Payment of Interest - agreement of sale - not carried out due to non- sanction of permission Under Tenancy & Land Reforms Act was not granted to full extent - suit for refund of amount on the doctrine of frustration - suit decreed with interest - appeal by defendants - negatived doctrine of performance - found that the plaintiff is at fault , awarded to go with sanctioned extent - Appeal filed but arguments are restricted only to the extent of payment of interest only - Apex court held that Therefore, award of interest in the judgment against the principal amount upto the date of the institution of the suit at 9% and 6% thereafter from the date of institution of case till the date of payment is legal and valid as the said amount has been utilized by the defendants in the liquor business but they have failed to prove not obtaining the sale deed in respect of the land agreed upon to be sold in favour of the plaintiffs to the extent of area for which permission was granted by the State Government.=
The plaintiffs (the respondents herein) and the defendants (the
appellants herein) executed an agreement to sell 164 bighas, 7 biswas
of land in question on 2.8.1995.
As pre-condition for sale, permission
from the competent authority under Section 118 of the Himachal Pradesh
Tenancy & Land Reforms Act (hereinafter referred to as “the Land
Reforms Act”) was necessary.
The onus to obtain the relevant
permission was cast on the plaintiffs in the agreement to sell.
The
plaintiffs managed to obtain permission only for 145 bighas of land.
As the stipulated time for obtaining permission for the entire area
expired, the plaintiffs sought extension of time from the defendants.
This extension was denied which eventually led to filing of the suit
in question.
In the suit, the plaintiffs pleaded frustration of
contract and sought refund of the money already paid with interest.
The learned single Judge decreed the suit, finding that there was
frustration of contract.=
Original Appeal
Aggrieved by the same, the defendants filed an appeal before the
Division Bench of the High Court.
The Division Bench held that :-
(i)
the contract in question was not “frustrated” as understood in Indian
law in terms of Section 56 of the Contract Act, 1872;
(ii) the
plaintiffs were at fault for their failure to obtain the necessary
permission for the entire area as the obligation to obtain the
permission rested with them. The plaintiffs had committed breach of
the agreement, however, the defendants had not committed any breach
and
(iii) permission having been obtained for at least 145 bighas of
land, sale could have been completed with regard to this substantial
portion of the suit property.
Aggrieved by the same, the defendants have filed this appeal.=
Second Appeal
The Division Bench of the High Court has also examined the said
aspect of the matter by adverting to the provisions of Sections 73, 74
and 75 in Chapter VI of the Indian Contract Act and also taken into
consideration the decisions of various High Courts and this Court has
held that the defendants have not proved that they sustained losses on
account of the non performance of the contract by the plaintiffs. The
Division Bench of the High Court with reference to the allegation made
by the defendants in their written statement that they suffered loss
in the liquor business is not relatable to the contract and the same
is not supported by material evidence on record. It was further
submitted by the learned senior counsel for the defendants that due to
the breach of contract on the part of the plaintiffs, the sum of
[pic]4,00,000/- in the agreement which is the earnest money and
advance of [pic]4,00,000/- shall be forfeited towards loss of
compensation. The Division Bench after proper evaluation of the
pleadings and evidence on record has rightly rejected the said
contention and decreed the suit for sum of [pic]39,20,000/-
with 6% interest per annum from the date of institution of the suit
till the date of payment of money and it has rightly recorded the
concurrent finding for grant of the decree in favour of the plaintiff
directing the defendants for repayment of the consideration amount
with interest as mentioned above after holding that there is no
frustration of contract entered between the parties though the sale
of the land could not take place for non grant of permission to the
entire extent of 165 bighas 7 biswas of land, the said finding of fact
is accepted by this Court at the time of issuing notice and therefore,
the correctness of the same has attained finality for the reason that
this Court at the time of issuing notice to the plaintiffs has
clarified that this appeal is confined on the issue of payment of
interest awarded on decreetal amount from the date of institution of
the civil suit till the payment to be made by the defendants to the
plaintiffs. The money being paid as part consideration to the
defendants has been utilised by them in its liquor business.
Therefore, award of interest in the judgment against the principal
amount upto the date of the institution of the suit at 9% and 6%
thereafter from the date of institution of case till the date of
payment is legal and valid as the said amount has been utilized by the
defendants in the liquor business but they have failed to prove not
obtaining the sale deed in respect of the land agreed upon to be sold
in favour of the plaintiffs to the extent of area for which permission
was granted by the State Government. For the reasons stated supra, the
award of interest on the principal amount and decreetal amount in the
impugned judgment is perfectly justifiable on the basis of the facts
and circumstances of the case.
