Topic: Bashir Ahmad and others v.

state of Andhra
Pradesh

BACK DROP OF THE CASE

This is the case of enforcement of contracts on an event happening which comes under section
32 of Indian Contracts Act 1872. In this rule A contingent contract might be based on the
happening of an uncertain future event. In such cases, the promisor is liable to do or not do
something if the event happens. However, the contract cannot be enforced by law unless the
event takes place. If the happening of the event becomes impossible, then the contingent contract
is void. This rule is specified in Section 32 of the Indian Contract Act, 1872. Or we can say that
Contingent contracts to do or nor to do anything in an uncertain future event happens, cannot be
enforced by law unless and until that event has happened .If the event becomes impossible, such
contracts become void.

Illustrations

(a) A makes a contract with B to buy B's horse if A survives C. This contract cannot be enforced
by the law unless and until B dies in A's lifetime.

(b) A makes a contract with B to sell a horse to B at a specified price, if C, to whom the horse
has been offered, refuse to buy him. The contract cannot be enforced by law unless and until C
refuses to buy the horse.

Whether their has been part payment and the government could not float the company to be in a
position to meet the obligation, it cannot said to be a contingent contracts.
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FACTS OF THE CASE

1. In 1936 H. E. H. the, Nizam visited Delhi in and there he meet the plaintiff Hakim Mir
Anwar Ahmed and invited him to Hyderabad. The plaintiff had been working with the
late famous Hakim Ajmal Khan Saheb. The idea of H. E. H. the Nizam was that the
plaintiff would be a great asset in the field of Unani medicine in the State of Hyderabad.
The plaintiff accordingly went to Hyderabad and started his Dawakhana. On 1st Safar
1355 H, the Chief Secretary wrote to the plaintiff that H. E. H. the Nizam would
inaugurate the plaintiff's factory to be called "Mukzanul Advia Majeediya". It appears
that H. E. H the. Nizam's grand-son was known as Majeedi Pasha. H. E. H. the Nizam
also promised to give sufficient grant to the Dawakhana when the question of
reorganisation of Dawakhana was decided. Arrangements were made for the inauguration
and the list of persons to be invited settled.

2.  On 26th II Jami 1361 H, H. E. H. the Nizam issued an Order suggesting that something
be done for Hakeem Anwar Ahmed who had suffered loss on account of dearness of
Articles etc. H. E. H. finally concluded:
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“Finally I think it necessary to say some thing more that is, this person is an expert in the
art of medicine from the period of the late Hakim Ajmal Khan who had full confidence in
his work and no doubt the medicines prepared by him are rare and unavailable in our
days which were prepared in specified medical way.”

In this Order H. E. H. the Nizam also suggested that a Committee be appointed constituting
one member of the Finance Department, the other from the Military Department and the third
from the Nazim Medical Service and this Committee be Ordered to submit its report within
one month to the concerned department in the Council considering all the aspects how to
save this Makhasan from the devastations of time.

3. In July 29,1942 Committee held the meeting suggested a certain scheme. These
suggestions were further modified in a meeting dated July 31, 1942. The suggestions
were conveyed to the plaintiff and he was asked to submit his own proposals for the
consideration of the Committee. In a meeting on August 19, 1942, the Committee
decided that a company should be floated and the name of the proposed company would
be "Magzen Majeedia Advia Limited."

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The para 2 of this proposal says:

“The issued capital of the concern shall be rupees two lakhs, out of which the Government shall
purchase 55% of the shares and the remaining 45% of the shares shall be earmarked for the
public and out of latter shares for Rs. 10,000 shall be allotted to Moulvi Anwar Ahmed Saheb
which shall be deemed to be the compensation for the technical services which he may render
and he shall give all his medical formulas to the company.

We need not mention the other details regarding the management. It was also suggested that the
samans (Articles) present in the Dawakhana of the plaintiff would be taken into possession after
ascertaining their value and the shares of the same value would be allotted to him which shall be
in addition to the shares of Rs. 10,000. It was also provided that the plaintiff would get a sum of
Rs. 375 per mensem towards his remuneration.”

