INSTITUTE FOR EXCELLENCE

IN HIGHER EDUCATION,
BHOPAL
2015-16

For partial fulfilment of degree of

Bachelor of Commerce
Accounts Honours

Discharge of contract

SUBMITTED TO

SUBMITTED BY:

Mrs. Nidhi Masih

HARSH VIJAY WARGIYA

(Commerce department)

B.COM III YR A/C B

113114

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Certificate
This is to certify that Harsh Vijay Wargiya is a regular student of Institute for
Excellence in Higher Education. He has conducted an authentic project report
on the topic Discharge of contract and has completed his Mercantile Law
Project successfully under the able guidance of Mrs. Nidhi Masih. The Project
is being prepared for his honors papers of B.Com part III (Accounts Honors)
for examination 2015-16 and is being submitted thereof.

Mrs. Nidhi Masih

Commerce department

DECLARATION
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I hereby declare that the project entitled Discharge of contract submitted to

Institute of Excellence in Higher Education, is record of original work done
by me under the guidance of Mrs. Nidhi Masih (Department of commerce).
Any inferences, research or similarity is purely coincidental.

Acknowledgement
I would like to take this opportunity to thank Dr. M.L. Nath (Director, Institute
for Excellence in Higher Education, Bhopal), Dr. S.S. Vijayvargiya (Head of
commerce department) and Mrs. Nidhi Masih (Teacher guide) to have provided
me with such a great opportunity to work on this Mercantile Law project.

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Last, but not the least, I would like to thank my family, friends and all those
who helped me in some way or the others in the successful completion of this
research project.

Harsh Vijay Wargiya

B.com II year
Accounts Honours
Section B
Roll No. 113114

INDEX
S. No

Particulars

Page No.
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Introduction

1-5

Discharge of Contract

6-17

Landmark of Judgement

18-19

DETAIL STUDY OF CASES IN (INDIA)

20-34

DETAIL STUDY OF CASES IN (OUTSIDE INDIA):

35-40

Conclusion

41

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INTRODUCTION
Law is a system of rules that are enforced through social institutions to govern behaviour.
Laws can be made by a collective legislature or by a single legislator, resulting in statutes, by
the executive through decrees and regulations, or by judges through binding precedent,
normally in common law jurisdictions. Private individuals can create legally binding
contracts, including arbitration agreements that may elect to accept alternative arbitration to
the normal court process. The formation of laws themselves may be influenced by a
constitution, written or tacit, and the rights encoded therein. The law shapes politics,
economics, history and society in various ways and serves as a mediator of relations between
people.

A general distinction can be made between (a) civil law jurisdictions (including canon and
socialist law), in which the legislature or other central body codifies and consolidates their
laws, and (b) common law systems, where judge-made precedent is accepted as binding law.
Historically, religious laws played a significant role even in settling of secular matters, which
is still the case in some religious communities, particularly Jewish, and some countries,
particularly Islamic. Islamic Sharia law is the world's most widely used religious law.

The adjudication of the law is generally divided into two main areas referred to as (i)
Criminal law and (ii) Civil law. Criminal law deals with conduct that is considered harmful
to social order and in which the guilty party may be imprisoned or fined. Civil law (not to be
confused with civil law jurisdictions above) deals with the resolution of lawsuits (disputes)
between individuals or organizations. These resolutions seek to provide a legal remedy (often
monetary damages) to the winning litigant. Under civil law, the following specialties, among
others, exist: Contract law regulates everything from buying a bus ticket to trading on
derivatives markets. Property law regulates the transfer and title of personal property and real
property. Trust law applies to assets held for investment and financial security. Tort law
allows claims for compensation if a person's property is harmed. Constitutional law provides
a framework for the creation of law, the protection of human rights and the election of
political representatives. Administrative law governs what executive branch agencies may
and may not do, procedures that they must follow to do it, and judicial review when a
member of the public is harmed by an agency action. International law governs affairs
between sovereign states in activities ranging from trade to military action. To implement and
enforce the law and provide services to the public by public servants, a government's
bureaucracy, military, and police are vital. While all these organs of the state are creatures
created and bound by law, an independent legal profession and a vibrant civil society inform
and support their progress.

LAW OF INDIA:
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Law of India refers to the system of law in modern India. India maintains a common law
legal system inherited from the colonial era and various legislations first introduced by the
British are still in effect in modified forms today. During the drafting of the Indian
Constitution, Indian laws also adhere to the United Nations guidelines on human rights law
and the environmental law. Certain international trade laws, such as those on intellectual
property, are also enforced in India.

Indian personal law is fairly complex, with each religion adhering to its own specific laws. In
most states, registering of marriages and divorces is not compulsory. Separate laws govern
Hindus, Muslims, Christians, and followers of other religions. The exception to this rule is in
the state of Goa, where a uniform civil code is in place, in which all religions have a common
law regarding marriages, divorces, and adoption.

As of May 2010, there were about 1221 laws. However, since there are Central laws as well
as State laws, it is difficult to ascertain their exact numbers as on a given date and the best
way to find the Central Laws in India is from the official website.

MERCANTILE LAW:
Mercantile Law are the rules relating to industry, trade, and commerce. It is also known as
commercial law.

Scope:
The scope of commercial law is large. It includes the laws relating to contract, partnership,
negotiable instruments, sale of goods, companies etc.

It must be noted that there is no fixed line of division between commercial law and other
branches of law, nor is there any conflict or contradiction between them. The law of contract,
which is very important part of commercial law, is applicable not only to merchants and
bankers but also to other persons. When a merchant files a suit in a court of law the procedure
is not materially different from that of other suits. When a trader commits an offence he is
punishable under the criminal law exactly in the same way as any other person. The subjects
studies under the heading of commercial law do not from a comprehensive code dealing with
all aspects of mercantile activity. Commercial law deals with only those parts of law which
are of special importance to the mercantile community. The same laws are applicable to other
citizens under appropriate circumstances.

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Sources of Mercantile Law:

The mercantile law of India is based upon statues of the Indian legislature, English mercantile
law and Indian mercantile usages, modified and adapted by judicial decision. The sources
from which the rules of Commercial Law of India have been derived are given below.

1. Statutes of Indian Legislatures

The legislature is the main source of law in modern times. In India, the Central and the State
legislatures possess law making powers and have exercised their powers extensively. The
greater part of Indian commercial law is statutory.

2. English Mercantile Law

Many rules of English mercantile Law have been incorporated into Indian Law through
statues and judicial decision. English Mercantile Law is a mixture of diverse elements. It
contains rules originating form the following sources:

(i) Maritime usages which developed during the 14th and the 15th centuries among
merchants trading in the European ports. These usages are known as Lex Mercantoria.
(ii) Rules which developed by custom in England and which constitute what is called the
English Common Law
(iii) Rules of Roman law.
(iv) Rules of Equity i.e. rules which were applied by English Courts of Equity in cases where
the common law rules were considered harsh and oppressive.
(v) Statues of the British Parliament.

3. Judicial Decision or Precedents

Judges interpret and explain statues. Rules of equity and good conscience are incorporated
into law through judicial decisions. Whenever the law is silent on a point, the judge has to
decide the case according to his idea of what is equitable. Prior to 1947, the Judicial
Committee of the Privy Council of Great Britain was the final court of appeal for Indian cases
and its decisions were binding on Indian courts. After, independence, the Supreme Court of
India is the final court of appeal. But decision of the superior English courts like the Courts of
Appeal, Privy Council, and the House of Lords, are frequently referred to as precedents
which might be followed interpreting Indian statues and as rules of equity and good
conscience.
4. Custom and Usage

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A customary rule is binding where it is ancient, reasonable, and not opposed to any statutory
rule. A custom becomes legally recognized when it is accepted by a court and is incorporated
in a judicial decision.

Contents of Mercantile law:

Law of Contract- General Principles

Indemnity and Guarantee

Bailment and Pledge

Contract of Agency

Sale of Goods

Partnership

Negotiable Instruments

Arbitration

Insurance Carriage of Goods

Insolvency

The Consumer Protection Act

Indian Contract Act, 1872

The law relating to contracts in India is contained in INDIAN CONTRACT ACT, 1872. The
Act was passed by British India and is based on the principles of English Common Law. It is
applicable to all the states of India except the state of Jammu and Kashmir. It determines the
circumstances in which promises made by the parties to a contract shall be legally binding on
them. All of us enter into a number of contracts everyday knowingly or unknowingly. Each
contract creates some rights and duties on the contracting parties. Hence this legislation,
Indian Contract Act of 1872, being of skeletal nature, deals with the enforcement of these
rights and duties on the parties in India.

Key points of Indian Contract Act:

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(a) When one person signifies to another his willingness to do or to abstain from doing
anything, with a view to obtaining the assent of that other to such act or abstinence, he is said
to make a proposal;

(b) When a person to whom the proposal is made, signifies his assent thereto, the proposal is
said to be accepted. A proposal, when a accepted, becomes a promise;

(c) The person making the proposal is called the promisor, and the person accepting the
proposal is called promisee

(d) When, at the desire of the promisor, the promisee or any other person has done or
abstained from doing, or does or abstains from doing, or promises to do or to abstain from
doing, something, such act or abstinence or promise is called a consideration for the promise;

(e) Every promise and every set of promises, forming the consideration for each other, is an
agreement;

(f) Promises which form the consideration or part of the consideration for each other, are
called reciprocal promises;

(g) An agreement not enforceable by law is said to be void;

(h) An agreement enforceable by law is a contract;

(i) An agreement which is enforceable by law at the option of one or more of the parties
thereto, but not at the option of the other or others, is a voidable contract;

(j) A contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable.

