Assignment 2 Subject: Legal Environment (Cases) Date: 22-9-2012 Prepared By

Patel Hardik
11MBA0108 Section B MBA 2011-13, Semester III Submitted to Mr. Gaurang Badheka

INDUKAKA IPCOWALA INSTITUTE OF MANAGEMENT (I2IM) CHAROTAR UNIVERSITY OF SCIENCE AND TECHNOLOGY (CHARUSAT)

Case 1 Different Parties of the case Abdul Kafoor and Anr Vs Abdul Razack and Anr (AIR 1959 Mad 131) FACTS One Vappu Rowther was the owner of properties, he died in 1936 and left behind him a daughter Savuravan Beevi through his predeceased first wife, his second wife, Zuleka Beevi and a son by her, the first respondent to the appeal. Zuleka Beevi died after the succession to the estate of Vappu Rowther opened. Savuravan Beevi died in 1944 leaving behind her children the appellants as her heirs. The appellants claim that their mother was entitled to a share in the properties as an heir of Vappu Rowther, that on the death of their mother they were entitled to the same. However the first respondent contend that Savuravan Beevi even during the life-time of Vappu Rowther had executed a release on 13-1-1936 relinquishing all her rights of inheritance in the properties of her father Vappu Rowther in consideration of a payment of Rs. 300. Further to secure that sum of Rs. 300 and as part of the same transaction Vappu Rowther is said to have executed a simple bond, on the same date in favour of his daughter, Savuravan Beevi promising to pay her with interest at four kalams of paddy per cent per annum. The first respondent, therefore, pleaded that by virtue of the release and the benefit she obtained the appellants' mother had surrendered all her rights in the estate of her father and that she was also estopped from claiming a share. The first respondent also pleaded that he would be entitled to benefit under Section 43 of the Transfer of Property Act. Alternatively he claimed that in case the partition were to be granted, he should be compensated for improvements effected on the property, the debts of the estate which her discharged and the funeral expenses of Vappu Rowther incurred by him.

PROCEDURAL FACTS The learned District Munsif negatived the contentions of the first respondent and held that the release was invalid and that the appellants would be entitled to a partition and separate possession of 24 share in the properties. He also held that interest paid worked out at slightly more than the legitimate hare of income to which Savuravan Beevi would be entitled and directed the defendants to refund a sum of Rs. 38/13/0 together with a sum of Rs. 50 which was received towards the principal. The first respondent filed an appeal to the Sub-Court, Mayuram, against the preliminary decree.

The learned Subordinate Judge agreed with the District Munsif and held that was not valid, that Savuravan Beevi and her sons were not estopped from claiming partition and that the first respondent would not be entitled to the benefit of Section 43 of the Transfer of Property Act. Against that decree the first respondent filed a second appeal to this court. Krishnaswami Nayudu, J., who heard the appeal held that the release deed was invalid and that the appellants would not be estopped from claiming partition by reason of Section 115 of the Evidence Act. The learned Judge, however, held that apart from the rule of estoppel provided for in Section 115 of the Evidence Act there were other kinds of estoppel under which it could be held that a family arrangement was entered into by Savuravan Beevi with her father who was benefited by it and therefore, binding on the parries concerned.

ISSUES Whether Section 6(a) of the Transfer of Property Act which does not apply to Muslims,apply in this case as a transfer or renunciation of a contingent right of inheritance is prohibited by the Muhammadan law itself Whether the appellants' mother had surrendered all her rights in the estate of her father and that she was also estopped from claiming future share in the property on the execution of simple bond

CONTENTIONS In the case of Asa Beevi v. Karuppan Chetty12, a Bench of three Judges of the High court held that the chance of a Muhammadan heir-apparent cannot validly be released. The contention on behalf of the first respondent, which was accepted as sound by the learned Judge, was that the simple bond amounted to a family arrangement. In the written statement filed by the respondent no specific plea was taken that and B. 12 amounted to any family arrangement. The only contention was that it was a release and as a release it was valid to extinguish the releasor's rights of future inheritance was not an arrangement in the sense that no other member of the family got a benefit under it. There was neither a settlement nor any arrangement by Vappu Rowther as a result. He continued as owner and died intestate. The Deed of release executed on the 13th day of January 1936 in favour of Vappu Rowther by Savuravan Beevi Ammal, eldest daughter of the said Vappu Rowther stated that whereas you have me a daughter by your senior wife and a son by name Razak by your junior wife, whereas there is due to me a one third share in the properties according to our caste custom

and whereas, I have agreed to receive from you a sum of Rs. 300 and to execute a release in respect of my rights over the immoveable and moveable properties belonging to you, the sum received by me in the matter of getting a simple debt bond executed by you is Rs. 300. As this sum of Rs. 300 has been received by me in the aforesaid manner I have no right whatever over your immoveable and moveable properties. Hereafter there will be between us friendly relationship only and not relationship as regards money matters. To the said effect is the deed of release executed by me with consent." However, it is not very clear from the document as to whether any future right of inheritance was at all released, and indeed during the last stages of the argument the learned Advocate for the respondent contended that the releasor should be deemed to have surrendered her then existing claim to the property. If that were so, the release me rely made Vappu Rowther's title to the properties perfect and on his death Savuravan Beevi would under the law of inheritance be entitled to her legitimate share. JUDGMENT An analysis of the case brings out that the judgment given by the honourable judge was right, as when property is conveyed in future there is said to be a transfer of property no less than when it is conveyed in the present as stated under Section 5 of the Transfer of Property Act. The Legislature has provided that the chance of an heir-apparent cannot be a subject of conveyance in present or in future. An agreement, therefore, to convey in future such a chance cannot be considered a valid contract because it is an agreement to transfer that which the law says is incapable of transfer. The 'object' of such an agreement is of such a nature that if permitted, it would defeat the provisions of Section 6 (a) of the Transfer of Property Act and Section 23 of the Indian Contract Act. It would be defeating the provisions of the Act to hold that though such hopes or expectations cannot be transferred in present or future, a person may bind himself to bring about the same results by giving to the agreement the form of a promise to transfer not the expectations but the fruits of the expectations by saying that what he has purported to do may be described in a different language from that which the Legislature has chosen to apply to it for the purpose of condemning it.

