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Govindarajulu Naidu and ors. Vs. S.S. Naidu Alias Soundararajulu Naidu - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai High Court
Decided On
Reported in(1958)2MLJ148
AppellantGovindarajulu Naidu and ors.
RespondentS.S. Naidu Alias Soundararajulu Naidu
Cases Referred and Khangul v. Latha Singh A.I.R.
Excerpt:
.....(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. it is not disputed that even at the worst, as laid down in ramalinga padayachi v. 18. that these purchaser defendants did not officiously confer the benefit upon the plaintiff disentitling them to restitution has been equally well-established. to recall the famous dictum of mahatmaji people then considered that any such hope was 'drawing a postdated cheque on a crashing bank 'the wife and son of the plaintiff as well as the purchasers cannot be attributed with greater foresight. the line of decisions generally arising under section 41 of the..........of the property. therefore, this is certainly a case where the plaintiff has been enriched by the benefit received from the purchaser defendants.17. that the plaintiff has been unjustly enriched follows from the fact that the plaintiff who wants to repudiate the sale transaction wants at the same time to retain the benefits. his liabilities have been discharged. his properties are no longer encumbered. in other words, he wants back his properties free from all liabilities, retaining unjustly the benefits. it is not disputed that even at the worst, as laid down in ramalinga padayachi v. srinivasalu naidu : air1955mad657 the creditor can have recourse to the estate on the principle of subrogation when the wife and son have the right of indemnity against the estate of the absentee husband.....
Judgment:

Ramaswami, J.

1. This second appeal is preferred against the decree and judgment of the learned District Judge of Tiruchirapalli in A.S. No. 214 of 1952, confirming the decree and judgment of the Subordinate Judge of Tiruchirapalli in O.S. No. 212 of 195O

2. The plaintiff Soundararajulu Naidu is a returned F.M.S. emigrant residing in Tanjore Tank Road, Tiruchirapalli. The first defendant Rajagopal Naidu who is well employed, is the son of the plaintiff. The second defendant Muthukrishnammal is the wife of the plaintiff. The plaintiff emigrated to Malaya and was employed in a rubber estate at Kualapilah as Chief Clerk and Assistant Manager. He was in Malaya from 1912 and retired in 1948 on a pay of Rs. 600. It is stated that with the funds of the plaintiff the suit lands were purchased under Exhibit B-2 dated 7th March, 1938 for Rs. 3,505. The properties belonged to the estate of late Nangavaram Subbaramier and the estate was administered by the District Court, Tiruchirapalli, through Receivers appointed in O.S. No. 2 of 1934. The purchase under Exhibit B-2 was in Court auction. The plaintiff had executed a power-of-attorney Exhibit A-2 dated 27th August, 1941, in favour of his wife, the second defendant. Therein he says that he was going to F.M.S. and that as he had to reside there permanently he was executing the power. This power has apparently been executed during a visit of the plaintiff to India. This power does not specifically confer upon the second defendant the power to alienate or encumber his properties and the suit lands which are punja lands are not mentioned in this document. After the outbreak of the Japanese war the plaintiff was not able to return to India and there was no postal or telegraphic communications and in fact nothing was known about this plaintiff to his relatives till the communications were restored in or about 1948 and the plaintiff returned to India in September, 1948. On coming here he cancelled the power granted to his wife under Exhibit A-3 dated 4th October, 1948. In the meanwhile defendants 1 and 2 had sold the suit properties to defendants 3 and 4 for Rs. 7,000 under Exhibit B-1 dated 2nd June, 1944. Out of this sum of Rs. 7,000 Rs. 3,975-1-10 was directed to be paid towards the debt due by the plaintiff to Tiruchirapalli Bank under Exhibit B-3 dated 27th August, 1941. Rs. 2,500 was directed to be paid towards a mortgage bond in favour of Lakshmana Ayyar for Rs. 12,000 dated 25th September, 1939. The balance of Rs. 524-14-2 is mentioned as having been received for effecting repairs to the houses in Chinnakadai street and for family expenses. The security bond Exhibit B-3 is for a sum of Rs. 4,000. It is stated therein that it was executed for having dealing with the Bank for the purpose of discharging debts borrowed for building house. The property which is secured is the house property in Chinnakadai street. It is also stated in the security bond that property given as security was purchased by the plaintiff on 17th November, 1932, with his own earnings. Exhibit B-4 is the pay-in-slip for Rs. 1,000 paid by the fourth defendant to the Tiruchi Bank and Exhibit B-5 is the pay-in-slip showing the payment of Rs. 2,975-1-10 towards the debt. It is stated therein that this amount had been paid by the vendees of the suit lands in full discharge of the debt due under the security bond. Exhibit B-6 is a receipt passed by Lakshmana Ayyar to the fourth defendant for payment of Rs. 2,500 towards the mortgage bond executed by the plaintiff. Subsequently defendants 3. and 4 have sold portions of the properties purchased by them to defendants 6 and 7 under Exhibit B-7 and to the fifth defendant under Exhibit B-8 and to defendants 8 and 9 under Exhibit B-g. All these sale deeds are dated 6th July, 1944. In regard to the transaction under Exhibit B-1, the evidence clearly shows and this has been accepted by both the Courts below, that the properties were sold for an adequate price and that the consideration passed as recited and that every pie of the consideration went towards the discharge of the debts of the plajntiff or towards the expenses which would have to be incurred by the plaintiff.

