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P.S. Machado and ors. Vs. K. Venkatarama Gopala Iyer and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai High Court
Decided On
Case NumberLetters Patent Appeal No. 84 of 1960
Judge
Reported inAIR1963Mad231; (1963)IMLJ183
ActsContract Act, 1872 - Sections 72
AppellantP.S. Machado and ors.
RespondentK. Venkatarama Gopala Iyer and ors.
Appellant AdvocateM. Natesan, Adv.
Respondent AdvocateS. Padmanabhan, Adv.
DispositionAppeal dismissed
Cases ReferredA. Ramamurthi G. Krishnamurthi and Co. v. M. Seetaramayya
Excerpt:
.....to a case in which a mistake arose in the formation of the contract. it was pointedout that the term 'mistake' in section 72 comprised within itsscope a mistake of law as well as a mistake of fact andthat under that section a party would be entitled to recoverthe money paid by mistake or under coercion and if it wereestablished that the payment had been made by the partylabouring under a mistake of law, the voluntary nature ofthe payment would not affect the liability of the payeeto refund it......benefit of a non-gratuitous act of payment. it could certainly be based under section 72 as for money paid by mistake, or under coercion. it can be probably included within the scope of the latter part of section 73, as an obligation resembling that created by a contract. further, there can be no doubt that there was failure of consideration to the extent of the excess collection of rs. 2-8-0 per ton.'but the learned judge ultimately rested his conclusion on the ground that the appellant must be held to have received the excess payment either under duress or under a mistake.4. in this appeal against the judgment of the learned judge, mr. natesan, who appeared at first for the appellant, raised before us the only contention that he raised before the learned judge, namely, that as the.....
Judgment:

S. Ramachandra Iyer, C.J.

1. This is an appeal under Clause 15 Letters Patent from the judgment of Anantanarayanan j. in A. S. No. 606 of 1956 by which the learned Judge affirmed the decree passed by the Additional District Judge, Nagarcoil directing the appellant herein in a suit filed by the respondent to refund the excess collections of transport charges made by him. The respondent had entered into a contract with the Cochin Government, a contract under which time was the essence, to deliver a large quantity of salt at Allepey and Cochin. The respondent had brought up the salt to be delivered at the place called Manakudi. Transport from that place to the two places of delivery had to be made by means of sailing vessels popularly known as country crafts through waterways connecting the places. Wartime needs hall brought about scarcity of shipping space. Further, there was also need for regulating the charges levied by the ship and country craft owners. With a view to facilitate the transport of cargo after meeting the needs of the Government, and the Military Departments and also with a view to prevent the craft owners from exploiting the situation occasioned by the great demand for shipping space and demanding unconscionable amounts by way of transport charges, the Government of India placed certain restrictions on the shippers and the ship owners in the matter of transport of goods. They had power to do this under Rule 89 (2) (e) read with Sub-clause 5 of the Defence of India Rules. Sub-clause 5 enacted that the provisions of Sub-rule 2 to Rule 89 would apply in relation to water transport. Under Sub-rule 2(e), 'the Government may by general or special order prescribe conditions subject to which and the rates at which any vehicle may be hired for the purpose of transport'. Accordingly on 30th August 1944 the Government issued a notification fixing the rates of transport charges for country crafts and other sailing vessels and also introducing a system by which route agents were nominated by the Government who were given sole authority to secure for the intending shippers shipping space. These route agents collected transport charges for the cargo offered for transport by the shippers. Rule 1 of the notification states that no person shall hire any country craft for the purpose of transporting goods or persons by any of the routes specified except through the agency of the route agent specified against that route, The rule further nominated the appellant as the route agent between Cochin and Tuticorin including all intermediate ports and vice versa. Rule 3 fixes the rates of transport charges for the country crafts in regard to transport of salt from Mankudi to Cochin at Rs. 10 per ton and for other ports between Malabar and Tuticorin at Rs. 9 per tort. These rates can be altered only by the Government.

