Case Note & Summary
The dispute pertained to a contract for sale of two plots of land in the Lake Colony Scheme, entered into in May 1941 between the respondent purchaser and the appellant vendor company. The respondent paid earnest money and undertook to complete the transaction within one month of completion of road and drainage development work by the appellant. The land was later requisitioned by the Government under the Defence of India Rules, preventing the company from undertaking development work during the continuation of the war. Different portions of the land covered by the scheme were requisitioned between November 12, 1941 and July 25, 1944; the plots in question were requisitioned by an order dated February 18, 1944. In December 1943, the company sent a circular letter to all purchasers offering either refund of earnest money or immediate completion of sale on as-is basis, with forfeiture if no response was received within one month. The respondent denied having received this circular. After learning of proposed de-requisitioning, the respondent's attorneys wrote on May 8, 1946 asking when the company would complete the roads. The company replied on May 29, 1946 referencing the circular and stating that the contract stood cancelled and earnest money forfeited due to the respondent's failure to exercise options. The respondent's attorneys on June 13, 1946 denied receipt of the circular and asked for a road completion date. The company did nothing, and the respondent filed the suit on August 8, 1946 for specific performance. The trial court decreed the suit, and the High Court upheld the decree. The company obtained special leave to appeal to the Supreme Court. The Supreme Court framed two main issues: whether the contract was discharged by frustration due to temporary unlawful performance caused by Government requisitioning, and whether the suit was premature because development work was not complete when filed. The appellant argued that the contract stood discharged by frustration because its performance was rendered unlawful by the requisitioning orders, and that the suit was premature as the right to obtain a sale deed only arose after development was complete. The respondent contended that he did not receive the circular, that the company was bound to complete development after de-requisitioning, and that he was ready to complete the transaction. The Supreme Court, following its earlier decision in Satyabrata Ghose v. Mugneeram Bangur & Co., held that under Sections 56 and 32 of the Contract Act, a contract may be frustrated by supervening impossibility or unlawfulness, but mere temporary impossibility does not discharge the contract unless time is of the essence. Here, the parties knew of the prevailing circumstances and possible difficulties, and had deliberately not fixed a time for development. Therefore, time was not of the essence and the contract was not discharged under Section 46. The Court also held that the suit was not premature because the development work had been completed by the time the appeal was heard by the High Court, and the court could take notice of subsequent events in moulding relief. The appeal was dismissed and the decree for specific performance was upheld.
Headnote
A) Contract Law - Frustration of Contract - Supervening Unlawfulness - Indian Contract Act, 1872, Sections 56, 46 - Temporary requisitioning of land by Government under Defence of India Rules made performance of development work unlawful during the war but did not discharge the contract because time was not of the essence and parties had not fixed any time for completion of development. The Supreme Court held that mere temporary impossibility or unlawful performance does not frustrate a contract; if time is of essence or a time limit is fixed, contract would stand discharged when performance is unlawful at the time it ought to be performed, but here the parties were aware of possible requisitioning and deliberately did not fix time, so the contract was not discharged (Pages 637-638). B) Contract Law - Premature Suit - Specific Performance - Indian Contract Act, 1872, Section 46 - Court may take notice of subsequent events while moulding relief - The suit was filed before completion of development work but by the time the appeal was heard by the High Court, the development work had been completed; hence the suit was not premature and the court could take notice of subsequent events to grant appropriate relief. Held that the contention of premature suit could not be accepted (Page 638).
Issue of Consideration
Whether the contract for purchase of land stood discharged by frustration under Section 56 of the Indian Contract Act, 1872 due to temporary unlawful performance caused by Government requisitioning of land; and whether the suit for specific performance was premature because the development work was not complete when the suit was filed.
Final Decision
Appeal dismissed; decree for specific performance upheld. Contract not frustrated; suit not premature as development work had been completed before appellate hearing.
Law Points
- Mere temporary impossibility or unlawfulness of performance of an essential term does not frustrate a contract under Section 56 of Indian Contract Act
- 1872 unless time is of the essence
- parties having deliberately not fixed time for performance cannot claim discharge due to short-lived supervening events
- suit for specific performance not premature when development work completed before appellate hearing and court may take notice of subsequent events
- performance rendered unlawful for indeterminate time only discharges contract if unlawfulness attached at time contract ought to have been performed.
