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A.P. Kochudevassy Vs. State of Kerala - Court Judgment

LegalCrystal Citation
SubjectContract
CourtKerala High Court
Decided On
Case NumberA.S. No. 177 of 1976
Judge
Reported inAIR1982Ker90
ActsContract Act, 1872 - Sections 20, 22, 23, 70 and 72; Kerala Rationing Order, 1966
AppellantA.P. Kochudevassy
RespondentState of Kerala
Appellant Advocate C.K. Sivasankara Panicker,; D. Narayanan Poti,; P.G. Par
Respondent AdvocateGovt. Pleader
DispositionAppeal dismissed
Cases ReferredState of West Bengal v. B. K. Mon
Excerpt:
.....in view of united india insurance co. ltd. v tilak singh, air 2005 sc 1576 & new india assurance co. ltd. v asha rani, air 2003 sc 607. united india insurance co. ltd. v appukuttan, 1995 (1) ker lt 807; 1996 aihc 933 (ker) overruled]. - the judge also stated that there was no evidence that the plaintiff had suffered any loss as a result of the government's failure to pay him the higher rate retrospectively. 691 :once a contract has been made, that is to say, once the parties, whatever their inmost states of mind, have to all outward appearances agreed with sufficient certainty in the same terms on the same subject matter, then the contract is good unless and until it is set aside for failure of some condition on which the existence of the contract depends or for fraud or on some..........and willingly acted upon the rate applicable to the ii zone as a result of which only such rate of charges had been collected from the consumers. by his conduct and acquiescence he led the authorities to believe that the distance between his depot and the central depots was such that he came in the ii zone. it was on that basis that transport and incidental charges were collected from the consumers and paid over to the plaintiff. the government, however, fairly corrected the mistake, when it was brought to their notice, by placing him in the iii zone as from 1-8-1971. as from that date the correct charges are collected from the consumers and paid over to the plaintiff. to demand the higher rate of charges for the past period is to say that the government should suffer the.....
Judgment:

Kochu Thommev, J.

1. This appeal is brought by the plaintiff against the judgment and decree of the learned Subordinate Judge at Irinjalakuda, dismissing his suit for recovery of amounts from the defendant which is the State of Kerala. The pla;ntiff is a wholesale ration dealer at Kottappuram in Kodun-gallur taluk in Trichur District. He was appointed as a wholesale dealer under the Kerala Rationing Order, 1966. Exts. B3 and B4 are the agreements executed by him pursuant to his appointment by the District Collector. Under G. O. No. 3/65/Food dated 2-1-1965, the wholesale distributor was entitled to a certain rate of transport charges. The rate was revised and enhanced as per G. O. Rt. 56/70-Food dated 7-2-1970. By virtue of these orders a wholesale distributor is entitled to transport and incidental charges with reference to the zone applicable to him on the basis of distance. The zones have been constituted on the following basis:

I Zone -- up to and including 10 miles.

II Zone -- up to 25 miles.

III Zone -- up to 50 miles.

IV Zone -- above 50 miles.

The contract provides that the plaintiff has to lift articles from the Central Depots at Mulamkunnathukavu and Trichur to his own depot at Kottap-puram. During the period from 14-1-1965 to 30-7-1971 the plaintiff had admittedly lifted the goods mentioned in the plaint from the Central Depots to his depot. He was paid transport charges for the goods lifted at the rate applicable to II Zone. Without question the plaintiff accepted the charges He acted on the assumption that the charges were correctly paid according to the right zone. The plaintiff did not realise until 1971 that the distance between his depot and the Central depots exceeded 25 miles and he ought therefore to have been placed in the III Zone and not in the II Zone. If he had been correctly placed he would have received the higher rate of transport charges applicable to the III Zone. This mistake he realised only when Shri K. D. Achutha Pai who was a wholesale dealer at Mala raised the question of distance with the Government. The plaintiff also petitioned the Government for enhanced rate on the basis of the III Zone. His petition was allowed by the Board of Revenue by their Order No. CS. A2. 8083/71/K. Dis. dated 15-7-1971. It is specifically stated in the order that it was not to operate retrospectively. The plaintiff was therefore paid the higher rate applicable to the III Zone only from 1-8-1971. Ext. A5 dated 15-7-1972 is a letter sent to him on behalf of the Board of Revenue, which reads as follows :--

'I am directed to inform you that your request for the benefit of retrospective effect cannot be accepted, as the higher rates of transportation charges have not been added in the computation of the price to be collectedfrom the cardholders and it cannot also be done now.'

