Satyabrata Ghose v. Mugneeram Bangur & Co

Facts

• Mugneeram Bangur & Co (defendant) agreed to develop land and sell plots to buyers including Satyabrata Ghose (plaintiff)
• During World War II, the government requisitioned a large portion of the land under the Defence of India Rules
• The requisition was for an indefinite but presumably temporary period
• The company claimed the contract was frustrated because the requisition made development illegal/impossible
• The buyer (Satyabrata) sued for specific performance, arguing the contract remained alive

Issues

1. Whether Section 56 of the Indian Contract Act is the complete statutory code for frustration in India?
2. Whether temporary requisition of land by the government renders a development contract impossible of performance under Section 56?
3. How should "impossibility" in Section 56 be interpreted?

Held

• The contract was NOT frustrated
• Section 56 is the exhaustive statutory provision governing frustration in India; English common law doctrines of frustration cannot be imported to supplement or override it
• "Impossibility" in Section 56 means practical impossibility, not just literal/physical impossibility. It covers situations where performance, though not physically impossible, has become impracticable or useless by reason of a supervening event
• However, temporary requisition does not equal permanent impossibility; the land still existed, ownership was not lost, and development could resume after de-requisition
• The delay was temporary and the contract could still be performed in the future

Ratio Decidendi

The doctrine of frustration in India is governed solely by Section 56 of the Indian Contract Act. "Impossibility" in Section 56 is not used in the literal sense but covers cases where: (a) a supervening event makes performance physically impossible; (b) performance, though possible, has become so radically different from what was contemplated that the contract's foundation is destroyed; or (c) performance has become unlawful. However, mere temporary difficulty, delay, or increased expense does not amount to impossibility. The test is whether the supervening event fundamentally changes the nature of the outstanding contractual obligations.