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Trilokidas and ors. Vs. Firm Ram NaraIn Damodar and ors. - Court Judgment

LegalCrystal Citation
SubjectContract;Commercial
CourtRajasthan High Court
Decided On
Case NumberFirst Appeal No. 49 of 1962
Judge
Reported inAIR1971Raj88
ActsDefence of India Rules, 1939 - Rules 97 and 98; Contract Act - Sections 56; Sea Customs Act; Defence of India Ordinance
AppellantTrilokidas and ors.
RespondentFirm Ram NaraIn Damodar and ors.
Appellant Advocate C.L. Agrawal, Adv.
Respondent Advocate Hastimal, Adv.
DispositionAppeal allowed
Cases ReferredGherulal Parakh v. Mahadeodas
Excerpt:
- - 7. though in the lower court, a good deal of controversy was raised on the point that case no. first, that the plaintiff has failed to prove that there was any agreement of partnership between the parties and the learned district judge has wrongly relied upon the admissions of the defendant contained in exs. on the other hand, at best, it showed that there was an agreement for the sale of synthetic stone to the extent of six annas by the defendant to the plaintiff in case the stones were received from georges lambercier, and secondly, that plaintiff no. the ship was condemned as a prize at colombo, but she was allowed by the government to proceed and discharge her cargo at her destination, the government undertaking to give delivery to british subjects who were entitled to receive.....c.b. bhargava, j.1. this appeal was originally filed by the defendant damodardas who died during the pendency of this appeal and so it is now being continued by his legal representatives. it is directed against the judgment and decree dated 30th march, 1961, of the district judge. jaipur district, jaipur, in a suit for dissolution of partnership and rendition of accounts. the learned district judge by his decree has declared that damodar and his two sons dwarka das and gordhandas are entitled to six annas share in 3 lakh carat white synthetic stones contained in gl/11, or if already sold, to six annas share in the net profit thereof from the defendant damodardas. he has also appointed a commissioner to go into accounts and submit his report.2. the suit was instituted by firm ram narain.....
Judgment:

C.B. Bhargava, J.

1. This appeal was originally filed by the defendant Damodardas who died during the pendency of this appeal and so it is now being continued by his legal representatives. It is directed against the judgment and decree dated 30th March, 1961, of the District Judge. Jaipur District, Jaipur, in a suit for dissolution of partnership and rendition of accounts. The learned District Judge by his decree has declared that Damodar and his two sons Dwarka Das and Gordhandas are entitled to six annas share in 3 lakh carat white synthetic stones contained in GL/11, or if already sold, to six annas share in the net profit thereof from the defendant Damodardas. He has also appointed a Commissioner to go into accounts and submit his report.

2. The suit was instituted by firm Ram Narain Damodar, Johari Bazar, Jaipur, through Damodar and Dwarkadas and Gordhan Das sons of Damodar Malpani, proprietors of the firm Ram Narain Damodar, on 13th April, 1944, against Damodardas Khandelwal. It was alleged that both parties had their business in the city of Jaipur and were dealing in precious stones. In July, 1941, it was agreed between Gordhan Das acting on behalf of the firm and the defendant that rough synthetic stones may be ordered from Georges Lambercier in partnership with whom the defendant was already in correspondence, and thereafter may be sold and the plaintiffs will have six annas share in its profit and loss, while the defendant will have 10 annas share. In pursuance of this agreement of partnership, an order with the joint consultation of the parties for 10 lakh carats of white synthetic stones and one lac carats of yellow colour was placed with Georges Lambercier. The latter despatched three cases numbering GL/11, 12 and 13 containing nine lac carat white synthetic stones in November 1941 to the defendant which was to arrive in Bombay via Newyork and the delivery was to be given on payment to the Imperial Bank of India. In January, 1943, plaintiffs were informed by the defendant that the consignment was reaching Bombay by steamer S.S. Lock Dee and that they should accompany him to Bombay for taking delivery. In the last week of February, 1943, defendant, however, informed that the delivery of the consignment had been stopped by the Government of India and a suspension order had been passed in respect of it. It is alleged that out of the three cases consigned from Geneva, only one case marked GL/11 consisting of three lakh carat white synthetic stones arrived in India of which delivery was taken by the defendant, but he did not give plaintiffs their share out of it nor did he render any account of its disposal. Thereupon on 19th May, 1943, plaintiffs moved the Jewellers Association, Jaipur, to settle their dispute but on 23rd November, 1943, after some proceedings, the Association also expressed its inability to decide the matter and so the present suit has been filed.

