What is concept of reimbursement of unjust enrichment regarding Government Contract?

 Taking into account the legal position as enunciated in these judgments, the impugned award holds that the absence of a contract would not deprive the respondent/contractor from a reasonable remuneration for the work performed. The view taken in the impugned award is plausible, and based on an application of law laid down in the judgements referred to therein. Reference is also apposite to the judgment of a co-ordinate bench of this Court in M.C.D. v. Ravi Kumar, MANU/DE/4058/2017, where this Court had occasioned to specifically consider an identical issue, viz :-

"(i) Whether in absence of a formal agreement/contract awarding additional works to the respondent, the respondent is entitled to make a claim for such work?"

{Para 30}

31. As regards the above issue, this court held as under :-

"12. Interpreting the said provision, Supreme Court in case of Mulamchand v. State of Madhya Pradesh MANU/SC/0009/1968 : AIR 1968 SC 1218, held that in the absence of a formal contract between Dominion of India and a private individual not in the form required by Section 175(3) of the Government of India Act, 1935, the same was void and cannot be enforced, however, at the same time, if money is deposited and goods are supplied or if services are rendered in terms of the void contract, the provisions of Section 70 of the Indian Contract Act may be applicable and where a person has lawfully done something for other not intending it to be done gratuitously and the other person enjoys the benefit thereof then such other person shall become liable to make compensation to the former in respect of, or to restore, the things so done or delivered.

 IN THE HIGH COURT OF DELHI

O.M.P. (Comm) 405/2023, IA Nos. 19196/2023 and 19198/2023

Decided On: 03.10.2023

Bharat Sanchar Nigam Ltd. Vs. Vihaan Networks Ltd.

Hon'ble Judges/Coram:

Sachin Datta, J.

Citation: MANU/DE/6799/2023.

Read full Judgment here: Click here.

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Whether the contractor is entitled to get the payment for work allegedly executed by it even if no concluded contract came into existence?

It is highlighted at the cost of repetition that works in question had been undertaken by the Claimant for which it has incurred the expenditure. This was done at the instance of USOF/BSNL. Had the work been finally awarded, the Claimant would have recovered the amount of expenditure. Since that is not done, the Claimant would be entitled to the expenditure incurred in view of the provisions of Section 70 of the Contract Act, which reads as under:

"70. Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered."{Para 114}

115. This provision incorporates the doctrine Quantum Meruit. According to contract law, quantum meruit is a doctrine that states there is an inferred promise to pay a fair amount for work and the materials provided, even without a lawful, enforceable agreement between the parties. A party who carries out a worthwhile service for another party normally participates in a written, legally binding agreement or contract before fulfilling the service, especially when the party providing the service is in the business of executing that service."

 Likewise, the conclusion that the respondent/claimant was entitled to reimbursement of expenses incurred by it notwithstanding absence of a concluded contract was predicated upon Section 70 of the Contract Act which incorporates the doctrine of quantum meruit. The said view is not liable to be interfered, particularly on the touchstone of Section 34 of the A & C Act, 1996. (Para 28)

 IN THE HIGH COURT OF DELHI

O.M.P. (Comm) 405/2023, IA Nos. 19196/2023 and 19198/2023

Decided On: 03.10.2023

Bharat Sanchar Nigam Ltd. Vs. Vihaan Networks Ltd.

Hon'ble Judges/Coram:

Sachin Datta, J.

Citation: MANU/DE/6799/2023.

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Whether it is permissible to recover compensation in case of void contract?

“6. ….. The principle is that the provisions of Section 175(3) of the Government of India Act, 1935 or the corresponding provisions of Article 299(1) of the Constitution of India are mandatory in character and the contravention of these provisions nullifies the contracts and makes them void. There is no question of estoppel or ratification in such a case. The reason is that the provisions of Section 175(3) of the Government of India Act and the corresponding provisions of Article 299(1) of the Constitution have not been enacted for the sake of mere form but they have been enacted for safeguarding the Government against unauthorised contracts. The provisions are embodied in Section 175(3) of the Government of India Act and Article 299(1) of the Constitution on the ground of public policy — on the ground of protection of general public —and these formalities cannot be waived or dispensed with. If the plea of the respondent regarding estoppel or ratification is admitted, that would mean in effect the repeal of an important constitutional provision intended for the protection of the general public. That is why the plea of estoppel or ratification cannot be permitted in such a case. But if money is deposited and goods are supplied or if services are rendered in terms of the void contract, the provisions of Section 70 of the Indian Contract Act may be applicable. In other words if the conditions imposed by Section 70 of the Indian Contract Act are satisfied then the provisions of that section can be invoked by the aggrieved party to the void contract. The first condition is that a person should lawfully do something for another person or deliver something to him; the second condition is that in doing the said thing or delivering the said thing he must not intend to act gratuitously; and the third condition is that the other person for whom something is done or to whom something is delivered must enjoy the benefit thereof. If these conditions are satisfied, Section 70 imposes upon the latter person the liability to make compensation to the former in respect of, or to restore, the thing so done or delivered. The important point to notice is that in a case falling under Section 70 the person doing something for another or delivering something to another cannot sue for the specific performance of the contract, nor ask for damages for the breach of the contract, for the simple reason that there is no contract between him and the other person for whom he does something or to whom he delivers something. So where a claim for compensation is made by one person against another under Section 70 it is not on the basis of any subsisting contract between the parties but on a different kind of obligation. The juristic basis of the obligation in such a case is not founded upon any contract or tort but upon a third category of law, namely, quasi-contract or restitution. In Bibrosa v. Fairbairn, 1943 AC 32 Lord Wright has stated the legal position as follows: “... any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep. Such remedies in English Law are generically different from remedies in contract or in tort, and are now recognised to fall within a third category of the common law which has been called quasi-contract or restitution”.

