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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What is the court's duty when the proceeding in which a stay granted to recover money is dismissed?

  Following the said decision, this Court in Kanoria Chemicals and Industries Ltd. and Others v. U.P. State Electricity Board and Others, (1997) 5 SCC 772 has held that an order of stay which is granted during the pendency of a writ petition/suit or other proceeding comes to an end with the dismissal of the substantive proceedings and it is the duty of the court in such cases to put the parties in the same position that they would have been in but for the interim order of the court. In that case, this Court rejected the contention that when the operation of the notification itself was stayed, no surcharge could be demanded upon the amount withheld. It was held thus:

“11. …. Holding otherwise would mean that even though the Electricity Board, who was the respondent in the writ petitions succeeded therein, yet deprived of the late payment surcharge which was due to it under the tariff rules/regulations. It would be a case where the Board suffers prejudice on account of the orders of the court and for no fault of its. It succeeds in the writ petition and yet loses. The consumer files the writ petition, obtains stay of operation of the notification revising the rates and fails in his attack upon the validity of the notification and yet he is relieved of the obligation to pay the late payment surcharge for the period of stay, which he is liable to pay according to the statutory terms and conditions of supply — which terms and conditions indeed form part of the contract of supply entered into by him with the Board. We do not think that any such unfair and inequitable proposition can be sustained in law.

xxx xxx xxx

It is equally well settled that an order of stay granted pending disposal of a writ petition/suit or other proceeding, comes to an end with the dismissal of the substantive proceeding and that it is the duty of the court in such a case to put the parties in the same position they would have been but for the interim orders of the court. Any other view would result in the act or order of the court prejudicing a party (Board in this case) for no fault of its and would also mean rewarding a writ petitioner in spite of his failure. We do not think that any such unjust consequence can be countenanced by the courts. As a matter of fact, the contention of the consumers herein, extended logically should mean that even the enhanced rates are also not payable for the period covered by the order of stay because the operation of the very notification revising/enhancing the tariff rates was stayed. Mercifully, no such argument was urged by the appellants. It is un-understandable how the enhanced rates can be said to be payable but not the late payment surcharge thereon, when both the enhancement and the late payment surcharge are provided by the same notification — the operation of which was stayed.”{Para 19}

20. In Rajasthan Housing Board and Others v. Krishna Kumari, (2005) 13 SCC 151 this Court observed that Order 39 of the Civil Procedure Code, 1908 provides for grant of temporary injunction at the risk and responsibility of the person who obtains it and, if ultimately case is decided against such person, he would be liable to pay interest on the arrears of any amount due which had been stayed by the injunction order. The legal maxim actus curiae neminem gravabit, which means that an act of the Court shall prejudice no man, becomes applicable in such a case.

21. In South Eastern Coalfields Ltd. V. State of M.P. and Others, (2003) 8 SCC 648 the writ petitioner therein had argued that interest accrued due to nonpayment of enhanced amount of royalty was protected by a judicial order of an interim nature and, therefore, merely because the writ was finally dismissed, the writ petitioner should not be held liable for payment of interest so long as money was withheld under the protective umbrella of the injunction order. This submission was rejected by this Court by holding as under:

“The principle of restitution has been statutorily recognized in Section 144 of the Code of Civil Procedure, 1908. Section 144 CPC speaks not only of a decree being varied, reversed, set aside or modified but also includes an order on a par with a decree. The scope of the provision is wide enough so as to include therein almost all the kinds of variation, reversal, setting aside or modification of a decree or order. The interim order passed by the court merges into a final decision. The validity of an interim order, passed in favour of a party, stands reversed in the event of a final decision going against the party successful at the interim stage. Unless otherwise ordered by the court, the successful party at the end would be justified with all expediency in demanding compensation and being placed in the same situation in which it would have been if the interim order would not have been passed against it. The successful party can demand (a) the delivery of benefit earned by the opposite party under the interim order of the court, or (b) to make restitution for what it has lost; and it is the duty of the court to do so unless it feels that in the facts and on the circumstances of the case, the restitution far from meeting the ends of justice, would rather defeat the same. Undoing the effect of an interim order by resorting to principles of restitution is an obligation of the party, who has gained by the interim order of the court, so as to wipe out the effect of the interim order passed which, in view of the reasoning adopted by the court at the stage of final decision, the court earlier would not or ought not to have passed. There is nothing wrong in an effort being made to restore the parties to the same position in which they would have been if the interim order would not have existed.”

