Delhi High Court
State Bank Of India vs Earnest Traders Exporters, Importers & ... on 30 January, 1997
Equivalent citations: 1997IIIAD(DELHI)467, 67(1997)DLT218, 1997(41)DRJ659
JUDGMENT Anil Dev Singh, J.
(1) This is a suit for recovery of Rs. 6,50,970.42 paise. The plaintiff is State Bank of India which is authorised to deal in foreign exchange under the Foreign Exchange Regulation Act, 1947. While the defendant No. 1 is Earnest Traders, a partnership firm dealing in the business of exports and imports, the defendant No. 2 is one of its partners.
(2) By letter dated June 6, 1973, defendant No. 2 on behalf of defendant No. 1 forwarded to the plaintiff photostat copies of Five contracts executed by and between the defendants and M/s. Century Rayon, Bombay, and M/s. Indian Rayon Corporation Limited, Bombay, for shipment of Rayon Filament Yarn to Afghanistan Against dollar payment to be received from M/s. Sharvan D. Sethi, Kabul during the period from June 1973 to December 1973. As per the letter, the total quantity of Rayon to be exported to Afghanistan came to 210,000 kgs. The aggregate value of the same as per the following details was Rs. 40,38,500.00 :- 1.Century Rayon: 180,000 kgs. valued at Rs. 36,11,000. 2. Indian Rayon : 30,000 kgs. valued at Rs. 4,27,500.
(3) Along with the letter a copy of the letter dated June 4, 1973 received from M/s. Sharvan D. Sethi accepting the above arrangement and requesting the defendants to cover the foreign exchange in dollars through any bank was forwarded to the plaintiff. The defendants by means of the aforesaid letter also requested the plaintiff to cover the Us dollars for the above said amount. By the same letter the defendants requested the plaintiff to convey the rate for the former's acceptance. In response to the letter of the defendants the plaintiff by its letter dated June Ii, 1973 required the defendant "to intimate the exact amounts in terms of Us dollars and specific periods of the forward contracts" which the defendants wanted the plaintiff to book. On receipt of the letter of the plaintiff, the defendants by their letter dated June 15, 1973 gave the necessary details and requested the plaintiff to book four forward purchase contracts on their behalf as per below:- ______________________________________________________________________ Amount PERIOD Rate ______________________________________________________________________ $ 65,000 15.6.73 to 14.7.73 13.79 $ 50,000 15.7.73 to 14.8.73 13.79 $ 50,000 15.8.73 to 14.9.73 13.79 $ 91,909 15.9.73 to 14.10.73 13.79 ______________________________________________________________________ Total $ 5,56,909 ______________________________________________________________________ (4) On the same date, viz., June 15, 1973, the plaintiff booked the four forward contracts and in this regard informed the defendants by its letter dated June 18, 1973. Along with the letter the plaintiff enclosed contracts No. ET/73/1/$ to ET/73/4/$ for the signatures of the defendant. On June 27, 1973 the defendant returned the exchange contracts duly signed. In so far as contract No. ET/73/1/$ is concerned, the plaintiff received Us dollars 69,850 and Us dollars 95,100 aggregating to Us dollars 1,65,000 in July 1973. In regard to contract No. ET/73/2$ the defendants by their letter dated July 28, 1973 requested the plaintiff for extending the delivery period from August 15, 1973 to September 14, 1973. This request was made as the situation in Afghanistan had changed. Subsequently, on August Ii, 1973 the defendants informed the plaintiff that as per the Export Order (Trade Control) dated July 27, 1973 (for short 'the banning order') the export of Rayon Filament Yarn had been banned by the Government of India. It was also stated in the said letter that the defendants were approaching the concerned authorities for special permission to export the filament yarn to Afghanistan. On receipt of the letter of the defendants the plaintiff by its letter dated August 14, 1993 asked the defendants to intimate if they wanted extension or cancellation of the aforesaid contracts. On August 16, 1973 the defendants requested the plaintiff to extend three contracts, namely, ET/73/2, ET/73/3 and ET/73/4 for a further period of two months. The plaintiff by its communication dated August 31, 1973 informed the defendants that it had been advised by its Foreign Department that as the forward purchase contracts ET/73/2 ET/73/3-and ET/73/4 were valid upto 14th September 1973, 14th September 1973 and 14th October 1973, respectively, they will consider the matter after a decision is taken by the Government of India regarding export of the banned item. The defendants were also asked to intimate the latest developments in the matter so that the plaintiff could approach its