3. The defendant contested the suit, denied the agreement of partnership between the parties through Gordhan Das and stated that after he had placed an order for the supply of Synthetic stones with Georges Lambercier. Gordhan Das plaintiff expressed his desire that some portion of the Synthetic stones ordered from Georges Lambercier be also given to him, and he agreed to give him six annas share in stones provided he also gave him 2000 totals of the imitation stone which had been imported by him before the war at its cost price in case he so required it. It was also stated that no consignment of synthetic stone was received from Georges Lambercier nor did the plaintiffs give any goods to the defendant. It was pleaded that Georges Lambercier had been declared an enemy firm in 1941, and, therefore no agreement of partnership could be made or continued for importing stones from that firm and that no suit concerning that partnership was maintainable. The alleged partnership in either case had become illegal.

4. On the above pleadings, the learned Judge framed the followingissues :

1. Whether in July 1941 a partnership was formed between the parties in terms of para. No. 2 of the plaint?

2. Whether in pursuance of the contract and past correspondence, an order for 10 Lakh carats white and one lakh carat of lemon colour imitation stones was placed with Georges Lambercier?

3. Whether case No. GL/11 imported by the defendant belonged to the partnership?

4. Whether the suit is not maintainable?

5. Whether in 1941 Georges Lambercier was declared enemy firm, and therefore no partnership could be formed for importing stones from that firm, nor a suit is maintainable on the basis of such a partnership?

6. Whether, because the goods have been imported from outside the country, this Court has no jurisdiction?

7. Relief?

5. Plaintiffs in support of the above issues examined Mr. Richard Grasser P. W. 1 who was the Swiss Trade Commissioner for India, Burma and Ceylon, Mohammad C. Rehman P. W. 2 who was the Controller of Enemy Firms and Enemy Trading and Custodian of Enemy Property, A. K. Mukherji P. W. 3, who was the Under-Secretary, Central Board of Revenue, New Delhi, Gopi-chand, P. W. 4, N.K. Acharya P. W. 5, Mohamed Khan P. W. 6, Vinev Chand P. W. 7 and Gordhandas P. W. 8. Documents Exs. 1 to 10, P-12 to P-29, P-30 to P-34, Exs. P-35, and P-37, Exs. CD-1 to CD-5, C-3 to C-12 and C-32 to C-39. Defendant examined Kamla Prasad D. W. 1, Damodar Dass D. W. 2, Bhagwan Sahai D. W. 3, Radha Gopal D. W. 4 and Chhabildas D. W. 5, and also produced Exs. A-1 to A-7, A-9 to A-25 and C-13 to C-30. The learned District Judge after discussing the evidence of the parties came to the following findings:

(1) That partnership was formed between the parties as alleged in Para. 2 of the plaint;

(2) That in pursuance of the agreement of partnership, an order of 10 Lakh carats white arid one lakh carats lemon colour synthetic stories was placed with the Georges Lambercier;

(3) That out of the goods ordered, one case No. GL/11 reached India and it belonged to the partnership in which the plaintiffs were entitled to six annas share.

(4) That though in 1941, Georges Lambercier was declared an enemy firm by British Government, it was not so declared by the Jaipur Government and as such the agreement of partnership for importing stones from that firm was not illegal.

(5) That the Court had jurisdiction to entertain and try the suit.

6. As a result of these findings, the learned District Judge passed a preliminary decree in favour of the plaintiffs declaring its six annas share in the three lakh carat synthetic stones contained in case No. GL/11 and appointed a Commissioner to go into accounts.

7. Though in the lower Court, a good deal of controversy was raised on the point that case No. GL/11 was not imported from Georges Lambercier but was imported from Hrand Dgevhirdiian, another Swiss Firm, and so the plaintiff was not entitled to any share in that consignment; but in this Court, learned counsel for the appellants confined his arguments only to two points which are covered by issues Nos. 1 and 5. In regard to issue No. 1, the argument is two-fold; first, that the plaintiff has failed to prove that there was any agreement of partnership between the parties and the learned District Judge has wrongly relied upon the admissions of the defendant contained in Exs. 9 and 10 because from them no inference regarding any agreement of partnership could be drawn. On the other hand, at best, it showed that there was an agreement for the sale of synthetic stone to the extent of six annas by the defendant to the plaintiff in case the stones were received from Georges Lambercier, and secondly, that plaintiff No. 1 which is a joint Hindu family concern could not by agreement enter into any partnership with the defendant as alleged in Para. 2 of the plaint.