Aggrieved by the refusal of the concerned authority to pay the plaintiff the rate applicable to III Zone for the period between 14-1-1965 to 30-7-1971, he instituted the suit for recovery of a sum of Rs. 79,255/- alleged to be the arrears due to him by way of transport charges and for interest thereon. The plaintiff pleaded an implied undertaking on the pan of the defendant to pay him the excess charges. He stated that the very admission implied in the correction made by the Government for the future in regard to the applicable Zone warranted payment for the entire period of his contract, for, the distance between the depots remained the same prior to and subsequent to the correction by the Board.

2. A written statement was filed on behalf of the defendant contending that the plaintiff had knowingly and willingly acted upon the rate applicable to the II Zone as a result of which only such rate of charges had been collected from the consumers. By his conduct and acquiescence he led the authorities to believe that the distance between his depot and the Central Depots was such that he came in the II Zone. It was on that basis that transport and incidental charges were collected from the consumers and paid over to the plaintiff. The Government, however, fairly corrected the mistake, when it was brought to their notice, by placing him in the III Zone as from 1-8-1971. As from that date the correct charges are collected from the consumers and paid over to the plaintiff. To demand the higher rate of charges for the past period is to say that the Government should suffer the consequences of the plaintiff's negligence. It is specifically stated in the written statement that the plaintiff was included in the II Zone with his full concurrence, knowledge and acquiescence.

3. The suit was dismissed by the learned Judge principally on the ground that the plaintiff, who was a resident of the locality and who had considerable experience in Government contracts, involving, transport of goods by lorry, could not have made a mistake as to the distance, and he had therefore knowingly and willingly waived his right for higher payment, and was accordingly estopped from demanding the higher rate. The Judge also stated that there was no evidence that the plaintiff had suffered any loss as a result of the Government's failure to pay him the higher rate retrospectively.

4. Shri C. K. Sivasankara Panicker, counsel for the plaintiff-appellant submits that both the plaintiff and the defendant were mistaken about the correct distance between the depots. Neither the plaintiff nor the concerned authority had realised until 1971 that the distance between Mottappuram and the two Central Depots exceeded 25 miles and that the plaintiff was therefore entitled to the higher rate applicable to the III Zone. As soon as the mistake was pointed out by the plaintiff the correct Zone was adopted and payment was made on that basis, but only from 1-8-1971. It was this common mistake, counsel says, which the defendant unreasonably refused to correct for the past period. Counsel further says that the goods were carried by the plaintiff lawfully and in the course of business, and he is therefore on the basis of the principle of Section 70 of the Contract Act, 1872. entitled to compensation for nonpayment of the correct rate of charges.

5. From the facts it would appear that Shri panicker is right in contending that both parties were mistaken as regards the distance. Neither the plaintiff nor the concerned government authority had apparently realised the mistake until it was pointed out and corrected in 1971. It was therefore a case of common mistake. The mistake was as regards the distance and not as regards the existence of the subject matter of the contract. It was not a case of a mistake arising from res extincta or res sua, which, because of the sheer impossibility, as from the very beginning of performance, makes the contract at law a nullity. Any other case of common mistake, unless warranted by a principle of equity, does not vitiate the contract. As stated by Cheshire and Fifoot (Law of Contract, 9th Edn. p. 217):

'.........at common law a contract isnot void merely because the parties have made the same mistake, however fundamental; in other words, that the common law recognises no doctrine of common mistake as such. A contract will be void only if there is nothingto contract about, either because the subject matter does not exist at the time of the agreement or because the object of the purported sale already belongs to the buyer and the ground of such nullity is not the mistake but the absence of a res. The agreement is void of all content.'

Lord Denning, L. J. (as he then was) says in Solle v. Butcher. (1950) 1 KB 671, at p. 691 :

'Once a contract has been made, that is to say, once the parties, whatever their inmost states of mind, have to all outward appearances agreed with sufficient certainty in the same terms on the same subject matter, then the contract is good unless and until it is set aside for failure of some condition on which the existence of the contract depends or for fraud or on some equitable ground.'

6. The mistake in the present case being a common mistake other than by reason of res extincta or res sua, the burden is upon the plaintiff to show that there is some compelling consideration' in equity which warrants interference by the court with the terms adopted by the parties by mutual consent, although on the basis of a mistaken belief. Courts are not without power to grant relief where, as a result of common mistake, substantial injustice has been done, particularly when the interests of third parties are adversely affected. In any such case the Court may on such terms as it thinks just intervene to set aside the contract and render justice. Another case where the court may intervene to set right a common mistake is where it may rectify a written contract or deed which has not accurately recorded the agreement between the parties. In all other cases equity follows the law and the parties must accept the position which they brought about by their agreement, albeit by a common mistake.

