LEGAL ARTICLE
Title of the case…………Satyabrata Ghose v. Mugneeram Bangur & Co. (1954)
Name of the court………Supreme Court of India
Year of the case…………1954
Name of the Judge who has delivered the judgement…….Hon’ble judges, Mukherjea BK, Bose ,Vivian, Bhagawati , Natwarlal H.
Legal Provisions-
Indian Contract Act : section 56
Principal part of the judgement-
Indian courts may consider English laws as persuasive but not binding.
Frustration occurs when the foundation of the contract is fundamentally disturbed.
Section 56 adopts a practical view of ‘impossibility,’ including instances where performance becomes impractical due to unforeseen events.
ABSTRACT
The Supreme Court of India expounded on the concept of frustration in Indian contract law through this momentous case. The main point of contention was the property transaction and the unanticipated events that affected the land’s physical characteristics. The court stressed that an interpretation that is practical rather than literal is required for interpreting Section 56 of the Indian Contract Act, 1872, which deals with impossibility. It clearly shown that Indian law is regulated by its statutes and that, notwithstanding the potential persuasiveness of English legal concepts, they are not superseded by the unambiguous requirements of Indian law.
Background:
The respondent, Mugneeram Bangur & Co., possessed a sizable plot of land in Calcutta that they planned to develop for residential use. The appellant, Satyabrata Ghose, succeeded Bejoy Krishna Roy, one of the purchasers with whom the corporation had an arrangement.
It was decided that the land would be transferred upon the conclusion of specific developments in exchange for a minor earnest money payment. However, the land was taken over by the military during World War II, which prompted the business to treat the contract as null and void and offer to either repay the earnest money or pick up where it left off.
Rejecting these possibilities, the appellant demanded that the original contract be fulfilled.
Brief facts
- The defendant in this case was Mugneeram Bangur and Co. His business possessed a sizable portion of land in Calcutta, which is now Kolkata. The corporation decided to split the big tract of property into several tiny plots and sell them in order to develop the land and make it suitable for residential use.
- The company started working as per the plan and made certain agreements for the sale of plots with various purchasers. It also asked for some money deposits from the buyers and received the same.
- The company on the other hand took the responsibility of providing all the necessities for the residential purpose be it the construction of roads/ drainage system or any other essential.
- For the completion of construction of all the essentials, no time limit was specified in the agreement.
- It was decided that after all such construction is done, the company after receiving the complete payment from the buyers of the plot will provide the land to respective buyers.
- Satyabrata Ghose, 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.
- The plaintiff gave the advance 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.
- Because further building and sale are now impossible, Mugneeram Bangur and the Company decided to treat the contract as canceled. And they informed the purchasers of this as well.
- The company offered the buyers two options: either return the earnest money, or purchase the full amount from the corporation after the war ends and the company proceeds with building on the property.
- 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.
Issue Identified
- Whether the appellant had the locus standi to sue.
- Whether the contract became frustrated under Section 56 of the Indian Contract Act.
- The applicability of English law of frustration in India.
- Judicial History
- The trial court ruled in favour of the appellant, which was upheld by the district court. However, the High Court ruled in favor of the respondent, leading to an appeal to the Supreme Court.
Arguments and Analysis:
In the history of the Indian Contract statute, 1872, Satyabrata Ghose v. Mugneeram Bangur and Company and Ors was a pivotal case, especially with regard to section 56 of the aforementioned statute and the notion of frustration or force majeure. The case study that has been discussed in this project was conducted using three predetermined research questions. The court in this case dismissed the first of them, which concerned whether the word “impossible” in section 56’s second paragraph can only refer to physical impossibility. It stated that the paragraph’s terminology is fairly broad and that even though the accompanying pictures aren’t very cheery, they can’t be deemed to contradict the enactment’s fundamental terms.
The word “impossible” was not intended to imply physical or literal impossibility in this context. A promise made by a promisor is unlikely to be fulfilled if an unfavorable event or change in circumstances completely upends the basis upon which the parties based their agreement. Although an act may not be technically impossible, it may be impracticable unless it serves the object and purpose that the parties intended.
As for the second question that related to if English law of frustration can be applied in India, the court clarified that the principles of contract frustration in English law, as stated in the High Court’s ruling, were not applicable to the statutory provisions of the Indian Contract Act, according to the
Supreme Court and that they only carry a persuasive value.
Regarding the analysis of our final and last research question in this commentary, which asks whether the sale agreement between the defendant’s business and the plaintiff’s predecessor is dissolved due to frustration, the court reached a different conclusion, holding that the government’s requisitioning orders did not disrupt the fundamental basis of the contract because these were ordinary events during a war, and that since the defendant had not set a deadline for finishing the construction work, there could not have been an ongoing delay impeding the contract’s progress.
In this decision, the Supreme Court defined “impossible” differently, holding that a performance need not be physically or literally impossible in order to qualify as such. The performance will be deemed impossible even if the event upends the fundamental elements of the contract, making its goal or intention worthless. The court in the aforementioned case, however, held—contrary to the reasoning—that this criterion of impossibility will not apply, and the appeal was granted.
One more clarification was given by the court on the application of English rule of frustration in India. According to the Supreme Court, the concepts of contract frustration in English law, as articulated in the High Court’s decision, were not applicable to the statutory provisions of the Indian Contract Act.
This ruling established the standard of impossibility of performance, and it still has consequences today in that a breach will still be deemed to have occurred even if the pandemic’s effects allow for some form of contract performance even though the parties are unable to accomplish the agreement’s goals. For instance, while the salesman is able to knock on doors, performing under a lockdown with restricted movement is not problematic in a door-to-door sales service contract. He is a door-to-door salesman, thus it is doubtful that people will interact with him in order to avoid contracting COVID-19. The court will decide that the contract has been frustrated in these situations.
Conclusion:
The Supreme Court gave a clear ruling on the Indian Contract Law notion of frustration in Satyabrata Ghose v. Mugneeram Bangur & Co. It proved that Indian law is guided by its legislation, even though English legal ideas have some persuasive power.
The ruling shaped subsequent interpretations and applications of Section 56 of the Indian Contract Act by highlighting the sanctity of contracts and the circumstances under which a contract can be deemed frustrated.
FAQ
- What is doctrine of frustration?
It states that a contract becomes void when unforeseen events occur after its formation, rendering it impossible to fulfill, no party is considered at fault and the contract is automatically terminated.
- What are the key elements of frustration?
Unforeseen events, radical change in circumstances, impossibility to perform
