Central Bank of India Staff Co-operative Building Society Limited Vs. Dulipalla Ramachandra Koteswara Rao - Court Judgment

Excerpt:
contract - frustrated contract - sections 16 and 20 of specific relief act, 1963 and section 56 of contract act, 1872 - performance of contract rendered impossible by an act of parliament - impossibility of performance renders such contract dissolved - such impossibility of performance cannot be treated as breach of contract - no special circumstance has arisen to seek relief - held, suit for specific performance based on such frustrated contract cannot be allowed. - - the defendant produced several receipts of land revenue as well as electricity consumption charges of the agricultural well situated in the land subsequent to the date of agreement of sale. it is therefore held that the appellant failed to establish delivery of possession on the date of agreements of sale and.....g. yethirajulu, j.1. these appeals are preferred by the sole plaintiff in o.s.nos. 504 and 983 of 1993 filed for specific performance of agreements of sale on the file of the ii additional senior civil judge, vijayawada.2. the plaintiff in both the suits is the central bank of india staff co-operative buildings society ltd., vijayawada represented by its president, which was formed with the sole object of securing land for construction of houses to its members. the respondent and his mother executed two separate agreements of sale covered by o.s.no. 504 of 1993 and o.s.no. 983 of 1993 respectively on 10-12-1974. since his mother died before filing of the suit, and as the respondent-defendant is the sole legal heir to his mother, both the suit were filed against him for specific.....

Judgment:

G. Yethirajulu, J.

1. These appeals are preferred by the sole plaintiff in O.S.Nos. 504 and 983 of 1993 filed for specific performance of agreements of sale on the file of the II Additional Senior Civil Judge, Vijayawada.

2. The plaintiff in both the suits is the Central Bank of India Staff Co-operative Buildings Society Ltd., Vijayawada represented by its President, which was formed with the sole object of securing land for construction of houses to its members. The respondent and his mother executed two separate agreements of sale covered by O.S.No. 504 of 1993 and O.S.No. 983 of 1993 respectively on 10-12-1974. Since his mother died before filing of the suit, and as the respondent-defendant is the sole legal heir to his mother, both the suit were filed against him for specific performance of agreements of sale. Subsequently, by an order dated 30-7-2001 passed in LA.No. 723 of 2001 the Trial Court added his wife and son as defendants 2 and 3 in O.S.No. 983 of 1993 which relates to the agreement of sale executed by the defendant's mother. The averments in both the suits are almost common, therefore, the lower Court recorded common evidence and disposed of the suits through its common judgment dated 8-4-2002.

3. The averments of the plaints in both the suits are briefly as follows:

4. The defendant is the absolute owner of an extent of Ac.3-73 cents of dry land situated in NTS No,25 of Vijayawada Town. His mother was the absolute owner of an extent of Ac.2-00 dry land situated in the same survey number. Both of them executed agreements of sale on 10-12-1974 in favour of the plaintiff agreeing to sell the land @ Rs. 40,000/- per acre and executed agreements of sale by receiving Rs. 5,000/-each towards advance. It was agreed that the balance sale consideration be paid within three months after the defendant and his mother obtaining necessary permission from the Government of A.P. for executing sale-deeds in favour of the plaintiff-society or its members. It was further agreed that in case of the plaintiff-society committing default in payment of balance of sale consideration within the time stipulated therein, the said balance amount carries interest @ 12% per annum. The possession of the suit lands was delivered to the plaintiff on the date of the agreements and since then the plaintiff-society is in continuous possession and enjoyment of the same. The plaintiff is always ready and willing to perform its part of contract. Despite repeated requests, the defendant did not come forward to execute the sale-deeds. Therefore, the plaintiff got issued a legal notice dated 14-1-1992 to the defendant and his mother calling upon to perform their part of contract, but they sent reply notices on 10-2-1992 with all false and untenable allegations. The plaintiff issued a rejoinder to the reply notice on 16-2-1992 and later filed the suits for specific performance of agreements of sale.