11. In view of the reasons stated supra, we do not find any reason
whatsoever to interfere with the impugned judgment and decree wherein
the award of interest at the rate of 6% per annum on the amount
decreed by the learned single Judge from the date of institution of
the suit need not be set aside by this Court. Accordingly, the Civil
Appeal is dismissed, but with no order as to costs.
2014 ( April.Part) http://judis.nic.in/supremecourt/filename=41492
GYAN SUDHA MISRA, V. GOPALA GOWDA
NON-REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4882 OF 2014
(Arising out of SLP(C) No. 35139 of 2012)
GIAN CHAND & ORS. …APPELLANTS
VERSUS
M/S. YORK EXPORTS LTD. & ANR. … RESPONDENTS
J U D G M E N T
V. GOPALA GOWDA, J.
Leave granted.
2. This Civil Appeal is directed against the judgment and order
dated 14.6.2012 passed in Original Side Appeal No.9 of 2005 by the
High Court of Himachal Pradesh at Shimla, whereby it has dismissed the
appeal of the appellants herein by concurring with the judgment and
decree dated 3.10.2005 passed in Civil Suit No. 31 of 1997 by the
learned Single Judge in decreeing the suit for payment of money at
[pic]39,20,000/- with 6% interest per annum from the date of
institution of the suit till the date of payment of decretal amount to
the respondents giving its reasons in the impugned judgment though it
did not entirely agree with the reasonings provided by the learned
single Judge. Correctness of the same with regard to the interest from
the institution of the suit till the date of payment is questioned by
the appellants, urging various facts and legal contentions.
3. For the sake of brevity and convenience in this judgment, the
parties are referred to as per the rank assigned to them in the
original suit proceedings.
4. The plaintiffs (the respondents herein) and the defendants (the
appellants herein) executed an agreement to sell 164 bighas, 7 biswas
of land in question on 2.8.1995. As pre-condition for sale, permission
from the competent authority under Section 118 of the Himachal Pradesh
Tenancy & Land Reforms Act (hereinafter referred to as “the Land
Reforms Act”) was necessary. The onus to obtain the relevant
permission was cast on the plaintiffs in the agreement to sell. The
plaintiffs managed to obtain permission only for 145 bighas of land.
As the stipulated time for obtaining permission for the entire area
expired, the plaintiffs sought extension of time from the defendants.
This extension was denied which eventually led to filing of the suit
in question. In the suit, the plaintiffs pleaded frustration of
contract and sought refund of the money already paid with interest.
The learned single Judge decreed the suit, finding that there was
frustration of contract.
5. Aggrieved by the same, the defendants filed an appeal before the
Division Bench of the High Court. The Division Bench held that :- (i)
the contract in question was not “frustrated” as understood in Indian
law in terms of Section 56 of the Contract Act, 1872; (ii) the
plaintiffs were at fault for their failure to obtain the necessary
permission for the entire area as the obligation to obtain the
permission rested with them. The plaintiffs had committed breach of
the agreement, however, the defendants had not committed any breach
and (iii) permission having been obtained for at least 145 bighas of
land, sale could have been completed with regard to this substantial
portion of the suit property. Aggrieved by the same, the defendants
have filed this appeal.
6. This Court vide order dated 3.12.2012 passed the following order
in the matter:-
“ We have heard learned counsel for the petitioners and
perused the record. In our view, the impugned judgment as
also the judgment of the learned Single Judge does not
suffer from any legal infirmity insofar as the decree for
payment of the principal amount is concerned.
Issue notice only on the question of payment of
interest by the petitioners on the amount which they had
received from the respondent in furtherance of the main as
well as the additional agreement, returnable on
06.02.2013. Dasti, in addition, is permitted.
Issue notice on the petitioners’ prayer for interim
relief, returnable on 06.02.2013. Dasti, in addition, is
permitted.
In the meanwhile, operation of the impugned judgment
as also the judgment of the learned Single Judge shall
remain stayed insofar as they relate to award of interest
to the respondent.
The petitioners shall pay the principal amount to
the respondent within a period of six weeks from today.
It shall be the petitioners' duty to serve the
respondent before the next date of hearing failing which
the interim order passed today shall stand
automatically vacated.”
After service of notice in the Special Leave Petition, the plaintiffs
filed the counter affidavit and the defendants also filed additional
documents. Thereafter, the matter was listed before this Court for
hearing on 31.01.2014. After hearing Mr. Jayant Bhushan, the learned
senior counsel appearing on behalf of the defendants and Mr. Deepak
Sibal, the learned counsel for the plaintiffs, this Court passed the
order by assigning the following reasons.
