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Firm Bachhraj Amolakchand and anr. Vs. Firm Nandlal Sitaram and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMadhya Pradesh High Court
Decided On
Case NumberFirst Appeal No. 208 of 1959
Judge
Reported inAIR1966MP145
ActsContract Act, 1872 - Sections 50 and 56
AppellantFirm Bachhraj Amolakchand and anr.
RespondentFirm Nandlal Sitaram and ors.
Appellant AdvocateA.P. Sen and ;A.H. Saifi, Advs.
Respondent AdvocateC.P. Singh, Adv.
DispositionAppeals dismissed
Cases ReferredAlopi Parshad and Sons Ltd. v. Union of India
Excerpt:
.....expect some provision being made in the contracts themselves contemplating that possibility. the condition of the availability of wagons was implied and the impossibility of performance which resulted from the failure of supply of wagons excuses the performance of the contract for both the parties in the cases on hand. 23. in this view, both the appeals must fail and they are dismissed with costs......with the plaintiff to deliver certain bags of rice to him. the contract contemplated delivery by railway wagons. as a war measure, the government had imposed wagon restrictions and priority certificates all over the presidency and this interfered with the free and easy transport of rice. the existence of these restrictions was well known to all the parties. owing to the shortage of wagons on account of the enforcement of the rules, the defendant was not able to perform his contract and he pleaded impossibility of performance as a defence to the suit. it was held:'the law does not imply an absolute obligation to do that which the law forbids, and the reasonable view to take of the contract would be that the seller agreed to supply the promised number of bags of rice if, after using his.....
Judgment:

Bhargava, J.

1. This appeal arises out of Civil Suit No. 27-B of 1958 instituted in the Court of IIIrd Additional District Judge, Bilaspur, by the appellant firm against the respondent firm for the recovery of Rs. 11168-12-0 as damages for breach of contract. There is also another appeal (First Appeal No. 209 of 1959) which arises out of Civil Suit No. 26-B of 1958 instituted by the same plaintiff-appellant firm against a different defendant partnership firm Nandlal Radhakishan for the recovery of Rs. 10182-11-0 as damages for similar breach of contract. Both the suits were dismissed by the trial Court.

2. The questions for consideration in both the appeals are identical, though the suits were based on different contracts. The evidence for both the cases was recorded in Civil Suit No. 26-B of 1958. This judgment shall therefore govern the disposal of both the appeals.

3. In the body of this judgment we are referring to the facts of Civil Suit No. 27-B of 1958. Reference to documents will have to be construed to the corresponding documents in the other case (Civil Suit No. 26-B of 1958). Express reference to them for the disposal of the other appeal is not necessary.

4. Most of the facts are no longer in dispute. Briefly stated, they are as follows:

On 2-12-1957 and 16-12-1957, the defendant firms entered into contracts with the plaintiff firm for the purchase of 220 bags (550 maunds) of rice and 480 bags (1200 maunds) of rice at specified rate. The contracts were reduced to writing. The transactions were 'bilticut' under which the goods were to be sent by rail from Bilaspur to three different places in the Bihar State. The plaintiff firm indented for the requisite number of wagons for despatching the goods a day after making the above contracts, that is to say, on 3-12-1957 and 17-12-1957. However, before the wagons could be allotted to the plaintiff firm, the Central Government, in exercise of the powers conferred under Section 3 of the Essential Commodities Act (No. X of 1955), passed an order on 20-12-1957 banning the export of rice from the State of Madhya Pradesh to any other State in the Union of India for an indefinite period. After the imposition of this ban, all the Station Masters in Madhya Pradesh were instructed by the South East Railway to stop booking of rice to any station outside Madhya Pradesh. The plaintiff therefore admittedly did not book the goods by rail and did not send the railway receipt to the defendant firm. However, the plaintiff firm sent a letter Ex. P. 6 on 16-1-1958 to the defendant firm asking the latter to take delivery. Along with this letter a bill for Rs. 37167-15-6 (Ex. D. 23) was also sent. The defendant firm in its reply Ex. P. 7 dated 25-1-1958 refused to take delivery and claimed damages from the plaintiff firm, charging it with breach of contract. Thereupon, the plaintiff firm sent another letter Ex. P. 8 on 3-2-1958, reiterating the facts above stated and emphasizing that the defendant firm was bound to take delivery of the goods in the plaintiff's rice mill at Bilaspur according to the printed conditions No. 2 and 3 in the written contract, and asked for compliance within 15 days failing which the goods would be sold in the market and the defendant would be liable for the loss incurred to the plaintiff. The defendant firm did not take delivery even after this letter. Ultimately, the plaintiff firm sold the rice and sent notice dated 10-3-1958 (Ex. P. 9) claiming the loss sustained by it on such sale. Account of sale (Ex. P. 10) was sent along with this letter, showing Rs. 11064-3-6 as the total amount of loss sustained by the plaintiff firm. The defendant firm repudiated its liability by its letter dated 18-3-1958 (Ex. P. 11), claiming Rs. 3500/-as damages from the plaintiff for the breach of contract. Ultimately the plaintiff firm filed the present suit on 5-5-1958.

