P L D 1965 (W (PLP)

WAHIDUDDIN AHMED, J.‑

These two connected Regular First Appeals bearing Nos. 92 of 1960 and 206 of 1961 arise out of two cross‑suits filed by the parties. Appellants had filed Suit No. 79 of 1959 against the respondents for the recovery of Rs. 65,000 as damages which was dismissed by the Second Assistant Judge, Nawabshah by judgment dated 9th March 1960, against which First Appeal No. 92 of 1960 had been filed. On the dismissal of this suit respondents filed Suit No. 31 of 1960, for the recovery of Rs. 6,500 paid as deposit towards the contract entered into between the parties. By judgment dated 30th September 1961, the First Class Sub‑Judge, Nawabshah decreed the suit in favour of the respondents. First Appeal No. 206 of 1961 has been filed from this judgment and decree. This judgment will dispose of both the appeals in which common questions of fact and law are involved.

2. The material facts for the disposal of these appeals may be briefly stated. By two contracts dated 17th August 1958, and 18th August 1958, the appellants had agreed to sell 10,000 and 3,000 maunds (N. T. R.) of cotton seed at the rate of Rs. 17 and Rs. 16/12 per maund including sales tax respectively. The goods covered by the first contract were to be supplied out of the first ginning of the season 1958‑

59. After the supply of 10,000 maunds, the goods of the second contract were to be supplied. The appellants' ginning factory started ginning the cotton from 21st October 1958. In the meantime Martial Law had been pro claimed and on 7th October 1958, Martial Law Regulation No, 26 was promulgated making black‑marketing of any commodity or goods a punishable offence for which the maximum punishment is 14 years, R. I. By Martial Law Regulation No. 42 promul gated on 1st November 1958, published in the Gazette of Pakistan Extraordinary dated 4th November 1958, it was provided that the only lawful prices of the commodities covered or to be covered thereunder were to be that which would be fixed under its pro vision. In para. 9 of this Regulation it was further provided that any sale or re‑sale above the prices determined under this Regulation will constitute "black‑marketing" for the purposes of Martial Law Regulation No.

26. By notification No. BP/217/ 58, dated 10th November 1958, published in the Gazette of Pakistan Extraordinary dated 14th November 1958, the Martial Law Authorities fixed Rs. 12 per maund as price of the cotton seed for outside Karachi, as a result of which the respondents refused to purchase the contracted goods at the rates agreed upon between the parties by the above‑mentioned two contracts. Res pondents, however, expressed their willingness to purchase the contracted goods at the rate of Rs. 12 per maund fixed by the Martial Law Authorities.

3. The appellants on the refusal of the respondents filed First Class Suit No. 79 of 1959 for the recovery of Rs. 65,000 as damages from the respondents. The suit was mainly contested by the respondents on the ground that the contracts had been frustrated and became incapable of perform ance in view of the provisions of the Martial Law Regulation by which the price of the contracted goods has been fixed at a much lower figure. The learned Second Assistant Sub‑Judge, Nawabshah by judgment dated 9th March 1960, accepted the plea of the respondents and held that in view of the Martial Law Regulations the respondents were not bound, to purchase the goods at the stipulated rate. It was further held that for this reason the respondents could not be burdened with any damages suffered by the appellants.

4. On the dismissal of this suit the respondents filed First Class Suit No. 31 of 1960 for the recovery of Rs. 6,500 paid by them as advance towards the performance of the contract to the appellants. It is not disputed that towards the first contract the appellants received Rs. 5,000 in advance and towards the second contract they received a sum of Rs. 1,

500. It was contended on be half of the respondents in this suit that the contracts in dispute could nod be performed for no fault of the respondents and in law the appellants were bound to return the amount deposited with them towards the performance of the contract. This plea was accepted by the learned First Class Sub‑Judge, Nawabshah by judgment dated 30th September 1961. By this judgment the learned sub ordinate Court passed a decree for the refund of Rs. 6,500 with costs against the appellants. The appellants have challenged both the decisions in the above‑mentioned two appeals before us.

5. In support of the First Appeal Mr. Dingomal the learned counsel for the appellants has contended that the respondent had committed breach of the contract much before the prices were fixed under Martial Law Regulation No. 42 and, therefore, were liable td pay the damages suffered by the appellants. In order to appreciate this point‑ it is necessary to state certain facts brought on the record by the parties. It is not disputed that the two contracts were entered into on 17th August 1958, and 18th August 1958, between the parties. The agreement (Exh. 25‑B) for the sale of 10,000 mds. of cottonseed was at the rate of Rs. 17 per maund whereas 3,000 mds. of cottonseed under the second contract (Exh. 25‑C) were agreed to be sold at Rs. 16/ 12 per maund. It is also an admitted position that 10,000 mds. covered by the first contract was to be supplied from the first ginning of the appellants' factory in the season of 1958‑

