TMI Blog2017 (3) TMI 1690X X X X Extracts X X X X X X X X Extracts X X X X ..... and various restrictions by the Government, due to the prevailing war situation - The ground on which frustration was claimed, did not amount to a supervening circumstance, which alone could be successfully alleged to claim frustration under Section 56. To plead frustration under Section 56 of the Contract Act, there should be a supervening impossibility, which was never in the contemplation of the parties at the time when the contract was entered into - the petitioner did not have a D & O license at the time, when the petitioner approached the Appellate Authority for being permitted to pay tax under the compounding scheme. The petitioner also did not press for a D & O licence with respect to the quarry, since no such permit could have been issued to the petitioner without an Environmental Clearance. The petitioner's prayer for consideration of the D & O license for the crusher unit was also on the ground that even if he cannot quarry mineral, he could obtain minerals from other quarries and carry on the crusher operations - It cannot at all be said that the dismissal of the writ petition was a supervising impossibility, which stood against the petitioner's performance of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e impossibility of performance by itself extinguishes the obligation or duty and such impossibility would be akin to a discharge by the performance of the original promise, as has been found in M.D, Army Welfare Housing Organisation v. Sumangal Services (P) Ltd. [(2004) 9 SCC 619]. Mary v. State of Kerala and Others [(2014) 14 SCC 272] is cited only to indicate a different path trod as far as a statutory contract is concerned, which however on facts would not be applicable, is the argument. Koothattukulam Liquors v. Deputy Commissioner of Sales Tax [(2015) 12 SCC 794] is relied on for the proposition that the Indian Contract Act would be applicable even in the case of a statutory contract. 5. The learned Special Government Pleader (Taxes) argues that there is no impossibility as urged by the petitioner, that did not exist, even at the time the petitioner applied for compounding. The compounding was applied for in the year 2016-17 and when the same was applied for before the specified date of 31.05.2016, the petitioner did not have a license either for the quarry or for the crusher unit. The petitioner had filed monthly returns for April May, 2017 and on 27.05.2016, there was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The petitioner also filed a writ petition as W.P.(C) No.31093 of 2014, in which an interim order was issued as per Ext.P7; which directed renewal of the quarrying permit. The Panchayath was not a party there and the interim order could not have enabled the continuance of the quarry without the D O license. The operations of the crusher also could not have been carried out; again for reason of there being no D O license issued. This is the accepted position for the year 2014-15. 9. The Panchayath re-considered the issue of D O license to both establishments, in a meeting on 28.02.2015; the minutes of which are produced as Exts.P10 and P10(a), presumably in an application filed for the year 2015-16. The orders of the Tribunal staying the earlier decision were also referred to. On the various grounds stated in Ext.P10 and P10(a), license for the quarry and the crusher units were again declined. The petitioner challenged the same in a writ petition numbered as W.P.(C) No.10660 of 2015, the interim order in which is produced as Ext.P11. The respondent Grama Panchayath was directed not to interfere with the activities of the petitioner in the quarry and the crusher unit. The pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose insofar as being obliged to go under the regular assessment, if eventually he obtained license for the quarry and the crusher unit in the said year. Unfortunately, against his expectations, there was no interim order issued and eventually; W.P.(C) No.15530 of 2016 stood dismissed as per Ext.P30. This in fact resulted in his being not able to carry on any business of quarry and crusher and there was no incidence of tax ie; the sale of minerals in the subject assessment year. The impossibility is projected insofar as having not been issued with D O license and in such circumstance, the petitioner should be allowed to withdraw from the compounding applied for and granted. 13. It is pertinent that despite the petitioner's assertion that no business was carried on, the petitioner filed two returns for the months of April and May and the first installment, with respect to the compounding provision was also satisfied. One of the returns is produced as Ext.P17, which shows the business having been carried on in the assessment year. The petitioner's contention is that the sale conducted was of the already quarried materials. 14. The petitioner further argued that even at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act. 17. Ganga Saran (supra) was a case, in which the respondent undertook to supply certain bales of cloth manufactured by two named Mills. The supply could not be fully made and the respondent claimed that there was no supply effected from the Mill, which was a clear stipulation under the contract enabling the respondent to plead frustration. The High Court read the condition as 'if and when' to negative the loss claimed by the appellant. The Hon'ble Supreme Court found that the defense set up could only be under Section 32 or 56 of the Contract Act. It was found that Section 32 has no application since the words employed does not suggest the agreement to be contingent on the happening of a future event, nor was Section 56 applicable when the nonperformance of the contract is attributable to the default of the defendant; who cannot avail of the doctrine of frustration. 