Foreign Department again. Again by their letter dated September 14, 1973 the defendants requested the plaintiff to extend two contracts No. ET/73/2 and ET/73/3 for a further period of two months pending the decision of the Government of India with regard to the request of the defendants for permission to execute the contracts. In response to the letter of the defendants dated 14th September 1973 the plaintiff intimated to the defendants that it (plaintiff) had been advised by its Foreign Department that it was unable to extend the foreign purchase contracts No. ET/73/2 and ET/73/3 in absence of clearance from the Government of India. The plaintiff by the same letter advised the defendants that it will not be in the defendants' interest to allow the contracts to remain overdue until clearance is obtained from the Government of India as the contracts will attract overdue interest at the rate of 9-1/2% per annum in addition to the cancellation charges. The letter also indicated that the cancellation charges for the forward contracts No. ET/73/2 and ET/73/3 amounted to about Rs. 1,50,000.00 , the best possible rate allowing cancellation as on September 14, 1973. The defendants were also asked to intimate the position regarding the forward contract No. ET/73/4 which was due for performance on or before September 10, 1973. The defendants, however, by their letter dated November 2, 1973 again requested the plaintiff to extend the contracts for a further period of two months by which time the defendants were hopeful of getting the permission (clearance) from the Government of India to export the goods, pertaining to the forward purchase contracts, to Kabul. In reply to the said letter, the plaintiff by its letter dated November 13, 1973 expressed its willingness to assist the defendants for achieving its export target but at the same time advised that the contracts be cancelled and in case the export materialised, fresh forward contracts be booked. By telegram dated April 14, 1974 the plaintiff drew the attention of the defendants to the aforesaid forward contracts and intimated that overdue interest was continuously mounting and as on March 15, 1974 it was to the tune of Rs. 4,45,967,58. The telegram again advised the defendants to cancel the contracts and to pay the cancellation charges as there was no change in the Government of India's policy on the export of Rayon Filament. On June 7, 1974 the plaintiff sent cancellation forms to the defendants in order to enable them to apply for cancellation of the forward contracts. Pursuant to the letter of the plaintiff dated June 7, 1974 the defendants by their letter dated June 28, 1974 took up the stand that the contracts in question had ceased to exist in view of the ban imposed by the Government of India on export of Rayon Filament, the item covered by the aforesaid forward contracts. It was also pointed out that because of the ban imposed by the Government of India the contracts in question had been frustrated, and there was no question, therefore, of cancellation of non-existing contracts. On October 23, 1973 the plaintiff again asked the defendants to apply for cancellation of the contracts. On November 12, 1974, the defendants, by a written communication reiterated their earlier stand. Ultimately on April 4, 1977 the plaintiff issued a legal notice to the defendants requiring them to pay a sum of Rs. 15,27,087.10. On April 25, 1977 the defendants through their solicitors denied their liability in respect of the aforesaid amount. Thereupon on July Ii, 1977 the plaintiff Filed the instant suit against the defendants for recovery of Rs. 6,50,970.00 instead of Rs. 15,27,087.12.
(5) The defendants raised a number of pleas in their written statement, the main plea being that the contract had been rendered impossible of performance due to the ban imposed by the Government of India on the export of Rayon Filament. On January 9, 1980 the following issues were framed:- 1.What Shri M.L. Chandra duly authorised to sign and verify the plaint and to institute the suit? Opp 2. Whether the exchange contract bearing No. ET/71/1/1 to 4 was signed by the defendants as agents for Century Rayon, Bombay and India Rayon Corporation? If so, what is its effect? Opp 3. What is the effect of the ban on the export of rayon, filament and yarn covered by the contracts on the contract? Opd 4. What is the effect of the extension given for performance of the contracts? Opd 5. Are the defendants liable to pay the cancellation charges to the plaintiff as mentioned in paras 28 and 30 o the plaint? Opp 6. What is the effect, if any, of the non-cancellation of the contracts by defendants in spite of the plaintiff bank requests in that respect? OPD. 7. Is the suit barred by limitation? OPD. 8. Relief.