7. At the time of issuing notice in the Special Leave Petition on
03.12.2012, after hearing the learned counsel on behalf of the
defendants, this Court issued notice only on the question of payment
of interest by the defendants and the amount which they had received
towards the part consideration from the plaintiffs in furtherance of
the principal as well as the additional agreement. The learned senior
counsel Mr. Jayant Bhushan has questioned the correctness of the
impugned judgment of the High Court in affirming the award of interest
at the rate of 9% per annum on the part of consideration amount paid
to the defendants. The interest was to be paid at the rate of 9% per
annum prior to the institution of the suit and 6% on the said amount
from the date of decree till the date of payment. The learned senior
counsel contended that the defendants are not liable to pay the same
as the plaintiffs have committed breach of agreement entered with them
in not purchasing the agricultural land to an extent of 145 bighas of
land in respect of which the State Government in exercise of its power
under Section 118 of the Land Reforms Act granted permission to
purchase the same by the plaintiffs for the purpose of establishing
their factory, though the agreement of sale was intended to purchase
164 bighas 7 biswas of land in Khata Khatauni No. 98/105, Khasra No.
245, Mauza Beerh Plassi, Pargana Plassi, Tehsil Nalagarh, District
Solan, Himachal Pradesh. The case of the plaintiffs is that as per the
agreement between the parties entered on 2.8.1995, the defendants
agreed to sell the aforesaid property at the rate of [pic]50,000/-
per bigha and further agreed that the sale deed was to be executed on
31.5.1996 but prior to that date, the plaintiffs were required to pay
a sum of [pic]15,03,500/- to the defendants. Undisputedly, this amount
was also paid to the defendants on 21.8.1995. The sale deed could not
be executed by the defendants in favour of the plaintiffs by 31.5.1996
as the State Government granted permission to the plaintiffs for
purchase of only 125 bighas of land under Section 118 of the Land
Reforms Act. Thereafter the parties renewed the agreement on
31.5.1996. As per the renewed agreement, the plaintiffs were to pay
[pic]18,00,000/- more which was also paid on 4.6.1996. As
per this agreement, the sale deed was to be got executed by
31.12.1996. The State Government did not grant permission to the full
extent of land, which is agreed to be sold in favour of the
plaintiffs. On the other hand, the State Government allowed only to
the extent of 145 bighas of land in all to be purchased by the
plaintiffs. The plaintiffs did not get the sale deed executed. As to
the extent of land for which permission was granted by the State
Government, according to the plaintiffs, it was not sufficient for
establishing the factory. Therefore, the plaintiffs contended that the
contract is frustrated and therefore, they filed Civil Suit No. 31 of
1997 before the learned single Judge of the High Court for recovery of
the amount paid towards the part consideration along with interest at
the rate of 9% per annum up to the date of finalization of the suit
and 6% per annum from the date of institution of the civil suit. The
said claim was opposed by the defendants traversing plaint averments
contending that the contract is not frustrated as pleaded by the
plaintiffs under Section 56 of the Indian Contract Act, 1872 and the
plaintiffs are not entitled for the decree of money including the
interest as claimed by them and hence they have prayed for dismissal
of the suit.
8. The learned single Judge of the High Court vide order dated
3.10.2005 in Civil Suit No. 31 of 1997 framed 9 issues for his
adjudication. After the trial, the contentious issues framed in the
civil suit were answered in favour of the plaintiffs and passed the
decree to a sum of [pic]39,20,000/- with 6% interest per annum from
the date of institution of the suit till the date of payment of money.
The correctness of the reasons and findings answered on the
contentious issues in the judgment of the learned single Judge was
challenged before the Division Bench of High Court urging various
legal contentions. The Division Bench of the High Court, on the basis
of the rival legal contentions urged on behalf of the parties
formulated the following two points for its adjudication :-
“1. Whether the contract stood frustrated by the fact
that the plaintiff did not get permission to purchase
164 bighas 7 biswas of land?
2. Whether the defendants were entitled to retain the
amount paid to them by the plaintiff and if so, to
what amount?”
After examining the correctness of reasons recorded by the learned
single Judge in holding that the non-grant of permission by the State
Government to purchase 164 bighas 7 biswas of land in favour of the
plaintiffs in terms of the agreement entered between the parties
amounts to frustration of contract as provided under Section 56 of the
Contract Act was examined by the Division Bench of the High Court. The
Division Bench of the High Court with reference to the reasons
recorded by the learned single Judge in the civil suit, on the
question of the frustration of the contract between the parties, after
adverting to the relevant provisions of Section 56 of the Indian
Contract Act, by assigning its own reasons, has answered the same by
holding that the decision that the contract between the parties stands
frustrated is erroneous in law.