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Discharge of
Contract
A valid contract creates certain obligations on all the contracting parties, and the parties
become liable to fulfil their respective obligations. When the parties fulfil their respective
obligations, their liability under the contract, comes to an end and the contract is said to be
discharged. Thus, the discharge of a contract means that the parties are no more liable under
the contract. In other words, when the rights and obligations created by the contract comes to
an end, the contract is to be discharged. The discharge of a contract may, therefore, defined as
the termination of contractual relationship between the parties.
In this assignment, the various modes of discharge of contract and other legal provisions will
be discussed in detail. Also, various landmark cases in the matter of discharge of contract will
be discussed. Focus of such case studies will be on the matter of argument between parties
involved, decision taken by the respective bench and the effect of such decisions on
mercantile law.

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Modes of Discharge

By
performanc
e

By
impossibility
of
performanc
e

By mutual
agreement

By lapse of
time

By breach of
contract

By
operation of
law

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1. DISCHARGE OF A CONTRACT ON PERFORMANCE

A contract can be discharged by performance in any of the following ways.

A. By an Actual Performance
It means the parties to contract have performed their respective promises under the contract.

B. By an Attempted Performance or a Tender

It means the promisor has made an offer of the performance of promise but it has not been
accepted by the promisee.

2. DISCHARGE OF A CONTRACT BY A MUTUAL AGREEMENT OR

BY AN IMPLIED CONSENT
A contract can be discharged by mutual agreement in any of the following ways.

A. Novation
The novation means a new contract is entered into in consideration of the old contract. The
new contract is entered into between the same parties or the new parties. The novation is
valid when all the parties must consent it. The new contract must be valid and enforceable,
otherwise the old contract will continue valid.

Example:
X owed Image 100 to B, under contract. B owed Image 100 to C. It was agreed among X, B
and C that X would pay Image 100 to C.

B. Alteration
An alteration of a contract means a change in one or more terms of the contract with the
mutual consent of the parties. The alteration discharges the original contract and creates a
new contract. However, the parties to the new contract remain the same. In case of alteration
of the contract, the old terms and conditions need not to be performed while the new terms
and conditions must be performed.

Example:
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Y agreed with Z to supply 100 TV sets at a certain price by the end of October. Subsequently,
Y and Z mutually agree that the supply be made by the end of November. This is an
altercation in the terms of the contract by consent of both the parties.

C. Rescission
The rescission of a contract means the cancellation of the contract by one or all the parties to
contract. It may take place:

1. With the mutual consent of the parties.

2. By a party whose consent was not freely obtained (voidable contract).
3. One party may rescind the contract, if a breach of contract by the other party.
4. The party rescinding the contract must restore the benefit received from the other party.
5. No partial rescission. The party may rescind the entire contract. The rescission of the
contract in part is not possible. Just as a proposal has to be communicated, the rescission
should also be communicated. A rescission may be revoked in the same manner as a proposal
is revoked.

D. Remission
The remission means the acceptance of a lesser consideration than what is agreed under the
contract. It takes place when the promisee:

1. Dispenses with a part or whole of the performance of a promise.

2. Extends the time for a performance by the promisor.
3. Accepts a lesser sum.
4. Accepts any other consideration, than agreed in the contract.
Example:
A owes B Image 5000. A pays Image 2000 to B and B accepts the amount in satisfaction of
the whole debt. The whole debt is discharged.

It may be noted that when a party accepts a lesser sum in satisfaction of a larger sum due
under the contract it is called accord and satisfaction in the English Law. The promisee
accepts a lesser sum than what is due under the contract is known as Accord and the actual
payment is the satisfaction. This is a valid contract.

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E. Waiver
It means the abandonment (i.e., giving up) of right by the party under the contract. No
consideration is necessary for the waiver.

Example:
A promises to supply goods to Y. Later on, Y exempts A from carrying out the promise. It
amount as waiver of right of performance on part of Y.

F. Merger
The conversion of the inferior right into superior right is called as merger. It is also called as
vesting of rights and liabilities in the same person.

Example:
A person holds property under lease, purchases the property. On purchase, his lease
agreement is discharged.

3. DISCHARGE OF A CONTRACT BY IMPOSSIBILITY OF

PERFORMANCE
Sometimes, the performance of a contract is impossible. In such a case, the contract is
discharged. This is based on the principle that law does not recognize what is impossible. The
impossibility of performance may be of two types, namely (a) the initial impossibility and (b)
the subsequent impossibility.

A. Initial Impossibility or Pre-contractual Impossibility

It means impossibility exists at the time of making a contract. The initial impossibility may
be (i) known or (ii) unknown to the parties at the time of making the agreement.

1. Known Impossibility
It means one or both the parties have a knowledge that a promise is impossible to perform
even though they enter into an agreement.

Example:
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A agrees with B to bring a dead man to life. It is known to the parties at the time of making
the agreement that the performance is impossible. The agreement is void ab initio.

2. Unknown Impossibility
It means both the parties genuinely believe that the performance of a promise is possible but
it is impossible to perform. It can also be said here that there is a bilateral mistake of parties.

Example:
A agrees to sell certain goods to B, supposed to be on their way from Mumbai to Kolkata in a
certain ship. Unknown to both the parties, the ship had already sunk in the deep sea, and the
goods ceased to exist at the time of contract. The contract becomes void when the
impossibility of performance is discovered.

3. Supervening Impossibility or Post-contractual Impossibility

The contract becomes void on account of the subsequent impossibility only if the following
conditions are satisfied:

1. The act should have become impossible after the formation of the contract.
2. The impossibility should have been caused by a reason of some event which was beyond
the control of the promisor.
3. The impossibility must not be the result of some act or negligence of the promisor himself.

Example:
A and B contract to marry each other. Before the time fixed for the marriage, A becomes mad.
The contract becomes void.

B. SPECIFIC GROUNDS OF SUBSEQUENT IMPOSSIBILITIES

It is also known as the doctrine of frustration under the English law. In the following cases,
the contract is discharged on the ground of the supervening impossibility.

1. Destruction of SubjectMatter

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The destruction of the subjectmatter after a contract is made without the fault of any party
discharge the contract. But if the destruction of the subject matter is due to the fault of any
party, he is liable for the damage to the other party.

Example:
A music hall and a garden was let out by A to B for a series of concerts on four different days.
The hall was burnt-down before the date of the first concert. Held, the contract became void
by the supervening impossibility.

2. Incapacity or Death
Incapacity or death of the promisor and the contract is for personal service or skill. The
contracts involving the use of personal skill or ability of the promisor are discharged on the
illness, death, or incapacity of the promisor.

Example:
A piano player agreed to perform a concert on a particular day. She was not able to give her
performance due to her illness. Held, the contract was discharged due to her illness.

3, Change in Law or Circumstances

Sometimes, certain circumstances arise subsequent to the formation of a contract, which
makes the performance of the contract impossible, as contemplated by the parties. In such
circumstances, the contract is discharged.

Example:
P agreed to sell his land to Q. Subsequently, the land was acquired by the government. Held,
the contract was discharged.

4. Declaration of War
The pending contract at the time of declaration of a war is either suspended or declared void.
Generally, the contract at the time of the declaration of a war is void, when the government
declares it against the public interest or national interest.

Example:
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A contracts to take in a cargo for B at a foreign port. A's government, afterwards, declares a
war against the country in which the port is situated. The contract becomes void when war is
declared.

CASES WHERE A CONTRACT IS NOT DISCHARGED ON THE GROUND

OF SUPERVENING IMPOSSIBILITY
In the following cases, the contract is not discharged on the ground of supervening
impossibility. Such excuses are not recognized by the law.

1. Performance becomes Difficult

When the performance of the contract becomes difficult, the contract is not discharged.
Difficulty is not impossibility. A party can perform it with more effort or hardship.

2. Commercial Impossibility
The party is not discharged from the performance on the ground that it will be non-profitable
for him to perform the contract.

Example:
C agreed to sell to D, dhotis manufactured in a particular mill. The mill got into repairs and
so, dhotis did not manufacture. Held, the contract was not frustrated as the stipulation as to
delivery did not make the delivery by the mills, a condition precedent. It was a breach of the
contract.

3. Impossibility Due to the Conduct of Third Party

If a promisor could not perform the promise because of default of the third party, he cannot
make an excuse and claims that it is impossible to perform the promise. The third party's fault
or conduct has nothing to do with the contract. The contract is not discharged because of third
party's default.

Example:
G agreed with F to supply certain cloth manufactured by a specified mill. The terms of the
agreement stipulated that G could supply goods as soon as they are supplied to him by the
mill. The mill failed to supply the goods to G. Held, G was liable to supply as the terms only
indicated the process of delivery.

4. Strikes, Riots or Civil Disturbances

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Strikes, riots, or civil disturbances do not discharge the contract. When such an event takes
place, the performance of a promise under the contract becomes impossible for the time
being. Once a strike is called off or life becomes normal, it is possible to perform the
promise.

Example:
H agreed to supply certain goods to J which were to be imported from Algeria. The goods
could not be imported due to the riots and civil disturbances in that country. Held, A cannot
be excused for the non-performance of the contract.

5. Self-induced Impossibility
If the performance of the contract becomes impossible due to the act of the omission of a
party, it is called as self-induced impossibility. In such cases, the contract is not discharged.

6. Failure of Object
The failure of one of the object out of many objects, do not discharge the contract. But, if all
the objects of the contract fail, the contract becomes discharged.

4. DISCHARGE OF A CONTRACT BY LAPSE OF TIME

Every contract and promise under the contract should be performed within a time limit. The
contract is discharged, if it is not performed or enforced within a specified period called as
the period of limitation.

Example:
The period of limitation for recovering the debt is 3 years and 12 years for the recovery of
immovable property.

