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Judgment
Chittaranjan Dash, J.
Heard learned counsel for the Parties.
By means of this application, the Petitioner seeks intervention of this Court in respect of the continued subsistence of Agreement No.01 PI of 2024-25, notwithstanding the non-availability of the requisite land for execution of the approach road, and seeks appropriate consequential reliefs in relation to closure of the agreement and the Additional Performance Security furnished thereunder.
The facts leading to the present writ petition is that the petitioner was awarded the work of construction of a bridge over Local Nallah at 1/300 km on Sadakashi to Radhikapatia Sahi Road in the district of Cuttack under the Biju Setu Yojana. Pursuant thereto, the Petitioner furnished the Additional Performance Security and commenced execution of the work. The bridge portion was completed, as acknowledged by the Department; however, the approach road could not be executed as the requisite land was not made available by the State. The Petitioner, therefore, seeks closure of the agreement and consequential relief in respect of the Additional Performance Security.
Learned counsel for the Petitioner submits that the Petitioner has duly completed the bridge portion of the work, whereas the remaining approach road could not be executed owing to non-availability of the requisite land, which is attributable to the Opp. Parties. It is contended that the Petitioner cannot be held responsible for non-performance of an obligation which has become incapable of performance for reasons beyond his control. The Petitioner, therefore, invokes the doctrine of frustration under Section 56 of the Indian Contract Act, 1872, and seeks closure of the agreement and consequential release of the Additional Performance Security.
Learned AGA, on the other hand, submits that the matter concerns contractual obligations arising under the agreement and the consequences thereof are required to be considered in accordance with the terms governing the contract.
The question that arises for consideration is whether the admitted non-availability of the requisite land for execution of the approach road, which has prevented completion of the remaining work, warrants consideration of the Petitioner’s request for closure of the agreement and consequential relief in respect of the Additional Performance Security, in the light of the doctrine of frustration embodied in Section 56 of the Indian Contract Act, 1872.
The principle underlying the doctrine of frustration finds expression in the maxim lex non cogit ad impossibilia, signifying that the law does not compel a person to do that which he is incapable of performing. The statutory basis of the doctrine is found in Section 56 of the Indian Contract Act, 1872, which reads as follows:
Section 56: Agreement to do impossible act.—
An agreement to do an act impossible in itself is void.
Contract to do act afterwards becoming impossible or
unlawful.—A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or tmlawful.
Compensation for loss through non-performance of act known
to be impossible or unlawful.—Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise.
The statutory provision, however, does not make every subsequent difficulty in performance a case of frustration. The nature of the supervening circumstance, its effect upon the contractual obligation and the terms governing the particular contract have necessarily to be examined before its applicability can be determined. The doctrine, therefore, has to be applied with reference to the contract and the circumstances in which performance has subsequently become difficult or impossible.
In Boothalinga Agencies vs. V.T.C. Poriaswami Nadar, reported in AIR 1969 SC 110, the Hon’ble Supreme Court held that the doctrine of frustration is an aspect of the law of discharge by reason of supervening impossibility or illegality and that Section 56 lays down a rule of positive law in this regard. The Court further held that the applicability of the doctrine is to be determined by the effect of the supervening circumstance upon the performance of the contractual obligation. The relevant paragraphs are laid down below:
“10.The doctrine of frustration of contract is really an aspect, or part of the law of discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done and hence comes within the purview of Section 56 of the Indian Contract Act. It should be noticed that Section 56 lays down a rule of positive law and does not leave the matter to be determined according to the intention of the parties. 13. In English law, therefore, the question of frustration of contract has been treated by courts as a question of construction depending upon the true intention of the parties. In contrast, the statutory provisions contained in Section 56 of the Indian Contract Act lay down a positive rule of law and English authorities cannot therefore be of direct assistance, though they have persuasive value in showing how English courts have approached and decided cases under similar circumstances.
