1. This is a suit for recovery of Rs. 18,011-3-3 on account of price of bricks supplied by the plff. to the Chief Engineer, Eastern Command & alternatively as compensation.
2. The plff. is a manufacturer of bricks & has a brickfield at, among other places, Ballykhab in the district of Howrah. In January, 1942 an order was promulgated by the Govt. of Bengal in exercise of powers conferred by Clause (a) Sub-R. (2) of R. 81, Defence of India Rules, to the effect that no first & second class bricks manufactured in brick kilns within the areas specified in the order should be disposed of by sale or otherwise without a written permit issued by the Chief Controller of prices, Bengal or any officer authorised by him in writing in that behalf. The Sadar Sub-Division of the district of Howrah within which Ballykhal is situate is one of the areas specified in the said order.
3. On 2-12-1943, the Controller of bricks, Bengal, issued three permits, viz., Permit Nos. 1604, 1605 & 1606, whereby the Chief Engineer, Eastern Command, was allowed to purchase bricks, Jhama, brickbats (hereinafter referred to as bricks) referred to in the permits from Messrs. R. N. Sinha & Bros., Ballykhal Uttarpara (Hooghly) for supply for urgent military work. The permits mentioned the rates ex-field at which the bricks could be purchased. Permit No. 1604 related to purchase of brinks marked 'Kalyan', permit to 1605 to bricks marked 'P.W.D.'' & permit No. 1606 to bricks marked 'E.C.C.' on the back of the said permits an endorsement was made on behalf of the Chief Engineer, Eastern Command in these words: 'These bricks are to be collected by M/s Eastern Construction Co., Ltd., on behalf of the C.E., E.C.'.
4. The Eastern Construction Company (hereinafter called the Company) is a firm of Engineers who were at the material time engaged in doing military work & in particular a work which was called Job No. 115 in Alipore & there is no doubt that these bricks were necessary for the purpose of carrying out & completion of the said work.
5. It appears that the plff. supplied bricks under these permits. The bricks were delivered to the Company at Juggernath Ghat & Dahi Ghat by boat wherefrom the bricks were transported by lorry at the cost of the Company. There is no dispute about the quantity of bricks supplied.
6. Between 14-12-1943 & 14-1-1944 about 2,00,000 bricks were supplied. The challans Were made out in the name of the Company & the acknowledgment of the receipt thereof was signed on its behalf. On 5-2-1944 the plff. made out three bills addressed to the Company in respect of Bricks supplied under these permits & charged the rates mentioned in the permits. It appears that the Company insisted on paying lower rates than those mentioned in the permits. The bills were not paid.
7. The evidence on behalf of the plff. is that on 15-1-1944, one Biswanath Singh, representing the plff. called on the Chief Engineer at 100, Clive Street, Calcutta, when he was ordered to deliver the bricks to the Company. Biswanath Singh thereupon saw Major Benge who was then the Garrison Engineer at Dum Dum & under whose supervision the Company was carrying out Job No. 115. Biswanath Singh asked Mr. Benge as to who was going to pay for the bricks which were being supplied & he was assured that the Govt. took responsibility for payment of the price. Biswanath Singh thereupon asked for something in writing & Major Benge wrote out the following on a piece of paper & signed it.
'Payment for bricks collected or to be collected on permits Nos. 1604 & 1606 from R. N. Singha by M/s Eastern Construction Company will be guaranteed by G. E. 157 I.W.S., from bill owing to M/s Eastern Construction Company for works done on Job 115.'(Ex.2).
8. The plff. thereafter supplied further bricks & delivered them to the Company on 20-1-1944 a letter was written on behalf of the Chief Engineer. Eastern Command, copy whereof was sent to the plff. The letter was addressed to the Company & asked it to draw from the plff. 6 lakhs of bricks on permits Nos. 1604, 1605 & 1606 & an additional quantity of 2,70,000 bricks on behalf of the Chief Engineer, Eastern Command for urgent military work. The plff. made out three bills, dated 3-8-1944 (Ex. 9) on the Chief Engineer, Eastern Command for Rs. 11.902-10-0, Rs. 4,972-15-9 & Rs. 1.135-9-0 respectively. These bills were submitted with the relevant challans & receipt of these bills was acknowledged by S. D. O. I., on 16-9-1944, the plff. received a letter written on behalf of the Garrison Engineer, 157 I.W.S., as follows:
'No bricks have been drawn by this unit from you for work at Alipore. Messrs. Eastern Construction Company in their letter No. C.D./113/ 10978, dated 25-8-1944 have said that not only have you been paid for all the bricks drawn but that you have been over paid to the extent of Rs. 2,762-2-0 which includes all boat hire, toll-charges & loading charge. The bill in question is returned herewith.'
9. Thereafter there was correspondence between the plff. & the Chief Engineer Eastern Command. The plff. contended that the bricks had been supplied on the assurance of the Garrison Engineer that the payment of such supply would be made by the office of the Garrison Engineer 157. It appears that the Company was written to on behalf of the Garrison Engineer that the claims of the plff. should be satisfied early. On 4-10-1945, the Company wrote to the Chief Engineer, Eastern Command, that the plff. had been overpaid & the claim of the plff. was unfounded. On 24-10-1945, a letter was written on behalf of the Chief Engineer, Eastern Command to the plff. that the question of payment of the plff's. bills and had to be decided between the plff. & the Company. There was further correspondence between the plff. & the Chief Engineer in course of which the plff. insisted on payment by the Govt. On 22-2-1946 a letter was written to the plff. by the Engineer in Chief which is as follows:
'I acknowledge the receipt of your letter dated 14-2-1946, regarding the question of payment for bricks collected toy M/s. Eastern, Construction Company on behalf of the Chief Engineer,-Eastern Command.
The matter is receiving attention by the Chief Engineer, Eastern Command to whom further communication should be addressed.'
10. On 26-3-1946 notice was given under Section 80, Civil P. C. addressed to the Secretary, Central Govt. Defence Dept, New Delhi demanding payment of Rs. 18,011-3-3 on account of the price of bricks supplied & alternatively as compensation.
