THE NAIHATI JUTE MILLS LTD. versus KHYALIRAM JAGANNATH

Citation: [1968] 1 S.C.R. 821 · Decided: 19-10-1967 · Supreme Court of India · Bench: J.C. SHAH · Disposal: Dismissed

Cited by 2 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

THE NAIHATI .JUTE MILI.S LTD. 
v. 
KBYALIRAMJAGANNATB 
[J. C. SHAH, S. M. SIKIU AND J.M. SHELAT, JJ.) 
October 19, 1967 
Co11tract-frustratio11-impossibllit11 of performa11Ce due to l11teT-
vening circumstances-Whether .contract discharged on an implied 
term or on Court deciding performance impossible-Contract Act 
ss. 32 and 56-Scope of-Whether damages could be awarded on the 
A 
B 
basis of public poliCI/ of Pakistan Government. 
O 
The appellant entered into a contract on July 7, 1958 with the 
respondent to ;>urchase from him 2000 bales of jute to be imported 
from ~akistan. The cont1'aet, inter alia, provided that shipment of 
the consignment would be made during August-November, 1958, 
that the buyers would obtain the necessary import licence, that if 
they failed to obtain the licence by November 1958, the period of D 
shipment would be eixtended upto December 1958 and that if it was 
not obtained by December 1958, the contract would be settled at the 
market price prevailing on January 2, 1959. The contract also con-
tained an arbitration clause whereunder all disputes under the con-
tract including the question whethe- the contract had been termi-
nated or completed were to be referred to the arbitration of an 
Arbitration Tribunal. 
The appellants applied to the Jute Commissioner on August 8 
B 
for an import licence but this was refused on the ground that the 
appellants had sufficient stock to carry on for some months more. 
Tuey applied again on November 29, 1958 when their stock was re-
duced, but the Jute Commissioner refused to issue the licence and 
asked them to meet their requirements from purchases of Inclim 
jute. The respondents thereafter claimed damages from the appel-
I 
lants on the ground that the appellants had failed to furnish the 
import licence as provided in the contract. 'Elle appellants disclaim-
ed their liability and thereupon the disputes between the parties 
-were referred to the Arbitration Tribunal. The Tribunal passed an 
'award holding that the appellants had failed to can-y out their part 
of the contract and were liable to pay damages to the respondent 
assessed at Rs. 34,000 and interest 
G 
The appellants thereafter applied to the High Court to set aside 
the award and contended (a) that they could not be held to have 
committed breach of the contract as they had done all that could 
'!>e expec:ted of them to, obtain the licence; (b) that owing to the 
mtervenmg causes, i.e., a change in the policy of the Government, 
which the parties could not foresee when they entered into the con-
tract, the contract became impossible of performance and ought to 
have been treated as void under s. 56 of the Contract Act; and (c) B 
that the arbitrators had no jurisdiction as the arbitration clause in 
the said. contract perished along with the contract. A Single Bench 
of the High Court dismissed the application and an appeal to a· Divi-
sion Bench was also dismissed. 
On appeal to this Court. 
L;1'(N)7BCI-ll(a) 
321 
822 
SUPREME COURT _BEPO!l'I'~ 
[1968] I s.o.R. 
A 
Held, dismissing the sppeal: 
(i) The provision in the contract that whereas the delay to pro-
vide a licence in November 1958 was to be excused but that the con-
tract was to be settled at the market rate prevailing on January 2, 
1959 if the appellants failed to deliver the licence in December 
1958 clearly meant that the appellants had taken upon themselves 
the absolute burden of furnishing the licence latest by the end of 
B December 1958 and had stipulated that in default they would pay 
damages on the basis of price prevailing on- January 2, 1959. That 
being the position the defence of impossibility of perfQrmance or 
of the contract being void for· that reason or that the court should. 
spell out an implied term·fu the contract to that effect was not 
available to the appellants. (832 B-C]. 
Since under the Contract Act a promise may be express or im--
C plied, in cases where the court gathers as a matter of construction 
that the contract itself contains impliedly or expressly a term ac-
cording to which it would stand discharged on the happening 
of 
certain circumstances, the dissolution of the contract would take 
place under the terms of the contract itself, and such cases would 
be outside the purview of s. 56 Although in English law such cases 
might be treated as cases of frustration, in India they would be 
D dealt with under s. 32. In a majority of cases, however, the doctrine 
of frustration is not

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