P L D 1964 (W (PLP)

4. Mr. Jan Muhammad Dawood, the learned counsel for the sellers contended that the fixation of the price of cotton seeds by the Central Government on the 10th November 1958 was without jurisdiction. He argued that item‑C of para. 2 of the Martial Law Regulation No. 42, which mentions selected foodgrains as one of the commodities, the price of which was to be controlled by the Central Government, did not include cotton seeds and, therefore, the order of the Central Government dated 10th November 1958 fixing the maximum price of cotton seeds at Rs. 12 was in excess of their powers. He further pointed out that amongst the goods specified in para. 4 of the Regulation edible seeds were not included. This argument assumes that the categories in paras. 2 and 4 of the Martial Law Regulation No. 42 are distinct. That is not so. Under para. 2 the Central Government had been directed to control the prices of imported goods, goods manufactured within Pakistan and selected food grains. Para. 4 specifically mentions various imported goods, goods manufactured within Pakistan and selected foodgrains about which the Central Government was specifically directed to fix the prices. Therefore, the prices of other goods which are not mentioned in the list contained under para. 4 would still be fixed by the Central Government if they came within the category of the three items contained under para. 2 if the Central Government so ordered. All that para. 4 did was to specifically mention certain commo dities and of these the Central Government was bound to fix the prices. Therefore, if `cotton seeds' came within the definition of "foodgrains", the Central Government would have the powers to control its price even though if it was no specifically mentioned under para.

4. That cottonseed which is covered by the description "edible seeds" was intended to be covered by the description "foodgrains" becomes clear by the reconstituted Martial Law Regulation No. 42, for under para. 4 thereof edible seeds were expressly mentioned under item (3l. However, even if it was found that edible seeds could not come within the expression "foodgrains" the case of the sellers is not advanced because, as I have pointed out, edible seeds are expressly mentioned under para. 4 of the reconstituted Martial Law Regulation No. 42 and para. 10 thereof provides that the prices of goods mentioned in para. 4 will be deemed to have come into force from the date of their notification. In the present case the price of cotton seeds was fixed on 10th November 1958 by the Central Government and the press note of the Central Government was published on the 11th of November in the newspaper and on the 14th in the Gazette. Para. 10 of the reconstituted Martial Law Regulation which was enacted on 6th December 1958 gives retrospective effect to the prices fixed by the Central Government of the goods mentioned under para. 4 of the notification. The order of the Central Government dated 10th November 1958 by which the price of cotton seeds was fixed therefore becomes valid and effective as from the date of the notification regardless of the fact whether cotton seed was or was not covered under the original Martial Law Regulation No.

42. I am, however, of the opinion that it was covered by the expression "foodgrains" in that Regulation.

5. The next contention of Mr. Jan Muhammad Dawood was that this Court should not allow the retrospective operation provided by para. 10 of the reconstituted Martial Law Regulation No. 42 inasmuch as it affects vested rights. That question really arises when the point of construction is raised. It is true that it is presumed that the Legislature does not intend what is unjust. The Courts have leaned against giving retrospective operation to statutes which affect vested rights. But where the intention is g clear and the Legislature, assuming it had power, has enacted a legislation and made its operation retrospective it is not for the Courts to decline to give effect to it. Mr. Jan Muhammad Dawood was not able to contend that the Chief Martial Law Administrator did not have the power to enact para. 10 of the reconstituted Martial Law Regulation No.