5. The defendant filed written statement in both the suits with the following averments in brief:

6. Vijayawada Municipality laid a road for public use in an extent of 2105 2/3 sq. yds. of land in the land covered by the schedule of O.S. No. 504 of 1993 and an extent of 991 sq, yds. in the land covered by the schedule of O.S. No. 983 of 1993. The representatives of the plaintiff-society approached the defendant and his mother Seshamma and induced them by playing fraud, undue influence and misrepresentation to agree to sell the plaint schedule land. The representatives of the plaintiff got the agreements prepared behind the back of the defendant. The agreements are therefore illegal, unenforceable and unsustainable. By the date of the alleged agreements of sale the Andhra Pradesh Vacant Lands in Urban Areas (Prohibition of Alienation) Act, 1972 (Act 12 of 1972) came into force and it was repealed on 5-11-1977. By virtue of the provisions of the said Act, the alienation of the urban vacant land was prohibited and the alienation made in contravention of the Act becomes null and void. In the meanwhile, the Urban Land (Ceiling and Regulation) Act, 1976 came into force with effect from 17-2-1976 prohibiting sale of the land in excess of ceiling limit rendering any transfer to be null and void. The plaintiff-society filed a statement before the competent authority under Act 33 of 1976 and the said authority disposed of the same in C.C. No. 2263 of 1976 by order dated 27-10-1980 observing that the plaintiff is not holding the plaint schedule land and the said order became final. Therefore, it operates as res judicata barring the filing of these suits under Section 11 C.P.C. The possession of the land was never given to the plaintiff and the defendant has been in possession and enjoyment of the land by paying land revenue to the land and electricity charges for the agricultural pump set. The Government did not grant permission to sell the land. Road was laid in part of the. land and the remaining land has to be kept vacant as per the Master Plan of VUDA. The agreements of sale are frustrated since it became impossible to perform the agreements by virtue of the provisions of the Urban Land Ceiling Act. The suits are not maintainable on account of Doctrine of Frustration, They are therefore liable to be dismissed with exemplary costs.

7. The lower Court on the basis of the pleadings framed the following issues in both the suits:

Issues framed in OS No. 504/93:

(1) Whether the plaintiff is entitled to the relief of specific performance of agreement as prayed for? Or alternatively?

(2) Whether the plaintiff is entitled to refund of Rs. 5,000/- advance amount with interest at 18% p.a. from the date of agreement till repayment?

(3) Whether the suit agreement is null and void as it was obtained by representatives of the plaintiff by playing fraud, undue influence and misrepresentation?

(4) Whether the agreement of sale in conditional and contingent contract is cheat in nature and not enforceable?

(5) Whether the suit agreement is deemed to be non est in view of Act 13/72 and 33/76?

(6) Whether the suit agreement is hit by Sections 23 and 25 of Contract Act?

(7) Whether the suit claim is hit by Section 11 of C.P.C.?

(8) Whether the defendant delivered possession of suit schedule property , on the date of suit agreement?

(9) Whether the suit is not maintainable on the ground of doctrine of frustration?

(10) Whether the suit agreement is abandoned?

(11) Whether the plaintiff is represented by competent person?

(12) Whether the suit schedule is correct and available for specific performance of agreement?

(13) To what relief? Issues framed in O.S No. 983/93:

(1) Whether the plaintiff is entitled for specific performance of agreement as prayed for? Or In the alternative, whether the plaintiff is entitled for return of Rs. 5,000/-with interest as prayed for?

(2) Whether there is frustration of contract as alleged in the written statement?

(3) To what relief?

8. The plaintiff in order to get the relief of specific performance examined P.Ws.1 to 6 and marked Exs.A.1 to A.30. The defendant got himself examined as D.W.1 and marked Exs.B.1 to B.83.

9. The Trial Court after considering the oral and documentary evidence adduced by both parties dismissed the suits through its common judgment dated 8-4-2002.

10. The plaintiff being aggrieved by the judgment and decree of the Trial Court preferred these appeals challenging their validity and legality.

11. The defendant filed Cross-Objections vide CMP (SR) No. 43282 of 2002 in A.S.No. 918 of 2002 questioning the judgment of the lower Court on its conclusions that the possession of land was delivered to the plaintiff on the date of agreement and the suit land is in possession of the society.

