Pushpa Priya Devi & Ors Vs. State of
Maharashtra & ANR [1978] INSC 76 (4 April 1978)
KAILASAM, P.S.
KAILASAM, P.S.
SARKARIA, RANJIT SINGH
CITATION: 1978 AIR 1076 1978 SCR (3) 578 1978
SCC (2) 534
ACT:
Madhya Pradesh Abolition of Proprietary
Rights (Estates, Mahals, Alienated Lands) Act, 1950, Act 1 of 1950, Sections 3
and 6-Scope of-Whether the Forest Contract Ex. P. 19 void-Whether there is a
novation of contract by virtue of the letter Ex. P. 17 and therefore whether
there is estoppel by conduct in claiming the refund.
HEADNOTE:
Before the Madhya Pradesh Abolition of
Proprietary Rights (Estates, Mahals Alienated) Act, 1950, came into force on
31st March, 1951, the plaintiff predecessor of the appellant and who is a
brother of the second respondent and the proprietor of Ahiri estate, took a
forest contract Ex. P.19 on 15th March, 1951 for cutting the standing trees in
the forest known as Huchbodi Nendwadi coupe for a sum of Rs. 50,000/-. The
contract provided that a sum of Rs. 15,000 was to be paid immediately on the
date of the execution of the contract and the balance to be paid within six
months.
After the dismissal, on 2nd, May, 1952 of the
writ petition filed by the second respondent, challenging. the validity of the
Act, the departments of the Government refused permission to the original
plaintiff to remove the trees cut. The plaintiff made representation to the
State Government and the State Government by its letter dated 12th March, 1953
Ex. P.-17, permitted the plaintiff to remove the trees on condition that he
deposited Rs. 35,000/-.
Accordingly the plaintiff paid Rs. 35,000/-
on 24th March 1953 and removed the timber. Thereafter, the plaintiff filed a
suit for the return of the said sum of Rs. 35,000/- on the ground that he had
already paid Rs. 35,000/- to his brother on 30th September, 1951, with interest
of Rs. 7,000/- in all Rs. 42,000/- contending that as the Supreme Court had
granted a stay of the operation of the Act, the property did not vest in the
State on 31st March 1951 but only on 2nd May, 1952, when the Supreme Court
dismissed the writ petition and therefore the contract was binding on the
defendant's estate, making his title perfect on the date of the contract before
31st March, 1951 when the estate vested in the State. The trial Court decreed
the suit on 21st November 1959 holding that the transaction was entered into by
the second respondent in the ordinary course of management and that the
transaction was not sham or a bogus one and that the transfer of sale under the
contract of the standing timber was sale of movable property and, therefore,
the transaction did not contravene the provisions of s. 6 of the Madhya Pradesh
Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950.
The High Court of Bombay, (Nagpur Bench)
allowed the appeal by the State, set aside the decree passed by the trial Court
and dismissed the suit of the original plaintiff.
Dismissing the appeal by Certificate, the
Court
HELD : 1. While under Section 3 of the Madhya
Pradesh Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act,
1950 the interest of the proprietor vests in the State Government from the date
specified in the Notification i.e. 31st March, 1951 Section 6 provides that the
transfer of any right which is liable to vest in the State under this Act made
by the proprietor at any time after 16th March, 1950 shall be void from the
date of vesting. The result of the operation of Section 6 would be that the
contract dated 15th March, 1951 which is a transfer of a right of property
which is liable to vest in the State having been made by the proprietor after
16th March, 1950, shall become void from the date of vesting i.e. 31st March,
1951. [581 G-H, 582 A]
2. (a) The several clauses of the contract
Ex. P. 19 clearly show that the contract was to commence on 15th March, 1951
and will be in force till 14th March, 1953 during which period the contractor
agreed to file monthly 579 accounts of falling, logging and extraction by him.
As per Cl. 5, the contractor will not remove the forest produce till logs are
checked and passed by the Estate Forest Officer. The second installment of Rs.