IN THE SUPREME COURT OF INDIA

 CIVIL APPELLATE JURISDICTION 

CIVIL APPEAL NO. 2417 OF 2022 

 STATE OF U.P. THR. SECRETARY AND ORS. Vs PREM CHOPRA

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Whether the trial court can grant restitution of property if the case did not fall within the ambit of S 144 of CPC?

 In the case of Mrs. Kavita Trehan and another v. Balsara

Hygiene Products Ltd., reported in AIR 1995 SC 441, in paragraph

nos. 13 and 15, the Supreme Court has made the following

observations:

“13. The Law of Restitution encompasses all claims

founded upon the principle of unjust enrichment.

'Restitutionary claims are to be found in equity as well as

at law'. Restitutionary law has many branches. The law of

quasi-contract is "that part of restitution which stems

from the common Indebitatus counts for money had and

received and for money paid, and from quantum meruit

and quantum vale bat claims." [See 'The Law of

Restitution" - Goff & Jones, 4th Edn. Page 3]. Halsburys

Law of England, 4th Edn. Page 434 states :

“Common Law. 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.”

For historical reasons, quasi contract has traditionally

been treated as part of, or together with, the law of

contract. Yet independently, equity has also developed

principles which are aimed at providing a remedy for

unjustifiable enrichment. It may be that today these two

strands are in the process of being woven into a single

topic in the law, which may be termed "restitution”.

Recently the House of Lords had occasion to examine some

of these principles in Woolwich Equitable Building Society

v. Inland Revenue Commissioners, [1993] A.C. 70.

14. ......

15. Section 144 CPC incorporates only a part of the

general law of restitution. It is not exhaustive. (See

Gangadhar v. Raghubar Dayal, AIR 1975 All 102 (FB)

and State Govt. of Andhra Pradesh v. M/s. Manickchand

Jeevraj & Co., Bombay , AIR 1973 Andhra Pra. 27).

The jurisdiction to make restitution is inherent in every

court and will be exercised whenever the justice of the

case demands. It will be exercised under inherent powers

where the case did not strictly fall within the ambit of

Section 144. Section 144 opens with the words, "Where

and in so far as a decree or an order is varied or reversed

in any appeal, revision or other proceeding or is set aside

or modified in any suit instituted for the purpose,...." The

instant case may not strictly fall within the terms of

Section 144; but the aggrieved party in such a case can

appeal to the larger and general powers of restitution

inherent in every court..............”

In view of the above observations, even if the cases not

falling within the ambit of Section 144 of CPC, restitution can be

made under inherent powers.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

BENCH AT AURANGABAD

901 WRIT PETITION NO. 269 OF 2018

CHANDRAKALABAI  BAPURAO SHIRSAT  Vs HABIB KHAN 

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Supreme court: Inter-relation between Promissory Estoppel, Legitimate Expectations and article 14 of Constitution of India

Promissory Estoppel and Legitimate Expectations

289. As we have seen earlier, for invoking the principle of promissory estoppel there has to be a promise, and on that basis the party concerned must have acted to its prejudice. In the instant case it was only a proposal, and it was very much made clear that it was to be approved by the Central Government, prior whereto it could not be construed as containing a promise. Besides, equity cannot be used against a statutory provision or notification.

290.....In any case, in the absence of any promise, the Appellants including Aadhunik cannot claim promissory estoppel in the teeth of the notifications issued under the relevant statutory powers. Alternatively, the Appellants are trying to make a case under the doctrine of legitimate expectations. The basis of this doctrine is in reasonableness and fairness. However, it can also not be invoked where the decision of the public authority is founded in a provision of law, and is in consonance with public interest.