The Division Bench of the High Court held that the finding recorded
by the learned single Judge on non-grant of permission to the entire
164 bighas 7 biswas of land as agreed between the parties to sell in
favour of the plaintiffs does not amount to the frustration of
contract for the reason that the State Government at first granted
permission to the plaintiffs for purchase of 125 bighas and thereafter
granted permission to purchase 145 bighas of land. Further, the
Division Bench of the High Court has held that there is virtually no
material on record to show that after the second permission was
granted, the plaintiff took further steps to get permission from the
State Government for purchasing the remaining land. Even if such
permission was not granted and permission was specifically refused,
the contract between the parties would not stand frustrated. It is
further rightly held by the Division Bench of the High Court that the
parties at the time of agreement could not have presumed that the
permission must be granted. Further it has observed that supposing the
State Government refused to grant permission for purchase of land,
then obviously, it would be a case of the contract not being able to
be performed. But, when the State Government grants the permission for
a lesser area of land than the agreed upon area in the agreement by
the defendants, plaintiffs could not have elected to purchase the
lesser area, i.e. 145 bighas, for which the permission was granted.
Further, the learned Division Bench of the High Court has rightly
rejected the argument of the plaintiffs that permission for purchase
of 145 bighas of land granted by the State Government in favour of the
plaintiffs, was not sufficient to set up the plant as in this regard
no evidence worth the name to support this plea of the plaintiffs has
been produced before the Court. Further, the High Court has rightly
assigned its reasons on the basis of the project reports of the
plaintiffs, the State Government and the Department of Industries,
taking all relevant aspects into consideration has decided that
permission should be granted in favour of the plaintiffs only for
purchase of 145 bighas of land. This fact would clearly indicate that
according to the Industries Department, sale of land of 145 bighas in
favour of the plaintiffs by the defendants was sufficient to set up
the industry for which purpose the plaintiffs have entered into an
agreement with the defendants. Further, in the impugned judgment the
High Court assigned its reasons stating that the parties may or may
not get permission for the purchase of the entire land. However, in
the absence of such condition expressed in the agreement, the contract
between the parties does not frustrate particularly, when the
plaintiffs had alternative to purchase 145 bighas of land from the
defendants. The Division Bench of the High Court on the issue of
frustration of contract has relied upon the decisions of this Court
and various High Courts in support of its reasons which are adverted
in the impugned judgment, which need not be referred to in this
judgment.
9. The Division Bench of the High Court did not accept the finding
of the learned single Judge who had conducted the trial of the suit,
who has erroneously held that the contract stands frustrated under
Section 56 of the Contract Act.
10. The Division Bench of the High Court has also examined the said
aspect of the matter by adverting to the provisions of Sections 73, 74
and 75 in Chapter VI of the Indian Contract Act and also taken into
consideration the decisions of various High Courts and this Court has
held that the defendants have not proved that they sustained losses on
account of the non performance of the contract by the plaintiffs. The
Division Bench of the High Court with reference to the allegation made
by the defendants in their written statement that they suffered loss
in the liquor business is not relatable to the contract and the same
is not supported by material evidence on record. It was further
submitted by the learned senior counsel for the defendants that due to
the breach of contract on the part of the plaintiffs, the sum of
[pic]4,00,000/- in the agreement which is the earnest money and
advance of [pic]4,00,000/- shall be forfeited towards loss of
compensation. The Division Bench after proper evaluation of the
pleadings and evidence on record has rightly rejected the said
contention and decreed the suit for sum of [pic]39,20,000/-
with 6% interest per annum from the date of institution of the suit
till the date of payment of money and it has rightly recorded the
concurrent finding for grant of the decree in favour of the plaintiff
directing the defendants for repayment of the consideration amount
with interest as mentioned above after holding that there is no
frustration of contract entered between the parties though the sale
of the land could not take place for non grant of permission to the
entire extent of 165 bighas 7 biswas of land, the said finding of fact
is accepted by this Court at the time of issuing notice and therefore,
the correctness of the same has attained finality for the reason that
this Court at the time of issuing notice to the plaintiffs has
clarified that this appeal is confined on the issue of payment of
interest awarded on decreetal amount from the date of institution of
the civil suit till the payment to be made by the defendants to the
plaintiffs. The money being paid as part consideration to the
defendants has been utilised by them in its liquor business.
Therefore, award of interest in the judgment against the principal
amount upto the date of the institution of the suit at 9% and 6%
thereafter from the date of institution of case till the date of
payment is legal and valid as the said amount has been utilized by the
defendants in the liquor business but they have failed to prove not
obtaining the sale deed in respect of the land agreed upon to be sold
in favour of the plaintiffs to the extent of area for which permission
was granted by the State Government. For the reasons stated supra, the
award of interest on the principal amount and decreetal amount in the
impugned judgment is perfectly justifiable on the basis of the facts
and circumstances of the case.
