http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 11  

PETITIONER: BADRI PRASAD

       Vs.

RESPONDENT: STATE OF MADHYA PRADESH AND ANOTHER

DATE OF JUDGMENT: 16/03/1965

BENCH: DAYAL, RAGHUBAR BENCH: DAYAL, RAGHUBAR GAJENDRAGADKAR, P.B. (CJ) RAMASWAMI, V.

CITATION:  1966 AIR   58            1965 SCR  (3) 381

ACT: Sale  of Goods Act (3 of 1930), s. 20-Auction of cut  timber of forest-Delivery-Destruction by fire before removal-Formal contract signed by competent authority later-If property  in timber passed.

HEADNOTE: The  2nd  respondent purchased on 24th December 1956,  at  a public  auction sale held by the Divisional Forest  Officer, the cut timber of a coupe and paid the first installment  of the purchase price immediately.  The appellant stood  surety for  the  payment of the remaining three  instalments.   The coupe  was  divided into 4 sections according to  the  rules which  were  deemed  to  be part of  the  contract  and  the boundary certificates was furnished to the 2nd respondent on 5th  February 1957.  He began operations in the 1st  section on  the last week of February, but defaulted in the  payment of  the 2nd instalment which was due on 1st March 1957,  and so,  on  25th April the appellant and  2nd  respondent  were informed by the forest authorities, that no further  removal of  the  timber  would be allowed, as the  value  of  timber already  removed exceeded the amount paid.  On 28th April  a fire  broke  cut and the timber sold to the  2nd  respondent ceased  to exist.  On 3rd May 1957, the formal deed of  con- tract,  which  was  signed by the  2nd  respondent  and  the Divisional  Forest Officer on 24th December, was  signed  by the Chief Conservator of Forests, as required by the  rules. Since the 2nd respondent had not paid the later  instalments proceedings were commenced by the 1st respondent against the appellant, whereupon he filed a suit for restraining the 1st respondent  from continuing the proceedings.  The  suit  was decreed by the trial court, but dismissed on appeal, by  the High Court. In  his appeal to this Court, the appellant  contended  that the  2nd  respondent had not been put in possession  of  the timber  sold, except the portion in the 1st section  of  the coupe, that there was no transfer of property in the  timber and  therefore he was not liable to pay the amounts  due  on the  other  3 instalments, the transfer of property  in  the timber being a condition precedent to his liability. HELD:     There  was an unconditional contract for the  sale

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 11  

of  specific goods in a deliverable state, the  property  in the  timber passed to the 2nd respondent when  the  contract was  made  on 24th December 1956 under s 20 of the  Sale  of Goods  Act,  1930,  and possession was  also  given  on  5th February 1957.  Therefore, the appellant’s suit was  rightly dismissed by the High Court [391 H] The  timber was sufficiently identifiable and was  therefore specified  goods  and  there was  nothing  in  the  contract postponing  possession till the other instalments have  been paid.   The fact that the contract was signed by  the  Chief Conservator, after fire had broken out has no effect on  the validity of the contract, or on the question of delivery  of possession or on the passing of property in the timber.  The instructions  in  the  Forest  Manual  about  execution   of contracts plainly take into consideration the lapse of  time between the execu- 382 tion  by the lessee and by the competent  forest  authority, and  therefore,  the  date on which  the  Chief  Conservator signed  had not any real effect on the actual date on  which the  sale of the timber took place.  It was also within  the realm  of  possibility  that the timber  might  be  lost  on account  of  fire  or other risk, before  the  contract  was formally  signed.   The  sale  of  the  timber  to  the  2nd respondent was therefore final on 24th December, the date of sale, subject to the acceptance of his bid by the  competent authority. [387 E-H; 388 F; 393 A-B] Williams  v. North China Insurance Co., L.R. (1876)1  C.P.D. 757, applied. Rule 8 of the Forest Contract Rules empowers the  Divisional Forest  Officer  to stop the removal of the  timber  on  his finding  that  the  value  of  the  timber  already  removed exceeded  the amount of instalments paid.  But,  that  would not  amount to reserving a right of disposal in  the  State, because, the rules provide that though Ordinarily the timber should  be  sold  for  cash  payment  in  full,  payment  in instalments  could  be considered as payment in full,  if  a right  in  accordance  with  r.  8  is  reserved.   When   a contractor  is deemed to have paid in full the price,  there could  be no occasion for the Government to reserve a  right of disposal.  The provision in r. 8 is only in pursuance  of the  statutory provision in s. 83 of the Forest  Act.  1927, which  provides  that when any money is payable  for  or  in respect of any forest produce, the amount thereof shall be a first  charge on such produce, and that such produce may  be taken  possession of by a Forest Officer, until such  amount has been paid. [390 H-391 D]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 672 of 1964. Appeal by special leave from the judgement and decree  dated October  1962  of  the Madhya Pradesh High  Court  in  First Appeal No. 8 of 1960. C.   B. Agarwala, W. S. Barlingay and A. G. Ratnaparkhi, for the appellant. M.   Adhikari,  Advocate  General for the  State  of  Madhya Pradesh, B. sen, M. S. K. Sastri, M. N. Shroff, R. P.  Kapur for 1.    N. Shroff, for the respondent No. 1. The judgment of the Court was delivered by Raghubar Dayal, J. This appeal, by special leave, arises out of a suit instituted by the appellant for a declaration that he  was  not liable to pay a certain amount  originally  due from  defendant-respondent  No.  2 and for the  issue  of  a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 11  