(6) Now I proceed to deal with the issues :- Issue No. 1: The plaint has been signed and verified by Shri M.L. Chander, Manager of the plaintiff bank. PW-3, Shri D.C. Rai Chandani, Officer, State Bank of India deposed to the effect that all the officers of the Bank who arc posted as Managers/Branch Managers are entitled to sign the plaint. He stated that this entitlement was based on Regulations no. 76 & 77 of the State Bank of India General Regulations, 1955. Regulation 77 needs to be quoted for immediate reference :- "77.Plaints, written statements, petitions, and applications may be signed and verified, affidavits may be sworn or affirmed, bonds may be signed, sealed and delivered, and generally all other documents connected with legal proceedings whether contentious or non-contentious may be made and completed on behalf of the State Bank by the Chairman or by any officer or employee empowered by or under regulation 76 to sign documents for and on behalf of the State Bank."
(7) From a perusal of Regulation 77 it is clear that the plaints and written statements, petitions and applications can be singed and verified by any officer or employee empowered by or under Regulation 76 to sign documents or an on behalf of the State Bank. Under Regulation 76, the power of signing the documents has been conferred on the Vice Chairman, the Managing Director, the Deputy Managing Director, the Chief General Manager and such other officers or employees of the State Bank as the Central Board or the Executive Committee may authorise in this behalf by a notification published in the Gazette of India. Pursuant to powers conferred under Regulation 76, notification dated September 17, 1959 was published in the Government of India Gazette, Part Iii, Section 4, dated September 26, 1959 by virtue of which it authorised "agents" and other persons to sign the documents mentioned in regulation 76. A conjoint reading of Regulations 76 and 77 and the above said notification leaves no manner of doubt that an "agent" would be entitled to sing and verify the pleadings, etc. It may be noted that the "agents" have been redesignated as Branch Managers by virtue of notification dated June 21, 1972 published in the Govt. of India Gazette Part Ii, Section 4, dated August 26, 1972. This notification came into force w.e.f. September 1, 1972. Thus, any Manager of the plaintiff bank would be fully authorised to sing and verify the pleadings and would also be entitled to institute the legal proceedings, for and on behalf of the bank. In this view I am supported by the decision of the Punjab & Haryana High Court in State Bank of India v. Kashmir Art Printing Press and others, (1983) 54 Comp Cos 56.
(8) Therefore, I hold that shri M.L. Chandra, Manager of the plaintiff bank, was duly authorised to sing and verify the plaint and institute the suit. Accordingly, issue No. 1 is decided in favour of the plaintiff.
(9) Issue No. 2: Defendants produced number of witnesses in their endeavour to show that they had entered into forward contracts with the Bank as agents of Indian Rayon and Century Rayon. It will not be necessary to examine the same as the defendant No. 2, who is the partner of the defendant No. 1, has admitted in his deposition that he was dealing with the State Bank on his own accord and not on behalf of Indian Rayon or Century Rayon. This is what defendant No. 2 stated in his cross-examination :- "IT is correct that I was dealing with State bank of India of my own and not on account of Indian Rayon or Century Rayon."
(10) In view of the above admission of defendant No. 21 have no hesitation in holding 'that the defendants signed the forward' contracts not as agents of the Indian Rayon or Century Rayon but on their own account. Accordingly, this issue is decided in favour of the plaintiff.