Reportable

Supreme Court of India

Orissa Industrial Infra.Dev. ... vs M/S Mesco Kalinga Steel Ltd. & Ors on 14 February, 2017

Bench: Arun Mishra, Amitava Roy

Citation:(2017) 5 SCC 86

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When contractor is entitled to get compensation for extra work done by him?

IN THE HIGH COURT OF CALCUTTA

F.A. No. 26 of 2012

Decided On: 20.02.2015

Appellants: Gopal Chandra Bhui
Vs.
Respondent: Bankura Zilla Parishad and Ors.

Hon'ble Judges/Coram:Indira Banerjee and Tapabrata Chakraborty, JJ.

Commercial - Extra work - Compensation for - Entitlement therefor - Section 70 of Indian Contract Act, 1872 - Present appeal filed for challenging order whereby, Appellant's suit for compensation for extra work done in project was dismissed - Whether Appellant was entitled for compensation for extra work done in project - Held, undisputed that Appellant had raised bill for work including extra work - Respondents had admitted that some extra work, over and above work under tender, was undertaken by Appellant as per verbal instruction of Respondents - Section 70 of Act categorically specifies that where person lawfully does anything for another person, not intending to do so gratuitously, and such other person enjoys benefit thereof, latter is bound to make compensation to former in respect of thing so done.

Citation;AIR 2015 Cal 124

Tapabrata Chakraborty, J.

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Basic concept of doctrine of unjust enrichment

The plaintiff's claim, as said before, is now confined to Section 70 of the Contract Act. It is well established that an agreement which does not comply with the provisions of Article 299 of the Constitution is void. It is also well settled that Article 299 of the Constitution does not stand in the way of claiming compensation under Section 70 of the Contract Act. If any person lawfully does any work for another person, not intending to do so gratuitously and the other person has enjoyed the benefit of such works. Section 70 of the Contract Act enjoins the person receiving such benefit to pay compensation to the person who has done that work for him.

25. There is no dispute between the parties that the plaintiff lawfully carried the said cargo of coal by "Jag Sevak" and delivered them to the defendant. Moreover the correspondence exhibited in the suit conclusively show that the plaintiff had rendered the said service to the defendant not intending to do so gratuitously. There is no dispute that the defendant had accepted the said works and had enjoyed the benefit of such works. In these circumstances the defendant had incurred a statutory liability to make compensation to the plaintiff under Section 70 of the Contract Act.

26. Section 70 is in Chapter V of the Act which deals with "Relations Resembling Those Created by Contract". Chapter VI of the Act deals with the consequences of a breach of contract and Section 73 is in Chapter VI of the Act. First paragraph of Section 73 of the Act inter alia provides that whenever a party has suffered loss or damage in consequence of a breach of contract he is entitled to receive compensation from the party who has broken the contract Principle upon which such compensation is to be assessed is that a party injured by a breach of contract should be placed in the same position in terms of money as far as possible had the contract been performed by the party in default. This paragraph cannot have any application in those cases where agreements are void for any reasons whatever.

27. The third paragraph of Section 73 of the Act, however, provides that when an obligation resembling those created by contract has been incurred by a party and has not been discharged by him the injured party is entitled to receive compensation from the party in default, as if the party in default had agreed to pay him such compensation and had broken that agreement. This paragraph confers a statutory right on a person to receive compensation from the person who has incurred a statutory obligation to pay it under Section 70 of the Act and though there may not be any contract to pay compensation but "the party in default" having incurred a statutory liability is enjoined to discharge it as if he had entered into a contract to pay compensation to the injured party and has broken such a contract.