2. Under the route system that introduced the route agent nominated by the Government alone could provide space for all cargo within the route entrusted to him, and he had authority to charge freight at the rates fixed by the Government and after deducting commission payable to him he is to pay the balance to the ship owner. In other words the route agent would receive freight charges from the shippers in the first instance in accordance with the rates fixed by the notification and pay the ship owner and the brokers their respective shares as freight and brokerage after retaining his own commission. This notification was in force till 1st September 1945.

3. During the period between 27th December 1944 and 16th January 1945, the respondents transported salt intended for delivery to Cochin Government through country crafts engaged by the appellant as the route agent. The country craft owners and other ship owners were, however, not satisfied with the freight charges fixed under the Government notification as they considerd that the rates fixed under the notification were inadequate. On representations being made by them, the Freight Advisory Committee at Bombay by their proceedings dated 29th December 1944 recommended to the Controller of Indian Shipping to enhance the rates of transport charges for salt from Manakudi to Cochin from Rs. 10/-to Rs. 12-8-0 per ton. But even before the order of the Controller could be obtained sanctioning the increased rate, the appellant instructed his agents at Manakudi to demand from all shippers, freight charges at the rate recommended by the Advisory Committee. The respondent being one of such consignors had to pay at the increased rate demanded as he had under the terms of a contract entered into with the Cochin Government to deliver salt within a specified period. The respondent paid at the increased rates under protest. The Controller of Indian Shipping, however, Ultimately refused to sanction the increased rate. The respondent then instituted the suit out of which this appeal arises for recovery of the excess charges collected from him. This claim was resisted by the appellant on various grounds. But the trial Judge overruled the contentions and granted a decree as prayed. On appeal Anantanarayanan J. affirmed the decree of the lower court. Adverting to the precise basis of the suit claim, the learned Judge observed :

'This claim of the plaintiff (respondent) could in law ba supported upon several grounds. It could be justified as an action in common law for money 'had and received'. It could be sought to be based upon Section 70 of the Contract Act as an obligation of a person who had the benefit of a non-gratuitous act of payment. It could certainly be based under Section 72 as for money paid by mistake, or under coercion. It can be probably included within the scope of the latter part of Section 73, as an obligation resembling that created by a contract. Further, there can be no doubt that there was failure of consideration to the extent of the excess collection of Rs. 2-8-0 per ton.'

But the learned Judge ultimately rested his conclusion on the ground that the appellant must be held to have received the excess payment either under duress or under a mistake.

4. In this appeal against the judgment of the learned Judge, Mr. Natesan, who appeared at first for the appellant, raised before us the only contention that he raised before the learned Judge, namely, that as the appellant had paid over the excess collections made by him to the country craft owners whose vessels were employed in the transport of the cargo of the respondent, the remedy of the respondent was only to sue the country craft owners and that he cannot charge the appellant for it. In support of this contention learned counsel relied on the decision reported in K. M. P. R. Firm v. Official Assignee of Madras, 43 MLJ 142 : AIR 1923 Mad 17. In that case, there were sales of certain bales of cotton mull. Each bale was supposed to contain 100 pieces, that was the basis of the contract between the parties. But some of the bales actually contained an excess number of pieces. Both the parties to the contract were therefore labouring under the same mistake, namely, that each bale contained only 100 pieces. The purchaser sold whatever he got to a third party without the knowledge of even having received the excess quantity. After discovering the mistake, the original seller sued his purchaser for recovery of the value of the excess number of pieces delivered by mistake. Coutts Trottter J. delivering the judgment of the Bench observed.

'I am quite prepared to say that Section 72 of the Contract Act which I think has a bearing on this, has to be qualified by the doctrine of equity, in order to render it intelligble .......... the words are 'a person to whom money has been paid (that is not forthcoming) or anything delivered by mistake or coercion must repay or return it. What we should do when the money is simply passed on is not stated in the section. Taking the words literally, he cannot return it when he has not got it. The same result is arrived at by applying the equitable doctrine.'

The equitable doctrine referred to is the one relating to restitution. We agree with Anantanarayanan J. that the principle of that decision cannot apply to a case where a person obtains money under duress. To hold otherwise would really lead to anomalous if not to startling results. For example, a person who obtains property or money under duress will have only to transfer that property or money to somebody else and then snap his fingers and defeat the claim of the aggrieved party on the ground that he had given it away to some other person. A contention leading up to such a result cannot obviously be correct.