permanent  injunction  restraining  the  State   Government, Madhya  Pradesh, defendant respondent No. 1 from  continuing the  proceedings  for  the recovery of  the  amount  or  for starting any fresh proceedings.  The suit was decreed by the Trial  Court  but, on appeal, the High  Court  reversed  the decree and dismissed the appellant’s suit. The  admitted  facts of the case are that  on  December  24, 1956, respondent No. 2 purchased at the public auction  sale held by the Divisional Forest Officer, Harda, the cut timber and arkat trees of coupe No. 9 Eastern, East Kalibhit Range, in Harda Forest 383 Division,  for Rs. 70,200.  The appellant stood  surety  for the  purchaser, viz., respondent No. 2. The  purchase  price was  to be paid in four instalments, according to para 4  of the  deed of contract.  Rs. 17,600 were to be paid  at  once and  were so paid.  The other instalments were due on  March 1, May 15 and December 15, 1957.  These instalments were not paid  by  respondent No. 2 and hence respondent No.  1  took proceedings  against the appellant for the recovery  of  the amount. According to the terms of the contract, the contractor, res- pondent  No. 2, was to commence his work of  collecting  and removing  the cut timber within 1 month after  furnishing  a copy of the boundary certificate.  This certificate, Exhibit D-1,  was furnished on February 5, 1957 and stated that  the respondent  No. 2 had clearly understood the  boundaries  of the  areas  covered  by  the lease and  that  he  had  taken possession of the standing/felled/ collected material in the aforesaid coupe as announced at the auction and described in the  said lease and that he was satisfied that the  quantity delivered to him agreed substantially with that announced at the auction. The  appellant  Badri Prasad signed this  certificate  as  a witness.  The work could continue upto June 30, 1958. Interest  was to be charged at 6-1/4 per cent per  annum  in respect  of the instalments not paid on the due dates.   The removal  of the forest produce purchased from  the  contract areas  was  to be according to specified routes  and,  after they  had been examined at the depots specified in clause  5 of  the  contract deal.  Clauses 5A and 5B of  the  contract made it incumbent on the forest contractor respondent No.  2 to  set  apart certain timber for certain  purposes  to  the agriculturists and the residents of the villages till  three months  before  the  expiry of  the  contract.   The  Forest Contract  Rules  were  deemed to be  part  of  the  contract entered  into  between respondent No. 2 and  the  State,  by clause 6 of the contract. The formal deed of contract was signed by the Chief  Conser- vator of Forests on May 3, 1957 and the preamble of the deed gives  the date of the making of the contract to be  May  3, 1957. The First Schedule to the Contract states: "The  forest  produce sold and purchased  consists  of:  All standing  trees  bearing  hammer mark  of  marginally  shown device  at base and breast height.  All felled trees  marked at  the  butt end and stumps with the device  shown  in  the margin". This  is signed by the contractor, respondent No. 2  and  by the   Divisional  Forest  Officer,  Harda  Division,   dated December  24, 1956.  The trace of the coupe sold was  signed by  respondent  No. 2 and the Divisional Forest  Officer  on November  29, 1956, prior to the actual auction  sale.   The Third Schedule relating to the out. 384