5. The main question for consideration in the case whether in the contracts made between the parties, the plaintiff firm as seller had the option to give delivery of the contracted quantity of rice in any other manner except by sending railway receipt to the defendant firm. The case of the plaintiff is that the contract depended on availability of wagons; that time was not the essence of contract; and that according to the printed terms contained in the written contract, the defendant firm was bound to accept delivery in other mode when the goods could not be despatched by rail to the places outside the State of Madhya Pradesh.

6. The defendant firm contended that it being a 'bilticut' contract it was not bound to accept delivery in any manner except by receiving the railway receipt and paying for it. The argument is that the plaintiff firm could not substitute one contract for another, nor will it be the proper function of the court to alter the contract between the parties on change of circumstances. It is urged that it was an absolute liability of the plaintiff firm under the contract to book the goods by rail within the alleged stipulated period of time and even if it be held that there was no contract between the parties to that effect, then also the plaintiff firm was bound to despatch the goods within a reasonable period and as it failed to do so, it was guilty of breach of contract and could not recover any damages from the defendant firm, taking advantage of its own breach. In the second place, it was contended that even if it be assumed that the plaintiff firm did not commit any breach of contract, the defendant firm was absolved of its responsibility under the contract under the principle of frustration of contract as embodied in Section 56 of the Contract Act. It was pleaded that the printed terms of the contract were not applicable at all to the contracts in question, because they were contracts of a special type, that is to say, 'bilticut' contracts, which had their own characteristics and incidents. On these contentions it was urged that the suit of the plaintiff firm was rightly dismissed by the trial Court.

7. The printed terms in Exs. P. 4 and P. 5 are in Hindi. The parties have agreed that rendered in English, they would read as follows:

'1. The goods of this contract have been sold on mill delivery. The purchaser will have to take delivery at his own responsibility and expense.

2. If the goods of this contract have been sold at the place of the customer or on condition of 'station delivery', then the mill would arrange to send the goods. But, if due to any reason, due to floods in rivers or rivulets, dislocation in trucks, restrictions in railways; legal obstacles, and other difficulties, the mill becomes helpless to send the goods to the place of the customer, then the customer would be required to make his own arrangement at the earliest for taking the delivery.

3. If due to any reason whatever, the mill is closed, or there is strike or lock out, or the stored goods become unavailable, or the official legal obstacles come into existence or if due to other reasons the mill is unable to complete (the supply of) the goods relating to this contract, then to extend the time of delivery or cancel the contract will be at our (plaintiffs') option. The purchaser shall have no right to claim damages or reducing the rates.

4. If the purchaser does not take delivery of the goods of this contract, we (plaintiffs) shall have the right to sell the goods after giving the detailed information to the purchaser and after waiting for 15 clays, the loss sustained therein would have to be paid by the purchaser.

5. The customer shall have to supply empty drums, containers, and bags for obtaining delivery, otherwise the mill may effect delivery in its own drums, containers or bags, the price of which would be required to be paid by the purchaser.'