(emphasis supplied)

41. In Union of India v. Lt. Col. P.K. Choudhary MANU/SC/0169/2016 : (2016) 4 SCC 236, speaking through Chief Justice T S Thakur, the Court discussed the decision in Monnet Ispat (supra) and noted its reliance on the judgment in Attorney General for New South Wales v. Quinn (1990) 64 Aust LJR 327 : (1990) 170 CLR 1. It then observed:

This Court went on to hold that if denial of legitimate expectation in a given case amounts to denial of a right that is guaranteed or is arbitrary, discriminatory, unfair or biased, gross abuse of power or in violation of principles of natural justice, the same can be questioned on the well-known grounds attracting Article 14 of the Constitution but a claim based on mere legitimate expectation without anything more cannot ipso facto give a right to invoke these principles.

Thus, the Court held that the doctrine of legitimate expectation cannot be claimed as a right in itself, but can be used only when the denial of a legitimate expectation leads to the violation of Article 14 of the Constitution.

42. As regards the relationship between Article 14 and the doctrine of legitimate expectation, a three judge Bench in Food Corporation of India v. Kamdhenu Cattle Feed Industries MANU/SC/0257/1993 : (1993) 1 SCC 71, speaking through Justice J.S. Verma, held thus:

7. In contractual sphere as in all other State actions, the State and all its instrumentalities have to conform to Article 14 of the Constitution of which non-arbitrariness is a significant facet. There is no unfettered discretion in public law: A public authority possesses powers only to use them for public good. This imposes the duty to act fairly and to adopt a procedure which is 'fairplay in action'. Due observance of this obligation as a part of good administration raises a reasonable or legitimate expectation in every citizen to be treated fairly in his interaction with the State and its instrumentalities, with this element forming a necessary component of the decision-making process in all State actions. To satisfy this requirement of non-arbitrariness in a State action, it is, therefore, necessary to consider and give due weight to the reasonable or legitimate expectations of the persons likely to be affected by the decision or else that unfairness in the exercise of the power may amount to an abuse or excess of power apart from affecting the bona fides of the decision in a given case. The decision so made would be exposed to challenge on the ground of arbitrariness. Rule of law does not completely eliminate discretion in the exercise of power, as it is unrealistic, but provides for control of its exercise by judicial review.

8. The mere reasonable or legitimate expectation of a citizen, in such a situation, may not by itself be a distinct enforceable right, but failure to consider and give due weight to it may render the decision arbitrary, and this is how the requirement of due consideration of a legitimate expectation forms part of the principle of non-arbitrariness, a necessary concomitant of the Rule of law. Every legitimate expectation is a relevant factor requiring due consideration in a fair decision-making process. Whether the expectation of the claimant is reasonable or legitimate in the context is a question of fact in each case. Whenever the question arises, it is to be determined not according to the claimant's perception but in larger public interest wherein other more important considerations may outweigh what would otherwise have been the legitimate expectation of the claimant. A bona fide decision of the public authority reached in this manner would satisfy the requirement of non-arbitrariness and withstand judicial scrutiny. The doctrine of legitimate expectation gets assimilated in the Rule of law and operates in our legal system in this manner and to this extent.

 IN THE SUPREME COURT OF INDIA

Civil Appeal Nos. 3860-3862 of 2020 

Decided On: 01.12.2020

The State of Jharkhand Vs. Brahmputra Metallics Ltd. and Ors.

Hon'ble Judges/Coram:

Dr. D.Y. Chandrachud and Indu Malhotra, JJ.

Author: Dr. D.Y. Chandrachud, J.

Citation: MANU/SC/0906/2020

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Whether doctrine of unjust enrichment is applicable to deposit made as per order passed by court?