12. The defendant contended that the plaintiff never reported ready to perform its part of contract. The plaintiff slept over the matter for a period of 19 years, therefore, by virtue of Doctrine of Frustration it has to be concluded that the plaintiff abandoned the claim and requested to confirm the judgment of the Trial Court by dismissing the appeals.

13. In the light of the rival contentions, the following are the points taken up for consideration:

(1) Whether the plaintiff is entitled for a decree of specific performance as prayed for?

(2) Whether the plaintiff is entitled for the alternate relief of return of the advance amount of Rs. 5,000/- each with interest as prayed for?

Point No. 1:

14. The President of the plaintiff-society was examined as P.W.1, he stated that on 10-12-1974 the defendant and his mother Seshamma executed two agreements of sale for the suit lands after receiving earnest money of Rs. 5,000/- each. As per the terms of the agreements, the plaintiff has to pay the balance of sale consideration within three months from the date of obtaining permission from the urban land ceiling authorities for the sale of the land. The defendant did not obtain necessary permission from the Government and did not co-operate with the plaintiff to get the clearance from the Government. They made all efforts to get permission from the urban land ceiling authorities. They attended before the land ceiling authorities on 28-11-1978 during the enquiry. The urban land ceiling authorities passed orders recommending to the Government for according permission, but they did not receive any orders from the Government. The Society made attempts to sell part of the property to third parties, but the permission could not be obtained, for getting the sale-deeds from the defendant and his mother. The Society executed agreements of sale in favour of 14 third parties. Those third parlies also tried to obtain permission from the Government, but they could not succeed. Since the Government refused to grant permission, the agreements in favour of third parties got cancelled. The society sold the suit land excluding the area covered by the road to one Rajendra Prasad and 9 others after cancellation of the agreements of 14 third parties. P.W.1 further deposed that in the year 1976 he came to know that for the first time that permission has to be taken from the Government or any other competent authority. As per the terms of the agreement, the plaintiff also should co-operate with the defendants to obtain permission from the Government, therefore, they made efforts to obtain permission in the year 1976. As per Ex.A.3, they obtained application from the owners and sent them to the Revenue Department. The society received Rs. 5,000/- under the agreement entered with 14 vendees. The society passed a resolution on 1-12-1983 at pages 52 and 53 that no funds are available with it to get the sale-deeds registered. P.W.1 further stated that in the agreements executed in favour of Y. Rajendraprasad and 9 others and Sri Y. V.Rao and others there was a mention that possession of the land was given to them. Despite a recital in those agreements that the possession was delivered to them, the possession continues to be with the society. The plaintiff also made efforts to acquire some other land through the Collector and private owners.

15. The defendant as D.W.1 stated that P.W.1 and others in-charge of the affairs of the society approached him and his mother offering to purchase the land for house-sites. He informed P.W.1 that there is prohibition of alienation of urban land, but P.W.1 told him that they will obtain permission from the concerned authorities. But, the plaintiff-society could not obtain any permission from the urban land ceiling authorities. After receipt of the rejection letters from the urban land ceiling authorities, the plaintiff society did not prefer any appeal whereas his mother and himself preferred appeals before the Commissioner of Land Revenue, Hyderabad and the Commissioner also refused to grant permission for the suit land. The society was conscious about the efforts made by the defendant to obtain permission from the land ceiling authorities for alienation of vacant land and the land ceiling authorities not agreeing for the same.

16. As per Exs.B.81 and 82 the suit land was excluded from the holding of the declarant on the ground that 40 ft. wide road was laid in 98 cents and an extent of Ac.4-08 cents is earmarked for the purpose of park, playground, open place etc., and that there is an absolute embargo on construction of buildings on that land under building regulations. It was also mentioned in Ex.B.82 that as per the Master Plan, the 40 ft. wide road has to be made 80 ft. wide and the construction of the buildings on the balance land of 20 ft. is not permissible under buildings regulations, therefore, an extent of Ac.6-89 cents shall be excluded from the holding of the defendant and his mother.

