KADIR BAKHSH & SONS Versus PROVINCE OF SIND

This is a suit for recovery of Rs.1,57,752.43.

2. The plaintiff was granted the lease to collect toll tax at toll plaza on either side of Super Highway between Hyderabad and Karachi for the period beginning from 1‑4‑1972 and ending with 31‑12‑1972. Under this contract the plaintiff was to pay Rs.28,35,000 in 18 fortnightly instalments. The first instalment was payable on 31st April, 1972 and the last two instalments by 5th December, 1972. The plaintiff was also required to deposit Rs.2,75,000 as security which was to be refunded after completion of the contract. The plaintiff duly deposited the aforesaid amount of security and also paid all the instalments except the last 2 instalments. It is alleged that in the beginning of July 1972 there were wide‑spread civil disturbances in the province of Sindh and curfew was also imposed for a number of days, with the result that the traffic on this route remained suspended from 7th July, 1972 till 21st July, 1972 and therefore the collection of toll tax during this period was only Rs.10,460 whereas the plaintiff paid Rs.l , 57, 500 to the defendant as lease money for this period. On account of the alleged frustration of contract the plaintiff claimed remission of lease money to the extent of Rs.1,47,040 for these 14 days but his request was not acceded to. The defendant had also threatened the plaintiff to recover the amount of last two instalments besides forfeiting the security deposit. Hence this suit for recovery of Rs.1,47,040 on account of loss sustained due to the alleged frustration of contract and Rs.10,712.43 being the balance of security deposit even after appropriating the last two instalments.

3. The defendant filed a written statement in which the terms of the contract were admitted. It was also admitted that the plaintiff had paid 16 instalments of lease money out of 18 and that two instalments were outstanding. The payment of security deposit was also admitted. It was however, alleged that on account of non‑payment of the last two instalments the defendant was entitled to forfeit the security deposit and yet in addition to that recover those last two instalments. It was denied that the plaintiff was entitled to any remission or reduction on account of diminution of traffic in view of clause (9) of the contract.

4. On the pleadings of the parties the following issues were framed by the Court:‑‑

(1) Whether between 7‑7‑1972 and 21st July, 1972 the contract had become partly suspended /frustrated? If so its effect?

(2) Whether the total toll collection during the period from 7‑7‑1972 to 21‑7‑1972 was only Rs.10,460? If so, is the plaintiff entitled to remission of lease money for this period as alleged in view of clause (9) of lease agreement?

(3) Whether the defendant was not entitled to recover lease money for the said period as alleged in para 8 of the plaint?

(4) Whether assurance that plaintiff's above claim will be considered favourably was given by/or on behalf of the defendant? If so its effect?

(5) Whether Mr. Anwar Malik, the then Executive Engineer had agreed that the security deposit will be adjusted towards the last two instalments? If so its effect?

(6) Whether the plaintiff by depositing Rs.65,000 and requesting adjustment of the amount of security towards the balance of lease money, substantially discharged his obligations under the contract?

(7) Whether the defendants were entitled to forfeit the security deposit?

(8) To what relief, if any, is the plaintiff entitled?

5. My findings on these issues are as follows:‑‑

(1) As under.

(2) As under.

(3) Yes.

(4) No.

(5) No.

(6) Yes.

(7) No.

(8) Suit decreed only for a sum of Rs.10,712.43.

6. REASONS

The plaintiff has examined their partner Qassim as Exh. 5 and has produced the lease agreement Exh. 5/1 and correspondence between the parties. as Exhs. 6 to 17.

As against this the defendant has examined Allahdino Assistant Engineer Highway as Exh. 18.

7. The facts of the case are not materially disputed. The only dispute in this case is as to whether on account of reduction in traffic for the period of 14 days as alleged by the plaintiff and 8 days as alleged by the defendant there was a frustration of the contract and if so whether the plaintiff was entitled to any remission on that account.

8. Mr. S.M. Sadiq, Advocate for the plaintiff has relied upon section 56 of the Contract Act. This section relates to the discharge of contract. Certain principles and the doctrine of the frustration are embodied in this provision, which reads as under:‑‑

"56. An agreement to do an act impossible in itself is void.‑‑ A contract do an act which, after the contract to 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 unlawful.

Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promise did not know to be impossible or unlawful, such promisor must make compensation to such promise for any loss which such promise sustains through the non performance of the promise."

Mr. S.M. Sadiq then referred to the case of Parshoram Das Shankar Das v. Municipal Committee, Batala reported in A I R 1949 (36) East Punjab 301. The facts of this case were that Batala Municipal Committee leased out tonga stand to Parshoram Das for Rs.500. It was subsequenly found that tongawala instead of using those stands used private stands with the result that Parshoram Das got nothing by way of fees from tongawalas. Municipality did everything in its power to compel the tongawalas to use those stands but it could not succeed. It was held that the contract had become impossible and the plaintiff was entitled to refund of the amount in view of section 56 of the Contract Act.

Mr. S.M. Sadiq also relied upon the English case of Krell v. Henry reported in 1903(2) K.B. 740. In this case the defendant had agreed to hire from the plaintiff a flat for two days, on which dates coronation procession had to pass along that route. As the procession did not take place on those days the defendant declined to pay the balance of the agreed rent. It was held that the plaintiff was not entitled to recover the balance of rent fixed by the contract due to contingency which happened afterwards.

