Section 56 in The Indian Contract Act Cases India.

Section 56 in The Indian Contract Act Cases India.

56. Agreement to do impossible act. An agreement to do an act impossible in itself is void. Contract to do act afterwards becoming impossible or unlawful.- 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. 2[ Compensation for loss through non- performance of act known to be 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. Illustrations

(a) A agrees with B to discover treasure by magic. The agreement is void,

(b) A and B contract to marry each other. Before the time fixed for the marriage, A goes mad. The contract becomes void.

(c) A contracts to marry B, being already married to C, and being forbidden by the law to Which he is subject to Practise polygamy, A must make compensation to B for the loss caused to her by the non- performance of his promise.

(d) A contracts to take in cargo for B at a foreign port. A' s Government afterwards declares war against the country in which the port is situated. The contract becomes void when war is declared.

(e) A contracts to act at a theatre for six months in consideration of a sum paid in advance by B. On several occasions A is too ill to act. The contract to act on those occasions becomes void.

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provisions of Section 56 of the Indian Contract Actadopting the Doctrine of Frustration of English Law because of the impossibility of performing thecontract would not be applicable in the facts and circumstances of the present case and that the learned Additional District Judge has committed mistake in invoking the principle of law as laid down in the said section. Mr. Chatterjee's second line of argument is that the present case squarely comes under the ambit of Section 12 of the Specific Relief Act, 1963. Mr. Chatterjee has submitted that by virtue of the application of Section 12(3) of the Specific Relief Act, read withSection 20(4) and explanation (i) to Section 10 of the said Act, the instant case is the fit case where the court should grant a decree for specific performance of the contract. Mr. Chatterjee has further submitted that there is no clause or any term in the agreement for sale debarring the plaintiff from getting the sale deed executed in respect of the suit property

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Calcutta High Court

Smt. Purnima Rani Dutta vs Smt. Lakshmi Bala Dasi on 8 July, 1987

Equivalent citations: AIR 1988 Cal 148

Author: S Chakravarty

Bench: S Chakravarty, G C Chatterjee

JUDGMENT

Sukumar Chakravarty, J.

1. This appeal is directed against the judgment and decree passed by Shri A. K. Chakravorty, the learned Additional District Judge, First Court, Midnapore, in other Appeal No. 306 of 1977 reversing the judgment and decree passed by Shri M. N. Das, the learned Subordinate Judge, First Court, Midnapore in Other Suit No. 35 of 1975 and dismissing the suit.

2. Plaintiff Purnima Rani Dutta, filed the aforesaid suit against the defendant Lakshmi Bala Dasi for specific performance of the contract for sale of the suit property and for possession. It was the case of the plaintiff in brief that the suit property originally belonged to one Sushila Sundari Dasi who executed a deed of gift dated 29-6-51 in favour of the defendant in respect of the suit property. The defendant possessed the suit property since then and her name was duly recorded in the R. S. record of rights. The defendant entered into an agreement to sell the suit property to the plaintiff for a consideration of Rs. 5,300/- and executed a registered deed of agreement on 24-11-72 on acceptance of Rs. 500/- as earnest money towards the consideration. It was agreed between the parties that within four months from the date of the execution of the deed of agreement the plaintiff would pay the balance consideration money of Rs. 4,800/- and the defendant would execute the sale deed in respect of the suit land in favour of the plaintiff. It was further stipulated in the agreement that the defendant within three months from the date of the execution of the deed of agreement would amicably evict the tenant in respect of the suit property and at the time of the execution of the sale deed, the defendant would give vacant" possession of the suit property to the plaintiff and that in default the defendant would refund the earnest money of Rs. 500/- with interest to the plaintiff. After the execution of the deed of agreement for sale the defendant handed over the title deeds to the plaintiff. The plaintiff tendered the balance consideration money in terms of the agreement and requested the defendant to execute the sale deed but the defendant on some pretext did not accept the balance consideration money from the plaintiff and did not execute the sale deed in terms of the agreement. The plaintiff was all along ready and willing to perform her part of the contract but the defendant refused to perform her part of the contract. The plaintiff accordingly brought the suit.

