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Nuli Kanaka Rao and ors. Vs. Tetali Sriranga Venkata Ramalinga Reddy - Court Judgment

LegalCrystal Citation
SubjectContract
CourtAndhra Pradesh High Court
Decided On
Case NumberSecond Appeal No. 201 of 1962
Judge
Reported inAIR1966AP297
ActsIndian Contract Act, 1872 - Sections 70
AppellantNuli Kanaka Rao and ors.
RespondentTetali Sriranga Venkata Ramalinga Reddy
Appellant AdvocateAdv. General
Respondent AdvocateAdinarayana Raju and ;M. Krishnam Raju, Advs.
DispositionAppeal allowed
Excerpt:
.....to recover any amount on the basis of the contract, the conduct of the defendant in enjoying the benefit of the work without immediately cancelling the contract and exercising the option of dismantling the work, clearly showed acceptance of the work as performed and was, therefore, liable to pay for the same on quantum meruit not on the basis of any quasi contract but on the basis of an implied in fact agreement deducible from the circumstances of the case. i have already heldthat the defendant has failed to prove the consentof the plaintiffs for carrying out these repairsand since i have found that section 70 of theact is not applicable, what must follow is thatthe defendant will not be entitled to thereimbursement which he has claimed for carrying out the repairs to the mill apart..........an implied contract where there is an express contract in existence. where, by the terms of the contract, the person who does the work agrees that he is not entitled to any remuneration unless the work has been checkmeasured, then, he cannot claim for any work that has not been checkmeasured.' to the same effect is madras state v. mad elec tramways, : air1957mad169 . it is held in this case by a bench of the madras high court that the principle of quantum meruit has no application to cases where there are specific contracts in operation and has only application to cases where there is no contract in operation. 15. the same view was held by the calcutta high court in mosele solomon v. martin and co., (1936) 163 ind cas 331 (cal.) 10. it is unnecessary to cite other cases which.....
Judgment:

Gopal Rao Ekbote, J.

1. This second appeal arises out of a suit filed by the plaintiffs appellants for accounts of the amount due to them after deducting the expenses in terms of the lease deed dated 22-10-1958. It arises in the following circumstances:

The plaintiffs who are the co-owners of a Rice Mill named Sri Gopalakrishna Rice Mm along with certain others gave the Mill on lease under a registered lease need dated 22-10-1938 to the defendant for a certain period ending by September, 1960. It was agreed at the time when the lease deed WHS executed that an expenditure of Rs. 1,200 should be borne by the owners, as that amount was to be spent on carrying out certain repairs for the piston rod of the Mill. The defendant was therefore, permitted to expend that amount and get the repairs done. It was alleged that the defendant over and above the permitted repairs claims to have carried on certain other repairs and incurred an expenditure of Rs. 4,888 and that this amount the defendant cannot claim because no permission in accordance with the lease deed was taken from the Plaintiffs. Denying this claim of the defendant was contended that the suit for account be decreed.

2. The defendant contended in his written statement that at the lime of the lease it was represented that the Mill requires repairs only in so far as the piston rod was concerned and no other repairs were necessary. The defendant therefore, undertook to spend that amount and recover it subsequently from the owners. The defendant however brought a mechanic who dismantled the Mill on 24-10-1958 in the presence of all the co-owners and gave his opinion that besides the piston rod some other essential repairs have to be carried on. It was contended that all the co-owners agreed for such repairs and directed the defendant to get them done and that any amount spent will be reimbursed. The defendant further stated that the other co-owners having seven annas share have already made contributions towards the amount which the defendant has spent on carrying out repairs other than to the piston rod, and it is only these the plaintiffs are denying to reimburse. It was further claimed that the co-owners had directed the defendant to obtain instructions from one Chetlapalli Subba Rao, one of the sharers, and carry out the repairs.

3. Upon these pleadings the trial Court framed several issues and after recording the evidence adduced by the parties held that the repairs besides the piston rod were effected by the defendant in accordance with the permission granted by the owners and therefore the defendant is entitled to claim re-imbursement of that amount. The trial Court consequently passed a preliminary decree for accounts giving a direction to allow the said re-imbursement.

4. Dissatisfied with that judgment the plaintiffs fifed an appeal. The defendant filed cross-objections.

5. The learned Subordinate Judge, Eluru, disallowed the appeal and the cross-objections holding that the plaintiffs' consent was not obtained by the defendant for carrying out the repairs to the Mill other than the piston rod. He however directed the re-imbursement on the ground that under Section 70 of the Indian Contract Act (hereinafter called the Act) when the plaintiffs are deriving the benefit of the repairs carried on by the defendant, who. without Intending them to be gratuitous, they (the plaintiffs) have to re-imburse that amount on the principle of quantum meruit. It is this view that is now assailed in this second appeal.