42. That being so, the argument loses all its force.

6. The next question is as to the date on which the price fixed by the Central Government of cotton seeds became effective. Mr. Jan Muhammad Dawood contended that under the original Martial Law Regulation 42 it was expressly provided by para. 11 that the prices determined under the said Regulation were to come into force from 17th November 1958 and, therefore, the prices fixed by the order dated 10‑11‑58 did not become effective before the 17th of November. This argument loses sight of para. 10 of the reconstituted Martial Law Regulation which overrides para. 11 of the original Regulation and it is expressly stated in para. 1 that if any Martial Law Regulation is repugnant to the provisions of this Regulation (reconstituted Regulation), it shall have no effect to the extent of that repugnancy. When this was pointed out to the learned counsel he took up the position that in any case the control price did not become effective before the Gazette Notification dated 14th November 1958. I do not agree. The Government made an order on the 10th of November and issued a press note which was published in the newspaper on 11th November 1958. In my opinion, therefore, the issuance of the press note and the publication thereof in the newspaper amounted to a notification within the meaning of para. 10 of the reconstituted Regulation and became effective as from the 11th November 1958. This interpretation is also in consonance with the notification dated 7th October 1958 issued by the Chief Martial Law Administrator, para. 2 of which laid down that Martial Law Regulations and Orders will be published in such a manner as is conveniently possible. My finding, therefore, on the first issues is that the price of cotton seeds was validly fixed and became effective from 11th November 1958.

7. I then come to the issue No. 2 which is the most important issue in the case. It was the case of the buyers that inasmuch as the price of cotton seed was controlled in pursuance of the Martial Law Regulation No. 42, contravention whereof was made punishable by imprisonment, the performance of the contract at the price of Rs. 17‑8‑0 per maund had become either impossible or unlawful and for that reason the contract was rendered void. The contention was based primarily upon section 56 o the Contract Act. I would like to reproduce it straightaway : "

56. An agreement to do an act impossible in itself is void. 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 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."

8. In some of the decisions cited before me the question of frustration of contract has been dealt with by elaborate reference to English Law on the subject. There have been weighty pronouncements from high judicial authorities and there has been a certain amount of controversy on the subject. The oft repeated theory upon which the doctrine has been based has been the theory of an implied term in the contract. This implication is imputed by law to the parties to regulate a situation which they would have done had they thought of it. In dealing with this basis of an implied term in the contract Viscount Simon in the Case of Joseph Constantine v, Imperial Smelting Corporation (1942 A G 154), described it as most satisfactory. This is what he said "The doctrine of discharge from liability by frustration has been explained in various ways sometimes by speaking of the disappearance of a foundation which the parties assumed to be at the basis of their contract, sometimes as deduced from a rule arising from impossibility of performance, and sometimes as flowing from the inference of an implied term. Whichever way it is put, the legal consequence is the same. The most satisfactory basis, I think, on which the doctrine can be put is that it depends on an implied term in the contract of the parties."

9. Lord Justice Scrutton had put it in a more guarded fashion, in the case of re‑Comptoir (1944 A C 265 at pp. 275, 276). This is what the learned Judge said :‑ "The Court ought not to imply a term merely because it would be a reasonable term to include if the parties had thought about the matter, or because one party, if he had thought about the matter, would not have made the contract unless the term was included ; it must be such a necessary term that both parties must have intended that it should be a term of the contract, and have only not expressed it because its necessity was so obvious that it was taken for granted."

10. Lord Wright in the case of Denny, Mott and Dickson Ltd. v. James B. Fraser & Co. Ltd. (1944 A C 265 at pp. 275, 276), dealing with this question took the view which he himself described as somewhat heritical that the doctrine is invented by the Court to supplement the defect of the actual contract. I am tempted to quote from his lordship's judgment the following passage :‑ "The Court has formulated the doctrine by virtue of its inherent jurisdiction, just as it has developed the rules of liability for negligence, or for the restitution or repayment of money where otherwise there would be unjust enrichment. I find the theory of the basis of the rule in Lord Summer's pregnant statement (loc. cit.) that the doctrine of frustration is really a device by which the rules as to absolute contracts are reconciled with the special exceptions which justice demands. Though it has been constantly said by high authority, including Lord Summer, that the explanation of the rule is to be found in the theory that it depends on an implied condition of the contract, that is really no explanation. It only pushes back the problem a single stage. It leaves the question what is the reason for implying a term. Nor can I reconcile that theory with the view that the result does not depend on what the parties might, or would as hard bargainers, have agreed. The doctrine is invested by the Court in order to supplement the defects of the actual contract. The parties did not anticipate fully and completely, if at all, or provide for what actually happened. It is not possible, to my mind, to say that, if they had thought of it, they would have said : `Well, if that happens, all is over between us'. On the contrary, they would almost certainly on the one side or the other have sought to introduce reservations or qualifications or compensations. As to that the Court cannot guess. What it can say is that the contract either binds or does not bind."