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 11  

turn  register was also signed by respondent No. 2  and,  by the  appellant  who stood surety and the  Divisional  Forest Officer, on December 24, 1956. The  security bond was signed by the appellant  on  December 29,  1956 and by the Divisional Forest Officer on March  30, 1957  and was countersigned by the Chief Conservator on  May 3, 1957. The entire coupe whose cut timber was sold to the respondent was divided into four sections A, B, C and D. This was  done in accordance with r. 18 of the Forest Contract Rules.  This rule  provides  that  the  operations  carried  out  in  the contract  area  under  a forest contract  for  the  sale  of standing  trees are divided into two stages (a) cutting  and (b)  carting.   Cutting operations include felling  and  all processes  of  conversion etc. without removing  it  further from the place where it was felled than may be necessary  to carry  out such processes.  Carting operations  include  all operations  for  the  removal  of  a  felled  tree,  or  its converted products from the place where the tree was felled, whether such removal be to a depot or to a saw mill or other destination.  Sub-r. (2) of r. 18 authorizes the  Divisional Forest Officer to divide the contract area, shortly termed a coupe, into such number of sections, not exceeding,,  eight, as  he  may think fit.  The Divisional  Forest  Officer  can regulate  and confine the operations of the forest  contract in  accordance with the provisions mentioned in clauses  (a) to (c) of that sub-rule.  Clause (b) provides that a  forest contractor  can be allowed to carry out  cutting  operations first  in sections 1 and 2 of the coupe only and as soon  as he begins cutting operations in section 3 he shall be deemed to have surrendered all his rights to the standing trees  in section  1 and similar would be the result on his  beginning cutting  operations  in section 4 and so on,  till  all  the sections of the coupe are completed.  Clause (c)  authorises the  forest contractor to begin carting operations from  the sections  whose trees he has begun to cut and provides  that his rights to the forest produce in section 1 cease when  he starts cutting operations in section 4, and so on. The  provisions of r. 20 apply to contracts where the  trees have  been  felled by the Forest Department and  the  felled trees  only were sold to the forest contractor.  Sub-r.  (3) makes rules 18 and 19 applicable to such contracts in so far as they be applicable.  Sub-r. (2) of r. 20 provides that  a forest  contractor  who  has purchased  felled  trees  shall remove all the trees purchased by him under his contract. Respondent  No. 2, the contractor, began his  operations  in section  A of the coupe in the last week of February,  1957. He  defaulted in the payment of the second instalment  which was  due on March 1, 1957 and did not pay that  amount  till April 25, 1957,                             385 though it was demanded several times from him.  On March 23, 1957 a notice.  Exhibit P4, was issued to him.  It stated:               "You  are being informed through  this  notice               that  the removal of goods from the  coupe  by               you  is  already  in  excess  of  the   amount               deposited  by you in the treasury.  So  please               send  the challan of the second instalment  as               soon  as possible by the return load  carrier,               otherwise  your  removal  of  goods  would  be               stopped  and  a report would be  made  to  the               higher authority within two days". This was duly served on respondent No. 2. On  April  25,  1957 the appellant was told  by  the  forest authorities  that no further removal of the  forest  produce