8. Now I shall deal with the other contention of the learned counsel relating to issue No. 5. The objection is that after the defendant had placed his order for importing synthetic stone from Georges Lambercier in 1941, the said firm was declared an enemy firm vide notification issued by the Government of India on 2nd December, 1941, and published in the Gazette of India Extraordinary dated December 22nd, 1941, because of the Second World War between His Majesty's Government and Germany'. It is argued that under Rule 98 of the Defence of India Rules, trading with the enemy as denned in Rule 97 had become illegal as also punishable with imprisonment (R. 98 (3))- So on the arrival of the consignment GL/11, the defendant could neither take its delivery nor make payment of the price to the consignor because that would have amounted to trading with the enemy, and therefore the contract had become unlawful and void. It had therefore become impossible for the defendant to perform the contract alleged to have been made by him with the plaintiffs: vide Sec. 56 of the Contract Act. Learned counsel for the respondent urges that though the firm Georges Lambercier of Geneva had been declared an enemy firm by the British Indian Government, it was not so declared by the erstwhile Jaipur Government, and unless it was so done, it could not be regarded as 'enemy' within the meaning of Rule 97 and the defendant was not debarred from taking delivery of the consignment or making payment of its price. It is urged that the Jaipur State Government had applied the Defence of India Ordinance No. V of 1939 and the Rules made thereunder to the whole of Jaipur territory subject to certain modification as specified in the Schedule and save where the context otherwise required (i) references to the Central Government, a Provincial Government or appropriate Government were to be construed as references to the Jaipur Government; (ii) references to the defence of British India to be construed as references to the defence of Jaipur territory; and (iii) references to British India (otherwise than in the expression 'de fence of British India'), and a Province of British India to be construed as references to Jaipur territory. That being so, in Rule 97 (d), the expression Central Government has to be read as Jaipur Government and so read, a person or body of persons to be an 'enemy' within the meaning of Clause (d) had to be declared so by the Jaipur Government. In the present case, no such declaration was made by the Jaipur Government in respect of Georges Lambercier of Geneva. Therefore the contract of the defendant with Georges Lambercier on the one hand and with the plaintiff on the other had neither become illegal nor impossible of performance. It is next urged that even if Georges Lambercier had become an enemy firm within the meaning of Rule 97 (d) even for the Jaipur Government, the defendant in the present case cannot be deemed to have traded with the enemy because he had taken delivery of the consignment GL/11 by the authority of the Central Government and the case is, therefore, fully governed by the proviso (a) to Rule 98.

9. On 3rd September, 1939, the British Empire declared war against Germany and on that very day the Governor General in pursuance of the powers vested in him under the Government of India Act promulgated Ordinance No. V of 1939 for the defence of India and subsequently the defence of India Act was enacted.

10. Defence of India Ordinance No. V of 1939 and the Rules made thereunder was applied to the whole of Jaipur territory except the Sambhar Shamlat area subject to certain modifications which were specified in the Schedule by His Highness the Maharaja of Jaipur vide Notification No. 2-C published in the Jaipur Gazette Extraordinarv dated 12th September, 1939. The schedule contained the following modification in the Defence of India Ordinance, 1939:

'1. Save where the context otherwise requires:

(i) references to the Central Government, a Provincial Government or appropriate Government shall be construed as references to the Jaipur Government,

(ii) references to the defence of British India shall be construed as references to the defence of Jaipur territory,

(iii) references to British India (otherwise than in the expression 'Defence of British India'), and a Province of India shall be construed as references to Jaipur territory,

(iv) references to High Court shall be construed as references to Chief Court, and

(v) references to British subject shall be construed as references to Jaipur subject.

2. The words 'vessel' and 'port' wherever they appear, shall be deleted.' No modification was however made in Rule 97 or 98 of the Defence of India Rules.

11. By notification No. 156-0-Misc./ M-6-96 dated 20th July, 1940, published in the Jaipur Gazette Extraordinary dated 23rd July, 1940, the following further amendments were made in the Jaipur Defence Ordinance and Rules:

SCHEDULE

1. For the words and figures 'in the Defence of India Ordinance, 1939', substitute 'in the Defence of India Ordinance, 1939 and the Defence of India Rules.'

