Holding that doctrine of reasonableness or
fairness is not applicable to statutory contracts, Supreme Court of India
(“Supreme Court”) has rejected an appeal wherein the appellant had sought the refund
of security amount which was deposited to open an arrack shop. In Mary
v. State of Kerala and Ors [Judgment dated October, 22, 2013], the court had
to consider the following issue:
“.....in case
of a statutory
contract, will it necessarily destroy
all the incidents
of an ordinary contract
that are otherwise
governed by the Contract Act?”
Facts:
The appellant, Mary, having succeeded in an auction for sale of privilege to
open an arrack shop, had deposited 30% of the bid amount as security. However, near
to the area, where the arrack shop had to be started, was the birth place of Adi
Sankaracharya and also a Christian pilgrim centre. Because of this, physical
resistance was offered by the local people so that the arrack shop could not be opened in the area.
This situation led the appellant to believe that it was not possible for her to
open arrack shop in the area. Accordingly, she requested the concerned
authorities to consider the ‘proposed contract’ as rescinded.
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Declining the request of the appellant, the Excise
Inspector sent a notice to the appellant thereby awarding the contract to open
arrack shop in her favour. In addition to this, security deposit, as requested
by the appellant, was not returned. Further communications took place between
the appellant and the authorities but the request of the appellant was not
accepted. Against this, the appellant filed a writ petition before the High
Court of Kerala (“High Court”). Applying
the doctrine of frustration and impossibility, the single judge bench of
the High Court held that the contract had become void from its inception. On
appeal to division bench, the single judge bench judgment was reversed and it
was held by the High Court that the state was justified in forfeiting the
deposit made as a security.