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 11  

would  be allowed in view of the default of payment  of  the second  instalment.  The licence book and the  transit  pass were taken back by the Government Forester, Madanlal Pagare. Fire broke out in the forest and the cut timber sold to res- pondent  No.  2 was burnt.  The report about the  loss  from fire is Exhibit D2 dated April 29, 1957 and is signed by the contractor and Sheoprasad Parashar. the Forest Guard.  As  a result  of the fire the goods purchased by respondent No.  2 and  not removed by then, ceased to exist.  He did  not  pay the amounts due for the 2nd, 3rd and 4th instalments. The  appellant sought to avoid his liability as  surety  for the non-payment of the amount inter-alia on the -round  that the  contractor  respondent  No.  2  had  not  been  put  in possession  ’of  the cut timber sold to him except  of  such timber  which  had been in section A of coupe  No.  9,  that therefore  there  had been no transfer of  property  in  the timber sold to him and that he was therefore not liable  for paying the amounts due on the 2nd, 3rd and 4th  instalments. It  was  averred by the appellant in paragraph 5(A)  of  the plaint:               "Thus it was clearly understood on both  sides               and  also explained by the  Forest  Department               officials  of  defendant No. 1 and  which  has               been all along implicit in the contract as per               usual practices of the forest department  that               the possession of the goods of each respective               section will be delivered to the Contractor on               payment  of each instalment as  stated  above.               It was only on due payment of each  instalment               that the contractor was to become entitled  to               remove  the goods in pursuance of the  licence               book supplied to him by the forest  department               of defendant No. 1.               In paragraph 5(B) it was stated:               "That  the contractor or his licensee  had  no               right  to remove the goods until the same  was               duly  hammer marked by the  representative  of               the said forest department               386               and  until  the licence and the  transit  pass               were  duly  checked and signed  by  the  Coupe               Guard  or such other representative as may  be               present on the spot".               Para 5(C) mentioned:               "That  the contractor or his men were  further               liable  to carry the forest produce for  check               and  examination of forest  Depot-officers  of               Ziri,  Rahetgaon and Timarni  established  for               that  purpose  and  after  the  cut  wood  was               checked  by the Depot Officers, the same  used               to  be marked with a special hammer mark,  and               unless that was done it was not lawful for any               person to remove timber brought to the depot". Respondent  No. 1 admitted what was stated in paras  5(B)  & (C)  of the plaint.  It denied the understanding as  averred in para 5(A) and what was alleged in para 5(D) to the effect that  it  was  after the processes  mentioned  earlier  that delivery  of the goods was deemed to be given to the  forest contractor and was to be at his disposal. The  main question urged before us is that the  property  in the cut timber sold and existing in sections B, C and D  ’of the  coupe had not passed to the contractor before the  fire broke out in the last week of April 1957 and this contention is based on the facts that the goods sold were not  specific goods as they had not been hammer-marked, that the goods  in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 11  

sections B, C and D could not be delivered till the 2nd, 3rd and  4th  instalments  had been paid and that  the  deed  of contract was signed after the fire had taken place. We  may  now  consider the points urged in  support  of  the contention that the property in the timber of sections B,  C and D had not passed to respondent No. 2. The  first schedule to the contract describes the  property, forest produce sold and purchased, thus:               "  All standing trees bearing hammer  mark  of               marginally  shown  device at base  and  breast               height.   All felled trees marked at the  butt               end  and stumps with the device shown  in  the               margin". It  is  the case of the plaintiff-appellant that  cut  trees timber  or  cut trees were sold.  Para 2(A)  of  the  plaint describes  the  property purchased as ’the  cut  timber  and arkat  trees of coupe No. 9’.  Clause (1) of para 2 ’of  the statement of the case filed on behalf of the appellant makes this further clear as it is stated therein that the contract was for the purchase of ’the cut-timber and cutarkat trees’. It appears therefore that the expression about ’all standing trees  bearing  hammer mark’ in the  description  of  forest produce sold was inadvertently omitted to be struck out from the  deed of contract though there was no sale  of  standing trees to respondent No. 2. 387 Chapter XX of Part IV of Vol.  1 of the Central Provinces  & Berar  Forest  Manual  (hereinafter  shortly  termed  Forest Manual) gives the rules for the disposal of forest  produce. Rule  5 states that before forest produce is disposed of  it shall  be  properly marked.  The standing trees  are  marked with hammer at two places, at the butt end and at the  lower part, a little above the stem.  ’the trees are to be  felled so as to leave the lower hammer mark in the un-cut  portion. The  felled  tree sold is subject to  further  processes  of cutting etc.  The portions so cut have to be hammer  marked, as only one such portion will have the hammer mark which was first  put  at the butt end of the tree.  A  second  special hammer  mark is placed on these cut portions at the time  of checking at the depot.  The two hammer marks necessary to be put on the cut portions of the felled tree before they could be actually taken away from the forest area were not made on the  cut timber existing in sections B, C and D and sold  to respondent No. 2, as the felled trees in those areas had not been  cut  further by the contractor.  The omission  to  put such marks does not make the goods sold unascertained.   The felled trees sold to the respondent No. 2 had a butt mark at the  butt  end.  A similar hammer mark existed on  the  stem near which the felled tree must have lain, it being presumed that  the  rules  for the felling  of  trees  were  properly complied  with by the forest authorities,  mentioned  above. The goods sold therefore were specified goods. There  is nothing in the contract that possession would  not be delivered over the cut timber in sections B, C and D till the  2nd,  3rd  and 4th instalments  have  been  paid.   The relevant  provisions of r. 18 of the Forest Contract  Rules, extracted earlier, do not contain any such restriction.   It only provides that the operations necessary to be  conducted by  the contractor had to start with section A or the  first section  and  that  the  rights of  the  contractor  to  the material  purchased  would be deemed to  be  surrendered  in certain  circumstances.   This has nothing to  do  with  the payment  of  the  instalments by  the  contractor.   He  can proceed  to  operate  on  the  entire  property   purchased, according   to  his  inclination  in  accordance  with   the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 11  

