TaxTMI 
TaxTMI 
1966 (9) TMI 170
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....ncorporated the terms and conditions of the sale. The following are the material terms of the contract : "2. The quantity of the said forest produce to be sold under this contract shall be the quantity which may exist at the time of executing this indenture or may come into existence thereafter in the contract area all of which forest contractor may collect and remove from it in accordance with the conditions herein contained during 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, 1955, ........... 3. The forest contractor shall commence his work of collecting and removing the said forest produce within one month after furnishing the necessary certificate mentioned in clause 2 above,.... 5. The said forest produce shall be removed by the forest contractor from the contract area by the routes specified in the following table and shall be presented by him for examination at one or other of the depots specified in that table :- (Table Omitted) 6. The Forest contractor shall be subject to the Forest Contract Rules as amended from t....
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....rom the contractor. The High Court of Madhya Pradesh confirmed the decree of the Trial Court. 7. By virtue of clause 6 of the terms of the contract, the relevant Forest Contract Rules were to be treated as part of the contract between Jagatram and the State. By r. 2 it was provided that all contracts whereby the Government sells forest produce to a purchaser shall be subject to the rules, insofar as they are applicable, and that those rules, shall be deemed to be binding on every forest contractor not only as rules made under the Forest Act, but also as conditions of his forest contract. By r. 6 the forest contractor is required to carry with him an "accessory licence" entitling him and his servants and agents to go upon the land specified in the contract and to do all acts necessary for the proper extraction of the forest produce purchased under the contract. Rule 8 provides : "Where the consideration payable to Government under a forest contract is payable in installments and the Divisional Forest Officer at any time before the last installments is paid, considers that the value of the forest produce removed by the contractor exceeds the amount of the installments alr....
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....y forest produce not so removed, but such assignment shall not be valid unless it is made with the previous sanction in writing of the forest officer who executed the contract. 8. It is also necessary to refer to Sections 82 & 83 of the Indian Forest Act 16 of 1927. By s. 82 it is provided that all money payable to the Government under the Act or under any rule made under the Act, or on account of the price of any forest produce, or of expenses incurred in the execution of the Act in respect of such produce, may, if not paid when due, be recovered as if it were an arrear of land-revenue. Section 83 provides : "(1) When any such 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. (2) If such amount is not paid when due, the Forest Officer may sell such produce, by public auction, and the proceeds of the sale shall be applied first in discharging such amount. (3). . . . ." Beside the contractual right which is conferred upon the State by r. 8 to stop removal of goods in value ex....
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....on the production of the "coupe boundary certificate" the contractor becomes the owner of the goods. Under clause(2) of r. 29 when a contract is terminated for reasons mentioned in clause(1) all forest produce remaining within the contract area or at the depots specified under r. 13 becomes the absolute property of the Government. It is implicit in the rule that till the eventuality contemplated by r. 29(1), property in the forest produce is in the contractor. The terms of r. 33(2) which authorize the forest contractor to assign any forest produce also support that inference. The right to assign the forest produce not removed from the contract area predicates title to the forest produce. The argument of the State that the property in the goods had not passed to the forest contractor till they were removed, and on that account the statutory charge under s. 83 of the Forest Act did not attach to the goods sold, has therefore no force. As soon as the contract was entered into and the coupe boundary certificate was produced and we assume in this case that it was so produced, the property in the goods passed to Jagatram. But for the contract price there was a first charge on such produc....
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....o the extent of the value of the security lost or parted with. 12. The State had a charge over the goods sold as well as the right to remain in possession till payment of the installments. When the goods were removed by Jagatram that security was lost and to the extent of the value of the security lost the surety stood discharged. In the present case the State has not produced the accounts furnished under r. 16 by the contractor relating to the quantity of goods removed by Jagatram. We must in the circumstances hold that the entire quantity contracted to be sold to Jagatram had been removed, and the surety is, because the State has parted with the security which it held, discharged from liability to pay the amount payable under the terms of the contract. 13. In Wulff and Billing v. Jay, I.L.R. (1872) Q.B. 756 Hannen, J., stated the law thus : "..... I take it to be established that the defendant became surety upon the faith of there being some real and substantial security pledged, as well as his own credit, to the plaintiff; and he was entitled, therefore, to the benefit of that real and substantial security in the event of his being called on to fulfil his duty as ....