(11) Issues No. 3 to 6; Issues No. 3 to 6 are inter connected and it will be convenient to take them together. In order to determine the basic question as to whether the forward contracts between the parties came to an end due to the ban it will be necessary to examine the relevant evidence led by the parties on the point. The plaintiff produced Mr. K.B. Rai, Officer, State Bank of India, Calcutta, Mr. A.K. Mehta, Senior Management Officer, State Bank of India, Chandigarh, and Mr. D.C. Raichandani, Officer, State Bank of India, Mathura, to prove that the defendants are liable to pay the suit amount as they failed to ship the goods to Afghanistan and consequently were not able to deliver the agreed foreign exchange for which the plaintiff had entered into cover sale contracts with another bank/other banks. The defendants, on the other hand, examined several persons including defendant No. 2 in support of their stand that they were acting as agents of Century Rayon Corporation Limited and Indian Rayon Corporation Limited in respect of the contracts in question. Except the statement of defendant No. 2, who also stated about the banning order and its ramifications, reference to statements of these persons will not be necessary as I have already held that the defendants did not sign the forward contracts as agents of Century, Rayon and Indian Rayon.
(12) First the evidence of the plaintiff. PW-1 Mr. K.B. Rai stated he was posted in the Foreign Department of the plaintiff bank in Calcutta from 1975 to 1984. He deposed that the exchange rates of foreign currencies are fixed by his department. He also explained the nature of the forward purchase transaction. According to him under this type of transaction the rate of foreign exchange is quoted in advance while the transaction takes place much later. He further sated that in order to secure the interest of the bank they used to enter into cover sale contracts with other banks. Explaining the reasons for entering into such transactions, he stated that this was done to secure against the fluctuations in foreign currency rates. He-also asserted that he dealing banks and the customers arc bound by the Exchange Control Manual and Foreign Exchange Dealers' Association of India Rules (for short 'FEDA' Rules) issued by the Reserve Bank of India. He alluded to the fact that the plaintiff bank entered into forward purchase contracts with defendant No. 1 of which only one was honoured, while the other three were not carried out. According to the witness, the controversy with regard to the remaining three contracts cropped up due to the ban on export of Rayon filament 'imposed by the Govt. of India and, therefore, defendant No. 1 was required by the plaintiff to cancel the contracts. He further stated that the plaintiff bank wanted to secure its position by getting the cover contracts entered into with other banks cancelled and this could be done only if defendants first got their forward contracts with the plaintiff cancelled; threat where the exporter does not deliver dollars within the stipulated period fixed by a forward contract, the plaintiffs obligation to the covering banks no letheless subsists and in that event, it purchases the dollars from the open market for handing them over to the covering banks; that the forward contract rate agreed to with the defendants was $ 13.79 equivalent to Rs. 100; the bank later had to purchase. dollars from open market @ $ 11.22 equivalent to Rs. 100 for being delivered to the covering banks and this resulted in loss to the plaintiff to the extent of Rs. 49,153.66 paise in each of the first two contracts and Rs. 1,52,663.09 in the third contract, which had not been honoured and that these losses were incurred on 11th July, 1977. In the cross-examination, the witness stated that the delivery periods for the unperformed contracts were: (I)From 15.7.73 to 14.8.73 (ii) From 15.8.73 to 14.9.73, and (iii) From 15.9.73 to 14.10.73 (13) Witness testified to the fact that the first contract was extended by one month while there was no such extension in regard to the other two. As regard the inability of defendants to deliver dollars to the plaintiff under the forward contracts the witness stated as follows :- "IT is correct that the defendants could not effect delivery of dollars under the contract other than by way of export of Rayon filament to Afghanistan."
(14) The witness was not in a position to give the names of the banks with which the plaintiff had entered into cover contracts. The reason advanced by him was as follows "WHEN we enter into cover contracts with other banks, they are with regard to the overall position covering several contracts."
(15) The witness, however, was not in a position to specify the sellers from whom dollars were bought by the plaintiff for discharging its liability towards the covering banks. As per the statement, July Ii, 1977 was the date for determining the damages since on that date the contracts were cancelled and the suit was filed. He stated that dollars must have been purchased on that date. He further added that the purchase is entered in the plaintiffs books of accounts against the contract in question. In the next breath, he stated that "this specific purchase with regard to the contracts in dispute, however, would not be so entered because the purchases are made on overall basis." With regard to Foreign Exchange Dealers' Association of India Rules, he stated that the same were not supplied to defendants by the plaintiff bank but the defendants were aware of them and the same were explained by the bank to the defendants.
