PETITIONER:
GANGA SARAN
Vs.
RESPONDENT:
RAM CHARAN RAM GOPAL
DATE OF JUDGMENT:
01/11/1951
BENCH:
FAZAL ALI, SAIYID
BENCH:
FAZAL ALI, SAIYID
KANIA, HIRALAL J. (CJ)
MAHAJAN, MEHR CHAND
CITATION:
1952 AIR 9 1952 SCR 36
CITATOR INFO :
R 1954 SC 44 (10)
R 1959 SC 135 (20)
R 1968 SC 522 (7)
ACT:
Indian Contract Act (1 of 1872), s. 56--Contract for
delivery of goods manufactured by particular Mill as soon as
they are supplied --Construction of contract--Non-receipt of
goods from Mill within time--Whether excuses
performance--Doctrine of frustration.
HEADNOTE:
The respondents agreed to deliver 61 bales of cloth to
the appellant by the 17th November, 1941. The agreement
provided "we shall continue sending the goods as soon as
they are prepared to you up to Magsar Badi 15, Sambat
1998 ...... We shall go on supplying goods to you of the
Victoria Mills as soon as they are supplied to us by the
said Mills ......We shall go on delivering the goods to
you ...... out of the goods noted above which will be
prepared by the Mill." In a suit for damages for non-deliv-
ery of the goods the respondents pleaded that as they had
not received the goods from the Victoria Mills before the
17th of November, 1941, performance of the contract had
become impossible by reason of an event which they could not
prevent and the contract had therefore become void under
Sec. 56, Indian Contract Act:
Held, (i) that, on a proper construction of the con-
tract, delivery of the goods was not made contingent on
their being supplied to the respondents by the Victoria
Mills. The words "prepared by the Mills" were only a de-
scription of the goods to be supplied, and the expressions
"as soon as they are prepared" and "as soon as they are
supplied to us by the said Mill "simply indicated the proc-
ess of delivery. This was not therefore a case in which the
doctrine of frustration of contract could be invoked. (ii)
Even apart from the construction of the agreement, as the
respondents had not shown that they had placed an order for
the goods with the Victoria Mills and yet the Mills had
failed to supply, there was a clear breach of contract to
deliver and the appellant was entitled to recover damages.
Harnandrai v. Pragdas (L. R. 15 I.A. 9) and British
Movietone News v. London Cinemas [1951] 2 A.E.R. 617) relied
on.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 56 of
1951.
Appeal from a judgment and decree of the High Court of
Allahabad (Malik and Wali Ullah JJ.) dated 14th February
1946, in Appeal No. 240 of 1943 which
37
arose out of a decree dated 19th January, 1943, of the Court
of the Civil and Sessions.Judge, Kanpur, in Original Suit
No. 34 of 1942.
Achhru Ram (P. S. Safeer, with him) for the appellant.
S.P. Sinha (K. N. Aggarwala, with him) for the respond-
ent.
1951. November 1. The Judgment of the Court was deliv-
ered by
FAZL ALI J.–This is an appeal by special leave against
a decision of the High Court at Allahabad, reversing the
decision of the trial court, in a suit instituted by the
appellant to recover damages from the respondent-firm for
breach of a contract.
It appears that between the 10th and 18th April, 1941,
the parties entered into 5 contracts, by which the respond-
ent-firm undertook to supply to the appellant 184 bales of
cloth of certain specifications manufactured by the New
Victoria Mills, Kanpur, and the Raza Textile Mills, Ramput.
Only 99 bales were taken up and there was a dispute about
the remaining 85 bales. On the 17th October, 1941, a settle-
ment was arrived at between the parties, and it was agreed
that the respondent-firm should deliver to the appellant 61
bales, and that the goods should be delivered by the 17th
November, 1941. The actual text of the agreement (exhibit
4) was as follows:—
” 61 bales as noted below are to be given to you by us.
We shall continue sending goods as soon as they are
prepared to you upto Magsar Badi 15 Sambat 1998. We shall go
on supplying goods to you of the Victoria Mills as soon as
they are supplied to us by the said Mill.
