Satyabrata Ghose vs. Mugneeram Bangur & Co.

Citation: 1954 AIR 44

Facts

Satyabrata (plaintiff), assignee of Bejoy Krishna Roy, sued defendant alongwith Bejoy as party defendant, for wrongfully repudiating the contract of developing the lands which were sold to the plaintiff, and asked for specific performance of the same. Defendant took the defence of frustration as the lands which needed to be developed were temporarily requisitioned by the Govt. under the defence rules such that for unspecified period of time, any development work if executed on the land would be illegal. The contract was made at a time when war conditions were prevailing and any such requisition was imputed to be in contemplation of the parties while forming contract. Further, no time was specified in the contract.

Issue: Whether the contract was rendered illegal and hence frustrated u/s 56? If not, what should be reasonable time within which performance of contract was to be given u/s 46?

Held

‘Impossibility’ u/s 56 doesn’t mean literal impossibility to perform (like strikes, commercial hardships, etc.) but refers to those cases where a supervening event beyond the contemplation and control of the parties (like the change of circumstances) destroys the very foundation upon which the contract rests, thereby rendering the contract ‘impracticable’ to perform, and substantially ‘useless’ in view of object and purpose which the parties intended to achieve through the contract.

Though under the English Law, frustration developed under the guise of reading implied terms in the contract upon which parties rested the fundamental assumption as to the performance (i.e. when an unexpected change of circumstances render the contract impossible to perform, Courts apply the test of what the reasonable men as parties to such a contract would have stipulated under the unexpected change of events), however, Indian Law treats the two subjects of study completely different u/s 32 and 56. Therefore, where a Court in India while interpreting the contract, is convinced about the existence of an implied (S.9) or express term in the contract, that the contract shall be discharged upon happening of certain event, the matter will be dealt u/s 32 and will be completely outside the purview of S.56.

In the present case: Firstly, war condition were known to the parties while entering into the contract such they were aware of the possible difficulty in performance of the contract, in such circumstances, the requisition of property did not affect the root of the contract; Secondly, no stipulation as to time was provided in the agreement such that the work was to be completed within a reasonable time, but having regard to the nature of the development contract and the knowledge of the war conditions prevailing during the contract, such a reasonable time was to be relaxed. Therefore, the contract had not become impossible of performance u/s 56.

Author: Vishrut Kansal