35,000/- is to be paid on 15th September, 1951. What was contracted for was the
sale of forest produce, which is proprietary right vested in the proprietor in
the property which according to the Act is to vest in the State. The plea that
the contract was only for the sale of goods i.e. movable property and that as
the trees have been marked and felled before 31st March 1951, the contract of
sale of goods had been concluded cannot be accepted. The contract was clearly
not for sale of goods but for transfer of right in property. [593 C-E] (b) In
order that the property in the goods passes under the Sale of Goods Act, it is
necessary that the tree should be felled and ascertained before the .relevant
date. In the present case, the trees were not felled before 31st March, 1951
and further they were not ascertained as required under the contract for the
sale as logs had to be checked and passed by State Forest staff by affixing the
mark before they can be removed by the appellant. Since the trees were not
felled and ascertained the title in the goods had not passed to the appellant
before 31st March. 1951, the date on which the estate vested in the State. The
provisions of s. 6(1), therefore, will be attracted and this being a transfer
of right in property which is liable to vest in the State after 16th March,
1950, it shall be void from the date of vesting. [584 A, G-H, 585 A] Badri
Prasad v. State of Madhya Pradesh & Anr. [1967] 2 S.C.R. 380; followed.
3.Taking into account the fact that the
appellant and the second respondent are brothers, the imminence of the vesting
of the entire estate of the second respondent with the State, and the absence'
of any material to show that the appellant was possessed of the funds, the
appellant would not have paid the amount of Rs. 35,0001- to the second
respondent. After the vesting of the forest in the Government, the Government
under s. 6(2) offered to permit the appellant to remove the trees on payment of
Rs. 35,000/-. Having agreed to the condition and paid Rs. 35,000/- the
appellant cannot ask for any refund.
[585 E, F-G]
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 2455 of 1968.
From the Judgment and Decree dated 12-8-1966
of the Bombay High Court in F.A. No. 15 of 1960.
M. N. PPhadke and A. G. Ratinaparkhi for the
Appellant.
R. P. Bhart, S. P. Nayar and M. N. Shroff for
Respondent No.1.
M. R. K. Pillai for Respondent No. 2 The
Judgment of the Court was delivered by KAILASAM, J.-This appeal is by the legal
representatives of the plaintiff by a certificate granted by the High Court of
Bombay (Nagpur Bench) against its Judgment and decree dated 12th August, 1966.
The plaintiff in the suit is the brother of
the ex- proprietor of the Ahiri Zamindar, the second defendant, second
respondent in this appeal. The first defendant is the State of Maharashtra, the
first respondent in this appeal.
The Madhya Pradesh Abolition of Proprietary
Rights (Estates, Mahals, Alienated Lands) Act, 1950, Act 1 of 1951 received the
assent of the President on 22nd January, 1951 and was published in 580 the
Gazette on 26th January, 1951. The State Government published a notification
bringing the Act into force from 31st March, 1951. 'Before the Act came into
force on 31st March, 1951 the plaintiff who is a brother of the second
respondent, the proprietor of the estate, took a contract on 15th March, 1951,
for cutting the standing trees in the forest known as Hachbodi Nendwadi coupe
for a gum of Rs. 50,000. The contract provided that a sum of Rs. 15,000 was to
be paid immediately on the date of the execution of the contract and the
balance to be paid within six months. The second respondent filed a writ before
the Supreme Court challenging the validity of the Act and also of the
notifications and obtained an order of stay on 27th March, 1951. The writ
petition was ultimately dismissed on 2nd May, 1952 and the stay vacated. After
the dismissal of the writ petition filed by the second respondent, the
Departments of the Government refused permission to the plaintiff to remove the
trees cut. The plaintiff made a representation to the State Government and the
Government by a letter dated 12th March, 1953, Ex. P-17, permitted the plaintiff
to remove the trees on condition that be deposited Rs. 35,000. Accordingly, the
plaintiff paid Rs. 35,000 on 24th March, 1953 and removed the timber.
The suit out of which this appeal arises was
filed by the plaintiff for the return of the sum of Rs. 35,000 on the ground
that he bad already paid Rs. 35,000 to his brother by 30th September, 1951 and
that the Government was not entitled to recover another sum of Rs. 35,000. He
claimed for the return of the amount of Rs. 35,000 with interest of Rs. 7,000
in all Rs. 42,000. It was contended in the plaint that as the Supreme Court had
granted a stay of the operation of the Act the property did not vest in the
State on 31st March, 1951 according to the notification and that it was only on
2nd May, 1952 when the Supreme Court dismissed the writ petition that the
estate vested in the Government.
On this ground it was submitted that the
plaintiff's contract was binding on the defendant's estate. Plaintiff also
contended that apart from Rs. 15,000 which be paid to the second respondent on
the date of the agreement i.e. on 15th March, 1951, be paid the balance in two
installments of Rs. 35,000 on 31st August, 1951 and 30-9-1951. The 'plaintiff,
it was submitted, was forced to pay another Rs. 35,000 as the first respondent,
the State, refused to permit him to remove the timber that had already been cut
by him.