procedure, as regulated by the rules.  There is therefore no force  in  the  submission that there  could  have  been  no delivery of possession over the produce sold and existing in section  B,  C and D till the various instalments  had  been paid. The  fact that the contract was signed by the Chief  Conser- vator  of Forests on May 3, 1957, after fire had broken  out has  no effect on the question of delivery of possession  of the produce sold and consequently on the passing of property in  the goods to the contractor respondent No. 2. The  Chief Conservator  who was the proper authority for entering  into the contract of sale of property worth over Rs. 70,000/- had necessarily  to sign the deed of contract subsequent to  the actual auction sale and in view of the L/B(N)3SCI-12 388 exigencies of the procedure to be followed may have to  sign after a substantial period of time. The  bid  of respondent No. 2 at the auction sale  had  been provisionally accepted by the Divisional Forest Officer  who is  authorized under the rules to conduct the auction  sale. The   Divisional  Forest  Officer  and  respondent   No.   2 thereafter signed the deed of contract on December 24,  1956 the  date  on  which  the  auction  sale  took  place.   The appellant,  as  surety, also signed the  third  schedule  on December   24,  and  the  security  bond  on  December   24. Practically all the formalities necessary for the  execution of  the  deed  except  for  the  signatures  of  the   Chief Conservator,  authorised  to enter into a contract  of  this magnitude, had been completed.  His formal signature on  the deed  of contract relates back the contract to the  date  of auction  when the bid of respondent No. 2 was  provisionally accepted and he and the Divisional Forest Officer signed the contract. In  this connection, reference may be made to certain  rules and  the  instructions issued by Government to  the  various officers   for  complying  with  those   rules.    Executive instructions   on   the  preparation  of   forest   contract agreements  are printed at p. 125 of Vol. 11 of  the  Forest Manual.  Instruction No. 9 provides that if the parties have signed  the  deed  on the same date,  that  date  should  be entered  in  the  preamble, but if they had  signed  on  two different dates, then the later of those two dates should be entered  in  the preamble.  It was in accordance  with  this instruction  that May 3, 1957, the date on which  the  Chief Conservator  signed  the  contract  was  mentioned  in   the preamble of the contract deed.  That date therefore had  not any real effect on the actual date on which the sale of  the forest produce took place in favour of respondent No. 2. Instruction  10  directs that the dates in clause 2  of  the prescribed deed of contract should be very carefully entered as  they have an important bearing on the deed and show  the period during which the contract will remain in force.  Such a  period  in the deed of contract Exhibit D is  the  period ’from the date the forest contractor furnishes the necessary coupe boundary certificate after inspection of the  contract area  to  the 30th day of June 1958, both  days  inclusive’. The coupe boundary certificate was furnished on February  5, 1957.   It follows that the period for the operation of  the contract  was from February 5, 1957 to June 30, 1958.   This is  a clear indication that the date in the preamble has  no real  effect  and that the contract, after  its  being  duly signed by the competent authority, relates back to the  date of sale. Instruction  16  deals  with the execution of  the  deed  of contract.   Clause  (i) provides for the drawing up  of  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 11  