5. DISCHARGE OF A CONTRACT BY OPERATION OF LAW

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In the following circumstances, the contract is discharged by the operation of law:

A. Death
The contract that requires personal skill is discharged on the death of the promisors.
However, any benefit received before the performance shall be returned by the legal
representative of the deceased party.

B. Merger
The conversion of the inferior right into superior right is called as merger. It is also called as
vesting of rights and liabilities in the same person.

C. Insolvency
The insolvent is discharged from all the liabilities on all the contracts, entered into, up to the
date of insolvency.

D. Unauthorized Material Alteration

The alteration which changes the nature of the contract is material alteration. If one party
makes any material alteration in the terms of the contract without the approval of the other
party, the contract comes to an end.

Example:
One of the parties without the consent of the other party changes the date of payment or the
place of delivery.

6. DISCHARGE OF A CONTRACT BY BREACH OF CONTRACT

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It means the failure of a party to fulfil his obligation or promise under the contract. When
there is a breach of contract, certain remedy or consequences are available to the aggrieved
party. The aggrieved party means a party who is not at a fault.

Consequences of Breach of Contract

The aggrieved party is not required to perform his part of the promise. The aggrieved party is
having various remedies depending upon the type of breach. The breach of contract is of the
following two types:
A. Actual breach
B. Anticipatory breach

A. Actual Breach of Contract

An actual breach of contract means any party to contract refuses or fails to perform his
promise on the due date of performance, or during the performance. The actual breach of
contract may take place expressly or impliedly.

Examples:
P agreed with Q to sell 500 TV sets on 21 January. P refuses to deliver the TV sets on the due
date. This is a breach of contract on the due date.
V agreed with W to supply 3000 computers at a certain price to be delivered in three
instalments of 1000 each. After 2000 computers had been supplied, W informs V to deliver
no more. This is the actual breach of contract during the performance by express refusing,
and W can claim damages for the breach.

Following are the consequences of the actual breach of contract:

o The contract is voidable at the option of the aggrieved party.

o The aggrieved party can claim the compensation for the loss for non-performance.
o The aggrieved party cannot claim compensation when he accepts delayed
performance.
It is important to note that if time is not the essence of the contract, the contract is
not voidable but the aggrieved party can claim compensation for any loss caused for
non-performance.

B. Anticipatory Breach of Contract

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When any party declares his intention of not performing the contract before the performance
is due, it is called as anticipatory breach of contract.

Example:
A agrees with B to sell his car on 21 January. Before this date he informs B that he will not
sell it. This is an anticipatory breach of contract.

There are two modes of anticipatory breach (a) express repudiation and (b) implied
repudiation. The express repudiation means when the party refuses expressly to perform his
obligation before the performance due. The implied repudiation means the party acts in such
manner that it becomes impossible for him to fulfil his obligation under the contract. In the
case of implied repudiation, the party does something which indicates his unwillingness to
perform the contract.

Following are the consequence of anticipatory breach:

o The aggrieved party may treat the contract as alive.

o The aggrieved party can rescind the contract and claim damages. Here, the damage
will be equal to the difference between the contract price and the price as on the date
of communication.

Note:
When a contract becomes void, any benefit received under such contract is bound to restore
such benefit or to make compensation for such benefit to the person from whom he received
it.

CASE
STUDIES

17 | P a g e

LIST OF LANDMARK JUDGEMENTS

These are the landmark cases in history of cases of discharge of contract:

Cort vs. Ambergate Railway. Co. (1851)

The actual breach of contract also occurs when during the performance; the party fails to
perform his obligation.

Krell vs. Henri (1903)

The failure of the object due to non-occurrence of the contemplated event discharges the
contract.

Shyam Sunder vs. Durga (1976)

The contract is discharged if the performance becomes impossible due to a change of law or a
change in the government policy after the formation of the contract.

Jacob vs. Credit Lyonnais (1884)

The strikes lock-out and civil disturbances is not the impossibility for the performance of a
contract and therefore, the contract is not discharged.

Shankar Lal Damodar vs. A. Ajaipal (1946)

In the case of novation of a contract if the new contract is not enforceable by law the existing
contract is received and the parties are bound by it.

Manohar Koyal vs. Thakur Dass Naker (1888)

The novation must take place before the breach of the original contract.

Loonkaran Sethia vs. Ivan E. John (1976)

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Where one party, without the consent of the other party, changes the date of payment or
delivery of goods or substitutes, such words which change the meaning and affect the
contract, such changes are material alterations to the contract.

Robinson vs. Davidson (1871)

The contract involving the use of personal skill or ability of the promisor is discharged on the
illness, death or incapacity of the promisor.

Shanty Vijay and Co. vs. Princess Fatima Fouzia (1980)

The injunction order or stay order is in force, the performance of a contract may be stayed.
The contract cannot be enforced.

Blackburn Bobbin Co. vs. T. W. Allen and Sons (1918)

If the performance of a contract becomes difficult, in such a case, the contract is not
discharged.

H. B. Steamboat Co. vs. Hutton (1903)

Where there are several objects for which a contract is entered into, the failure of one of the
objects will not discharge the contract.

DETAIL STUDY OF CASES IN (INDIA):

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 Shyam Sunder vs. Durga (1976)

Calcutta High Court
Shyam Sundar Jalan vs Durga on 27 January, 1976
Equivalent citations: 1977 47 CompCas 61 Cal, 1977 106 ITR 275 Cal
Author: S Basu
Bench: P Chanda, S Basu
JUDGMENT: Sudhanmay Basu, J.

1. These are six rules arising out of applications made under Sections 397, 401 and 482 of the
Code of Criminal Procedure, 1973, for quashing complaints under Sections 276(b), 276B,
276(d) and 276D of the Income-tax Act, 1961, and some orders passed by the learned Chief
Presidency Magistrate, Calcutta.

2. It appears that complaints were filed against the directors of the Asiatic Oxygen and
Acetylene Company Limited and Asiatic Oxygen Company Limited and one Mr. K.C.
Gangwal, designated as the principal officer of the said companies, for failure to deduct
income-tax from the salary of the employees, for failure to submit returns in time, for failure
to deduct income-tax and super-tax on dividends for certain period under various sections of
the Income-tax Act. To be precise, the Revision Case No. 271 of 1975 relates to a complaint
for delay in submitting returns under Section 276(b) of the Income-tax Act. The returns were
due on April 30, 1971, but the same were filed on December 12, 1972, and the complaint was
filed on the 19th of September, 1973. The complaints were made against Shyam Sundar
Jalan, H.L. Dey (since deceased) and Bal Krishna Jalan described as directors and one Mr.
K.C. Gangwal, principal officer. In Revision Case No. 272 of 1975, complaint is made
against Shyam Sudar Jalan, H.L. Dey and Durga Narayan Kapur as directors and one Mr.
Kapur Chandra Gangwal as principal officer. The same is for failure to submit return in time
under Section 276(b). The return was to be filed on April 13, 1966, but it was actually filed
on November 2, 1972, and the complaint was lodged on September 19, 1973. Revision Case
No. 273 of 1975 arises out of a complaint against the Asiatic Oxygen and Acetylene
Company Limited, Shyam Sundar Jalan, H.L. Dey and Bal Krishna Jalan as directors and
K.C. Gangwal as principal officer. It is for failure to deduct income-tax out of salaries for the
month of March, 1967, and is under Section 276B. Similarly, Revision Case No. 275 of 1975
also involves Section 276B for failure to deduct salaries for the month of December, 1967,
which was actually paid on November 18, 1972. The persons complained against were M/s.
Asiatic Oxygen Ltd., Shyam Sundar Jalan, H.L. Dey, Durga Narain Kapoor as directors and
K.C. Gangwal as principal officer. Civil Revision No. 276 of 1975 involves a complaint
under Section 276(d) for failure to deduct income-tax out of salaries for the month of June,
1967. The same was paid on November 8, 1972, and the complaint was made on September
25, 1973. The persons complained against are the same as in Civil Revision Case No. 275 of
1975. Civil Revision No. 274 of 1975 involves complaint for failure to deduct income-tax
20 | P a g e

and super-tax on dividend for the year ending on the 31st of March, 1967, under Section
276(d).

The amount was due on April 8, 1967, but was paid on October 18, 1973. The complaint was
filed on 21st of May, 1974.

3. The next point urged by Mr. Banerjee was that a company can have only one principal
officer. According to him, more than one principal officer is not contemplated under the
existing laws. Directors are not principal officers but under the Income-tax Act any director
may be designated as a principal officer. In these cases the sanctioning authority accorded
sanction against Mr. K.C. Gangwal as principal officer and against others as directors. He
referred in this connection to Section 2, Sub-section (35), of the Income-tax Act which
defines a principal officer. In this connection he also referred to Section 282, Sub-section
2(b), of the Income-tax Act according to which a notice or requisition under the Act may be
addressed in the case of a local authority or company to the principal officer thereof. Section
2(35), which states what a principal officer means runs as follows:

Principal Officer, used with reference to a local authority or a company or any other public
body or any association of persons or anybody of individuals, means:

(a) The secretary, treasurer, manager or agent of the authority, company, association or body,
or
(b) Any person connected with the management or administration of the local authority,
company, association or body upon whom the Income-tax Officer has served a notice of his
intention of treating him as the principal officer thereof. "

4. The said definition does not mention a director but any person connected with the
management or administration upon whom the Income-tax Officer has served a notice of his
intention of treating him as the principal officer can be a principal officer. No such notice was
given by the Income-tax Officer to any of the directors. Moreover, Mr. Banerjee contended
that a director cannot act as an agent of the company. It is only the board of directors ' who
collectively constitute agency. In this connection he referred to Pennington's Company Law,
3rd edition, where it has been stated that the directors have no power to act individually as
agents for the company. According to Mr. Banerjee, the director means board of directors. In
any event, since the proceedings were initiated on the basis of sanction but the sanction
describes all the persons as directors except one it is clear that the case cannot proceed
against them.