In any event, the plaintiff contended that
his title became perfect on the date of the contract before 31st March, 1951
when the estate vested in the State. The State denied the claims of the
plaintiff and contended that the property vested in the State on 2nd May, 1952
and denied the allegation that the plaintiff had paid a sum of Rs. 35,000 to
the second respondent. While admitting that the plaintiff applied for
permission to remove the teak cut and receipt of Rs. 35,000 it denied that the
amount was collected under any duress. The plea by the State Government was
that the contract Ex. P-19 entered into by the plaintiff with the second
respondent was sham and collusive transaction without consideration.
581 The trial court decreed the suit on 21st
November, 1959 holding that the transaction was entered into by the second
respondent in the ordinary course of management and that the transaction was
not sham or a bogus one. It also found that as a result of the stay order the
property continued to be with the 'second respondent and that he was entitled
to receive the balance of the sale rice under the contract. It also held that
the transfer of sale under the contract of the standing timber was sale of
movable property and therefore the transaction did not contravene the
provisions of section 6 of the Madhya Pradesh Abolition of Proprietary Rights
(Estates, Mahals, Alienated Lands) Act, 1950.
In an appeal by the State before the High
Court it was conceded by the plaintiff that the vesting of property in the
State could not be postponed by reason of the stay order. The order of stay
passed by this Court was not produced and the High Court rightly accepting the
concession found that the vesting of the. Estate was not postponed because of
the order of the stay granted by this Court.
Before examining the contention whether the
contract Ex. P- 19 was a sham and collusive transaction and whether the
plaintiff had paid Rs. 35,000 to his brother, the second respondent, it is
necessary to examine the provisions of the Act for determining the rights of
parties on the date when the contract was entered into. The Madhya Pradesh
Abolition of Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950,
Act 1 of 1951, received the assent of the President on 22nd January, 1951 and
the assent was published in the Madhya Pradesh Gazette on 26th January, 1951.
Section 3 of the Act provides that on and from a date to be specified by
notification by the State Government in this behalf all proprietary rights in
an estate vesting in a proprietor of such estate shall pass from such
proprietor and vest in the State for the purposes of the State free of all
encumbrances. By a notification the Act came into force on 26th March, 1951 and
the estate vested in the State on 31st March, 1951. Section 4 states that when
a notification under section 3 in respect of any area has been published all
rights, title and interest vesting in the proprietor or any person having
interest in such proprietary right through the proprietor in such area
including land (cultivable or barren), grass land, scrub jungle, forest, trees
etc. shall cease and be vested in the State for purposes of the State free of
all encumbrances. Section 6 of the Act renders certain transfers void. It
provides that except as provided in sub-section (2), the transfer of any right
in the property-which is liable to vest in the State under this Act made by the
proprietor at any time after the 16th March 1950, shall as from the date of
vesting, be void. While under section 3 the interest of the proprietor vests in
the State Government from the date specified in the notification i.e. 31st
March, 1951, section 6 provides that the transfer of any right which is liable
to vest in the State under this Act made by the proprietor at any time after
the 16th March, 1950 shall be void from the date of vesting. The result of the
operation of this section would be that the contract 582 dated 15th March, 1951
which is a transfer of a right of property which is liable to vest in the State
having been made by the proprietor after 16th March, 1950 shall become void
from the date of the vesting i.e. 31st March, 1951.
The plea on behalf of the plaintiff is that
the transfer would become void only as from 31st March, 1951 but as by that
date the sale in favour of the plaintiff had become complete, section 6 would
not have any application. On behalf of the State, it was submitted that the
plaintiff applied under sub-section (2) that the transfer was in good faith and
in ordinary course of business management and therefore may be declared that
the transfer shall not be void after the date of the vesting. The Collector
refused to accept the plea but permitted him to remove the timber that had been
cut on payment of Rs. 35,000 which was not paid to the second respondent. The
questions that arise for consideration are whether the transaction of sale was
complete before the date of the vesting of the estate i.e. on 31st March, 1951
and whether the plea of the plaintiff that he was forced to pay a sum of Rs.
35,000 to the State even though he had already paid the amount of Rs. 35,000 to
the second respondent as provided for in the contract is made out.
To, determine the question as to whether the
transaction between the, plaintiff and the second respondent was complete
before 31st March, 1951 it is useful to refer to the contract entered into
between the parties. Ex. P-19 is the contract and is dated 15th March, 1951.
