Varadaraja Iyengar, J.
1. This appeal is by the defendant to a suit for refund of amounts alleged to have been paid under a mistake of fact.
2. The defendant N. V. Joseph was employed by the Government of India on 27-3-1943, as Assistant Labour Liaison Officer in Assam (A. L. L, O.) for the Travancore State Labour recruited for employment on Defence Projects connected with the second World War. The post as orignally sanctioned was for a period of six month, but the period was later extended as for the duration of war or for such shorter period as may be found necessary. Officially the world war ended on 1-4-1946 and the post accordingly terminated with that date. The Office of the Field Controller of Military Accounts at Poona continues, however, by mistake, to Issue the defendant's salary cheques at the rate of Rs. 450/- per mensem as they used to do, even after 1-4-1946 and up to 30-4-1947.
The plaint avers that the defendant drew these excess amounts with the full knowledge of the mistake and refused to refund the amounts when called upon to do so by notice dated 14-5-1947. The suit was therefore laid, by the Governer-General of India for recovery from toe defendant of a net amount of Rs. 6,337 and Annas 11 along with a sum of Rs. 683-8-11 pies by way of interest at six per cent from 14-5-1947 to 11-3-1849 aggregating on the whole to Rs. 6921. 3-11 plea. The defendant contested the suit. He contended that the post of Assistant Labour, Liaison Officer was not abolished to his knowledge on 14-1946 and he had been, in fact, assisting even subsequently in the disposal of compensation claims of labourers which work had previously been allotted to him.
Even otherwise, the defendant had been appointed to ills post by the Travancore Government and not by the Government of India and that again 'until further orders' and not for specific period, and no further order had been Issued by the Travancore Government terminating his appointment. There was no question therefore of payment to the defendant of any excess salary or refund thereof. The defendant questioned his liability, in any event, to the interest claimed. The court below found that the post of the Assistant Labour Liaison Officer was created only by the Government of India, though in consultation with the Travancore Government and that the defendant's appointment thereto ceased as from 1-4-1946 and the payments of salary made to him thereafter were Under a mistake of fact and defendant was bound to refund the same. The court below, however, found it not proper to allow the claim in the plaint for interest before-suit. Hence this appeal by the defendant. The plaintiff has filed cross-appeal in respect of the Interest disallowed.
3. Learned Counsel for the appellant urged at the outset that the court below was wrong in its conclusion on fact and that defendant had not been in service alter 1-4-1946. He strongly relied in this connection upon the terms of Ext. II order dated 10-3-1943 issued by the Chief Secretary to the Government of Travancore to the defendant appointing him to the post of Assistant Liaison Officer on a pay of Rs. 450/- until further orders and without any reference to the Government of India and the admitted fact that the Travancore Government did not issue any notice terminating the appointment at any time later on. But it is seen from Ext. H letter of the Travancore Government that they themselves relied for the appointment, on Ext. A communication dated 14-1-1943.
Now, Ext A is written by the Under Secretary to the Government of India to the Quartermaster. General in India and refers to the sanction of the Governor-General-in-Council to the creation of the post, for a period of 6 months and on a pay of Rs. 900/-. It would appear that this proposed salary of Rs. 900/- was split up on the representation of the Travancore Government, into two halves so as to form the salaries of two officers, viz., the defendant. Assistant Labour Liaison Officer and another to be yet appointed by the Travancore Government as Welfare Officer. See Ext B letter of the Staff Captain, Labour dated 20-4-1943.
Then comes Ext. C letter of the Under secretary of the Government of India dated 11-10-1943 intimating sanction for the extension of . the period of appointment until the duration of the war or for such shorter period as may be necessary. It cannot be that the defendant was unaware of these matters for, Ext. TV letter, written on the eve of the 6 months' period, on 19-9-1943 by the Chief Labour Liaison Officer to the defendant, seeks to re-assure the defendant in regard to the extension of his appointment. There is no substance therefore in the defendant's contention that he was appointed by the Travancore Government and until further orders which Were not issued.
4. Learned counsel for defendant then said that the defendant had been actually functioning in his appointment even after 1-4-1946 and that the salaries paid must be attributed to such service. But this is belied by Ext. I circular letter dated 25-3-1946 issued by the defendant himself as Assistant Liaison Officer in charge, advising various offices that the Office of the Chief Labour Liaison Officer will close as and from 31st March 1946. Ext. I takes occasion to mention that the defendant will be pleased to render assistance as and when required, should occasion arise, but gives the defendant's home address alone without reference to his original designation.