5. Mr. Ghose, on the other hand, contended with some force that as regards principal officer
the definition under Section 2(35), Sub-clause (a), only was involved. Clause (b) was not
21 | P a g e

attracted. Directors should be treated as agents of the company. There is no reason why the
company may not have plurality of officers. Citing Palmer's Company Law, 17th edition,
page 167, he stated that directors are, in the eye of law, agents of the company. What special
assignment each director had in making payments of income-tax will be a matter of evidence.
We find substance in Mr. Ghosh's submissions. Without evidence the question cannot be
decided here and now. It is noted that paragraph 1 of the petition of complaints itself makes a
distinction between directors and the principal officers. In the case of R.K. Dalmia v. Delhi
Administration , it was held (para. 98) that Dalmia as a director and chairman of the company
was an agent of the company. It was, inter alia, found that Dalmia got control and dominion
over the funds under the powers conferred on him by the board of directors by its resolution
authorising him and another person to operate on the accounts of the insurance company with
the bank. It was a matter of evidence whether the directors named in this case could be
treated as agents of the company. The petition before us itself shows how finance was
arranged for, how the Industrial Finance Corporation was approached, how amounts were
deducted from the employees' salary but the same was kept in the general fund. The petition
shows that it was under the direction of the directors that the amounts were deducted.
Therefore, it is not a case where the petition does not disclose a prima facie case. Whether
directors could be treated as principal officers in the circumstances of the case is a matter of
evidence and at this stage it would be premature to quash the proceedings on that ground
alone. Again, Section 2(20) of the Income-tax Act states that the expression " director has the
same meaning as is ascribed to it in the Companies Act ". Now, in the Companies Act,
according to Section 2, Sub-section (13), a director would include any person occupying the
position of director by whatever name called and under Section 2, Sub-section (24), an
individual, (sic) the principal officer, also includes a manager or an agent. Whether the
directors in these cases were in charge of the management is a matter of evidence. The
complaint, as is well known, does not usually and need not contain all material pleadings.
Facts and circumstances may be proved by evidence to show that directors acted as
managers. Their own appeal before this court, as Mr. Ghose pointed out, fills up some of the
gaps in the petition of complaint and, inter alia, shows prima facie that deduction of incometax was utilised for some ulterior purposes.

6. What is after all a sanction ? Under Section 279, Sub-section (1), of the Income-tax Act, a
person shall not be proceeded against for an offence under Section 275A or Section 276 or
Section 276A or Section 276B or Section 276C or Section 276D or Section 277 or Section
278 except at the instance of the Commissioner. It merely requires that the complaint should
be at the instance of the Commissioner. There is no doubt that in the instant cases the defect
to the complainant is the Commissioner (sic). Dealing with the argument of Mr. Banerjee that
there was no application of mind Mr. Ghose submitted that there was initially a presumption
that the official acts were done properly. Moreover, the expression " director " is only a
designation or prescription to identify the particular persons. Other particulars may come in
due course. The complaint, as has already been noted, is not required to disclose all of them.
Moreover, even if the board of directors collectively could act on behalf of the company
circumstances may make the directors as agents. Reference may be made to Halsbury, 4th
edition, volume 7, for creating the position of directors. In paragraph 496, the directors are
regarded as agents of the company. It is observed that the true position of directors is that of
agents for the company. As such, they are endowed with powers and duties of carrying on the
22 | P a g e

whole of its business subject, however, to restrictions imposed by the articles and statutory
provisions. Definition of manager in Companies Act in Section 2(24) would include a
director. Therefore, it is a question of evidence. The complaint makes out an offence.
Evidence would only disclose who the offenders are. The word directors " may be looked
upon as designations to identify particular persons. The role they played will only appear in
course of evidence. Board of directors, as such, cannot be prosecuted. Whether one or two
directors or the entire board of directors acted as agents in the company would appear only
through evidence. On a careful consideration of the facts and circumstances of the case we
are unable to hold that the learned Magistrate had no jurisdiction or competence to issue
process. We also hold that it will be premature at this stage to quash the proceedings. The
point as to whether the accused persons who are designated as directors are principal officers
or agents could only be determined after the witnesses were examined.

7. The result is that five of the petitions fail. The rules except in C.R. No. 274 of 1975, are
discharged. The rule in C.R. No. 274 of 1975 is made absolute as the same is barred by
limitation. Let the records go back at an early date so that the hearing may be expedited. It
may be noted that the rules have abated with regard to H. L. Dey who has since died.

Manohar Koyal vs. Thakur Dass Naker (1888)

Calcutta High Court
Manohar Koyal vs Thakur Das Naker on 11 January, 1888
Equivalent citations: (1888) ILR 15 Cal 319
Bench: Norris, Beverley
JUDGMENT:
1. The facts of this case appear to be these: The suit was brought by the plaintiff to
recover a sum of Rs. 1,473. How that sum is arrived at is stated at the top of page 3 of
the paper-book.
2. It appears that in Falgoon 1288 the defendant executed a bond for Rs. 801 in favour
of the plaintiff. The money was to be repaid in Magh 1289. From the date of the bond
up to the date fixed for repayment of the money interest was to be paid at eighteen per
cent, per annum. If the money was not paid on the date it was covenanted to repay it,
namely, Magh 1289, then interest upon the original sum and upon the interest up to
Magh 1289 was to run at the rate of twenty-four per cent, per annum. The money was
not repaid on the date fixed for its repayment, namely, Magh 1289. The defendant not
being able to pay went to the plaintiff, and said in effect this to him: "I am not able to
pay you what is due to you under the bond; but I will pay you in cash Rs. 400, and I
will execute a fresh kistibundi bond in your favour for Rs. 701." The plaintiff
accepted these terms, but the defendant failed to carry them out. He did not pay the
plaintiff the Rs. 400, nor did he, as he ought to have done, tender the kistibundi bond
for Rs. 701 to the plaintiff. The plaintiff therefore has brought this action upon the

23 | P a g e

basis of the old bond, and seeks to recover the amount which I have already
mentioned, namely, Rs. 1,473.
3. The Subordinate Judge gave the plaintiff a decree for the whole amount claimed by
him.
4. The Additional District Judge on appeal has modified that decree, and has allowed
the plaintiff's claim only to the extent of Rs. 400. The ground upon which the
Additional District Judge has proceeded is this; He says in effect, "I find that the
provisions of Section 62 of the Contract Act apply. I find that the parties to the first
contract agreed to substitute a new contract for it, and therefore the original contract
need not be performed; and, though the defendant has not carried out his part of the
new contract, the plaintiff is not relegated to his rights under the old contract."
5. We are of opinion that the Judge has erred in applying the provisions of Section 62
of the Contract Act to this case at all. Section 62 is but a legislative expression of the
common law; and its provisions do not apply after there has been a breach of the
original contract. The parties may make a new contract in substitution of the old one,
or may rescind or alter the old contract, and if they do so while the original contract is
subsisting and unbroken, the original contract need not be performed. As I pointed out
in the course of the argument, the law on this matter is laid down in the well-known
and universally accepted text-book, Bullen and Leake's Pleadings, 3rd edition, page
673. It is said there: "It is competent to the parties to a contract at any time before
breach of it by a new contract to add to, subtract from, or vary the terms of it, or
altogether to waive and rescind it. The substituted contract forms a good defence to an
action on those terms of the previous contract which have been altered by it, and may
be so pleaded without any performance or satisfaction which is required to constitute
a good plea after breach." Then the form of the plea is given at page 675--"that after
the alleged contract and before any breach thereof it was agreed by and between the
plaintiff and the defendant that the said contract should be rescinded, and they then
rescinded the same accordingly;" and there is a similar form in the case of a
substituted agreement setting out the substituted agreement. Now is the case within
Section 63? It is quite clear that Section 63 not only modifies, but is in direct
antagonism to the law in England. It was laid down, as pointed out, in the case of
Foakes v. Beer L.R. 9 App. Cas. 605 that for the last pretty nearly three hundred years
it has been the law in England that if A owes B five thousand rupees, and B consents
to take two thousand rupees in payment of the debt, that is what is called in law
nudum factum, and that B after taking the two thousand rupees can subsequently
bring his action for the unpaid three thousand rupees. The law in this country by
virtue of Section 63 of the Contract Act is different; and it says: "Every promise may
dispense with or remit, wholly or in part, the performance of the promise made to
him, or may extend the time for such performance, or may accept instead of it any
satisfaction which he thinks fit." We think that the finding of the lower appellate Court
in this case is that the plaintiff accepted in satisfaction of what was due to him at the
time the agreement was made Rs. 400 in cash and a fresh bond for Rs. 701. We think
that is the finding. We do not think that the plaintiff ever intended to accept the naked
promise to pay Rs. 400 and. to give a bond for Rs. 701. The defendant has not given
24 | P a g e