Case 2 NEGOTIABLE INSTRUMENTS Parties: PHILIPPINE EDUCATION CO. INC. VS. SORIANO [GR L-22405, 30 June 1971] Facts: On 18 April 1958 Enrique Montinola sought to purchase from the Manila Post Office 10 money orders of P200.00 each payable to E. P. Montinola with address at Lucena, Quezon. After the postal teller had made out money orders numbered 124685, 124687-124695, Montinola offered to pay for them with a private check. As private checks were not generally accepted in payment of money orders, the teller advised him to see the Chief of the Money Order Division, but instead of doing so, Montinola managed to leave the building with his own check and the 10 money orders without the knowledge of the teller. On the same date, 18 April 1958, upon discovery of the disappearance of the unpaid money orders, an urgent message was sent to all postmasters, and the following day notice was likewise served upon all banks. Instructing them not to pay anyone of the money orders aforesaid if presented for payment. The Blank of America received a copy of said notice 3 days later. On 23 April 1958 one of the above mentioned money orders numbered 124688 was received by Philippine Education Co. as part of its sales receipts. The following day it deposited the same with the Bank of America, and one day thereafter the latter cleared it with the Bureau of Posts and received from the latter its face value of P200.00. On 27 September 1961, Mauricio A. Soriano, Chief of the Money Order Division of the Manila Post Office, acting for and in behalf of Post-master Enrico Palomar, notified the Bank of America that money order 124688 attached to his letter had been found to have been irregularly issued and that, in view thereof, the amount it represented had been deducted from the bank's clearing account. For its part, on August 2 of the same year, the Bank of America debited Philippine Education Co.'s account with the same amount and gave it advice thereof by means of a debit memo. On 12 October 1961 Philippine Education Co. requested the Postmaster General to reconsider the action taken by his office deducting the sum of P200.00 from the clearing account of the Bank of America, but his request was denied. So was Philippine Education Co.'s subsequent request that the matter be referred to the Secretary of Justice for advice. Thereafter, Philippine Education Co. elevated the matter to the Secretary of Public Works and Communications, but the latter sustained the actions taken by the postal officers. In connection with the

events set forth above, Montinola was charged with theft in the Court of First Instance of Manila (Criminal Case 43866) but after trial he was acquitted on the ground of reasonable doubt. On 8 January 1962 Philippine Education Co. filed an action against Soriano, in the Municipal Court of Manila. On 17 November 1962, after the parties had submitted the stipulation of facts, the municipal court rendered judgment, ordering Soriano, et al. to countermand the notice given to the Bank of America on 27 September 1961, deducting from said Bank's clearing account the sum of P200.00 representing the amount of postal money order 124688, or in the alternative, to indemnify Philippine Education Co. in the said sum of P200.00 with interest thereon at the rate of 8-1/2% per annum from 27 September 1961 until fully paid; without any pronouncement as to costs and attorney's fees." The case was appealed to the Court of First Instance of Manila where, after the parties had resubmitted the same stipulation of facts, the appealed decision dismissing the complaints with costs, was rendered. Philippine Education Co. appealed. Issue Whether the postal money order is a negotiable instrument. Judgment Philippine postal statutes were patterned after similar statutes in force in the United States. For this reason, Philippine postal statutes are generally construed in accordance with the construction given in the United States to their own postal statutes, in the absence of any special reason justifying a departure from this policy or practice. The weight of authority in the United Status is that postal money orders are not negotiable instruments; the reason behind this rule being that, in establishing and operating a postal money order system, the government is not engaging in commercial transactions but merely exercises a governmental power for the public benefit. Some of the restrictions imposed upon money orders by postal laws and regulations are inconsistent with the character of negotiable instruments. For instance, such laws and regulations usually provide for not more than one endorsement; payment of money orders may be with held under a variety of circumstances.

Case 3 Facts A firm doing business in Bombay entrusted goods worth Rs. 35,500 the Railway for delivery in Delhi. The goods were consigned to "self" and the firm endorsed the railway receipts to a Bank against an advance of Rs. 20,000 made by the Bank to the firm. The firm also executed a promissory note in favour of the Bank for that amount. When the goods reached the destination, the Bank refused to take delivery, on the ground that they were not the goods consigned by the firm. The Bank, thereafter filed a suit for the recovery of the value of the goods. The trial court dismissed the suit. On appeal by the Bank, the High Court allowed the appeal and decreed the claim for Rs. 20,000 on the ground that as pledge of the goods, the Bank suffered loss only to the extent of the loss of its security. Both the Bank and the Railway appealed to this Court, and it was contended on behalf of the Railway that the endorsement of the railway receipt in favour of the Bank, did not constitute a pledge of the goods covered by the receipt and that the Bank had no right to sue for compensation.