(Specifications of cloth given here). We shall go on deliv-
ering the goods to you upto Magsar Badi 15 out of the goods
noted above which will be prepared by the Mill.”
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As the 61 bales were not supplied, the appellant sent a
telegraphic notice to the respondent-firm on 20th November,
1941, to the following effect
“Give delivery of our 61 bales through Bank.
Otherwise suing within a days.”
The appellant did not receive any reply to this notice, and
so he instituted the suit which has given rise to this
appeal, on the 23rd April, 1942, claiming a sum of Rs. 9,808
and odd, which, according to him, represented the loss
sustained by him on account of the rise in the market rate
of the contracted goods, and he also claimed costs and
interest. The respondent-firm resisted the suit on a number
of grounds, but their main plea, with which alone we are
concerned in this appeal, was that the performance of the
contract had been frustrated by circumstances beyond their
control and hence the appellant’s claim must fail. This plea
was negatived by the trial court, but it was upheld by the
High Court, and hence this appeal.
The only point which arises in this appeal is whether
the circumstances of the case afford any basis for the
application of the doctrine of frustration of. contract, a
doctrine which is embodied, so far as this country is con-
cerned, in sections 32 and 56 of the Indian Contract Act,
1872.
The main grounds of attack against the judgment of the
High Court are :–
(1) that it has misread the agreement (exhibit 4) dated
the 17th October, 1941, on which both parties rely; and
(2) that it has paid more attention to an abstract legal
doctrine than to the facts of the case.
In our opinion, both these contentions are correct.
The construction placed by the High Court upon the agree-
ment and its conclusion based thereon, are set out in the
following passage in the leading judgment of Wali Ullah J.
:–
“It seems to me that the parties clearly intended that
the defendant was to supply the goods to the
39
plaintiff’ if and when–and only in that event–the particu-
lar goods were prepared by the Victoria Mills and were
supplied to the defendant between the 17th of October, 1941,
and 17th of November, 1941. As the fundamental assumption on
which the contract was made ceased to exist during the time
of performance and consequently it became impossible for the
defendant to fulfil the contract, it must be held that the
contract was discharged by supervening impossibility.”
The construction suggested by the High Court is precise-
ly the construction which was attempted to be put on a
similar contract by the defendant-respondents in the case of
Harnandrai v. Pragdas (1) but the Privy Council negatived
it.’ In that case, the provision as to delivery of goods ran
as follows :–
“The said goods are to be taken delivery of as and when
the same may be received from the Mills.”
The Mills failed to perform their contract with the
defendants as they were engaged in fulfilling certain con-
tracts with the Government, and consequently the defendants
could not supply the goods to the plaintiffs. The questions
raised before the Privy Council were as to the meaning of
the contract and whether its performance had been frustrat-
ed, and the Privy Council disposed of them in these words
:–
“It was also suggested that the words ‘as and when the
same may be received from the Mills’ should be construed, as
if they were ‘ if and when the same may be received from the
Mills.’ This is to convert words, which fix the quantities
and times for deliveries by instalments into a condition
precedent, to the obligation to deliver at all, and virtual-
ly makes a new contract. The words certainly regulate the
manner of performance, but they do not reduce the fixed
quantity sold to a mere maximum, or limit the sale to such
goods, not exceeding 864 bales, as the Mills might deliver
to the defendants during the remainder of the year.”
Their Lordships then proceeded to observe:–
(1) (1888) L.R. 15 I.A. 9.
40
“The Mills, from which the goods were to come, no doubt
were contemplated as continuing to exist, though it does’
not follow that, in a bargain and sale such as this, the
closing or even the destruction of the Mills would affect a
contract between third parties, which is in terms absolute;
but the Mills did continue to exist and did continue to
manufacture the goods in question, only they were made for
and delivered to somebody else.”