11. In view of the reasons stated supra, we do not find any reason
whatsoever to interfere with the impugned judgment and decree wherein
the award of interest at the rate of 6% per annum on the amount
decreed by the learned single Judge from the date of institution of
the suit need not be set aside by this Court. Accordingly, the Civil
Appeal is dismissed, but with no order as to costs.
………………………………………………………………………J.
[GYAN SUDHA MISRA]
………………………………………………………………………J.
[V. GOPALA GOWDA]
New Delhi,
April 25, 2014
The plaintiffs (the respondents herein) and the defendants (the
appellants herein) executed an agreement to sell 164 bighas, 7 biswas
of land in question on 2.8.1995.
As pre-condition for sale, permission
from the competent authority under Section 118 of the Himachal Pradesh
Tenancy & Land Reforms Act (hereinafter referred to as “the Land
Reforms Act”) was necessary.
The onus to obtain the relevant
permission was cast on the plaintiffs in the agreement to sell.
The
plaintiffs managed to obtain permission only for 145 bighas of land.
As the stipulated time for obtaining permission for the entire area
expired, the plaintiffs sought extension of time from the defendants.
This extension was denied which eventually led to filing of the suit
in question.
In the suit, the plaintiffs pleaded frustration of
contract and sought refund of the money already paid with interest.
The learned single Judge decreed the suit, finding that there was
frustration of contract.=
Original Appeal
Aggrieved by the same, the defendants filed an appeal before the
Division Bench of the High Court.
The Division Bench held that :-
(i)
the contract in question was not “frustrated” as understood in Indian
law in terms of Section 56 of the Contract Act, 1872;
(ii) the
plaintiffs were at fault for their failure to obtain the necessary
permission for the entire area as the obligation to obtain the
permission rested with them. The plaintiffs had committed breach of
the agreement, however, the defendants had not committed any breach
and
(iii) permission having been obtained for at least 145 bighas of
land, sale could have been completed with regard to this substantial
portion of the suit property.
Aggrieved by the same, the defendants have filed this appeal.=
Second Appeal
The Division Bench of the High Court has also examined the said
aspect of the matter by adverting to the provisions of Sections 73, 74
and 75 in Chapter VI of the Indian Contract Act and also taken into
consideration the decisions of various High Courts and this Court has
held that the defendants have not proved that they sustained losses on
account of the non performance of the contract by the plaintiffs. The
Division Bench of the High Court with reference to the allegation made
by the defendants in their written statement that they suffered loss
in the liquor business is not relatable to the contract and the same
is not supported by material evidence on record. It was further
submitted by the learned senior counsel for the defendants that due to
the breach of contract on the part of the plaintiffs, the sum of
[pic]4,00,000/- in the agreement which is the earnest money and
advance of [pic]4,00,000/- shall be forfeited towards loss of
compensation. The Division Bench after proper evaluation of the
pleadings and evidence on record has rightly rejected the said
contention and decreed the suit for sum of [pic]39,20,000/-
with 6% interest per annum from the date of institution of the suit
till the date of payment of money and it has rightly recorded the
concurrent finding for grant of the decree in favour of the plaintiff
directing the defendants for repayment of the consideration amount
with interest as mentioned above after holding that there is no
frustration of contract entered between the parties though the sale
of the land could not take place for non grant of permission to the
entire extent of 165 bighas 7 biswas of land, the said finding of fact
is accepted by this Court at the time of issuing notice and therefore,
the correctness of the same has attained finality for the reason that
this Court at the time of issuing notice to the plaintiffs has
clarified that this appeal is confined on the issue of payment of
interest awarded on decreetal amount from the date of institution of
the civil suit till the payment to be made by the defendants to the
plaintiffs. The money being paid as part consideration to the
defendants has been utilised by them in its liquor business.
Therefore, award of interest in the judgment against the principal
amount upto the date of the institution of the suit at 9% and 6%
thereafter from the date of institution of case till the date of
payment is legal and valid as the said amount has been utilized by the
defendants in the liquor business but they have failed to prove not
obtaining the sale deed in respect of the land agreed upon to be sold
in favour of the plaintiffs to the extent of area for which permission
was granted by the State Government. For the reasons stated supra, the
award of interest on the principal amount and decreetal amount in the
impugned judgment is perfectly justifiable on the basis of the facts
and circumstances of the case.
11. In view of the reasons stated supra, we do not find any reason
whatsoever to interfere with the impugned judgment and decree wherein
the award of interest at the rate of 6% per annum on the amount
decreed by the learned single Judge from the date of institution of
the suit need not be set aside by this Court. Accordingly, the Civil
Appeal is dismissed, but with no order as to costs.
