Case: Naihati Jute Mills Limited Vs. Hyaliram Jagannath

months. If is therefore manifest that their application was refused because of a personal disqualification and not by reason of any force majeure. Since this was the position there is no question of the performance becoming impossible by reason of any change in the Governments policy which could not be foreseen by the parties. No question also would arise of importing an implied term into the contract. 10. Assuming, however, that there was a change of policy and that the Government in the intervening period had decided to place an embargo on import of Pakistan jute the question would still be whether the appellants were relieved from liability for their failure to deliver the licence. A contract is not frustrated merely because the circumstances in which it was made are altered. The Courts have no general power to absolve a party from the performance of his part of the contract merely because its performance has become onerous on account of an unforeseen turn of events, Alopi Parshad and Sons v. Union of India, (1960) 2 SCR 793 at p. 808: (AIR 1960 SC 588 at p. 594). The question would depend upon whether the contract which the appellants entered into was that they would make their best endeavours to get the licence or whether the contract was that they would obtain it or else be liable for breach of that stipulation. In a case falling under the former category, Lord Reading, C. J. in Anglo-Russian Merchants-Traders v. John Batt and Co., 1917-2 KB 679 observed that there was no reason why the law should imply an absolute obligation to do that which the law forbids. It was so said because the Court construed the contract to mean only that the sellers there were to make their best efforts to obtain the requisite permits. As a contrast to such a case there are the cases of Partabmull Rajeshwar v. K. C. Sethia, (1951) 2 All ER 352 and Peter Cassidy Seed Co. v. Osuustukkuk Auppa, 1957-1 WLR 273 where the courts have observed that there is nothing improper or illegal for a party to take upon himself an absolute obligation to obtain a permit or a licence and in such a case if he took the risk he must be held bound to his stipulation. As Lord Sumner in Bank Lime Ltd. v. Capel (A) Co. Ltd., 1919 AC 435 at p. 455 said :"Where the contract makes provision (that is, full and complete provision, so intended) for a given contingency, it is not for the court to import into the contract some other different provisions for the same contingency called by different name." In such a case the doctrine of discharge by frustration cannot be available, nor that of an implied terms that the existing state of affairs would continue at the date of performance. The reason is that where thee is an express term the court cannot find on construction of the contract an implied term inconsistent with such express term. 11. In our view, the provision in the contract that whereas the delay to provide a licence in November 1958 was to be excused but that the contract was to be settled at the market rate prevailing on January 2, 1959 if the appellants failed to deliver the licence the December 1958 clearly meant that the appellants had taken upon themselves absolutely the burden of furnishing the licence latest by the end of December 1958 and had stipulated that in default they would pay damages on the basis of price prevailing of January 2, 1959. That being the position the defence of impossiblity of performance or of the contract being void for that reason nor that the court should spell out an implied term in the contract would not be available to them. 12. In the view that we take that the said contract cannot be said to be or to have been void and that in any event the stipulation as to obtaining the import licence was absolute, the question that the arbitration clause perished along with the contract and consequently the arbitrators had no jurisdiction cannot arise. But assuming that the appellants had established frustration even them it would not be as if the contract was ab initio void and therefore not in existence.In cases of frustration it is the performance of the contract which comes to an end but the contract would still be in existence for purposes such as the resolution of disputes arising under or in connection with it. The question as to whether the contract became impossible of performance and was discharged under the doctrine of frustration would still have to be decided under the arbitration clause which operates in respect of such purposes. Union of India v. Kishorilal, (1960) 1 SCR 493 (514) = (AIR 1959 SC 1362 (1371)). 13. Mr. B. Sen for the appellants also raised two other questions, as to the legal misconduct on the part of the arbitrators and as regards interest on damages awarded by them. We need not however say anything about these two questions as ultimately they were not pressed by him. 14. The last contention raised by him was that the arbitrators awarded damages on the basis of the market rate at Rs. 51 per maund instead of Rs 65 which was the export price fixed by the Government of Pakistan.The argument was that such a basis was contrary to the public policy laid down by the Government of Pakistan and it would not be expedient on our part to give our imprimature to an infringement by the arbitrators of such a policy. There is, in our view, no merit in the argument. The Government of Pakistan cannot lay down any public or economic policy for this country. If the arbitrators found the prevelent rate on January 2, 1959 in Calcutta to be Rs. 51 a maund there can be no objection to their adopting that rate for adjudicating the quantum of damages.