11. It, however, appears to me that having regard to the express words of section 56 of the Contract Act it is not really necessary to wander into the English decisions on the subject though there is no doubt that the pursuit may be extremely fascinating and instructive. Mulla in his Commentary on the Contract Act has observed that‑

Nothing resembling this section has been found among the materials known to have been used by the framers of the Act. It varies the Common Law to a large extent, and moreover the Act lays down positive rules of law on questions which English and American Courts have of late more and more tended to regard as matters of construction depending on the true intention of the parties. English authorities, therefore, can be of very little use as guides to the literal applications of this section. We must, therefore, turn to the section itself and the question which falls for determination in this case is whether by reason of some event which the buyers could not prevent the contract became impossible of performance or that performance became unlawful.

12. Now, in the present case, when the parties entered into this contract the price of cotton seed had not been controlled. The parties entered into the contract on the expectation of the normal state of the market at the time of delivery of the goods, but then came the Martial Law Regulation No. 42 and the maximum price of cotton seeds was fixed at Rs. 12 per maund. The contract rate was Rs. 17‑4‑0 per maund. Para. 9 of the Regulation provides that any sale or resale above the prices determined under this Regulation will constitute black-marketing for the purposes of Martial Law Regulation No. 26 and para. 10 provides that the contravention shall be punishable under that Regulation. This Regulation contains heavy punishments for an offence of black-marketing. It is admitted that the contract in suit was merely an agreement to sell and according to sub clause (4) of section 4 of the Sale of Goods Act it would become sale when the conditions are fulfilled subject to which the property in the goods was to be transferred. The property in the goods in this case would have passed to the buyers after the sellers had put them into the railway wagons, obtained a railway receipt and handed over this receipt to the buyers. This stage was never reached so that if the sale was to take place at the contracted price of Rs. 17‑4‑0 per maund it would clearly be a contravention of the Martial Law Regulation No. 42 and punishable under Martial Law Regulation No. 26 due to the fixation of maximum price at Rs. 12 per maund. An agreement can be rendered void either initially on the ground of its object or consideration being unlawful or it may be so rendered after the contract is made by reason of some event which the promissee could not prevent rendering the act unlawful. This is what section 56 of the Contract Act provides. Section 23 enumerates the reasons upon which an agreement becomes unlawful and one of the reasons is where the consideration or object of an agreement is forbidden by law. The payment of price at the contracted rate was forbidden by law after the agreement was executed and before it was performed. Such a case is clearly provided for under section 56 which renders the contract void. A similar question arose directly in a case before Calcutta High Court reported in Jagadish Prasad Pannalal v. Produce Exchange Corporation Ltd. (A I R 1946 Cal. 245). In that case a contract was entered into between a firm and a company for the purchase of one wagon of maize starch at the rate of Rs. 77 per cwt. F. O. R. Jagadhari. The maximum price for maize starch was then fixed by the Government of India at Rs. 78 per cwt. The goods were loaded on railway wagons at Jagadhari on 27th December 1943 by the sellers who were shown as consignee in the railway receipt. On 3rd January 1944 the railway receipt was endorsed over to the buyers who paid the balance of the price of the goods on that date. In the meantime on 16th December 1943 a new order was passed by the Government of India fixing the maximum price of maize starch at Rs. 48 per cwt. This order was applicable to all contracts in which delivery was to be given on or after 1st January 1944. The buyers then filed a suit to recover the difference between the contract price of Rs. 77 per cwt. and the maximum price of Rs. 48 per cwt. It was held that the fixation of price at Rs.48 per cwt. by the Government affected the contract and that the contract, as it stood, could not be performed without infringing the law and hence under section 56 of the Contract Act the contract became void on 16th December 1943, that is the date on which the second Government order was promulgated.