11. On 27-8-1946, the present suit was filed.
12. In the written statement filed on behalf of the deft, it is alleged, 'inter alia', as follows: The permits were issued on the application & for the benefit of the Company, which was carrying out constructional works at Alipore being Job No. 115. The Company on 26-3-1943, had entered into an agreement with the plff. for supply of 15 lacs bricks at a flat rate of Rs. 24/- per thousand. The Company had supplied 500 tons of coal at Rs. 12/8/- to the plff. & advanced Rs. 25,500/- for the purpose of facilitating the manufacture of bricks. The bricks were supplied to the Company under the permits but pursuant to the said agreement dated 26-3-1943. The Company applied for & obtained the permits in order to enable it to collect the bricks. There was no privity of contract between the plff. & the deft. The Chief Engineer, Eastern Command did not order the plff. to deliver the bricks to the Company who took delivery on its own behalf & not on behalf of the Chief Engineer. The bricks were supplied to the Company & had been paid for by them. The deft, was not bound by the letter dated 15-1-1949 of Major Benge who had no authority to execute any letter of guarantee & there was no consideration for the same. The deft, was not bound to make compensation to the plff. as no bricks were supplied to the deft. &, the deft, did not enjoy the benefit of the same.
13. The following issues were framed at the trial:
1. Was there any contract between the plff. &, the deft, as alleged in the plaint?.
2. Did the plff. supply any goods to the deft? (a) If so, was it pursuant to any contract?
(b) If they supplied pursuant to any contract is the contract binding on the deft, having regard to Section 175, Govt. of India Act?
3. Did the deft, guarantee-payment of any sum to the plff. as. alleged in para 9 of the plaint?
(a) Had Major Benge authority to guarantee payment to the plff?
(b) Is the deft, bound by the alleged letter of guarantee dated 15-1-44, having regard to Section 178 Govt. of India Act?
4. Is the deft, bound to make compensation to the plff. as alleged in para 13 of the plaint?
5. To what relief, if any, is the plff. entitled?
14. Issue No. 2.
Did the plff. supply any goods to the deft
(a) If so, was it in pursuance of any contract?
(b) If they supplied pursuant to any contract, is the contract binding on the deft, having regard to Section 175, Govt. of India Act?
(After discussing the evidence His Lordship held that the goods were supplied by the plaintiff to the defendant and' not to the Company and proceeded I will now deal with issues Nos. 2(a) & 2(b)
15. Biswanath Singh admitted (Q 279-283) that he treated the permits as orders & he accepted the orders on the basis of the rates mentioned in the permits. The acceptance by the plff. of the orders of the Chief Engineer constitutes an agreement & the supply of the goods was made under the agreement. The question is whether the agreement was legally binding or in other words,'whether there was a contract.
16. Section 175(3), Govt. of India Act 1935 provides as follows:
'Subject to the provisions of this Act with respect to the Federal Authority, all contracts made in the exercise of the executive authority of the Federation or of a province shall be expressed to be made by the Governor General, or by the Governor of the Province, as the case may be, & all such contracts & all assurances of property made in the exercise of that authority shall be executed on behalf of the Governor General or Governor by such persons & in such manner as he may direct or otherwise.
17. In the Govt. of India Act, 1915, Section 30(3) provided that 'every contract shall, be executed by such person & in such-manner as the Governor General in Council by resolution directs or authorises.' Section 175(3), Govt. of India Act, 1935, goes further & requires that the contract must also be expressed to be made by the Governor General. There are many authorities which have considered the question as to whether a contract not made or executed as provided by the Act is valid or binding on the Govt. It has been held that a con tract on behalf of the Govt. must comply with the requirements laid down in the section. The provisions of the section have been held to be mandatory, & non-rcompliance with the requirements provided therein have been held to make the contract void & not binding on the Govt. It is not necessary to refer to the authorities which are well known. ;
18. Mr. Banerjee for the plff. contended that having regard to the decision of the F. C. in J.K. Gas Plant , v. Emperor' 1947F. C. R, 141, it ought to be held that Section 175(3) is directory & not mandatory & non-compliance with the formalities mentioned therein does not reader the Contract void or unenforceable. Had I thought that there is any substance in this contention, I would have reported to that effect to the Chief Justice, in compliance with Chap. 5 Rule 3 of the rules of the original side. The question arose in that case as to whether Section 40 (II of Sch. 9 to the Govt. of India Act 1935 which provided that 'All orders & other proceedings of the Governor General in Council shall be expressed to be made by the Governor General in Council & shall be signed by a secretary to the Govt. of India, or otherwise, as the Governor General may direct & when so signed, shall not be called In question in any legal proceedings on the ground that they were duly made by the Governor General in Council,' was directory or mandatory.
19. It was held by the P. C. that the said provision was not mandatory. The P. C. did not feel compelled, so far as authorities were concerned, to put either a mandatory or directory construction on the provision in question. On a reading of the provision according to its ordinary meaning & the context in which it occurred, Spens, C.J., came to the conclusion that the provision was directory & non-compliance with the provision did not make the order invalid, as there were indications in the sub-section itself that it did not prescribe the manner & form in which orders of the Governor General in Council must be made to be valid. One of the indications was that the sub-setcion itself provided that the result of compliance with the direction as to the expressing of the orders & as to signature was that the order could not be called in question in any Ct. of law as not having been duly made by the Governor General in Council. Section 175(3), Govt. of India Act, 1935 & Section 30, Govt. of India Act, 1935 were referred to as well as to the authorities which had held that the section was mandatory. There is nothing in the report to indicate that the P. C. was of opinion that Section 175(3) was not mandatory. As I have already said numerous authorities have held that Section 30, old Govt. of India Act & Section 175(3) Govt. of India. Act, 1935 are mandatory & non-compliance with provisions thereof rendered the contract void. Having regard to the authorities. I think it is too late in the day to contend that the section is only directory.
20. I, therefore, hold that the agreement under which the bricks were supplied is void & not binding on the deft.
21. Issue No. 3:
Did the deft, guarantee payment of any sum to the plff. as alleged in para 9 of the plaint?
(a) Had Major Benge authority to guarantee payment to the plff.?
(b) Is the deft, bound by the alleged letter of. guarantee, dated 15-1-1944 having regard to Section 175, Govt. of India Act?