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]It is not hardship or inconvenience or material loss which brings about the principle of frustration into play. There must be a change in the significance of obligation that the thing undertaken would, if performed, be a different thing from that which was contracted for6. These theories have been evolved in the main to adopt a realistic approach to the problem of performance of contract when it is found that owing to causes unforeseen and beyond the control of the parties intervening between the date of the contract and the date of its performance it would be both unreasonable and unjust to exact its performance in the changed circumstances. Though none of them was fully accepted and the courts construed the contracts coming before them applying one or the other of them as appearing to tee more rational than the other, the conclusion arrived at were the same. The necessity of evolving one or the other theory was due to the common law rule that courts have no power to absolve a party to the contract from his obligation. On the one hand, they were anxious to preserve intact the sanctity of contract while on the other the courts could not shut their eyes to the harshness of the situation in cases where performance became impossible by causes which could not have been foreseen and which beyond the control of partiesIt is clear from the circulars produced during the trial that as early as March 1958 the Government of India had issued warnings that import of Pakistan jute would be permitted to the absolute minimum and that the jute Mills should satisfy their needs by purchasing Indian Jute. It appears that at the time when the parties entered into the contract the policy was to grant licences in the ratio of 5:1, that is, if an importer had bought 500 maunds of Indian Jute he would he allowed a licence to import 100 maunds of Pakistan jute. This policy is indicated by the Circular dated July 17, 1958 issued by the Indian Jute Mills Association to its members. Such licences would be issued to mills who had stock of less than two months consumption. As already stated, the appellants applied on August 8, 1958 for an import licence for 14,900 maunds and the Jute Commissioner declined to certify that application on the ground that they held stock sufficient to last them for some months. In November 1958, they applied again this time stating that their stock had been reduced and in December 1958 they were told to buy Indian jute. The said Circular appears to show that the Government had not placed a total embargo on import of Pakistan jute. At any rate, such an embargo was not proved by the appellant. It appears, on the contrary, from the documents on record that the policy of the Government was that the licensing authorities would scrutinise the case of each applicant on its own meritThe contract, no doubt contained the printed term that the buyers would not be responsible for delay in delivering the licence but such delay as therein provided was to be excused only if it occurred by such reasons as an act of God, war, mobilisation etc., and other force majeure. It is nobodys case that the performance became impossible by reason of such force majeure. As already stated when the appellants applied for the licence, the authorities refused to certify their application because they held at that time stock for more than 2 months. If is therefore manifest that their application was refused because of a personal disqualification and not by reason of any force majeure. Since this was the position there is no question of the performance becoming impossible by reason of any change in the Governments policy which could not be foreseen by the parties. No question also would arise of importing an implied term into the contractIn such a case the doctrine of discharge by frustration cannot be available, nor that of an implied terms that the existing state of affairs would continue at the date of performance. The reason is that where thee is an express term the court cannot find on construction of the contract an implied term inconsistent with such express term11. In our view, the provision in the contract that whereas the delay to provide a licence in November 1958 was to be excused but that the contract was to be settled at the market rate prevailing on January 2, 1959 if the appellants failed to deliver the licence the December 1958 clearly meant that the appellants had taken upon themselves absolutely the burden of furnishing the licence latest by the end of December 1958 and had stipulated that in default they would pay damages on the basis of price prevailing of January 2, 1959. That being the position the defence of impossiblity of performance or of the contract being void for that reason nor that the court should spell out an implied term in the contract would not be available to them12. In the view that we take that the said contract cannot be said to be or to have been void and that in any event the stipulation as to obtaining the import licence was absolute, the question that the arbitration clause perished along with the contract and consequently the arbitrators had no jurisdiction cannot arise. But assuming that the appellants had established frustration even them it would not be as if the contract was ab initio void and therefore not in existence.In cases of frustration it is the performance of the contract which comes to an end but the contract would still be in existence for purposes such as the resolution of disputes arising under or in connection with it. The question as to whether the contract became impossible of performance and was discharged under the doctrine of frustration would still have to be decided under the arbitration clause which operates in respect of such purposesWe need not however say anything about these two questions as ultimately they were not pressed by himThere is, in our view, no merit in the argument. The Government of Pakistan cannot lay down any public or economic policy for this country. If the arbitrators found the prevelent rate on January 2, 1959 in Calcutta to be Rs. 51 a maund there can be no objection to their adopting that rate for adjudicating the quantum of damages.