such delay as therein provided was to be
excused only if it occurred by such reasons as an act of God, war, R
mobilisation etc., and other force majeure. It is nobody's case
that the performance became impossible by reason of such forct
majeure. As already stated when the appellants applied for the
licence .• the authorities refused to certify theiI application becallSe
they held at that time stock for more than 2 months. It is therefore
SUl'll1':ME COt:RT UEPORTS
[1968) l B.O,R.
A manifest that their application was refused because of a personal
disqualification and not by reason of any force majeure. Since
this was the position there is no question of the performance
becoming impossible by reason of any change in the Government's
policy which could not be foreseen bv the parties. No question
a !so would arise of importing an implied term into the contract.
11
Assuming. however, that there was a change of policy and
that the Government in the intervening period had decided to
place an embargo on i~port of Pakistan jute the question would
still be whether the appella'nts were relieved from liability for
their failure to deliver the licence. A contract is not frustrated
merely because the circumstances in which it was made are
·C altered. The Courts ha.ve no general power to absolve a party
from the performance of his part of the contract merely because
its performance has become onerous on account of an unforeseen
turn of events.(') The question would depend upon whether the
contract which the appellants entered into was that they would
make their best endeavours to get the licence or whether the conD tract was that they ·would obtain it or else be liable for breach of
·that stipulation. In a case falling under the former category, Lord
Reading C.J. in Anglo-Russian Merchants-Traders v. John Batt
& Co.(') observed' that there was no reason why the law should
imply an absolute obligation to do that which the law forbids.
It was so said because the Court construed the contract to mean
E only that the sellers there were to make their best efforts to obtain
the requisite permits. As a contrast to such a case there are the
cases of Pattahmull Rajeshwar v. K. C. Sethia(') and Peter Cassidy
Seed Co. v. Osuustickaanppa(') where the courts have observed
that there is nothing improper or illegal for a party to take upon
himself an absolute obligation to obtain a permit or a licence and
F in such a case if he took the risk he must be held bound to his
stipulation. As Lord Sumner in Bank Lime Ltd. v. Capel (A) Co.
Ltd.(') said : -
"Where the contract makes provision (that is, full and
complete provision, so intended) for a given contingency
G
it is not for the court to import into "the contract some
other different provisions for the same contingency called
by different name."
B
In such a case the doctrine of discharge by frustration cannot be
available, nor that of an implied term that the existing state of
(') M/s Alopi Parshad & Sons v. Union of India [1960] 2 S.C.R.
793 at p. 808.
(') [1917] 2 K.B. 679.
('.) [1957] W.L.R. 273.
(3) [1951] 2 All. E.R. 352.
(') [1919] A.C. 435 at p. 455.
C\AJHATI JUTE :MILT.S LTD. !'. KHYALIRA>I (S/ielat, .J.)
831
affairs would continue at the date of performance. The reason A
is that where there is an express term the court cannot find on
construction of the contract an implied term inconsistent with
such express term.
In our view, the provision in the contract that whereas the
delay to provide a licence in November 1958 was to be excused
but that the contract was to be settled at the market rate prevailB
ing on January 2, 1959 if the appellants failed to deliver the
licence in December 1958 clearly meant that the appellants had
taken upon themselves absolutely the burden of furnishing the
licence latest by the end of December 1958 and had stipulated
that in default they would pay damages on the basis of price prevailing on January 2. 1959. That being the position the defence c
of impossibility of performance or of the contract being void for
that reason or that the court should spell out an implied term
in the contract would not be available to them.
In the view that we take that the said contract cannot be
said to be or t0 have been void and that in altly event the stipulation
as to obtaining the import licence was absolute, the question that D
the arbitration clause perished along with the contract and
consequently the arbitrators had no jilrisdiction cannot arise. But
assuming that the appellants had established frustration even then
it would not be as if the contract was ab initio void and therefore
not in existence. In cases of frustration it is the "performance of
the contract which comes to an end but the contract would still E
be in existence for purposes such as the resolution of disputes
arising uader or in connection with it. The question as to whether
the contract became impossible of performance and was discharged under the doctrine of frustra,tion would still have to be decided under the arbitration .:lause which operates in respect of such
purposes. (Union of India v. Kishorilal>(').
F
Mr. B. Sen for the appellants also raised two other questions,
as to the legal misconduct on the part of the arbitrators and as
regards interest on damages awarded by them. We need not however say anything about these two questions as ultimately they
were not pressed by him.
G
The last contention raised by him was that the arbitrators
awarded damages on the basis of the market rate at Rs. 51 per
maund instead of Rs. 65 which was the export price fixed by
the Government of Pakistan. The argument was that such a basis
was contrary to the public policy laid down by the Governmen•
of Pakistan and it would not be expedient on our part to give
our. imprimatur to an infringement by the arbitrators of such a H
pohcy. There is. in our view. no merit in the argument.
The
Goyernment _of Pakistan cannot lay down any public or economic
policy for this country. If the arbitrators found the prevalent rate
--·-.. -·--------·
('l (1960] 1 S.C.R. 514.
832
SUPREJIB COUJIT RllPORTS
[1968) 1 S,C.B.
A on January 2, 1959 in Calcutta to be Rs. 51 a maund there can
be no objection to their adopting that rate for adjudicating the
quantum of damages.
The appeal fails and is dismissed with costs.
B·R.K.P.S.
Appeal dismissed.