STATE OF MADHYA PRADESH versus KALURAM

Citation: [1967] 1 S.C.R. 266 · Decided: 05-09-1966 · Supreme Court of India · Bench: K.N. WANCHOO · Disposal: Dismissed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

STATE OF MADHYA PRADESH 
'" 
KALURAM 
September 5, l 966 
[K. N. WANCllOO, J.C. SHAH AND R. S. BACHAWAT, JJ.) 
Indhln Contract Act, s. 141-/''orest conlract-Contractor allowed to 
rtniove u·ood without making due pa)'ment--Sccurity for paynient thus 
lost-Surety wh<tlzer di.sclzarged. 
Al an auction 
held by 
the Divisional Forest Officer 
lloshangabad 
Division for sale of "felled trees', one J was declared the highest bidder. 
The amount of the bid was payable in four instalment>. 
According to 
A 
B 
the contract the Forest Contract Rules were binding on 
the contractor, 
C 
and the contractor could be prevented from rcrnOving the forest produce 
in c .. e he made default in payment of the instalmOillS due. 
One K bad 
stood surety for J along with another surety. J paid the fir.;t "instalment 
due under t~e contract hut without making the subsequent payments \\'as 
allowed to remove the whoJe forest produce contracted to be JOld fron1 
the contract area. The State of Madhya Pradesh thereafter took pn.:ceed· 
in&S to recover from K as arrears of land revenue the amount due front 
J. 
K commenced an auction for a declaration that he was not liable to 
D 
pay the dues recoverable from J and for an injunction against the State. 
He contended that since the Forest Deplrtmeot had allowed J to rcmov,. 
tbe forest produce the security was lost and he stood discharged. The trial 
Coun and the High Court both held in K's favour. 
The State of Madhya 
Pradesh appealed to thfa Court by special leave. 
HELD : (i) The expression "security'" in s. 141 of the Indian Contract 
Act is not used in any technical sense : it includes all right• which the 
E 
creditor bas a&ainst the property at lhe date of the contract. Tho surety 
i1 entitled on payment of the debt or performance of all tbat !:c i.,. liahle 
for to the beneftt of the rights of the creditor aaainst the principal debtor 
which arise out of the transaction which given rise to the right or liabi· 
lity : be is therefore an payment of the am011nt due by the principal 
debtor entitled to be put in the same position in which the creditor stood 
in relation to the principal debtor. If the creditor bas lost or parted with 
the security without the consent of the surely, the latter is by the express 
f 
provision contained in s. 141, discharged to the extent of the value of the 
security lost or parted with. 
[272 E-G] 
Wulff and Bi/lint v. Jay, L.R. (1872) 7 Q.B. 756, referred to. 
(ii) The Forest Officer parted \\'ilh the forest produce before receiv. 
iog payment of the amount due by the contractor. Thereby tbo charee 
in favour of the State was seriously impaired and the statutory power to 
G 
sell the produce for non·payment of the amount remaining due became. 
for all practical 
purposes. 
ineffective. 
Again, 
under the terms o( the 
contract the Forest aulhoritiC6 bad the right to prevent removal of the 
produce sold until the price \Vas paid : that right was also lost. The right 
roof erred bv s. 83 of the Forest Act and under the tenns of the contract to 
prevent removal and right to sell the produce 
for non.payment of the 
price, coupled with charge on the produce c0t1>tituted the security of the 
State and that security was lost because the Forest Officers permitte~ re· 
H 
moval of the produce by the contractor. 
(273 O·Hl 
Accordingly the surely stood discharged from liability to pay the 
amount undertaken by him under the terms of the surety bond. 
A 
B 
c 
D 
E 
F 
G 
H 
M. P. STATE v. KALURAM (Shah, J.) 
267, 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 359 of 1964. 
Appeal by special leave from the judgment and decree dated 
September 29, 1961 of the Madhya Pradesh High Court in First 
Appeal No. 123 of 1958. 
B. Sen, J.P. Dube and I. N. Shroff, for the appellant. 
B. C. Misra and S. S. Shukla, for the respondent. 
The Judgment of the Court was delivered by 
Shah, J, This is an appeal with special leave against the 
decree passed by the High Court of Madhya Pradesh in appeal No. 
123 of 1958 confirming the decree of the Additional District Judge, 
Hoshangabad, decreeing the plaintiff's suit. The State of Madhya 
Pradesh has appealed to this Court. 
At an auction held on July 20, 1954 by the Divisional Forest 
Offil:er, Hoshangabad Division, for sale of "felled trees" in Coupe 
No. 66 Dhekria, Range Seoni, one Jagatram was declared the highest 
bidder and the trees were sold to him for Rs. 12,100. The amount 
of the bid was payable in four instalments of R

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