JUDGMENT

Bajpai, J. - This is an appeal against the judgment and decree of the Civil Judge of Dehra Dun dated 26th March 1935, by which the plaintiffs' claim for recovery of a sum of money was dismissed. Plaintiff 1, Devi Prasad Sri Krishna Prasad, Ltd, of Delhi is a limited liability company which was incorporated on 4th September 1931, with the object inter alia 'to enter into a contract of sale of forest produce with the Forests Officer, western circle.' Plaintiff 2 firm Devi Prasad Sri Krishna Prasad is a firm of Government Contractors in Delhi. The defendant is the Secretary of State for India in Council. On 21st May 1931, a sum of Rs. 25,000 was deposited by plaintiff 2 with Mr. V. A. Herbert, Conservator of Forests of the western circle who was-acting in the transaction on behalf of the defendant as security money for performance of a contract of lease and sale of forest produce. The plaintiffs, alleging that the contract for the performance of which the said sum was deposited remained incomplete and as the said sum of money was paid to plaintiff 2 by plaintiff 1, raised an action on 9th March 1933, in the Court of the Civil Judge of Dehra Dun for recovery of the said sum with interest due on it against the defendant. The trial Judge finding that the contract for the performance of which the said sum was deposited having been concluded between the parties and the plaintiffs being in default in not completing the bargain dismissed the claim and against the said dismissal the plaintiffs have made this appeal and the main controversy which arises in the case is whether the deposit was made in the midst of the negotiations for contract or at the conclusion of the contract.

2. The western circle of the Forest Department of the U.P. Government grows a large quantity of bbabar or baib grass which is suitable for manufacturing paper. The Conservator of Forest, western circle, is authorised on behalf of the Government to sell the grass and other forest produce and to enter into contracts with regard to it on behalf of the defendant. Prior to the year 1931 a lease and sale of grass and forest produce in western circle was executed by the defendant in favour of Beilgerow & Co. a firm of paper manufacturers in Calcutta. This contract had come to an end or was about to come to an end in 1931 when Mr. V. A. Herbert the Conservator of Forests by a notice dated 10th April 1931, invited tenders for a fresh lease of the bhabar or baib grass for any number of years upto ten. It was stated in the notice that:

The maximum yield of grass in any one year under the last lease was approximately 4,50,000 maunds. This could probably be largely increased, but commercial outturn is dependent on cost of extraction.

3. It was further stated in the notice that:

Exact terms of contract will be subject to settlement with the undersigned later, but approximate terms of contract can be ascertained before submission of tenders.

4. The tenders were to reach the Divisional Forest officer, DehraDun, before 12 noon on 10th April 1931. On 8th April 1931, plaintiff 2 submitted a tender for the lease and sale of the said grass and it offered to take the lease for a period of ten years on payment of "royalty" of Hs. 90,000 per year for the said lease in two equal instalments. The tender further stated that plaintiff 2 was 'prepared to agree to any reasonable terms to be finally settled between you and us for the working of the forest.' This tender submitted by plaintiff 2 did not reach in time and there were also other reasons, as a result of which the Conservator of Forests decided to invite fresh tenders up to 30th April 1931, 12 noon. On 10th April 1931, Mr. Herbert invited the plaintiff to submit a fresh tender and in doing so he stated as follows:

With regard to terms, I enclose a copy of the terms of the last lease. Individual terms might be subject to modification, but the general terms would have to be on these lines. If you do submit a fresh tender by 30th April