22. No evidence has been adduced before me that Major Benge had any authority to bind the deft, by giving a guarantee to pay the price of tne foods to the plff. Even if there was evidence that Major Benge had such authority the contract contained in the letter of guarantee dated 15-1-1944 would have been void having regard to the provision of Section 175(3) Govt. of India Act.
23. Issue No. 4:
Is the deft, bound to make compensation to the plff. as alleged in para 13 of the plaint?
24. In para 13. an alternative claim is made on the basis that there was no contract between the parties. It is alleged that the bricks were supplied to the deft, without intending to do so gratuitously & the deft, having enjoyed the benefit thereof is bound to make compensation to the plff. in respect thereof.
25. The claim of the plff. has apparently been made under Section 70, Contract Act. Mr. Banerjee at the time of his opening the case stated that he wanted also to rely on Section 65 Contract Act. No objection was raised to this course & no formal amendment of the plaint was insisted on. It was understood that the plff. would be entitled to rely both on Section 65 & on Section 70 Contract Act, in support of his claim for' compensation made in para 13 of the plaint.
26. Section 65, Contract Act, is in these terms: 'Where an agreement is discovered to be void, or when a contract becomes Void, any person who has received any advantage under such agreement or contract is bound to restore it or to make compensation for it to the person from whom he received it.'
27. Learned Counsel for the deft, contended that this section has no application to cases where there was a statutory disqualification to enter into contracts except in compliance with certain formalities prescribed by the statute. It was urged that a statutory person who is incompetent to make any contract except in compliance with the formalities prescribed by the statute is as much a disqualified person as a minor or a lunatic & Section 65 should not apply to a contract made by him.
28. Reference was made to the case of 'North Stafford Steel Iron and Coal Co. (Burslem) Ltd. v. Ward' (1849) 3 Ex. 172 & the following passage from the judgment of Mr. Justice Willes was relied on:
'The proper rule to apply therefore is.......... the ordinary rule, that if authority is given expressly, though by affirmative words, upon the defined condition, the expression of that condition excludes the doing of the act authorised under other circumstances than those so defined. 'Ex-pressio unius est exclusio alterlus.'
Reference was also made to the case of 'Ramkissendas v. Satya Charan' 50 C WN 310. It was contended that if a statute created an obligation & provided in the same section or passage a specific means or procedure for enforcing it no other method than that thus provided could be used for the purpose. Strong reliance was placed in the case of 'Mohori Bibi v. Dharmadas Ghosh', 30 I. A. 114, where it was. held that the contract of a minor was void. It was then contended on behalf of the appellant that though a contract by a minor was void, the minor was bound under Section 65 Contract Act to restore the advantage received under the void contract. In repelling this contention the Privy Council observed as follows:
'It is sufficient to say that this section like Section 64 starts from the basis of there, being an agreement or contract between competent parties & has no application to a case in which there never was & never could have been any contract.'
29. It is urged that as the Governor General in Council was incompetent to enter into a contract) except in compliance with the formalities prescribed by Section 175(3) Govt. of India Act, 1935, it was in the same position as a minor & the observations of the Privy Council in Mohori Bibi's case applied & precluded the application of Section 65, Contract Act.
30. It is, however, to be observed that there is a difference between the case of a minor entering into a contract & that of a statutory person. The statutory person has power to enter into a contract if it complies with certain conditions mentioned in the statute. The minor, however, has no power to enter into a contract at all under any circumstances. In the case of a minor there can never be any contract. In the case of a statutory person however there can be a contract provided certain formalities are observed. It is true that the non-observance of the formalities renders the contract of a statutory body or person void but there is in that case no inherent disqualification or incompetency to make a contract as in the case of a minor.
31. It seems to me the observations of the P. C. are directed to cases where there could not be any contract in any circumstances. It does not apply to a case where there is a competency to enter into a contract but conditions are prescribed as to the mode in which the contract must be entered into. As I will show later on, the Privy Council has applied Section 65 to a case where there was in-competency to contract except in compliance with certain conditions which were not observed.
32. As was observed by Sir Lawrence Jenkins in the case of 'Harnath Kuar v. Indar Bahadur' 50 IA 69, the plff's claim to compensation rests not on any principle or formula of English Law but on the words of Section 65 & it has to be seen whether the facts of the case come within its scope. It is therefore necessary to examine the language of Section 65.
33. Sir Lawrence Jenkins in delivering the judgment of the Board in 'Harnath Kunwar's case' 50 I A 69, analysed Section 65 in these words.
'The section deals with (a) agreements, & (b) contracts. The distinction between them is apparent from Section 2; by Cl. (c) every promise & every set of promises forming the consideration for each other is an agreement, & by Cl. (h) an agreement enforceable by law is a contract. Section 65 therefore deals with (a) agreements enforceable by law & (b) with agreements not so enforceable. By Cl. (g) an agreement not enforceable by law is said to be void. An agreement therefore discovered to be void is one discovered to be not enforceable by law, &, on the language of the section, would include an agreement that is as void in that sense from its inception as distinct from a contract that becomes void.'
34. Section 65 prescribes, so far as is relevant to the facts of this case, the happening of the following conditions in order that compensation can be recovered (a) There must be an agreement between the parties (b) The agreement must be avoid. (c) Benefit or advantage must be received under the agreement (d) Benefit must be received before the agreement is discovered to be void.
35. Section 65, therefore, applies only to a case where benefit or advantage is derived under an agreement before it is discovered to be void. If the benefit is received after the agreement is discovered to be void, then it is clear that the advantage cannot be said to have been received under the agreement. The section therefore only applies to a case where an agreement is entered into between the parties under which benefit is received by one party & after the benefit is so received the agreement is discovered to be void. It is then that the party who has received the advantage is compelled to restore the advantage so received. Section 65 embodies & is an expression of the principle of restitution & of prevention of unjust enrichment. The crucial questions to be determined are: (a) Was there an agreement between the parties? (b) Was advantage received under the agreement? (c) Was the agreement discovered to be void after advantage was received?