3. The defendant contested the suit after filing the written statement. The defendant admitted in her written statement the execution of the deed of agreement for sale, the acceptance of the earnest money of Rs. 500/-and also the handing over of the title deeds to the plaintiff. The defendant, however, denied the plaintiff's allegation regarding the tender of the balance consideration money within the stipulated period, time being the essence of the contract. The defendant further contended that the plaintiff failed to perform her part of the contract in terms of the agreement and that it was not possible on the part of the defendant to give vacant possession of the suit property in terms of the agreement. The defendant accordingly expressed her willingness to refund the earnest money with interest but the plaintiff demanded Rs. 1,000/-which the defendant refused to pay. The plaintiff being enraged by defendant's such refusal, brought the suit. The plaintiff was therefore not entitled to the relief as prayed for.

4. The learned Subordinate Judge on consideration of the materials on the record found that the defendant executed the deed of agreement in favour of the plaintiff for sale of the suit property in terms of the agreement for a consideration of Rs. 5,300/- and that the defendant accepted the earnest money of Rs. 500/-. The learned Subordinate Judge also found that the time was not the essence of the contract and that the plaintiff within the stipulated period requested the defendant to accept the balance amount of the consideration money and to execute the sale deed and that the plaintiff was ready and willing to perform her part of the contract. The learned Subordinate Judge accordingly passed the judgment and decree for specific performance of the contract in favour of the plaintiff.

5. On appeal the learned Additional District Judge concurred with the aforesaid findings of the learned Subordinate Judge but found that as the defendant was not in a position to give vacant possession of the suit property by evicting the tenants within the stipulated time in terms of the agreement, the agreement for sale itself became void because of the supervening impossibility in performing her part of the contract. The learned Additional District Judge, accordingly, dismissed the suit after reversing the judgment and decree of the learned Subordinate Judge.

6. Mr. Chatterjee appearing for the appellant plaintiff has challenged the j udgment and decree of dismissal as passed by the learned Additional District Judge on the following grounds. His first ground is that in the absence of specific plea being taken in the written statement with regard to the fact that the agreement for sale became void because of the supervening impossibility to perform any part of the contract and in the absence of any issue framed for the purpose in the suit the learned Additional District Judge committed mistake in taking up such point for the first time in the appeal as the said point is based on the mixed question of fact and law. Mr. Chatterjee has further submitted that the provisions of Section 56 of the Indian Contract Act adopting the Doctrine of Frustration of English Law because of the impossibility of performing the contract would not be applicable in the facts and circumstances of the present case and that the learned Additional District Judge has committed mistake in invoking the principle of law as laid down in the said section. Mr. Chatterjee's second line of argument is that the present case squarely comes under the ambit of Section 12 of the Specific Relief Act, 1963. Mr. Chatterjee has submitted that by virtue of the application of Section 12(3) of the Specific Relief Act, read with Section 20(4) and explanation (i) to Section 10 of the said Act, the instant case is the fit case where the court should grant a decree for specific performance of the contract. Mr. Chatterjee has further submitted that there is no clause or any term in the agreement for sale debarring the plaintiff from getting the sale deed executed in respect of the suit property by the defendant in terms of the agreement because of defendant's failure to give vacant possession of the suit property after evicting the tenants therefrom and that accordingly the plaintiff is entitled to get a decree for specific performance of the contract for sale when both the courts below have found that the plaintiff was ready and willing to perform her part of the contract. In support of his submission, Mr. Chatterjee has relied on the decisions in the case of Arun Prokash Boral v. Tulsi Charan Bose reported in AIR 1949 Cal 510 and in the case of Labanya Roy v. Rai Saheb Phanindra Mohan Mukherjee reported in (1964) 68 Cal WN 611. Mr. Chatterjee's further submission is that the decision in the case of T. V. Kochuvareed v. P. Mariappa Gounder reported in AIR 1954 Trav Co 10 as referred to by the learned District Judge, based on different facts is not applicable in the facts of the present case and that assuming that the said decision is applicable, then also, the principle of law as enunciated in the said case does not stand in the way of plaintiff's getting the relief for specific performance of the contract for sale of the suit property, so far as it relates to the execution of the sale deed by the defendant in terms of the agreement, and giving symbolical possession of the suit property with tenants therein.