(16) PW-2, ShriA.K. Mehra Senior Management Officer stated that he was dealing with the accounts of the defendants; that the defendants were to export rayon filament to Afghanistan; that they approached the plaintiff bank for executing forward contracts in order to secure against fluctuations in foreign exchange; that four such contracts were entered into between the plaintiff and defendants; that one of them materialised fully while the other three could not materialise; that foreign exchange dealings are governed by the Feda Rules; that the defendants were apprised of the fact that the contracts will be governed by those Rules; that when the ban came in August 1973, the plaintiff bank wrote vide Exhibit P-8 to the defendants to cancel the forward contracts as the extension was not possible because of the said ban, but the defendants requested vide Exhibits P-9 and P-12 to the bank for extension on the ground that they were hopeful of getting permission for exporting the goods; that the defendants did not succeed in their efforts and the plaintiff continued requesting the defendants to cancel the contracts but the defendant did not do so; that vide Exhibit P-19 the defendants for the first time took the stand that there was no need for them to cancel the contracts because the contracts stood frustrated due to the ban. In cross-examination, the witness admitted that before entering into forward contracts the defendants gave the supporting documents relating to their contracts with Century Rayon, Bombay, and Indian Rayon Corporation, Bombay, and the Afghanistan party who was to import the Rayon. He denied the suggestion that the defendants were not the exporters and on the contrary the exporters were the Century Rayon and Indian Rayon Corporation. He also denied the suggestion that the defendants were their commission agents. With regard to the first contract, which materialised, he stated that he defendants-were the exporters and the shipment was made on behalf of the defendants by the two Bombay parties. As regards the Feda Rules, he stated that the bank expected all customers to know about the same and the defendant No. 2 was explained the Rules even before and on the date of entering into contract. However, the witness admitted that the copy of these Rules was not given to defendants as the same was not demanded by them. In so far as the cancellation of contracts is concerned, the witness stated that the cancellation could take place only if the defendants asked for the cancellation of the same and since they never asked for it the bank treated July. 11, 1977, when the suit was instituted, as the date for computation of damages. He denied the suggestion that the contracts ceased to be effective w.e.f. August 1, 1973.
(17) P.W.3, Shri D.C. Rai Chandani, inter-alia, stated that the cancellation charges in the present case were calculated by Foreign Exchange Office, Calcutta. The witness deposed with regard to the exchange rates as per below :- "Foreign Exchange rates are computed by our Calcutta Foreign Exchange Office. Other, branches are not competent to do so. The Press Trust of India conveys to us Foreign Exchange rates prevalent in London market. On their basis I prepared document marked 'Q' as on 9th and 11th July 1977.
(18) In cross-examination, he admitted that the aforesaid documents were not initialled by him and they were prepared on the basis of the rates conveyed by Press Trust of India as prevalent in London Market.
(19) Coming to the evidence of the defendants, the statement of defendant No. 2, Shri Kewal Krishan Sethi, need be noticed. Shri Kewal Krishan Sethi stated that the earnest traders at the time of filing of the suit were dealing in export of goods to Afghanistan; that it used to export tea, spices, rayon yarn, that yarn used to be exported as agents of Century Rayon and Indian Rayon, on payment of two and a half per cent and 3 per cent as commission on the value of rayon exported; that the export benefit was being paid to the defendants by the Government which used to be passed on to the principals; that the Government of India imposed ban on 27th July, 1973 and as a result thereof the goods, except relating to one contract, could not be exported. The witness admitted that he had been seeking extensions from the plaintiff bank so that he could secure exemption from the ban. In the cross-examination, he admitted that he was dealing with the State Bank of India on his own account and not on account of Indian Rayon or Century Rayon. This is all the evidence which parties led in regard to the aforesaid issues.