17. After going through the evidence of P.W.1 and D.W.1, and the documents marked by both parties, it is established that the nature of the land covered by the suit schedule was changed. After chasing the process with all force, the plaintiff society understood that it is impossible to obtain permission from the concerned authorities in view of the change of the nature of the property and there is no use of blaming the defendant for not obtaining permission from the concerned authorities.

18. It is not the case of the plaintiff that the defendant is avoiding execution of sale-deeds on the ground that the conditions of the agreement are onerous or that some temporary obstacle was created. It is made out from the record that there is impossibility to enforce the agreement of sale and the plaintiff has to blame itself for entering into such an agreement which is not permissible under law. As on the date of agreement of sale, the plaintiff was conscious that there was prohibition of alienation of vacant lands and in lieu of that, they incorporated a clause that they will pay the balance of sale consideration after the defendant obtaining clearance from the land reforms authorities. It is not mentioned in the agreement that the defendant shall obtain permission from the Government. Since the plaintiff knows the implications of the prohibition of alienation of vacant lands, the wording in the agreement was used in such a way making it not compulsory for the defendant to obtain permission from the concerned authorities.

19. The lower Court while observingthat the evidence of P.W.2 corroboratedwith the evidence of P.W.1 regarding thedelivery of suit land to the plaintiff, thatthe defendant admitted the execution ofExs.A.1 to A.18-agreements of sale, that theland revenue receipts produced by thedefendant do not contain the New TownSurvey Number, held that the defendantand his mother delivered possession of thesuit land on the date of execution of theagreements of sale.

20. There was a recital in the agreements that the possession was immediately delivered. The defendant contends that though, there was a mention in the agreements of sale that the possession was delivered, physical possession was not given to the plaintiff, therefore, he continues to be in possession of the property. It was elicited from P.W.1 that there was a lemon garden in the land as on the date of agreement of sale and it continued to remain for several, years after the agreement of sale. The defendant produced several receipts of land revenue as well as electricity consumption charges of the agricultural well situated in the land subsequent to the date of agreement of sale. P.W.1 did not whisper as to who were paying the land revenue and who were paying the electricity consumption charges, except saying that they continued to be in possession of the property. The plaintiff did not make any constructions on the land and it remained vacant. The defendant did not accept the version of the plaintiff that the land was delivered to the plaintiff at the time of agreement of sale. The plaintiff did not examine any witnesses Improve as to what were the activities that were conducted on the suit land and what is the nature of enjoyment by the plaintiff. Generally in sale transactions, especially regarding the agreements of sale, there is a practice of the vendor parting with the possession if the vendee pays more than 50% of the sale consideration so as to enable the vendee to get some usufruct from the land till the date of its registration in favour of the vendee. Since the earnest money paid by the plaintiff was negligible, there is any amount of doubt whether the plaintiff was entrusted with the possession of the property. The plaintiff did not produce any documents in proof of enjoyment of property. They did not question me payment of compensation to defendant regarding the land taken for road. It is therefore held that the appellant failed to establish delivery of possession on the date of agreements of sale and subsequent enjoyment. The Cross-Objections filed by the defendants/respondents can be allowed without any hesitation.

21. The version of the plaintiff regarding the possession was not accepted by the urban land ceiling authorities. They included the property in the holding of the defendant and his mother and later excluded on the ground that it has to be kept vacant on account of the Master Plan and on account of laying of road,

22. After carefully going through the oral and documentary evidence adduced by both parties, we are of the view that the lower Court was carried away by the recital of agreements of sale to the effect that the possession was delivered to the plaintiff and gave a finding in favour of the plaintiff. But, in the light of the above discussion, we hold that the plaintiff failed to establish delivery of physical possession of the land on the date of the agreement of sale.

23. The learned Counsel for the appellant submitted that though the land reforms authorities did not accord permission to sell the land, the defendant shall be directed to execute the sale-deed in favour of the plaintiff and it is for the plaintiff to use or not to use the land for the purpose for which the society was established.