2014 ( April.Part) http://judis.nic.in/supremecourt/filename=41492
GYAN SUDHA MISRA, V. GOPALA GOWDA
NON-REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4882 OF 2014
(Arising out of SLP(C) No. 35139 of 2012)
GIAN CHAND & ORS. …APPELLANTS
VERSUS
M/S. YORK EXPORTS LTD. & ANR. … RESPONDENTS
J U D G M E N T
V. GOPALA GOWDA, J.
Leave granted.
2. This Civil Appeal is directed against the judgment and order
dated 14.6.2012 passed in Original Side Appeal No.9 of 2005 by the
High Court of Himachal Pradesh at Shimla, whereby it has dismissed the
appeal of the appellants herein by concurring with the judgment and
decree dated 3.10.2005 passed in Civil Suit No. 31 of 1997 by the
learned Single Judge in decreeing the suit for payment of money at
[pic]39,20,000/- with 6% interest per annum from the date of
institution of the suit till the date of payment of decretal amount to
the respondents giving its reasons in the impugned judgment though it
did not entirely agree with the reasonings provided by the learned
single Judge. Correctness of the same with regard to the interest from
the institution of the suit till the date of payment is questioned by
the appellants, urging various facts and legal contentions.
3. For the sake of brevity and convenience in this judgment, the
parties are referred to as per the rank assigned to them in the
original suit proceedings.
4. The plaintiffs (the respondents herein) and the defendants (the
appellants herein) executed an agreement to sell 164 bighas, 7 biswas
of land in question on 2.8.1995. As pre-condition for sale, permission
from the competent authority under Section 118 of the Himachal Pradesh
Tenancy & Land Reforms Act (hereinafter referred to as “the Land
Reforms Act”) was necessary. The onus to obtain the relevant
permission was cast on the plaintiffs in the agreement to sell. The
plaintiffs managed to obtain permission only for 145 bighas of land.
As the stipulated time for obtaining permission for the entire area
expired, the plaintiffs sought extension of time from the defendants.
This extension was denied which eventually led to filing of the suit
in question. In the suit, the plaintiffs pleaded frustration of
contract and sought refund of the money already paid with interest.
The learned single Judge decreed the suit, finding that there was
frustration of contract.
5. Aggrieved by the same, the defendants filed an appeal before the
Division Bench of the High Court. The Division Bench held that :- (i)
the contract in question was not “frustrated” as understood in Indian
law in terms of Section 56 of the Contract Act, 1872; (ii) the
plaintiffs were at fault for their failure to obtain the necessary
permission for the entire area as the obligation to obtain the
permission rested with them. The plaintiffs had committed breach of
the agreement, however, the defendants had not committed any breach
and (iii) permission having been obtained for at least 145 bighas of
land, sale could have been completed with regard to this substantial
portion of the suit property. Aggrieved by the same, the defendants
have filed this appeal.
6. This Court vide order dated 3.12.2012 passed the following order
in the matter:-
“ We have heard learned counsel for the petitioners and
perused the record. In our view, the impugned judgment as
also the judgment of the learned Single Judge does not
suffer from any legal infirmity insofar as the decree for
payment of the principal amount is concerned.
Issue notice only on the question of payment of
interest by the petitioners on the amount which they had
received from the respondent in furtherance of the main as
well as the additional agreement, returnable on
06.02.2013. Dasti, in addition, is permitted.
Issue notice on the petitioners’ prayer for interim
relief, returnable on 06.02.2013. Dasti, in addition, is
permitted.
In the meanwhile, operation of the impugned judgment
as also the judgment of the learned Single Judge shall
remain stayed insofar as they relate to award of interest
to the respondent.
The petitioners shall pay the principal amount to
the respondent within a period of six weeks from today.
It shall be the petitioners' duty to serve the
respondent before the next date of hearing failing which
the interim order passed today shall stand
automatically vacated.”
After service of notice in the Special Leave Petition, the plaintiffs
filed the counter affidavit and the defendants also filed additional
documents. Thereafter, the matter was listed before this Court for
hearing on 31.01.2014. After hearing Mr. Jayant Bhushan, the learned
senior counsel appearing on behalf of the defendants and Mr. Deepak
Sibal, the learned counsel for the plaintiffs, this Court passed the
order by assigning the following reasons.
7. At the time of issuing notice in the Special Leave Petition on
03.12.2012, after hearing the learned counsel on behalf of the
defendants, this Court issued notice only on the question of payment
of interest by the defendants and the amount which they had received
towards the part consideration from the plaintiffs in furtherance of
the principal as well as the additional agreement. The learned senior
counsel Mr. Jayant Bhushan has questioned the correctness of the
impugned judgment of the High Court in affirming the award of interest
at the rate of 9% per annum on the part of consideration amount paid
to the defendants. The interest was to be paid at the rate of 9% per
annum prior to the institution of the suit and 6% on the said amount
from the date of decree till the date of payment. The learned senior
counsel contended that the defendants are not liable to pay the same
as the plaintiffs have committed breach of agreement entered with them
in not purchasing the agricultural land to an extent of 145 bighas of
land in respect of which the State Government in exercise of its power
under Section 118 of the Land Reforms Act granted permission to
purchase the same by the plaintiffs for the purpose of establishing
their factory, though the agreement of sale was intended to purchase
164 bighas 7 biswas of land in Khata Khatauni No. 98/105, Khasra No.