5. But the decision in 43 MLJ 142 : AIR 1923 Mad 17 can be distinguished on a real ground. That was a case where a person who was sought to be proceeded against was himself a party to the mistake and before such mistake could be discovered he had parted with the goods. The learned Judges held that the plaintiff could if at all obtain relief only on the principle of equitable restitution. It was held that when restitution became impossible, the person became disentitled to relief. There is no scope for the application of that principle to the present case, whereas, we shall show presently, the appellant occupying a position of authority, collected amounts in excess of the legitimate charges for the transport of cargo and the respondent paid such amounts either thinking that the money was due while in fact it was not due at all, or because he had no other alternative except to pay. He did so under protest. The learned Advocate General, who subsequently appeared for the appellant adopted a new line of argument, first contended that the true position of the appellant was that of an agent of a disclosed principal, namely, the ship owners, and in view of the fact that he as their agent had paid over the entire collection minus his commission to them (principal) no action would lie against him.

We have therefore first to see what is the position of the appellant. From what we have stated above regarding the duties of a route agent, it will be apparent that there was no privity of contract between the shipper and ship owners. It was the duty of the route agent to allot shipping space to the shippers and the latter had no choice in the matter of shipping. Similarly, the ship owners cannot accept cargo for transport directly from the shipper or even make a choice as to his customer. His boats will have to carry such consignments as the route agent might direct him to carry.

6. But it is contended on behalf of the appellant that as under Section 4 of the Coasting Vessels Act, 1838, the name and number of every vessel employed in trading coast-ways together with the names of the owners thereof should be registered in a book maintained by the Collector of Sea Customs, and as in any event, the respondents were aware by which country craft they were to consign their cargo, they should be held to be aware of who the boat-owner was and that therefore the contract of the route agent should be regarded as one of an agent of a disclosed principal. Reliance is placed in support of the argument on the decision reported in Mackinnon, Mackenzie and Co. v. Lang, Moir and Co., ILR 5 Bom 584. The plaintiffs in that case by a charterparty contracted to let a steamship to the defendants upon certain terms. The charterparty was signed in their own names Without any qualification whatsoever as to their representative character. The charterparty in the body thereof stated that the party was acting as the agent for the owners of the ship. When the plaintiff sued the defendants for breach of the charterparty, it was held that as they had contracted as agents they should not be sued as the charterparty conveyed the idea that they were contracting not for themselves but for and on behalf of their principal. West J. observed,

'The essential point is the knowledge and here the name of the ship and the registry number being given, the defendants not only knew that the agents were not owners, but could immediately find out if they did not know before who the owners were. This, I think, was equivalent to actual knowledge and actual knowledge is equivalent to disclosure, the sole object of which would be to convey such knowledge.'

But we are unable to see how it can be said in the present case that the appellant was acting on behalf of any principal at all. In the case cited above the plaintiffs were acting as the agents, the only question was whether the principal's name was disclosed or not. But here the duties performed by the appellant were those for which he was nominated under a notification made under the Defence of India Rules. His authority was to secure shipping space for the intending consignors, and cargo for transport to the ship owners. It was a statutory duty as it were, in the performance of which duty there was no scope for any contractual relationship between the ship owner and the authority concerned. The route agent (appellant) no doubt, received freight charges and the commission due to him from the consignor, but he did that in his capacity as an appointee under the notification aforesaid and not by virtue of any contractual relationship between him and the ship owners : His duty by virtue of the authority given to him under the notification would have ceased after bringing the consignor and the carrier together and making over the payment collected by him by virtue of his authority to the ship owner.

Therefore in making the collection and paying the charges to the ship owner the appellant was performing his, own statutory duty. When such a person or authority, namely the route agent, conceiving itself to be authorised in the circumstances made a demand upon the shipper, coupled with an implied threat that if the demand were not satisfied the latter would not obtain what he would be entitled to, namely, carriage for his goods and the latter is thereupon obliged to make the payment demanded, such payment cannot be regarded as a voluntary one. It is one made under duress and it will be no answer to say that although the amounts had been paid under coercion the party who collects the same would be discharged from liability if he had made over the moneys illegally collected to another person.