3. It is in these circumstances that the plaintiff came to Court for recovery of the suit properties with mesne profits on the foot that his son or wife had no right or title to the suit properties and that they had no right or power to sell the suit properties and that the sale is void.

4. The contesting defendants though they laid a foundation for the contention that the doctrine of unjust enrichment would apply to this case, put in the forefront three contentions which the lower Courts had no difficulty in rejecting. First of all they contended that the suit properties constituted joint family properties and that the sale was for necessary and binding purposes. The lower Courts found that the suit properties are the separate properties of the plaintiff. Secondly, they contended that the sale should be upheld on the principle of agency of necessity in the trial Court, relying upon Article 104 in Bowstead's Law of Agency, 11 the edition. Both the Courts fo reasons stated in the judgment, found themselves unable to accept this contention. Thirdly, it was contended that in any event since the plaintiff's debt had been discharged with the purchase money obtained under Exhibit B-1, the plaintiff was under a duty by reason of the provisions of Section 41 of the Specific Relief Act to pay compensation to the defendants to the extent to which he has received benefit under Exhibit-B-1. In other words, though necessary facts were placed before the Court to apply the doctrine of unjust enrichment and consequent restitution, the contention as advanced on the foot of Section 41 of the Specific Relief Act did not find acceptance at the hands of the lower appellate Court.

5. Therefore, both the Courts found themselves unable to make the restitution and decreed the suit and dismissed the appeal. Hence this second appeal by the defeated defendants 3 to 7 and 9 to 11.

6. On a review of the entire circumstances of the case I have come to the conclusion on the facts set out above, that the plaintiff has been unjustly enriched to the extent of Rs. 7,000 plus interest thereon at 6 per cent, per annum up to the date of recovery of possession with a corresponding obligation on the part of the contesting defendants to account for the mesne profits from the date of purchase up to the date of delivery of possession. In other words, the plaintiff would be entitled to a decree for recovery of possession subject to his restituting Rs. 7,000 with interest thereon at six per cent, per annum from the date of the sale-deed Exhibit B-1 up to the date of his taking possession and setting it off against the amount of mesne profits from date of sale up to the date of delivery of possession derived by the contesting defendants. Here are my reasons.

7. The sum and substance of the defendants' case is based on the doctrine of unjust enrichment and which according to a bench decision of this Court (Rajamannar, G.J. and Viswanatha Sastri, J.) in Mahalingam Chettiar v. Ramanathan Chettiar and Ors. A.S. No. 665 of 1948 can be equated to Sections 69 and 70 of the Indian Contract Act and for which grounds were laid by the appellants' advocate in the lower appellate Court.

8. This doctrine of unjust enrichment has been the subject of a detailed discussion by me in Nityananda Mudaliar v. Arunachalam Chettiar S.A. No. 1245 of 1954, JVallayya Gounder v. Ramaswamy Goundar and Anr. S.A. No. 109 of 1955 , and Ramachandra Mudaliar v. Kannammal and Ors. S.A. NO. 1191 OF 1955 and S.A. No. 317 of 1956 in which I delivered the Judgment on 30th July, 1957; 2nd August, 1957; and 17th September, 1957.