7. Mr. Roy Chowdhury appearing for the defendant-respondent while supporting the dismissal of the suit, has submitted that the instant case is one where the contract as conceived by the parties had become wholly impossible of performance and not one where there was the possibility of substantial performance and therefore was not governed by Section 12 of the Specific Relief Act but was hit by the second para of Section 56 of the Indian Contract Act. Mr. Roy Chowdhury further submits that the impossibility of performance of the part of the contract rendering the contract void under Section 56 of the Indian Contract Act", is the question of law and that accordingly such question of law can be agitated in appeal even in the absence of specific averment in the written statement and even in the absence of issue framed for the purpose, when it is admitted that the defendant was not in a position to give vacant possession of the suit property after evicting the tenants therefrom and when the defendant made a mention of such impossibility in the written statement Mr. Roy Chowdhury has further submitted that he does not entirely rely on the decision in AIR 1954 Trav Co 10 bused on the different facts in support of the dismissal of the suit.

8. It has already been stated that the plaintiff in this case has filed the suit for specific performance of the contract for sale of the suit property by getting the sale deed executed by the defendant in terms of the agreement for sale and for possession in the suit property. The agreement for sale dt. 24-11-72 is Ext. 1. It is an admitted fact that the defendant agreed to sell the suit property to the plaintiff for Rs. 5,300/- and executed the agreement for saie Ext. 1 and accepted the earnest money of Rs. 500/-.

9. The salient conditions as incorporated in the agreement for sale Ext. 1 are as follows : -

(i) the plaintiff shall pay to the defendant the balance consideration money of Rs. 4,800/-within four months from the date of the agreement for sale and shall get the sale deed executed in respect of the suit property by the defendant at the expensesof the plaintiff.

(ii) the defendant shall get her tenants in the suit property amicably evicted within three months from the date of the agreement for sale and shall give vacant possession of the suit property to the plaintiff a t the time of the execution of the sale deed in favour of the plaintiff and in default the defendant shall be liable to repay the earnest money with interest and expenses.

10. Both the courts below have found that the time was not of the essence of the contract and that the plaintiff was ready and willing to perform her part of the contract and that the plaintiff requested the defendant to execute the sale deed in terms of the agreement by accepting the balance consideration money of Rs. 4,800/- which was tendered by the plaintiff, after rejecting the defence case that the plaintiff was not ready and willing to perform her part of the contract.

11. There is no dispute to the fact that the agreement for sale Ext. 1 also proves that the condition in the agreement for sale stating the defendant's obligation to give vacant possession after a micably evicting her tenants from the suit property is defendant's part of the contract in terms of the agreement for sale. The decisions in (1964) 68 Cal WN 611 and AIR 1949 Cal 510 also lend support to such view. It is true that the impossibility of performance of the defendant's part of contract to give vacant possession by evicting the tenants from the suit property rendering the contract void in terms of Section 56 of the Indian Contract Act was not specifically pleaded in the written statement although it was contended therein that the plaintiff did not tender the balance consideration money within the stipulated time and that it was not possible for the defendant to give vacant possession of the suit property and that accordingly the defendant offered to pay Rs. 600/- inclusive of the earnest money of Rs. 500/- and interest thereon but the plaintiff refused to accept the same and demanded Rs. 1,000/-.

