Business laws MTE Project

By: Akilesh Raj [2K20/BBA /12]

Digamber Pershad Kirti Prasad v. State of Uttar Pradesh and Ors.

Citation of the case: AIR 1996 All 1

Name of court: Allahabad High Court
Judges: Om Prakash, R.R.K. Trivedi

Brief facts of the case:

Digamber Pershad got the tender to cut trees and collect timber through an agreement to
sell. He paid security and additional deposit for it. He started the work, cut down trees and
collected timber at a central point for aerial transportation. He also stated that all precautions
were taken to prevent timber from being destroyed- all inflammable material was moved 1
feet away from it and watchmen were appointed to look after it day and night. Eventually one
day a fire broke out and destroyed all the timber. The respondents (state of Uttar Pradesh)
demanded Rs 2,70,500, amount due under the sale, failing which recovery proceedings as
arrears of land revenue were threatened. So, Digamber Pershad filed a writ petition against
the state of Uttar Pradesh.

Issues involved:
● Whether or not the petitioner is liable to pay purchase price demanded/ Whether the
title of the goods actually passed to the petitioner at the time of signing of the
contract?

Arguments of both parties:

Plaintiff: The petitioner points out that the ownership did not land to him as the wood
collected was destroyed before the timber was removed. He further says that the sale was
incomplete and only an agreement to sell took place between the parties, which means the
title of the goods still rested with the state government. As the subject matter (timber) was
destroyed before the sale, the contract stood frustrated and thus, the petitioner is not liable
to pay any amount, but rather get a refund of security and additional deposits he had made
at the time agreement.
Defendant: The respondent argued that the sale was completed the moment it got approved
by the conservator of forest and the petitioner commenced the work when the possession of
the area was delivered to him. The contract concluded as usual and the fire broke out much
after it. Also, it was duly noted that the property and risk in the goods both passed to the
petitioner and thus, the petitioner is liable to pay the purchase price under the contract.

Decision:
Petition failed and was thus dismissed/ Digamber Pershad was declared liable to pay as the
ownership passed onto him.
Reasoning of the decision:
The court ruled that the trees were felled and timber was collected at a central point, and
thus was in a deliverable state within the meaning of Section 20 of sale of goods act which
states -
“Specific goods in a deliverable state.—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 the price or the time
of delivery of the goods, or both, is postponed.”
Court also ruled that just because the full payment was not made and the timber was not
removed does not prevent the transfer of property in the goods to the plaintiff. Transfer of
property in the goods depends on the facts and circumstances and intention of the parties to
the contract and there was nothing to rule that the parties intended otherwise.

Furthermore, according to section 26 of sale of goods act which states-

“Risk prima facie passes with property.—Unless otherwise agreed, the goods remain at the
seller’s risk until the property therein is transferred to the buyer, but when the property
therein is transferred to the buyer, the goods are at the buyer’s risk whether delivery has
been made or not: Provided that, where delivery has been delayed through the fault of either
buyer or seller, the goods are at the risk of the party in fault as regards any loss which might
not have occurred but for such fault: Provided also that nothing in this section shall affect the
duties or liabilities of either seller or buyer as bailee of the goods of the other party,”
Which means the risk of goods remains with the seller until the property in the goods is
transferred to the buyer. But this rule is subject to the agreement made between the parties.
It was mentioned in the contract that after 30 days from the date of acceptance of the
contract or from the date of commencement of work under the contract, whichever is earlier,
the buyer will be fully responsible for the damage caused to the goods. This condition is an
agreement which was obliged upon by the petitioner. The goods were destroyed way later
after 30 days when the work commenced. Hence, he was responsible for the goods
destroyed and was liable to pay price for it.

Law points laid down:

The case has helped lay down two of the conditions:
1. If the goods are ascertained and in deliverable state, irrespective of the fact if the
actual delivery has been made or not, the property in the goods is passed
immediately to the buyer when the contract is made and postponement of time of
payment or the time of delivery does not rule otherwise.
2. Also, the goods remain at the seller's risk until the property is transferred to the
buyer, but if done so, the goods are at the buyer’s risk whether the delivery is made
or not. This, however, is subject to parties involved and can be altered as per
convenient to them.