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Pentakota Audinarayana Naidu Vs. the Panchayat Board of Munagapaka Represented by Its President, Pentakota Ayodhyaramayya Naidu and anr. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtChennai
Decided On
Reported inAIR1940Mad660; (1940)1MLJ582
AppellantPentakota Audinarayana Naidu
RespondentThe Panchayat Board of Munagapaka Represented by Its President, Pentakota Ayodhyaramayya Naidu and a
Cases ReferredLloyds Bank Ltd. v. The Administrator
Excerpt:
.....altered or the plaintiff has not been guilty of any laches, he would be entitled to recover the money paid by him under a mistake of fact even if he had been careless or negligent and failed to exercise due diligence to enquire into the facts or to remember them. that a mistake like this was purely a mistake of fact cannot be doubted. in this case, however the plaintiffs have by their conduct made it impossible to restore the parties to their original position and this fact in my opinion affords a good defence to the suit. they were held to have been estopped on account of their silence, and estoppel, even if it is by conduct, is, as already observed, a good defence to a suit of this kind. one cannot expect to find a circumstance like this in every case. it cannot be said in a case..........contract act made no distinction between mistakes of fact and those of law and alleged that the money paid erroneously was refundable whether it was paid under one kind of mistake or the other. it must be admitted that the words of this section are very general and capable of bearing the interpretation which was attempted to be put upon them; but in view of section 21 of the contract act which provides that a contract is not voidable because it was caused by a mistake as to any law in force in british india, it has been decided in some cases that the mistake, to entitle a party to get the relief, must be one of fact and not of law - see appavu chettiar v. south indian railway co. ltd. (1928) 56 m.l.j. 269 : a.i.r. 1929 mad. 177, raja rajeswara sethupathi avergal v. secretary of state.....
Judgment:

Abdur Rahman, J.

1. This is a revision from the decree of me Subordinate Judge of Vizagapatam acting as a judge of the Court of Small Causes in a suit instituted by one Pentakota Audinarayana Naidu against the Panchayat Board of Munngapaka for the refund of money alleged to have been paid by him for profession and house taxes and in regard to the licensing fee for his rice mill and brick kiln under a mistaken belief that the properties or business in respect of which he had paid the license fees or other taxes were situated within the jurisdiction of the Panchayat Board. The levy of the profession-tax was also questioned on the ground that the notice issued to the plaintiff by the Panchayat Board did not comply with the requirements of law and the demand was therefore illegal. The Subordinate Judge disallowed the plaintiff's claim in regard to the refund of house-tax and license-fee as he held the payments made by the plaintiff to have been voluntary and not under a mistake of fact that arose out of contractual relation, although to use the Sub-Judge's words:

There was an error in understanding the limits of this jurisdiction owing to ignorance of all parties concerned.

2. In regard to the profession-tax however he passed a decree for the refund of the tax paid for the year 1934-35 as he found the notice served by the Board on the plaintiff to be illegal and the levy of the same consequently ultra vires. The claim for, refund of the profession-tax for prior years was not allowed as it was held that the plaintiff had failed to prove that the notices in regard to them were defective and the demand by the Board unjustified. This has led the plaintiff to file the present revision.