2. (1) For Clause (v), substitute the following:--

(v) references to His Majesty's subjects or British subjects shall be construed as references to Jaipur subjects'. (2) After Clause (v), add the following Clauses:--

'(vi) references to forfeiture to His Majesty shall be construed as references to forfeiture to the ruler of the state,

(vii) references to any Act shall be construed as references to that Act as applied to, or to the analogous law in force in, the Jaipur territory, and

(viii) references to His Majesty's forces shall include Jaipur State forces,' Rule 44 : 'In Clause fc) of Rule 97, insert the words 'in enemy territory, or', between 'incorporation' and 'in'.'

12. Learned counsel for the respondent therefore urges that according to the aforesaid modifications in Rule 97 (d) of the Defence of India Rules, 'Jaipur Government' has to be read in place of 'Central Government' and unless any person or body of persons has been declared by the Jaipur Government to be an enemy, it would not be so regarded for the purpose of Part XV. Since it is not disputed that the Jaipur Government had not declared Georges Lambercier of Geneva as enemy firm, it could not be illegal for a Jaipur State subject to deal with that firm. This argument obviously prevailed in the lower Court. But in my view this argument cannot be accepted.

13. Now it is common knowledge that the Indian States before India gamed independence possessed limited sovereignty and had no international status. The relationship between the Paramount Power and the Indian States has been described thus in the White Paper on Indian States at page 22:

'41. As already stated the paramountcy of the British Crown was not co-extensive with the rights of the Crown flowing from the Treaties. It was based on Treaties, Engagements, Sanads as supplemented by usage and sufferance and by decisions of the Government of India and the Secretary of State embodied in political practice. The rights that the Paramount Power claimed in exercise of the functions of the Crown in relation to the States covered matters both external and internal.

42. For external purposes State territory and State subjects were, for all practical purposes, in the same position as British territory and British subjects. The State had no international life and in consequence of the loss by them _ of their power of negotiation and legation, the Paramount Power had the exclusive authority of making peace or war or negotiating or communicating with foreign States. The rights and duties assumed by the Paramount Power in regard to external affairs carried with them consequential rights and duties. The Paramount Power was responsible for implementing its international commitments; the Princes were required to give effect to the international obligations entered into by the Paramount Power.

43. The right of intervention in internal affairs could be exercised for the benefit of the Rulers of the States of India as a whole, or for giving effect to international commitments. The authority of the Paramount Power could thus be interposed inter alia for the prevention of dismemberment of a State, the suppression of a rebellion against the lawful sovereign, the prevention of gross misrule, the economic growth of the whole of India, checking inhuman practices or offences against natural law or public morality.

44. The Paramount Power was responsible for the defence of both British India and the Indian States and exercised full control over all matters connected with defence, such as the establishment of cantonments, the regulation of the strength of the armed forces of the States, the procurement of supplies, free passage of troops, supply of arms and ammunition, etc.'.

The Treaty of 1818 between the Ruler of Jaipur State and the East India Company inter alia provided:

'Article 1

There shall be perpetual friendship, alliance, and unity of interest between the Honourable Company and Maharajah Juggut Singh and his heirs and successors, and the friends and enemies of one party shall be the friends and enemies of both parties.

Article 2

The British Government engages to protect the territory of Joypore and to expel the enemies of that principality.

Article 3

Maharajah Sewaee Juggut Singh and his heirs and successors will act in subordinate co-operation with the British Government and acknowledge its supremacy; and will not have any connection with other Chiefs and States.

Article 4

The Maharajah and his heirs and successors will not enter into negotiation with any Chief or State without the knowledge and sanction of the British Government; but the usual amicable correspondence with friends and relations shall continue.

Article 7

The principality of Jeypore shall furnish troops according to its means, at the requisition of the British Government.'

(See Treaties, Engagements and Sanads relating to India and neighbouring countries compiled by C.U. Aitchison Vol. III pages 68-69).

This being the political set up of the Jaipur State under the Paramountcy of the British Crown, it is impossible to comprehend that the subjects of Jaipur State could legally carry on trade with a firm which had been declared an enemy firm by the Central Government under the provisions of Rule 97 fd) of the Defence of India Rules. The Jaipur Government had no political contacts with foreign countries and had not the means to collect information for exercising powers under Clause (d) of Rule 97. Jaipur State had no direct trade relation with foreign countries and all goods imported' into the State from foreign countries by land or sea were subject to the prohibitions and restrictions imposed by the Sea Customs Act. In order, therefore, that there may not be any conflict between the provisions of Defence of India Act and the rules framed thereunder and those applied by the Jaipur State, the modifications suggested under the Schedule were subject to the saving: 'where the context otherwise requires', and there cannot be any doubt that the context did not require the substitution of 'Jaipur Government' in place of 'Central Government' in Clause fd) of Rule 97. Because of its treaty relations and political status the Ruler of Jaipur State without any declaration of war became at war with States and Sovereigns with whom His Majesty was at 'war. All States, Sovereigns, and individual corporations who were enemies of His Majesty became enemies of the Ruler of Jaipur, It, therefore, could not be that a firm which has been declared 'enemy firm' by the Central Government was not to be regarded similarly by the Ruler of Jaipur State in the absence of a similar declaration by the Jaipur Government.