6. Before I consider the principal contention advanced before me by the learned Advocate General I shall dispose of the contention of the learned Advocate for the respondent that the lower appellate Court has erred in holding that the plaintiffs did not give their consent to incur the expenditure for carrying out the repairs as is claimed by the defendant. I do not however see much substance in this contention. It is true that D. Ws. 2 to 5 were not considered by the lower appellate Court separately, but it was clearly of the opinion that they being interested parties and being in collusion with the defendant, their evidence cannot be relied upon. I have no reason to disagree with that conclusion. The only independent evidence was that of D. W. 6. The evidence of this witness far from being helpful to the defendant does a good deal of damage to his defence in this regard, He states that 'D. W. 5, D. W. 4 and plaintiff JJ and others were present then. The parts are all worn out. I said that besides piston, other parts have to be replaced. That day they did not give any reply but the next day I was asked to undertake all the repairs.' From the cross-examination it is made clear that it is D. W. 5 who told the mechanic the next day to undertake the repairs. It is thus plain that his evidence goes to prove, contrary to the defence set up, that no consent was given by the plaintiffs on the day when the mechanic gave his opinion.

I see therefore no reason to differ from the conclusion of the lower appellate Court.

7. The important question then which has to be necessarily considered in this appeal is whether in the face of an express contract governing the relations of the parties, can reimbursement be claimed under Section 70 of the Act in violation of a term of the contract. According to Clause 5 of the lease deed the defendant was required to obtain consent of all the co-owners if he was required to spend in carrying out repairs to the Mill an amount exceeding Rs. 150. Admittedly the amount involved in this second appeal exceeds that limit and consequently consent ought to have been taken of all the co-owners before any repairs ware carried on. What was contended before the lower Appellate Court and is also contended before me is that in spite of this clause of the contract when the defendant has actually spent the amount in carrying out the repairs to the Mill and the plaintiffs along with other co-owners are enjoying the benefit of these repairs, the defendant is entitled to the amount on the basis of quantum meruit under Section 70 of the Act.

8. In order to appreciate the implications of the above contention it is necessary to read Section 70 of the Act

'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 fo restore, the thing so done or delivered.'

A careful reading of this Section would indicate that the Section is couched in very wide terms and it is because of them sometimes difficulties are felt in applying the provisions of that Section to specific cases. Three things must necessarily be established in order to attract Section 70. Firstly, some benefit must have been legally con-furred by an act. Secondly, the act must have bom done by the doer without intending to be gratuitous and thirdly, that the person for whom it has been done must have enjoyed the benefit arising out of such act. It can thus be broadly stated that the Section applies where a person lawfully doing something for another not intending to do so gratuitously is entitled to reimbursement. oNE caution must however be sounded. The Section merely because it is couched in wide, language cannot be read so as to justify the officious interference of one man with the affairs and property of another man, or to impose obligations in respect of services which the person sought to be charged did not wish to have been rendered. The expression 'lawfully' employed in the Section postulates cases in which a person holds a relation as either directly to create or by implication reasonably to justify a reference that by some act done for another person the party, doing the act is entitled to look for compensation for it to the person for whom it is done; Sec Hyderabad State Bank v. Kanganarh AIR 1958 Andh Pra 605.

9. It is however beyond doubt that according to that Section it is not essential that the act shall have been necessary in the sense that it has been done under circumstances of pressing emergency or even that it shall have been an act necessary Io be done at some time for the, preservation of property. The benefit of this section therefore, can be extended to cases in which no question of salvage enters. It is patent that its application cannot be limited to persons standing in particular relationships one to another. It is also manifest that in order to constitute an act lawful for the purposes of this Section, it does not impose any condition in regard to circumstances under which the act must have been done.

10. In spite of the wide import of the Section the essence of it undoubtedly is the word, lawfully' appealing in that section. It becomes therefore, necessary in every case where Section 70 is sought to be applied to find out whether the! person who performed the act had any lawful interest in doing that act. The meaning of the word 'lawfully' in this section is merely bona fide. In ascertaining whether an act is lawfully done for another the test mentioned by me just before shall have to be applied. If that test was not Jo be applied, then it would almost amount to permit a person to meddle officiously with the affairs of another and make him liable for the work done which though advantageous in some measure may either not have bean undertaken by him at all, or he might have put some restrictions in doing such an act. It is in this context that the existence of some kind of lawful interest with the person doing an act becomes generally necessary.