3. Although conceded by the trial Court, learned Counsel on, behalf of the respondent contended in this Court that the mistake found to have been committed by the parties was one of law and not that of fact and would not therefore entitle the plaintiff to sue the Board on that basis. Mr. Balaparameswari Rao (learned Counsel for the petitioner) denied this and contended on the other hand that Section 72 of the Indian Contract Act made no distinction between mistakes of fact and those of law and alleged that the money paid erroneously was refundable whether it was paid under one kind of mistake or the other. It must be admitted that the words of this section are very general and capable of bearing the interpretation which was attempted to be put upon them; but in view of Section 21 of the Contract Act which provides that a contract is not voidable because it was caused by a mistake as to any law in force in British India, it has been decided in some cases that the mistake, to entitle a party to get the relief, must be one of fact and not of law - see Appavu Chettiar v. South Indian Railway Co. Ltd. (1928) 56 M.L.J. 269 : A.I.R. 1929 Mad. 177, Raja Rajeswara Sethupathi Avergal v. Secretary of State (1929) 55 M.L.J. 770 : I.L.R. 52 Mad. 12 : A.I.R. 1929 Mad. 179 and Wolf & Sons v. Dadyba, Khimji & Co. I.L.R.(1919) 44 Bom. 631 . It may be argued that since the term 'coercion' used in Section 72 of the Indian Contract Act has been held by their Lordships of the Privy Council in Kanhaya Lal v. National Bank of India Ltd. (1913) 25 M.L.J. 104 : L.R. 40 IndAp 56 : I.L.R. 40 Cal. 598 , to have been used in the ordinary sense and the definition in Section 15 held not to control the meaning of that word in this section, the word mistake might similarly be construed in the ordinary sense and should not be controlled by Section 21 of the Act. It is unnecessary, however, for me to consider this question in this case as there is no doubt that the payments were made by the plaintiff to the defendant Board under the mistaken notion that the properties in regard to which those were made were situated within the local jurisdiction of the Board and not beyond it. Whether the plaintiff is entitled to recover them on the ground of failure of consideration or on the basis of an express or at least an implied request of the defendant, there can be no doubt that they were made under a mistake of fact and the plaintiff is entitled to recover them as money had and received by the defendant for the plaintiff's use. The observations of their Lordships otjhe Privy Council in Tom Boevey Barrett v. African Products Ltd. (1928) 29 L.W. 72 are helpful and may be cited. They observed:

It follows that in the absence of such proof, the payment made to the appellant in respect of his one thousand shares was, on the interpretation of the facts most favourable to himself, a payment made under a mistake of fact common to himself and the company, namely, that he was a shareholder for one thousand shares, when in truth he was not, and money so paid can be recovered as money had and received to the use of the company and this was the form of the action.

4. The lower Court's suggestion that even if the mistake under which the money was paid to the Board was one of fact, it was 'not one that arose out of any contractual relation' and the money could not therefore be refunded was not justified. It is quite possible to conceive of cases where a payment may have been made by a party under a mistake of fact although there may have been no contractual relation between him and the person to whom the money was paid. The case in Anrudh Kumar v. Lachmi Chand I.L.R.(1928)50 All. 818, may be cited as one of the instances in which money paid by mistake was held to be recoverable although there was no contractual relation between the parties to that suit.

5. Since the main ground on which the plaintiff's claim for refund was disallowed by the lower Court was that the payments made by the plaintiff were voluntary in character, the next question to decide is how far the conclusion arrived at by the lower Court in this connection is correct. Money paid under a mistake of fact would only be recoverable when it is found that it was not paid by the plaintiff with the intention of making a gift or with an idea that the party receiving the money may have the benefit of the same whether the reason which led to the payment was correct or otherwise. Since the remedy under the section is of an equitable nature, it may also not be recoverable if the person who paid the money is found to be estopped from recovering it or even when the receiver's rights in relation to third parties have been prejudiced. But where the position is not altered or the plaintiff has not been guilty of any laches, he would be entitled to recover the money paid by him under a mistake of fact even if he had been careless or negligent and failed to exercise due diligence to enquire into the facts or to remember them. If the money were paid under compulsion of legal process it might hare been a different matter, but when it was paid under the mistaken notion of fact that the defendant was entitled' to receive this money from the plaintiff, there is no reason why he should not be entitled to recover it after the mistake was discovered. The following statement of law made by Lord Reading, C.J., in Maskell v. Homer (1915) 3 K.B. 106 is if I may say so with great respect to that high authority correct in so far as it goes. It was to the following effect:

If a person pays money, which he is not bound to pay, under the compulsion of urgent and pressing necessity or of seizure, actual or threatened, of his goods he can recover it as money had and received.