(20) I will first determine the implication of the 'banning order' on which will depend the answer to all the aforesaid issues. As is apparent from the evidence on record, the export of rayon was banned w.e.f. 27th July, 1973. It is the admitted case of the parties that all the relevant documents relating to the export of rayon to Afghanistan against dollar payment to be received from M/s Sherwani D. Sethi Capital, were send to the plaintiff by the defendants and in order to secure against the fluctuations of foreign currency, the plaintiff and the defendants entered into the afor;said forward contracts under which the defendants were to deliver dollars, and the plaintiff was to pay Rs. 100 for every Us $ 13.79 to the defendants received from the Afghanistan party. All the witnesses have stated that export was not possible in view of the 'banning order' Since the export were not possible in view of the 'banning order' the defendants were not able to deliver the dollars to the plaintiff agreed to under the three unperformed agreements, namely, ET/73/2 to ET/73/4. It was not the case of the plaintiff tl'at in the event of the failure of the defendants to export the goods to Afghantistan, the defendants would buy dollars from the open market and deliver them to the plaintiff (please see the statement of PW-1). In any event if such a condition would have been incorporated in the Agreements, the same would have been violative of the Foreign Exchange Regulations Act.
(21) It appears to me that the 'banning order' destroyed the very foundation of the forwarding contracts as bargain between the parties was made on the assumption that the export of rayon would remain open. After the ban fundamentally different situation emerged which was not due to the creation of the contracting parties but was due to the order of the Government of India in which the parties had to hand at all. Due to the 'banning order' the forward contracts dissolved automatically. It is well settled that the supervening frustrating event immediately puts an end to an agreement independently of the volition of the parties without either party being conscious of the fact that what has happened has snapped their contractual bonds.
(22) Learned counsel for the plaintiff submitted that despite the request of the plaintiff, the defendants did not cancel the three remaining contracts and on the contrary requested that the same be extended in the hope that the Government of India would lift the ban or would permit the defendants to export the goods as the export orders were prior to the coming into force of the 'banning order'. He further contended that the defendants are liable to pay interest to the. plaintiff in accordance with sub-rule 2 of Rule 9(III), and Rule 9(III) of the Feda Rules, which are statutory in nature. He also convassed that in order to secure the interest of the bank, the plaintiff had entered into cover contracts with other banks and had to purchase dollars at a loss from other sources in order to discharge its liability to the covering banks.
(23) I have considered the submissions of the learned counsel for the plaintiff. In order to appreciate the contention of the learned counsel, it will be relevant to notice Rule 9 (III) & (IV) of the Feda Rules. Therefore, at this stage it will be convenient to set out these Rules to the extent they are relevant for the resolution of the controversy :- Rule No. 9(111) : (1) In the case of Bank sales, interest at not less than 2% p.a. over the Reserve Bank of India rate from the date of expiry to the date of cancellation with a minimum of 7% p.a. (2) In the case of Bank purchases, interest at not less than 1% p.a. over the ruling discount rate of the Central Banking institution of the country on which exchange was fixed, from the date of expiry to the date of cancellation with a minimum of 7% p.a. Rule 9(IV): (1) Interest for the period for which the contract has remained overdue, as laid down in Iii above, (2) exchange difference as laid down in (C), (D) and (E) below. xx xx xx"
(24) From a perusal of the Rules 9(lll)(2) and 9(IV) it is clear that these provision would apply where the contract is cancelled. In the instant case, the situation is that the contract was frustrated and as already pointed out, once the contract is frustrated it is determined automatically and cannot be kept alive by the parties. There is a basic difference between frustration of a contract and cancellation of a contract. Frustration occur", due to a supervening event beyond the. control of the contracting parties making the contract impossible of performance. It relieves the parties from the obligations which they had undertaken once such a situation arises. However, in the case of cancellation of a contract, it is determined at the volition of the parties or one of them and the same does not come to an end automatically.