24. It is an undisputed fact that the value of the land increased hundreds of times. When the land was not useful for the construction of houses, we could understand the motive behind the insistence of the plaintiff for the execution of the sale-deed in its favour. The suit land is earmarked as vacant land for park, playgrounds etc. If it is not so, it becomes excess land of the defendant making him liable to surrender the same to the Government. If that is so, no land remains for sale. If it is treated as vacant land, it cannot be alienated contrary to the terms and conditions of the Master Plan prepared by the Municipal Corporation for development of the town.

25. The learned Counsel for the plaintiff concedes that the land cannot be used for any other purpose except for construction of houses by the society. Under those circumstances, the argument of the appellant's Counsel that as there are agreements of sale between the plaintiff and the defendant, it is for him to execute the sale-deed after taking the balance of sale consideration and it is for the plaintiff whether to use the land or not to use for the purpose for which it is purchased, cannot be accepted.

26. On the point of abandonment of the agreements of sale, it is evident that the agreement of sale was executed in 1974. Since then, till few days before the suit, the plaintiff did not open its mouth about the suit transaction and there was no action from the plaintiff to pursue the matter expressing its readiness to pay the balance of sale consideration and to obtain the sale-deed.

27. P.W.1 stated that the society was not having any money for payment of sale consideration during the period of agreement of sale. The then President parted Rs. 10,000/- to make payment of earnest money to the defendant and his mother. There were no transactions of the society for so many years and no money was lying with the plaintiff. Though the amount payable towards sale consideration is not shown, specific performance can be insisted by expressing readiness to get the sale-deeds from the vendors. Since the plaintiff lost hope of getting the land they did not mobilize the funds and they simply abandoned the agreements of sale to give up their claim once for all. But, after a lapse of 19 years they came forward with a claim of readiness and willingness to obtain the sale-deeds knowing fully well that the sale of vacant lands was prohibited under the Urban Land Ceiling Act. When they were aware of the non-availability of permission for sale, they did not explain as to what are the special circumstances under which the plaintiff came to the Court seeking the relief of specific performance. The non-pursuing of the matter for 19 years, nondelivery of possession of the land under the agreement of sale, non-granting of permission by the urban land ceiling authorities is a clear indication that the plaintiff society abandoned its claim.

28. Regarding the long lapse of time, it was submitted by the Counsel for the defendant that when there was delay of 19 years in approaching the Court, it amounts to abandonment of the claim, therefore, the plaintiff has to suffer for its latches and it is not entitled for an equitable relief of specific performance of the agreement of sale.

29. In Chand Rani (Smt.) (dead) by LRs, v. Kamal Rani (Smt) (dead) by LRs, : AIR1993SC1742 , the Supreme Court held that in case of sale of immovable property, there is no presumption as to time being the essence of the contract. Even if it is not of the essence of contract, the Court may infer that it is to be performed in a reasonable time if the conditions are (i) from the express terms of the contract; (ii) from the nature of the property; and (iii) from the surrounding circumstances, for example, the object of making the contract. For the purposes of granting relief, the reasonable time has to be ascertained from all the facts and circumstances of the case.

30. In K.S, Vaidyanandan v. Vairavan, : AIR1997SC1751 , the Supreme Court held as follows;

Even where time is not of the essence of contract, the plaintiff must perform his part of the contract within a reasonable time by looking at all the surrounding circumstances, including the express terms of the contract, and the nature of the property.

31. The plaintiff, in the suit on hand, remained silent for unduly long period, therefore, it amounts to abandoning the agreements.

32. In Shah Jitendra Nanalal, Ahmedabad v. Patel Lallubhai Ishverbai, Ahmedabad, : AIR1984Guj145 (F.B), a Full Bench of the Gujarat High Court while considering Urban Land (Ceiling and Regulation) Act, 1976, held that the passing of a conditional decree for specific performance of the obligation of the holder to transfer vacant land in excess of ceiling limit held by him subject to exemption being obtained under Section 20 is permissible. The Full Bench further held that so long as the provision declaring the transfer of vacant land in excess of ceiling limit under Section 5(3) as void is subject to the right to move for exemption, obtain exemption and transfer the property, the power of an owner of vacant land in such land is dormant in him and such power could be exercised by him in case he seeks exemption, satisfies the Government that the grounds for exemption exist and obtains such exemption. That being the case, a decree cannot be defeated on the ground that 'transfer' inter-parties would not be possible. The possibility of obtaining exemption survives till the notification under Section 10(2) of the Act is issued. That being the situation, until then, a plaintiff seeking specific performance cannot be told that the terms of the contract cannot be fulfilled.