9. In my view neither section 56 nor the doctrine of frustration contained therein nor any one of these rulings applies to the present case for two reasons. The first is that it cannot be said that the contract did not make reference to the anticipated circumstances and therefore, the plaintiff was unaware of the risk involved in that contract. Clause (9) of the Contract Act reads as under:‑‑

"9. No remission or reduction of the amount secured to the lessor under this lease will be made by the lessee in respect of any diminution or reduction of the traffic over the Highway or in the income from the tolls collected under the lease due to any case whatsoever."

It is quite clear from the perusal of this clause that the defendant had already warned the plaintiff that no remission will be given to him on account of decrease in the traffic for any cause whatsoever.

10. The doctrine of frustration applies only when something which is unanticipated happens. It does not apply to a case where anticipated circumstances take place for which provision has already made in the contract. The second reason is that this was not a case of either complete frustration of contract or even material frustration of the contract. The contract was for a period of as many as 9 months. The decrease in the traffic was only for 8 days or at the most for the 14 days. The plaintiff has alleged that he had suffered a loss of f Rs.1,47,040 during this period and has furnished a detail of collections of these 14 days. He has not furnished the details of collections of the remaining 8 months and 16 days of the contract period. The presumption is that he had earned much more than the contracted amount during that period. It, therefore, cannot be said that the contract had completely or even materially frustrated on account of this decrease of traffic for a small period of 8 or 14 days. The doctrine of frustration will therefore not be attracted to such a case.

Reference in this connection may be made to the case of Banori v. S.K. Shakrullah where it was held that doctrine of frustration only applies if the disturbance goes to the extent of substantially preventing the performance of the whole contract. Interference leaving a considerable part capable of performance will got be an excuse.

Same view has been taken by a Division Bench of this Court in the case of Jaffer Brothers Limited v. Islamic Republic of Pakistan reported in P L D 1978 Kar. 585 where it was held as follows:‑‑

"In matter of contract, parties in Pakistan are governed by the Contract Act, 1872 and, the legal position is not different under that Act. In the case of an executory contract, where an uncontemiplated turn of events has occurred which makes further performance impossible or unlawful, the contract becomes frustrated at that point and, the parties are absolved from further performance under it. This is provided in section 56 of the Contract Act. But, if the Court holds that notwithstanding the uncontemplated turn of events, the contract does not become impossible to perform, the parties continue to be bound by the terms of the contract. The Court has no power or discretion to qualify the contract and depart from the express terms thereof in order to apply it to the changed circumstances on the ground that it seems just and reasonable to do so, because the change of circumstances was unforeseen by the parties at the time they entered into the contract or because the performance of the contract has become more onerous. In the present case, the contract had been fully performed and the supplier had been paid the price of the cement stipulated in the contract. It was a fixed price on liner terms, that is, it was agreed that the supplier was to be responsible for payment of stevedoring and lighterage charges. Assuming, as did the arbitrator, that the increase in labour charges awarded by the Industrial Court was not in the contemplation of the parties at the time they entered into the contract, nevertheless, the contract was not frustrated and it continued to bind the parties and, in fact, it was fully performed. The arbitrator was, therefore, not justified in departing from the express terms of the contract by awarding extra stevedoring and lighterage expenses to the supplier, on the ground that had the increase in labour charges been foreseen at the time the contract was concluded, the parties would have made provision for it and that, therefore, it was just and equitable to allow the increase for the supplier."

The view of the Privy Council that has been expressed in the case of T .0. T . Co. v. Uganda Sugar Company Limited reported in AIR (32) 1945 P C 144 is to the effect that whether frustration occurs depends on the nature of the contract and on the events which have occurred. In the case under ruling appellant company contracted to supply steel rail group Section to respondent Company, the specification defined precisely what were the goods but did not define the source. It was held that the contract was not frustrated because main source of the steel from which it could come i.e. Germany was closed due to war. There were many other possible sources of 'supply from manufacturers in England, America, Belgium and France besides Germany.

I am, therefore, of the clear view that the plaintiff is not entitled to refund of the amount of Rs.1,47,040 on account of the decrease in the traffic for this short period.

11. So far as the question of recovery of last two instalments is concerned, no doubt there was a provision for forfeiture of the earnest money in case there was default in payment of instalments, but it may be pointed out that the earnest money which was to the tune of Rs.2,50,000 was nearly sufficient in itself to discharge the two instalments. Moreover, the plaintiff had also paid Rs.65,000 towards the last two instalments, and had thus to his credit with the defendant a sum, which was more than the last two instalments. Hence it would appear that the plaintiff was entitled, on the contrary, to the refund of excess amount, that is a sum of Rs.10,712.43.

12. Reliance was rightly placed by the counsel for the plaintiff in the case of Province of West Pakistan v. M/s Mistri Patel & Co. reported in P L D 1969 S C 80, where it was held that despite express stipulation in a contract the Court can on equitable principles relieve defaulting buyer from forfeiture of earnest money if circumstances of the case justify such a course.

In the present case the plaintiff had successfully carried out all the terms and conditions of the contract and paid all the instalments regularly except the last two instalments. The last two instalments, as already pointed out, 'were nearly equal to the amount of the security deposited. It would be very harsh to the plaintiff if in addition to the forfeiture of security deposit, he was compelled to pay the last two instalments. Hence I am of the clear view that defendant is not entitled to forfeit security and still recover the last two instalments under these circumstances.

13. The result is that the plaintiff's suit is decreed but only to the extent of Rs.10,712.43. The costs of the suit shall be borne by the plaintiff.

A . A . / K‑49 / K Suit partly decreed.