the satisfaction. He has not paid the money. He has not tendered the bond. The
question is, what were the rights of the parties under these circumstances? It seems to
us perfectly clear that the parties were relegated to their rights and liabilities under the
original contract, and that the plaintiff, upon breach by the defendant of the terms
which he had made, and upon the non-performance by him of the satisfaction which
he had promised to give, was. relegated to his rights under the old contract, and was
entitled to bring the suit on the basis of the old bond, and to recover the money which
he claimed.
6. The appeal must therefore be allowed, the decision of the Additional Judge set
aside, and that of the Second Subordinate Judge restored, with costs in all the Courts.
Loonkaran Sethia vs. Ivan E. John (1976)
Supreme Court of India
Loon Karan Sethia vs Ivan E. John on 20 October, 1976
Equivalent citations: 1977 AIR 336, 1977 SCR (1) 853
Author: J Singh
Bench: Singh, Jaswant
Judgement:
Messrs. John & Co. were in financial difficulties and, therefore, entered into a financial
agreement with Sethia & Co. a partnership firm of the plaintiff and Seth
SuganChand. On 6th July, 1948 Messrs. John & Co. obtained another financial
accommodation from Sethia & Co. Messrs. Tejkaran Sidhkaran had also given some
advances to Messrs. John & Co. The liability to the firm of Messrs. Tejkaran Sidhkara
was transferred to Sethia & Co.
Seth Loonkaran Serbia filed a suit against John & Co. And his partners (defendants first
set) as well as Messrs.
John, Jain, Mehra & Co. and its partners. (defendants second set) for recovery of Rs.
21,11,500/- with costs and future interest and for a declaration that the plaintiff had a
prior and floating charge on all the business assets of Messrs. John & Co. It was alleged
by the plaintiff that the defendants (second set) entered into partnership with the defendant
(first set) under the name and style of Messr. John Jain, Mehra & Co and maliciously induced
them to commit breach of the agreement dated 6-7-1948 by forcibly turning out his
representatives who used to remain in charge of the stocks, stores. coal, waste, etc., of the
mill and making them enter into a financial agreement contrary to the terms of the agreement
with his firm.
The plaintiff also alleged that accounts were again settled on 4-4-1949 and a sum of Rs. 47,
23,738/- was found due to him from the defendants. The defendant (first set) contended that
there was no settlement of accounts; that the accounts were tainted
with fraud and
obvious mistakes and that on a true and correct accounting a large sum of money would be
found due to them; that the plaintiff and said Sugan Chand obtained various documents,
25 | P a g e

agreements, vouchers, receipts etc., and that the same were of no legal value as they were
secured by the former by practising undue influence, fraud, coercion and misrepresentation;
that the plaintiff had illegally and contrary to the agreement dated 6-7-1948 debited them
with huge amounts which were not really due to them; that the cotton supplied by the
plaintiff was of inferior quality and that the rates charged were exorbitant. It was also denied
that the plaintiff had floating or prior charge on any of their stocks, stores, etc.; that the suit
was barred by the provisions of section 69 of the Partnership Act and that the agreement
dated 6-71948 which was insufficiently stamped could not form the basis of the suit. The
defendants. (Second set) also denied the claim of the plaintiff. The Trial Court held that the
suit was maintainable; that the firm of Messrs. Sethia & Co. was dissolved before the
institution of the suit; that the suit being one for the recovery of the assets due to a. dissolved
partnership firm from a third party, was not barred by section 69 of the Partnership Act: that
Seth Sugan Chand was not a necessary party to the suit; that the agreement dated 6-7-1948
was duly stamped and that no undue influence etc., was exercised by the plaintiff on the
defendants; that there was no accounting on 4-4-1949 as alleged by the plaintiff and that
both the plaintiff and the defendants (first set) committed a breach of the agreement dated 67-1948. The Trial Court also held that a charge was created in favour of the plaintiff in
respect of the entire business assets and that the defendants (second set) were liable to satisfy
the plaintiffs claim. The Trial Court decreed the plaintiff's suit to the extent of Rs. 18,
00,152 but rejected his claim for specific performance and injunction. The Trial Court
accordingly passed a preliminary decree against both the sets of defendants directing them to
deposit 854 the said amount in the court within the prescribed time and in default gave the
plaintiff a right to apply for a final decree for the sale of all the business assets, goods,
stocks, stores, etc. The decree also gave a right to the plaintiff to apply for a personal decree
against the defendants for the balance of his claim in case the net sale proceeds of the
property of the firm were found insufficient to discharge his claim.
The plaintiff filed an appeal in the High Court of Allahabad and the defendants also filed an
appeal against the judgment of the Trial Court. The High Court allowed both the appeals
partially holding that no fraud, undue influence, coercion or misrepresentation was
practised by the plaintiff; that the agreement dated 6-7-1948 was neither insufficiently
stamped nor did it require registration; that the deed of dissolution dated 22-7-1948 was
prepared for the purpose of the case but there was sufficient evidence on the record to
indicate that said Sugan Chand had withdrawn from the partnership carried on in the name of
Serbia & Co. with effect from 30-6-1948; that Seth Sugan Chand was not a necessary
party to the suit; that the suit was not barred by section 69 of the Partnership Act; that the
alterations in the deed dated 6-7-1948 were not material alterations and did not render the
agreement void; that the plaintiff had a floating charge over the business assets of John &
Co.; that it was defendants (first set) and not the plaintiff who committed breach of the'
agreement. The High Court, therefore, passed a preliminary decree for Rs. 11, 33,668/- in
favour of the plaintiff and against the defendants (first set) but dismissed the suit with costs
as against the defendants (second set). The High Court granted certificate under Article 133
in both the appeals.
Dismissing the plaintiffs appeal and allowing the appeal of the defendants (first set) held:
(1)
Section 69 of the Partnership Act is mandatory in character and its effect is to render
a suit by a plaintiff in respect of a right invested in him or acquired by him under a contract
26 | P a g e

which he entered into as a partner of an unregistered firm, whether existing or dissolved,

void. [869A]
(2)
A partner of an erstwhile unregistered partnership firm cannot bring a suit to enforce
a right arising out of a contract failing within the ambit of section 69 of the Partnership
Act. The suit out of which the appeals arise was for enforcement of the agreement entered
into by the plaintiff as partner of Serbia & Co. It was never pleaded by the plaintiff not even
in his replication that he was suing to recover the outstanding of a dissolved firm. Thus the
suit was clearly hit by section 69' and was not maintainable. [869 B-C]
(3) A close scrutiny of the document and other evidence clearly negatives the plaintiff's claim
that the firm was dissolved with effect from 30th June 1948. [865 C]
(a) The agreement dated 6th July 1948 itself is signed by the plaintiff as a partner and
the, expression partner also appears in the body of the agreement. [865 D]
(b) The alleged deed of dissolution dated 22nd July 1948 between the plaintiff and Seth
Sugan Chand was prepared on a stamp paper printed in the Government Press in November,
1948. The said Dissolution Deed was, therefore, clearly fabricated by the plaintiff. The
plaintiff signed various cheques in July, 1948 as the partner of Sethia & Co. [865F-H; 866 AC; 867 F]
(c) No service by post or advertisement in the newspaper about the dissolution was given
either by the plaintiff or by Seth Sugan Chand. [867 F]

(4)
Seth Sugan Chand was a necessary party to the suit and in spite of the objections
raised on behalf of the defendants the plaintiff did not care to implead' Seth Sugan Chand.
The suit was bound to fail on that ground also. [869D-E]

(5) A material alteration in a document without the consent of a party to, it has the effect
of cancelling the deed. [870 A]
Volume 12 of Hapsburgs Laws of England (Fourth
Edition) referred to. 855 Nathu Lal & Ors. Vs Musammat Gomti & Ors. (A.I.R. 1940P.C.
160) relied on.
In the present case there were many material alterations of the document. The material
alterations, therefore have the effect of cancelling the deed in question. [870 B-D]
(6) The plaintiff's suit was for a specific and ascertained sum of money on the basis of
settled account. The Courts below found concurrently that there was no settlement of account
as alleged by the plaintiff on 4th April 1949.
After that it was not open to the courts below to make out a new case for the plaintiff
which he never pleaded. The courts below could have either dismissed the suit or
passed a preliminary decree for accounts directing that the books of account be
examined item by item and an opportunity allowed to defendants to impeach and falsify
the accounts. [871 A-C]
Shanty Vijay and Co. vs. Princess Fatima Fouzia (1980)

27 | P a g e

Supreme Court of India

Shanti Vijay & Co. vs Princess Fatima Fouzia on 31 August, 1979
Equivalent citations: 1980 AIR 17, 1980 SCR (1) 459
Author: A Sen
Bench: Sen, A.P. (J)
Judgement:
The Judgment of the Court was delivered by SEN J.-In these appeals, one of which is
by special leave and the other two on certificate, brought from a judgment of the Andhra
Pradesh High Court dated June 12, 1978, the short question is whether that Court was
justified in setting aside the alleged sale of 37 items of jewellery belonging to H.E.H. the
Nizam's Jewellery Trust, effected by the Board of Trustees,
in exercise of their
discretionary power of sale under cl. 13 of the trust deed in favour of the appellants and
other successful tenderers for Rs. 14.43 crores, and accepting instead the offer of
the
eighth respondent, Peter Jansin Fernandez for Rs. 20.25 crores made during the pendency
of the appeal before The facts of the case, so far as they are material, are not now in
dispute, and are as follows:

The late H.E.H. Nawab Mir Sir Osman Ali Khan Bahadur, the Nizam of Hyderabad, by
ah indenture dated March 29, 1951, created a trust called H.E.H. The Nizam's Jewellery
Trust, in respect of 107 items of extremely valuable, rare and priceless jewellery of
exquisite design and beauty studded with emeralds, diamonds, sapphires, rubies etc. Of
the highest quality and purity belonging to him, specified in thefirst Schedule, and
Government securities of the aggregate face value of Rs.10 lakhs, specified in the Second
Schedule, for the benefit of his two sons, Prince Azam Jha and Prince Muazzam Jah; two
grandsons, Prince Mukarram Jah and Prince Muffakham Jah; two granddaughters, Princes
Fatima Fouzia and Princess Amina Mirzia; daughter Shahzadi Begum, and his stepbrother Sahebzada Nawab Basalat Jah Bahadur.