Different Parties The Morvi Mercantile Bank Ltd. And ... vs Union Of India, Through The ... on 3 March, 1965

PETITIONER THE MORVI MERCANTILE BANK LTD. AND ANR. Vs. UNION OF INDIA, THROUGH THE GENERAL MANAGER,CENTRAL RAILWAY

JUDGMENT The judgment of SUBBA RAO, DAYAL and BACHAWAT JJ was delivered by SUBBA RAO, J. The dissenting opinion of MUDHOLKAR and RAMASWAMI JJ was delivered by RAMASWAMI J. Subba Rao, J. On october 4, 1949 M/s. Harshadrai Mohanlal & Co. a firm doing business at Thana, Bombay. Here in after called the firm, entrusted 4 boxes alleged to have contained menthol crystals to the then G.LP. Railway for carriage from Thana to Okhla near Delhi under a railway receipt bearing. On October 11, 1949, the firm consigned 2 more such boxes to Okhla from Thana under 2 railway receipts bearing to each party. All the said 6 boxes were marked with the name of the said firm and were consigned to "self". The said firm endorsed the relevant railway receipts in favor of Morvi 'Mercantile Bank Ltd., here in after called the Bank, against an advance of Rs. 20,000 made by the Bank to the firm. They said consignments did not reach

Okhla. The railway company offered to deliver certain parcels to the Bank, but the Bank refused to take delivery of the same on the ground that they were not the goods consigned by the firm. As the railway failed to deliver the boxes and the Bank, as the endorsee of the said railway receipts for valuable consideration, in the Court of the Civil Judge, Senior Division. Thana, against the Union of India through the General Manager, Central Railway, Bombay, for the recovery of Rs. 35,500, being the value of the goods contained in the said consignments as damages. The defendant in the written-statement averred that on February 1, 1950 the railway company offered to deliver all the consignments to the Bank, but the latter wrongfully refused to take delivery of the same on the ground that the consignments were not identical to the ones consigned from Thana it put the plaintiff to strict proof of the allegation that the consignments contained menthol crystals as alleged or that the aggregate value of the said consignments was Rs. 35,500 that the railway receipts were endorsed in favors of the plaintiff for valuable consideration. The decision is depends upon the scope of the legal requirements to constitute a pledge under the Indian law. That calls for a careful scrutiny of all the relevant provisions of the Indian Contract Act, the Indian Sale of Goods Act and the Transfer of Property Act. For their combined consideration yields the answer to the problem raised. Railway receipt was so nominee not included in the definition. But the Privy Council, on the basis of brought the railway receipts under that part of the definition describing generally the documents of title to goods. It may also be noticed that the Judicial Committee. Though its attention was called to the provisions of the Transfer of Property Act, preferred to decide that case decors the said provisions. In the Explanation of the Transfer of Property Act, 1882, the definition of the expression "mercantile document" is practically the same as that found in the Indian Factors Act noticed by the Judicial Committee in the decision cited supra; with the difference that it expressly includes there in railway receipt. In 1930 Parliament in enacting the Indian Sale of Goods Act, 1930, presumably borrowed the definition of "documents of title to goods" from the Indian Factors Act noticed by the Judicial Committee, but expressly included in the definition the railway receipt. This indicates the legislative intention to accept the mercantile usage found by the Judicial Committee in Ram das Vithaldas Durbar v. S. Amerchand & Co. It may be noticed that this decision also turned upon the relevant provisions of the Contract Act before its amendment in 1930, though at the time the decision was made the amendment came into force. On the question whether a pledge of a document is a pledge of the goods as distinct from the document, the Judicial Committee observed, Their Lordships likewise in the present case see no reason for giving a different meaning to the term in from that given to the terms in addition a railway receipt is specifically included in the definition
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of mercantile document of title to goods by the Transfer of Property Act, 1882, to be taken as part of the Contract Act as being a section relating to contracts. The section emphasizes that a mercantile agent shall be in possession of documents of title with the consent of the owner thereof if he is in such possession and pledges the goods by transferring the documents of title to the said goods, by fiction, he is deemed to have expressly authorized by the owner of the goods to make the same. The condition of consent and the fiction of authorization indicate that he is doing what the owner could have done. This sub-section clearly recognizes that a buyer or his mercantile agent can pledge goods by transferring the documents of title there it protects a bona fide pledge from the buyer against any claim by the original owner based on the lien or any other right still left in him. If the owner--the purchaser becomes the ownercannot pledge the goods at all by transfer of documents of title. the protection given under "Subject to the provisions of this Act, the unpaid seller's right of lien or stoppage in transit is not affected by any sale or other disposition of the goods which the buyer may have made, unless the seller has assented there to Provided that where a document of title to goods has been issued or lawfully transferred to any person as buyer or owner of the goods, and that person transfers the document to a person who takes the document in good faith and for consideration, then, if such last mentioned transfer was by way of sale, the unpaid seller's right of lien or stoppage in transit is defeated, and, if such last mentioned transfer was by way of pledge or other disposition for value, the unpaid seller's right of lien or stoppage in transit can only be exercised subject to the rights of the transferee."

Arguments The argument that section 178 of the Contract Act, as amended in 1930, restricts the scope of the earlier section and confines it only to a mercantile agent was noticed by the Judicial Committee in Official Assignee of Madras v. Mercantile Bank of India, Ltd. and it observed there in "The Indian Legislature may well have appreciated in 1872 the exigencies of business, even though in 1930 they recanted. Or perhaps they did not appreciate fully the effect of the actual words of the section."