11. It must also in this connection be remembered that the act done must have resulted in the enjoyment of its benefits of other persons sought to be held liable. If the act is done for the doer's benefit or the person sought to be held liable does not derive any benefit, or that the benefit is both to the person who does the act and incidentally it also benefits some other person, it is obvious that no liability can be fastened under Section 70 of the Act.

12. That seems to me to be the import of Section 70. What is therefore, to be seen in this case in the background of above mentioned discussion is whether the repairs carried on by the defendant are of such a character that the plaintiffs can be held liable for the amount in spite of the lease deed expressly providing for the manner in which the repairs, if necessary, should be carried out. It is quite relevant to note that Section 70 falls in Chapter V of the Act, the heading of which is 'Or Certain Relations Resembling those created by Contract'. A reading of that Chapter would disclose that it deals with certain obligations imposed by law on the parties concerned and not resulting from any express agreement, or from any agreement which can as a matter of fact be implied. Such relations are commonly known as quasi-contracts. This term however is technically incorrect and is an unfortunate misnomer because the basic element in contract viz., agreement is entirely lacking in most of the instances falling within the meaning of that term. It is however clear that in obligations imposed by law under Chapter V of me Act there can be nothing contractual. The promise or the obligation which Section 70 creates is entirely fictitious and is the creation of law. Any action to enforce this obligation is not an action based on any contract.

In the words of Mansfield, C. J., 'the gist of this kind of action is that the defendant upon the circumstances of the case is obliged by the ties of natural justice and equity to refund the money.' This Section therefore, unquestionably imposes an obligation without any reference to mutual assent of the parties and that obligation is enforceable only in special assumpsit, as if it was the result of an actual contract. Keeping in view the difference between implied contract in fact and the quasi or constructive contract created by law, it can be stated that Section 70 creates a right not because of any promise or mutual assent of the parties, but is the creation of law and is imposed by a provision of law on the defendant irrespective of and sometimes in violation of his intention and that is why I have called that class of relationship as quasi contractual relationship. It creates a contractual duty implied from the acts done under the law.

13. When once it is found that the obligation created under Section 70 of the Act is not based on any mutual consent of the parties, then it has to be found out whether that obligation can arise even where there Js an express contract between the parties governing the relationships in regard to a particular transaction. It is clear from some of the cases cited before me which hold that where there is an express agreement Section 70 does not apply. It cannot however be stated that there are no exceptions to this broad rule. It must be remembered that Section 70 is not inapplicable merely because the plaintiffs have another right of action arising out of another cause such as one founded upon contract, express or implied, or where for some reason the contract in unenforceable. Nor is the application of this Section can be said to be excluded because there was a contract, but the contract is not enforceable by reason of nonconformity with certain statutory provisions. In such and other cases of this nature it is plain that the provisions of Section 70 can be applied, and relief on quantum meruit can be granted. From the discussion of the cases on this question, which I presently propose to do, it would be evident that while cases governed by contracts, express or implied in fact, will have to be normally dealt with in accordance with the terms of the contract express or implied in fact, cases arising out of obligation undertaken prior to the contract and in order to effectuate the contract and also cases arising subsequent to the breach of the contract and its termination or recession must be distinctly and separately considered. In such cases obligation can arise under Section 70 of the Act.

No case was cited before me which slates that in spite of the existence of an express contract containing an exclusive term governing the relationship in regard to the matter which is the subject of a litigation, Section 70 can be pressed into service ignoring the terms of the contract. The learned advocate for the respondent could not suggest to me a case where quasi contractual obligation may be said to arise in cases where the entire relationship of the parties is governed by express terms of the contract. I am also unable to visualise at the moment any such eventuality. I do not therefore, find any difficulty in holding that to grant quantum meruit under Section 70 of the Act to the defendant in this case would be tantamount to violating an express term of the contract under which the defendant could not have carried out the repairs involving an amount exceeding Rs. 150 without the prior approval of all the co-owners of the Mill. I have therefore, no hesitation in holding that in the face of express contract and clause 5 therein governing the relationship of the lessor and the lessee in this case^ Section 70 cannot be pressed into service and no relief can be granted to the defendant on the foot of quantum meruit merely because the plaintiffs also will be enjoying the benefits of the repairs carried out by the defendant.

14. In D. Vanjeeswara v. Dist. Board, South Arcot, AIR 1941 Mad 887 Horwill, J., held:

'The principle of quantum meruit is often applied where for some technical reason a contract is held to be invalid. Under such circumstances an implied contract is assumed, by which the person for whom the work is to be done contracts to pay the person who does work reasonably for the work done. There is no room however for an implied contract where there is an express contract in existence. Where, by the terms of the contract, the person who does the work agrees that he is not entitled to any remuneration unless the work has been checkmeasured, then, he cannot claim for any work that has not been checkmeasured.'