Clause 13 of the trust deed, Ex. 'A', confers upon the trustees the power of sale of the
Jewellery, the material portion of which is in these terms:

Subject to the Trusts aforesaid in respect of the articles referred to in clause 3(c), (d)
7 (e) and (f) hereof, during the lifetime of his eldest son Prince Azam Jah (if and so
long as the Dynasty of the Settlor continues
and Prince Azam Jah succeeds him as the
Nizam
of Hyderabad) it shall be at the option of the trustees either to keep the said
jewels and other articles mentioned
in the first
Schedule hereunder written
unsold or to sell the same or any part thereof at such time or times and in such manner as
they may in their discretion think fit, but subject as aforesaid, after death of the Settlor as
well as of the said Prince Azam Jah the Trustees shall sell the said jewels and other
28 | P a g e

articles specified in the First Schedule hereunder written within a period of three years
after the date of the death of the survivor of the Settlor and the said Prince Azam Jah and
any such sale as aforesaid shall be effected by the Trustees at such price or prices or for
such consideration and on such terms as the trustees may in their absolute discretion think
fit and either in India or in any foreign country without the trustees being liable or
accountable to any person whomsoever for the propriety of or justification for any such
sale or for the reasonableness or otherwise of the price or consideration or other terms in
respect of the sale of any of the said articles.
The said jewellery is kept in the safe deposit vault of the Mercantile Bank Ltd. at
Bombay.

R. N. Malhotra, Addl. Secretary to the Government of India, Ministry of Finance,

Department of Economic Affairs, is the Chairman of the present Board of Trustees of
H.E.H. The Nizam's Jewellery Trust, as a nominee of the Government of India. The other
four trustees are: Prince Muffakham Jah, Zaheer Ahmed, Ataur Rehmarr and M. A.
Abbasi. M. A. Ashruff is the Secretary of the Trust.

It appears that Prince Azam Jah died in October 1970 and there after, on July 1, 1972 the
trustees submitted a memorial to the then Prime Minister of India to acquire the jewellery
as they were
of great historical and cultural value and keep it intact as a national
heritage, and not allow it to pass into the hands of people who were interested only in
their money value.It appears that the trustees acted upon legal opinion that there was no
objection to the sales being arranged through negotiation on the basis of valuation by two
independent valuers.

The Government of India constituted an Experts Committee whose

function was
purely of an advisory nature, with a view to guide the Government whether any part of
the jewellery should be acquired as antiques under the Antiquity and Art
Treasures
Act,
1972. It was required to select and evaluate such items of antique jewellery
as had to be acquired in the national interest. The Experts Committee inspected the
jewellery at the vault of the Mercantile Bank. During these proceedings the
Government appointed a Committee of Valuers which by its report dated January 3, 1976,
valued
all the 107 items of jewellery at
Rs. 6,62,58,500 while Vithaldas, RW 6,
the valuer appointed by the trustees, by his valuation report dated March 18, 1976 valued
these 37 items of jewellery at Rs. 10,26,30,000. Eventually, the Government of
India acquired 18 selected pieces
of antique jewellery for their cultural
and
historical importance at a mutually negotiated price of Rs. 1.17 crores.

It has been represented that the beneficiaries are in very straitened

circumstances due
to the abolition of privy purse, heavy incidence of income-tax and wealth-tax, and are
heavily indebted due to the trustees applying the income of the trust largely towards
payment of taxes, making it increasingly difficult to
maintain themselves. The
29 | P a g e

beneficiaries were, therefore, pressing the Board of Trustees to effect an

sale
of the 37 items of jewellery.

immediate

On January
9, 1978 it is alleged that there was a meeting of the Board of
Trustees. Malhotra,
who is the Chairman, conveyed to the trustees that the
Government of India were not likely
to acquire any of the 37 pieces of jewellery with
regard to which negotiations were being made. The Board of Trustees accordingly
passed a resolution to sell the jewellery immediately. The next meeting of the Board was
held on January 25,
1978 but Malhotra could not attend it.

Pursuant to the resolution of the Board of January 9, 1978, the Secretary of the trust
applied to the Director of Archaeological Survey of India, for the grant of clearance for
sale of the said jewellery; and in consultation with Dinshaw Jehangir Gazdar, RW 3, a
noted jeweller of Bombay, with the concurrence of M. A. Abbasi decided upon the
procedure to be adopted for the eventual sale of these 37 items of jewellery.

It appears that the conditions of sale, Ex. B-49, were got drafted by M. A. Abbasi, one of
the trustees, and M. A. Ashruff, Secretary, through a firm of solicitors. Conditions 11 and
12, which formed an integral part of the contract of sale, are as follows:

"11. Tenders will be opened by the Trustees on the date announced at the time of
inspection and the party whose tender is accepted will be notified
soon thereafter.
The jewellery shall on acceptance of the tender become immediately the property of the
buyer and shall be available for delivery to
the buyer immediately thereafter on
payment of the balance of 90% of the tendered amount as specified in para 12 below. If
delivery is not taken at that time the jewellery will be held for and on behalf of the
tenderer at his risk.
12. Tenderers
whose offers are accepted will be required to deposit in full the
tendered amount (after deducting the amount of 10% deposited as per clause 4 above) on
the date or dates to be announced on the day of inspection before taking delivery. It is
hereby agreed that if the tenderer fails to pay the balance amount within the stipulated
period, the sale shall stand cancelled and the earnest money paid by him to the Trust shall
be forfeited by
the Trustees and the Trustees shall be at liberty
to offer the
same jewellery at the next sale and any deficiency arising at such sale together with
all expenses arising from the subsequent sale shall be borne by the tenderer who shall also
pay interest at the rate of 10% per annum to the Trust until the completion of the resale."
On January
31, 1978, Gazdar sent intimations (Exs.
B.130-133) to some foreign and Indian nationals abroad regarding the intended sale of the
jewels. It appears that M. A. Ashruff,
Secretary, also addressed letters dated February
8/10,
1978 (Exs. B.72-87) and also sent telegrams dated February25, 1978 (Exs.
B.88-100) to
29 reputed dealers, seven
of whom
were jewellers from
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abroad and the remaining 22 in the country, as per list Ex. B-46.
Secretary as far as material, read:

The letters of the

"The unique collection of the fabulous oriental jewellery of the once richest man of the
world, HEH the Nizam of Hyderabad and Berar, the erstwhile premier prince of India, is
coming up for sale in Bombay sometime during the first or second week of March
1978. The exact dates will be notified later."
The telegrams sent by him mentioned that: 'inspection of the jewellery could be hadrom
March 6 to 9'. It would thus appear that the intending buyers were not notified the date of
sale.

The 37 items of jewellery put up for sale were divided into 16 groups. Inspection of
these 37 items of jewellery was to
be offered to the intending bidders from March 6
to March 9. During the course of inspection, however, the trustees decided to restrict the
period of inspection till March 8 and they informed the intending bidders accordingly, and
asked them to give their bids before a particular hour on March 9. On the 8th of March,
Malhotra was present throughout, at the Mercantile Bank Ltd., and there was also a
meeting of the Board of Trustees.

It is somewhat disconcerting that throughout this litigation, the trustees should have, as
they appear to have done, aligned themselves with the appellants and other successful
tenderers. They not only asserted that there was a 'concluded contract' for the sale of 37
items of jewellery by the alleged acceptance of bids by them on March 9, 1978, but also
that the Court had no power to interdict the sale under. If we may say so, the attitude
adopted by the Board of Trustees was clearly against the interests of the beneficiaries.

In the present case, evidence is tendered by the trustees, not for the purpose of showing
that they tried to protect the interest of the beneficiaries, but for proving facts from which
it could be inferred that, accepting that the price of Rs. 14.43 crores offered by the
appellants and other tenderers
was wholly inadequate, the discretionary power of sale
was not liable to be interfered with.

It remains then to determine whether on the whole of the evidence as tendered, the
appellants have established facts from which a sale in their favour could be inferred or,
that the act of the trustees was not a bonafide exercise of their power so as to attract the
Court's over- riding power to annul
the sale under s. 49 of the Trusts Act. The
testimony, of Dinshaw Jahangir Gazdar RW 3, Kashmir Chand RW 4 and
Vithaldas
RW 6 goes to show that they have been in jewellery business since long, and selling
jewellery belonging to several Indian princes. Dinshaw Jahangir RW 3, was a consultant
31 | P a g e

to the late Nizam for sale of

his jewellery, and
had also arranged the sale of
jewellery belonging to late Salarjung of Hyderabad. Kashmir Chand, RW 4, partner of the
appellant firm M/s. Shanti Vijay & Co., had participated in the sale of jewellery belonging
to the Maharajahs of
Gwalior, Darbhanga, Jodhpur and Bikaner. Vithaldas, RW 6, is
one of approved valuers appointed by the Government of India, and had valued the
jewellery belonging to the Paiga of Khrusheed Jah and also some jewels belonging to the
late Salarjung. At the instance of the Government of India,
he had valued the
jewellery belonging to the Nizam as also the Nawab of Rampur. According to these
jewellers, the only method of sale adopted in all these sales was to inform reputed
jewellers both in the country and abroad. None of the sales were by advertisement in the
press.