36. I have already held that there was an agreement between the plff. & the deft, represented by the Chief Engineer & that the deft, have received advantage under the agreement as bricks were supplied under the agreement which were utilised for' Govt. Work. The authority of the Chief Engineers to enter into contract on behalf of the deft, has not been challenged. The only question which remains to be determined is 'When was the agreement discovered to be void?'
37. It was contended that the agreement was discovered to be void on the date of the agreement because the parties are presumed to know the law & the plff. must be deemed to have known on the date the agreement was entered into that it was not enforceable by law. Reliance is placed on the case of 'Hansraj Gupta v. Dehra-Dun Mussoorie Electric Tramway Co. Ltd.,' 60 I A 13. Where the Privy Council observed as follows:
'In the absence of special circumstances (and none exist here) the time at which an agreement is discovered to be void within the meaning of Section 65 is the date of the agreement.'
38. Reliance is also placed on the case of 'Annado Mohan Roy v. Gour Mohan Mullick 50 I A 239, where the Privy Council observed as follows:-
'There has been no suggestion anywhere in the course of the present proceedings that any such facts occurred as could alter the view which must normally be taken of the meaning of the word 'discovery' & of the time at which that discovery must be held to be occurred.'
39. In these cases, however, the appellant raised the contention on Section 65 for the first time in the Privy council & there was no evidence when the agreement was discovered to be void.
40. Their Lordships of the Privy Council have held that though an agreement may be void from its inception, there may be circumstances in which it may be held that the discovery took place long after the date of the agreement.
41. In 'Harnath Kunwar's case', a Hindu 'who was the next reversioner to an Oudh Estate sold half the estate in consideration of Rs. 25,000/- advanced to him. It was held that though the transfer was not effectual, since the vendor had only an expectancy, the purchase money paid was recoverable with interest under Section 65, Contract Act; Their Lordships held that though ' the subject matter of the agreement was incapable of being bound in the manner stipulated, there were materials on the record from which:
'It could be fairly inferred that there was misapprehension as to the private rights of the vehdor which he purported to sell & that the true nature of those rights was not discovered earlier than the time at which his demand for possession was resisted.'
42. In the case of 'Mohan Manucha v. Manzoor Ahmad', 70 I A 1; a mortgage had been executed by an Oudh Talukdar without the permission of the collector, which it was necessary to obtain under para. 11, Sch. 3, Civil P. C. It was held when the mortgage was executed the Talukdar was incompetent to mortgage the property as the permission of the collector had not been obtained. There was, however, a personal covenant in the mortgage deed which could be enforced. The entire contract contained in the mortgage deed was not therefore void. Learned counsel for the appellant abandoned the claim on the personal covenant & as the security was invalid, asked for relief under Section 65, Contract Act. Held, that the, mortgagee was entitled to relief under Section 65. Their Lordships observed as follows:
'The principle underlying Section 65 is that a right to restitution may arise out of the failure of a contract though the right be not itself a matter of contractual obligation. If it be settled law that the incapacity imposed on a J. D. by para 11, sch. 3 is an incapacity to affect his property & not a general incapacity to contract, it follows that the covenant is not make void by the mere operation of this para. But the lender who has agreed to make a loan upon security & has paid the money, is not obliged to continue the loan as an unsedured advance. The bottom has fallen out of the contract & he may avoid it. If he does so avoid the contract he brings himself within the terms of Section 65 & within the principle' Of restitution of which it is an expression....................... They can refuse to be bound by the contract & rely on the right to recover their money which arose therefrom not under any contract but as a matter of restitution by reason that no contract subsists.'
The point also arose in that case at what point of time the security was discovered to be void. Their Lordships considered the case in 50 I. A. 69 & other cases to which I have referred & observed as follows:
'Their Lordships have already expressed in this judgment their view that the transaction in question in the present case was an open & honest transaction & think that its invalidity was at the time obscured by the difficulty in applying para 11, Sch. 3. correctly to the particular facts of the execution proceedings & to the terms of the orders' as recorded. For 10 years payments of interest were made & received thereunder. In these circumstances they are of opinion that in the special circumstances of the case the security of 12-8-1919 was not discovered to be void until after the present suit was instituted on 7-8-1934. On this view no question of limitation can arise under Section 65 since the circumstances giving rise to their right to rescind did not come to the appellant's knowledge until after action was brought.'
43. The question is are there any special circumstances in the present case which entitle me to say that the agreement was not discovered to be void on the date of the agreement & was so discovered much later.
44. It is to be observed that the Privy Council considered the question as to date of discovery in connection with the question of limitation raised in those cases. In this case there is no question of limitation involved.
45. It is true that every one must be presumed to know the law but it is also that there are many who do not in fact know & appreciate the exact implications of Section 175(3), Govt. of India Act, 1935. II presumption of knowledge of law was conclusive in every case, Section 65 could in no case apply where the agreement was void on grounds of law. In the case reported in 50 IA 69, there was a transfer of expectancy which was void on legal grounds, still the P. C. held that the agreement was not discovered to be void till a date later than the date of the agreement. So also in the case reported in 70 I A 1.
46. In this case I have to determine whether the plff. in fact knew & appreciated on the date of the agreement that it was void or whether there are any special circumstances which enable me to hold that the parties were under a misapprehension by reason where of the date of discovery was postponed. (His Lordship after discussing the evidence proceeded.) In these circumstances I am of opinion that the transaction to question was an open & honest transaction & that the invalidity of the agreement was at no time suggested or appreciated & the plff. delivered the bricks in the bona fide belief that they were being supplied under a contract & would be paid for. I am of opinion that the earnest date when the agreement was discovered to be void was after the bills had been submitted & the liability of the deft, had been repudiated.
47. The question whether the principle of restitution embodied in Section 65, Contract Act, is applicable to a case where an agreement entered into between the parties is void by reason of non-compliance with express statutory provisions has been considered in many cases & judicial opinion on the point has been divergent.