4. The plaintiff agreed to these proposals but suggested that experts be consulted in
connection with the scheme, and he expressed preference for the Makhasan being
nationalised. A memorandum was submitted to H. E, H. In 1943 Nizam issue the
following :

“In view of the opinion of the council the proposals submitted by the committee
appointed for the purpose of receiving the Makzan Advia Majeedia which is part and
parcel of the Sadar Shafakhana Nizamia from the "Dusthburd Zamana" (i. e. from the
vicissitudes of time) are hereby approved. Action may be taken accordingly. It is further
Ordered that the said Dawakhana (Makzan Advia Majeedia Limited) should always be
run on commercial lines under the supervision of the Government. Arrangements may be
made for the purchase of the medicines prepared by the said Dawakhana, not only by the
Government Hospitals but also by the public both in the State and outside the State and
all the formulas of Hakim Anwar Ahmed should be obtained for the said Limited
Company and I may be informed of the compensation to be paid to the said Hakim
Ahmed for the same and the case may be completed after the end of Ramzan because it is
highly necessary that this matter be decided during the lifetime of the said Anwar Ahmed
since he has been of infirm health most of these days.”

5. In compliance with the above Orders a committee was appointed for determining the
compensation for goodwill, compensation for the formulas and an assessment of the
value of the existing assets of the Factory. The Committee, considering that the
prescriptions were being purchased for a company, fixed the compensation at Rs.
1,20,000. This compensation was computed by considering the profits which used to be
derived annually. The total compensation determined was two lakhs and the method of
payment was recommended as follows:3

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. Out of this amount Hakim Meer Anwar Ahmed will be paid in cash a total of rupees forty
thousand as per the Orders of the H. E. H. The Nizam and the remainder of the rupees shall be
paid to him one lakh and sixty thousand in the form of shares in the company proposed. In the
light of the above circumstances the new business i. e. Magzan Advia Majeedia (Limited) will
commence with a proposed capital of ten lakhs of rupees. The released capital shall be rupees of
five lakhs and one lakh and sixty thousand rupees of the same shares shall be allocated to Hakim
Meer Anwar Ahmed, and the equity shares shall be allocated to the public

The Minister of Finance stated that all payments should be made in cash to Hakim Anwar
Ahmed except those reflecting the purchase price of the stock for which shares of the same value
will be allocated to him out of the share capital of the company. The Council of Ministers
indicated the Government would purchase one-third of the proposed company's issued capital
shares. All those suggestions were sent to H. H.E. For Instructions, Nizam. And H. E. H. On 2
July 1945 the Nizam issued the following Firman:

The Council proposals submitted in this regard are acceptable in this matter. Therefore steps may
be taken. However Hakeem Anwar Ahmed shall be paid Rs. 500 instead of Rs. 400 per month
(from the 1st of Sharawar) according to the condition proposed and a amount of rupees fifty
thousand in cash instead of rupees forty thousand may be paid to him and a receipt obtained from
the fee accepted. The remaining amount of one and a half lakh rupees in the company's capital
will be spent on his behalf. In any case all matters should be resolved quickly Hakeem Anwar
Ahmed is now facing some health issues.

6. On august 1,1945 a cheque for Rs. 50,000 was sent to the plaintiff and he was asked to send
the book "Tohfa-e-Osmania" in obedience to Firman that was issued by the Nawab. On August
3, 1945, the plaintiff sent the book in a sealed cover. However, nothing further happened
regarding the floating of the company.

7. On April 6, 1948, the plaintiff wrote to the Secretary to the Government, Medical
Department, suggesting that the cash compensation which was to be paid to him be
increased. He also wanted the compensation for the medicines and the goodwill to be
revised. He suggested that the entire compensation may be paid in cash. In the course of
this letter he said:
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 Thus there are some practical difficulties in the way of the business of "Makhzan"
which it is impossible to overcome in the near future. Apart from this there is no
likelihood of the availability of capital. I had, on the basis of the promises made by
my friends assured that at least shares of the value of (5) lakhs would be sold through
me and as such I had filed a list of the expected purchasers but I regret to say "That
cup is broken and that cup bearer is no more.

It is on this passage that the defendant rests his alternative case that the whole
contract fell through because the plaintiff was not able to fulfil his part of the
contract.

8. On June 15, 1948, the Secretary to Government, Medical Department, submitted an

Arazdasht to H. E. H. the Nizam for information. In this he submitted that the conditions
were not favourable for converting the Magzan Advia Majeedia into a limited factory and
the matter may be postponed for the present and the status quo maintained. It appears that
one Syed Ahmed Mohiuddin was appointed Managing Director of the proposed limited
company and in this Arazdasht it was suggested that he be relieved of the post.

9. On June 15, 1948, the plaintiff wrote saying that Moulvi Syed Ahmed Mohiuddin,
Managing Director that the Company had not obtained any formal charge because the
Company had not taken any separate existence till then.

