Case: Indl. Finance Corpn. Of India Ltd Vs. Cannanore Spg. & Wvg. Mills Ltd.


Decision reasoning: 1[ds]We are of the opinion that he is so discharged on the principle expressed in the maxim lex non cogit ad impossibilia29. We have first thus to consider as to the exact meanings of the words or expressions used in the covenant between the parties. There can be no doubt that a man may by an absolute contract bind himself to perform which subsequently however becomes impossible, or to pay damages for the non-performance and this interpretation is to be placed upon an unqualified undertaking, where the event which causes the impossibility was or might have been anticipated and guarded against in the contract, or where the impossibility arises from the act or default of the promissor30. But where the event is of such a character that it cannot reasonably be supposed to have been in the contemplation of the contracting parties when the contract was made, they will not be held bond by general words which, though large enough to include, were not used with reference to the possibility of the particular contingency which afterwards happened. It is on this principle that the act of God is in some cases said to excuse the breach of a contract31. The Latin Maxim referred to in the English judgment lex non cogit ad impossibilia also expressed as impotentia excusat legem in common English acceptation means, the law does not compel a man to do that which he cannot possibly perform. There ought always thus to be an invincible disability to perform the obligation and the same is akin to the Roman Maxim nemo tenetur ad impossibilia. In Brooms Legal Maxims the state of the situation has been described as below:-It is, then, a general rule which admits of ample practical illustration, that impotentia excusat legem; where the law creates a duty or charge; and the party is disabled to perform it without any default in him, and has no remedy over, there the law will in general excuse him (t): and though impossibility of performance is in general no excuse for not performing an obligation which a party has expressly undertaken by contract, yet when the obligation is one implied by law, impossibility of performance is a good excuse. Thus in a case in which consignees of a cargo were prevented from unloading a ship promptly by reason of a dock strike, the Court, after holding that in the absence of an express agreement to unload in a specified time there was implied obligation to unload within a reasonable time, held that maxim lex non cogit ad impossibilia applied, and Lindley, L.J., said : We have to do with implied obligations, and I am not aware of any case in which an obligation to pay damages is ever cast by implication upon a person for not doing that which is rendered impossible by causes beyond his controlRecapitulating the facts briefly, the Nationalisation Act came into force in the year 1974 by reason of which the assets of a debtor company stand vested on the State. In terms of the provisions of the Nationalisation Act, there was appointed a Commissioner of Payments and by reason of the factum of the Appellant herein being a secured creditor, lodged its claim before the Commissioner of Payments in its entirety. The Commissioner of Payments, however, in terms of the provisions of the Nationalisation Act its allowed a major portion of the claim but as regards the remainder, expressed its inability to pass any order and the remainder or the balance of the claim stands out to be the subject matter of the present proceedings. Incidentally, there exists some departure and shift from the case made out before the High Court and the case before this Court since the frustration was said to have occurred by reason of statutory termination of the Managing Agency System. (Damodaran & Company, being the Managing Agent of the principal-debtor) It has been the definite contention before the High Court that the contractual obligation by reason of severance of relationship between Damodaran and the principal-debtor the contract had become incapable of being performed in the same capacity in which the parties had entered into the contract with the appellant herein. The case made out before this Court, however, is a complete departure therefrom and as a mater of fact introduction of the Legislation of 1974 in terms of which the entire assets stand vested has been taken recourse to as the supervening event and the contract of guarantee has thus become incapable of being performed for reasons beyond the control of the guarantors having due regard to the statutory provisions, as appears from Section 141 of the Contract Act - undoubtedly the shift and variation cannot but be attributed to be well imagined but irrespective of the same and in either of the situations (i.e. the plea before the High Court or the plea before this Court), the doctrine of frustration as envisaged in terms of Section 56 of the Contract Act does not and cannot have any manner of application in the contextual facts. It is on the failure of the principal debtor to pay the entire sum due, the guarantee stands invoked- the Contract of Guarantee has no co-relation with that of the Nationalisation Act neither is dependent thereon: it is an independent contract and in all fairness has to be honoured to fulfil the contractual obligation between the surety and the creditor. Taking recourse to Section 141 by the surety, in our view, is utterly misplaced and we need not dilate once again, since we have already dealt with the issue hereinbefore in this judgment, except recording that doctrine of frustration as contended cannot be invoked having regard to the provisions of Section 141 of the Contract Act