The agreement is designated as Forest Contract and provided that the agreement
is for the sale and purchase of forest produce and that it was agreed between
the parties in the following terms :- 1.The Forest Produce sold and purchased
under this agreement is the following Un-Marked (Teak & Miscellaneous)
Standing/cut/with fallen trees, situated in the coupe known as Teak trees coupe
in the near Hachbodi-Nendwadi Forest Range in the Aheri Estate:- Teak 1000 Teak
trees over 4' in girth near Hachbodi-Nendwadi at Rs. 501/-per tree sanctioned
by Z. S. Ahiri on 14-3-1951.
Clause 3 provided that the contract shall
commence on 15th March, 1951 and will be in force up to 14th March, 1953 after
which date the contractor will have no right to any material not removed from
the contract area. The contractor agreed to remove the forest produce only
during the above period. Clause 4 provided that the consideration payable by
the contractor for this contract is Rs. 50,000 and that the amount will be duly
paid by the contractor by crediting it in the Ahiri Estate Treasury in
installments of Rs. 15,000 on 15th day of April and Rs. 35,000 on 15th day of
September. Clause 5 of the contract is important any may be extracted in full
"5. The contractor will not remove any forest produce from the site of the
x (x torn) and until the logs' are checked and passed by the Estate Forest
Staff by affixing x (x torn) bed passing hammer. The contractor will not 583
remove any forest produce between the sunset and sunrise. The contractor will
make his own arrangements for stacking x (x torn) outside the contract
area." Clause 7 provided that the contractor will duly coppice the stumps
of the trees felled by him. He agreed to carry out all his operations properly,
according to the rules in force governing the forest area and in a workman-like
manner and further agreed to abide by any directions and instructions in regard
to the working of this contract that may be issued to him by the Estate Forest
Staff and other estate authorities. Clause 8 provided that in the event of the
contractor's failure to pay any of the installments within the time fixed, the
estate authorities will be entitled to stop and restrain all further extraction
or other work in the contract area. Clause 9 provided that the contractor
agrees to file every month accounts of the felling, logging and extraction done
by him.
The clauses above extracted clearly show that
the contract was to commence on 15th March, 1951 and be in force till 14th
March, 1953 during which period the contractor agreed to file monthly accounts
of felling, logging and extraction by him. Clause 5 also provided that the
contractor will not remove any forest produce till the logs are checked and
passed by the State Forest staff. The second installment of Rs. 35,000 is to be
paid on 15th September, 1951. These clauses make it very clear that what was
contracted for was the sale of forest produce which is a proprietary right
vested in the proprietor in the property which according to the Act is to vest
in the State. The plea on behalf of the plaintiff that the contract was only
for the sale of goods i.e. movable property and that as the trees had been
marked and felled before 31st March the contract of sale of goods bad been
concluded cannot be accepted. Apart from the fact that the contract was clearly
not for sale of goods but for transfer of right in property, the facts also do
hot support the plea of the plaintiff that the trees were marked and felled
before 31st March, 1951. The evidence of P.W. 1 is that the marking and cutting
was done at the same time simultaneously and that the plaintiff bad cut all the
trees in the disputed contract. According to P.W. 2 the trees were being cut as
they were marked. The trial court held that the title of the plaintiff to the
trees was complete 'before 31st March, 1951 but the High Court came to the
conclusion that there is no evidence to ,how that the trees were cut before the
date of vesting. The High Court may not be quite correct in stating that there
is no evidence to show that the trees were cut before the date of vesting but
there can be no doubt that the evidence cannot be accepted for it is impossible
to have cut the trees before 31st March, 1951.
Even assuming that the trees were cut the
property will not pass to the plaintiff till requirements of clause 5 of the
contract are complied with i.e. the logs have been checked and passed by the
State 'Forest Officer by affixing marks and delivered to the plaintiff. This
was admittedly not done. Before the logs are checked and passed the goods are
not ascertained and the title cannot pass to the plaintiff.
584 We have no hesitation in coming to the
conclusion that the trees were not in fact cut before 31st March, much less the
cut trees ascertained before 31st March, 1951.
The decision of this Court in Badri Prasad v.