48. It was held in 'Md. Ebrahim v. Commissioner for the Port of Chittagong' 54 Cal 189, that where a contract was not enforceable by reason of non-compliance with a statutory provision quantum meruit can be recovered. In that case a contract was entered into by the Port Commissioners of Chittagong by which a towing vessel was led out by the Commissioners for operation outside the Chitr tagong Port. It was found that the agreement was in contravention of the mandatory provisions of Section 29, Chittagong Port Act, 1914, & was not enforceable, but it was held that the commissioners were entitled to recover quantum meruit for the services rendered by them. Section 65, was not expressly referred to in the judgment but the learned Judges observed as follows:
'We don't thing that the invalidity of the agreement prevents the plffs. from recovering such amount as may be reasonable & just for the services rendered by them.'
This case has been adversely commented upon in Pollock & Mullah but has been approved of & followed in other cases.
49. In 'Arunachala Nadar v. Srivilliputtur Municipal Council' 58 Mad 65, the suit was for recovery of the value of certain bags of rice supplied by the plffs. to a municipality pursuant to an agreement between the parties. There was no written contract signed by two councillors as required by Section 45, Madras District Municipalities Act, of 1884. It was held that the contract could not be sued upon. The question then arose as to whether compensation could be claimed under Section 65, Contract Act. It was held that the plff. was entitled to compensation under Section 65, Contract Act & the decision in 54 Cal 189 was followed. Jackson J. considered the point as to whether the provisions of the statute would be rendered nugatory if the agreement was brought within the ambit of Section 65, Contract Act, & after considering the authorities came to the conclusion that the statutory provision would not be nullified if Section 65 was applied to the facts of the case. He observed:
'We can hardly say that if this claim is allowed we shall in effect be repealing the Municipalities Act or depriving the rate payers of that protection which the Legislature intended to secure for them. Because obviously by its language which is the best guide to a Legislature's intention, it has not made this provision in regard to agreements & on general principles it is hard to see why it should make such a provision............ We see no force in Mr. Srinivasan Ayangar's suggestion that a Municipality is more like a lunatic or a minor than a juristic person.'
50. In the case of 'Madura Municipality v. K. Alagiri Swami Naidu', I.L.R. (1939) Mad. 928, the Madura municipality filed a suit for recovery of a sum of money alleged to be due from the deft, in respect of the right of taking rubbish & night soil for the years 1928-29 & 1929-30 on a contract entered into by the Chairman of the Municipality with deft. It was held that the contract was invalid & void because it was in contravention of Section 68, Madras District Municipalities Act. The question then arose whether Section 65 enabled the Municipality to recover compensation in respect of advantage received by the deft. Under the agreement. It was held that Section 65 applied to the facts of the case & entitled the Municipality to recover compensation. Abdur Rahaman, J. who delivered the leading judgment, held that a distinction must be drawn between contracts where they became unenforceable on account of failure to comply with certain forms or for want of giving expression to them in the manner prescribed by law & cases where the contracts were immoral or opposed to public policy & were inherently illegal. In cases where the contracts were Illegal, the Ct. could not render assistance in enforcing them but when an agreement was not Illegal but discovered to be unenforceable there was no reason why the principle underlying Section 65 should not be given effect to, He pointed out that the language employed in Section 65 was much wider than that employed in the Act of Parliament which came up for construction in 'H. Young and Co. v. Mayor & Corporation', of Royal Leamington Spa. (1883) 8 A. C. 517. He dealt with two arguments which were advanced before him (a) that in the event of divergence between special law & general law of the country the former has to be preferred, & (b) that a man cannot be allowed to do by indirect means what he is forbidden by law to do directly. He held that the section of the District Municipalities Act & Section 65, Contract Act, were not inconsistent & further held that the general law permitted a party to get relief when on account of special law the agreement could not be considered to be enforceable. He also held that it could not be legitimately contended that in asking for relief under Section 65, Contract Act, the plff. were doing indirectly the same thing that was forbidden by the Municipality Act He observed:
'In a suit oh the basis of the contract a party is trying to enforce its terms while in a suit under Section 65 a party merely asks for restoration or compensation as the agreement has not matured into a contract & he wants to be placed in the position in which he would have been if no agreement had been entered into................................ It would be extremely inequitable to find that when a contract has not been entered into by authorised persons or is found not to be enforceable for want of certain formalities the advantage gained by a party should not, when it was not intended to be gratuitous, be restored or compensated............ The relief which a person asks for under Section 65 has not been forbidden by any law & it cannot be legitimately argued that in trying to secure such relief he is attempting to do indirectly what he bad been forbidden by law to do directly.'
He also came to the conclusion that Section 70, applied to the facts of the case & there was nothing unlawful in permitting the deft, to remove the rubbish or night-soil.
51. In 'Ledu v. Hiralal', 43 Cal 115, a suit was filed to enforce a contract for return of money paid to a Nazir to secure an appointment as a District Court peon for the plff's son. The suit was held not to be maintainable, the agreement being void ab initio, its object being opposed to public policy. On behalf of the plff. Section 65 was relied on. It was held that the words of the section could only be applied in such cases as that of an agreement which is subsequently found to be void on account of some latent defect or of circumstances unknown at the date of the agreement or of a contract which is afterwards made void by circumstances which supervened & it did not apply to an agreement which was void on the face of it or was void ab initio. It is to be observed, that in this case the contract was illegal & no Court could give any assistance to a party to re-cover money paid under a contract which was void on account of illegality & where the parties were in pari delicto. It is also to be observed that it has now been held in 50 I A 69 that Section 65 applies to contract which is void from its very inception.
52. In 'Nathu Khan v. Sewak Koere'. 15 C. W. N. 408 the plaintiff sold the property in suit to deft. 2 by a conveyance in consideration of services rendered or to be rendered by the deft, in inducing his employer to sell certain villages to the plff. that is to say the deft, was employed in order to commit fraud on his employer & this fact, was known to the parties at the time when the agreement was made. It was held that Section 65 did not apply where the object of the agreement was illegal to the knowledge of both the parties at the time it was made. The illegal purpose had been carried out & relief was not granted by the Ct. because both the parties were in pari delicto.
