Case Comment

Case Comment:
Satyabrata Ghose v/s Mugneeram Bangur - 1954 AIR

44, 1954 SCR 310
Introduction
This case is related to sale of land and the question before the court was
certain supervening events which affected the material part of it and would
those events lead to its discharge. The doctrine of frustration of contracts when
an act becomes impossible to perform or unlawful comes under the purview of
Section 56 of Indian Contract Act, 1872. By Satyabrata v Mugneeram, the
Supreme Court established the scope of Section 56 of Indian Contract Act that
impossibility as mentioned in the said Section is used in a practical and not in
literal sense. It also held that it is not permissible to import English law to the
statutory provisions of Indian Contract Act.
Facts:
The Respondent's company owned a large tract of land in Calcutta. It started a
scheme for the development of the land for residential purposes and divided
land into different plots. The company entered into agreements with
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 undertook the job of
constructing roads and drains, necessary for the residential purposes. The
plots would be given after the construction and payment of balance amount by
the buyers.
Bejoy Krishna Roy entered into the agreement with the company and paid the
earnest money deposit of Rs. 101 on 5th August, 1941. On 30th November
1941, the appellant was made the nominee of the above land. It so happened
that subsequently the land was requisitioned by the Collector, 24 - Paragnas
under Defence of India rules for military purposes. As a consequence, in
November 1943, the company decided to treat the agreement cancelled but
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.
The appellant refused both the options. He filed a suit on 18th January 1946
and claimed that the company was bound to the terms of agreement.
Judicial History:
The trial court passed its judgement in the favour of Appellant (then plaintiff).
The respondents filed for an appeal in the District court which was dismissed.
A second appeal was filed in the High Court which gave its judgment in the
favour of the respondent. The learned Attorney General, who appeared in
support of the appeal, has put forward following three-fold contention on behalf
of his client.
1. 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.
2. 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.
3. 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.
Issues:
1. Did the plaintiff have a locus standi for instituting the suit?
2. Did the contract become frustrated under the Section 56 of ICA?
3. Does English law of frustration apply in India?
The apex court observed as following on the above contentions:

1. A contention in the extreme form that the doctrine of frustration as
recognised in English law does not come at all within the purview of section 56
of the Indian Contract Act cannot be accepted.
2. It is true that in England the judicial opinion generally expressed is, that the
doctrine of frustration does not operate in the case of contracts but the reason
underlying this view is that under the English law as soon as there is a
concluded contract for sell of land interest of the buyer in the property is
created. According to the Indian law a contract for 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 to a contract for sale of land are, therefore, the
same as in other ordinary contracts and consequently there is no conceivable
reason why the doctrine of frustration should not be applicable to contracts for
sale of land in India. This contention of the Attorney General must, therefore,
fail.
3. Having regard to the nature and terms of the contract, the actual existence
of war conditions at the time when it was entered into, the extent of the work
involved in the development scheme and last though not the least the total
absence of any definite period of time agreed to by the parties within which the
work was to be completed, it cannot be said that the requisition order vitally
affected the contract or made its performance impossible.
Judgment:
Thus, the apex court held that the events which have happened in this case
cannot be said to have made the performance of the contract impossible and
the contract has not been frustrated at all and set aside the order of the High
Court and restored those of the courts below it i.e. in favour of the plaintiff.
The apex court also observed that the doctrine of frustration is really an aspect
or part of the law of discharge of contract by reason of supervening
impossibility or illegality of the act agreed to be done and hence comes within
the purview of S. 56 of the Indian Contract Act. The view that s. 56 applies only
to cases of physical impossibility and that where this section is not applicable
recourse can be had to the principles of English law on the subject of
frustration is not correct. English cases can have only a persuasive value, and
are only helpful in showing how English courts decided cases under similar
circumstances. Section 56 of the Indian Contract Act lays down a rule of
positive law and does not leave the matter to be determined according to the
intention of the parties. In cases, therefore, where the court gathers as a matter
of construction that the contract itself contained impliedly or expressly a term,
according to which it would stand discharged on the happening of certain
circumstances, the dissolution of the contract would take place under the
terms of the contract itself and such cases would be outside the purview of S.
56 altogether. Although in English law these cases are treated as cases of
frustration, in India they would be dealt with under s. 32 of the Indian
Contract Act which deals with contingent contracts or similar other provisions
contained in the Act.
Comment:
Over the time, English law has pronounced many theories and principles
relating to the law of frustration. However, it was made clear by this case that
in India we have statutory provisions to be followed under Section 56 of Indian
Contract Act.
It has 3 provisions. First says, An agreement to do an act impossible in itself is

void.
Second says contracts to do an act which afterwards become impossible or

unlawful are void. So when do contracts become impossible? First,
impossibility does not apply to the cases where the contract contains an
implied term which discharges them from the performance of contract.
Section 56 (2) is dealt with when matter is not determined to the intention of
parties. It is applied when parties did not have an intention regarding the
supervening event and when there is no implied term in the contract. Another
important aspect to check for the application of impossibility is that the
foundation of the contract gets upset.
In this case of Satyabrat Ghose v. Mugneeram Bangur, though the land gets
requisitioned by the government, impossibility does not apply because:
They did not start their work when the land got requisitioned. Therefore, there
was no interruption in the work.
As the Respondent pleads there would be an indefinite delay in performance of

the contract so the impossibility should be applied. But there was no time limit
described in the contract and the requisition was only temporary. So there was
no indefinite delay.
Third provision of Section 56 [2] says when a person while signing the contract
has reasonable diligence which the other party didn't know must compensate
for the loss faced by the other party.
It can be stating that though theories of law of frustration of England are not
applicable in India, the matter is always determined to the court which
analyzes the contract as presented by the parties and considers the
circumstances around the contract.

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Case Comment:

Satyabrata Ghose v/s Mugneeram Bangur - 1954 AIR

1. That the doctrine of English law relating to frustration of contract, upon

The apex court observed as following on the above contentions:

It has 3 provisions. First says, An agreement to do an act impossible in itself is

Second says contracts to do an act which afterwards become impossible or

As the Respondent pleads there would be an indefinite delay in performance of

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