13. A similar point arose in a case before a Bench of the Dacca High Court' in Qutubuddin v. Abu Jaffar (P L D 1963 Dacca 304). That case arose out of an agreement of lease of land but the principle of the decision is applicable to the present case. In that case a memorandum of agreement of lease in respect of certain lands was executed on 25th November 1955 and on 16th December 1955 a notification was issued by the Government under sub section (3) of section 17 of the East Bengal State Acquisition and Tenancy Act. By virtue of this notification the subletting of the properties in dispute became prohibited as from the date of the notification and any subletting of such properties on or after the said date was to be not only rendered null and void but also entailed forfeiture of the land. In this case the agreement of lease had been executed before the date of the said notification and the question arose whether the said agreement could be specifically enforced in face of the total prohibition against subletting under section 75‑A of the aforesaid Act. It was held with reference to sections 23 and 56 of the Contract Act that even though the contract of lease had been made prior to the coming into operation of the prohibiting statute and was lawful on that date, its object became unlawful because of the prohibition contained in section 75‑A of the Act named above. The contract was, therefore, frustrated and could not be specifically performed.

14. My finding, therefore, on issue No. 2 is that the agreement in question was rendered void by reason of the succession of the maximum price of cotton seeds under Martial Law Regulation No. 42 which had the effect of prohibiting the sale at a higher price such as the one agreed to between the parties and provided for punishment for any contravention. This finding, is, of course, upon the basis that the buyers' liability for damages had not already arisen before the control of prices under the Martial Law Regulation No.

42. That question is the subject‑matter of issue No. 3 with which I shall now proceed to deal.

15. Issues 3 and 4 are so interconnected that I will deal with them together. The contention of Mr. Jan Muhammad Dawood, the learned counsel for the sellers, was that before the prices fixed under the Martial Law Regulation No. 42 became effective, the buyers had already incurred liability for damages for breach of contract and the transaction was past and closed and could not be re‑opened by reference to price control which, according to him, took effect after the liability had been squarely fixed upon the buyers. In order to understand this argument it would be necessary to revert to some of the facts. It may be recalled that it was on 5th November 1958 that the sellers wrote to the buyers as per Exh. 21 asking the buyers to send their representative to the factory for purposes of weighment. The question of delivery to the buyers' representative did not arise having regard to the nature of the contract. It was contended that time was of the essence of contract in this case and in so far as the contract provided for continuous delivery from the first ginning and the first ginning started on the 5th of November as stated in the seller's letter, Exh. 21 and the buyers failed to send their representative to the factory at Setharja they were in breach. Reference was made to the delivery clause of contract and the special clause attached to it. This may be reproduced:‑ Delivery: Weighment to be made in any of the Factory Godowns or Compound at Setharja and delivery to be given at any time between of 1st Ginning as soon as possible after Buyer's application for it. If complete delivery is not taken before the final date, the balance of Buyer's goods will be weighed and appropriated by the sellers, when it shall be optional for the sellers to keep the goods in their Godown and/or Compound at Buyer's risk and expense (recovering from the Buyers godown‑rents at the reasonable rate) or to take any other steps they may consider advisable for the protection of their interest, holding the Buyers responsible for all losses resulting therefrom. The acceptance at any time by the Buyers of the tender by the sellers of a quantity less than that contracted for, shall not under any circumstances be taken to cancel the contract as to the balance to be delivered. The said contract has been made with the condition that sellers have to give continuous delivery of first ginning to the buyers. If some delay is caused in securing wagons due to shortage of wagons and in consequence thereof a stock of goods to the extent of 10 000 maunds is accumulated the sellers cart bring the later produce in their own use." These two clauses read together and particularly the special clause which was written in hand at the foot of the contract clearly show that the sellers were charged with the obligation of giving continuous delivery to the buyers from the first ginning. The two clauses then provide as to what was to happen if complete delivery was not taken by the buyers or if some delay was caused in delivery on the part of the sellers for want of availability of wagons. If the ginning in this case started on the 6th of November, I cannot bring myself to hold that merely because the buyers did not send their representative until the 10th or the 12th of November, this factor by itself would amount to breach of contract so as to relieve the sellers from the obligation to give delivery and to make the buyers liable in damages for breach of contract. There is provision in the contract for storing of the goods in their godown and if 10,000 maunds were produced and accumulated and wagons were not available, the sellers were allowed to bring the later produce in their own use. Therefore, if there were no other circumstances, the mere fact of not sending a representative for 4 or 5 days even for a week would not by itself entitle the sellers to put an end to the contract and claim damages. Oral evidence has been led by the sellers with regard to the production capacity of their factory, but that in my opinion is rather exaggerated. As for the time within which the sellers' representative must reach the factory no time was fixed under the contract and, therefore, it could have been done within a reasonable time. The oral evidence led on this point has not impressed me. I cannot consider one week as an unreasonable time in the circumstances of the case and having regard to the terms of delivery, storage and disposal by the sellers. We then come to Exh. 22 which was a letter written by the sellers to the buyers on 10th November 1958 and in this they called upon the buyers to send their representative within 48 hours and take delivery of the goods within 3 days of the receipt of this letter, failing which they will have the right to sell the contracted goods in the market at the risk and account of the buyers. The buyers did not send their representative and replied on 12th November (Exh. 23) saying that the contract was governed by Martial Law Regulation No. 42 with which both the parties must comply. On the 14th the sellers replied to this letter as per Exh. 24 and they said that in view of the attitude of the buyers they had been compelled to resell the entire quantity of 51,000 maunds at the rate of Rs. 12 per maund. The stand taken initially was that this sale was to their own oil mills which is situated within the compound of the same factory at Setharja where the ginning was being done. There was, of course, no such sale for the simple reason that a person cannot sell something to himself. Even factually this position was not correct and, therefore, the sellers wisely abandoned this case and took the stand that they claimed damages upon the basis of difference between the contract rate and the rate prevailing on the date of breach. This has been stated to be 12th November 1958, that is the day on which the buyers wrote their letter Exh.