53. In 'Badha Krishna v. Municipal Board Benares', 27 All 592: the plff. brought a suit against the Municipal Board of Benares to recover a sum of money as the price of stone ballast supplied & for damages for breach of contract. The contract was not executed in the particular form which was prescribed by Section 40 of Act No. 15 of 1883 & Section 47, Local Act No. 1 of 1900. It was held that the contract was not enforceable even though there was an executed consideration. It was also held that Section 65 did not apply because that section applies to cases in which an agreement is void by reasons of mistake or impossibility or in consequence of want of legal consideration. This view unduly restricts the scope of Section 65, Contract Act. The Privy Council has applied the section to cases where the contract has been discovered to be void because one of the parties to the contract was incompetent to contract except with the permission of the Collector (See 70 I. A. 1) & where the subject-matter of the contract was incapable of being bound by the contract (See 50 I. A. 69.)
54. Reference was made to the judgment of Agarwalla J. as he then was, in 'Dhanna Munda v. Mt. Kosila Banian' A.I.R. (28) 1941 Pat 510. In this case a ryot made a transfer of a part of his holding in contravention of a certain notification under Section 46(6) Chotanagpur Tenancy Act. It was held that the plff. was not estopped from challenging the transfer as being void. An alternative claim was made on the basis of Section 65, Contract Act It was held that both the parties knew that the object of the agreement was illegal & that it was governed by the cases reported in 43 Cal. 115 & 15 C. W. N. 408. It was also held that as the contract was contrary to statutory law which the parties must be presumed to have known when they had entered into the contract the section cannot be held to apply. It was assumed that whenever a contract was entered into which is contrary to the provision of a statute Section 65 cannot apply.
55. I agree that if both the parties were aware at the time of the contract that the contract was in contravention of the terms of the statute the agreement would be discovered to be void at the time of the agreement & any benefit received thereunder could not be refundable, but there may be cases where there are circumstances which go to show that the transaction was perfectly open, bona fide & honest & that the parties had misapprehension as to the provisions of law which make it void. In those circumstances the agreement can be discovered to be void at a time later than the time which the agreement is entered into.
56. In the case of 'Sri Villiputtur, Municipal Councillor v. Arunachala Nadar' : AIR1933Mad332 , there was a contract which contravened the provision of Sections 44 & 45, District Municipalities Act, which was held to be void. The question then arose whether the Municipality -was liable under Section 65, Contract Act, to pay quantum meruit for the profit that the municipality had got under the contract. It was held that Section 65, did not apply & the plff. was not entitled to anything on the basis of quantum meruit.
57. In 'Akhoy Kumar v. Municipal Commissioners of Tonygunge Municipality', 46. C W. N. 393, a contract was entered into between the municipality & a private individual which was not in writing & not signed & sealed as required by Section 103(3), Bengal Municipal Act. The Municipality sued on the contract for recovery of money due. It was held that the contract was not binding either on the municipality or on the other party although the contract had been executed. It was further held that Section 65, Contract Act, did apply to such a case & the party receiving advantage under such a contract was bound to make compensation to the latter on the principle of quantum meruit where the latter had suffered loss, although the requirements for non-compliance whereof the contract failed were statutory. Roxburgh J. held that whatever might be said in the matter on the basis of the English authorities it was difficult to hold that Section 65 cannot apply merely because of an imperative provision in an Act which renders an agreement unenforceable & so void. 'Roxburgh J. dissented , from the case reported in 27 All. 592 & held that the claim was governed by the provisions of Section 65, Contract Act, & the petitioner was liable to make compensation to the Municipality for any advantage he had received under the agreement.
58. It will be seen that judicial opinion In India has not been uniform on the question wnether Section 65, should be applied where an agreement is entered into by parties which is discovered to be void by reason of failure to comply with statutory requirements. As Sir Lawrence Jenkins pointed out in 'Harnath Kunwar's case' 50 I A 69, the question has to be determined on the terms of the section itself & not by reference to English decisions. If the facts of the case can be brought within the scope of Section 65 it should be held to apply. The section enunicates the principle of restitution & should be liberally construed in order to do equity & justice between the parties. The intention of the section Is to prevent a party to avoid agreement, to retain benefits received under it. The agreement may be void on grounds of fact or on grounds of law. There is nothing in the section to restrict it to agreements which are void on grounds of fact. The only requirement is that the benefit must have been received under a void agreement before discovery that it was void. The next question is when the agreement is discovered to be void. The Privy Council has made it clear that there may be circumstances Under which an agreement which is void is discovered to be so after the date of the agreement. The question is what are those circumstances. The ordinary presumption is it is true that the parties know the law & are presumed to know it but the presumption may be rebutted by the special circumstances in a case if it is proved as a fact that the parties were under a misapprehension as to their rights & did not know in fact that the agreement which they had entered into was void by reason of a statutory provision of which they had no knowledge or appreciation. I think that in spite of presumption of knowledge of law, other facts can be taken into account in considering the question whether or not the parties in fact knew the agreement to be void & appreciated it. On the facts of this case, I am satisfied that neither the plff. nor the Chief Engineer knew the agreement to be void & both the parties proceeded on the assumption that the agreement was a valid agreement & the goods were supplied & received under a misapprehension as to the rights of the parties under the agreement.
59. I am, therefore, of opinion that Section 65, applies to the facts of this case & that the plff. is entitled to recover compensation under that section.
60. The next question is whether the plff. is entitled to recover the price of the goods under Section 70, Contract-Act. There are many authorities in India which have held that Section 70 applies to a case where goods have been supplied under an agreement which is found to be void. It was argued that where there is an express agreement there can be-no implication of an agreement & Section 70 only gives expression to the legal fiction in English Law of an implied agreement where goods are received 'without there being any contract between the parties. I think Section 70 has to be construed in the light of the words employed in the section & that no fiction of English Law should be invoked to restrict its operation. If it is found on a fair reading of the words of the section that the facts of this case come within its scope then the section should be applied. It has been held that Section 70, cannot apply where goods are delivered under a contract to a minor. That is because the minor could not in any circumstances enter into a contract but a statutory person who can enter into a contract provided it complies with certain formalities prescribed by the statute is in a different position. There is no inherent Incapacity to enter into-a contract, though the contract is void, the capacity or right not having been exercised in the prescribed manner.