As regards value of the jewellery, Dinshaw Jahangir Gazdar, RW 3, and M. A. Abbasi,

RW 1, want us to believe that Rs. 14.43 crores was the 'best possible price' that the 37
items of jewellery could ever fetch, despite the fact that the eighth respondent, Peter
Jansin Fernandez, made an offer of Rs. 20.25 crores for the same, during the course of the
proceedings. For this they largely relied upon the valuation report of Vithaldas,
RW
6, showing that these 37 items of jewellery were worth Rs. 10,36,30,00. We shall deal
with these witnesses later It is somewhat strange that the Board of Trustees should have,
acted in a cavalier fashion in disposing of the jewellery, without trying to ascertain their
actual value. The alleged sale effected by them was clearly detrimental to the interests of
the beneficiaries. M. A. Abbasi admits during his cross-examination, that 'the trustees had
no definite idea of the value of the 37 items of jewellery' when they were offered for sale.
He further admits that he did not consult anyone except Dinshaw Jahangir Gazdar, RW 3,
about the actual value. He also admits that he did not get in touch with any curators of
Museums of foreign countries to find
out whether they were interested in purchasing
any of the items, nor were any letters sent to any jewellers of Holland, Belgium, United
Kingdom, Switzerland and Geneva. Even in
this country, the trustees did not appear
to have written to any jeweller from Calcutta, Madras, Hyderabad or Bangalore. M. A.
Abbasi states that the trustees were advised particularly by Dinshaw Jahangir Gazdar that
it was not desirable to give
publicity in the daily newspapers as undesirable
elements might step in for inspecting the jewels and he could not assure them the bona
fides of every such person, who wanted to inspect the jewellery. He, therefore,
approached some of the jewellers through letters.

Then we come to Dinshaw Jahangir Gazdar, RW 3. It is true that this witness has wide
experience in jewellery business and tries to assert that the amount of Rs. 14.43 crores
offered
by the successful tenderers was a 'very good price', but then had to admit that
he does not possess any qualification in gemmology. According to this witness.

'There is no principle as such in valuing an item of jewellery. One looks at it and values
the same.' He, however, had to admit that he never participated in sales of rare jewels held
32 | P a g e

abroad, nor is he aware of the practice where jewels are sold abroad in auction rooms
after proper advertisement. This witness goes on to say: 'It is only a jeweller who can
value jewels by having a look at them. He will keep in consideration the size, cutting,
clarity and lustre, and colour.' Vithaldas, RW 6, also asserts that the price of Rs. 14.43
crores fetched was a 'very good price' in March 1978 for these jewels. When be was
confronted with the offer made by the eighth respondent during his cross-examination,
he stated that according to him an offer of Rs. 20.25 crores for these 37 items of jewellery
was a fancy price'. He explains by saying that a fancy price would be higher than the
market price. All this evidence was led by the appellants and the other tenderers as well as
by the Board of Trustees, in trying to establish that the trustees acted honestly and there
was no lack of good faith on their part.

It appears that, as so often happens when one deals with another's property, it matters little to
him what price the property fetches. But in the case of a trust, there arises the duty of the
trustees to act with prudence and as a body of reasonable men. The
High Court has
come to a definite conclusion that the improvident sale of the jewellery at such a low price
without due public notice was not a bona fide exercise of their power conducive of
beneficial management. There is no reason for us to come to a different conclusion.

On the totality of the evidence, in our opinion, the High Court rightly came to the
conclusion that though there were no mala
fides, corrupt motives, fraud or
mis- representation on the part of the trustees and they acted honestly, the trustees in
the facts and circumstances of the present case, did not act reasonably and in good faith
i.e. with due care and attention. Upon its finding that there was no concluded contract
between the parties within the meaning of s 2 (h) of the Contract Act, it accepted the offer
of the eighth respondent, Peter Jansin Fernandez, for Rs. 20.25 crores for the purchase of
37 items of jewellery.

It is necessary to mention that

upon receipt of the findings recorded by the High Court,
these appeals were placed before the Court for orders on April 18, 1979, when it
issued a direction to the effect:

"The parties will submit the methodology by which a maximum

price may be
fetched for the benefit of the beneficiaries. Any offer which is below Rs. 20 crores will
automatically be ignored."
Since the Court was rising for the summer vacation from May 5, 1979, learned counsel
for the eighth respondent, Peter Jansin Fernandez, made a request for withdrawal of the
deposit of Rs. 20.25 crores made by him before the
High Court for, the purchase of
the 37 items of jewellery, and instead gave an undertaking to furnish an irrevocable bank
guarantee by the State Bank of India overseas' Branch Bombay to that extent. This was
duly complied with by the eighth respondent, Peter Jansin Fernandez; and the irrevocable

33 | P a g e

bank guarantee for Rs. 20.25 crores furnished by him is due to expire on September 20,
1979.

The appeals came up for hearing before the Court on August 18, 19?9 We request to say
that though the appellants and other successful tenderers had nearly four months' time, no
better offer than the one made by the eighth respondent, Peter Jansin Fernandez, for Rs.
20.25 crores was forthcoming. We, therefore, proceeded to hear the appeals on merits.
The parties were heard on all aspects.

The question still remains as to the course open. Accepting the offer of the eighth
respondent, Peter Jansin Fernandez, without inviting fresh tenders would be subject to the
same infirmity. From the evidence on
record, it appears nobody really knows the
actual value of the 37 items of the jewellery. It may be well worth more than Rs. 20.25
crores.

We must, therefore, uphold the judgment of the High Court setting

aside the alleged
sale of 37 items of jewellery belonging to. H.E.H. the Nizam's Jewellery Trust, effected
by the Board of Trustees in favour of the appellants and
other successful tenderers
for Rs. 14.43 crores, but set aside its order accepting the bid of the eighth respondent,
Peter Jansin Fernandez, for purchase of the jewellery for Rs. 20.25 crores, and direct a reauction on the terms specified separately.

The appeals are disposed of accordingly. The appellants in all these appeals, excepting
Civil Appeal No. 1269 of 1978, shall bear their own costs and pay one set of cost to the
respondents as they have substantially failed. The two special leave applications are also
dismissed. N.V.K.

DETAILED STUDY OF CASES (OUTSIDE INDIA):

Jacobs, Marcus & Co v. Crdit Lyonnais
Jacobs, Marcus & Co v. Crdit Lyonnais
(1884) 12 QBD 589 (English Court of Appeal)

34 | P a g e

Whether an event constitutes an excuse for non-performance of a contract is an issue to

be determined by the proper law of the contract.

The judgment of the Court (Brett MR and Bowen LJ) was delivered by BOWEN LJ.
[598]. The plaintiffs in this case are esparto merchants, carrying on business in the city of
London, and the defendants are a banking firm, also carrying on business in the city.

By a contract made in London on October 6, 1880, the defendants agreed to sell to the
plaintiffs 20,000 tons of Algerian esparto, to be shipped from Algeria during the year
1881 by monthly deliveries on board ships or steamers to be provided by the plaintiffs:
payment to be made by cash on arrival of the ship or steamer at her port of destination.
The [599] defendants delivered a portion of the esparto under the contract, but failed to
deliver the remainder; and this action was brought by the plaintiffs for its non-delivery.
The defendants in their statement of defence admitted the non-delivery complained of,
but alleged that the insurrection in Algeria and the military operations connected with it
had rendered the performance of the contract impossible; and that by the French Civil
Code, which prevails throughout Algeria, force majeure is an excuse for nonperformance. The plaintiffs demurred to this defence upon the ground that the contracts
were governed by English law and not by the law of Algeria, and further alleged that the
defendants or their agents could have procured and shipped esparto from other ports of
Algeria where force majeure did not exist. The defendants to the latter allegation rejoined
that the insurrection and military operations rendered it impossible to transport such
esparto as last mentioned to the place fixed in the contract for approval by the plaintiffs of
its quality before shipment, or to transport the same to the place fixed in the contract for
shipment. To this rejoinder there was a further demurrer upon similar grounds. The
Court of Queens Bench having given judgment on both demurrers for the plaintiffs, the
case now comes before us upon appeal.

The question which we have in substance to consider is, whether non-performance of

their agreement by the defendants can be excused on the ground that military operations
in Algeria and the Algerian insurrection had rendered its performance impossible, and that
such an excuse would have been recognised by the French Civil Code which prevails in
Algeria.

The first matter we have to determine is, whether this contract is to be construed
according to English law or according to French. To decide this point we must turn to the
contract itself, for it is open in all cases for parties to make such agreement as they please
as to incorporating the provisions of any foreign law with their contracts. What is [600]
to be the law by which a contract or any part of it is to be governed or applied must be
always a matter of construction of the contract itself, as read by the light of the subjectmatter and of the surrounding circumstances. The broad rule is that the law of a country
where a contract is made presumably governs the nature, the obligation and the
interpretation of it, unless the contrary appears to be the express intention of the parties.
35 | P a g e

The general rule, says Lord Mansfield, established ex comitate et jure gentium, is that
the place where the contract is made, and not where the action is brought, is to be
considered in expounding and enforcing the contract. But this rule admits of an exception
where the parties at the time of making the contract had a view to a different kingdom:
Robinson v. Bland (1760) 2 Burr 1077.

It is obvious, however, that the subject-matter of each contract must be looked at as well
as the residence of the contracting parties or the place where the contract is made. The
place of performance is necessarily in many cases the place where the obligations of the
contract will have to be enforced, and hence, as well as for other reasons, has been
introduced another canon of construction to the effect that the law of the place of
fulfilment of a contract determines its obligations. But this maxim as well as the former
must, of course, give way to any inference that can legitimately be drawn from the
character of the contract and the nature of the transaction.

In the present case the contract was made in London between merchants carrying on their
business in the city of London, and payment was to be made in London. Presumably,
therefore, we should infer that this was an English contract, and intended to be [602]
governed by English law; but it still remains to be considered whether anything in the
contract itself or the nature of its stipulations displaces this prima facie view either wholly
or in part.

Now it cannot be contended that the parties have in express terms provided that any
portion of this contract is to be construed or applied otherwise than according to English
law; but it was suggested by the appellants [the defendants] that such an intention ought
to be inferred from certain provisions as to the collection of the esparto in Algeria and as
to its shipment thence.

[603] The mere fact that a contract of this descriptionmade in England between English
resident houses, and under which payment is to be made in England upon delivery of
goods from p-country in an Algerian portis partly to be performed in Algeria, does not
put an end to the inference that the contract remains an English contract between English
merchants, to be construed according to English law, and with all the incidents which
English law attaches to the non-performance of such contracts.