23. That has been pleaded as the date on which the cause of action arose.

16. For the reasons given I hold that the buyers did not commit breach merely because they failed to send their representative to the factory between the 6th and the 12th of November 1958. The next question is and it was upon this that Mr. Jan Muhammad Dawood mainly relied on this part of the case that this was a case of an anticipatory breach by the buyers and, therefore, regardless of the fact whether the sellers had the capacity and were in a position to give complete delivery by 14‑11‑58 (which is the date of Exh. 24) they were entitled to put an end to the contract after the expiry of 3 days from the receipt by the buyers of the sellers' letter dated 10th November 1958, Exh.

22. It was urged that time was of the essence of the contract and in so far as the buyers were not prepared to pay the contract price and take delivery they had repudiated the contract and the sellers were justified in putting an end to it. I agree with the learned counsel that time was of the essence of the contract in this case. The terms of delivery make it abundantly clear. It is true, no specific date for the commence ment of delivery was fixed but the contract expressly provided that the delivery was to be given from the first ginning and, therefore, when the first ginning started on 6th November 1958 the buyers were entitled to continuous delivery and the only ground upon which the sellers would avoid it was the non‑availability of railway wagons. In the first place, this was a commercial contract and secondly the terms of delivery as reproduced above make it abundantly clear that it was the intention of the parties that time was of the essence of the contract. A considerable amount of arguments was advanced on behalf of the buyers that there was no repudiation by them of the contract and that their letter of 10th November merely communicated the fact to the sellers that the contract was governed by the Martial Law Regulation No.