9. The doctrine of unjust, enrichment has been developing in all systems of civil jurisprudence, notably in France and Germany and what is more important to us in the English and American systems of Jurisprudence. For an exposition of the French law of unjust enrichment: see the Law Quarterly Review, No. CCXVII, volume LV, 1939, at page 50, and for an exposition of the German Law : see the Canadian Bar Review, volume 16 (1938) at page 254. In regard to the English system of jurisprudence the doctrine of unjust enrichment was based on assumpsit or had and received, and equity, by Lord Mansfield in Moses v. Macferlan (1760) 2 Burr. 1005, Towers v. Barrett 1 T.R. 133 . It subsequently underwent a chang with the decision in Sinclair v. Brougham L.R. (1914) A.C. 398, by Lord Sumner in 1913 whereunder liability was based upon implied agreement and finally has come to be rested more and more on the doctrine of restitution. Morgan v. Ascroft L.R. (1938) 1 K.G. 349, Berg v. Sadler L.R. (1937) 1 K.B. 158, Fibrosa Case L.R. (1943) A.G. 32, Transvaal & Delgoa Bay v. Investment Company, Ltd. (1944) 1 All. E.R. 579 United Australia, Ltd. L.R. (1941) A.C. 1, Nelson v. Larholt (1947) 2 All. E.R. 751, Reading's case Reading v. Attorney General, (1948) 2 All. E.R. 27; On appeal (1949) 2 All. E.R. 68 and House of Lords ; (1951) 1 All. E.R. 617 .A detailed exposition of this development in the doctrine of unjust enrichment which is nothing more than that when a person who got unjustifiably enriched at the expense of another can be compelled to make restitution will be found in the standard commentaries on Contracts and Torts by Cheshire, Chitty and Anson and Winfield. (Cheshire and Fifoot Law of Contracts, Fourth edition (1956 at page 548 and followed ; Chitty on Contracts, Twenty-first edition (1955), volume I, at pages 78-79; Anson's Law of Contract, Twentieth edition (1952), Chapter XXI, page 422 and followed ; Winfield The Law of Torts (1931) Ch. 7.

10. Parallel to this has been similar development in the United States of America beginning with restitution on the principle of 'had and received' (Keener). Then on the principle of implied contract (Woodward) and finally on the doctrine of restitution (Restatement) itself. These developments can be followed in Keener on 'Quasi Contracts' (1893) at pages 19 and 20 and by Professor Woodward in his Law of Quasi-contracts (1913) and in the publication of the American Law Institute, Washington D. C. viz., Re-statement of the Law of Restitution (Quasi-contracts and Constructive Trusts (1937). (See also Pomeroy Equity Jurisprudence (1919), 4th edition; Story Equity Jurisprudence, 14th edition, 1918 ; Williston Contracts, Revised edition, 1936-1938.)

11. In India this third category of the common law which had been called quasi-contract or restitution has been developed under Section 70 of the Indian Contract Act as obligation of person enjoying benefit of non-gratuitous act and concerning which the latest and best exposition is to be found in the Monumental Corpus Juris of India - The Indian Contract Act by V. V. Chitaley and Section Appu Rao, Volume IV (1956), Section 70, N1 to 11.

12. The doctrine of restitution may now be summed up in the language of the Re-statement of the Law of 'Restitution' in Chapter I, Section 1, at page 12 and following:

A person who has been unjustly enriched at the expense of another is required to make restitution to the other.

A person is enriched if he has received a benefit.

A person confers a benefit upon another if he gives to the other possession of or some other interest in money, land, chattels, or choses in action, performs services beneficial to or at the request of the other, satisfies a debt or a duty of the other, or in any way adds to the other's security or advantage - saves the other from expenses or loss. The word 'benefits' therefore, denotes any form of advantage...

Even where a person has received a benefit from another he is liable to pay therefor only if the circumstances of its receipt or retention are such that, as between the two persons, it is unjust for him to retain it. The mere fact that a person benefits another is not of itself sufficient to require the other to make restitution therefor...

Ordinarily the benefit to the one and the loss to the other are co-extensive, and the result of the remedies given under the rules stated in the restatement of this subject is to compel the one to surrender the benefit which he has received and thereby to make restitution to the other for the loss which he has suffered...

Where benefit and loss do not coincide...the amount of recovery is usually limited to the amount by which he has been benefited...

A person who officiously confers a benefit upon another is not entitled to restitution therefor.

13. The Indian Law on this subject is to be found in the following decisions : In Heramba Chandra Pal Chowdhury v. Kasinath Sukul (1905) Cri.L.J. 199, a bench of the Calcutta High Court held following Reid v. Rigby L.R. (1894) 2 Q.B. 40, that if the implied authority of an agent to raise a loan is not established, but it is proved that the sum borrowed or a portion thereof has been applied for the benefit of the business, the creditor is entitled to be reimbursed by the principal to the extent he has been benefited.