61. The following elements should exist before one can invoke aid of section 70: (a) The delivery must have been lawfully made (b) The person, who delivers the goods must intend not to do so gratuitously (c) The person who receives the goods must enjoy the benefit thereof. If these three elements are satisfied the person who receives delivery of the goods is bound to make compensation. Where delivery is made under a contract which is void is the delivery unlawful? In order to be a lawful delivery it need not be delivery under a contract. If there was a contract it would not be necessary to invoke the aid of Section 70. There is nothing in any law forbidding any person from delivering goods to a party except in compliance with the terms of a contract. The fact that the goods were delivered under an agreement which did not fulfil the statutory requirements does not in my opinion make the delivery unlawful. There is no provision anywhere in the Govt. of India Act or any other Law prohibiting delivery of goods to Govt. except under a contract. The other two elements can hardly be said not to exist in this case. It is further said that to so hold would be to render nugatory the salutary provisions of the Govt. of India Act. I do not think so. There is nothing wrong in the Governor General in Council paying money in respect of goods of which they have enjoyed the benefit. I do not think it was the intention of the Legislature that Govt. should be able to retain goods which they have accepted & of which they have enjoyed the benefit & not pay the price thereof. In order to comply with Section 70 the plff. will have to prove that the Govt. has enjoyed the benefit. If there was a contract the plff. would be able to recover according to the terms of the contract. If the contract is not in writing & not expressed & signed as prescribed in Section 175(3) spurious claims may be made against Governor General in-Council against which they must be safeguarded. Relief under Section 70, however, is granted on an entirely different footing. Under that section the plff. has to prove delivery not intending to do so gratuitously & the benefit of the delivery must be enjoyed by the Govt. There is nothing in the section against which the Governor-General-in-Coun-cll require any safeguard.
62. I will now deal with the authorities bearing, on the subject.
63. In 'Municipal Committee, Gujanwalla v. Fazaldin', 11 Lah 121, the Municipality of Gujran--walla, held an auction to sell to the highest bidder a right, to take for one year the sweepings of that town. The deft, was the highest bidder & he paid the necessary advance & agreed to pay the balance in monthly instalments. The Municipal Committee instituted a suit to recover a sum of Rs. 5,175/- being the unpaid balance of the amount for which the deft, became the Highest bidder. The defence to the suit was that there was no valid contract which could be enforced as there was no contract under the seal of the Municipality as required by Section 47, Punjab Municipal Act. It was held that notwithstanding the provisions of Section 47, the deft, had derived the benefit of the contract at the expense of the committee he must pay for what he has actually received & enjoyed as if there was a contract between the parties & the absence of the contract under the seal of the Corporation was no answer to the suit.
64. In 'Secretary of State v. G. T. Sarin and Co.', 11 Lah 375, the plff. entered into an agreement with the officer commanding a Depot whereby the iormer undertook to supply grain for the horses of the Depot. The plff. was paid from time to time the price of grain so supplied & after giving credit for the amount paid, the plff. claimed a decree for Rs. 7,669/4/5. Both the Secretary of State & the officer commanding the Depot were added as parties to the suit. It was not denied that the plffs. had in fact supplied the quantity of grain mentioned in the plaint. But it was pleaded that the officer commanding the Depot had no authority to enter into a binding contract on behalf of the Secretary of State.
65. It was held that the provisions of Section 30, Govt. of India Act. 1935, were mandatory & must be strictly complied with in order to constitute a valid contract. The act of the officer commanding the Depot on entering into the contract was 'ultra vires', & there was no valid contract between the parties.
66. On behalf of the plff. reliance was placed on Section 70, Contract Act. On behalf of the Secretary of State it was contended that Section 70 must be considered in the light of certain principles of the common Law.
67. Tek Chand, J., observed as follows:
'I do not think it necessary to examine the English cases on the point as I am of opinion that Section 70, Contract Act, must be interpreted according to its clear & implicit terms, & not in reference to the provisions of the English Law relating to this matter. It is well known that this section is much wider than the English Law & goes far beyond it.' This & many other provisions of the Contract Act are, no doubt, founded on English Law, but, as has been pointed out by Lord Sinha while delivering a judgment of Their Lordships of the P. C. in 'Rama Nandi v. Kalawati', in interpreting the statutory provisions of an Act of the Indian Legislature: 'The Cts. should examine......an Indian statute uninfluenced by any consideration derived from the English Law upon which it may be founded.' Similarly, Lord Atkinson observed in 'Chunamall v. Moolchand', 9 Lah 510 at p. 518 that the language of a section of the Contract Act ought not to be enlarged by any implications of English Doctrines'. Numerous instances of the application of Section 70 to circumstances similar to those of the case before us will be found in the Indian Reports. In 'Mathura Mohan v. Chittagong District Board', 43 Cal 790, a certain contract with the District Board of Chittagong was held to be invalid as not having been made in accordance with the prescriptions of the statute for such contracts. But the Board was held liable to compensate the opposite party for the benefit derived under the invalid contract. The question is discussed at length by Mookerjee, J. at p. 827, 'et seq.' & the law is summed up by him in the following passage, which, in my opinion completely disposes of the contentions of the learned Govt. Advocate:
'It cannot be disputed that where a corporation receives money or property under an agreement which turns out to be 'ultra vires' or illegal, it is not entitled to retain the money. The obligation to do justice rests upon all persons, natural & artificial. If one obtains money or the property of others without authority, the law, independently of express contract, will compel restitution of compensation. (Rankin v. Emigh'). This is good sense & based on sound principle. The relief is granted, not up on the illegal contract, nor according to its terms, but on an implied contract of the corporation to return, or failing to do that, to make compensation for property or money, which it has no right to retain; to maintain such an action is not to affirm, but to disaffirm the illegal contract: 'Central Transport Co. v. Pullman Palace Car Co'. As Baggallay, L. J., said in Chapleo v. Brunswick Building Society', if the Co. has received the benefit of the payment, if, for instance, that amount has found its way to the credit of its banking account, the plff. might have been enabled to establish a claim against the Co. to the extent of the benefit derived by it from the transaction: 'Lawford v. Billericay Rural Council and Douglas v. Rhyl Urban District Council'. In the case before us, the plff. is clearly entitled to a return of Rs. 937-11-1 together with interest thereon from the date of deposit to the date of realisation.'Reference may also be made to the recent case of 'Mohamed Ebrahim v. Commissioners for the Port of Chittagong', where, also while holding the' contract sued upon to be invalid & uhenforcible, the learned judges passed a decree in favour of the plff. for the services rendered by them to the deft. & assessed the compensation on the principles of 'quantum meruit', see also the remarks of Jenkins, C. J. in 'Suchand Ghosal v. Balaram Mardana', 38 Cal 1 and 'Damodara Mudaliar v. Secy. Of State', 18 Mad 88 where under converse circumstances the Secretary of State recovered from a private individual compensation under Section 70.'