59. The 3,000 mds. of the second contract was to be supplied after the performance of the first contract. It is also in evidence that the appellants' factory started ginning in 1958‑59 season from 21st October 1958, (vide Exh. 30‑D). It was faintly argued that the goods of the first contract were ready on the 23rd of October 1958, the date on which the respondents were called upon to take its delivery but on the evidence produced on the record it is quite obvious that on this date the goods could not be ready. In support of their pleas the appellants examined no oral evidence. Respondents examined D. W. Umer (Exh. No. 30) its Manager. He deposed that the daily output of the appellants' ginning factory was between 300 to 350 mds. of cottonseed every day. It is, there fore, quite impossible to reach the conclusion that on 23rd October 1958, when the appellants called upon the respondents to take the delivery of the goods of 10,000 mds. so much quantity had been ginned at the appellants' factory. In our view the finding of the learned subordinate Court that the appellants could not manufacture more than 700 mds. of cottonseed within two days is unassailable. Similarly that finding that the preparation for the delivery of 10,000 mds. of cottonseed could not be made before 10th November 1958, is also perfectly correct.

6. Mr. Dingomal the learned counsel for the appellants contended that the learned subordinate Court should have held that the respondents repudiated the contract and committed the breach on 14th November 1958, vide letter (Exh. 30‑M). In order to appreciate this argument it is necessary to consider certain correspondence which passed between the parties before this letter was sent by the respondents. As already stated on 19th October 1958, the appellants sent a telegram to the respon dents informing them that their factory will start functioning from 21st October 1958. This telegram was acknowledged by letter (Exh. No. 30‑E) dated 21st October 1958, by the respondents. By this letter the appellants were informed that they had sold the goods purchased from them to another merchant and they were if pressing upon the purchaser to send the Bardana and their representative at an early date. On 23rd October 1958, the appellants by telegram (Exh. 30‑C) informed the respondents that WY were not concerned with their re‑sale and called upon them to take delivery immediately. This telegram was acknow ledged by the respondents vide letter (Exh. No. 30‑L) dated 26th October 1958, informing the appellants "that they were not oblivious of the present situation of the cottonseed, since the ginner9, agents and the millers are inter‑dependent upon each other and this unbroken link has "been affected as a result of fixation of prices of oils. The matter was under active consideration and they would inform the appellants of the result of these negotiations on the reply from their millers". On 14th November 1958, the respondents by letter (Exh. 30‑M) brought it to the notice of the appellants a letter received from their pur chasers. The material portion of the contents of the letter is as under:‑‑ "We have to draw your kind attention to the fact which is already known to you, that on account of prevailing emergency all outstanding contracts have become frustrated and cannot be performed." Appellants' counsel has referred to this letter in support of his contention that the respondents committed the breach on 14th November 1958. In our view this contention is not sound because it is only an intimation of the letter received by the respondents from their purchasers. The respondents have not stated in this letter that they were not prepared to take delivery of the goods or the contract has been brought to an end. No such inference can legitimately be made. On the other hand from the documents produced by the parties it is quite clear that the matter remained under discussion between them till about the 16th of December 1958. On 20th November 1958, appellants by telegram (Exh. 30‑B) informed the respondents that the cottonseed was ready and called upon them to take the delivery of the goods immediately and threatened that on default the goods would be sold at their risk. By letter (Exh. No. 30‑G), dated 22nd November 1958, respondents in formed the appellants that they were prepared to take the delivery of the goods at Government controlled rate and called upon them to honour the contract within seven days. This was followed by another letter dated 1st December 1958, (Exh. 30‑J) calling upon the appellants to refund the amount paid by them in advance as they had failed to deliver the contracted goods at the controlled rates. It was by this letter that the respondents put an end to the contract. As expected this was followed by claim and counter‑claims. Appellants' Advocate by letter (Exh. 30‑F) dated 3rd December 1958, called upon the respon dents to pay the damages, which was challenged in respondents, reply dated 6th December 1958, (Exh. No. 30‑K). Exh. 30‑N, letter dated 8th December 1958, is the reply of the respondents to the appellants' Advocate's letter in respect of the damages claimed from them. Exh 30‑A dated 13th December 1958, is the appellants' telegram informing the respondents that they were selling the goods at their risk. Exh. 30‑H is a letter dated 16th December 1958, by the respondents informing the appellants that they were willing to take the delivery of the goods and called upon them to deliver the goods at the controlled rates. It is thus perfectly clear that so far as the first contract is concerned the appellants offered the goods to the respondents by telegram dated 20th November 1958, (vide Exh. 30‑B) and the contract was put to an end by the respondents letter dated 1st December 1958, (vide Exh. 30‑J). The chic of breach, therefore, would be 1st December 1958, and not 14th November 1958, as argued by the learned counsel for the appellants. At this stage it would be convenient to mention that the appellants had lest no evidence to establish that at any time the goods of the second contract were offered to the respondents.