…
14.Counsel on behalf of the respondent, however, contended that the contract was not impossible of performance, and the appellant cannot take recourse to the provisions of Section 56 of the Indian Contract Act. It was contended that under clause 1 of the Import Trade Control Order No. 2-ITC/48, dated March 6, 1948 it was open to the appellant to apply for a written permission of the licensing authority to sell the chicory. It is not shown by the appellant that he applied for such permission and the licensing authority had refused such permission. It was therefore maintained on behalf of the respondent that the contract was not impossible of performance. We do not think there is any substance in this argument. It is true that the licensing authority could have given written permission for disposal of the chicory under clause 1 of Order No.2-ITC/48, dated March 6, 1948 but the condition imposed in Ex. B-9 in the present case is a special condition imposed under clause (v) of paragraph (a) of Order No.2-ITC/48, dated March 6, 1948 and there was no option given under this clause for the licensing authority to modify the condition of licence that “the goods will be utilised only for consumption as raw material or accessories in the licence holder’s factory and that no portion thereof will be sold to any party”. It was further argued on behalf of the respondent that, in any event, the appellant could have purchased chicory from the open market and supplied it to the respondent in terms of the contract. There is no substance in this argument also. Under the contract the quality of chicory to be sold was chicory of specific description— “Egberts Chicory, packed in 495 wooden cases, each case containing 2 tins of 56 lb. nett”. The delivery of the chicory was to be given by “S.S. Alwaki” in December, 1955. It is manifest that the contract, Ex. A-1 was for sale of certain specific goods as described therein and it was not open to the appellant to supply chicory of any other description. Reference was made on behalf of the respondent to the decision in Maritime National Fish Limited v. Ocean Trawlers, Limited 1935 AC 524. In that case, the respondents chartered to the appellants a steam trawler fitted with an otter trawl. Both parties knew at the time of the contract that it was illegal to use an otter trawl without a licence from the Canadian government. Some months later the appellants applied for licences for five trawlers which they were operating, including the respondents’ trawler. They were informed that only three licences would be granted, and were requested to state for which of the three trawlers they desired to have licences. They named three trawlers other than the respondents’, and then claimed that they were no longer bound by the charter-party as its object had been frustrated. It was held by the Judicial Committee that the failure of the contract was the result of the appellants’ own election, and that there was therefore no frustration of the contract. We think the principle of this case applies to the Indian law and the provisions of Section 56 of the Indian Contract Act cannot apply to a case of “self-induced frustration”. In other words, the doctrine of frustration of contract cannot apply where the event which is alleged to have frustrated the contract arises from the act or election of a party. But for the reasons already given, we hold that this principle cannot be applied to the present case for there was no choice or election left to the appellant to supply chicory other than under the terms of the contract. On the other hand, there was a positive prohibition imposed by the licence upon the appellant not to sell the imported chicory to any other party but he was permitted to utilise it only for consumption as raw material in his own factory. We, are accordingly of the opinion that Counsel for the respondent has been unable to make good his argument on this aspect of the case.”
The aforesaid principle requires the question of frustration to be examined in the light of what has actually occurred and its effect upon the possibility of performance. The terms and construction of the contract, read with the circumstances existing when it was entered into, must be considered alongside the subsequent events. Where performance is dependent upon the continued availability of a particular thing and such availability ceases due to circumstances beyond the control of the parties, the very basis or practical purpose of the contract may, depending upon the circumstances, stand defeated.
In the present case, the contract contemplated construction of the bridge together with the approach road. The record discloses that while the Petitioner completed the bridge structure, the approach road could not be executed for want of the requisite land. The work performance certificate dated 23.02.2026 issued by the Department records that the bridge work had been completed successfully, whereas the approach road remained incomplete due to non-availability of land. The impediment, therefore, concerns the availability of the site necessary for execution of the remaining component of the contracted work.
The terms governing the contract assume significance in examining the aforesaid circumstance. The Tender Call Notice makes time the essence of the contract and prescribes a fixed period for completion, while also contemplating alteration of the stipulated period in exceptional circumstances with the approval of the competent higher authority. Clause 4 of the agreement further provides for extension of time where the contractor is unavoidably hindered in execution of the work, subject to the conditions stipulated therein. The contractual framework thus contains a mechanism for dealing with hindrance to performance. The question, therefore, is whether the admitted non-availability of land is a circumstance capable of being addressed within that contractual mechanism, or whether its effect upon the remaining work is such as to warrant consideration of discharge or closure of the agreement.
The Tender Call Notice does place certain obligations upon the contractor, including inspection of the site before quoting his rate and procurement of materials from authorised sources. However, the impediment in the present case is not referable to either of these obligations. The approach road could not be executed because the requisite land was not made available by the State. The record further indicates that steps towards acquisition/direct purchase of the land were initiated subsequently, including communications regarding valuation and consent of the landowners in January, 2026.
The distinction between a supervening circumstance which merely occasions delay or difficulty and one which affects the foundation of the contractual obligation was explained by the Hon’ble Supreme Court in DDA vs. M/s Kenneth Builders Developers Ltd., reported in (2016) 13 SCC 561, while reiterating the principles laid down in Satyabrata Ghose v. Mugneeram Bangur & Co., reported in AIR 1954 SC 44. The Hon’ble Supreme Court held as follows:
“33.The interpretation of Section 56 of the Contract Act came up for consideration in Satyabrata Ghose v. Mugneeram Bangur & Co.1 It was held by this Court that the word “impossible” used in Section 56 of the Contract Act has not been used in the sense of physical or literal impossibility. It ought to be interpreted as impracticable and useless from the point of view of the object and purpose that the parties had in view when they entered into the contract. This impracticability or uselessness could arise due to some intervening or supervening circumstance which the parties had not contemplated. However, if the intervening circumstance was contemplated by the parties, then the contract would stand despite the occurrence of such circumstance. In such an event, “there can be no case of frustration because the basis of the contract being to demand performance despite the happening of a particular event, it cannot disappear when that event happens.” This is what this Court had to say:
“The first paragraph of the section lays down the law in the same way as in England. It speaks of something which is impossible inherently or by its very nature, and no one can obviously be directed to perform such an act. The second paragraph enunciates the law relating to discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done. The wording of this paragraph is quite general, and though the illustrations attached to it are not at all happy, they cannot derogate from the general words used in the enactment. This much is clear that the word “impossible” has not been used here in the sense of physical or literal impossibility. The performance of an act may not be literally impossible but it may be impracticable and useless from the point of view of the object and purpose which the parties had in view; and if an untoward event or change of circumstances totally upsets the very foundation upon which the parties rested their bargain, it can very well be said that the promissor finds it impossible to do the act which he promised to do.