Learned Counsel referred to Ext. VI letter dated 25-5-1946 from the Chief Recruiting Officer, Pudukkottal, and referring to the details of certain pending compensation claims and said that that was clear evidence that the defendant was attending to the disposal of compensation cases even after 1-4-1946 as he used to do as per Ext. III order of the Chief Labour Liaison Officer dated 5-6-1943 from the very beginning. But the defendant admitted, when examined as D. W. I, that the reply he sent to Ext. VI was that the concerned files had all been already sent to Pudukkottai and reference should therefore, be made thereto. Apparently Ext. VI was written fn the belief that the Chief Labour Liaison Officer was still functioning and this accounts for the defendant's address being given there as care of C. L. L. O's Office. But that office had ceased even according to the defendant, by 1-4-1946. The defendant was compelled to admit that, except on four or five occasions, When he gave some advise to the Chief Labour Recruiting officer at Trivandrum he had done nothing after 14-1946, and even in respect of this, there was no record to show either that he attended that office, or gave such advise. Without doubt he had no office for himself, nor any staff to control, nor for the mat. ter of that, any allotted work to do. It follows therefore that the defendant's contention as to work done after 1-4-1946 is also without substance.
5. Learned Counsel for the appellant then raised the question that the defendant must be deemed to have been paid his salaries afer 1-4-1949, not under a mistake of fact as the Court below found, but under a mistake of law, as to the legal rights of the defendant under his contract of employment and that such mistake could not be relieved against under law. In our judgment, however, both limbs of this argument are wrong. On the first aspect as to mistake of fact or law, it is enough to say that no question of law arose at any stage In-the matter of the ascertainment of the defendant's right to salary for particular period or at all.
The over-payment arose because the Field Controller of Military Accounts who was in charge of the disbursement of the defendant's salaries, failed to receive the copy or Ext. I circular letter about the closure of the Chief Labour Liaison Office itself as & from 1-4-1946 and he also forgot to remember the duration the defendant's appointment as limited to the period of war or lesser period. He bethought himself of a possible mistake only towards the end of April 1S47 and became alive as regards excess payment on receipt of Ext. D communication dated 7-5-1947 from the Authorised Officer at the Labour Camp at Trivandrum. It is perfectly clear therefore that the payment to the defendant of salaries after 1-4-1946 was made only under a mistake of fact as to his contl-unance in service and not otherwise.
6. Taking up the second aspect that relief will be available only when the payment was under mistake of fact and not of law, that view was no doubt adopted in some cases. Now Section 72 of the Indian Contract Act says:--
'A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay jt or return It'.
The argument was that Section 72 contemplated only a mistake of fact and not one of law. It was said that if a sum paid under mistake of law be recoverable then Section 21 of the Contract Act would be rendered nugatory. Section 21 was to the effect that a contract is not voidable because it was caused by a mistake of law. The argument therefore ran thus that a contract is not voidable by reason of its being caused by mistake of law: therefore a payment made by mistake of law must be irrecoverable. For example in Wolf & Song v. Dadlba Khimji & Co., ILR 44 Bom. 631, : (AIR 1920 Bom. 192) (A) Macleod J., said (p. 648) referring to Section 72:
'On the face of It, mistake includes mistake of law. But it is said that under Section 21 a contract is not voidable on the ground that the parties contracted under a 'mistaken belief of the law existing in British India, and the effect of that section would be neutralised if a party to such a contract could recover what he had paid by mtans of Section 73 though under Section 21 the contract remained legally enforceable. This seems to be the argument of Messrs Pollock and MuIla and as far as I can see it is sound'.
And similarly in Appavoo Chettlar v. S. I. Rly. Co; A. I. R. 1929 Mad. 177 (B), Ramesam and Jack-BOD JJ. eay:
Though the word mistake in Section 72 is not limtted, it must refer to the kind of mistake that can afford a ground for relief as laid down in Sections 20 and 21 of the Act..............Indian Law seems to be clear, namely, that a mistake in the sense that it is a pure mistake as to the law in India resulting in the payment by one person to another and making it equitable that the payee sould return the money is no ground for relief'.
7. But as Sen, J., observed in Jagadish Prosad v. Produce Exchange Corporation Ltd., A. I. R 1046 Oal. 245 at p. 249, (C).
'This argument is not supported by logic Section 73 uses the word 'mistake' without any qualification. Is there any Justification for engrafting a qualification which fs not in the statute ........Section 21 speaks, not of a payment made under a mistake of law but of 'a contract caused by a mistake of law'. Section 72 does not speak of a contract at all but merely of a payment made under a mistake. The Section appears in Chap. V, which does not deal with contract but with certain relations resembling those created by contract.', As I read It, all that Section 73 says is that:
If a person makes a payment under a mistake (of law or of fact) a relationship resembling a contract is created under which the person receiving the payment is bound to return the money.'
This reasoning of Sen J, in A. I. R. 1946 Cal 846, (O) above cited was approved by their Lordships of the Judicial Committee in Shiba Prasad Singh v. Srish Ohandra, AIR 1949 P. 0. 297, (D) where they said:
'Payment 'by mistake' to Section 72 must refer to a payment which was not legally due and which could not have been enforced; the 'mistake' is thinking that the money paid was due when in fact it was not due. There is nothing inconsisten in enacting on the one hand that if parties enter into a contract under mistake of law that contract must stand and is enforceable, and on the other hand that if one party acting under mistake of law pays to another party money which is not due by contract of otherwise, that money must be repaid'.