12. It may be mentioned also that no issue with regard to the rendering the contract void because of the impossibility of performance of the contract was framed and no evidence to that effect was also adduced. D. W. 1 (defendant) has only stated in her evidence that she could not evict the tenants from the suit property within the stipulated time. There is nothing in evidence on the side of the defendant to show that the defendant made any effective attempt to get her tenants evicted from the suit property and that having failed in her such attempt, she communicated the impossibility of such performance to the plaintiff. In case of this nature, the defendant cannot be allowed to take advantage of her own default. The decisions in the cases reported in AIR 1949 Cal 510 and (1964) 68 Cal WN 611 support such view. In the aforesaid cases based upon the facts that according to the agreement to sell premises, the vendor contracted to give vacant possession to the purchaser, but by the default of the vendor, he was unable to give such possession, it was held that in a suit for specific performance of the contract by the purchaser, the purchaser had option to take the premises without vacant possession and that the vendor could not say that the purchaser could not do so as the contract was contract to deliver vacant possession and not a contract to deliver the premises with the tenant, and that a party was not entitled to rely on his own default and failure to excuse himself from the performance of the contract.

13. In the case reported in (1964) 68 Cal WN 611. on discussion of the relevant provisions of Specific Relief Act it wasfurther held that the plaintiff purchaser was entitled to a decree for specific performance of the agreement for sale upon relinquishment by her of her claim to vacant possession and also of her claim to compensation for loss or damages. It appears that in neither of the aforesaid two cases, the vendor-defendant took up the plea that the contract had become void being hit by second part of Section 56 of the Indian Contract Act because of the impossibility of performance of the contract.

14. The second part of Section 56 of the Indian Conlract Act runs as follows : "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."

15. It appears that the 'doctrine of frustration' known to the English law has been adopted in the provisions of Section 56 of the Indian Contract Act. In the case reported in AIR 1954 Trav. Co. 10, the relevant observation as made by the Division Bench on the scope of Seclion 56 of the Indian Contract Act may be quoted hereunder : "The doctrine of frustration known to English law has been statutorily recognised under the Indian Law. In Cricklewood Property and Investment Trust Ltd. v. Laighton's Investment Trust Ltd. 1945 AC 221 at page 225(H) this doctrine has been explained as follows : 'Frustration may be defined as the premature determination of an agreement between parties, lawfully entered into and in course of operation at the time of its premature determination, owing to the occurrence of an intervening event or change of circumstances so fundamental as to be regarded by the law both as striking at the root of the agreement, and as entirely beyond what was contemplated by the parties when they entered into the agreement'. For the application of this doctrine it is essential to ascertain the facts assumed by the parties as forming the fundamental basis of their contract and then to see how far the subsequent developments have resulted in the determination of the very basis of the contract, thereby rendering its performance impossible."

16. The facts in the case reported in AIR 1954 Trav. Co. 10 on the reliance of which the learned Additional District Judge dismissed the instant suit, were as follows : The suit was for specific agreement for sale of the several items of properties movable and immovable. The main item of property consisted of the tile factory under the name of Sivakasi Tiles Works. The other items of properties were the lands, bungalow and other buildings as well as the machinery and other accessories attached to the factory. Those properties belonged to the 1st defendant in the suit. Plaintiff who was a dealer in tiles negotiated with the 1st Defendant for the purchase of the Sivakasi Tiles Works together with all the properties attached to it and entered into the registered agreement on 22-5-1950 (Ext.D) setting forth the terms of the proposed sale and purchase. The sale price was fixed at Rs. 90,000/- and at time of the execution of the Ext. D an earnest money of Rs. 5003/-was paid by the plaintiff to the 1st defendant. It was stipulated in the agreement deed Ext. D that the sale deed should be executed before 15-7-1950, that on the date of the registration of the deed Ext. D, plaintiff should make a ready cash payment of Rs. 50,000/- out of the sale consideration before the Registering Office, that for the balance of consideration of Rs. 35,000/- plaintiff should execute mortgage of the same properties in favour of the 1st defendant with a provision for payment of that amount with six per cent interest on or before 31st May, 1951 and that all the expenses of the transaction were to be met by the plaintiff himself. The 1st defendant was to deliver possession of all the movable and immovable properties to the plaintiff at the time of the execution of the sale deed. The parties had also expressly stipulated that time should be of the essence of the agreement between them and the consequences to follow from the default by either party were also provided for in Ext. D. The plaintiff was ready and willing to perform his part of the contract and asked the 1st defendant to perform his part of the contract by issue of the notice. To this notice, the 1st defendant sent the reply stating that one Neelacanda Iyer was in possession of the Sivakami Tile Works under an outstanding lease and that the lessee had refused to surrender possession of the factory and that therefore it had become impossible to effect the sale as contemplated in Ext. D.