14. It will be noticed that Defence of India Rules also relate to matters such as Telegraphy, Postal communications, Restrictions on foreigners shipping, Air-crafts, Railways, Foreign purchase etc. in regard to which issuing of orders was entirely under the domain of Central Government and in such context Jaipur Government could not be substituted in place of Central Government in such rules.

15. I have, therefore, not the slightest doubt that in the context of Rule 97 (d) the expression 'Central Government' was to be substituted by Jaipur Government. It, therefore, follows that the firm Georges Lambercier of Geneva which had been declared an 'enemy firm' by the Central Government was also an 'enemy firm' within the meaning of Rule 97 (d) as applied to Jaipur State and the finding of the learned District Judge on this point is not correct.

16. Now how was the contract of partnership between the parties affectedby the declaration of Georges Lambercier as 'enemy firm' is to be considered. Did the contract between the parties become unlawful and incapable of performance within the meaning of Section 56 of the Contract Act?

17. Now for the duration of war, trading with the enemy is prohibited because-

'It is now fully established that, the presumed object of war being as much to cripple the enemy's commerce as to capture his property, a declaration of war imports a prohibition of commercial intercourse and correspondence with the inhabitants of the enemy's country, and that such intercourse, except with the licence of the Crown, is illegal. And the doctrine 'applies to all contracts which involve intercourse with the enemy or tend to assist the enemy even though no enemy be a party to the contract.'

(See Pollock's Principles of Contract Twelfth Edition page 292).

Rule 98 of the Defence of India Rules prohibits trading with the enemy and in general a person shall be deemed to have traded with the enemy if he has had any commercial, financial or other intercourse or dealings with or for the benefit of an enemy and in particular if he has obtained any goods from an enemy or traded in or carried any goods consigned to or from an enemy or paid or transmitted any money, negotiable instrument or security for money to or for the benefit of an enemy or to a place in enemy territory. There cannot be the least doubt that receiving of GL/11 consigned by Georges Lambercier by the plaintiff or payment of its price to the agent of Georges Lambercier at Bombay would have been trading with the enemy within the meaning of Rule 98 as unlawful after it had been declared enemy firm. Mr. Pareek also does not dispute this position. It, therefore, follows that the contract between the parties had become void and incapable of performance.

18. In Thiruvarangiah v. D.K. Pania & Co., AIR 1918 Mad 322, where plaintiff agreed to purchase in April 1914 certain cases of Belgium glass from defendants, agents of an Austrian firm the contracts were c. i. f., c. i. Madras were shipped on Board a German ship at Antwerp and while the vessel was on her voyage, war broke out between Great Britain and Germany. The ship was condemned as a prize at Colombo, but she was allowed by the Government to proceed and discharge her cargo at her destination, the Government undertaking to give delivery to British subjects who were entitled to receive delivery of the cargo on board the ship. In a suit by plaintiff for breach of contract by thedefendant, on the failure of the latter to deliver the goods, it was held that-

'as the bill of lading at the time of delivery contained a contract that was illegal and unenforceable, its tender was bad and that, on the outbreak of the war, the contract became void and incapable of performance.'

19. In Abdul Razack v. Khandl Rao, AIR 1918 Mad 515, where-

'Defendants, agents of a German firm, contracted on 25th August 1914 to deliver to plaintiff at Madura certain casks of dye in three instalments of two casks each 'to be delivered on arrival of the steamers, one lot of two casks to be delivered each time at Rs. 501-4-0 for each cask.' The defendants were not to be responsible if the steamers did not come to Madras or Tuticorin, the port for Madura, where the goods were to be consigned. One of the steamers' Barenfels-left Hamburg and Antwerp before the outbreak of war, but before it could arrive war had broken out and the Commercial Intercourse with Enemies Ordinance was in. force. The 'Barenfels' and her cargo were captured in October 1914 and condemned by the Prize Court. She was however subsequently released and allowed to proceed on her voyage to Colombo. The defendants were precluded from taking delivery of the goods., unless they deposited a sum amounting to twice the invoice value of the goods. In an action for damages for breach of contract against the defendants:

It was held that the defendants were not liable inasmuch as:

(1) on the true construction of the contract the defendants were not liable to deliver the goods even if the steamers did arrive when there were no such goods in it; Hale v. Rawson, (1858) 27 LJ CP 189, Dist.