10. The Goverment continued to pay the ammount of Rs. 500 to the plaintiff till 1953. On
June 25, 1953, the Secretary to Government, Medical and Health Department, directed
the following steps: (1) steps to recover the sum of Rs. 50,000 paid to Hakeem Anwar
Ahmed may be dropped; (2) the book of prescriptions and other papers received from
him in consideration of the amount of Rs. 1,20,000 proposed to be paid to him may also
be returned; and (3) the payment of an allowance of Rs. 500 per month which is now
being made may be stopped forthwith. On July 6, 1953, the book was returned to the
plaintiff but the plaintiff refused to receive it.

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ISSUES RAISED
1. Is the defendant Government entitled to receive the amounts paid to the Plaintiff. If so to what
extent?

2. Is the Plaintiff entitled to any amounts or damages and if so to what extent?

3. Was there a completed and concluded contract enforceable under law and has the Plaintiff any
cause of action? What is the effect on this case of payment of a lump sum of Rs. 50,000 and a
salary of Rs. 500 per month to Answer Ahmad by the Government?

RELEVANT CASE
1. U.P. Rajkiya Nirman Nigam Ltd vs Indure Pvt. Ltd. &
Ors
This appeal by special leave arises from the judgment and order passed on April 10, 1992 by the
Delhi High Court .The appellant filed an application under Section 33 of the Arbitration Act,
1940 [for short, "the Act"] for declaration that there exist no agreement between the appellant
and the first respondent-Indure Pvt. Ltd. on the basis of which a dispute for a claim of
Rs.1,68,73,628/- could be referred for arbitration as the agreement set up by the respondent was
non est and alternatively the dispute was not arbitrable under the agreement. Accordingly it
sought declaration to set aside the said agreement. The learned single Judge of the High Court in
the impugned order held that the draft agreement dated June 22, 1984 contains provision for
arbitration under clause [14] and the appellant is bound thereby; consequently, the arbitrators are
entitled to arbiter the dispute.
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JUDGEMENTS
In this case the court held that, there is definitely an agreement between government and plaintiff.   It
was also held that the agreement that the Government would buy the book of prescriptions
(Tohfa-e-Osmania), goodwill and existing assets of the factory for Rs. 2 lakhs for a company to
be floated by it. It was not a part of the agreement that the plaintiff had to float the company.
Further the Government in pursuance of the agreement purchased the book (Tohfa-e-Osmania)
and the property in it passed to the Government, It is true that the book was bought for the
company to be floated, but the court said that it was not the contingent contact. At one stage
contract was a package deal but the Government chose to carry out the contract piecemeal and
proceeded to buy the book and make an advance of Rs. 50,000. The balance of Rs. 1,50,000,
according to the Firman dated July 2, 1945, had to be "invested on his behalf in the capital of the
company". Plaintiff have all the right to enforce the contract if for some reason the company
could not float it. The court said that We are not concerned anything other than book "Tohfa-e-
Osmania" and order to delivery of the book and accordingly must pay the price mentioned in the
agreement.

In the third point , there is no material to show that the statement contained in plaintiff's letter
dated April 6, 1948, that he had assured that he would sell shares for Rs. 5 lakhs was part and
parcel of the original agreement. He may have stated this in Order to speed up the formation of
the company, but it in no way can be said to form part of the agreement which had nearly three
years earlier been partly performed.

CONCULSION
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What is described as ‘contingent contract’ in this topic is familiar to English law as ‘conditional
contract’. For a contingent contract, there is a certain event which needs to be fulfilled. The term
of these contract are certain and depend on the occurrence or non-occurrence of a future event. 

A contract is an agreement enforceable by law. For every contract, there should be an

agreement which is made by the free consent of parties competent to contract, for a
lawful consideration and with a lawful object. The agreement should not be declared
void hereby to form a contract. Every contingent contract is a contract primarily. Like
any other contract, it is also a contract to do or not to do something. It is not, however,
an absolute and unconditional one, without any reservations or conditions, which is to
be performed under any event. Its performance is dependent on some event’s
happening or not happening- the contingency.

For a contract to be a contingent contract, certain essential elements have to be there.

These elements form a contingent contract and without them, a contract will not be
contingent. There must be a valid contract to do or not to do something. The
performance of the contract must be conditional. The said event must be collateral to
such contracts and the event should not be at the discretion of the promisor. These are
some rules that have to be followed for a contingent contract to be enforceable. For
instance, on the happening of an event, on the event not happening and on the event not
happening within a specified time. There are some situations when a contingent
contract becomes void. Some of them are: the event being impossible, not happening of
event within fixed time, agreements contingent on impossible events and on the
conduct of a living person.

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