No English law principles can be imported in the presence of statutory provisions of the Indian Contract Act. [Satyabrata Ghose vs Mugneeram Bangur & Co.]

Satyabrata Ghose vs Mugneeram Bangur & Co., 1954 SCR 310.

Before the Hon’ble Supreme Court of India

Decided on: November 16, 1953

Bench: B.K. Mukherjea

Brief facts:

The defendant company owned a large tract of land in Greater Calcutta. In accordance with a scheme for sale of the land, it was divided into several plots and offers were invited from those interested in purchasing the plots. A small amount of money was collected from the purchasers by way of earnest at the time of agreement and it was decided that the remaining amount would be paid by them once construction of roads and drains was complete.

On November 12, 1941, an order was passed by the Collector, according to which a part of the company’s land was to be requisitioned for military purposes. The company accordingly informed Bejoy Krishna Roy, one of the purchasers, that due to the requisitioning of the land by the government, they had decided to cancel the agreement for sale and that he could take back his money within a month of receipt of the letter. The company also made an alternative offer of continuing the agreement and performing their obligations when the plot of land would be returned to them after the war.

Refusing to accept either of the two alternatives offered by the company, Satyabrata Ghose, assignee of Bejoy Krishna Roy, sued the defendant for wrongfully repudiating the contract of sale of land, and asked for specific performance of the same.

Issue:

Whether a contract for sale of land was discharged and came to an end by reason of certain supervening circumstances which affected its performance

Procedural History:

  • The Trial Court, by its judgment dated October 10, 1947, overruled the defendant’s pleas and decreed the plaintiff’s suit.
  • The defendant’s appeal to the District Court of 24 Parganas was dismissed and the Trial Court’s judgment was affirmed.
  • The defendant made a second appeal to the High Court of Calcutta, which gave a decision in its favour.
  • The present appeal was made by the plaintiff based on the strength of a certificate granted by the High Court under article 133(I)(c) of the Constitution of India.

Appellant’s Contention:

  • The English Doctrine of Frustration, based on which the High Court had given its decision in favour of the defendants, could not be applied in India.
  • Even if the English law applies, it could not be applied to contracts involving the sale of land.
  • No such event had taken place in the present case which would frustrate the contract or render its performance impossible.

Respondent’s Contention:

  • The Respondents contended that as a result of supervening events, the performance of the contract had become impossible and hence the contract had been discharged by frustration.
  • The Respondents also put forward an alternative argument that even if the performance of the contract was not made impossible, it became illegal as a result of the requisition order and consequently the contract became void under section 56 of the Indian Contract Act.

Held:

Appeal allowed. The judgment and decree of the High Court of Calcutta were set aside and those of the courts below restored.

Ratio:

  • Section 56: It would be incorrect to say that section 56 of the Contract Act applies only to cases of physical impossibility. The performance of an act may not be literally “impossible” but may be impracticable and useless from the point of view of the object and purpose which the parties had in mind. The performance of a contract can be said to have become impossible if an untoward event or change of circumstances beyond the contemplation and control of the parties upsets the very foundation upon which the parties rested their bargain.
  • The Indian Contract Act is exhaustive upon the subjects it deals with, and no English law principles can be imported in the presence of statutory provisions on these subjects.
  • In England, the Doctrine of Frustration does not operate in the case of contracts for the sale of land. However, according to Section 54 of the Transfer of Property Act, a contract for the 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 are the same as in other ordinary contracts and consequently, the doctrine of frustration is applicable to contracts for the sale of land in India.
  • The delay caused in the performance due to the requisition would not be so great and of such a character as to totally upset the basis of the bargain and commercial object that the parties had in view. The requisition order was of a temporary character and could have been withdrawn at any point of time. Because of this indefiniteness of time period, it could not be said that performance of the contract had become impossible. Hence, the order of requisition did not affect the fundamental basis upon which the agreement rested. It was merely a hardship, which gave no reason for the defendant to avoid the contract.

(This brief was prepared and submitted to LawBriefs.in by Aditi Mozika, Student at Gujarat National Law University.) 

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