Case 4 Supreme Court of India State Bank of India vs Saksaria Sugar Mills Ltd. And Ors on 14 February, 1986 Different Parties of the case STATE BANK OF INDIAVs. RESPONDENT: SAKSARIA SUGAR MILLS LTD. AND ORS. DATE OF JUDGMENT14/02/1986 ACT: The Sugar Undertakings (Taking over of Management) Act 1978, Sugar Undertaking Notified Only obligations, rights, liabilities etc. arising out of contracts, assurances of properties or agreements specified in the Notification issued remain suspended and unenforceable remedies against guarantor/surety Not suspended. Indian Contract Act, 1872. Facts of the case The Sugar Undertakings Act, 1978, by empowers the Central Government to issue a notification declaring that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments, in force immediately before the date of issue of the notification shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified in the notification. Section 7 of the Act provides that any remedy for the enforcement of any right, privilege, obligation or liability referred to in clause and suspended or modified by a notification, remain suspended or modified and all proceedings relating thereto pending before any Court, tribunal, officer or other authority shall accordingly remain stayed or be continued subject to such adaptations, so, however, that on the notification ceasing to have effect any right, privilege, obligation or liability so remaining suspended or modified shall become revived and enforceable as if the notification had never been made and any proceeding so remaining stayed shall be proceeded with subject to the provisions of any law which may then be in force from the stage which had been reached when the proceedings became stayed. The appellant, State Bank of India, had allowed cash credit facility to respondent No. 1, M/s. Saksaria Sugar Mills Ltd., on the security of goods produced at its Sugar Factory and the title deeds of its immovable properties deposited with the appellant by way of equitable mortgage to secure the amount advanced under the said cash credit facility. Respondents had agreed to be the guarantors for the repayment of any amount due from
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respondent under the said cash credit account. Since there was default in the repayment of the amount due under the said cash credit account, the appellant instituted a suit against respondent for recovery of a sum of Rs. 54, 89,822.99. In the meanwhile, the Central Government took over the Sugar undertaking belonging to Respondent No. 1 under the provisions of the Act and appointed a Custodian of the said undertaking. In the suit, respondent pleaded that the suit was liable to be stayed in view of the provisions of the Act. The Trial Court held that it had jurisdiction to try the suit. In revision, the High Court held that the trial of the suit in so far as prayer for decree for Rs. 54,89,822.99 against respondent Nos. 1 to 5 was concerned, was liable to be stayed by virtue of the provisions of the Act and that the trial of the suit with regard to all other matters may proceed. The High Court also dismissed an application flled by the appellant seeking clarification of the aforesaid order. Hence these appeals by Special Leave. Allowing the appeals, The order passed by the High Court is set aside and the trial court is directed to proceed with the suit The Sugar Undertakings Act 1978 does not provide that on a sugar undertaking automatically all the contracts, assurances of property or agreement etc. entered into by such sugar undertaking would become unenforceable. It states that only those contracts, assurances of property or agreements etc. which are specified in the notification issued would become suspended and the rights, privileges, obligations and liabilities arising under them would not be enforceable. In the instant case, the Central Government has made a declaration by Notification dated 21.3.84 to the effect that the operation of all obligations and liabilities accruing or arising out of all contracts, assurances of properties, agreements, settlements, awards, standing orders or other instruments in force immediately before the 28th March 1980 to which they said sugar undertaking or the person owning the said sugar undertaking is a party shall remain suspended up to March 12, 1985. It is very clearly stated in the said Notification that it does not apply to secured liabilities due to banks and financial institutions. The liability involved in the suit was a secured liability and the creditor is the State Bank of India. Since all secured liabilities due to a bank or a State Bank of India vs Saksaria Sugar Mills Ltd. And Ors on 14 February, 1986 financial institution are excluded from the operation of the Notification, the suit against respondent as well as respondent.

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The Act does not say that when a notification is issued of the Act, remedies against the guarantors also stand suspended. Moreover, under section 128 of the Indian Contract Act, 1872, save as provided in the contract, the liability of the surety is co-extensive with that of the principal debtor. The sureties thus became liable to pay the entire amount. Their liability was immediate and it was not deferred until the creditor exhausted his remedies against the principal debtor. Therefore, the order of the High Court against respondent.