17. The Travancore Cochin High Court in the aforesaid facts found that some of the itemscovered by the agreement for sale Ext. D consisted of movable properties which were surrendered to the lessee under Ext. 1 when that lease arrangement was entered on 1st Jan. 1917. It was not known as to whether those items did not really exist and if so in what condition. At any rate the 1st defendant was not now in a position to deliver those items to the plaintiff. Without such delivery there could be no completed sale in respect of those movable properties. The plaintiff had not stated that he was prepared toaccept the sale in respect of defendant No. 1's title to the remaining items of immovable properties only. So long as it is not possible for defendant to hand over those movables to the plaintiff and to effect a sale of them, the provision in Ext. D that the plaintiff should execute a mortgage in favour of the defendant No. 1 in respect of all the properties to be included in the sale deed, to secure the deferred consideration of Rs. 35,000/- could not be implemented. The High Court found also that the part of the contract to be specifically enforced did not stand on a separate and independent footing from the remaining part of the con tract as per the terms embodied in Ext. D. According to the Travancore Cochin High Court, it was clear from these terms that the parties contemplated only a single and indivisible transaction by way of sale with immediate delivery ol possession and for effecting such a conveyance the time stipulated was expressly stated to be of the essence of the contract. The High Court further observed that several terms contained in Ext. D read as a whole clearly rules out the possibility of splitting up the contract into separate and independent parts and of piecemeal performance of such parts. It was further held that the deliberate insertion of the provision in Ext. D that time was of the essence of the particular contract, was the surest indication that transfer of title and possession had to be simultaneous and within the stipulated time, and that the parties did not want the contract to be governed by the normal rules applicable to contracts for sale of immovable properties. The Travancore Cochin High Court accordingly dismissed the plaintiff's suit for the relief of the specific performance of the contract for sale by applying the doctrine of frustration as embodied in Section 56 of the Indian Contract Act.

18. The facts of the instant case under our consideration are different from those in the case reported in AIR 1954 Trav Co 10. This is why perhaps Mr. Roy Chowdhury has (not?) relied on the decision in that case. The agreement for sale Ext. 1 in the instant case consists of mainly two parts regarding the contract. By the first part, the plaintiff is under obligation to pay the balance consideration money of Rs. 4,800/- and to get the sale deed executed by the defendant within four months from the date of the agreement for sale and the defendant is under obligation to execute the sale deed in terms of the agreement. By the second part, the defendant is under further obligation to get the tenants evicted from the property proposed to be sold within three months from the date of the agreement and to deliver vacant possession of the said property at the time of the execution of the sale deed, and that in default, the defendant shall repay the earnest money with interest and expenses. There is nothing in the agreement for sale Ext. 1 to indicate that time was of the essence of the contract and that the agreement for sale would stand cancelled because of the failure of the performance of either party's part of the contract. In this suit for specific performance of the contract for sale, plaintiff has claimed for possession without mentioning vacant possession. Mr. Chatterji has submitted that his client plaintiff has no objection to get possession of the suit property with the tenants therein when the defendant has not taken any effective steps to evict those tenants in terms of the agreement and to give vacant possession. In a contract of this nature in respect of the immovable properties as envisaged in the agreement for sale Ext. 1, second part of Section 56 of the Indian Contrast Act is not attracted and does not stand in the way of enforcement of the contract for safe when the alleged impossibility of performance of the defendant's part of the contract for giving vacant possession has been resorted to by the defendant without making any bona fide and effective attempt to evict the tenants in terms of the agreement and without keeping the plaintiff informed about his such attempt and failure.