It cannot be disputed that the doctrine of unjust enrichment as incorporated by Section 27 of the Customs Act applies in all such cases. The only exception to the applicability of the aforesaid doctrine is that such amount is not paid as duty but has been paid by some interim orders in some proceedings by the Court as pre-deposit then it is not treated as duty. The endeavour of the Appellant is to submit that the aforesaid amount of Rs. 23,98,178/- was also a pre-deposit and, therefore, the High Court has committed error in not directing the refund thereof.

7. We are unable to accept the aforesaid submission. On the facts of the case, as is pointed out above, it is only Rs. 17.50 lakhs which was deposited by the Appellant pursuant to the interim orders of the Court. The Court had directed the Appellant to deposit Rs. 70 lakhs. As far as the balance amount is concerned that could not be deposited. It resulted in vacation of the stay order. Thus, once the stay order was vacated, it was open to the Department to recover the amount of duty which was payable as per the orders passed at that time. The amount was, thus, recovered on encashment of the Bank Guarantee by the Department and it was on the basis of the order passed by the Court. The Court had, after vacating the stay order, only permitted the Department to encash the Bank Guarantee. We, thus, are of the opinion that as far as refund of this amount is concerned, it had to be decided in the light of the doctrine of unjust enrichment which was clearly applicable. The order of the High Court is, therefore, without any blemish. This appeal is, accordingly, dismissed.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 987 of 2007

Decided On: 23.09.2015

DCW Ltd. Vs. Union of India (UOI)

Hon'ble Judges/Coram:

A.K. Sikri and Rohinton Fali Nariman, JJ.

Citation:(2016) 15 SCC789

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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 it is not permissible for bank to forfeit amount deposited by successful bidder in Auction sale?

 Another issue which was debated during the course of
hearing of the instant Letters Patent Appeal, is whether forfeiture of the
amount deposited by the appellant would amount to unjust enrichment
of the respondent-Bank. The learned Senior counsel for the appellant
contended that in the subsequent auction vide E-auction notice
published in the Newspaper on 07.05.2016 the borrower himself has
paid all dues to the Bank, which issued “No Dues Certificate” to the
borrower vide letter dated 23.06.2016 and therefore, appropriation of
Rs.31,25,000/- deposited by the appellant would be unjust retention of
the said amount by the Bank amounting to unjust enrichment.
Mr. P.A.S. Pati, the learned counsel for the respondent-Bank, however,
contended that on account of failure of the appellant to deposit the
balance bid amount, the auction failed and the Bank was constrained
to re-auction the property. The amount deposited by the appellant has
to be forfeited in terms of the conditions attached to E-auction notice
dated 01.03.2016, and if, the Courts interfere with the matters like the
present one, no auction would ever be concluded.
18. The Contract Act, 1872 recognizes the principle of
unjust enrichment in Section 72. This principle is infact foundation
for the law governing restitution. The retention of money or property of
another against the principle of justice, equity and good conscience
has been held by the Courts “unjust enrichment”. On admitted facts,
forfeiture of the amount deposited by the successful bidder, for sale of
a property which the respondent-Bank could not have sold in auction
sale without prior approval of the Housing Board and after realizing its
dues from the borrower, would certainly amount to unjust enrichment.
The respondent-Bank cannot legally retain EMD and 25% of the bid
amount deposited by the appellant.

 IN THE HIGH COURT OF JHARKHAND AT RANCHI
 L.P.A. No. 220 of 2016

Kumar Rohit, 
 V
Allahabad Bank, 
CORAM:  MR. JUSTICE VIRENDER SINGH, CHIEF JUSTICE
  MR. JUSTICE SHREE CHANDRASHEKHAR

 Dated:26th July, 2016.
Citation: AIR 2017 Jharkh 65

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Whether plaintiff is entitled to get refund of earnest amount if suit for specific performance is dismissed?

In view of the fact that the suit filed by the appellant for specific performance had been dismissed on the ground that the respondents did not have title, the respondents must repay the amount received by them from the appellant. The amount shall be returned within two months from today with simple interest @9%.
Non-Reportable

Supreme Court of India

Basavantappa vs Irappa(D) By Lrs. & Ors on 11 February, 2016

Bench: Anil R. Dave, Adarsh Kumar Goel

Citation:(2015) 16 SCC124

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When carrier of goods should not be held guilty for unjust enrichment?