JUDGMENT CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 569-70 of 1986. From the Judgment and Order dated 25.5.1984/22.2.1985 of the Allahabad High Court in C.M.An. of 1984 in C.R. No. 136 of 1982. Y.S. Chitale and S.A. Shroff for the Appellant. Yogeshwar Prasad and S.R. Srivastava for the Respondents. The Judgment of the Court was delivered by VENKATARAMIAH, J. These appeals by special leave are filed against the order dated May 25, 1984 passed by the High Court of Allahabad in Civil Revision No. 136 of 1982 and the order dated February 22, 1985 in C.M.A. of 1984 on the file of that Court. The appellant, the State Bank of India, had allowed cash credit facility to M/s. Saksaria Sugar Mills Ltd., respondent herein, on the security of the goods produced at the sugar factory belonging to respondent had also deposited in the Bombay office of the State Bank of India on February 2, 1962 by way of equitable mortgage the title deeds of its immovable properties to secure the amount advanced under the said cash credit facility. Respondents Nos. 2 to 5 M/s. Govind Ram and Brothers, Shri K.G. Saksaria, Shri G.L. Vaid and Shri R.K. Saksaria had agreed to be the guarantors for the repayment of any amount due from respondent No.1 under the said cash credit account. Since there was default in repayment of the amount due under the said cash credit account the State Bank of India instituted a suit in Suit No. 18 of 1980 on the file of the Additional District Judge, Gonda for recovery of a sum of Rs.54, 89,822.99 as on March 6, 1980 against respondents Nos. 1 to 5 who were described as defendants Nos.1 to 5 in the plaint praying for a decree in terms of order 34, rule 4 C.P.C. and further consequential directions. In the meanwhile by virtue of an order made by the Central Government under the Sugar Undertakings belonging to respondent No.1 had been taken over by the Central Government and one Raghubir Singh had been appointed as the Custodian of the said undertaking. The State Bank of India, therefore, impleaded Raghubir Singh and the Union of India also as defendants Nos. 6 and 7 in
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the suit. In the suit respondents pleaded inter alia that the trial court had no territorial jurisdiction to try the suit and that the suit was not maintainable and at any rate the suit was liable to be stayed in view of the provisions of the Act. The trial court had framed two issues arising out of the above pleas. The defendants filed an application before the trial court on September 6, 1982 requesting it to decide first the above two issues relating to its jurisdiction and its competence to proceed with the suit. After hearing the parties the trial court found that it had jurisdiction to try the suit as the properties given as security were situated within its jurisdiction and that there State Bank of India vs Saksaria Sugar Mills Ltd. And Ors on 14 February, 1986 was no impediment to proceed with the trial notwithstanding the fact that the management of the mill of respondent No.1 had been taken over by the Central Government under the Act. Aggrieved by the said decision of the trial court, respondent before the High Court of Allahabad. The High Court allowed the revision petition holding that the trial of suit in so far as relief No.1 namely the prayer for decree for Rs. 54,89,822.99 against respondent was concerned was liable to be stayed by virtue of the provisions of the Act. The High Court, however, directed that the trial of the suit with regard to all other matters may proceed. Since the only relief prayed in the suit was in respect of the recovery of Rs.54, 89,822.99 from respondents Nos. 1 to 5 in accordance with the provisions of order 34, rule 4 C.P.C. and that had been stayed, the State Bank of India applied to the High Court by filing an application of 1984 for clarification as to what other matter could be tried in the suit. That application was rejected by the High Court by its order dated February 22, 1985 holding that the provisions of order were quite clear and it was for the court below to proceed in accordance with law. The High Court was of opinion that the order needed no further clarification. Aggrieved by the others passed on revision in Civil Revision No. 136 of 1982 and the order passed in the State Bank of India has filed this appeal by special leave. The only question canvassed before us by the parties relates to the question whether the trial of the suit should be stayed by reason of the provisions of the Act. There is no dispute about the territorial jurisdiction of the trial court. It is contended by respondents that since the management of the sugar undertaking belonging to the respondent had been taken over by the Central Government under the Act, the trial of the suit filed against respondent for recovery of any amount due from the sugar undertaking was liable to be stayed. It is no doubt true that the Central Government has taken over the management of the sugar undertaking belonging to the respondent by issuing a notification under section 3 of the Act and has appointed a Custodian under section 5 thereof. The material part of section 7 of the Act