33. But, the facts relating to the suit on hand are different, where the permission to sell was rejected. Hence, the above decision is not applicable to the case on hand.

34. In K. Narendra v. Riviera Apartments (P) Ltd., : [1999]3SCR777 , the appellant on 25-7-1972 and 26-7-1992 entered into an agreement and supplementary agreement respectively to sell the disputed land together with all structures and plots to the respondents for a certain amount for the purpose of constructing a muliti-storeyed building of the same. A small portion of the price was to be paid at the time of the execution of the agreement and another portion was to be paid by a post-dated cheque dated 25-1-1973. It was to be encashed by the appellant after plans of the multi-storeyed building as submitted by the respondents were passed and cleared for construction by NMDC and L&DO.; The appellant filed a suit on 25-3-1979 seeking annulment of the agreement on the ground of being impossible of performance and return of the portion of land, possession whereof he had given to the respondents. On 14-3-1980 the respondent filed a suit against the appellant seeking specific performance of the contract for sale and for possession of the remaining portion of the plots. The question before the Supreme Court was whether in the said circumstances, the Court should exercise its discretion in favour of decreeing the suit for specific performance. Answering in the negative, the Supreme Court held:

In view of the order dated 26-4-1985 of the competent authority passed under Section 20(1)(a) read with Section 22 of the ULCRA, the agreement to sell entered into between the parties was incapable of being honoured in the light of the stringent terms and conditions subject to which the permission to construct the building was granted. Moreover, the intention of the parties as evidenced by the terms and conditions of the agreement and subsequent correspondence between them was that the respondent should have been in a position to . secure performance of the terms and conditions of the agreement within a reasonable time, which has been belied. In the meantime, the value of the land has skyrocketed

35. The Supreme Court further held at para 29 of the judgment as follows:

The jurisdiction under Section 20 of the Specific Relief Act, 1963 to decree specific performance is discretionary and the Court is not bound to grant such relief merely because it is lawful to do so; the discretion of the Court is not arbitrary but sound and reasonable, guided by judicial principles and capable of correction by a Court of appeal. ... However, mere inadequacy of consideration or the mere fact that the contract is onerous to the defendant or improvident in its nature, shall not constitute an unfair advantage to the plaintiff over the defendant or unforeseeable hardship on the defendant.

36. The learned Counsel for the defendant submitted that in view of the impossibility of alienating the property in favour of the plaintiff, the doctrine of frustration applies, and the plaintiff having slept over the matter for a period of 19 years cannot demand the defendant to enforce the agreement at this stage of sky rising prices, which is void under law.

37. Section 56 of the Indian Contract Act, 1872 deals with the Doctrine of Frustration and it reads as follows:

Section 56. Agreement to do impossible act--An agreement to do an act impossible in itself is void.

Contract to do act afterwards becoming impossible or unlawful-A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.

Compensation for loss through non-performance of act known to be impossible or unlawful-- Where one person has promised 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 promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise.

38. The first paragraph of Section 56 provides that an agreement to do an act impossible in itself is void. The second paragraph provides that a contract to do an act, which becomes unenforceable, if the act becomes: a) impossible; or b) for reasons of some event which the promisor could not prevent. This Section also provides that it becomes so unenforceable when the act becomes impossible or unlawful. The first paragraph represents the same law as in England. The second paragraph has the effect of turning into a general rule, the limited exceptions under the English law. The Act lays down positive rules of law on questions which English and American Courts have of late more and more tended to regard as matters of construction, depending on the true intention of the parties.

39. Frustration signifies a certain set of circumstances arising after the formation of the contract, the occurrence of which is due to no fault of either party and which render performance of the contract by one or both parties physically and commercially impossible. The Court regards these sets of circumstances as releasing the parties from any further obligations. Where the entire performance of a contract becomes substantially impossible without any fault on either side, the contract is prima facie dissolved by the Doctrine of Frustration.