To the same effect is Madras State v. Mad Elec Tramways, : AIR1957Mad169 . It is held in this case by a Bench of the Madras High Court that the principle of quantum meruit has no application to cases where there are specific contracts in operation and has only application to cases where there is no contract in operation.

15. The same view was held by the Calcutta High Court in Mosele Solomon v. Martin and Co., (1936) 163 Ind Cas 331 (Cal.)

10. It is unnecessary to cite other cases which similarly decide the point.

17. In Venkataswami v. Narasayya, : AIR1965AP191 , the facts were that the defendant-respondent was the highest bidder at the auction of the right to collect fees in weekly and daily markets and the cart stands in the vicinity of the Panchayat Board for the year 1951-52. The auction was knocked down in favour of the respondent. The auction was confirmed by the Panchayat Board. The respondent collected the market fees. It was however revealed that no registered lease deed representing the terms of the contract was at any time executed. In these circumstances their Lordships of this Court applied Section 70 of the Act to the facts of that case. It will however he clear from a reading of that judgment that although there was an agreement between the Municipality and the contractor, no lease deed as was required by the statute was ever executed. There was therefore, no completed contract according to the provisions of the relevant Act. I have already stated earlier that to such a case the provisions of Section 70 of the Act can certainly be applied, as there is no contract in existence which can be enforced in a Court of law.

18. The case of Gangapathi Pillai v. Pai Nadar : AIR1962Mad345 can easily be distinguished on facts. The facts of that case were that in order to effectuate the lease transaction itself certain constructions were necessary to the leased premises. The defendant-lessor has agreed to put up these constructions though later he was unable to spare the time or the money necessary for the purpose. The plaintiff put up the constructions. Upon these facts Srinvasan, J., held that as the benefit of the constructions would subsequently accrue to the defendant, the owner of the premises, the plaintiff, was entitled to be reimbursed under Section 70, the constructions not having been put up gratuitously by him. It is plain from the facts briefly stated above that in that case the very contract was to come into effect only on certain repairs being carried out by the lessor as agreed to between the parties. The lessee carried out those repairs as the lessor had failed to do it in order to effectuate the contract. It will thus be plain that the obligation to which effect was given by Srinivasan, J., was an obligation arising under Section 70 of the Act prior to the contract coming into effect. It cannot be argued from that decision that his Lordship allowed the quantum memit even in the face of a contract.

19. The last case to which I would like to to make a reference is 'Krishna v. Cochin Devaswom Board, AIR 196-3 Ker 18J. The facts of that case wore that the contract for electrical installations between the plaintiff and the defendant provided that the plaintiff should use 3/20 wires and gave option to the defendant to rescind the contract and dismantle the installations at its direction and the plaintiff used only 1/20 wires and, though the stipulation regarding the quality of the wire to be used was an essential condition going to the root of the contract, the defendant did not exercise the option of dismantling the installations but proceeded to apply to the electricity department for connection and enjoyed the benefit of the defective work. In these circumstances it was held that though the plaintiff could not claim to recover any amount on the basis of the contract, the conduct of the defendant in enjoying the benefit of the work without immediately cancelling the contract and exercising the option of dismantling the work, clearly showed acceptance of the work as performed and was, therefore, liable to pay for the same on quantum meruit not on the basis of any quasi contract but on the basis of an implied in fact agreement deducible from the circumstances of the case. It is clear from the said decision that in spite of the defective work, as it was accepted by the party concerned, the price for the work done was allowed not on the principles embodied in Section 70 of the Act, but on the foot of an implied in fact agreement,

20. The result of the above said discussionis that the lower appellate Court has erred ingranting compensation of the repairs carried onBy the defendant under Section 70 of the Actin spite of Clause 5 of the tease deed. Section 70of the Act, as stated earlier, cannot be appliedto the facts of this case and no relief on quantummeruit basis under Section 70 of the Act can begranted to the defendant. I have already heldthat the defendant has failed to prove the consentof the plaintiffs for carrying out these repairsand since I have found that Section 70 of theAct is not applicable, what must follow is thatthe defendant will not be entitled to thereimbursement which he has claimed for carrying out the repairs to the Mill apart from repairing the piston rod. Subject to the abovesaidmodification in the direction the preliminarydecree granted in favour of the plaintiffs by boththe Courts below will stand. No particularreason except as discussed above was pointed outto disturb the finding of fact challenged in thecross-objections. The cross-objections must therefore, fail. In the circumstances of the case Ileave the parties to bear their own costs of allthe Courts, in second appeal as well as in thecross-objections. No leave.


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