19. It appears from the facts and circumstances as discussed in this case with reference to the agreement for sale Ext. 1 that the present case attracts the provisions of Section 12(3) of the Specific Relief Act which runs as follows :

"(3) Where a party to a contract is unable to perform the whole of his part of it, and the part which , must be left unperformed either --

(a) firms a considerable part of the whole, though admitting of compensation in money; or

(b) does not admit of compensation in money;

he is not entitled to obtain a decree for specific performance; but the court may, at the suit of the other party, direct the party in default to perform specifically so much of his part of the contract as he can perform, if the other party --

(i) in case falling under cl. (a), pays or has paid the agreed consideration for the whole of the contract reduced by the consideration for the part which must be left unperformed and in a case falling under cl. (b) pays or has paid the consideration for the whole of the contract without any abatement; and

(ii) in either case, relinquishes all claims to the performance of the remaining part of the contract and all right to compensation, either for the deficiency or for the loss or damage sustained by him through the default of the defendant."

20. It has already been stated that in this suit for specific performance of the contract and possession, the plaintiff has not claimed any compensation. It maybe noted here that the plaintiff in this suit has not claimed for khas possession as well. Mr. Chatterjee submits that the plaintiff has relinquished the claim for compensation and that the plaintiff has expressed her obtain (option ?) to get possession of the suit properties even with the tenants the rein who could not be evicted by the defendant. Both the courts below have found that the plaintiff is ready and willing to perform her part of the contract by paying the balance consideration money of Rs. 4,800/-for the whole of the contract without any abatement, although the defendant would be failing to perform her whole part of the contract. Placing reliance on the decision in (1964) 68 Cal WN 611, we are of the view that Section 12(3) of the Specific Relief Act is attracted in the instant case.

21. It is true that the specific performance of the contract isequitable relief. Explanation (i) to Section 10 of the Specific Relief Act provides that unless and until the contrary is proved, the court shall presume that the breach of the contract to transfer immovable property cannot be adequately relieved by compensation in money. As laid down in Section 20(i) of the Specific Relief Act, the jurisdiction to decree specific performance is discretionary, and the court is not bound to grant such relief merely because it is lawful to do so; but the discretion of the court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a court of appeal. Sub-section (4) of Section 20, of the Specific Relief Act enjoins that the court shall not refuse to any party specific performance of a contract merely on the ground that the contract is not enforceable at the instance of the other party.

22. In view of what has been discussed above we are of the view that the plaintiff is entitled to gel a decree for specific performance of the contract for sale of the suit property in the facts and circumstances of the present case and that the learned Additional District Judge was not justified in reversing the judgment and decree of the learned Subordinate Judge and dismissing the suit.

23. In the result, the appeal is allowed and the judgment and decree of the learned Additional District Judge reversing the judgment and decree of the learned Subordinate Judge and dismissing the suit are set aside and those of the learned Subordinate Judge are restored and restored with the modification that on plaintiff's payment of the balance consideration money of Rs. 4800/- the defendant shall execute the sale deed in terms of the agreement for sale Ext. 1 in respect of the suit property at the expenses of the plaintiff within two months from the date of the judgment of this Court and in default the plaintiff shall get the sale deed executed through the court on deposit of the aforesaid balance consideration money and that the plaintiff shall get possession of the suit property with tenants therein. We make no order as to costs.

Gobinda Chandra Chatterjee, J.