Citation Name : 2014 SCMR 1728 SUPREME-COURT-OF-INDIA Side Appellant : MARY Side Opponent : STATE OF KERALA S. 56---Doctrine of frustration---Applicability---Statutory contract---Performance of contract becoming impossible---Consequences for non-performance of statutory contract mentioned in the contract---Whether doctrine of frustration would apply---Appellant was a successful bidder in a tender for the right to vend arrack in certain shops---Appellant deposited 30% of the bid amount in accordance with relevant statutory rules regarding disposal of shops through auction (auction rules)---Auction rules provided for forfeiture of earnest deposit money in case of breach of contract---After the bid deposit, it was discovered that the residents of the area were against the establishment of an arrack shop because of religious sentiments---Residents of the area offered physical resistance to the opening of shops and the law and order enforcing agencies could not assure smooth conduct of business---Appellant believed that it was impossible for her to run the arrack shop and she wrote to the administrative authorities requesting them to not to confirm the sale in her favour as it was impossible for her to execute the privilege for the reasons beyond her control---Appellant also requested to refund the deposit already paid on the plea that the proposed contract may be treated as rescinded---Department declined the request of the appellant to refund the deposit by virtue of the auction rules which allowed the State to forfeit the entire deposit amount---Further, a notice was issued to the appellant to deposit the rest sum of money and enter into a permanent agreement---Legality---Question for determination, in the present case, was whether the appellant could invoke the doctrine of frustration or impossibility or whether she would be bound by the terms of the statutory contract---Doctrine of frustration excluded ordinarily further performance where the contract was silent as to the position of the parties in the event of performance becoming literally impossible---However, a statutory contract in which party took absolute responsibility could not escape liability whatever may be the reason---In such a situation, events would not DISCHARGE the party from the consequence of non-performance of a contractual obligation---Further, in a case in which the consequences of non-performance of contract was provided in the statutory contract itself, the parties shall be bound by that and could not take shelter behind S. 56 of the Contract Act, 1872---Auction rules, in the present case, in no uncertain terms provided that on the failure of the auction purchaser to make deposit or execute such agreement temporary or permanent the deposit already made by him towards earnest money and security shall be forfeited to Government---Appellant had not carried out her obligations as provided in the auction rules and consequently the State was entitled under the auction rules to forfeit the security money---Appeal was dismissed accordingly.
Posted on: Tue, 09 Dec 2014 18:44:57 +0000
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