None of the contracts involved was a mill delivery contract and therefore there is no question of the applicability of the first term. Shri A.P. Sen, the learned counsel for the appellant firm, contended that the contracts in question were governed by the second term reproduced above. He argued that the words 'station delivery', as used in the second term, were of wider import and included within them the 'bilticut' contracts. We are unable to agree with this submission. In the first place, Mangalchand, one of the partners of plaintiff firm, who has been examined as P.W. 2. has himself clearly admitted in para 13 of his deposition that conditions Nos. 1, 2 and 5 had no application to the contracts in question, and stated that the contracts in question were governed by conditions 3 and 4. Secondly, the plaintiff firm in its notice dated 3-2-1958 (Ex. P. 8) wrote to the defendant firm that the latter fully understood the meaning of the term 'bilticut' and knew that in such contracts the wagon is required to be indented by the seller and the railway receipt is prepared only after the goods are loaded in the wagon. It was further stated, and that is important, that unless the wagon was available, the plaintiff firm could not load the goods in the wagon and till then the railway receipt could not be obtained. All these facts stated in the notice (Ex. P. 8) clearly show that the subsequent statement of Mangalchand (P. W. 2) in para 10 of his deposition to the effect that in 'bilticut' contracts it was not the responsibility of the seller to get the railway receipt prepared after the goods were loaded in the wagon is absolutely incorrect.

8. We may also refer to the statement of defendant's witness Harkeshlal. In para 4 of his deposition he has clearly stated the incident of a 'bilticut' contract. He stated that in such contracts the responsibility of indenting the wagons, having them allotted and getting the goods loaded in them is on the seller who has to bear all expenses upto the time of the preparation of the railway receipt. In such contracts, the seller is required to endorse the railway receipt in favour of the purchaser, and to give the bill and receive money. He also stated that in such contracts without giving the railway receipt, no question of taking delivery or payment of price arises. He explained in para 9 of his deposition the distinction between a 'station delivery contract' and a 'bilticut' contract. He stated that in the former, the rate includes the expenses of sending the goods up to the station and duty to get the railway receipt prepared is not on the seller, while in the latter the seller has to get the Railway receipt prepared for fulfilling his obligation under the contract. We have no hesitation in accepting his statement which is consistent with the view of 'bilticut' taken in Firm Hajarimal v. Firm Gulabchand Udechand ILR (1955) Nag 722: (AIR 1956 Nag 118). It was observed :

'Bilti' is a Hindi word for a railway receipt. Bilticut refers to the rate agreed. The bilticut rate includes the cost of bagging or containers, weighing, transport to the railway station, loading in wagons, if this is to be done by the consignor, and other station charges till the bilti is issued. The railway freight is to be paid by the buyer who undertakes the risk of transit. The price is payable against the railway receipt at the place of the buyer.'

The view taken in that case was also approved in Moon Corporation Ltd. Indore v. Chandrakant Manilal First Appeal No. 38 of 1957 (MP) by a Division Bench of this Court of which one of us (Bhargava, J.) was a member.

9. It therefore remains to be seen as to whether conditions Nos. 3 and 4 can be held to be applicable and if so, whether the plaintiff firm is entitled to get any benefit from these terms in the sense that he can ask the defendant firm to take delivery within the mill premises. On a plain reading of condition No. (3), it is clear that in the circumstances stated therein, the seller has either of the two options. He may extend time for the performance of the contract or may cancel it. There is no option to change the mode of performance of the contract. It is clear that the delivery of goods at various places situated in Bihar State cannot be the same thing as delivery of goods in this State. To insist on taking delivery in a different manner would be substituting one contract for another. It is therefore quite clear that term No. (3) has absolutely no application.

10. We now come to term No. 4. The opening words of this term are that if the purchaser does not take delivery of the contracted goods in question, then certain consequences will follow. In our view, the fact that the words 'does not take delivery' can only mean failure to take delivery in terms of the contract. It cannot mean refusal to take delivery in a manner which was not contemplated by the contract. In this view, we hold that these terms have no application in the instant case and do not give a right to the plaintiff of selling the goods in question at the defendant's risk, if delivery was not offered to the defendant in the manner contemplated by the contracts, Exs. P. 4 and P. 5.

11. The defendant has urged in the written statement that the goods should have been despatched within 5 days of making of the contract. The trial court has held against the defendant on this point, holding that no such contract was proved. We agree with the conclusion of the trial court, as there is absolutely no material on record to warrant a conclusion to the contrary. In the absence of there being any agreement with regard to the time within which the contract was to be performed, the provisions of the Contract Act require that the contract has to be performed within a reasonable time. What is 'reasonable time' is a question of fact depending upon the particular circumstances of each case.

