RAMJI RAO v. CHINDAN NAIR — 1967 DIGILAW 185 (KER)

Judgment :- 1. The revision petition arises out of a suit for the recovery of rent due for the Malabar year 1140. The contract of lease between the parties is evidenced by Ex. B-1 dated 27-5-1948. The rent fixed in Ex B-1 is 22 parahs of paddy per annum. It is seen from Ex. B-1 that a sum of Rs. 200/-was received by the plaintiff from the defendant for which interest at 8 parahs of paddy per annum is stipulated. According to the terms of Ex. B-1 the defendant is entitled to appropriate the interest due to him from out of the rent payable to the plaintiff. In O. A. No. 1492 of 1964 fair rent for the property comprised in Ex. B-1 has been fixed at 161/2 mudra parahs of paddy per annum under the provisions of Kerala Act 1 of 1964. The suit is filed by the plaintiff for recovery of the value of 161/2 mudra parahs of paddy being the rent payable for 1140 M.E. One of the contentions raised by the defendant with which alone we are concerned in the civil revision petition is that he is entitled to appropriate the interest due to him from out of the fair rent and he is liable only for the balance. The plea of the defendant was upheld by the learned Munsiff and the plaintiff was granted a decree for recovery of the value of 81/2 parahs of paddy. The plaintiff claims in the civil revision petition a decree for the value of the balance 8 parahs of paddy. 2. An almost identical question arose for decision in Kunhi Velayi alias Velayudhan v. P. K. Velayudhan 1961 K.L.T. 449. The facts were that the landlord filed a suit for recovery of fair rent fixed under the provision of the Malabar Tenancy Act. The tenant claimed for deduction of the interest due on the munpattom amount from the rent. It was contended on behalf of the landlord that the right to deduct paddy on account of interest cannot survive the proceedings for the fixation of fair rent and the right of the tenant to claim interest was lost on account of impossibility of performance or frustration. It was contended on behalf of the landlord that the right to deduct paddy on account of interest cannot survive the proceedings for the fixation of fair rent and the right of the tenant to claim interest was lost on account of impossibility of performance or frustration. In over-ruling these contentions M. A. Ansari, C. J. observed thus: "Under S.16 of the Malabar Tenancy Act the obligation to pay rent is variable but that power does not extend beyond, and the right to deduct interest on account of mun-pa torn is not so intimately connected with the fixation of fair rent as to be governed by the section. Therefore permission for deduction would not be varied by exercise of powers under the section, not, as a matter of fact, any such other been given in this case. It follows that the right of the tenant has not been lost unless the landlord claims impossibility of performance or frustration. But then, changed conditions, under all circumstances are not sufficient ground for discharging the obligation. Though by fixation of fair rent, the landlord's benefits been substantially reduced, yet it cannot be said that the right has become radically different. The right to receive the rent is there; and so is the advance amount with the landlord. It is true the obligation has become more burdensome; but, on that ground alone, contractual rights cannot be eliminated." The above observations were relied on for the respondent to support the decree passed by the lower court. 3. The learned counsel for the revision petitioner submitted that the provisions of Kerala Land Reforms Act, 1963 (Act 1 of 1964) have brought about a radical change in the relationship of landlord and tenant and the contract under Ex. B-1 has been discharged on account of the doctrine of frustration and therefore plaintiff is not liable for any interest on the sum of Rs. 200/-received under Ex. B-1 Apart from the question of the applicability of the doctrine of frustration to agricultural leases it is not possible to hold that the supervening legislation has rendered the contract evidenced by Ex. B-1 totally impossible of performance. 200/-received under Ex. B-1 Apart from the question of the applicability of the doctrine of frustration to agricultural leases it is not possible to hold that the supervening legislation has rendered the contract evidenced by Ex. B-1 totally impossible of performance. With reference to the doctrine of frustration their Lordships of the Supreme Court in Satyabrata v. Hugneeram A.I.R. 1954 S.C. 44 observed thus: "We bold, therefore, that the doctrine of frustration 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 S.56 of the Indian Contract Act. It would be incorrect to say that S.56 of the Contract Act applies only to cases of physical impossibility and that where this section is not applicable recourse can be had to the principles of English law on the subject of frustration." Section 56 of the Indian Contract Act runs thus: "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." Dealing with the above provision Mukherjea, J., stated thus in the decision of the Supreme Court in Satyabrata v. Rugnezram A.I.R. 1954 S.C. 44 already referred to: "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. 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 promisor found it impossible to do the act which he promised to do." The rule of frustration cannot operate merely because the circumstances in which the contract was made are altered. The supervening events should destroy the foundation of the contract and that has not happened in the case before us. The plea based on the doctrine of frustration cannot therefore be accepted. 4. The learned counsel for the revision petitioner then contended that in view of the "uncontemplated turn" of events brought about by the Kerala Land Reforms Act, 1963 (Act 1 of 1964) the defendant has no right to deduct the interest from out of the fair rent fixed and in support of his contention relied on the following passage in British Moviestonews Lid. v London and District Cinemas Ld. (1952) A.C. 166 at 185: "The parties to an executory contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. Yet this does not in itself affect the bargain they have made. Yet this does not in itself affect the bargain they have made. If, on the other hand, a consideration of the terms of the contract, in the light of the circumstances existing when it was made, shows that they never agreed to be bound in a fundamentally different situation which has now unexpectedly emerged, the contract ceases to bind at that point not because the court in its discretion thinks it just and reasonable to qualify the terms of the contract, but because on its true construction it does not apply in that situation. When it is said that in such circumstances the Court