(25) At common law, a man was bound by the obligations which he had undertaken to perform and was not to be excused on the ground that performance had subsequently been made impossible by a supervening factor. This doctrine of absoluteness has been abandoned in India by Section 56 of the Contract Act. The provisions of the Section 56 of the Contract Act came for interpretation by the Supreme Court in Satyabrata Chose v. Mugneeram Bangur and Co. and another, , where it was held as follows :- "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. 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 finds it impossible to do the act which he promised to do. In the large majority of cases however the doctrine of frustration in applied not on the ground that the parties themselves agreed to an implied term which operated to release them from the performance of the contract. The relief is given by the court on the ground of subsequent impossibility when it finds that the whole purpose or basis of a contract was frustrated by the intrusion or occurrence of an unexpected event or change of circumstances which was beyond what was contemplated by the parties at the time when they entered into the agreement. .... xx xx xx It is well settled and not disputed before us that if and when there is frustration the dissolution of the contract occurs automatically. It does not depend, as does rescission of a contract on the ground of repudiation or breach, or on the choice or election of either party. ... "
(26) By the very nature of things no one can be asked to perform an act which is declared illegal or which is inherently impossible to perform. A contract would stand frustrated by reason of an intervening impossibility or illegality of the act agreed to be done. In a nutshell, in a case of frustration, the contract is discharged. Keeping in view the above said principles I am of the opinion that Rules 9(III)(2) and 9(IV) will not apply as they do not deal with a situation where a contract stands discharged due to frustration. Both the Rules deal with a situation where a contract is cancelled. The plea of the plaintiff that it had cancelled the contract after the banning order came into effect has no substance. A contract which is discharged cannot be cancelled. In the present case, the contract between the parties was discharged without the default of the parties in the performance of the same. Since Rules 9(III) & (IV) of the Feda Rules are not applicable, it is not necessary to determine whether these Rules are statutory in nature .or not. The submission of the learned counsel for the plaintiff that the plaintiff had entered into further transactions with the covering banks will not be a good ground to fasten liability on the defendants. In view of the fact that the contract had been discharged due to frustration, the defendants would not be liable to pay interest under Rule 9(III)(2) or Rule 9(IV) of the Feda Rules. In any event, the witnesses produced by the plaintiff, as already indicated above, were not able to specify the bank or banks with which they had entered into 'cover transactions'. They were also not able to mention the names of the sellers from whom the foreign exchange was bought in order to discharge the obligations under the alleged contracts with other banks. Learned Counsel for the plaintiff invited my attention to Pages 64,69 & 71 of Part Ii of the Court record containing calculations on the basis of which the plaintiff expected from the defendants the suit amount. As the plaintiff is claiming this amount byway of interest under Rules 9(III)(2) and 9(IV) of Feda Rules, these calculations for the above reasons are of no avail to the plaintiff. For the foregoing reasons Issues No. 3,4,5 & 6 are decided as follows:
Issue No. 3 Contract was rendered impossible of performance on coming into effect of the banning order'.
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Issue No. 4 Since the contracts stood discharged and automatically dissolved w.e.f. the date of the banning order, the extensions given for performance of the contracts were of no effect and legally the contracts were not extended.
Issues No. 5 & 6 The defendants are not liable to pay any cancellation charges to the plaintiff as the contracts were discharged on July 27, 1973, when the 'banning order' came into force, and the subsequent cancellation, if any, by the plaintiff was of no consequence. Similarly, the non-cancellation of the contracts by the defendants is also of no consequence and did not have the effect of keeping them alive.
Issue No. 7 It would be necessary to recapitulate a few dates. The banning order came into effect on July 27, 1973. However, the suit was instituted on July Ii, 1977. As already noticed the contract was discharged with effect from the date of the banning order. The suit having been filed on July Ii, 1977, after three years of the coming in force of the ban, was clearly barred. The learned counsel for the plaintiff, however, submitted that the defendants 'having written several letters to the plaintiff requesting for extension of time for performance of the contract, the period of limitation would start running from that date. The defendants refused to cancel the contract. This plea is not available to the plaintiffs the cause of action accrued to the plaintiff on the date when the contract was discharged viz. July 27, 1993 and since it filed the suit after more than three years from threat date the suit is barred bylimitation.
RELIEF: In view of the findings on Issues Nos. 2 to 7, the suit is dismissed. No order as to costs.