(1) This is an appeal against the judgment of Venkatesam, J. in S. A. No. 421 of 1957 by which he dismissed the suit filed by the respondent therein for the recovery of Rs. 1919-7-0 as interest at 6 per cent per annum on the sales tax collected from it on 26-2-1954.
(2) The only point involved is whether the State of Andhra, which levied the said tax, is liable to pay interest from the date of collection to the date of decree, having refunded the tax collected with interest from the date of decree.
(3) The learned District Munsif dismissed the claim. On appeal the Additional District Judge decreed the claim. Our learned brother set aside the order on appeal and restored that of the District Munsif.
(4) The relevant facts, about which there is no controversy, are these : The appellant-plaintiff is an assessee. It is a registered firm carrying on business on commission agency and independently in certain commodities. It was assessed to a tax of Rs. 7248-6-2 on its business for the year 1945-46. In a suit levy filed by the firm, O. S. No. 111 of 1952, the said levy was held to be illegal. After the said declaration by the Court, the amount, which was collected, was refunded together with interest from the date of such pronouncement. The present suit was laid claiming interest on the amount collected at 6 per cent per annum from the date of collection, to wit, 26-9-49 to 25-2-1954 when the levy was declared illegal.
(5) In plain para 8, it is alleged thus :
'The Plaintiff is entitled to the said interest under law as well as by way of damages for being deprived of the use of its money illegally collected by the State .....................................'
(6) The plaintiff's claim for interest under the said circumstances could not be rested on any law as such providing for interest.
(7) Reference has been made to the Interest Act (XXXII of 1839), the relevant provision where of is as under:
'Section 1. It is, therefore, hereby enacted that, upon all debts or sums certain payable at a certain time or otherwise, the court before which such debts or sums may be recovered may, if it shall think fir, allow interest to the creditor at a rate not exceeding the current rate of interest from the time when such debts or sums certain were payable, if such debts or sums be payable by virtue of some written instrument at a certain time, or if payable otherwise, then from the time when demand of payment shall have been made in writing, so as such demand shall give notice to the debtor that interest will be claimed from the date of such demand until the term of payment: Provided that interest shall be payable in all cases in which it is now payable by law.'
(8) The appellant relied on the proviso 'that interest shall be payable in all cases in which it is now payable by law' as this proviso has been interpreted as giving the Court a power to grant interest on equitable grounds as well. Principally, the contention before us is that the appellant-plaintiff had been deprived of the money, which, by investment, could have earned interest and so the State is bound to pay interest.
(9) But, it does not appear that such a contention prevailed in certain cases cited to us which raised this issue.
(10) In Nanchappa Koundan v. Ittichathara Mannadiar, ILR 53 Mad 549 : (AIR 1930 Mad 727), a Bench of the Madras High Court has observed thus in dealing with the aforesaid proviso. (at page 558) (of ILR Mad) : (at p. 729 of AIR).
'When it is sought to bring a case within the proviso, the question that really arises is, would interest have been granted in such a case before the Act either at law or in equity? It is unnecessary to make a complete list of instances where interest was so awarded. It is sufficient to point out that before the Act, in the case of ordinary debts, interest was not payable at common law unless there was an agreement express or it could be implied as in the case of usage (see the judgment of Lindley, L. J. at p. 140 London, Chatham and Dover Rly. Co. v. South Eastern Rly. Co., 1892-Ch 120 and the judgment of Bowen, LJ., at p. 146). Vague notions as to what are equitable principles have led to some confusion; a rule may vaguely be just, but it is not necessarily a principle of equity. This distinction is most clearly brought out in the judgment of Lord Herschell in the house of Lords in London, Chatham and Dover Railway of Lords in London, Chatham and Dover Railway Co. v. South Eastern Rly. Co., (1893) A. C. 429, already cited. The Courts at one time granted interest in cases of debts on general grounds of justice; for example, in one case Lord Mansfield held that a debt carried interest where there was 'long delay under vaxatious and oppressive circumstances'. In another case, Best, C. J., observed that the jury might gave interest 'In the shape of damages for the unjust detention of the money.'
'This view of the law was not approved in later cases and interest was refused in cases of debts on any such broad equitable grounds. It was with the object of relaxing this law by statute. That Lord Tenterden's Act was passed. But the new rights created under that Act were within very narrow limits - too narrow indeed, as is pointed out by Lord Herschell, for the purposes of justice.............................(page 561) (of ILR Mad) : (at p. 730 of AIR).
'I am therefore clearly of the opinion that, under the proviso, the plaintiffs cannot claim interest on what are known as general equitable grounds.'
(11) The pertinent observations in this judgment have relied on by our learned brother and we think quite rightly. Manifestly this case did not recognise any claim to interest on what are known as general equitable grounds.