(2) the capture of the ship was one of the possibilities contemplated under the Clause in the contract relating to the non-arrival of steamers which relieved the defendants from the obligation to supply the goods on the said contingency;

(3) the condemnation of the goods related back and divested the owners of the goods as from the date of seizure and the effect of the proclamation was to render the further performance of the contract illegal;

(4) the subsequent release of the vessel and her cargo did not impose in the defendants any obligation to purchase the goods at a greatly enhanced price from the Prize authorities and make them over to the plaintiff.'

20. In Sakalchand v. Md. Nasu-ruddin, AIR 1918 Mad 1124, where a buyer who had contracted for the supply of goods by an enemy firm before the commencement of hostilities under ftC. I. F. contract could not enforce its performance, if, before delivery of documents to him, war had been declared, itwas held that-

'The contract had become impossible of performance and void by the combined operation of Section 56, Contract Act and the Proclamation of 12th September, 1914.'

In Madhoram v. G. C. Sett. AIR 1918 Cal 830, where-

'Under a C. I. F. contract the defendants (vendors) sent out an order to Europe for supply of certain goods to the plaintiffs (purchasers) in Calcutta. The goods were shipped on 2nd July 1914 in a German vessel which was on the high seas when war broke out between England and Germany, and the vessel was captured by the Government as an enemy ship and brought before the Ceylon Court of Admiralty. On 25th August, 1914 the ship was condemned as a lawful prize, but the cargo was released on condition that on its conveyance by the Crown to its destination the Crown would be authorised to recover certain expenses against the cargo released and delivered in Calcutta. On the arrival of the goods in Calcutta, the defendants asked the plaintiffs to take delivery on payment of those expenses. On the plaintiffs' refusal to do so the defendants disposed of the goods in the market, whereupon the plaintiffs instituted a suit for recovery of damages for failure of the defendants to deliver the goods in terms of the contract'.

It was held:

'that the plaintiffs were not entitled to recover damages, as the contract between them and the defendants became void under Section 56, Contract Act, inasmuch as by the outbreak of the war, one essential element of the contract, namely, the contract of affreightment, became unlawful and the fact that the defendants at one stage offered to deliver the goods to the plaintiffs on certain terms did not estop them from pleading that the contract had become void under Section 56, Contract Act. The incidents of a C. I. F. contract explained.'

'An executory contract made with an alien enemy in peace time is avoided or dissolved by the outbreak of war, if it enures to the aid of the enemy or if it is in its nature incapable of suspension.

A contract is deemed in its nature incapable of suspension, if its proper performance necessitates intercourse with the enemy during the war or where time is of the essence of the contract, or the parties cannot on the restoration of peace be put on a footing of equality.

A contract of affreightment may be dissolved without execution not only by act of the parties, but in many cases, bythe act of the law. If the voyage becomes unlawful or impossible to be performed, or if it is broken up, either before or after it has actually commenced, war or interdiction, complete or partial of commerce with the place o^ destination, the contract is dissolved.

Where a ship is condemned as a prize but the cargo is released, the Crown is entitled to impose the payment of freight as a condition of its release and has a lien on the goods till it is paid.

The ultimate conveyance of the goods by the condemned ship to its destination is in no sense a continuation of the original voyage in fulfilment of the contract of affreightment but is essentially a new voyage under new conditions.'

21. In Textile . v, Salomon Bros., AIR 191.6 Bom 251, where in February 1914 the defendants agreed to purchase from the plaintiffs certain goods during the year ending 31st December 1914 and to take delivery at least once monthly, the defendants were a German joint stock company. having a branch in Bombay under the sole management of a German subject, on account of the war and the various Proclamations and Ordinances issued, the defendants failed to take delivery of the goods as agreed. The plaintiffs sold the goods at a loss, and after deducting the value of the deposit with them, made by the defendants against fulfilment of the contract, issued the defendants for the balance. It was held-

'that the contract became illegal and was dissolved on the declaration of war on 4th August, 1914.' It was further held that-

'(1) that it had become impossible owing to circumstances arising from the outbreak of war for the defendants to perform their part of the contract;

(2) that even assuming that it only became so after the Hostile Foreigners Trading Order dated 14th November, the plaintiffs, inasmuch as they gave the defendants further time for taking delivery upto 16th December, waived any breach committed before the date.