7. Different considerations of course apply in the case of a unilateral mistake or even a mutual mistake where the evidence is so conflicting that a definite agreement cannot be imputed to the parties. Except in such circumstances or where fraud or unfair practice is alleged or in transactions between parties having a fiduciary relationship and cases of the kind, the court doesnot interfere with the terms of contract agreed upon between the parties at arm's length (See Thomas Abraham v. National Tyre and Rubber Co. ((1972) 1 SCWR 372) : (AIR 1974 SC 602).

8. In the present case there is no allegation of fraud or unfair practice. The sole contention of the plaintiff is that an honest mistake as to the distance was made. The Judge found that the plaintiff could not have made a mistake, for he was a man of the locality and fairly experienced in government contracts. Whether or not the plaintiff knew the correct distance, in the circumstances of this case, it has to be taken that he ought to have known the distance. If he did not verify the distance, but negligently treated the distance as less than 25 miles, he is not justified in saying that the Government is liable to compensate him for the loss which he has himself caused as a result of his negligence. He has no case that If he had pointed out the correct distance he would not have been placed in the correct zone. In fact the Government did place him in the correct zone for the future when the mistake was pointed out by him. Even if the plaintiff had made an honest mistake, as contended by him, there is no principle of law or equity which warrants intervention of the court on the facts of this case to rectify the terms upon which the parties acted. When the parties entered into the contract it was known to them that different rates applied to different zones and that the zones were determined on the basis of distance as provided under the then existing order, viz., Ext. Bl dated 2-1-1965. The plaintiff has no case that he was unaware of the zones. He unfortunately believed that the distance between his depot and the Central Depots was less than 25 miles. Accordingly he accepted without question the rates applicable to the II Zone. His acceptance of the payments made to him from time to time between 14-1-1965 and 30-7-1971 iustiaably made the defendant believe that payment was correctly made. His conduct led the defendant to collect from the consumers the corresponding charges in the honest belief that payment was made according to the correct zone. All this was brought about on account of the lack Of care On the part of the plaintiff toverify the distance and make the correct demand. If, on the other hand, the Judge was right in saying that the plaintiff knew the correct distance and knowingly kept quiet, the plaintiff has by his conduct consciously and deliberately waived a right which he had. On the basis of the present evidence we do not say that the plaintiff did know the correct distance, but we do say that any reasonable man, placed in the shoes of the plaintiff, would have known the correct distance. The plaintiff therefore ought to have known the correct distance. He was negligent in not verifying it. In the circumstances neither law nor equity comes to his aid,

9. Shri Panicker has placed much stress on the principle embodied in Section 70 of the Contract Act. The wording of the section and the illustrations mentioned thereunder militate against counsel's argument. The section has no application where the parties have acted upon stipulated terms of contract. The section embodies the equitable principle of restitution and prevention of unjust enrichment. The object of this provision is to enable the courts to do substantial justice where the relation between the parties is not based on contract, and the intervention of the court is required to prevent unjust enrichment. Where a person has rendered service to another which is lawful and which is not intended to be gratuitous, the former is entitled to compensation for the value of the service rendered by him, although he is not in a position to prove that the service was rendered under an express agreement: V. R. Subramanyam v. B. Thayappa, AIR 1966 SC 1034; Mulam-chand v. State of M. P., AIR 1968 SC 1218. As stated by the Supreme Court in State of West Bengal v. B. K. Mon-dal and Sons, AIR 1962 SC 779, at p, 786 :

'............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, it is on the basis of the fact that something was done by the party for another and the said work as done has been voluntarily accepted by the other party. That broadly stated is the effect of the conditions prescribed by Section 70.'

10. In a case such as this where the parties have acted upon the express terms of the relevant G. Os. and Exts. B3 and B4 agreements, Section 70 has no application. When the plaintiff was appointed by the District Collector and when he subsequenly entered into Exts. B3 and B4, he was well aware of his position under the contract. He knew that he would be paid according to the rates as provided under Exts. Bl and B2. Exts. Bl and B2 are therefore deemed to be part of the contract under which the parties acted during the relevant period. No service was rendered and no payment was made otherwise than under express terms of those contracts. In such a contractual relationship, the principle of Section 70 has no application.

11. Shri Panicker contends that in the light of Section 70 an implied term should be read into the contract enabling the plaintiff to claim the correct rate if by a mistake the wrong rate was paid. We do not agree that any such implied term can be read into the contract by recourse to the provisions of Section 70. Where the parties have at arm's length accepted a certain relationship on the basis of express provisions embodied in the relevant government orders and agreements, there is no scope for variation or enlargement of those terms On any theory of implied contract. Nor do we see Section 72 as importing any such term into the transaction already governed by contract.

12. In the circumstances we see no merit in the challenge against the judgment under appeal. The appeal is accordingly dismissed with costs.


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