8. In that case a lessee who was found to pay royalty at lower rate after particular date continued to pay at the higher rate as previously he was doing. The High Court had held that the overpayment was made because the lessee was unaware of his rights under the lease and it was not a mistake of fact but was a mistake of law and the law of India was to the effect that such overpayment could neither be recovered nor set-off against other payments due. Overruling the High Court, the Privy Council held that the lessees might have acted on Inadequate information or have taken a wrong view of their legal rights or continued paying at the old rates without giving any thought to the matter, but it was clear that there was no intention to make a present to the lessor of money which was not due. The money was paid under the belief that it was legally due. That belief waa mistaken and that was sufficient to bring the case within Section 72 of the Contract Act.
9. It follows therefore that the decree of the Court below granting the plaintiff's claim to refund of the salaries which had been paid to the defendant under mistake, is perfectly justified and the appeal filed by the defendant has accordingly to fail.
10. We now take up the cross-appeal filed by, the plaintiff as regards the claim for interest from date of defendant's knowledge of the overpayment viz., 14-5-1947 till' date of suit. The Court below. dealing with this question under issue No. 4 found that the plaintiff was negligent and had acted in an irresponsible manner and there was also no implled agreement and therefore disallowed the interest. Learned Counsel for the plaintiff says that Interest should have been allowed by way of damages, particularly in view of the equitable considerations arising in the case Now the question as to how far Interest is payable has been the subject of some controversy. Award of interest from date of Institution of suit is provided in Section 34, C. P. C.
The question whether the Court has authority to allow interest for the period prior to the institution of the suit, depends not upon the Code of Civil Procedure but upon substantive law. Now interest for the period prior to the date of suit may be awarded, If there is an agreement for the payment of interest at a fixed rate, or it is payable by the usage of trade having the force of law, or under the provision of any substantive law entitling the plaintiff to recover Interest. Under the Interest Act, XXXII of 1839, the Court may allow interest to the plaintiff, If the amount claimed is 9 sum certain which is payable at a certain time by virtue of a written instrument. There is however a proviso that 'interest shall be payable in all cases in which it is new payable by law' and it applies to cases in which the Court of equity exercises jurisdiction to allow Interest. But as observed in Maine and New Brunswick Electrical Power Co; Ltd., v. Alice M. Hart, AIR 1929. P. C. 185 (E).
In order to invoke a rule of equity it is neceseary in the first instance to establish the existence of a state of circumstances which attracts the equitable jurisdiction'.
And these equitable circumstances are summarised in the passage in Halsbury's Laws of England, Volume 21, page 40:
(1) 'Money obtained by fraud and retained by fraud can be recovered with interest.
(2) Interest may also be recovered in equity in some cases where a particular relationship exists between the creditor and the debtor, such as mortgagor and mortgagee, obligor and obligee on a bond, executor and beneficiary, principal and agent, principal and surety, trustee and cestui que trust, vendor and purchaser or in the case of arrears of annuities.
(3) Where a person who is an officer of the Court such as a sheriff, a solicitor or a receiver wrongfully withholds money which he has obtained in the course of legal proceedings, he may be ordered to pay it with interest.
11. The question of recovery of interest as damages under Section 73, Contract Act, where if it is not recoverable under the Interest Act, had given rise to considerable divergence of judicial opinion but it may now be deemed to be settled by the decision of the Privy Council in B. N. Rly. Co Ltd., V. Ruttanji Ramji, AIR 1938 P. C. 67 (F). Their Lordships in that case held, following their previous decision in Jamal v. Moola Dawood Sons and Co., AIR 1915 P. O. 48 (G), that
'Section 73 is merely declaratory of the common law as to damages and that interest cannot be allowed at common law by way of damages for wrongful detention of debt'.
and referred to the absence here of the amendment introduced in England by Section 3 of the Law Reform (Miscellaneous Provisions) Act, 1934, empowering a Court of Record to award interest on the whole or any part of any debt or damages, at such rate as it thinks fit, for the whole or any part of the period between the date when the cause of action arises and the date of the judgment.
12. Ordinarily therefore interest cannot be claimed merely because money has been detained as the result of the defendant's acts or misconduct. But if it is possible to invoke a rule of equity by establishing the existence of a state of circumstances which attracts the equitable jurisdiction, there can be no doubt that interest could be allowed. So it was held in Trojan & Co. v. Nagappa, Chettiar, A. I. R. 1953 S. C. 235 (H), that the defendant having as agent of the plaintiff, received and dealt his principal's money improperly and in breach of his duty and had again refused to pay it over on demand, was liable to pay interest from the time when he so received or dealt with the same or from the time of the demand.
13. There can be no doubt in this case that the defendant knew from the very moment he received the first remittance of salary after 1-4-1946, that he was being paid by mistake. But he continued to receive, and when after 12 months, demand was made of him for repayment, he chose to remain quiet. The principles of equity referred to above, it is clear, are sufficiently attracted and the defendant must therefore pay the interest claimed.
14. in the result we dismiss the appeal withcosts and allow the cross-appeal also with costs.