Section 70 and third paragraph of Section 73 of the Act are based on the doctrine of Restitution which says that you cannot unjustly enrich yourself by retaining anything delivered to you which does not belong to you and you must return it to the person from whom you have received it. It says that if you cannot return them In specie you must pay him their equivalent in money. Similarly if anything is done by one person for the other this doctrine says to the person who has accepted such works that you having enjoyed the benefits of such works must compensate the person who had done that work for you and if you do not want to pay him you will be guilty of enriching yourself unjustly by the labour of the other person and so you must pay to the person from whom you have received such work. Principle of restitution is not primarily based on loss suffered by the plaintiff but on the benefit which is enioyed by the defendant at the cost of the plaintiff which is wholly unjustified for the defendant to retain.

Calcutta High Court

Great Eastern Shipping Co. Ltd. vs Union Of India (Uoi) on 14 August, 1970

Equivalent citations: AIR 1971 Cal 150

Bench: S Deb

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Whether a person can be granted compensation as per S70 of contract Act if there is no pleading to that effect in plaint?

In Kotah Match Factory (supra), the Rajasthan High
Court noted that the plaintiff did not raise the plea for
compensation under Section 70 of the Contract Act nor was
any issue framed, nor were the parties given an opportunity
to lead any evidence on the point.
It was found that the
case of the appellant before the Court was based upon an
agreement. It was held that since the parties had not gone
on trial on the question of compensation under Section 70
of the Contract Act, if the benefit of the aforesaid provision
is allowed at this stage, it would amount to taking the

opposite party by surprise.
THE HIGH COURT OF DELHI AT NEW DELHI

Judgment Pronounced on: February 23, 2011
CS(OS) No. 2448/2000
M/S. S.N.NANDY & CO.

- versus -
M/S. NICCO CORPORATION LTD.
.....Defendant
CORAM:-
HON’BLE MR JUSTICE V.K. JAIN

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When deft is liable to pay compensation as per S 70 of contract Act even though request was made by unauthorised person?

A request when accepted constitutes an agreement but Section 70 of the Act docs not postulate any agreement between the parties. A request may be made by a wholly unauthorised person or such request may be wholly invalid in law and yet it does not lie in the mouth of a defendant to say that he is not liable to pay compensation under Section 70 of the Act in the absence of a request where he has received the benefit of the work lawfully done by the plaintiff not intending to do so gratuitously. Hence, there is no merits in the contention of Mr. Dhar. 

Calcutta High Court

Union Of India (Uoi) vs Kamal Kumar Goswami And Ors. on 22 May, 1973

Equivalent citations: AIR 1974 Cal 231, 78 CWN 154

Bench: B Mitra, S Deb

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Whether a person who has delivered goods to other party is entitled to get market value of goods?

In Civil Appeal No. 19 of 1967 (Pilloo Dhunjishaw Sidhwa v. Municipal Corporation of the City of Poona) the Supreme Court, in its unreported judgment D/- 15-1-1970 = , laid down the law on the subject in the following terms:

"In our view the High Court was in error in holding that the plaintiff is entitled not to the invoice value of the goods, but only to "the fair price" of the goods. Under Section 70 of the Contract Act, a person lawfully delivering goods to another, and not intending to do so gratuitously, is entitled to demand that the goods delivered shall be returned, or that compensation for the goods shall be made. Compensation would normally be the market price of the goods. By refusing to return the goods, the person to whom the goods have been delivered cannot improve his position and seek to pay less than the market value of the goods. The High Court of Lahore in Secy. of State v. G. T. Sarin & Co., ILR 11 Lah 375 = (AIR 1930 Lah 364) held that a person without an enforceable contract in his favour supplying goods to a Government Department is entitled to a money equivalent of the goods delivered, assessed at the market rate prevailing on the date on which the supplies were made.

Calcutta High Court

Great Eastern Shipping Co. Ltd. vs Union Of India (Uoi) on 14 August, 1970

Equivalent citations: AIR 1971 Cal 150

Bench: S Deb

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Whether the burden of proof is on the plaintiff to prove that defendant was permitted to occupy subject to payment of money?

Section 70 of the Contract Act reads:

"Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of or to restore, the thing so done or delivered". 

The learned second appellate Judge says:

"It is for the defendants to prove by satisfactory evidence that they were allowed to occupy the building free of any obligation to pay rent". This view, we are afraid, is not correct, because in our opinion, the onus is not on the defendant but on the plaintiff, as would be clear from the language of Section 70 itself. Section 70 says that where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, etc. The person (the plaintiff) must, not only establish that he did something lawfully for another (the defendant) or delivered something to him but must, in addition, prove that he did so not intending it to be gratuitous: the onus is on the plaintiff to show that the Act or the delivery was not gratuitous.

Kerala High Court

Bhagwandas Krishnadas And Anr. vs P.S. Sama Iyer And Ors. on 13 December, 1971

Equivalent citations: AIR 1972 Ker 259

Author: Raghavan

Bench: T Raghavan, P U Kurup

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