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Power of Central Government to make certain declarations the Central Government may, if it is satisfied, in relation to a notified sugar undertaking that it is necessary so to do in the interests of the general public with a view to preventing the fall in the volume of production of the sugar industry, it may, by notification, declare that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force immediately before the date of issue of the notification shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising there under before the said date, shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified in the notification. Any remedy for the enforcement of any right, privilege, obligation or liability referred to in clause of sub-section (1) and suspended or modified by a notification made under that subsection shall, in accordance with the terms of the notification, remain suspended or modified and all proceedings relating thereto pending before any Court, tribunal, officer or other authority shall accordingly remain stayed or be continued subject to such adaptations, so, however, that on the notification ceasing to have effect Any right, privilege, obligation or liability so remaining suspended or modified shall become revived and enforceable as if the notification had never been made Any proceeding so remaining stayed shall be proceeded with subject to the provisions of any law which may then be in force, from the stage which had been reached when the proceedings became stayed." Empowers the Central Government to issue a notification declaring that the operation of all or any of the contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force immediately before the date of issue of the notification shall remain suspended or that all or any of the rights, privileges, obligations and liabilities accruing or arising there under before the said date shall remain suspended or shall be enforceable with such adaptations and in such manner as may be specified in the notification. The Act provides that any remedy for the enforcement of any right, privilege, obligation or liability referred to in clause and suspended or modified by a notification made under that sub-section shall in accordance with the terms of the notification, remain suspended or modified and all proceedings relating thereto pending before any Court, tribunal, officer or other authority shall accordingly remain stayed or be continued subject to such adaptations, so, however that on the notification ceasing to have effect. A reading of clause that it is only on the issuance of a notification by the Central Govt. under containing the necessary declaration that the operation of all or any of the contracts etc. entered into by the notified sugar undertaking which are referred to in the said notification shall remain suspended or
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that all or any of the rights, privileges, obligations and liabilities accruing or arising there under before the said date shall remain suspended. The Act does not provide that on a sugar undertaking being notified, automatically all the contracts, assurances of property or agreements etc. entered into by such sugar undertaking would become unenforceable. It states that only those contracts, assurances of property or agreements etc. which are specified in the notification issued would become suspended and the rights, privileges, obligation and liabilities arising under them would not be enforceable. In the instant case the Central Government has issued notifications from time to time specifying the contracts, assurances of property, agreements etc. the operation of which would stand suspended or stayed during the period of its management of the sugar undertaking in question. The latest notification issued in that connection is dated March 21, 1984. Whereas the Central Government is satisfied that in relation to the Saksaria Sugar Mills Limited manufacturing sugar at Badhanan in the district of Gonda in the State of Uttar Pradesh being the notified sugar undertaking, it is necessary so to do in the interests of the general public with a view to preventing the fall in the volume of production of the sugar industry. Now, therefore, in exercise of the powers conferred by clause of the sugar undertakings and in continuation of the notification of the Government of India in the Ministry of Food and Civil Supplies the Central Government hereby declares that the operation of all obligations and liabilities accruing or arising out of all contracts, assurances of property, agreements, settlements, awards, standing orders or other instruments in force immediately before the 28th March, 1980 to which the said sugar undertaking or the person owning the said sugar undertaking is a party, or which may be applicable to the said sugar undertaking or that person, shall remain suspended for a further period from 28th March, 1984 to 12.3.1985." The above notification clearly sets out the contracts, assurances of property etc. the operation whereof is suspended or stayed. The Central Government has made a declaration by that notification to the effect that the operation of all obligations and liabilities accruing or arising out of all contracts, assurances of properties, agreements, settlements, awards, standing orders or other instruments in force immediately before the 28th March 1980 to which the said sugar undertaking or the person owning the said sugar undertaking is a parties shall remain suspended up to March 12, 1985. It is very clearly stated in the said notification that it does not apply to secured liabilities due to banks and financial institutions. The liability involved in the suit was a secured liablity and the creditor is the State Bank of India. Yet the High Court surprisingly has proceeded to hold that the operation of the contract, assurance of property and agreement in respect of the undertaking and its property entered into with the State Bank of India is to be suspended and the suit in respect of them should be stayed in view of the Act
