Business Law

Satyabrata Ghose v. Mugneeram Bangur [1953]

By Shubhi Shukla

Introduction

This case was about the sale of land and due to certain circumstances, the defendant contested his capability to perform the contract. But the court held otherwise. It also held that importing English law to the statutory provisions of the Indian Contract act is not allowed.

Facts of the Case

  • Mugneeram Bangur and Co was the defendant in the case. His company owned a very vast area of land in Calcutta (Kolkata at present). In order to develop the land and make it fit for residential purposes, the company decided to divide the large tract of land into different small plots and sell them.
  • The company started working as per the plan and made certain agreements for the sale of plots with various purchasers. It also asked for some money deposits from the buyers and received the same.
  • The company on the other hand took the responsibility of providing all the necessities for the residential purpose be it the construction of roads/ drainage system or any other essential. 
  • For the completion of construction of all the essentials, no time limit was specified in the agreement.
  • It was decided that after all such construction is done, the company after receiving the complete payment from the buyers of the plot will provide the land to respective buyers.
  • Satyabrata Ghose, the plaintiff of the case, was also interested in purchasing the plot of land and therefore entered into an agreement with Mugneeram Bungar and the Company.
  • The plaintiff gave the advance money deposit of Rs 101 on 5th August 1941.
  • Following in time,  as war conditions were frequent at those times, the government in 1943 decided to take over the land and make use of it for some military purpose. 
  • As a result of which Mugneeram Bangur and the Company decided to treat the contract canceled due to the impossibility of further construction and sale. And they conveyed the same to the buyers.
  • The company put forward two options to the buyers: the first to take back the earnest money or the second was to buy the entire amount to the company once the war is terminated and the company would continue its construction work on the land.
  • Satyabrata Goshe denied both the available options and decided to file a suit on 18th January 1946 against Mugneeran Bangur and the company, saying that it was bound to the terms of the contract in January 1946.

Frustrated Contracts

The frustration of a contract refers to a way in which the parties can escape from the contractual obligations. When the parties are not at fault but due to certain circumstances the contract becomes incapable of being performed.

Eg. A and B get into a contract to sell a cow for the purpose of slaughtering and the national government on the other day introduced a law saying that the selling of cows for slaughter purposes will become Illegal. Hence the contract between A and B would become a frustrated contract.

Supporting Cases

ALLURI NARAYAN MURTHY RAJU v. DISTRICT COLLECTOR VISHAKHAPATNAM

The petitioners under a contract were given leasehold rights for lifting the sand in a river in Maddi Gram panchayat, of Visakhapatnam district the residents of the village stopped him from carrying on the quarry operations on the ground because it would lead to depletion of the groundwater affecting the villager’s irrigation channels. The villagers were steadfast in the registration of criminal cases against them and also by a grant of an injunction by civil courts. The closure unavoidable from the uncontroverted facts was that on the basis of the events that had taken place after entering into the contract, which was far off the control of the parties to the contract, leading the performance of the contract to be unfeasible, the Andra Pradesh High court pronounced that the second limb of section 56 of the contract act 1872 was squarely attracted and therefore the doctrine of frustration was envisaged by the said provision was applied to all the fours of the contact.

Therefore where performance is extended by the intervention of law invalid or the subject matter assumed by the parties to the contract to exist is destroyed or does not happen or where the performance is to be rendered personally and the person dies or is disabled the contract stands discharged.

TAYLOR v. CALDWELL

A music hall was rented by Caldwell (the defendant) to Taylor (the plaintiff) organizing a music concert for the four different days at a rate of one hundred pounds per day. Taylor arranged all the equipment and staff required for the concert. Just before the concert, the hall was destroyed by fire in such a manner that no music concert could be held. So Taylor bought a suit against Caldwell in order to recover for all the purchases made in accordance with the concert. It was held that the plaintiff will not be able to recover the damages suffered because Defendant was not at fault and the concept of frustration as applicable.  

Position in India

In India too infeasibility doesn’t indicate merely physical impossibility to perform the contract; it also includes circumstances where the attainment of the contract may not be actually impossible, but because of changing situations, the performance would not fulfill the object which the parties had in mind.

In Arti Sukhdev Kashyap v. Daya Kishore Arora, it has been held that just because the execution has to be slowed down it does not mean frustration of the contract. In the given case there was the allocation of the plot by the development authority with the terms and conditions that permission for sale could not be admitted before the termination of ten years. Its permission for sale was requested earlier than that and the same was refused so there were no exceptional circumstances for the same. It was held that since there was the possibility of sale after 10 years the contract had not been frustrated

In another decision of the supreme court Sushila Devi v. Hari Singh, it was again pointed out that was wrong to say that section 56 of the Indian contract act applied to the cases of physical infeasibility only. In its view section, 56 covers those cases also where the performance becomes impracticable or useless having regard to the object and purpose of the contract.

In Sushila Devi’s case, A agreed to give her lands to B on lease for a period of three years. Under the agreement, the lessee (B) was personally responsible to take possession of the lands. The lands were situated in Gujranwala. due to the partition of the country on 15th August 1947, Tehsil Gujranwala went to Pakistan, and both A and B migrated to India. B could not take possession of the land. B had deposited Rs 34000 with A as a security of the rent. He sued A to recover back this amount plus Rs 2000 as damages, on the ground that the agreement to lease had become frustrated as because of changed circumstances it was no more possible for B either to obtain the possession of the land himself or to go to Pakistan and collect the rent from the cultivators. The plaintiffs’ contention was upheld and it was held that because of the supervening events, the agreement to lease had become impossible to0 perform.

Issue Raised

Did the contract of sale of land become frustrated after the given circumstances under section 56 of the Indian contract act?

Judicial History

  • The suit was filed by the plaintiff in the trial court and there the court pronounced its judgment in favor of the plaintiff.
  • The company then filed an appeal in the district court and the same was dismissed. Again a second appeal was filed in the high court where the court gave its judgment in favor of the company.
  • The plaintiff after the high court decision filed an appeal in the supreme court. And the court gave its judgment in favor of Stayabrata Ghose (the plaintiff).

Judgment

In the given case, the court held that performance of the contract by any of the parties has not become unfeasible, the court said that the land taken by the government was of temporary native the government did not take the land for a permanent purpose. It was only for a limited time period. Also, Mugneeram Bngur and the company did not initiate their work when the land was taken by the government. So therefore there is no case of interruption in work.

Court also noted that there was no time limit specified in the contract for the completion of construction of the roads and drains because it was understood that the work will be completed in a reasonable time period. Therefore, the work was to be completed within a reasonable time, and also since, the war conditions prevalent were known to both the parties while entering into the contract, that reasonable time was to be modified.

Hence the contract had not become incapable of being performed under section 56 i.e. Agreement to do impossible acts. Therefore the court gave its judgment in favor of the plaintiff.

Analysis

Wherever time is of the Essence of the contract, then such delays in the performance of the contract would result in the frustrated contract but in the given case the work could be continued after the termination of the war, and hence the contract was not held void. And it did not fall in the criteria of being a frustrated contract.

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