245, Mauza Beerh Plassi, Pargana Plassi, Tehsil Nalagarh, District
Solan, Himachal Pradesh. The case of the plaintiffs is that as per the
agreement between the parties entered on 2.8.1995, the defendants
agreed to sell the aforesaid property at the rate of [pic]50,000/-
per bigha and further agreed that the sale deed was to be executed on
31.5.1996 but prior to that date, the plaintiffs were required to pay
a sum of [pic]15,03,500/- to the defendants. Undisputedly, this amount
was also paid to the defendants on 21.8.1995. The sale deed could not
be executed by the defendants in favour of the plaintiffs by 31.5.1996
as the State Government granted permission to the plaintiffs for
purchase of only 125 bighas of land under Section 118 of the Land
Reforms Act. Thereafter the parties renewed the agreement on
31.5.1996. As per the renewed agreement, the plaintiffs were to pay
[pic]18,00,000/- more which was also paid on 4.6.1996. As
per this agreement, the sale deed was to be got executed by
31.12.1996. The State Government did not grant permission to the full
extent of land, which is agreed to be sold in favour of the
plaintiffs. On the other hand, the State Government allowed only to
the extent of 145 bighas of land in all to be purchased by the
plaintiffs. The plaintiffs did not get the sale deed executed. As to
the extent of land for which permission was granted by the State
Government, according to the plaintiffs, it was not sufficient for
establishing the factory. Therefore, the plaintiffs contended that the
contract is frustrated and therefore, they filed Civil Suit No. 31 of
1997 before the learned single Judge of the High Court for recovery of
the amount paid towards the part consideration along with interest at
the rate of 9% per annum up to the date of finalization of the suit
and 6% per annum from the date of institution of the civil suit. The
said claim was opposed by the defendants traversing plaint averments
contending that the contract is not frustrated as pleaded by the
plaintiffs under Section 56 of the Indian Contract Act, 1872 and the
plaintiffs are not entitled for the decree of money including the
interest as claimed by them and hence they have prayed for dismissal
of the suit.
8. The learned single Judge of the High Court vide order dated
3.10.2005 in Civil Suit No. 31 of 1997 framed 9 issues for his
adjudication. After the trial, the contentious issues framed in the
civil suit were answered in favour of the plaintiffs and passed the
decree to a sum of [pic]39,20,000/- with 6% interest per annum from
the date of institution of the suit till the date of payment of money.
The correctness of the reasons and findings answered on the
contentious issues in the judgment of the learned single Judge was
challenged before the Division Bench of High Court urging various
legal contentions. The Division Bench of the High Court, on the basis
of the rival legal contentions urged on behalf of the parties
formulated the following two points for its adjudication :-
“1. Whether the contract stood frustrated by the fact
that the plaintiff did not get permission to purchase
164 bighas 7 biswas of land?
2. Whether the defendants were entitled to retain the
amount paid to them by the plaintiff and if so, to
what amount?”
After examining the correctness of reasons recorded by the learned
single Judge in holding that the non-grant of permission by the State
Government to purchase 164 bighas 7 biswas of land in favour of the
plaintiffs in terms of the agreement entered between the parties
amounts to frustration of contract as provided under Section 56 of the
Contract Act was examined by the Division Bench of the High Court. The
Division Bench of the High Court with reference to the reasons
recorded by the learned single Judge in the civil suit, on the
question of the frustration of the contract between the parties, after
adverting to the relevant provisions of Section 56 of the Indian
Contract Act, by assigning its own reasons, has answered the same by
holding that the decision that the contract between the parties stands
frustrated is erroneous in law.
The Division Bench of the High Court held that the finding recorded
by the learned single Judge on non-grant of permission to the entire
164 bighas 7 biswas of land as agreed between the parties to sell in
favour of the plaintiffs does not amount to the frustration of
contract for the reason that the State Government at first granted
permission to the plaintiffs for purchase of 125 bighas and thereafter
granted permission to purchase 145 bighas of land. Further, the
Division Bench of the High Court has held that there is virtually no
material on record to show that after the second permission was
granted, the plaintiff took further steps to get permission from the
State Government for purchasing the remaining land. Even if such
permission was not granted and permission was specifically refused,
the contract between the parties would not stand frustrated. It is
further rightly held by the Division Bench of the High Court that the
parties at the time of agreement could not have presumed that the
permission must be granted. Further it has observed that supposing the
State Government refused to grant permission for purchase of land,
then obviously, it would be a case of the contract not being able to
be performed. But, when the State Government grants the permission for
a lesser area of land than the agreed upon area in the agreement by
the defendants, plaintiffs could not have elected to purchase the
lesser area, i.e. 145 bighas, for which the permission was granted.