(3) that on the above findings the defendants were entitled to a return of their deposit under Section 56(2).'

22. In S. K. R. Cama & Co.v. K.K. Shah, AIR 1916 Low Bur 7, it was held that-

'Accepting a bill of exchange drawn against goods coming from Germany and payment of their price after the proclamation forbidding any trade in such goods are acts of trading in connection with them.

If after a contract is made it becomes illegal to carry it out it cannot be enforced.'

23. In Buchanan v. Mall, AIR 1918 Low Bur 46, where-

'Sometime before the outbreak of war A entered into a contract with B, at Rangoon. Under the contract A was (i) to buy certain goods in Germany; (ii) to obtain a contract of affreightment to Rangoon; (iii) to take out a policy of insurance; and (iv) to ship the goods in July 1914. B on his part agreed to buy those goods from A for a price which was fixed C. I. F. Rangoon. A performed his part of the contract and on 12th August 1914 caused to be presented to B for acceptance a bill of exchange covering the price etc., of the goods and payable 90 days after sight. Along with the bill of exchange were tendered the bill of lading, invoice and insurance note. B refused to accept the bill of exchange as well as the documents of title, inasmuch as the war having broken out on 4th August the ship containing the goods was seized by the Belgian Government and trade with Germany was prohibited by the Royal Proclamation, dated 5th August 1914.' It was held that-

'the Royal Proclamation rendered the contract abortive and illegal and so void; (2) that the effect of the outbreak of the war was that the contract of affreightment was dissolved; (3) that A was bound to tender and B was entitled to get valid and effective documents by which B could recover what might be lawfully recovered under such documents, but as A did not and could not tender such documents in respect of the contract of affreightment B was entitled to refuse to pay against them.'

24. In A. F. Ferguson & Co. v. Lalit Mohan, AIR 1954 Pat 596, it was held that-

'Where due to the outbreak of war the performance of the contract by the insured by making payments of the premium to the enemy insurance Company with whom the insured was insured became impossible and illegal under R- 104 of Defence of India Rules, the contract became frustrated and void. Section 56 of the Contract Act is perfectly clear on the point, and if the performance of the contract after the outbreak of war became impossible or unlawful, the contract of insurance became void.

If and when there is frustration, the dissolution of the contract occurs automatically. It does not depend, as does rescission of a contract, on the ground of repudiation or breach, or on the choice or election of either party. It depends on the effect of what has actually happened on the possibility of performing the contract. Therefore, the moment the war broke out, any further performance of the contract became unlawful and the result was that the contract stood dis-solved on the very date the declaration of war was made absolving both the parties from its performance.

The Contract having become void,, the question of ratification does not arise, and the argument that on anqther company being authorised by the Central Government to manage business of the Insurance firm the contract revived, has to be rejected as being without any merit.'

25. Learned counsel for the respondents invited my attention to the following observations in Gherulal Parakh v. Mahadeodas, AIR 1959 SC 781:

'The primary duty of a Court of Law is to enforce a promise which the parties have made and to uphold the sanctity of contracts which form the basis of society.'

But these observations were made while the Court was dealing with the doctrine of public policy. However, the present case is fully covered by Section 56 of the Indian Contract Act and because it was an executory contract and on account of the outbreak of war and the declaration of Georges Lambercier as an enemy firm, illegality supervened so the contract was dissolved having become unlawful and void. The above decision has, therefore, no application in the present case.

26. Learned counsel for the respondent has next urged that since the delivery of the consignment was made to the defendant under the orders of the Government of India, he cannot be deemed to have traded with the enemy. Reference is made to the following proviso to Rule 98 of the Defence of India Rules: 'Provided that a person shall not be deemed to have traded with the enemy by reason only that he has-

(a) done anything under an authority given generally or specially by, or by any person authorised in that behalf by the Central Government.'