reaches a conclusion which is 'just and reasonable' (Lord Wright in Constantine's case, (1942) A. C. 154, 186) or one 'which justice demand's (Lord Sumner in F"i Mulji v. Cheong Yue Steamship Co, Ltd., (1926) AC. 497,510;, this result is arrived at by putting a just construction upon the contract in accordance with an implication from the presumed common intention of the parties' (Lord Sumner in Bank Line Ltd., v. Arthur Capel & Co. (1919) AC. 435,455." The above observations were considered by their Lordships of the Supreme Court in Satyabrata v. Hugneeram AIR. 1954 SC. 44 and it was observed thus: "In the latest decision of the House of Lords referred to above, (1952) AC. 166) the Lord Chancellor puts the whole doctrine upon the principle of construction. But the question of construction may manifest itself in two totally different ways. In one class of cases the question may simply be, as to what the parties themselves had actually intended; and whether or not there was a condition in the contract itself, express, or implied, which operated, according to the agreement of the parties themselves, to release them from their obligations this would be a question of construction pure and simple and the ordinary rules of construction would have to be applied to find out what the real intention of the parties was. According to the Indian Contract Act, a promise may be express or implied. According to the Indian Contract Act, a promise may be express or implied. In cases, therefore, where the court gathers as a matter of construction that the contract itself contained impliedly or expressly a term, according to which it would stand discharged on the happening of certain circumstances, the dissolution of the contract would take place under the terms of the contract itself and such cases would be outside the purview of S.56 altogether. Although in English law these cases are treated as cases of frustration, in India they would be dealt with under S.32 of the Indian Contract Act which deals with contingent contracts or similar other provisions contained in the Act." In M/s Alopi Parshad v. Union of India AIR. 1960 SC. 588 their Lordships of the Supreme Court had to examine the question whether a change of circumstances completely outside the contemplation of parties at the time when the contract is entered into, will justify a court while holding the parties bound by the contract in departing from the express terms thereof. There it was pointed out that according to the law in India and in England there is no general liberty reserved to the courts to absolve a party from liability to perform his part of the contract merely because on account of an uncontemplated turn of events the performance of the contract may become onerous. But their Lordships approved of the dictum in British Movietonens Ltd. v. London and District Cinemas Ltd. (1952) AC. 166 at 185, Joseph Constantine Steamship Line Ld. v. Imperial Smelting Corporation Ltd. (1942) AC. 154 and Hirji Mulji v. Cheong Yue Steamship Co. (1926) AC. 497 that a court can infer from the nature of the contract and the surrounding circumstances that a condition which is not expressed was a foundation on which the parties contracted. 5. The contention of the learned counsel for the revision petitioner was that the right of the tenant to appropriate 8 parahs of paddy towards interest on the sum of Rs. 200/-is dependent on the payment of pattom of 22 parahs of paddy per annum though the rent fixed forms the consideration for the lease and a term will have to be implied in the contract, that though the defendant is entitled to interest on the sum of Rs. 200/-is dependent on the payment of pattom of 22 parahs of paddy per annum though the rent fixed forms the consideration for the lease and a term will have to be implied in the contract, that though the defendant is entitled to interest on the sum of Rs. 200/- his right to claim the same in terms of paddy and at the rate of 8 parahs of paddy per annum will be in force only so long as the right of the plaintiff to receive pattom at the rate of 22 parahs of paddy per annum remains in force. In P. A. Tamplin Steamship Co. Ltd. v. Anglo-Mexican Petroleum Products Co. Ld.(1916) 2 AC. 397 at.pp. 403, 404, the legal principle was stated thus: "But a court can and ought to examine the contract and the circumstances in which it was made, not of course to vary, but only to explain it, in order to see whether or not from the nature of it the parties must have made their bargain on the footing that a particular thing or state of things would continue to exist. And if they must have done so then a term to that effect will be implied, though it be not expressed in the contract .... No court has an absolving power, but it can infer from the nature of the contract and the surrounding circumstances that a condition which is not expressed was a foundation on which the parties contracted." If so, the argument advanced on behalf of the revision petitioner is entitled to weight and the claim of the defendant for reduction of interest from out of the fair rent cannot be recognised. The provision in Ex. B-1 regarding interest is as follows: "Party No. I (tenant) shall cultivate the property referred to in schedule below as a lessee in consideration of which he shall pay Party No. 2 (land-lord) 22 parahs of paddy as pattom every year, and out of the said 22 parahs, Party No. 2 will appropriate 8 parahs in discharge of interest due on the sum of Rs. 200/- paid in advance and the balance of 14 mudra parahs valued at Rs. 200/- paid in advance and the balance of 14 mudra parahs valued at Rs. 24-8-0 be given to party No. 2 from 1124 M. E. onwards every year, on or before the 10th of Thulam, at the residence of Party No. 2 and take receipt therefor." Though we have held that it is not open to the defendant to claim reduction of the interest out of the fair rent it will be inequitable if the plaintiff is relieved of his liability to pay interest on the sum of Rs. 200/-due to the defendant. In 'view of the valuation of 14 mudra parahs of paddy at Rs. 24-8-0 in Ex. B-1, it is clear that the parties intended to provide 'for interest only at the rate of 7% per annum on the sum of Rs. 200/- which is only a reasonable rate of interest on the amount advanced. We therefore modify the decree and judgment of the court below and grant a decree to the plaintiff for the recovery of the value of 161/2 mudra parahs of paddy being the fair rent due for the year 1140 M. E. after deducting the interest due to the defendant on the sum of Rs. 200/- at the rate of 7% per annum. The paddy will be valued at the Gazette rate on the date on which the rent was payable under the terms of Ex. B-1. The Civil Revision Petition is allowed in the manner stated above. The parties will bear their costs in both courts.