14. In Gasiram v. Raja Mohan Bikram Sha (1907) Cri.L.J. 639, a bench of the Calcutta High Court held similarly following the previous decision cited above, and the English decision in Bannatyne v. Mclver L.R. (1906) 1 K.B. 103.

15. In Goolabchand v. Miller : AIR1938Mad966 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.

16. Bearing these principles in mind, if we examine the facts of this case, we find that though the sale has got to be rescinded, the defendant purchasers will be entitled to refund of Rs. 7,000 plus interest, subject to accounting for mesne profits as concluded above. That the plaintiff has been enriched to the extent of Rs. 7,000 and interest thereon, cannot admit of any doubt whatsoever. It has already been pointed out that every pie of the sale price under Exhibit B-1 has gone towards the discharge of the debt owing by the plaintiff or for purposes for which the plaintiff' should have incurred expenditure. It is idle to contend that the debts need not have been discharged because decrees had not been obtained on those debts. These are no liabilities which the plaintiff could have contested. Litigation would have meant only adding unnecessary expenditure. It would also have meant the loss of credit with the consequence that if the properties had to be sold on account of the decrees, proper price would not be fetched. On the other hand, the sale under Exhibit B-1 had obtained the market price viz., the price which a willing buyer would pay to a willing seller. The properties have been purchased for Rs. 3,505 and had been sold for double that amount. Similarly, repairs to the house cannot be put off without serious detriment to the value and stability of the property. Therefore, this is certainly a case where the plaintiff has been enriched by the benefit received from the purchaser defendants.

17. That the plaintiff has been unjustly enriched follows from the fact that the plaintiff who wants to repudiate the sale transaction wants at the same time to retain the benefits. His liabilities have been discharged. His properties are no longer encumbered. In other words, he wants back his properties free from all liabilities, retaining unjustly the benefits. It is not disputed that even at the worst, as laid down in Ramalinga Padayachi v. Srinivasalu Naidu : AIR1955Mad657 the creditor can have recourse to the estate on the principle of subrogation when the wife and son have the right of indemnity against the estate of the absentee husband whose whereabouts and even existence were not known in time of war and who was in alien territory and could have the right of direct reimbursement out of the properties of that person when the debts were for necessities. It is unnecessary for us to consider whether the principle of subrogation would be strictly applicable here, because the purchasers are entitled to restitution on the principle of unjust enrichment.

18. That these purchaser defendants did not officiously confer the benefit upon the plaintiff disentitling them to restitution has been equally well-established. I have just now mentioned that at the time of this transaction the plaintiff was living in Malaya after the Japanese War had broken out and that country had become alien territory and there were no communications whatsoever between Malaya and India and it could not even be known whether the plaintiff was in the land of the living or the dead. In fact nobody even knew at that time that the British would win the war and the F.M.S. would be recovered from the Japanese. To recall the famous dictum of Mahatmaji people then considered that any such hope was ' drawing a postdated cheque on a crashing bank '. The wife and son of the plaintiff as well as the purchasers cannot be attributed with greater foresight. The wife who had been given a general power-of-attorney and the son who was also earning, were to all intents and purposes managing the properties and enjoying the income. It is quite true that the power-of-attorney prohibits the wife from alienating the properties. The sale transaction itself shows that the purchasers were assured that in the event of the plaintiff coming back, his ratification would be obained. It is unnecessary to reiterate once more that was the market price that had been paid and every pie of the purchase price had been utilised for discharge of debts binding on the plaintiff. Therefore, looked at from any point of view the purchasers were not officiously conferring a benefit upon the plaintiff.

19. If the plaintiff's wife and son were looked upon as his agents, as certainly the purchasers were entitled to do, Article 104 of Bowstead on Agency states the rule of law that where by any wrongful or unauthorised act of an agent, the money sor property of a third person comes into 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 value of such money or property. In the footnote at page 226 of Bowstead's Law of Agency, Eleventh Edition (1951) the following English decisions are mentioned : Reid v. Rigby (1894) 25 Q.B. 40 : 63 L.J.Q.B. 451, Bannatyne v. Mclyer (1906) 1 K.B. 103 : 75 L.J.K.B. 120 , Reversion Fund etc. Co. v. Maison Cosway (1913) 1 K.B. 364 : 82 L.J.K.B. 512 , Ex Parte Schoolbred (1880) 28 W.R. 339 , Marsh v. Keeling (1834) 1 Bing N.C. 198 and Glyn v. Barker (1811) 13 East 509.