Although various theories have been propounded by the Judges and jurists in England regarding the juridical basis of the doctrine of frustration, yet the essential idea upon which the doctrine is based is that of impossibility of performance of the contract; in fact impossibility and frustration are often used as interchangeable expressions. The changed circumstances, it is said, make the performance of the contract impossible and the parties are absolved from the further performance of it as they did not promise to perform an impossibility. The parties shall be excused, as Lord Loreburn says2
“If substantially the whole contract becomes impossible of performance or in other words impracticable by some cause for which neither was responsible.”
xxx xxx xxx It must be pointed out here that if the parties do contemplate the possibility of an intervening circumstance which might affect the performance of the contract, but expressly stipulate that the contract would stand despite such circumstance, there can be no case of frustration because the basis of the contract being to demand performance despite the happening of a particular event, it cannot disappear when that event happens. As Lord Atkinson said in Matthey v. Curling3
“a person who expressly contracts absolutely to do a thing not naturally impossible is not excused for non-performance because of being prevented by the act of God or the King’s enemies … or vis major”. This being the legal position, a contention in the extreme form that the doctrine of frustration as recognised in English law does not come at all within the purview of Section 56 of the Indian Contract Act cannot be accepted.”
The principle which emerges is that the expression “impossible” in Section 56 is not confined to physical or literal impossibility; performance may be regarded as impossible where a supervening circumstance renders it impracticable or useless having regard to the object and purpose of the contract and substantially affects the foundation of the bargain. At the same time, frustration does not follow merely upon the occurrence of an intervening circumstance where the parties had contemplated such circumstance and had agreed, expressly or otherwise, that the contract would continue notwithstanding the same.
Applying the aforesaid principles to the present case, the mere fact that the approach road has remained incomplete cannot, by itself, be treated as frustration of the agreement. The contractual provisions governing extension of time and the circumstances in which the agreement may be continued or brought to an end must necessarily be taken into account. At the same time, the present case cannot be equated with one where performance has merely become onerous or inconvenient. The remaining work could not be undertaken because the requisite land was not made available by the State, and the Department’s own record acknowledges that the bridge had been completed while the approach road remained incomplete for want of land.
The admitted position, therefore, is that the impediment to completion of the remaining work did not arise from any default on the part of the Petitioner, but from the non-availability of the requisite land by reason of the State’s failure to make the same available. The question that remains is what consequence such circumstance entails under the agreement and the applicable law. Whether the circumstances warrant closure of the agreement and discharge of the Petitioner from the remaining contractual obligations, having regard to the contractual mechanism for extension and the principles governing frustration, is accordingly required to be considered by the competent authority.
In this regard, it is also relevant that the steps towards securing the requisite land were initiated only subsequently. The record discloses that the bench valuation of the land was communicated on 13.01.2026, the Assistant Executive Engineer sought the consent of the landowners for direct purchase on 15.01.2026, and the landowners expressed their consent on 21.01.2026. The circumstances, therefore, indicate that the impediment to execution of the approach road was not a consequence of any default in performance on the part of the Petitioner, but arose from the non-availability of the land necessary for execution of that part of the work.
In the aforesaid circumstances, while this Court is not called upon to pronounce finally upon the question whether the agreement stands frustrated or is liable to be treated as void by operation of Section 56 of the Indian Contract Act, 1872, the Petitioner’s grievance cannot be said to be without substance. The admitted non-availability of the land, coupled with the completion of the bridge portion and the Department’s own acknowledgment regarding the reason for non-completion of the approach road, warrants consideration of the Petitioner’s request for closure of the agreement and the consequential contractual obligations in accordance with the terms of the agreement and the applicable law.
In view of the aforesaid discussion, the competent authority amongst the Opp. Parties, more particularly Opp. Party No.4, shall consider the Petitioner’s request for closure of Agreement No.01 PI of 2024-25 and the consequential issues arising therefrom, including the question relating to the Additional Performance Security, in the light of the observations made hereinabove, the terms of the agreement and the applicable law, and take a reasoned decision thereon within a period of four (04) weeks from the date of communication of this order.
It is clarified that this Court has not adjudicated upon the Petitioner’s claims for compensation, idling charges, financial losses, price adjustment/escalation or other monetary benefits, which are left open to be pursued in accordance with law before the appropriate forum.
With the above, the writ petition is accordingly disposed of.