The learned counsel for the appellant urged that both the Courts below found that it was a case of mis-delivery. Hence, it would amount to non-delivery. However, in the instant case it is established and admitted case of the parties that the consignment was delivered by the carrier to the consignee, viz. Binod Steels Ltd., Indore. Even plaintiff s case is that the consignment was delivered to Binod Steels Ltd., Indore. The only grievance is that the consignment was delivered against the written instruction of the consignor that without obtaining lorry receiptthe defendant should not have delivered the consignment and since this was done against the written instructions of the consignor it amounted to breach of contract, hence damage could be awarded against the defendant. It is not the case of recovery of damage on the ground of breach of contract. At the most it can be said to be negligence of the Carrier in not obtaining lorry receipt before giv-ing delivery to the consignee. But it is nobody's case that the consignment was delivered to any party other than Binod Steels Ltd. On the other hand, admitted case is that the consignment was delivered to Binod Steels Ltd. Indore. In these circumstances it is neither a case of mis-delivery nor non-delivery of the goods. If it is so then the liability of the carrier cannot be enforced in favour of the appellant. The defendant being the carrier cannot be held guilty of unjust enrichment. The carrier has not misappropriated the goods nor has delivered it to some one else and misappropriated the price thereof. On the other hand, the consignment was received by the consignee who appropriated it. Consequently the doctrine of "unjust enrichment" can be applied against Binod Steels Ltd., Indore and not against the respondent.

Gujarat High Court

Saurashtra Ceramic Ind. And Anr. vs Sadhana Transport Co. on 26 February, 1998

Equivalent citations: I (2001) ACC 466, 2000 ACJ 24, AIR 1998 Guj 178, (1998) 3 GLR 97

Bench: D Srivastava

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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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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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When principal is liable jointly and severally with agent to restore amount received from third party?

 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

Author: Ramaswami

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Whether earnest money can be forfeited even in absence of proof of damage?

Mr. Palaniswami strenuously contended that as the amount is in the nature of earnest money, it could be forfeited notwithstanding the absence of proof of damage. Reliance was placed upon a decision of our High Court in Natesa Aiyar v. Appavu Padayachi (ILR 38 Mad 78): (AIR1915 Mad 896) (FB). Apart from the fact that we have our own doubts whether, in the light of the later pronouncements of the Supreme Court, the ratio of the above decision would still be applicable to the facts of this stage that the parties expressly stipulated that what was paid under Ex.B-2 was not earnest money but advance. It is reasonable also to characterise this amount as advance since it bears a very great proportion to the totality of the consideration as well. Generally earnest money forms a small proportion or ratio to the consideration which is agreed to be the consideration to be passed by one to the other under a contract of sale. Having regard to the fact that the amount of Rs. 10,000/- was paid, treated and nomenclatures as advance under Ex.B-2, we are unable to agree with Mr. Palaniswami that the amount paid should be treated automatically as earnest money. Again in the absence of pleading that the defendants have suffered damage to the tune of Rs. 10,000/- the plea that the entire amount paid by the plaintiff cannot be demanded and the defendants are not under an obligation to refund it is an extreme contention. We searched in vain for proof of any such sufferance of damage and in fact Mr. Palaniswami was called upon to refer to such a plea or a statement in the witness box by the witnesses examined on the side of the defendants. He was unable to refer to any specific statement by the defendants or by the witness examined on their side. It was in those circumstances that Sethuraman. J., said that without reference to any actual damage, the amount referred to in the agreement cannot be forfeited, because it would be in the nature of penalty. Proof of actual damage is a sine qua non to seek damage. The Supreme Court noticed the inequity in a case where an automatic forfeiture is sought for by a defendant and their conclusion is based upon the principle that nobody can unjustly enrich himself.