contract   in   triplicate.   Clause  (iii)   requires   the Divisional Forest Officer to initial the                             389 contract  after  checking it before the lessee is  asked  to sign  it.   Clause (iv) provides that where  the  Divisional Forest Officer himself is empowered to execute the agreement he and the lessee should execute it together and clause  (v) provides  that  where the Divisional Forest Officer  is  not empowered to execute the agreement, it should be executed by the lessee and his signature should be attested and that the agreement  should  then be sent as soon as possible  to  the Forest  Officer empowered to execute it, for  his  signature and attestation. These  instructions  about  the execution  of  the  deed  of contract  plainly take into consideration the lapse of  time between  the  execution by the lessee and by  the  competent forest authority. Instructions Nos. 38 to 48 are with regard to the auction of forest  contracts.  It is the Divisional Forest Officer  who is  directed  to  take certain steps.   Instruction  No.  45 provides  that Divisional Forest Officers should  ordinarily allow  themselves more than one day for the conduct  of  the auction  sales.  Instruction No. 47 provides that where  the agreements  are  to be signed by the Conservator  or  higher authority, the first instalments must still be paid and  the duplicate  agreements  signed  by  the  contractor  and  his surety,  if  any, and sent to the  Conservator  immediately. The  Conservators  should sign the duplicate  agreements  in token of acceptance and return them to the Divisional Forest Officers  as soon as possible.  The reason for this is  that it  is  obviously only fair to a forest contractor  that  he should  be in possession of his signed agreement  before  he starts  work on his contract, i.e., before July 1.  In  case the  Conservators  are not competent to  sign  the  contract deeds  such deeds will have to be sent by them to the  Chief Conservator  who is competent in view of r. 102A of Vol.   1 of  the Forest Manual (under Chapter XIX) and  the  relevant -orders of the Government to execute contracts for the  sale of  forest  produce  upto an amount  of  Rs.  1,00,000  when payment is received in full at the time of delivery and upto Rs. 10,000 or upto Rs. 50,000 with the previous sanction  of the  Provincial Government when payment is not  received  in full at the time of delivery. The  exercise  of this power by the  Chief  Conservator  and other  officers  is  subject  to  the  rules  given  in  the Government  Notification  and  rule  1(a)  of  these   rules relating to contracts for forest produce reads:               "No  timber  or other forest  produce  may  be               ordinarily sold except on cash payment in full               at   the   time  of   delivery.   Payment   in               instalments  may,  however, be  considered  as               payment  in  full  at  the  time  of  delivery               provided  that  there  is  a  clause  in   the               agreement  to the effect that when  Divisional               Forest Officer considers that the value of any               forest produce removed by the purchaser equals               or  exceeds the amount of purchase money  paid               by him upto               390               that  time, the Divisional Forest Officer  may               stop  further removal until the purchaser  has               paid  such further sum, as in the  opinion  of               the Forest Officer, may be sufficient to cover               the excess value of the forest produce removed               or to be removed".