7. It will, however, be noticed that in the present case the question whether the date of the breach of the contract is 14th November 1958, or 1st December 1958, is not of much importance because Mr. Dingomal, the learned counsel for the appellants, has contended that at no time the Martial Law Authorities validly fixed the price of the cottonseed under the relevant Martial Law Regulation. The learned counsel contended that Martial Law Regulation No. 42 came into force on 17th November 1958. Under it no power was given to the Central Government to fix the price of the cottonseed and edible seeds. He further contended that the price of the above‑mentioned goods fixed on 10th November 1958 published in the Gazette Extra ordinary dated 14th November 1958 was' of no legal effect because by that time no power had been given to the Central Govern ment for fixing the price of the cottonseed or the edible seeds. In respect of the re‑constituted Martial Law Regulation No. 42 which came into force on 6th December 1958, the learned counsel admitted that in para. 4 of the Regulation edible seeds were added but he contended that no notification was issued under party. 10 and, therefore it cannot be said that any price was fixed by the Central Government under this Regulation, He further con tended that any existing notification covering the goods in question would be of no help because it cannot be said to have been validated under the re‑constituted Regulation. In the alter native he contended that even if it applies to in existing notification the question. would still remain whether it became effective from 17th November; 1958 or 9th December, 1958. the contentions of the learned counsel have received our anxious consideration but we are not impressed by them. It will be noticed that Martial Law Regulation N o 42 was promulgated on 1st November: 1958. It provided that the Central Government shall control the prices of the imported goods, goons manufactured within Pakistan, and selected food grains. In para. 4 of the Regulation it was pro vided that "For the goods mentioned below the prices shall be fixed by the Central Government". This covered 14 items of various commodities. In item No. 3 vegetable ghee and edible oils have been mentioned. It is, however, important to note that towards the end of the said para. it is stated that the list may be varied as circumstances require. It was in these circumstances that the Central Government by notification dated 10th November 1958, published in the Gazette of Pakistan Extraordinary dated 14th November 1958, fixed i.e price of the cottonseed at Rs. 12 per maund without bags. It is quite correct that in para. 4 of the above‑mentioned Regulation cottonseed is not specifically men tioned but we are of the view that having regard to the power conferred under this clause the list of the goods mentioned in it was not final and could be varied as circumstances require. Vie fart that the Central Government fixed the price of cotton seed clearly indicates that it has varied the list by adding cotton seed to the list mentioned in the said clause. Under clause 11 of the said Regulation the prices determined were to come into force from 17th November 1958. But in view of the reconstituted Martial Law Regulation No. 42 this date lost its importance and cannot have any material bearing on the decision of this case. The reconstituted Martial Law Regulation No. 42 came into force on 6th December 1958. In clause 4 of this Regulation under item No. 3, vegetable ghee, edible seeds and edible oils are amongst the goods in respect of which the Central Government was authorized to fix the prices. Under clause 10 of this Regulation it was provided that "the prices of goods mentioned in paragraph 4 will be deemed to have come into force from the date of their notification". It is, therefore, quite obvious that this para. refers to the prices fixed in the old Martial Law Regulation No. 42 and became effective with retrospective effect from the date of the notification namely 10th November 1958.

8. There is no force in the appellants counsel's contention that under clause 10 of the reconstituted Martial Law Regulation No. 42 a fresh notification was contemplated. There is no such indication. On the contrary, it provides that any notification containing the prices of the goods mentioned in clause (3) shall A be deemed to have come into effect from the date on which the prices were notified. This clause is in the nature of giving effect to things done in the past with retrospective effect. Mr. Dingomal contended that in view of the decision of their Lordships of the Supreme Court of Pakistan in Rehmatullah v. Deputy Settlement Commissioner (P L D 1963 S C 633) no notification could have retrospective effect. No one can dispute this legal proposition but in the present case the restrospective effect was given under a specific provision of law contained in Martial Law Regulation No.

42. There is, therefore, no resemblance in the case before their Lordships of the Supreme Court and the case under consideration. Besides ink view of Martial Law Regulation No. 88 read with Martial Law Regulation No. 93, it is quite clear that any order made or any thing done whether the order or the thing is within the scope of the Regulation or Order or not, or whether the authority making the order or doing a thing had jurisdiction in the matter or not, it is not open to this Court to challenge the validity of the notification under which the price of the cottonseed was fixed under the Martial Law Regulation.

9. On this view of the matter there is not the slightest doubt in our mind that from 10th of November 1958, the price of the cottonseed had been fixed at Rs. 12 per maund. Any sale or re‑sale above the price fixed by the Central Government was an offence of black‑marketing under Martial Law Regulation No.