18. Satyabrata Ghose (supra) was a case, in which a suit for specific performance of a contract, decreed by the trial court and affirmed in appeal was rejected by the High Court. The appellant was the plaintiff and the respondent was the defendant in the suit. The defendant, a company, who was the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract as a whole, it is the court which can pronounce the contract to be frustrated and at an end. The court undoubtedly has to examine the contract and the circumstances under which it was made. The belief, knowledge and intention of the parties are evidence, but evidence only on which the court has to form its own conclusion whether the changed circumstances destroyed altogether the basis of the adventure and its underlying object. This may be called a rule of construction by English Judges but it is certainly not a principle of giving effect to the intention of the parties which underlies all rules of construction. This is really a rule of positive law and as such comes within the purview of Section 56 of the Indian Contract Act. 20. Having so stated the law the nature and terms of the contract and the circumstances under which it was entered was examined to determine whether or not the disturbing element, which is alleged to have happened, had prevented the performance of the contract. It was stated that the contract was not an ordinary contract for sale and purchase. It was an integral part of a development scheme and there was no time limit within which the roads and d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the intrusion or occurrence of an unexpected event or change of circumstance; which was not in the contemplation of the parties. It was held that: A contract is not frustrated merely because the circumstances in which it was made are altered. The Courts have no general power to absolve a party from the performance of his part of the contract merely because performance has become onerous on account of an unforeseen turn of events. The question would depend upon whether the contract which the appellants entered into was that they would make their best endeavors to get the license or whether the contract was that they would obtain it or be liable for breach of that stipulation' (sic-para 10). 22. In Army Welfare Housing Corporation (supra) frustration of contract was claimed on the ground of a stop memo issued by the local authority. It was held that statutory injunction by a statutory authority is one of such grounds which could be successfully urged to plead impossibility to fulfill the contractual obligation. On facts it was also found that the party to the contract who pleaded frustration had not abandoned the work and there was also no case set up of a self-induced frustr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was only on account of the pending W.P.(C) No. 15530 of 2106, in which there were no interim orders passed. The writ petition itself was filed on 22.04.2016 and stood rejected on 17.12.2016. 26. The petitioner also did not press for a D O licence with respect to the quarry, since no such permit could have been issued to the petitioner without an Environmental Clearance. The petitioner's prayer for consideration of the D O license for the crusher unit was also on the ground that even if he cannot quarry mineral, he could obtain minerals from other quarries and carry on the crusher operations. The specific plea recorded as seen from the judgment in W.P.(C) No.15530 of 2016 was that he could conduct the crusher by bringing raw materials from outside. The prayer so made was rejected. The very same pleading is reiterated here too. 27. It cannot at all be said that the dismissal of the writ petition was a supervising impossibility, which stood against the petitioner's performance of the obligation under the compounding scheme. It is established that there was no supervening subsequent event, which was not in the contemplation of the petitioner, when the petitioner had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioner could have opted to remain under the regular assessment, in which event, on denial of the license and permit, the petitioner could have filed NIL returns and there would have been no liability to tax. 30. The petitioner wanted the best of both worlds; the entitlement under the compounding scheme if the unit was permitted and a regular assessment if not permitted. The petitioner with eyes open, without any license or permit applied for compounding and on denial of the license seeks to turn around and plead frustration. Reiterating at the risk of repetition; there is no supervening impossibility occasioned by a subsequent event and it can only be said that the fond hope of the petitioner did not materialize. That is not a ground under Section 56 of the Contract Act. 31. The claim at best is that the obligation under the scheme, which the petitioner voluntarily opted, is onerous. Naihati Jute Mills Ltd.(supra) found that Courts cannot absolve a party from performance of a contract, merely for reason of the performance having become onerous by even an unforeseen turn of events. Here there is not even such an unforeseen turn of events. The Courts cannot alter or mo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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