(12) We may also refer to Bengal Nagpur Rly. Co. Ltd. v. Ruttanji Ramji, ILR (1938) 2 Cal 72 : (AIR 1938 PC 67) where it was explained at page 78 (of ILR Cal) : (at p. 70 of AIR) that the proviso applied to cases in which the Court of Equity exercised jurisdiction to allow interest and observed that
'In order to invoke a rule of equity it is necessary in the first instance to establish the existence of a state of circumstances which attracts the equitable jurisdiction, as, for example, the non-performance of a contract of which equity can give specific performance.'
(13) In Halsbury's Laws of England, Third Edition, Volume 27, page 8, paragraph 9, under the caption 'Equitable right to interest', the following occurs :
'In equity interest may be recovered in certain cases where a particular relationship exists between the creditor and the debtor, such as mortgagor and mortgagee, obligor and obligee on a bond; personal representative and beneficiary; principal and surety; vendor and purchaser; principal and agent; solicitor and client; trustee and cestui que trust; or where the debtor is in a fiduciary position to the creditor. Interest is also allowed on pecuniary legacies not paid within a certain time; on the dissolution of partnership; on the arrears of an annuity where there has been misconduct or improper delay in payment; or in the case of money obtained or retained by fraud. It may also be allowed where the defendant ought to have done something which would have entitled the plaintiff to interest at common law, or has wrongfully prevented the plaintiff from doing something which would have so entitled him.'
(14) We cannot say that the facts of the present case fall within the purview of any of the aforesaid relationships.
(15) Our learned brother has extracted from American Jurisprudence regarding taxation and observed that it could not be said that the tax collected by the State created debt or that it was a receipt of money has and received for the benefit of the tax payer.
(16) It is of particular importance to notice that it was expressed in 51 American Jurisprudence, Taxation, paragraph 1172 at page 1009 that
'In the absence of an express statutory provision as to interest, a tax-payer cannot maintain an independent action for interest alone after he has already received and accepted a refund of the amount of the over-payment of the tax itself?'.
(17) We agree with our learned brother that tax is levied in exercise of a sovereign power and the analogy of a creditor and a debtor cannot apply.
(18) We may also notice that in ILR 53 Mad 549 at p. 570 : (AIR 1930 Mad 727 at p. 734) Justice Madhavan Nair (as he then was) observed as follows :
'When we propose to apply equitable considerations in deciding the question whether a party may be awarded interest we have to ask ourselves the question whether a Court of Equity in such a case would usually award interest and unless a particular case falls within the well-recognised class of cases in which interest is demandable in equity, the Indian Courts, in my view, have no power to award interest in such a case on equitable grounds. If the case is one in which Courts of Equity would ordinarily award interest, then, Courts of law in this country, having the powers both of the Court of Equity and of law, can also award interest on equitable consideration. This seems to me to be the true scope of the decision in Milller v. Barlow, (1871) 3 P. C. 733 and understood in this light it is clear that the decision cannot be relied upon in support of the view that the plaintiff is entitled to interest in this case on broad equitable grounds :for, it is not shown that the nature of the claim made by the plaintiff is one which will bring the suit within the purview of a Court of Equity in which it will award interest'.
(19) The learned counsel for the appellant has relied on Mahomed Abdul Gaffur Rowther v. Hamida Bivi Ammal, ILR 42 Mad 661 : (AIR 1919 Mad 164). That was a case where a suit was laid for a sum of money which was payable to a Muhammadan lady (Plaintiff) as for her share on taking accounts of the business which was carried on by her father while he was alive and which was continued by her brothers (defendants) after his death, wherein the amount due to her was utilised by her brothers. It was held that the proviso in the Interest Act applied to the case and that 6 per cent interest was payable as damages on the amount due to the plaintiff.
(20) We do not consider that the said case helps place the case of the appellant on a better footing.
(21) Our attention has been invited to another Bench decision of the Madras High Court : Arunachalam Chettiar v. Rajeswara Sethupathi, AIR 1922 Mad 55, where a lessee for certain years collected the rents from the ryots after his lease expired. The lessor was held entitled to claim interest on the rents so collected by way of equitable damages, although the Interest Act might not justify the awarding of interest. The reasons given were succinctly stated at page 56 :
'The question then is whether the circumstances here are such as to justify an award of interest by way of equitable damages. The 1st defendant had clearly no right to receive, much less to retain, the rents paid by the lessee for the faslis in question as his right to collect them had ceased with the termination of his permanent lease, under the terms of which alone he had such a right. His action, therefore, in retaining the money was clearly wrongful, and he would be liable in damages for it.'
In our view, this decision does not apply to the facts of the instant case.