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and the notification issued there under. It is unfortunate that the High Court erred in overlooking words "other than those relating to secured liabilities to banks and financial institutions" referred to in the notification which had the effect of excluding the mortgage in favor of the State Bank of India from the scope of the notification issued under section 7 of the Act. The High Court further erred in not noticing that even when a notification is issued of the Act suspending the operation of any agreement or assurances of property to which a notified sugar undertaking or the person owning is a party, any proceeding against the guarantor would remain unaffected by the Issuance of such a notification. Under section 128 of the Indian Contract Act, 1872, save as provided in the contract, the liability of the surety is co-extensive with that of the principal debtor. The sureties thus became liable to pay the entire amount. Their liability was immediate and it was not deferred until the creditor exhausted his remedies against the principal debtor. The Act does not say that when a notification is issued remedies against the guarantors also stand suspended. In any event the order of the High Court against respondents. Since in the instant case all secured liabilities due to a bank or a financial institution are excluded from the operation of the notification, the suit against respondent as well as respondents remained unaffected by the notification issued by the Central Government. The order of the High Court in the Civil Revision is, therefore, liable to be set aside. We accordingly set aside the orders passed by the High Court against which these appeals are filed and direct the trial court to proceed with the suit. The appeals are accordingly allowed. Respondents shall pay the costs of the appellant.

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Case 5 Supreme Court of India Satyabrata Ghose vs Mugneeram Bangur & Co., And ... on 16 November, 1953 Different Parties of the case SATYABRATA GHOSE Vs. RESPONDENT MUGNEERAM BANGUR & CO. AND ANOTHER ACT: Indian Contract Act 1872, section 56 Agreement to sell land Doctrine of frustration Applicability Doctrine whether applicable in India- Scope of section 56 Impossible meaning ofAgreement for sale of land-Buyer's rights-English and Indian law. Facts of the case 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 of the Indian Contract Act. The view that section 56 applies only to cases of physical impossibility and that where this section is not applicable recourse can be had to the principles of english law on the subject of frustration is not correct. English cases can have only a persuasive value, and are only helpful in showing how English courts decided cases under similar circumstances. Section 56 of the Indian Contract Act lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties. According to the Indian Contract Act. a promise may be express or implied. In cases, therefore, where the court gathers as a matter of construction that the contract itself contained impliedly or expressly a term according 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 altogether. Although in English law these cases are treated as cases of frustration, in India they would be dealt with under s. 32 of the Indian Contract Act which deals with contingent contracts or similar other provisions contained in the Act. In the large majority of cases however the doctrine of frustration. is applied not on the ground that the parties themselves agreed to an implied term which operated to release them from the performance of the contract. The relief is given by the court on the ground of subsequent impossibility when it finds that the whole purpose or basis of a contract was frustrated by the intrusion or occurrence of an unexpected event or change of circumstances which was
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beyond what was contemplated by the parties at the time when they entered into the agreement. Here there is no question of finding out an implied term agreed to by the parties embodying a provision for discharge, because the parties did not think about the matter at all nor could possibly have any intention regarding it. When such an event or change of circumstance occurs which is so, fundamental as to be regarded by law as striking at the root of the contract as a whole, it is the court which can pronounce the contract to be frustrated and at an end. The court undoubtedly has to examine the contract and the circumstances under which it was made. The belief, knowledge and intention of the parties are evidence, but evidence only on which the court has to form its own conclusion whether the changed circumstances destroyed altogether the basis of the adventure and its underlying object. This may be called a rule of construction by English Judges but it is certainly not a principle of giving effect to the intention of the parties which underlies all rules of construction. This is really a rule of positive law and as such comes within the purview of s. 56 of the Indian Contract Act. The reason underlying the rule of English law that the doctrine of frustration does not apply to contracts for the sale of land. is that under the English law, ,is soon as the agreement to sell is complete the buyer becomes the owner of the land in equity. As a mere agreement to sell does not confer any rights of ownership on the buyer under the Indian law, the doctrine of frustration is as applicable in India to agreements for sale of land as in the case of other agreements. In 1940 as an integral part of a development scheme of an extensive area of land- started by the defendant company, it entered into a contract with the plaintiff's predecessor for the sale of a Plot of land to the latter accepting a small sum of money as earnest. It undertook to construct roads and drains and the conveyance was to be completed soon after the completion of tile roads on payment of the balance of the Price. As a considerable portion of the area comprised in the scheme was requisitioned by the Government for military Purposes in 1941, the company wrote to the defendant that the road construction could not be taken up for an indefinite period and required him to treat the agreement as cancelled and receive back his earnest Held, that having regard to the nature and terms of the contracts the actual existence of war condition at the time when it was entered into the extent of the work involved in the scheme fixing no time limit in the agreement for the cons traction of the roads etc., and the fact that the order of requisition was in its very nature of a temporary character, the requisition did not affect the fundamental basis of the contract nor did the performance of the contract become illegal by reason of the requisition, and the contract had not therefore become impossible within the meaning of s. 56 of the Indian Contract Act. Joseph Constantine Steamship Co. v. Imperial Smelting Cor- poration Ltd, Tamplin
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Steamship Co. Ltd. v. Anglo American Products Co. Ltd, Kesari Chand v. Governor General in Council, Ganga Saran v. Ram Charan, Taylor v. Caldwell, Robinson v. Davison Denny Mott and Dickson Ltd. v. James B. Frazer & Co. Ltd.