68. In Municipal Committee, Lahore v. Miran Baksh', 13 Lah 561, a suit was filed by the Municipality for recovery of unpaid portion of rent on the basis of an alleged lease of property belonging to the Municipality, but, there was no formal document in writing as required by Section 47, Punjab Municipal Act,. The suit was defended 'inter alia on the ground that there was no valid contract between the parties which could be enforced. It was held that inasmuch as the contract had not been reduced to writing & signed as required by that section, the contract was invalid. It was, however, contended on behalf of the Municipality that the deft, having derived 'Benefit from the contract was bound to make compensation. It was held that the deft, having entered into possession on the basis of the contract & having derived benefit therefrom was liable to compensate for the loss caused to the committee by the continuance of the defts. in possession of the premises for the period in suit.
69. In 'Pallonjee Eduljee and sons v. Lonavla City ' Municipality', IL.R. (1937) Bom 782, the Municipality entered into a contract in writing with the plff. for constructing a new vegetable market while the building was under construction, the President of the Municipality gave directions to construct other buildings. The plff. sued to recover the costs of the latter buildings on the Municipality taking possession of the same. The Municipality contended that as the provisions of Sections 48 & 49, Bombay Municipal Boroughs Act, 1925, had not been complied with, the Municipality was not bound by the contract, & was not liable.
70. It was 'held that the contract was in contravention of the Provisions of Sections 48 & 49, Bombay Municipal Boroughs Act, 1925 & was not enforceable. The question then arose whether the plff. was entitled to compensation under Section 70. Contract Act. It was contended that Section 70 did not apply, as the act done by the plff. would not be considered a lawful act, it having been done in contravention of Sections 48 & 49 of the said Act & those sections must override the provisions of Section 70, Contract Act. The Ct. held that section 70 applied to the facts of the case & the deft, was liable.
71. Tyabjee, J. observed as follows:
'The applicability of Section 70, Contract Act, cannot be excluded by the fact that there is no enforceable contract (or to use the language of the Municipal Boroughs Act, that there is not any contract binding on the Municipality) by reason of the requirements of Sections 48 & 49 having been disregarded. Section 70 does not depend upon the existence of a contract binding on the parties. It provides for liabilities other than contractual. There have been many cases on Section 70, in the Indian High Courts but, we are particularly concerned with those that refer to the apparent conflict between such a provision as is contained- in- Sections 48 & 49, Bombay Municipal Boroughs Act, & the Indian Contract Act Section 70. There need not necessarily be any conflict. There may be cases where there is no contract & Section 70 may be given effect to, apart from the provisions of Sections 48 & 49, Bombay Municipal Boroughs Act. The English cases are distinguish- able, since there is in India a statutory provision creating a liability arising not out of contract but out of relations resembling those created by the contract. The relation under Section 70 is created by the fact that one person lawfully does something for another or delivers anything to him & by the fact that the other person enjoys the benefit there of; & when this relation arises, the liability to make compensation or to restore the thing delivered arises as a statutory liability not arising out of contract.'
Tyabji J. differed from the observation of Straight J., in 'Chedi Lal v. Bhagwan Das', 11 All 234. to the effect that the Legislature in using the word 'Lawful' had in contemplation cases in which a person held such a relation to another as either directly to create or by implication reasonably to justify an inference that by some act done for another person the party doing the act was entitled to look for compensation for it to the person for whom it was done.
72. In 'Zulaing v. Yamethin District Council', 10 Rang 522, a party cleared a jungle on the orders of the Chairman of the District Council & filled up the low lying lands belonging to the Council. He sued the council for payment as on a contract. The contract was invalid because it was in contravention of a rule made under Section 79, Burma Rural Self Govt. Act. It was held that although the plff. could not sue on his contract, he was entitled to payment under Section 70, Contract Act for the work done, the benefits of which had been accepted by the council.
73. Brown, J. observed as follows:
'The wording of this section is, on the face of it; quite wide enough to cover the circumstances of the present case & none of the cases that have been cited before me are authority for the view that the section cannot be applied. As pointed out in the case of the 'Secretary of State and Anr. v. G.T. Sarin & Co' (11 Lahore 375) Whatever the law may be to England, the parties to this case are bound by Section 70, Contract Act, which must be interpreted in accordance with its clear & explicit terms. The terms of this section appear to me to be sufficiently clear & explicit, & the balance of authority to be in favour of the view that its provisions may be applied when one of the persons concerned is a corporation or other public body.
74. It seems to me that the preponderance of authority is in favour of the view that if the facts of a case can be fairly brought within the terms of Section 70, Contract Act & the conditions expressly laid down therein are satisfied, the section should be given effect to & applied irrespective of the fact that there was in fact no contract between the parties. It is true that the section may not be applicable where a contract could not have been entered into under any circumstances. The pro visions of Section 70, therefore, cannot be applied to a case where a minor is concerned. But the case of an artificial person, e. e., a statutory person or body is different from the case of a minor. The artificial person has the capacity to enter into a contract though it must exercise its capacity or powers, in the particular mode prescribed by the statute. There has been a large number of cases in India where the provisions of the section have been applied to cases where a statutory body has entered into a contract which is invalid by reason of non-compliance with the statutory requirements, & there is no reason, therefore, why the provisions of Section 70 should not Be applied to the case of the deft., which is a statutory body capable of entering into a contract which is found to be not binding by reason of non-compliance with the statutory requirements.
75. I, therefore, hold that Section 70 should be applied to the facts of this case & the deft, should be made liable to pay compensation for benefits received by accepting the delivery of the goods & utilising the same. (The rest of the judgment is not material for purposes of reporting.-Ed.)