(22) Our attention has been invited to a case of the Supreme Court : Satinder Singh v. Umrao Singh, : 3SCR676 . That was a case of an acquisition under the Land Acquisition Act where the claimants were awarded compensation. It was held that the claimants were entitled to interest on the amount of compensation for the period between the taking of the possession of the land by the State and the payment of compensation by it to the claimants. It was observed that the right to receive interest took the place of the right to retain possession . The learned Judges made reference to ILR (1938) 2 Cal 72 : (AIR 1938 PC 67) and adopted the view expressed therein. We are unable to see how this decision affords any assistance to the appellant.
(23) We are therefore unable to uphold the claim for interest on alleged general equitable grounds.
(24) The claim for interest by way of damages cannot be admissible in view of what the Privy Council had stated in ILR (1938) 2 Cal 72 : (AIR 1938 PC 67). In that case the Judges of the High Court had allowed interest by way of damages caused to the plaintiffs for the wrongful detention of their money by the railway. The Privy Council adopted the reasoning of the House of Lords in (1893) A. C. 429. Their Lordships also referred to the scope of section 73 of the Indian Contract Act. This is what was stated at page 78 :
'There is a considerable divergence of judicial opinion in India on the question of whether interest can be recovered as damages under section 73 of the Indian Contract Act, where it is not recoverable under the Interest Act. Now section 73 of the Indian Contract Act gives statutory recognition to the general rule that, in the event of a breach is entitled to recover from the party breaking the contract compensation for any loss or damage thereby caused to him. On behalf of the plaintiffs, reliance is placed upon illustration (n) to that section. The illustration, however. does not deal with the right of a creditor to recover interest from his debtor on a loan advanced to the latter by the former. It only shows that if any person breaks his contract to pay to another person a sum of money on a specific date, and in consequence of that breach the latter is unable to pay his debts and is ruined, the former is not liable to make good to the latter anything except the principal sum which he promised to pay, together with interest upto the date of payment. He is not liable to pay damages of a remote character. The illustration does not confer upon a creditor a right to recover interest upon a debt which is due to him, when he is not entitled to such interest under any proviso of the law. Now can an illustration have the effect of modifying the language of the section which alone forms the enactment.
'As observed in Jamal v. Molla Dawood Sons and Co. ILR 43 Cal 493 : (AIR 1915 PC 48) S. 73 is merely declaratory of the common law as to damages, and it has been held by the House of Lords in London, (1893) A. C. 429 that interest cannot be allowed at common law by way of damages for wrongful detention of debt.'
(25) We may also notice that the same view had been expressed by a Bench of the Madras High Court in ILR 53 Mad 549 : (AIR 1930 Mad 727).
(26) The learned counsel has contended that he could in the alternative rest his case as one of restitution. He has invited our attention to Thangaswamy Chettiar v. Bapoo Sahib, : AIR1951Mad804 which discussed the principles of restitution apart from section 144 C. P. C.
(27) He has also made reference to Veettil Chandanathil Mukkayi v. Parambil Puthavumma, (S) : AIR1955Mad173 where it was observed that the power of a court to direct restitution was inherent in the court of justice was under a duty to repair the injury done to a party by its act. It was observed that the principle of restitution was not confined to provisions of section 144, C. P. C.
(28) Where, for reasons stated by us, the relief claimed could not be given on general equitable grounds, we very much doubt whether relief could be given by way of restitution in the exercise of inherent powers under section 151 C. P. C. We find ourselves unable to accept this plea.
(29) The learned Government Pleader has invited our attention to Municipal Borough, Ahmedabad v. Vadilal Balsukh Ram, ILR 1944 Bom 134 : (AIR 1944 Bom 233 (1) ). That was a case where the plaintiff sued to recover interest on drainage tax after he had obtained refund of the amount paid in respect of the tax, the levy having been pronounced to be illegal by Court. There again the plaintiff advanced a claim for interest on the principle of justice, equity and good conscience. The learned Judge repelled the claim and cited ILR (1938) 2 Cal 72 : (AIR 1938 PC 67) as opposed to that view. The learned Government Pleader has relied on this decision as pari materia.
(30) The learned Government Pleader has also invited our attention to Rule 12-A of the Madras General Sales Tax Act, 1939, which contains a specific provision that in the event of the Appellate Tribunal holding that an excess amount was collected from any dealer, the said excess shall be refunded to the dealer without interest. This is a specific provision meeting the case of any modification in respect of tax due from a dealer ordered by an Appellate Tribunal. On the same analogy the learned Government Pleader argued that where a dealer had to be refunded any amount collected from him as sales-tax ; the amount should be refunded without interest. We need not rest the decision in this analogy, as we have answered the main pleas on which the claim was rested by the appellant, against him.
(31) For all these reasons, we do not find any reason to differ from the decision of our learned brother. We, therefore, dismiss this appeal , but there will be no order as to costs.
IH/ V. S. B. / D. V. C.
(32) Appeal dismissed.