40. The law excuses further performance under the Doctrine of Frustration, where the contract is silent as to the position of the parties in the event of performance becoming literally impossible or only possible in a very different way from that originally contemplated. The Doctrine of Frustration operates to excuse from further performance where 1) it appears from the nature of the contract and the surrounding circumstances that the parties have contracted on the basis that particular person will continue to be available, or that some future event, which forms the basis of the contract, will take place; and 2) before breach, an event in relation to the matter stipulated in a) renders performance impossible or only possible in a very different way from that contemplated, but without default of either party.

41. The appropriate test applied to determine whether the contract has been frustrated is that of 'a radical change in the obligation'. Lord Raddiffe said in Davis Contractors Ltd. v. Fareham Urban District Council, (1956) 2 All ER 145 at 160 = (1956) AC 696 at 728:.frustration occurs whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract... there must be as well such a change in the significance of the obligation that the thing undertaken would, if performed, be a different thing from that contracted for.

42. The impossibility of performance may arise through subsequent changes in the law. Where performance of the contract has been rendered impossible by an Act of Parliament passed after the contract was made, then the promisor is excused from performing his promise unless it appears mat he intended to bind himself with reference to the future state of the law.

43. In Shiam Sunderlal v. Durga, 0065/1966 : AIR1966All185 , the Allahabad High Court held that an agreement to convey zamindari lands become void when the land vested in the Zamindari Abolition Law in respect of the land so vested.

44. In Rajkumar Gupta v. Desraj, , the Himachal Pradesh High Court held that an agreement of sale of land become impossible and the seller was liable to return the amounts received, when a notification under a statute relating to town planning froze the existing use of land.

45. In Boothalinga Agencies v. V.T.C. Poriaswamy, : [1969]1SCR65 , the Supreme Court held that 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 Contract Act. The Supreme Court further held that the statutory provisions contained in Section 56 of the Contract Act lay down a positive rule of law and the provisions of Section 56 cannot apply to a case of 'self-induced frustration'.

46. In Satyabrata v. Mugneeram, : AIR1954SC44 , the Supreme Court held as follows:

The essential idea upon which the doctrine of frustration is based is that of impossibility of performance of the contract; in fact, impossibility and frustration are often used as inter-changeable expressions. The changed circumstances make the performance of the contract impossible and the parties are absolved from the further performance of it as they did not promise to perform an impossibility. The doctrine of frustration 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.

47. In the above decision, the Supreme Court further held as follows:

The differences in the way of formulating legal theories really do not concern us so long as we have a statutory provision in the Indian Contract Act. In deciding cases in India, the only doctrine that we have to go by is that of supervening impossibility or illegality as laid down in Section 56 of the Contract Act, taking the word 'impossible' in its practical and not literal sense. It must be borne in mind, however, 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.

48. In the light of the above legal position and in view of the above discussion, we have no hesitation to hold that the suit is hit by the Doctrine of Frustration and we further hold that the plaintiff is not entitled for the relief of specific performance as prayed for.

Point No. 2:

49. So far as the alternative relief of the refund of earnest money is concerned, the lower Court held that the plaintiff is not entitled to refund of the said money. After going through the record, we are of the view that the lower Court was right in refusing to order refund of the earnest money. This point is accordingly held against the plaintiff.

50. In view of the above findings against the plaintiff, the appeals are dismissed. The Cross-objections vide CMP (SR) No. 43282 of 2002 are allowed by holding that the plaintiff did not get possession of the property on the date of agreements of sale. The judgment of the Trial Court dated 8-4-2002 is confirmed in all other respects. Each party to bear its own costs.

Cross-Objections SR. No. 43283 of 2002.

Bilal Nazki, J.

Cross-objections SR No. 43283 of 2002 are also allowed in the terms of the judgment dated 13-6-2003, as it is pointed out that the number of these cross-objections has not been mentioned in that judgment.

Dated 18-7-2003.