7. The learned Advocate General however contended that a statutory authority like the appellant would be liable to pay over the moneys improperly collected only if he had retained such moneys and not if he had paid over the same to someone else, and in support of this he referred to the decision of Ganapatia Pillai J in A. A. O. No. 108 of 1960. That was a case where the Government had notified an estate under the Madras Rent Reduction Act and subsequently under the Estates Abolition Act, as well. Later on the notification was cancelled. The landholder filed a suit for accounts against the Government as if the Government were his agent under the common law. The learned Judge dealing with the liability of the Government to render accounts regarding the collection or otherwise of arrears, observed,

'I am, however of the opinion that scope of such a suit for accounts is limited in the suit for money had and received, viz, for recovery of specific sums of money collected by the State and not pai'd over to the landholder and for obtaining information from the State as to amounts collected and not paid over to the landholder. Beyond this, no duty attaches to the State as an agent as understood in common Jaw and no such liability could be enforced by a suit for accounts.'

8. We are unable to see how the decision referred to above can have any application to the present case where the statutory authority exceeded his jurisdiction and made illegal exactions taking advantage of his position, it will, be evident from the facts of the present case, that the collections were not even made bona fide. The appellants new that it was the Government alone that could increase the rate of freight and on the material dates there had been no enhancement of the rate by the Government. The appellant cannot therefore be said to have acted with due care and caution, while making the excess collections. So far as the respondent was concerned, the appellant was the authority to whom he has to look up for allotment of shipping space. If the latter refused to give shipping space unless some additional payment was made, over and above tile prescribed freight charges, he has no alternative except to make the payment under protest and recover the same later from the Government. If under these circumstances the appellant had paid over the excess collections to, the ship owners in spite of the protests of the respondent he has only to thank himself. Payments to the ship owner under these circumstances cannot obviously discharge him from his liability of being sued by a person from whom he collected.

9. The learned Advocate General next contended that as the higher charge collected by the appellant, (route agent), from the shipper was part of the contract of carriage of the latter's goods, which had been transported, it would not be open to the respondent to retain the benefit of the service rendered by the ship owner and repudiate that part of the contract which related to the collection of excess charges. Reference was made in this connection to the decision in Lakshman Prasad v. Achuthan Nair, (S) : AIR1955Mad662 . In that case the appellant sold to the respondent a motor car at a price under a mistaken impression that that was the controlled price while in fact the controlled price for the car was something less. After accepting delivery of the car, the respondent claimed from the appellant the excess amount collected over and above the control price. It was held that if the contract were considered as having been entered into by a mutual mistake of fact regarding the control price, it was open to the respondent to have avoided the contract and returned the car and got back the money which he had paid; but it would not be open to him to retain the car and claim, the excess amount paid by him as that would in effect be compelling the appellant to consent to a new contract, namely, sale of the car for the actual controlled price. It was held that tne case would not come under Section 72 of the Contract Act as the money was not paid by mistake but was payable under the contract which was entered into on a mistaken assumption as to the price the distinction being that if money was paid under a contract refund of it could be obtained by rescinding the contract alone.

The decision in this case was based on the principle laid down in Jagadish Prasad v. Produce Exchange Corporation Ltd., AIR 1946 Cal 245. The facts of that case were : A contract for the sale of starch was entered into at the rate of Rs. 77 per cwt. Subsequent to that date of contract but before delivery of the goods, the Government fixed the maximum price of starch at a lower rate making it unlawful for any person to charge a price in excess thereof. This notification was in force when the goods were despatched under the original contract. The buyer accepted the goods, paid for them and later brought a suit for recovery of the difference between the contract rate and the maximum price fixed by the Government just before the delivery of the goods. It was held that the contract became void on the promulgation of the Government Order, and that the buyer was not entitled to recover the difference between the contract price and the selling price fixed by the Government either under Section 65 or Section 72 of the Contract Act. Sen J. observed,

'Can it be said that the difference between the contract price and the maximum price fixed by the Government order represents a payment made by the plaintiff by mistake? In my opinion, it cannot; when the contract became void the plaintiff could have refused to pay anything at all and in that case he would have had to return the goods. If he paid the contractual sum in ignorance of the fact that the contract had become void it would be a payment by mistake. He could then recover the entire amount paid and return the goods. Here the entire contractual price has been paid by mistake. The plaintiff cannot be permitted to split up the payment made in the way he seeks to do and to treat a part only of such payment as being a payment made by mistake refundable under Section 72. To do so, would be to permit the plaintiff to enforce a new contract on the defendant company.'