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 11  

In view of this rule it would be deemed that the payment  of the  purchase  price had been made in full at  the  time  of delivery,  though the actual payment was to be made in  four instalments. We are therefore of opinion that the sale of the forest pro- duce  to respondent No. 2 was finalised on the date of  sale subject  of  course  to the acceptance of  his  bid  by  the competent  authority, the Chief Conservator of  Forests  and that the fact that the Chief Conservator signed the deed  on May 3, 1957, does not make the sale effective from the  date of  his signature.  His signatures do not ratify any  action of  the Divisional Forest Officer which he took  beyond  his competence,  but simply completes the execution of the  deed of  contract  and relate back its execution to the  date  on which the sale took place and the contractor and the  Forest Officer had signed the document. We  may now refer to the approach of the High Court to  this question of the deed of contract operating from the date  of its  execution by respondent No. 2. It was of  opinion  that respondent  No.  2, and the Divisional Forest  Officer,  had made  the  contract in December 1956 long before  April  28, 1957  and  even  if the Divisional Forest  Officer  was  not competent  to  enter  into the contract, his  act  had  been subsequently  ratified by the competent authority  and  that therefore  the ratification related back to the date of  the contract and had the same effect as if the Divisional Forest Officer had performed the act by the authority of the  Chief Conservator  of Forests.  With respect, we do  not  consider this approach to be correct.  The Divisional Forest  Officer had  authority  under the statutory rules  for  holding  the auction  and for provisionally accepting the bid.  All  that he did was within his authority.  He did not actually  enter into  the contract with respondent No. 2. He  simply  signed the  standard form of the contract for the  satisfaction  of the competent authority to the effect that its accepting the bid  and entering into the contract would be correct  as  is the usual official procedure where subordinates have to  put up or forward papers to the superior officers for  approval, sanction or orders.  The right view of the entire  procedure adopted in the case has been already stated by us above. The other point urged by Mr. Agarwala, for the appellant, is that  in  view of r. 8 of the Forest  Contract  Rules  which empowered the Divisional Forest Officer to stop the  removal of forest produce sold on his finding that the value of  the forest  produce already removed by the  contractor  exceeded the  amount  of  the instalments already paid  by  him,  the seller in this case had reserved the right 391 of  disposal of the forest produce until certain  conditions were  fulfilled  and that therefore s. 25(1) of  the  Indian Sale  of  Goods Act, 1930 (Act III of 1930  applies  to  the facts  of  the  case and  that  therefore,  notwithstanding, delivery  of  the  forest produce to  respondent  No.  2  in February 1957, the property in it did not pass to respondent No.  2  until  the conditions imposed  by  the  seller  were fulfilled.  There is nothing in the deed of contract ’or  in the  Forest  Contract Rules which reserved such a  right  of disposal in the State.  Right given to the Government  under r. 8 is the right to stop the removal of forest produce when the value of the forest produce already removed exceeded the amount  of  the instalments paid.  This is to  regulate  the compliance  with the conditions of the auction one of  which was  that ordinary forest produce was to be sold on  payment in  full  at  the  time of  delivery.   The  contractor  had therefore  to pay full price he had bid at the date  of  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 11  

sale or any day prior to the delivery of the goods to him in February  1957.   The  provision  for  allowing  payment  by instalments  is  a  concession for the  convenience  of  the contractor  and it is provided in the rule that  payment  in instalments may however be considered as payment in full  at the  time  of  delivery provided there be a  clause  in  the agreement  in accordance with the provisions of r. 8 of  the Forest Contract Rules. Reference may here be made to the provisions of s. 83 of the Indian  Forest Act, 1927 (Act XVI of 1927).  Subsection  (1) provides that when any money is payable for or in respect of any forest produce, the amount thereof shall be deemed to be a  first  charge on such produce, and such  produce  may  be taken  possession of by a Forest Officer until  such  amount has  been  paid.   Rule 8 of the Forest  Contract  Rules  is therefore in pursuance of the statutory provisions of s.  83 of the Forest Act which creates a lien on forest produce for the   money  payable  to  Government.   Action   which   the Divisional Forest Officer can take for stopping the  removal of the forest produce sold is in pursuance of the  statutory authority conferred on him and not in pursuance of any terms of the contract between respondent No. 2 and the Government. When  a contractor is deemed to have paid in full the  price there  could be no occasion for the Government to reserve  a right of disposal of the property even when its delivery had been made to the purchaser.  As already stated, it is s.  20 of  the  Sale ’of Goods Act which will apply to  this  case. This  section provides that where there is an  unconditional contract  for  the sale of specific goods in  a  deliverable state,  the property in the goods passes to the  buyer  when the  contract is made and it is immaterial whether the  time of payment ’of price or the time of delivery of the goods or both  is  postponed.  The contract  was  unconditional,  the goods sold were specific.  They were in a deliverable  state and therefore the property in the goods did pass at the time when the contract was made.  This section would have applied even if the time of payment 392 of  price  hand  been postponed.  In the  present  case,  as already stated, the payment allowed by instalments is to  be deemed  payment in full at the time of the delivery  of  the goods sold. The last contention raised for the appellant is that as  the contract  was signed by the Chief Conservator about  a  week after the goods lying in sections B, C and D had been  burnt by  fire, the contract must be deemed to have been not  made at  all  by  the  Chief  Conservator  who  could  not   have contracted   to  sell  goods  which  did  not  exist.    The contention really is that there could be no ratification  of the  act  of  the  Divisional Forest  Officer,  who  had  no authority  to enter into the contract, after the  goods  had ceased  to exist and reliance is placed in support  of  this contention  on  what  is stated at para 415 at  p.  177  ’of Halsbury’s  Laws of England, Vol. 1, III Edn.  It is  stated there:               "As to the time within which ratification  may               take place, the rule is that it must be either               within  a  period fixed by the nature  of  the               particular case, or within a reasonable  time,               after  which an act cannot be ratified to  the               prejudice of a third person".               This  is the general proposition and will  not               be applicable to this case as no third  person               is being prejudiced on account of the  signing               of  the contract by the Chief  Conservator  on

