NATIONAL AGRICULTURAL COOPERATIVE MARKETING FEDERATION OF INDIA versus ALIMENTA S.A.

Citation: [2020] 7 S.C.R. 789 · Decided: 22-04-2020 · Supreme Court of India · Bench: ARUN MISHRA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

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NATIONAL AGRICULTURAL COOPERATIVE
MARKETING FEDERATION OF INDIA
v.
ALIMENTA S.A.
(Civil Appeal No.667 of 2012)
APRIL 22, 2020
[ARUN MISHRA, M. R. SHAH AND B. R. GAVAI, JJ.]
Foreign Awards (Recognition and Enforcement) Act, 1961:
s.7 – Agreement between NAFED and Alimenta S.A. for export of
groundnut (commodity) for the season 1979-80 – Agreement
contained arbitration clause – Terms and conditions were as per
FOSFA 20 contract, a standard form of contract – NAFED was a
canalizing agency for the Government of India for export of
commodity – Clause 14 in the agreement was that in case of
prohibition of export by executive order or by law, the agreement
would be treated as cancelled – NAFED could not export the entire
quantity due to damage caused to crop by cyclone – Government
did not grant permission to NAFED to carry forward previous year’s
commitment to subsequent year – Because of refusal by Government,
it was not possible for NAFED to supply commodity to Alimenta
S.A. – Unfulfilled part was required to be cancelled – Arbitration –
Foreign award ordering NAFED to pay damages – Enforcement
challenged – Held: It is provided in s.7(1)(b)(ii) that if the court
dealing with the case is satisfied that the enforcement of the award
will be contrary to public policy, the foreign award may not be
enforced – The impugned award is ex facie illegal, and in
contravention of fundamental law, against the public policy as
envisaged in s.7 of the Act of 1961 – No export without permission
of the Government was permissible and without the consent of the
Government, quota could not have been forwarded to next season
– On the happening of contingency agreed to by the parties in Clause
14 of the FOSFA Agreement, the contract was rendered
unenforceable under s.32 of the Contract Act – As such the NAFED
cannot be held liable to pay damages under foreign award.
Contract Act, 1872 – s.32 – Applicability of – Held: s.32 of
the Contract Act applies in case the agreement itself provides for
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SUPREME COURT REPORTS
[2020] 7 S.C.R.
contingencies upon happening of which contract cannot be carried
out and provide the consequences – In this case, s.32 of the Contract
Act is attracted and not the provisions of s.56 – It was an agreement
to do an act impossible in itself without permission, and that is
declared void by s.32 – Foreign Awards (Recognition and
Enforcement) Act, 1961.
Allowing the appeal, the Court
HELD: 1.1 Section 32 of the Contract Act provides for
enforcement of contingent contracts. Section 56 of the Contract
Act deals with the agreement to do an impossible act or to do
acts afterward become impossible or unlawful. It also provides
for liability of the promisor to do something which he knew or
might have known with reasonable diligence an act which is
impossible or unlawful; as such, the promisor must make
compensation for the non-performance of the promise.
[Paras 45, 46][812-C, G-H]
Davis Contractor Ltd v. Fareham Urban District Council
(1956) 2 All ER 145;  Tsakiroglou & Co. Ltd. v. Noblee
& Thorl GmbH, [1961] 2 All ER 179; Ocean Tramp
Tankers Corporation v. V/O Sovfracht, [1964] 1 All ER
161; National Carriers Ltd. v. Panalpina (Northern) Ltd,
[1981] 1 All ER 161; Pioneer Shipping Ltd. & Ors. v.
BTP Tioxide Ltd.; The Nema, (1981) 2 All ER 1030;
Paal Wilson & Co. A/S v. Partenreederei Hannah
Blumenthal; The Hannah Blumenthal, [1983] 1 All ER
34; Delhi Development Authority v. Kenneth Builders
& Developers Private Limited and Ors., (2016) 13 SCC
561 – referred to.
1.2  Section 32 of the Contract Act applies in case the
agreement itself provides for contingencies upon happening of
which contract cannot be carried out and provide the
consequences. To this case, provisions of Section 32 of the
Contract Act is attracted and not section 56. In case an act
becomes impossible at a future date, and that exigency is not
provided in the agreement on the happening of which exigency,
impossible or unlawful, the promisor had no control which he
could not have prevented, the contract becomes void as provided
in section 56. However, section 56 also provides liability for a
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cause where the promisor has agreed 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 a
promisor must make compensation to such promise and is liable
to pay damages. The latter part of section 56 is a

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