State of Madhya Pradesh & Anr.(1) was relied on by both the appellants and
the respondents. The facts are similar and arise out of a forest contract in
Madhya Pradesh and the case raised similar questions. The facts of the case
briefly are that the appellant before this Court entered into a contract for
removing forest produce in Madhya Pradesh After the passing of the Abolition of
Proprietary Rights (Estates, Mahals, Alienated Lands) Act, 1950, a notification
was issued vesting the estate in the State and the appellant was prohibited
from cutting timber in exercise of his rights under the contract. Later after
some negotiations the appellant agreed to pay an additional sum of Rs. 17,000
but reserved his right to claim a refund. The State Government rejected the
appellant's right to cut trees. The appellant thereafter lied a suit claiming
specific performance of the contract on the ground that the forest and trees
did not vest in the St-ate under the Act and even if they vested the standing
timber having been sold to the appellant did not vest in the State and in any
event a new contract was completed in February and the appellant was entitled
to specific performance. This Court negatived all the pleas and held after
considering the earlier decisions that it was too late in the day to contend
that the forest and the trees did not vest in the State under the Act.
Repelling the contention on behalf of the appellant that under the contract the
plaintiff had become owner of the trees as goods, this Court observed that
though the trees which were agreed to be served before sale or under the
'contract of sale are goods for the purpose of Sale of Goods Act but before
they cease to be proprietary rights or interest within the meaning of section 3
and 4(a) of the Act, they must be felled under the contract. On the facts of
the case the Court held that the property in cut timber would only pass to the
appellant under the contract at the earliest when the trees were felled. It
further added that, as the contract provided that the appellant was entitled to
cut teak trees of more than 12" girth it would have to be ascertained
which trees fell within the description and till that is ascertained they were
not ascertained goods. Thus in order that the property in the goods passes
under the Sale of Goods Act, it is necessary that the trees should be felled
and ascertained before the relevant date. In the present case we agree with the
conclusion arrived at by the High Court that the trees were not felled before
31st March, 1951 and further they were not ascertained as required under the
contract for as pointed out the logs had to be checked and passed by State
Forest staff by affixing the mark before they can be removed by the appellant.
Thus the facts are similar and the decision in the case applies to the present
case. Holding that the trees were not felled and that the goods were not
ascertained, we find that the title in the goods had not passed to the
appellant before 31st March, 1951, the date on which the estate vested in the
State.
(1) [1969] 2 S.C.R. 380.
585 When it is found that the title in the
goods had not passed to the appellant, then the provisions of section 6(1) will
be attracted and this being a transfer of right in property which is liable to
vest in the State after 16th March, 1950, it shall be void from the date of
vesting.
We agree with the finding of the High Court
that it is not possible to accept the appellant's case that he paid Rs. 35,000
to the second respondent. The appellant is the brother of the Zamindar, the
second respondent. The appellant has not chosen to examine himself as a witness
and speak to his payment of Rs. 3 5,000 to the second respondent. On behalf of
the appellant his agent was examined as P.W. 1. According to him he paid in
cash to the respondent a sum of Rs. 35,000 on 30th September, 1951. The witness
was questioned as to whether for making the payment he borrowed the money from
second respondent himself. He denied any knowledge about such borrowing. It is
most unlikely that any payment of Rs. 35,000 was made on behalf of the
appellant on 30th September, 1951. Without making sure that he would be able to
remove timber contracted without any objection from the State, he would not have
paid Rs. 35,000. As pointed out by the High Court P.W. 3 does not state that he
in fact received Rs. 35,000 in cash.
There is no material to show that the
appellant had such an amount with him. In the correspondence that passed
between the appellant and the Government, the appellant did not mention that he
had already paid Rs. 35,000 to the second respondent. In fact. when the
Government demanded that he should pay Rs. 35,000 the appellant paid the amount
without any protest. Taking into account the fact that the appellant and the
second respondent are brothers, the imminence of the vesting of the entire
estate of the second respondent with the State, and the absence of any material
to show that the appellant was possessed of the funds, we have no hesitation in
agreeing with the finding of the High Court that the appellant would not have
paid the amount to the second respondent.
Lastly, it was contended that in any event as
the Government permitted the appellant to remove the logs on payment of Rs. 35,000
it should be construed as ratification of the contract entered into by the
second respondent and as such the Government is' not entitled to collect Rs.
35,000 as if at all anyone was entitled to the amount it was only the second
respondent. We have no hesitation in rejecting this argument for after the
vesting of the forest in the Government, the Government under section 6(2)
offered to 'permit the appellant to remove the trees on payment of Rs. 35,000.
Having agreed to the condition and paid Rs.
35,000 the appellant cannot ask for any refund.
We find that there is no substance in this
appeal and dismiss it with costs of the first respondent.
S.R.
Appeal dismissed.
Back
