Satyabrata Ghose vs Mugneeram Bangur Case was a landmark case about the selling of land. In this matter, questions were of unquestionably unforeseen circumstances that were continuing to affect the physical part of the land as well as to clarify that whether such circumstances would cause a discharge of the same. As per the Indian Contract Act, 1872 the doctrine of frustration states that an activity flatters to be unlawful or not under the law it falls under the flagship of purview as per section 56 of the Indian Contract Act 1872.
In Satyabrata Ghose vs Mugneeram Bangur Case, the apex court of the country established the limitations of section 56 of the Indian Contract Act, 1872 stating that the term ‘impossibility’ is discussed in the said section of the Act, has been pre-owned practically rather than in literal term. The Supreme Court also held that it isn’t allowed to bring in using English law in the provisions (statutory) of the Indian Contract Act, 1872.
- MUKHERJEA, B.K.
- BOSE, VIVIAN
- BHAGWATI, NATWARLAL H.
Indian Contract Act: Section 56
- The company of the respondent in the said matter owned an extensive amount of land in Calcutta, and started a strategy with an intention of developing the land for residential purposes and thus, distributed the entire property into plots.
- For the successful completion of the above mentioned strategy, the company went in for agreements with the interest purchasers with a motive of selling different plots to different purchasers, for which they gained a small amount as earnest money during the sale of the land.
- In order to complete the goal of developing the land for residential purposes, the company shouldered the responsibility of constructing various amnesties that are requisites for residential purposes such as building roads and drainage systems.
- The plan was to provide the buyers with the plots and attain the remaining payments from the buyers once the requisite construction was complete.
- One of these buyers was Mr. Bejoy Krishna Roy, who entered such an agreement with the company and made the payment for the earnest money of 101 INR on August 5th, 1941. After making the payment for the earnest money, the appellant became the nominee of the said land. Despite of this later the Collector, 24–Paragnas demanded the use of the land as per the Defence of India rules for military, which led the company to conclude regarding cancellation of the agreement in November 1943.
- However, the company provided the appellant, Mr. Bejoy Krishna Roy, with a choice of either receiving the paid earnest money back or else to make the outstanding payment to the company, as the company would continue its complete the task once the war ends.
- Despite the situations that were going on at the time and the choices provided to him by the company, the appellant filed a civil suit against the company on January 18th, 1946 claiming that everything should have worked as per the agreement as both the parties were bound to the terms mentioned in the agreement.
- The appellant refused both options. He sued on 18th January 1946 and claimed that the company was bound to the terms of agreement.
- Whether the appellant holds a locus standi and is qualified enough to institute the suit?
- Can law of frustration in English law be applied in India?
- Does this contract becomes frustrated according to section 56 of Indian Contract Act?
The Supreme Court of India held that although the government requisitioned the land, impossibility can not apply in this case as:
The work did not start when the work when the land was demanded use by the Defence of India. The plea of the defendant is just as the situations would give rise to undecided detainment in the contract’s completion, and thus, the impossibility shall apply.
However, there was no mention of a specified time limit in the contract and the demand was only short-term. Thus, it concluded that there wasn’t any unspecific slowdown.
The provision of the Indian Contract Act Section 56 stated that whenever a person, while signing the contract, has appropriate assiduity which the other party didn’t know about, then the party must compensate for the loss incurred by the other party.
The Supreme Court stated that the principles of Frustration of Contract in English law, as per the judgment passed by the High Court, were not relevant in the statutory provisions of the Indian Contract Act. Besides this, the court also affirmed that the execution of the contract did not become impossible.