This decision has been approved of by the Privy Council in Shib Prasad Singh v. Srish Chandra Nandi . The distinction pointed out, in the above case, namely, a payment made under a mistake and a payment made under a contract which was entered into under a mistake is a real one. In the Privy Council observed after considering the combined effect of Sections 20, 21 and 72 of the Contract Act,

'If a mistake of law had led to the formation of a contract Section 21 enacts that that contract is hot for that reason voidable. If money is paid under that contract, it cannot be said that that money was paid under a mistake of law. It was paid because it was due under a valid contract and if it had not been paid the payment could have been enforced.'

It will be seen that the contract referred to in (S) : AIR1955Mad662 as well as in AIR 1946 Cal 245 related to a case in which a mistake arose in the formation of the contract. It was held that any payment made by mistake in such a case would be one Under a contract and so long as the contract had been performed it would not be open to one party to get, back the excess payment and thereby create a new contract. But Section 72 refers to a case where payment is one which is not legally due. As the Supreme Court observed in Sales Tax Officer, Banaras v. Kanhaiya Lal Mukund Lal Saraf, : [1959]1SCR1350 :

'The mistake lies in thinking that the money paid was due when in fact it was not due and that mistake if established entitles the party paying the money to recover it back from the party receiving the same'

10. Therefore even where the parties enter into a contract by reason of a mistake in law but such, a contract has been performed, it would be extremely inequitable for the party who accepts the benefit of the contract, to claim the amount on the footins that the payment there under was under a mistake of law without restoring the other party to his original position. Therefore any payment made under a contract albeit such a contract was induced by a mistake of law cannot be recovered back. But this is different from a case where payment was not made under a contract but under a mistake, i.e., where such payment was made although it was not actually due under the contract or otherwise. In such a case money could be recovered as paid Hinder a mistake of law under Section 72 of the Contract Act. The distinction between the two types of cases has been if we may say so with respect lucidly brought out by Subba Rao C. J. (as he then was) in A. Ramamurthi G. Krishnamurthi and Co. v. M. Seetaramayya, AIR 1958 AP 427.

11. In the present case the contract is for carriageof goods at the rates prescribed by the Government. Itwas not the result of any contract of carriage entered intowith the ship owners. Even if the one were to assumethat the demand was not made under duress the positionwill be that the payment was made by the respondent in thebelief that the increased rate was due when in fact it wasnot due. It is, therefore, not a case of mistake of lawin the formation of any contract. If payment is made inthe belief that excess charges were payable while in factit was not so, relief can undoubtedly be claimed under Section 72of the Contract Act. In : [1959]1SCR1350 , a firm paid sales tax in respect of two forward transactions conducted by them in pursuance of the assessmentorders passed by the Sales-tax Officer. It was later on heldthat the levy of sales tax on forward transactions was ultravires.

The Supreme Court held that the firm was entitled torecover from the Government the tax paid in respect ofassessments on the forward transaction as such paymentsmust be held to have been made under a mistake withinthe meaning of Section 72 of the Contract Act. It was pointedout that the term 'mistake' in Section 72 comprised within itsscope a mistake of law as well as a mistake of fact andthat under that section a party would be entitled to recoverthe money paid by mistake or under coercion and if it wereestablished that the payment had been made by the partylabouring under a mistake of law, the voluntary nature ofthe payment would not affect the liability of the payeeto refund it. We are, therefore, in agreement with Ananta-narayanan, J. and hold that the excess payments made by therespondent to the appellant at the time of the carriage ofhis goods were under a mistake of law or under coercion and the payment not being the foundation for the contractof carriage can be recovered back by the respondent. Theappeal fails and is dismissed with costs.


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