Madras High Court

Marimuthu Gounder vs Ramaswamy Gounder And Ors. on 11 September, 1978

Equivalent citations: AIR 1979 Mad 189, (1979) 1 MLJ 343

Bench: T R Rao, Ramanujam

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When seller is bound to refund sale consideration to subsequent purchaser?

 In a contract for sale of immovable property for consideration, if a seller fails to transfer the title to the purchaser, for any reason, on receipt of consideration towards the sale price then a seller has no right to retain the sale consideration to himself and he has to refund the same to the purchaser. When the contract fails then parties to the contract must be restored to their respective original position which existed prior to execution of contract as far as possible provided there is no specific term in the contract to the contrary.

68. The contract between defendant no.2 and defendant no.1, i.e., owner and subsequent purchaser, stands frustrated due to impugned judgment/decree because now defendant no.2 would not be in a position to sell the suit house to defendant no.1 though she has received Rs.4 lacs from defendant no.1 for such sale of suit house in her favour. It is for this reason, defendant no.2 is liable to refund Rs.4 lacs to defendant no.1.

 Reportable

                        IN THE SUPREME COURT OF INDIA

                        CIVIL APPELALTE JURISDICTION

                    CIVIL APPEAL Nos. 9949-9950  OF 2014

             

       Rathnavathi   Vs          Kavita Ganashamdas                          

Citation;2015 ALLSCR 8

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Basic concept of unjust enrichment and restitution

 The Law of Restitution is founded upon the principle of "unjust enrichment". As stated by the learned authors, Lord Goff of Chieveley and Gareth Jones in the book "The Law of Restitution" (3rd Edn.) 1986, "It presupposes three things: first, that the defendant has been enriched by the receipt of a benefit; secondly that he has been so enriched at the plaintiff's expense; and thirdly, that it would be unjust to allow him to retain the benefit. These three subordinate principles are closely interrelated." (page 16). [See also Cheshire Fifoot & Furmston's "Law of Contract" (12th Edn.) 1991, page 649.]
10. The second aspect aforesaid, namely, that the defendant has been enriched "at the plaintiff's expense", has been considered by Peter Birks (Professor of Civil Law, University of Edinburgh) in his book "Introduction to the Law of Restitution" rater elaborately. The principles discernible from the above discussion has been succinctly stated by Endrew Burrows in his book -- The Law of Restitution (1933), at page 16, thus: "It is the major theme of Birks'
work that this phrase ambiguously
conceals two different ideas in the
law of restitution. The first, and
most natural meaning, is that the
defendant's gain represents a loss
to the plaintiff: in Birks'
terminology a `subtraction from'
the plaintiff. The second, and less
obvious meaning, is that the
defendant's gain has been acquired
by committing a wrong against the
plaintiff."
(Emphasis supplied)
The person claiming restitution should have suffered a "loss or injury". In my opinion, in cases where the assessee or the person claiming refund has passed on the incidence of tax to a third person, how can it be said that he has suffered a loss or injury? How is it possible to say that he has got ownership or title to the amount claimed, which he has already recouped from a third party? So, the very basic requirement for a claim of restitution under Section 72 of the Contract Act is that the person claiming restitution should plead and prove a loss or injury to him; in other words, he has not passed on the liability. If it is not so done, the action for restitution or refund, should fail.

Supreme Court of India

Mafatlal Industries Ltd., ... vs Union Of India Etc. Etc on 19 December, 1996

Bench: K Paripoornan

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What is basic concept of unjust enrichment?

"The doctrine of unjust enrichment is an equitable concept created to remedy injustices that occur where one person makes a substantial contribution to the property of another person without compensation. 

"... unjust enrichment arises when three elements are satisfied: an enrichment; a corresponding deprivation; and an absence of juristic reason for the enrichment. When a claimant is under no obligation contractual, statutory or otherwise to provide the work and services to the recipient, there will be an absence of juristic reasons for the enrichment.

"... personal as well as proprietary remedies are available to remedy unjust enrichment.

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