26. The question, therefore, arises whether in such circumstances the respondents were justified in repudiating the contract. The law on this point is dealt with in section 56 of the Contract Act, which provides that a contract to do an act which, after the C 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. In other words the section contemplates two kinds of impossibility namely physical impossibility and non‑self‑induced legal impossibility. The doctrine of frustration is founded, on the theory of an implied term but in this case there being a clear provision it is not necessary for reading such an implied term into the contract. In the present case it cannot be denied that in view of the Martial Law Regulations and the prices fixed under it the price at which the parties had agreed to supply the goods had become illegal and unlawful. Any one contravening its provisions would be guilty, of a penal offence. Thus the contract for this reason was frustrated and in law it was not possible to perform it on the terms agreed upon between the parties. Since the contract had become impossible to perform no responsibility for non‑performance of the contract could be placed on the respon dents. In view of the price fixed by the Central Government the contract as it stood could not be performed without infringing the law and under section 56 it would be considered to have become void on the date on which the price was fixed. The respondents, therefore, cannot be burdened for any damages suffered by the appellants on account of supervening or unforseen circumstances not contemplated by the parties at the time when the contract was entered into by them. We are, therefore, satisfied that the learned subordinate Court was perfectly justified in dismissing the appellants' suit for damages against the respondents.

10. This brings us to the cross‑suit filed by the respondents No. 206/1961. In this suit the respondents claimed refund of the total amount of Rs. 6,500 paid to the appellants as advance deposit as a guarantee for the performance of the two contracts. Ordinarily in the absence of a contract to the contrary a vendor is bound to refund the deposit to the purchaser if a contract is not performed for no fault of the purchaser. But if a contract could not be performed on account of the default of the purchaser, he is not entitled to its refund. This is now a well established rule of law that where a contract for sale of goods is not performed for default of the purchaser the vendor is entitled to retain the deposit, but where there is no repudiation of the contract by the purchaser nor any conduct on his part amounting to repudiation, he is entitled to the return of the deposit. In the present case we have already held that the two contracts in dispute could not be performed on account of frustration or impossibility in the performance of the contract created by the Martial Law Regulations. There was no fault of the respondents in this respect. In law, therefore, the respondents are entitled to the refund of the deposit paid by them towards the performance of the contract.

11. Mr. Dingomal the learned counsel for the appellants has, however, urged that in such case section '65 of the Contract Act is applicable. Under this provision of law when an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make com pensation for it, to the person from whom be received it. In support of his contention the learned counsel relied on a decision of the Judicial Committee of the Privy Council in Govindram Seksaria v. Edward Radbone (A I R 1948 P C 56). In that case it was held by the Judicial Committee that the result of section 65, Contract Act was that after the contract became void each of the parties became bound to restore to the other any advantage which the restoring party had received under the contract of sale. In this connection their Lordships observed at page 59 of the report as under:‑-- "Apart from the terms of certain documents, which will be considered later, their Lordships feel no doubt that the decision of Blagden, J., was correct. The result of section 65, Contract Act, was that, as from 3‑9‑1939, each of the parties became bound to restore to the other any advantage which the restoring party had received under the contract of sale. In their Lordships' view, the custodian could not recover any sum in his action, as pleaded unless he proved that the value of the `advantage' which the appellants had received under the contract, i.e., of the machinery which had been delivered to them, was greater than the sum of 88,375 Reichmarks, that sum being admittedly an `advantage' which the custodian had received under the contract. Moreover in their Lordships' view the value of the machinery which was delivered to the appellants, for the purposes of section 65 of the Act, must be taken to be the value of that Machinery in India immediately after the contract had become void by reason of section

65. In estimating that value, a Court would have to take into account the fact that the balance of the machinery contracted to be supplied could not be supplied from Germany, and the fact that the appellants could no longer have the services of qualified erector sent from Germany and of the sellers' Chief Chemist. Further, the Court would have to consider the question whether or not the appellants were able to procure from other sources the balance of the machinery contracted to be sent from Germany, and, if so, at what price and within what period of time, and what quantity and quality of products could be produced by the plant so assembled." This case is clearly distinguishable and has no application to the facts of the present case. In the present case there was no part performance of the contract. Moreover, there is not an iota of evidence that the appellants did not receive any advantage in the amount paid to them. In the absence of any such evidence on the plain language of the section the appellants are bound to restore the advantage received by them under the contract.

12. Having regard to the facts and the circumstances of the present case we are satisfied that the appellants have not been able to make out any case to interfere with the findings of the learned subordinate Court in the two cross‑suits. In our opinion the learned subordinate Court was perfectly justified in dismissing the appellants suit for damages and decreeing the respondents' suit for the refund of the amount deposited by the respondents with the appellants.

13. In the result both the appeals are dismissed with costs. K.B.A. Appeals dismissed.