Satyabrata Ghose vs. Mugneeram Bangur, 1953

This case was about the sale of land and due to certain circumstances, the defendant contested his capability to perform the contract. 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. The company entered into agreements with the purchasers for the sale of the different plots and accepted a small amount of earnest money at the time of sale of land.
• The company on the other hand took the responsibility of providing all the necessities for the residential purpose are it the construction of roads/drainage system or any other essential needs for residing. The plots would be given after the construction of all essentials gets completed and payment of balance amount by the respective purchasers.
• Satyabrata Ghose (assignee of Bejoy Krishna Roy), 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 and paid the earnest 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 in November 1943, decided to treat the contract cancelled due to the impossibility of further construction and sale and they conveyed the same to the buyers. But the company gave the appellant the option of either taking the earnest money back or paying the balance money and the company would continue its work after the termination of war.
• 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.

1. Whether the appellant hold a locus standi and is qualified enough to institute the suit?
2. Can the law of frustration in English law be applied in India?
3. Does this contract become frustrated according to section 56 of Indian Contract Act?

Appellant’s Agruments

• The learned Attorney General on behalf of appellant, who appeared in support of the appeal, has put forward a three-fold contention on behalf of his client. He has contended in the first place that the doctrine of English law relating to frustration of contract, upon which the learned Judges of the High Court based their Decision has no application to India in view of the statutory provision contained in section 56 of the Indian Contract Act.
• It is argued in the second place, that even if the English law Applies, it can have no application to contracts for sale of land and that is in fact the opinion expressed by the English, judges themselves. His third and the last argument is that on the admitted facts and circumstances of this case there was no frustrating event which could be said to have taken away the basis of the contract or tendered its performance impossible in any sense of the word

Respondent’s Arguments

Mr. Gupta, who appeared for the respondent company put forward an alternative argument that even if the performance of the contract was not made impossible it certainly became illegal as a result of the requisition order and con- sequently the contract became void under section 56 of the Indian Contract Act as soon as the requisition order was made.

JUDGMENT :-

• The Supreme Court stated that English principles of Frustration of Contract on basis of which the judgment of the High Court was passed is not applicable in the statutory provisions of Indian Contract Act. 
• It also said that the performance of the contract has not become impossible.
• The Court pointed out, the company had not commenced its work when the land was requisitioned, and therefore, there was no interruption of work. 
• Secondly, there was no time limit implied in the contract for the completion of construction of the roads and drains.
• It was laid by the trial court as well as the lower appellate court that the appellant was a real assignee of Bejoy Krishna Roy on the issue of latter's rights on filing the suit.
• Appeal allowed.

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 fall under Section 56 (INDIAN CONTRACT ACT ) does not held void.

And it did not fall in the criteria of being a frustrated contract.