In Goolabchand v. Miller (1938) 2 M.L.J. 688 a Bench of this Court consisting of Varadachariar and|Pandrang Row, JJ., observed as follows at pages 694-695:
It is only when the contract as such cannot be enforced against the principal, that the lender has to fall back on the equitable rule founded on the theory of 'unjust enrichment'. Though the authorities have not been uniform as to the precise basis of the rule, the rule itself is now well established that, where by any wrongful or unauthorised act of an agent the money or property of a third person comes to the hands of the principal or is applied for his benefit, the principal is liable jointly and severally with the agent to restore the amount or the value of such money or property (see Bowstead, Article 103). In some cases, the plaintiff's right was based on the count for money had and received or the theory of failure of consideration, and sometimes on the analogy of the count for money paid to the use of the defendant. Again the theory of subrogation was at one time suggested as the analogy but it was later on pointed out that the analogy was not true. In re Wrexham Mold and Connahs' Quay Railway Co. L.R. (1890) 1 Ch. 440. It was also suggested that in such cases, there was really no borrowing at all, because there was no addition to the principal's total liability but merely a substitution of liability to another (the lender) in place of the pre-existing liability to another (the person paid off). Other cases have supported the claim only on grounds of equity ; and in In re Wrexham Mold and Connah's Quay Railway Co. L.R. (1890) 1 Ch. 440, two of the Lords Justices observed that the effect of the rule was to make the borrowing valid to the extent to which the principal has received the money or the benefit of its application.
In Mahalingam Chettiar v. Ramanathan Chettiar and Ors. Appeal No. 665 of 1948, it was held:
It was first contended that the case fell within the doctrine of unjust enrichment. The basis of the doctrine is that if a person has received any property or benefit from another it is just that he should make restitution as otherwise he would be unjustly enriched at the expense of the other. This doctrine so far as we are concerned is embodied in Sections 69 and 70 of the Indian Contract Act and it is generally recognised that these Sections are much wider in scope than the doctrine as applied in England and go far beyond it. Mr. Rajah Ayyar referred to the following passage in Leake on Contracts (8th edition) which may be taken as an accurate statement of the English Law, 'A debt for money paid arises where a person has paid money for another under circumstances and upon occasions which make it just and equitable that it should be repaid ; a debt or promise to pay is then implied in law, without any actual agreement to that effect.
Madras High Court
Govindarajulu Naidu And Ors. vs S.S. Naidu Alias Soundararajulu ... on 17 January, 1958
Equivalent citations: (1958) 2 MLJ 148