JUDGMENT CIVIL APPELLATE JURISDICTION Civil Appeal No. 80 of 1952, Appeal from the Judgment and Decree dated the 6th September, 1950, of the High Court of Judicature at Calcutta in Appellate Decree No. 318 of 1949 from the Judgment and Decree dated the 25th February, 1949. Of the Court of the District Judge of Zillah 24 Parganas in Title Appeal No. 8 of 1948 arising out of the Judgment and Decree dated the 10th October, 1947, of the Court of the Additional Subordinate Judge, 7th Court, Alipore. M.C. Setalvad, Attorney-General for India for the appellant. Atul Chandra Gupta for respondent No. 1 1953. November 16. The Judgment of the Court was delivered by MUKHERJEA J.The facts giving rise to this appeal are, for the most part, uncontroverted and the dispute between the parties centres round the short point as to whether a contract for sale of land to which this litigation relates, was discharged and came to an end by reason of certain supervening circumstances which affected the performance of a material part of it. To appreciate the merits of controversy, it will be necessary to give a brief narrative of the material facts. The defendant company, which is the main respondent in this appeal, is the owner of a large tract of land situated, in the vicinity of the Dhakuria Lakes within Greater Calcutta. The company started a scheme for development of this land for residential purposes which were described as Lake Colony Scheme No. I and in furtherance of the scheme the entire area was divided into a large number of plots for the sale of which offers were invited from intending purchasers. The company's plan of work seemed to be, to enter into agreements with different purchasers for sale of these plots of land and accept from them only a small portion of the con- side ration money by way of earnest at the time of the agreement. The company undertook to construct the roads and, drains necessary for making the lands suitable for building and residential purposes and as soon as they were completed. the purchaser would be called upon to complete the con- valance by payment of the balance of the consideration money. Bejoy Krishna Roy, who was defendant in the suit and figures as a pro forma respondent in this appeal, was one of such purchasers who entered into a contract with the company for purchase of a plot of land covered by the scheme. His contract is dated the 5th of August, 1940, and he
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paid Rs. 101 as earnest money. In the receipt granted by the vendor for this earnest money, the terms of the agreement are thus set out "Received with thanks from Babu Bejoy Krishna Roy of 28 Tollygunge Circular Road, Tollygunge, the sum of Rs. 101 as earnest money having agreed to sell to him or his nominee 5 K. more or less in plot No. 76 on 20 and 30 ft. Road in Premises No. Lake Colony Scheme No. 1, Southern Block at the average rate of Rs. 1,000 (Rupees one thousand only) per Cotta. The conveyance must be completed within one month from the date of completion of roads on payment of the balance of the consideration money, time being deemed as the Essence of the Contract. In case of default this agreement will be considered as cancelled with forfeiture of earnest money. Mokarari Mourashi Terms of payment:One third to be paid at the time of registration and the balance within six years bearing Rs. 6 per cent. interest per annum". On 30th November, 1941, the plaintiff appellant was made a nominee by the purchaser for purposes of the contract and although he brought the present suit in the character of a nominee, it has been held by the trial judge as well as by the lower appellate court, that he was really an assignee of Bejoy Krishna Roy in respect to the latter's rights under the contract. Some time before this date, there was an order passed by the Collector, 24-Parganas, on 12th of November, 1941 under section 79 of the Defense of India Rules, on the strength of which a portion of the land covered by the scheme was requisitioned for military purposes. Another part of the land was requisitioned by the Government on 20th of December, 1941. While a third order of requisition, which related to the balance of the land comprised in the scheme, was passed sometime later. In November, 1943, the company addressed a letter to Bejoy Krishna Roy informing him of the requisitioning of the lands by the Government and stating inter alia that a considerable portion of the land-appertaining to the scheme was taken possession of by the Government and there was no knowing how long the Government would retain possession of the same. The constructs of the proposed roads and drains, therefore, could not be taken up during the continuance of the war and possibly for many years after its termination. In these circumstances,, the company decided to treat the agreement for sale with the addressee as cancelled and give him the option of taking back the earnest money within one month from the receipt of the letter. There was offer made in the alternative that in case the purchaser refused to treat the contract as cancelled, he could, if he liked, complete the conveyance within one month from the receipt of the letter by paying the balance of the consideration money and take the land in the condition in which it existed at that time, the company undertaking to construct the roads and the drains, as circumstances might permit, after the termination of the war.
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The letter ended by saying that in the event of the addressee not accepting either of the two alternatives, the agreement would be deemed to be cancelled and the earnest money would stand forfeited. This letter was handed over by Bejoy Krishna to his nominee, the plaintiff, and there was some correspondence after that, between the plaintiff on the one hand and the company on the other through their respective lawyers into the details of which it is not necessary to enter. It is enough to state that the plaintiff refused to accept either of the two alternatives offered by the company and stated categorically that the latter was bound by the terms of the agreement from which it could not, in law, resale. On 18th of January, 1946, the suit, out of which this appeal arises, was commenced by the plaintiff against the defendant company, to which Bejoy Krishna Roy was made a party defendant and the prayers in the plaint were for a two-fold declaration, namely, that the contract dated the 5th of August, 1940, between the first and the second defendant, or rather his nominee, the plaintiff, was still subsisting and that the plaintiff was entitled to get a conveyance executed and registered by the defendant on payment of the consideration money mentioned in the agreement and in the manner and under the conditions specified therein. The suit was resisted by the defendant company who raised a large number of defenses in answer to the plaintiff's claim, most of which are not relevant for our present purpose. The principal contentions raised on behalf of the defendant were that a suit of this description was not maintainable under section 42 of the Specific Relief Act and that the plaintiff had no locus stand to institute the suit. The most material plea was that the contract of sale stood discharged by frustration as it became impossible by reason of the supervening events to perform a material part of it. Bejoy Krishna Roy did not file any written statement and he was examined by the plaintiff as a witness on his behalf. The trial judge by his judgment dated 10th October, 1.947, overruled all the pleas taken by the defendant and decreed the plaintiff's suit. An appeal taken by the defendant to the Court of the District Judge of 24-Parganas was dismissed on the 25th February, 1949, and the judgment of the trial court was affirmed. The defendant company thereupon preferred a second appeal to the High Court which was heard by a Division Bench consisting 'of Das Gupta and Lahiri JJ. The only question canvassed before the High Court was, whether the contract of sale was frustrated by reason of the requisition orders issued by the Government. The first argument advanced by the learned AttorneyGeneral raises a somewhat debatable point regarding the true scope and effect of section 56 of the Indian Contract Act and to what extent, if any, it incorporates the English rule of frustration of contracts. The Indian Contract Act which relates to performance of contracts and it purports to deal with one circumstances under which performance of a,
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contract is excused or dispensed with on the ground of the contract being-void. The section stands as follows: "An agreement to do an act impossible in itself is void. A contract to do an act which after the contract is made, becomes impossible, or by reason of some event which the promise could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promise did not know to be impossible or unlawful, such promisor must make compensation to such promise for any loss which such promise sustains through the non-performance of the promise". "If substantially the whole contract becomes impossible of performance or in other words impracticable by some cause for which neither was responsible,." In Joseph Constantine Steamship Line Limited v. Imperial Smelting Corporation Ltd.(2), Viscount Maugham observed that the "doctrine of frustration is only a special case of the discharge of contract by an impossibility of performance arising after the contract was made." Lord Porter agreed with this view and rested the doctrine on the same basis. The question was considered and discussed by a Division Bench of the Nagpur High Court in Kesari Chand v. Governor- General in Council(3) and it was held that the doctrine of frustration comes into play when a contract becomes impossible of performance, after it is made, on account of circumstances beyond the control of the parties. The doctrine is a special case of impossibility and as such comes under section 56 of the Indian Contract Act. We are in entire agreement with this view which is fortified by a recent Pronouncement. Mr. Gupta, who appeared for the respondent company. put forward an alternative argument that even if the performance of the contract was not made impossible. it certainly became illegal as a result of the requisition order and consequently the contract became void under section 56 of the Indian Contract Act as soon as the requisition order was made. In support of his contention the learned counsel placed reliance upon certain provisions of the defence of India Rules and also upon to section 56 of the Contract Act. All Satyabrata Ghose vs Mugneeram Bangur & Co., And ... on 16 November, 1953 that the defence Regulations show is that the violation of a requisition order could be punished as a criminal offence. But no matter in whichever way the requisition order could be enforced, in substance it did nothing else but impose a prohibition on the use of the land during the period that it remained in force. The effect of such prohibition on the performance of the contract, we have discussed above, and we do not think that the mere fact that the requisition order was capable of being enforced by a criminal sanction made any difference in this respect. In any view this question was not raised in any of the
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courts below and has not been indicated even in the respondent's statement of the case. We do not think that it would be proper to allow this question to be raised for the first time before us, as it requires consideration of the different provisions of the defence of India Act and also of the implication of appended to section 56 of the Contract Act. In our opinion, the events which have happened here cannot be said to have made the performance of the contract impossible and the contract has not been frustrated at all. The result is that the appeal is allowed, the judgment and decree of the High Court of Calcutta are set aside and those of the courts below restored. The plaintiff will have his costs in all the courts. Appeal allowed. Agent for the appellant: S. C. Banerjee. Agent for the respondent No. I : R. R. Biswas. 330 Satyabrata Ghose vs Mugneeram Bangur & Co., And ... on 16 November, 1953

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