We agree with the reasoning of the Privy Council, and it
seems to us that the considerations which prevailed with
them must govern the construction of the agreement with
which we are concerned in this case. The agreement does not
seem to us to convey the meaning that the delivery of the
goods was made contingent on their being supplied to the
respondent firm by the Victoria Mills. We find it difficult
to hold that the parties ever contemplated the possibility
of the goods not being supplied at all. The words “prepared
by the Mill” are only a description of the goods to be
supplied, and the expressions “as soon as they are prepared”
and “as soon as they are supplied to us by the said Mill”
simply indicate the process of delivery. It should be remem-
bered that what we have to construe is a commercial agree-
ment entered into in a somewhat common form, and, to use the
words of Lord Sumner in the case to which reference has been
made, “there is nothing surprising in a merchant’s binding
himself to procure certain goods at all events, it being a
matter of price and of market expectations.” Since the true
construction of an agreement must depend upon the import of
the words used and not upon what the parties choose to say
afterwards, it is unnecessary to refer to what the parties
have said about it.
Even apart from the construction of the agreement, it
seems to us that the plea of the respondents must fail on
their own admissions. The defendant has stated in his
evidence that he had not sold the 61 bales of cloth to any
other person at the time he received the telegraphic notice
of the 20th November, 1941, (exhibit 1). On his own admis-
sion, therefore, he was
41
in a position to supply 61 bales of the contracted goods at
the time when the breach of the agreement is alleged to have
happened. That being so, we are unable to hold that the
performance of the contract had become impossible. The
matter however does not rest there. Guruprasad, a clerk of
the Mills Company, who is the second witness for the defend-
ants, has made an important statement to the following
effect
“The customers all place their requirements before the
sales manager. If the goods required are ready, they are
sold to the customers and if they are not ready and if the
customer wants them to be manufactured they are delivered to
the customers after manufacture. An order book is main-
tained at the Mills.”
Such being the practice which prevailed in the Victoria
Mills, it was for the defendants to show that an order for
the manufacture of the contracted goods was placed with the
Mills and yet the Mills failed to supply the goods. No such
evidence has however been offered by the defendants- The
High Court has surmised that it might not have been possible
to supply the goods within the period mentioned in the
agreement, but there is no material to support that state-
ment.
In these circumstances, this is obviously not a case in
which the doctrine of frustration of contract can be in-
voked. That doctrine has been explained in a number of
cases, some of which are referred to in the judgment of the
High Court, but the latest pronouncement with regard to it
is to be found in the speech of Viscount Simon in British
Movietone News v. London Cinemas(1), in which the Lord
Chancellor referred with approval to the following enuncia-
tion of the doctrine by Earl Loreburn in a previous case
F.A. Tamplin S.S. Co. Ltd. v. Anglo-Mexican Petroleum
Products Co., Ltd(2):-
“…a court can and ought to examine the contract and
the circumstances in which it was made, not of course
(1) [1951] A.E.L.R. 617. (2) [1916] 2 A.C. 403,
404.
6
42
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 state of
things would continue ,to exist. And if they must have done
so, then a term to that effect will be implied, though it be
not expressed in the contract …… no court has an
absolving power, but it can infer from the nature of the
contract and the surrounding circumstances that a condition
which is not expressed was a foundation on which the par-
ties contracted,”
It seems necessary for us to emphasize that so far as
the courts in this country are concerned, they must look
primarily to the law as embodied in sections 32 and 56 of
the Indian Contract Act, 1872. These sections run as fol-
lows :–
“32. Contingent contracts to do or not to do anything
if an uncertain future event happens cannot be enforced by
law unless and until that event has happened.
If the event becomes impossible such contracts become void.”
“56. An agreement to do an act impossible in itself is
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………
The enforcement of the agreement in question was, as we
have already pointed out, not contingent on the happening of
an uncertain future event, nor does the present case fall
within the second paragraph of section 56, which is the only
provision which may be said to have any relevancy to the
plea put forward by the respondents. Clearly, the doctrine
of frustration cannot avail a defendant, when the non-per-
formance of a contract is attributable to his own default.
We accordingly allow the appeal, set aside the judgment
of the High Court, and restore the decree of the trial
court. The appellant will be entitled to his costs through-
out.
Appeal allowed.
Agent for the appellant: R.S. Narula. Agent for the respond-
ent: S.S. Sukla.
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