6. But this does not mean that the money not paid under compulsion of urgent and pressing necessity is not recoverable. A payment made under a mistake as provided in Section 72, Indian Contract Act, is a case in point. If money is paid under a mistake of fact, it cannot be said to have been voluntary in the sense in which that term was used in law in connection with payments although there may have been no actual compulsion of urgent or pressing necessity. To be voluntary it must have been made by a person of one's own free will; but if it is made under a mistake of fact, how can it be said to have been so? There is no scope here for the application of decisions in cases such as in The Municipal Council, Tuticorin v. Ralli Brothers (1933) 67 M.L.J. 566, and in The Chairman, Municipal Council, Rajahmundry v. Nyapathi Subba Rao : (1937)1MLJ496 , where no question in regard to a mistake of fact was raised or considered. Indeed in the first of the above cases Mr. Justice Krishnan Pandalai observed:

It has not been contended and very properly that the right to recover can be put upon any ground of mistake because if mistake there was it was a mistake of law and that is not sufficient.

7. This would show that the learned Judge was not considering cases where the mistake committed was one of fact. If money is paid voluntarily under a mistake of fact, such as the parties were under in this case, namely, in regard to the territorial limits of the Board's jurisdiction, it is recoverable under Section 72 of the Indian Contract Act. That a mistake like this was purely a mistake of fact cannot be doubted. It was so held by Lord Alverstone, C.J., in Meadows v. Grand Junction Water Works Co. 21 Times L.R. 538. It must therefore be held that a payment under a mistake of fact cannot be regarded as a voluntary payment and the decision of the case against the plaintiff on that ground was erroneous. The decision in Manilal Lallubhai v. Chandulal Tribhovandas : AIR1930Bom430 does not decide that a Voluntary payment, even if made by mistake, cannot be recovered from the party receiving it.

8. The learned Subordinate Judge has however in refusing the reliefs prayed for by the plaintiff based his decision on certain other circumstances These were firstly that the plaintiff was the President of the Board at the time when he made these payments and he did not care to read the notification limiting the jurisdiction of the Board to certain areas carefully, and secondly that the condition mentioned in Lloyds Bank Ltd. v. The Administrator-General of Burma I.L.R.(1933)12 Ran. 25, which was to the effect that the mistaken payment must be of such a nature that if such payment were not rectified, the liability would be created against the persons paying, was not complied with. Both these grounds are, in my opinion, incorrect and do not disentitle the plaintiff from recovering the money. As to the first one I have already observed that the plaintiff's ignorance and even forgetfulness would not by themselves disentitle him from claiming a refund unless the plaintiffs can be held to have been estopped or guilty of laches. This is borne out by the very case on which the Subordinate Judge relied in support of the second ground. The learned Judge of the Rangoon High Court expressed himself in the following words:

The rule governing the recovery of money paid under a mistake of fact seems to be this. That the person paying under a mistake of fact however ignorant he may be and however forgetful he may have been, is entitled to recover such money unless he has at any time waived his claim or has been estopped by reason of conduct by which the payee has altered the position by parting with the money.

9. Learned Counsel for the respondent has cited Raghunath Rithkaran v. The Imperial Bank of India Ltd. I.L.R.(1925) 50 Bom. 49, in support of his contention that since the plaintiff was negligent in ascertaining the truth, Section 72, Indian Contract Act, would be of no help to him. A reference to the decision would however show that it does not support the proposition for which it has been cited. It was found in that case that the persons who had paid a hundi on presentation were not entitled to recover the money, although they were not the drawees and had paid it under a mistake of fact. In recording his opinion the learned Chief Justice observed as follows:

It would seem contrary to principles of common law that in cases of negotiable instruments mistakes of this kind should not be notified within a reasonable time. The fact that the party assumed the liability which was not cast upon him by the document which was presented to him for payment must be taken as a ground for holding that he was bound to notify the mistake within a reasonable time to the holder of the document.

