Case: Boothalinga Agencies Vs. V. T. C. Poriaswami Nadar

2. The appellant carries on business in the manufacture and sale of coffee powder. He was for this purpose importing chicory under actual users licence issued by the Government. The consignment of chicory in question was a consignment of 24-3/4 tons - 495 cases which arrived at Madras port by "S.S. Alwaki" in December, 1955. Exhibit B-9 was the licence under which the consignment was imported. The goods were cleared by the appellant on December 20, 1955. The case of the respondent was that the appellant agreed to sell the consignment to him under Ex. A-1 dated November 26, 1955 after taking an advance of Rs. 7,500. The contract was, however, entered into in the name of the find defendant and P. W. 2 acted as a broker in the transaction. The respondent paid another sum of Rs. 20,00 on December 23, 1955 after the goods arrived and were cleared on the representation that the delivery would be given in one month. Defendant No. 1 executed a letter, Ex. A-2 in this connection but thereafter owing to rise in prices the appellant committed a default. The suit was contested by the first defendant on the found that the contract was illegal an therefore void. The case of the second defendant was that he had nothing to do with the contract entered into between the plaintiff and the first defendant and, in any case, the contract for sale of chicory was illegal and void ab initio us contravening provisions of the licence granted to him or the import of chicory. The trial Court held, upon examination of the evidence, that both defendants 1 and 2 undertook with the plaintiff to fulfil the terms of the contract. On the question of legality of the contract the Court held that as the contravention of the terms of the licence by the sale of the imported goods would entail only an administrative penalty, the sale cannot be held to be prohibited by law and the contract was therefore a legal contract binding on both the parties. The trial court found that the date of the breach of the contract was February 14, 1956 and granted a decree in favour of the plaintiff against both the defendants for a sum of Rs. 35,640. Two appeals were filed in the Madras High Court against the judgment of the trial court-A. S.No. 367 of 1958 by the second defendant and A. S. No. 363 of 1959 by the first defendant. The appeals were heard together by the High Court which by its judgment D/-16-3-1962 allowed the appeal of the first defendant A. S. No.363 of 1959 and dismissed the suit as against him. As regards the appeal filed by the 2nd defendant the High Court reduced the amount of damages to the sum of Rs. 23,265. The High Court agreed with the finding of the trial Judge that the contract for the sale of imported chicory was entered into by the respondent directly with the second defendant and the second defendant was liable for its breach. As regards the legality of the contract, the High Court took the view that it could not be regarded as a contract prohibited by any law and so it was valid and binding between the parties and the plaintiff could properly sustain an action for damages for its breach. The High Court further held that the real contract which the plaintiff had entered into was with the second defendant and the first defendant was only a dummy in whose name the contract was entered into for ulterior reasons.

Court's reasoning:
1. Notification No. 23-ITC/43, dated the 1st July, 1943, issued by the late Department of Commerce, as amended.Notification No. 2-ITC/48, dated 6th March, 1948, issued by the late Ministry of Commerce.8. On the basis of these provisions was contended by Mr. Gokhale on behalf of the appellant that the contract which is the subject-matter of the suit was unlawful and the respondent cannot claim damages for breach of such a contract. It was not disputed by Mr. Gokhale that the contract between the parties was entered into on November 26, 1955 before the coming into force of the Imports (Control) Order. It was nevertheless argued that a breach of the conditions of the licence was punishable under Section 5 of Act XVIII of 1947 as it stood at the relevant time and therefore the contract was illegal and no claim for the breach thereof was maintainable. The contention of the appellant was that the contravention of the terms of the licence issued under the notification dated March 6,1948 was a contravention of the notification itself within the meaning of Section 5 of Act XVIII of 1947 and was punishable. We are unable to accept this argument as correct. It is clear that Section 5 before its amendment only penalised the contravention of any order made or deemed to have been made under the Act. It is true that a licence was granted by virtue of a statutory notification dated March 6, 1948 issued under the Defence of India Rules and later deemed to have been issued under Act XVIII of 1947. Notification No. 23N-ITC/43 dated July 1, 1943 merely provides that no goods shall be imported except the goods covered by special licences issued by an authorised officer. Notification No. 2. ITC/48 dated March 6, 1948 authorises the licensing officer to impose one or more conditions prescribed by that order and the licensing officer has therefore power to impose conditions in the licence issued by him, but if the licensee contravenes the conditions imposed by the licence it is difficult to hold that it is not merely a contravention of the conditions of a licence but there is contravention of the terms of the notification and so the provisions of Section 5 of Act XVIII of 1947 are attracted. Reference was made on behalf of the appellant to the amendment made to S. 5 of Act XVIII of 1947 by the Amending Act 4 of 1960. By the Amending Act Section 5 of Act XVIII of 1947 was amended so as to include contravention of a condition of a licence granted under any order as an offence under Section 5 of the Act.It is not, however, permissible, in the circumstances of the present case, to construe the language of Section 5 of the parent Act with the aid of the Amending Act (Act 4 of 1960). It is not possible for us to accept the contention of Mr. Gokhale that the Amending Act of 1960 is something in the nature of a Parliamentary exposition of the meaning of Section 5 as it stood in the parent Act. It follows therefore that on the material date a breach of the condition of a licence was not tantamount to a breach of the statutory order within the meaning of Section 5 of Act XVIII of 1947.The view that we have expressed is borne out by the decision of this Court in East India Commercial Co. Ltd. Calcutta v. Collector of Customs, Calcutta, (1963) 3 SCR 338   = (AIR 1962 SC 1893  ) in which it was held by the majority judgment that an infringement of the condition of a licence was not equivalent to an infringement of the two orders dated July 1, 1943 and March 6, 1948 i. e., Nos. 23 ITC/43 and 2-ITC/48 made under the Imports and Exports (Control) Act, 1947 and therefore the provisions of Section 167 (8) of the Sea Customs Act were not attracted. We accordingly reject the argument of Mr. Gokhale on this aspect of the case.The doctrine of frustration of contract is really an aspect or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of Section 56 of the Indian Contract Act. It should be noticed that Section 56 lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties.In English Law therefore the question of frustration of contract has been treated by courts as a question of construction depending upon the true intention of the parties. In contrast, the statutory provisions contained in S. 56 of the Indian Contract Act lay down a positive rule of law and English authorities cannot therefore be of direct assistance, though they have persuasive value in showing how English courts have approached and decided cases under similar circumstances.