42. Now, if the buyers were not prepared to pay the contract price it would no doubt amount to repudiation of the contract. The price in a contract is amongst other things the foundation of it and if a buyer refuses to pay the contracted price it is purile for him to say that he was not repudiating the contract. Therefore, apart from the consequences of the Martial Law Regulation and the fixation of prices by the Government in pursuance thereof, there can be little doubt that the refusal of the buyers to pay the H contracted price would amount to repudiation of the contract, entitle the sellers to put an end to it and claim damages under the law of contract. Once a buyer repudicated the price it would not be necessary for the seller to go about doing things for the performance of the contract and produce the required quantity of the goods. Upon such a repudiation they would be entitled to treat this as an anticipatory breach and put an end to the contract and claim damages if they were so entitled. Section 39 of the Contract Act is clear upon that point and if any further authority was needed reference may be made to a judgment of the Judicial Committee in the case of Ram Gopal v. Dhanji Bhatia (55 I A 299). In that case the owners of a cotton ginning mill had contracted to put that mill at the disposal of the plaintiff, a cotton merchant, for half of its working time at fixed rates. Before any of the plaintiff's cotton had been taken by the mill the defendants repudiated the contract and the plaintiff sued for damages. It was held that this was a case of anticipatory breach and the plaintiff was entitled to recover damages and that he was not bound to buy cotton and have it ginned at other mills for the purposes of mitigating damages.

17. Apart from the letter dated 12th November 1958, Exh. 23, Hashim Bhai, the managing director of the Bengal Oil Mills (buyers) made a candid statement in the witness box and the matter was not left in any doubt. He admitted that he would not have taken the cotton seeds at the price of Rs. 17‑4‑0 per maund from 5‑I1‑58 to 14‑11‑58 inclusive, not because he wanted to get out of the contract but because he could not carry out the contract contrary to the provisions of Martial Law. I have no doubt that if the price had not been fixed by the Central Government under the Martial Law Regulation No. 42 and if that factor had not affected the contract, as I have held it did, I would have had no hesitation in granting the sellers' claim for damages at the rate claimed by them. But as I have already held under Issue No. 1 that the price had been validly fixed at Rs. 12 per maund and had become effective from the 11th of November the contract was rendered void and the buyers were not under an obligation to pay the contracted price. The position would have been the same even if the control price became effective as from 14‑11‑

58. In this view of the matter the sellers' claim for damages cannot be entertained.

18. For the reasons given my findings on issue No. 3 is that the buyers had not become liable for damages before the price control of contract goods under Martial Law Regulation No.

42. On issue No. 4 my finding is that time was of essence of the contract, but as .the contract itself was rendered void the question of putting an end to it or claiming damages for non performance does not arise.

19. Issue No. S.‑Relates to the claim of the buyers for the purpose of the Bardana. It is not disputed by the sellers that Bardanas were received. The buyers' evidence that the two lots contained 15,000 Bardanas and that the price of it was Re. 1 per Bardana has not been shaken. I, therefore, find that the buyers had supplied 15,000 Bardanas and that its value was Rs. 15,000.

20. Issues Nos. 6 and 7.‑It was conceded by Mr. Jan Muhammad Dawood that if the contract was held to have been frustrated or rendered void the sellers would be bound to refund the deposit money of Rs. 50,

500. As I have found in favour of the buyers on the point I hold that they are entitled to the refund of the deposit amount of Rs. 50,

000. It follows that the sellers' claim for damages must be rejected. I answer issues 6 and 7 accordingly.

21. Issue No. 8.‑.In view of my findings I decree the plaintiffs' claim for Rs. 50,500 being the deposit amount and the further claim for Rs. 15,000 being the value of the Bardanas. On the question of costs and interest it must be remembered that this was an extraordinary situation created by the certain fixation of prices by Central Government. The sellers must have suffered heavy loss because of the abrupt fall of price brought about by price control. The question as to the liability was a difficult one and could not have been easy to determine. I have further taken note of the fact that though the buyers were not prepared to pay the contracted price they were bullying the sellers through the agency of the Civil Supplies Department to make delivery of the contracted goods at the rate of Rs. 12 per maund, a claim which was completely groundless in view of the fact that the contract itself had been frustrated and nothing out of it could be salvaged. I am, therefore, of the opinion that this is a fit case in which the parties should bear their own costs in both the suits. For the same reason I order that the decretal amount as ordered above shall carry interest at 6Y0 only from the date of the judgment. In the result Suit No. 176/59 is dismissed with no order as to costs and the Suit No. 74/59 is decreed in the terms stated above. K. B. A. Suit dismissed.