12. Manglchand (P. W. 2), in para 7 of his deposition stated that at the time of making of the contracts, there was no idea of the period within which the goods will be despatched. He further stated that usually it takes up to 3 months to get the wagons. Thus, the goods could have been despatched up to some date in the month of March 1958 when three months from the date of contracts expired. It is clear that the goods were not despatched till that time and possibility of sending the goods was completely lost by the goods having been sold on or before 10-3-1958.

13. We are now required to consider as to whether the doctrine of frustration relieves the defendant from his liability. The facts of the case make it undisputedly clear that the export ban for rice was imposed on 20-12-1957 for an indefinite period. The essential result of this ban was that railway receipts of the goods for the destinations indicated in Exs. P.4 and P. 5 could not be prepared. We have already emphasized that in mercantile venture of this type, it would be a very pertinent consideration for the purchaser to get the goods at the place bargained for. It is apparent that the purchaser may not be having any facilities to stock the goods at any place other than the one where he intends to receive them. It is also clear that he may be in a position to sell in the way he likes only at the place where he had contracted to get the goods. We, therefore, agree with the lower court that in the circumstances it would amount to substituting one contract for another, if it were to be held that the defendant firm was bound to accept delivery at the plaintiff's mills at Bilaspur instead of the different places contracted.

14. The 'doctrine of frustration' is contained in Section 56 of the Contract Act. That section provides:

'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.

Where one person has promised to do something which he knew or, with reasonable diligence, might have known, and which the promisee did not know to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise.'

15. We may now refer to some of the decided cases in which the meaning and scope of Section 56 has been considered. In Kesarichand v. Governor-General in Council, ILR (1949) Nag 718 a Division Bench of this Court, after reviewing several English cases observed :

'The doctrine of frustration comes into play when a contract becomes impossible of performance after it is made on account of circumstances beyond the control of the parties. It is a special case of discharge of the contract. It occurs when a violent outside force suddenly dashes against the adventure which forms the basis of the contract. The contract is at an end and future performance is excused on both sides if it wrecks the adventure beyond recognition, or swamps it out of existence. Performance is not, however, excused if the adventure survives. The doctrine applies to India. The doctrine is a special case of 'impossibility' and as such is dealt with in Section 56 of the Indian Contract Act.'

It was further observed in the same case:

'Courts have no absolving power to modify or alter contracts, or to construct for the parties contracts which they have not in terms made.'

16. In Shree Kishen v. Gambhirmal, (S) AIR 1955 Hyd 233 the facts were to some extent identical. The defendant in that case had made a contract with the plaintiff for supplying certain goods at a place outside the State of Hyderabad when there was no prohibition against sending goods outside the State. But subsequently, such a prohibition was imposed and the railway booking was closed and it remained so for a considerable time. It was held that this supervening event had made the contract impossible and exempted the defendant from performing the contract under Section 56 of the Contract Act. Relying on

1. F. A. Tamplin Steamship Co. v. Anglo-Mexican Petroleum Products Co., Ltd. 1916-2 AC 397,

2. Joseph Constantine Steamship Line Ltd. v. Imperial Smelting Corporation Ltd. 1942 AC 154,

3. ILR (1949) Nag 718,

4. Dinkcrrai Lalit Kumar v. Sukhdayal Rambilas, AIR 1947 Bom 293.

5. Ganga Saran v. Firm Ram Charan Ram Gopal, AIR 1952 SC 9 and

6. G.A. Galia Kotwala and Co. Ltd. v. K. R. L. Narasihman and Brother, AIR 1954 Mad 119.

it was held that the fact that the defendant could have sent the goods to a different place cannot affect the defendant and impose any liability on him.

17. In Dominion of India v. Bhikhraj Jaipuria, (S) AIR 1957 Pat 586, it has been held:

'Where the performance of the contract is rendered impossible due to unexpected emergence of a fundamentally different situation which no party could have foreseen and which happened in spite of them, frustration of the contract occurs and the contractor is absolved from liability.

If the performance of a contract is rendered unlawful because of subsequent change in the law, there is automatic discharge of the contract under Section 56.'