To my mind, the above proviso refers to cases where performance of a contract with the enemy is allowed generally or specially by the Central Government, that to say, where the party under a licence from the Central Government is permitted performance of the contract with ;he enemy. It has no application to cases where the property has vested in the Controller of Enemy Property and thereafter on his orders it is delivered to the consignee who happens to be a British subject or a subject of Indian State. Delivery of the consignment under the orders of the Controller of the Enemy Property has not the effect of reviving the contract which has already become unlawful and void. By taking the delivery of the consignment and making payment, the consignee is not perfoming the contract which was made with the enemy firm. The delivery of the consignment is entirely at the discretion of the Controller of Enemy Property and cannot be regarded as a revival of the previous contract. Since this objection was not raised in the Court below, there is no clear evidence as to how the consignment was dealt with after it had reached Bombay. It is, however, admitted by the plaintiff that a suspension order was passed in respect of this consignment. Plaintiff Gordhandas has also admitted in his statement that because Georges Lambercier was declared an enemy, a penalty was imposed on the delivery of GL/11. From Ex. C-7 dated 24th February, 1943, which is defendant's letter to the Controller of Enemy Property in India it appears that the consignment was not to be delivered until the latter had passed orders. The defendant requested that goods may not be confiscated or auctioned because he would be put to heavy loss and they may be delivered on payment and the amount so recovered may be confiscated. From Ex. C-9 dated 9th May. 1943, it appears that the consignment GL/11 had been transferred to the Kings warehouse under the orders of the Controller of Enemy Property in India. From Ex. C-35 dated 19-2-43 which is a letter from the Chief Accountant of the Imperial Bank of India to the defendant, it also appears that the goods were not to be released because the Controller of Enemy Trading, Bombay, acting under the instructions from the Government of India had issued such instructions. Exhibit C-37 dated 31-12-46 is a letter from the Chief Accountant to the defendant showing that the goods relating to the above that is GL/11 were cleared under penalty. Ex. C-39 is a letter of the Controller of Enemy Trading in India to the Imperial Bank of India dated 28-6-43 informing that 'the Government of India have now been pleased to authorise the release of such cases out of the above consignment that are still under detention to the respective consignees against payment of their value into a blocked account.' It was further informed that all amounts received by the defendant against the above mentioned consignment and credited to a blocked account are to be held to any order pending further instructions from Government.

27. Learned counsel for the respondent is placing his reliance upon this letter to show that the consignment was released to the defendant under the orders of the Controller of Enemy Trading for the instructions of the Central Government.

28. The above documents unmistakably show that the consignment was detained, kept in the Kings warehouse, its delivery stopped and then it was delivered on the orders of the Custodianof Enemy Property. Whether any penalty was imposed or not cannot be definitely said although the plaintiff has admitted this fact, because Shri Mohammed C. Rehman P. W. 2 who was the Controller of Enemy Firms and Enemy Trading Custodian of Enemy Property has said that as far as he could see from the records it was not a fact that a penalty was levied against delivery of synthetic stones marked GL/11. However, Mr. Rehman has admitted that a suspension order was passed and delivery was suspended and later on it was effected and the money realised by the consignee was kept in blocked account because Georges Lambercier was declared an enemy firm. As soon as the property vests in the Custodian due to the outbreak of war, an enemy firm ceases to have beneficial ownership of the property and during the interval it is in statutory suspense or abeyance. See In re, Munster, 1920-1 Ch. D 268.

29. The fact that the subsequent delivery of the property to the consignee has not the effect of reviving the contract would be clear from the cases already cited. In AIR 1918 Mad 322, (supra), only the ship was condemned but it was allowed by the Government to proceed and discharge her cargo at the destination and goods were delivered to the consignee. Yet it was held, that it was no breach of contract by the defendant on his failure to deliver the goods. Similarly in AIR 1918 Mad 1124 (supra), it was held:

'The fact that the goods were released by Government after having been temporarily detained will not have the effect of reviving the contract or renewing the validity of the contract which had become void before the order of release was passed. Its only effect is that the Government withdraws its hands so that any party entitled to the goods may establish his right to them.'

To the same effect are the observations of Mukerjee J. in AIR 1919 Cal 830 (supra),, already quoted.

30. I am, therefore, of the view that the subsequent release of the goods by the Controller of Enemy Property to the consignee had not the effect of reviving the contract which had become illegal and void. Plaintiffs, therefore, cannot Legally enforce their contract of partnership against the defendant. I, therefore,, find issue No. 1 in favour of the plaintiffs and issue No. 5 against them. In view of the finding on issue No. 5, the present suit is not maintainable.

31. The appeal is, therefore, allowed, the judgment and decree of the lower Court is set aside and the plaintiff shall pay costs of both the Courts to the appellant.


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