20. The law is also the same in India. In Suppayya Pattar v. Haji Ahamed Salt (1915) M.W.N. 761 it was held that where the principal has been benefited by the money borrowed by the unauthorised agent from the plaintiff, either by the principal having received the money directly or by its having been spent in meeting his legal liabilities, the principal is equitably bound to return to plaintiff the said money to the extent that he has derived benefit therefrom : See also Ram Pratab v. Marshall I.L.R.(1899) Cal. 701, Jayantilal v. Poppatlal : AIR1937Bom262 and Kasam v. Narayanan .

21. Or looked at from the point of view of Section 41 of the Specific Relief Act, which empowers the Court adjudging the cancellation of an instrument, to require the party to whom such relief is granted, to make compensation to the other which justice may require. The plaintiff is under a duty to the purchaser defendants to compensate them to the extent to which he has received the benefit under Exhibit B-1. In Viswanathan v. Gupta I.L.R. (1954) Mad. 1013, a Bench of this Court recently laid down that if a suit laid under Section 39 of the Specific Relief Act for the cancellation of an instrument, which is either void or voidable, the Court can require the plaintiff under Section 41 of the Act to make such compensation as the justice of the case may require as part of the adjudication. In that case the plaintiff prayed for a declaration that the partition deed was void and for an injunction restraining the defendants from interfering with the rights of the plaintiff in the business as its sole proprietor. In substance, as the Bench held, the suit was for cancellation of the deed of partition. The trial Judge Balakrishna Ayyar, J., was of the opinion that if the plaintiff was to be granted a declaration it must be on condition that he repaid to the defendants all the amounts received from them on account of the partnership. The Bench held that this was a condition which they were entitled to impose before granting a declaration in favour of the plaintiff and that in the interests of justice, the plaintiff should be directed as part of the adjudication that the instrument was void, that he should repay all the amounts. The term 'compensation' includes any return of money or payment received as part of he transaction, whether personally or through an agent. Interest is also covered by it. The Court exercises power to grant compensation urder Section 41 to do complete justice between the parties by restoring them to the position which they occupied before the contract was entered into. Whether compensation is to be granted at all and if so to what extent and in what form, are therefore matters to be determined by the Court in each particular case, according to its particular facts and circumstances. The line of decisions generally arising under Section 41 of the Specific Relief Act are those relating to null and void contracts entered on behalf of a minor by his guardian, and is based upon the well-known maxim 'He who seeks equity must do equity'. Hanumantha Rao v. Sitharamayya : AIR1939Mad106 , Choghatta v. Aso Mal 17 Ind.Cas. 371; Guthrie v. Abool Mozuffer (1871) 14 M.I.A. 53; Ajit Singh v. Bijai Bahadur Singh (1884) 11 Cal. 61 , Abdul Majid v. Ramiza Bibi : AIR1931Mad468 , Rahima Bib. MannanBee : AIR1936Mad140 , Mohori Bibi v. Dharmo Das Ghose (1903) I.L.R. 30 Cal. 539 (P.C.) Appaswami v. Narayanaswami (1930) 60 M.L.J. 117 : I.L.R. Mad. 112 : A.I.R. 1930 M. 945 Raghavayya v. Subbayya (1917) 7 L.W. 124 , and Khangul v. Latha Singh A.I.R. 1928 Lah. 609 .

22. Or looked at from the point of view of Sections 69 and 70 of the Indian Contract Act, which is based on the doctrine of unjust enrichment or unjust benefit restitution is due, except in the case of volunteers or gratuitous payors and which is not the case here from persons so unjustly enriched or benefited.

23. Consequently, looked at from any point of view, the purchaser defendants are entitled to restitution to the extent concluded above.

24. The decrees and judgments of both the Courts below are set aside and the plaintiff is given a modified decree viz., recovery of possession with liability for restitution but not as a condition precedent on the lines indicated above. The properties will stand charged with the restitution. The rights and liability of the appellant inter se and who are getting a composite decree will be worked out by them in the absence of agreement outside in the suit itself.

25. This second appeal will stand allowed to the above extent and in view of the fact that both parties have been guilty of advancing pleas far in excess of their legal claims, they will bear their own costs throughout.

26. Clause in the trial suit re : improvements will stand.


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