Further, the learned Division Bench of the High Court has rightly
rejected the argument of the plaintiffs that permission for purchase
of 145 bighas of land granted by the State Government in favour of the
plaintiffs, was not sufficient to set up the plant as in this regard
no evidence worth the name to support this plea of the plaintiffs has
been produced before the Court. Further, the High Court has rightly
assigned its reasons on the basis of the project reports of the
plaintiffs, the State Government and the Department of Industries,
taking all relevant aspects into consideration has decided that
permission should be granted in favour of the plaintiffs only for
purchase of 145 bighas of land. This fact would clearly indicate that
according to the Industries Department, sale of land of 145 bighas in
favour of the plaintiffs by the defendants was sufficient to set up
the industry for which purpose the plaintiffs have entered into an
agreement with the defendants. Further, in the impugned judgment the
High Court assigned its reasons stating that the parties may or may
not get permission for the purchase of the entire land. However, in
the absence of such condition expressed in the agreement, the contract
between the parties does not frustrate particularly, when the
plaintiffs had alternative to purchase 145 bighas of land from the
defendants. The Division Bench of the High Court on the issue of
frustration of contract has relied upon the decisions of this Court
and various High Courts in support of its reasons which are adverted
in the impugned judgment, which need not be referred to in this
judgment.
9. The Division Bench of the High Court did not accept the finding
of the learned single Judge who had conducted the trial of the suit,
who has erroneously held that the contract stands frustrated under
Section 56 of the Contract Act.
10. The Division Bench of the High Court has also examined the said
aspect of the matter by adverting to the provisions of Sections 73, 74
and 75 in Chapter VI of the Indian Contract Act and also taken into
consideration the decisions of various High Courts and this Court has
held that the defendants have not proved that they sustained losses on
account of the non performance of the contract by the plaintiffs. The
Division Bench of the High Court with reference to the allegation made
by the defendants in their written statement that they suffered loss
in the liquor business is not relatable to the contract and the same
is not supported by material evidence on record. It was further
submitted by the learned senior counsel for the defendants that due to
the breach of contract on the part of the plaintiffs, the sum of
[pic]4,00,000/- in the agreement which is the earnest money and
advance of [pic]4,00,000/- shall be forfeited towards loss of
compensation. The Division Bench after proper evaluation of the
pleadings and evidence on record has rightly rejected the said
contention and decreed the suit for sum of [pic]39,20,000/-
with 6% interest per annum from the date of institution of the suit
till the date of payment of money and it has rightly recorded the
concurrent finding for grant of the decree in favour of the plaintiff
directing the defendants for repayment of the consideration amount
with interest as mentioned above after holding that there is no
frustration of contract entered between the parties though the sale
of the land could not take place for non grant of permission to the
entire extent of 165 bighas 7 biswas of land, the said finding of fact
is accepted by this Court at the time of issuing notice and therefore,
the correctness of the same has attained finality for the reason that
this Court at the time of issuing notice to the plaintiffs has
clarified that this appeal is confined on the issue of payment of
interest awarded on decreetal amount from the date of institution of
the civil suit till the payment to be made by the defendants to the
plaintiffs. The money being paid as part consideration to the
defendants has been utilised by them in its liquor business.
Therefore, award of interest in the judgment against the principal
amount upto the date of the institution of the suit at 9% and 6%
thereafter from the date of institution of case till the date of
payment is legal and valid as the said amount has been utilized by the
defendants in the liquor business but they have failed to prove not
obtaining the sale deed in respect of the land agreed upon to be sold
in favour of the plaintiffs to the extent of area for which permission
was granted by the State Government. For the reasons stated supra, the
award of interest on the principal amount and decreetal amount in the
impugned judgment is perfectly justifiable on the basis of the facts
and circumstances of the case.
11. In view of the reasons stated supra, we do not find any reason
whatsoever to interfere with the impugned judgment and decree wherein
the award of interest at the rate of 6% per annum on the amount
decreed by the learned single Judge from the date of institution of
the suit need not be set aside by this Court. Accordingly, the Civil
Appeal is dismissed, but with no order as to costs.
………………………………………………………………………J.
[GYAN SUDHA MISRA]
………………………………………………………………………J.
[V. GOPALA GOWDA]
New Delhi,
April 25, 2014