18. In Gundayya v. Subbayya AIR 1927 Mad 89, the facts were that the defendant contracted with the plaintiff to deliver certain bags of rice to him. The contract contemplated delivery by railway wagons. As a war measure, the Government had imposed wagon restrictions and priority certificates all over the presidency and this interfered with the free and easy transport of rice. The existence of these restrictions was well known to all the parties. Owing to the shortage of wagons on account of the enforcement of the rules, the defendant was not able to perform his contract and he pleaded impossibility of performance as a defence to the suit. It was held:

'The law does not imply an absolute obligation to do that which the law forbids, and the reasonable view to take of the contract would be that the seller agreed to supply the promised number of bags of rice if, after using his best endeavours he was able to secure the necessary number of wagons. The obligation to perform the contract was not therefore absolute, but impliedly conditional.'

19. In the case of Ram Kumar v. P. C. Roy and Co., (India) Ltd. AIR 1952 Cal 335, the principle of frustration came up for consideration of the Court in the context of the facts that certain goods were contracted to be transhipped from Bihar to Bengal by railway. But due to non-availability of wagons, they could not be so transhipped. Their Lordships laid down:

'The main object of the contract was the transhipment of the goods from Bihar to Bengal by Railway and in my opinion having regard to the events that have happened the basis of the contract has been overthrown. In the absence of express intention of the parties I have to determine what is just and reasonable in view of the non-availability of wagons for transport and the difficulties created by the restrictions or emergency orders. It may be now accepted as settled law that when people enter into a contract which is dependant for its performance on the continued availability of a specific thing and that availability comes to an end by reason of circumstances beyond the control of the parties, the contract is dissolved. According to Lord Wright the expression 'frustration of the contract' is an elliptical expression. The fuller and more accurate expression is 'frustration of the adventure or the commercial or practical purpose of the contract.' In my view, the commercial or practical purpose of this contract was defeated or over-thrown by the refusal on the part of the Government to issue permit and by the non-availability of the transport facilities and the restrictions and embargoes put by the Government and ultimately by requisition of the stock of the plaintiff. The real object of the contract as contemplated by the parties was the purchase or employment of the goods for a particular purpose and therefore the doctrine of frustration can be imported and if necessary, the requisite terms can be implied.'

20. In a very recent case of the Supreme Court, Alopi Parshad and Sons Ltd. v. Union of India, AIR 1960 SC 588, it has been observed:

'The parties to an executory contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate--a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. Yet this does not in itself affect the bargain they have made. If, on the other hand, a consideration of the terms of the contract. in the light of the circumstances existing when it was made, shows that they never agreed to be bound in a fundamentally different situation which has unexpectedly emerged, the contract ceases to bind at that point--not because the court in its discretion thinks it just and reasonable to qualify the terms of the contract, but, because, on its true construction it does not apply in that situation.'

21. Applying the test and principles discussed in the above cases, it is clear that in each case, the following three questions arise for consideration:

1. What was the foundation of the contracts having regard to all the circumstances of the case?

2. Whether the performance of the contract was prevented; and

3. Whether the event which prevented the performances of the contract was of such A character that it could not reasonably be said to be in the contemplation of the parties at the date of the contract.'

If all these questions can be answered in the affirmative, both the parties are discharged from further performance of the contract.

22. We are of the view that in the instant case all the above questions must be answered in the affirmative. The foundation of the contract in a 'bilticut' contract was and must be taken to be the availability of the wagons. The plaintiff could not be expected to perform the impossible, if the wagons were not available. The non-availability of wagons in the instant case prevented the performance of the contract. The non-availability of wagons was not contemplated by the parties when the Contract was made. If any of the parties had anticipated the failure of the supply of wagons, we could reasonably expect some provision being made in the contracts themselves contemplating that possibility. The only provision that has been made in term No. 3 of the contract is that in such an event, the plaintiff might have cancelled the contract or might havea extended the time of performance. But the plaintiff had not been given the option to offer delivery in any manner other than the one contemplated by the contract. The uncertainties of future were there when the contract was made, but when those uncertainties became realities, we are of the view that the commercial venture frustrated. It appears to us that the performance of the contract in this case depended on the continued existence of a given state of things. The condition of the availability of wagons was implied and the impossibility of performance which resulted from the failure of supply of wagons excuses the performance of the contract for both the parties in the cases on hand.

23. In this view, both the appeals must fail and they are dismissed with costs.


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