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 11  

             May  3,  1957,  a  week  after  the  fire  had               destroyed  certain goods purchased.   Further,               it is stated in the same paragraph:               "But  by an anomalous rule limited  to  marine               insurance a contract of marine insurance  made               by an agent on the principal’s property may be               ratified  by  the principal  after  notice  of               loss".               This  proposition is well-settled in  England.               In  Williams v. North China  Insurance  Co.(1)               this  proposition was sought to  be  reviewed.               Cockburn C.J. said at p. 764:               "The existing authorities certainly show  that               when   an   insurance  is   effected   without               authority  by one person on another’s  behalf,               the  principal may ratify the  insurance  even               after  the loss is known.  Mr. Benjamin  asked               us,  as  a Court of Appeal,  to  review  those               authorities......  Where an agent effected  an               insurance  subject to ratification,  the  loss               insured  against  is  very  likely  to  happen               before ratification, and it must be taken that               the   insurance  so  effected  involves   that               possibility as the basis of the contract.   It               seems to me that, both according to  authority               and the principles of justice, a  ratification               may be made in such a case". These  observations  would fully apply to the facts  of  the present  case,  even if we were of the view that  the  Chief Conservator ratified the unauthorised act of the  Divisional Forest Officer on May (1)  L.R. [1876] 1 C.P.D. 757.                             393 3,  1957, after the fire had taken place.   The  provisional acceptance  of  the bid and the signing of the deed  by  the Divisional  Forest  Officer must. in the  circumstances,  be held to be subject to ratification.  It was within the realm of  possibility  that the forest produce might  be  lost  on account of fire or any other risk mentioned in r. 32 of  the Forest  Contract  Rules  before the  deed  of  contract  was formally  signed  by the Chief  Conservator.   The  contract entered into therefore involved the possibility of the  loss of goods by fire as the basis of the Contracts Lastly,  reference  may  be  made to r.  32  of  the  Forest Contract Rules which provides that a forest contractor shall not  be entitled to any compensation whatever for  any  loss that may be sustained by reason of fire etc.  This is not  a suit  for compensation by the contractor respondent  No.  2, but  in  essence the basis ’of the suit is that  the  forest contractor  did not get possession of the forest produce  in sections B, C and D, that such produce was lost by fire  and that  therefore  he  was not to pay the  second,  third  and fourth  instalments and cannot be said to be in  default  in payment  of  those instalments.  The loss of such  goods  by reason of fire therefore does not in any way give support to the claim of the appellant. We  are therefore of opinion that the appellant’s  suit  has been  rightly dismissed by the High Court.   We  accordingly dismiss the appeal.  There will be no order as to costs. Appeal dismissed. 394