10. The learned Chief Justice was, it must be remembered, dealing with a Negotiable Instrument in that case and it would be wrong to extend its application to cases where considerations special to that type of cases are not to be taken into account. He held that in the circumstances of that case a duty was cast upon the plaintiffs to inform the Bank within a reasonable time that they had accepted the position under a mistake of fact. The real reason for disallowing the claim was brought out by the other learned Judge when he observed:

In this case, however the plaintiffs have by their conduct made it impossible to restore the parties to their original position and this fact in my opinion affords a good defence to the suit.

11. This gives the real clue to the reason why the plaintiffs were held disentitled to recover the money paid by them under a mistake of fact. They were held to have been estopped on account of their silence, and estoppel, even if it is by conduct, is, as already observed, a good defence to a suit of this kind.

12. The mere fact therefore that the plaintiff was himself the President of the Board during the period when he paid this amount and was ignorant of the limits of its jurisdiction could not, without anything else, justify the Court in disallowing his claim.

13. As for the second ground reliance was placed by the lower Court in its judgment and by the learned Counsel for the respondent here on an observation in Lloyds Bank Ltd. v. The Administrator-General of Burma I.L.R.(1933) 12 Rang. 25 . It reads as follows:

But, it has been laid down that the mistaken payment must be of such a nature that if such payment is not rectified a liability will be created against the person paying. This requirement is present here as any Administrator-General who parts with money belonging to an estate of which he has charge is obviously accountable for the loss thus sustained.

14. It would not be easy to assent to the proposition if the learned Judge was proposing to lay down a general rule applicable to all cases of payments under mistakes of fact. If the learned Judge was on the other hand, giving an additional ground which was taken by him into consideration in granting the equitable relief, the observation would be innocuous but perhaps unnecessary. One cannot expect to find a circumstance like this in every case. In a large number of cases monies paid by persons under mistakes of fact will be found to have belonged to themselves only and no further liability found to have been created if the money is not refunded to them; while in other cases although a liability may be found to come into existence if the money paid by a person is not refunded to him, yet it may not be possible to pass a decree in his favour; I am thus constrained to hold that a condition such as stated by the learned Judge in Lloyds Bank Ltd. v. The Administrator-General of Burma I.L.R.(1933)12 Rang. 25 cannot be held to be a sine quo non for ordering a refund of money paid under a mistake of fact.

15. There is nothing else which was said at the bar or which would point to the conclusion that the plaintiff had either waived his right to claim or was estopped from claiming this amount. Learned Counsel for the respondent seemed to suggest at one time that the money, after it was received by the Board, was utilised towards discharging certain liabilities and could not therefore be recovered but the suggestion was not pressed seriously. It is immaterial if the money paid under a mistake is spent by the recipient in works or things for which he would have paid anyhow whether the money paid under a mistake was received by him or not. It cannot be said in a case like this that the defendant has altered his position on account of the receipt of this payment and this could be no ground to disallow the plaintiff from recovering the money paid by him under a mistaken notion.

16. So far as the profession tax is concerned, the lower Court had disallowed the refund of payment for prior years only because it found that the plaintiff had not produced any notice like Ex. G in respect of those years. In doing so the Subordinate Judge appears to have overlooked para. 4 of the additional written statement filed by the defendant where it was admitted that the form employed in Ex. G was employed by the Bard for all the notices sent during the period when the plaintiff was the President of the Board. This would show that the other notices sent to the plaintiff suffered from the same illegality as from which Ex. G was suffering and the same decree sh0uld therefore have been passed in regard to the other payments as well.

17. There seems to be no force in the question of limitation so far as the payments other than those relating to profession tax are concerned. The suit was instituted by the plaintiff very shortly after the discovery of the mistake as found by the Court below and since the limitation under Article 96 started from the date when the mistake became known to the plaintiff, his suit cannot be held to be beyond time. As to the profession tax, the plaintiff would be entitled to a decree for such payments as he had made during the three years prior to suit.

18. The revision must therefore be accepted and the plaintiff's suit decreed accordingly. In view however of the fact that the plaintiff's conduct had been negligent, I would leave the parties to bear their own costs throughout.


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