Case: State of Uttar Pradesh Vs. Jayanand Lakhera

In the year 1944, the State of Tehri Garhwal desired to appoint the Tahwildar in the State Treasury. It was the practice in the state to require a prospective candidate to furnish surety bond in the sum of Rs. 10, 000/for proper performance of his duties. One Tungeshwar Prasad was selected for employment as Tahwildar. On June 10, 1944, the respondent to this appealJayanand Lakhera submitted a surety bond which is so far as it is relevant stated :"I, Jayanand Lakhera............ of my own, accord execute a property as security for Shri Tungeshwar Prasad Lakhera, at present Tahwildar of Tehri Tahsil aforesaid; as Tungeshwar Prasad aforesaid has now been posted on Tehsil Tehri by the Darbar and security has been demanded from him, so, I Jayanand aforesaid stand as surety and declare that Tungeshwar Prasad aforesaid will not misappropriate any kind of Government money in cash, etc. and if he misappropriates Government money in cash, then I the surety shall be responsible for the payment of the money of that amount, and the Darbar shall have the right to realise the amount found due for the personal property of me the surety. Therefore I have executed this property by way of security, so that it may be of use when needed.Tungeshwar Prasad in the course of his service was found to have misappropriated a sum of Rs. 21,He was prosecuted and convicted. Thereafter, the State of Uttar Pradesh sought to recover the amount misappropriated from the respondent Jayanand Lakhera. Jayanand then filed suit No. 1 of 1955 in the court of the Civil Judge of Tehri for an injunction restraining the State of U.P. which was the successor to the Durbar of Tehri Garhwal from recovering the amount of Rs. 21, 300/which was embezzled by Tungeshwar Prasad. The suit was partially decreed. The trial court held that the money embezzled was Government money, and the bond was accepted by the Durbar. He held however that the liability of Jayanand Lakhera was restricted to Rs. 10,He accordingly issued an injunction restraining the State of U.P. from recovering an amount exceeding Rs. 10, 000/from Jayanand Lakhera. In appeal the High Court of Allahabad decreed the suit and restrained the state from recovering any amount from Jayanand Lakhera. The present appeal has been preferred by the state with special leave.

Court's reasoning:
The language used in the bond is somewhat obscure. It does not set out the authority in whose favour it was executed, but the clearest implication was that it was in favour of the Durbar of Tehri Garhwal State. It is not clear whether Tungeshwar Prasad was appointed Tahwildar before June 10, 1944, or that after that date, though it may be stated that at foot of the bond or in the correspondence accompanying it, there is an endorsement, dated September 15, 1944, that "the applicant Tungeshwar Prasad Lakhera may be appointed.On the record there is no evidence of any express acceptance of the bond by the Durbar.But Dr. Singhvi for the State contends that Tungeshwar Prasad was appointed by order, dated September 15, 1944, and that the appointment amounts to acceptance by the Ruler of Tehri Garhwal of the bond submitted by Jayanand Lakhera.It is recited in the bond that Tungeshwar Prasad was posted at Tehri Garhwal by the Ruler, but there is no clear evidence as to whether the appointment was made on June 10, 1944, or after that date. On the bond submitted by Jayanand, there are several endorsements, the first being that it was forwarded to the A/C Sahib for information and necessary action. It is then endorsed that the bond sent to the S.D.O., Mohal Kirtinagar, requesting him to make full enquiry about the actual status of the surety and to intimate the same. Then there is the endorsement, presumably of the S.D.O., Mohai Kirtinagar that "the Patwari of Barjula is ordered to write as to what area of land of what particular sort and of what valuation" Jayanand Lakhera possesses and "what other properties he possesses". There is then an endorsement of the S.D.O. that the bond be sent to the Chief Accountant and that a report has been prepared by the Patwari of Jakhand to the effect that the status of the surety is good. Relying upon the Section 8 of the Indian Contract Act, Dr. Singhvi contends that Jayanand Lakhera offered to stand surety for making good any amount embezzled by Tungeshwar Prasad if he was appointed Tahwildar and since Tungeshwar Prasad was in fact appointed, there was a completed contract and the appointment of Tungeshwar Prasad must be regarded a acceptance. But the state has to overcome several difficulties before this argument may be accepted. There is nothing on the record that to prove that the Indian Contract Act or a statute analogous thereof was in force at the relevant time in the Tehri Garhwal State. Again, it cannot be stated with certainty that Tungeshwar Prasad had not been appointed prior to June 10, 1944. The evidence led on behalf of Jayanand Lakhera that the Durbar used to accept the surety bond was not challenged inand was not controverted by any evidence on behalf of the State. No rules relating to the appointment of Tahsildars and submission of the surety bonds, and delegating the authority of the Durbar or the Ruler have been produced. The record is completely silent on these points. Since there is nothing to prove that the Indian Contract Act applied to this area, we must proceed on the broad ground of equity. Here is a case in which the respondent Jayanand had submitted a bond for the acceptance of the State under which he offered render himself liable for any amount that Tungeshwar Prasad may embezzle, such amount being Government money. Enquiry was made in the financial status of Jayanand Lakhera and it was found that he was good for the amount of Rs. 10, 000/for which it appears the bond had been taken. But thereafter there is no evidence of any acceptance of the bond by the Durbar which on the evidence led by the plaintiff Jayanand Lakhera was the only authority competent to accept the bond. The High Court was in our judgment therefore right in holding that in the absence of evidence of acceptance of the bond, Jayanand Lakhera was not liable to be proceeded against for recovery of the amount of Rs.