Now one of the incidents which the English law attaches to a contract is that (except in
certain excepted cases, as that of common carriers and bailees, of which this is not one), a
person who expressly contracts absolutely to do a thing not naturally impossible is not
excused for non-performance because of being prevented by vis major [i.e. a force
practically impossible to resist]. The rule laid down in the case of Paradine v. Jane
(1647) Aleyn 26 has often, says Lord Ellenborough, in the case of Atkinson v. Ritchie
36 | P a g e

(1809) 10 East 530, 533 been recognised in courts of law as a sound onethat is, that
when the party by his own contract creates a duty or charge upon himself, he is bound to
make it good if he maynotwithstanding any accident by inevitable necessity : because
he might have provided against it by his contract. ... If inevitable necessity occurring in
this country would not excuse non-performance, why should non-performance be excused
on account of inevitable necessity arising abroad? So to hold would be to alter the
liability which English law attaches to contracts, and would, in the absence of an express
or implied intention to that effect, be contrary to authority as well as principle ... .

[604] the contract has absolutely provided that delivery of the esparto shall be duly made; not
that the bargain as to such delivery need only be observed when the foreign law would insist
upon such observance. The contract being an English contract, only such portions of the
French Civil Code can be applied to its provisions as to performance in Algeria as are not
inconsistent with the express language of the contract as interpreted according to English law.
If the parties had wished in addition to this to incorporate a provision of French law which in
the event of vis major would operate to excuse the contracting parties for non-performance,
and thus to vary the natural construction of the instrument according to English law, they
should have done so in express terms. Read by English law the contract is not susceptible of
such an interpretation, and there is nothing to show that in this respect the parties desired the
contract to be governed by the French. For these reasons we are of opinion that the judgment
of the Court below was right and must be affirmed with costs.

H. B. Steamboat Co. vs. Hutton (1903)

On June 28, 1902, the owners let their steamship Cynthia to the defending hirers,
providing that the said steamship should be at the disposal of the defendant on June 28
to take passengers from Herne Bay. The contract stipulates inter alia that:

for the purpose of viewing the naval review and for a days cruise round the fleet; also on
June 2 similar purposes: price 250 payable, 50 down, balance before ship leaves Herne
Bay.
37 | P a g e

On the signing of the agreement the defendant paid the 50 deposit. On June 25 the
review was officially cancelled, whereupon the plaintiffs wired to the defendant for
instructions, stating that the ship was ready to start, and also requesting payment of the
balance. Receiving no reply, the plaintiffs, on June 28 and 29, used the ship for their own
purposes, thereby making a profit. On June 29 the defendant repudiated contract in toto.
During the two days in question the fleet remained anchored at Spithead.

In an action by the plaintiffs, the owners of the Cynthia, they attempted to recover the
balance 200, less the profits made by their use of the ship during these two days. The
judge at first instance gave his judgment for the defendants.

In the Supreme Court of Judicature Court of Appeal, Before Vaughan Williams, Stirling
and Romer LJJ. 1903 August 6.

Vaughan Williams LJ at pp.688-689:

AccordinG to my understanding of this contract, this ship was placed at the disposal of
Mr. Hutton really for those two days. This con does, in my opinion, place the ship at the
disposal of Mr. Hutton, just as a charter party places the vessel, the subject of it, at the
disposal of the charterers. That being so, what is there besides in the present case? Only
this, that Mr Hutton, in hiring this vessel, had two objects in view: first, of taking people
to see the naval review, and, secondly, of taking them round the fleet. Those, no doubt,
were the purposes of Mr Hutton, but it does not seem to me that because, as it is said,
those purposes became impossible, it would be a very legitimate inference that the
happening of the naval review was contemplated by both parties as the basis and
foundation of this contract, so as to bring the case within the doctrine of Taylor v
Caldwell 3 & S 826. On the contrary, when the contract is properly regarded, I think the
purpose of Mr Hutton, whether of seeing the naval review or of going round the fleet with
a party of paying guests, does not lay the foundation of the contract within the authorities.

I see nothing that makes this contract differ from a case where, for instance, a person has
engaged a brake to take himself and a party to Epsom to see the races there, but for some
reason or other, such as the spread of an infectious disease, the races are postponed. In
such a case it could not be said that he could be relieved of his bargain. So in the present
case it is sufficient to say that the happening of the naval review was not the foundation of
the contract.

Romer LJ at pp.690-692:

38 | P a g e

I may point out that this case is not one in which the subject-matter of the contract is a
mere licence to the defendant to use a ship for the purpose of seeing the naval review and
going round the fleet. In my opinion, as my Lord has said, it is a contract for the hiring of
a ship by the defendant for a certain voyage, though having, no doubt, a special object,
namely, to see the naval review and the fleet; but it appears to me that the object was a
matter with which the defendant, as hirer of the ship, was alone concerned, and not the
plaintiffs, the owners of the ship.

The case cannot, in my opinion, be distinguished in principle from many common cases
in which, on the hiring of a ship, you find the objects of the hiring stated. Very often you
find the details of the voyage stated with particularity, and also the nature and details of
the cargo to be carried. If the voyage is intended to be one of pleasure, the object in view
may also be stated, which is a matter that concerns the passengers. But this statement of
the objects of the hirer of the ship would not, in my opinion, justify him in saying that the
owner of the ship had those objects just as much in view as the hirer himself. The owner
would say, 'I have an interest in the ship as a passenger or cargo carrying machine, and I
enter into the contract simply in that capacity; it is for the hirer to concern himself about
the objects.

The ship (as a ship) had nothing particular to do with the review or the fleet except as a
convenient carrier of passengers to see it: any other ship suitable for carrying passengers
would have done equally as well. Just as in the case of the hire of a cab or other vehicle,
although the object of the hirer might be stated, that statement would not make the object any
the less a matter for the hirer alone, and would not directly affect the person who was letting
out the vehicle for hire. In the present case I may point out that it cannot be said that by
reason of the failure to hold the naval review there was a total failure of consideration. That
cannot be so. Nor is there anything like a total destruction of the subject-matter of the
contract. Nor can we, in my opinion, imply in this contract any condition in favour of the
defendant which would enable him to escape liability. A condition ought only to be implied in
order to carry out the presumed intention of the parties, and I cannot ascertain any such
presumed intention here. It follows that, in my opinion, so far as the plaintiffs are concerned,
the objects of the passengers on this voyage with regard to sightseeing do not form the
subject-matter or essence of this contract.

Stirling LJ at pp.692-693:

It is said that, by reason of the reference in the contract to the 'naval review', the existence
of the review formed the basis of the contract, and that as the review failed to take place
the parties became discharged from the further performance of the contract, in accordance
39 | P a g e

with the doctrine of Taylor v Caldwell 3 & S 826. I am unable to arrive at that
conclusion. It seems to me that the reference in the contract to the naval review is easily
explained; it was inserted in order to define more exactly the nature of the voyage, and I
am unable to treat it as being such a reference as to constitute the naval review the
foundation of the contract so as to entitle either party to the benefit of the doctrine in
Taylor v Caldwell 3 & S 826. I come to this conclusion the more readily because the
object of the voyage is not limited to the naval review, but also extends to a cruise round
the fleet. The fleet was there, and passengers might have been found willing to go round
it. It is true that in the event which happened the object of the voyage became limited, but,
in my opinion, that was the risk of the defendant whose venture the taking the passengers
was. For these reasons I am unable to agree with the learned judge in holding that in the
contemplation of the parties the taking place of the review was the basis for the
performance of the contract, and I think that the defendant is not discharged from its
performance.

CONCLUSION
My literary analysis is about how this assignment has covered the topic Discharge of
Contract and has provided me with in-depth knowledge of the Mercantile law and Indian
Contract Act, 1872.
First of all as the name suggests mercantile law deals with all the mercantile or
commercial transactions. In India, it governs all the deals and transactions of commercial
nature. The Indian Contract Act, 1872 deal with all the aspects of an agreement and

40 | P a g e

defines it legality. It governs all types of agreements between two or more parties in
India.
This assignment was made on a particular part of Indian Contract Act, 1872 i.e.
Discharge of contract. Discharge of contract describes when an agreement between two
or more parties comes to an end. After the discharge both the parties are free from all the
liabilities of contract. Discharge of contract can rightly be identified as the full stop of an
agreement in line.
A few cases inside and outside India have also been discussed in this assignment. This
was done to learn the practical aspect of mercantile and its significance in judicial
proceedings. An important point to notice is that these cases are the landmark cases in
history of mercantile law as the final judgement of the bench in these cases has led to
addition of new sections and clauses in the mercantile law all over the world ,thus,
improving its efficiency. These cases still serve as a benchmark for courts in India as well
as in other countries.
Last but not the least, I hope that the assignment made by me is within permissible errors
(if any) and fulfil its purpose to the best.

BIBLOGRAPHY
BOOKS:

A Textbook Of Mercantile Law ( Commercial Law) (English) 4th Edition By

P.P.S Gogna
Mercantile Law (English) 13th Edition By S. Chand

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WEBSITES:

https://en.wikipedia.org/wiki/Law
https://en.wikipedia.org/wiki/Law_of_India
https://www.safaribooksonline.com/library/view/businesslaw/9789332511248/xhtml/chapter007.xhtml
http://indiankanoon.org/doc/1424668/
http://indiankanoon.org/doc/123844433/
http://www.lawandsea.net/List_of_Cases/H/HemeBaySteam_v_Hutton_1903_2_
KB_683.html
http://www.publishyourarticles.net/eng/articles2/commercial-law-or-mercantilelaw-explained-learn-about-its-definition-scope-and-sources/1824/

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