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Keshab Kishore Narain Saraswati v. State Of Bihar And Another

Patna High Court

Dec 18, 1969

Judgment

Subsequent
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Concise Analytical Summary of the Opinion (Kanhaiyaji, J.)

Factual and Procedural Background

The plaintiff filed two money suits seeking recovery of rent for the same parcel of land for different periods. The lands involved totalled 1 bigha 2 kathas, broken down in the plaints as follows: 1 katha taken with effect from 1 May 1947, 10 kathas taken with effect from 1 July 1950 and 11 kathas taken with effect from 1 April 1957. It was common ground that the Public Works Department (PWD) of the State of Bihar occupied the land for dumping coal and tar.

The plaintiff pleaded that the lands were taken at a rent of Rs. 10 per katha per month and that no payments were made for the relevant periods despite demand. In Money Suit No. 66 of 1960 (First Appeal No. 262 of 1963) rent was claimed for periods beginning 1 August 1951 (for the 1 katha) and 1 July 1950 / 1 April 1957 for the other parcels, up to 31 March 1959. In Money Suit No. 31 of 1962 (First Appeal No. 297 of 1965) rent was claimed from 1 April 1959 to 31 March 1962 at Rs. 10 per katha per month.

The defendants were the State of Bihar (through the Secretary, Public Works Department) and the Collector of Darbhanga. They admitted occupation but denied liability at the rate claimed and raised multiple defences including: (a) that Rs. 10 in respect of the 1 katha covered land and a house; (b) that the rent for other lands should be fixed by the District Magistrate (i.e., fair rent); (c) absence of a written contract in the form required by Article 299(1) of the Constitution; and (d) limitation (in Money Suit No. 66 of 1960).

At trial the learned Subordinate Judge found the fair rent to be Rs. 10 per katha, held that the alleged contract was hit by Article 299(1) of the Constitution (and thus unenforceable), and applied Article 110 of the Limitation Act (three-year period for arrears of rent), treating a letter of 31 January 1959 as an effective acknowledgment; accordingly claims prior to 1 February 1956 were held barred. On merits the trial judge found the plaintiff's case established but dismissed the suits for non-compliance with Article 299. The plaintiff appealed; the two appeals were heard together and this judgment governs both.

Legal Issues Presented

Whether a claim for compensation / rent can be maintained against the State (or its officers) where the underlying contract is void for non-compliance with Article 299(1) of the Constitution.
Whether Section 70 of the Indian Contract Act (quasi-contract / prevention of unjust enrichment) can be invoked to recover compensation from the State despite a void contract, and the conditions for such invocation.
Which Article of the Limitation Act applies to a claim founded on restitution / quasi-contract (Article 110 — arrears of rent — or Article 120 — actions founded on statutory liabilities or quasi-contract), and the resulting limitation cut-off dates for the suits.
Whether interest prior to the decree (antecedent interest) is claimable where recovery is based on damages/compensation under Section 70 rather than an express or implied contract.

Arguments of the Parties

Plaintiff-Appellant's Arguments

The plaintiff did not contest the trial court's finding that the alleged contract was void under Article 299(1), but urged that Section 70 of the Indian Contract Act (quasi-contract / restitution) permitted recovery of compensation for a non-gratuitous act from the party who enjoyed the benefit.
Counsel relied on Supreme Court authority (State of West Bengal v. B.K. Mondal and Sons and Mulamchand v. State of Madhya Pradesh) establishing the three conditions for invoking Section 70: (1) lawful performance/delivery for another, (2) not intended to be gratuitous, and (3) benefit enjoyed by the other party — and argued these were met.
On limitation, the plaintiff contended that Article 110 does not apply to a claim in quasi-contract; instead Article 120 applies, making the relevant cut-off date earlier (the court records a reliance on a Full Bench decision, Kora Lukose v. Chacko Uthuprpan, in support).
It was further argued that the plaint and records contained sufficient material to assess quantum (the plaintiff pleaded the fair rent of Rs. 10 per katha and related materials were on record), so the matter did not need remand for additional evidence.

Respondents' (Defendants') Arguments

The respondents accepted occupation but denied liability at the claimed rate, asserted alternative bases for the rent assessment (e.g., fair rent to be fixed by District Magistrate), and relied on Article 299(1) to assert the contract was void and unenforceable.
They contended that the plaintiff's claim under Section 70 had not been pleaded at trial and that necessary materials for fixing quantum were not on the record; the only material, they said, was a revised fair rent fixed by the Collector at Rs. 3 per katha.
On limitation they argued that Article 110 of the Limitation Act (three years for arrears of rent) applied to bar earlier portions of the claim; in the trial court this argument succeeded subject to the letter of 31 January 1959 being treated as acknowledgement.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
State of West Bengal v. B.K. Mondal and Sons, AIR 1962 SC 779	Sets out three conditions for invoking Section 70: (1) lawful performance/delivery for another, (2) not intended to be gratuitous, (3) the other party must have enjoyed the benefit.	The court adopted these conditions as the test for applying Section 70 against the State; the opinion uses this authority to explain the juristic basis of restitution/quasi-contract and to justify recovery despite a void contract when the conditions are satisfied.
Mulamchand v. State of Madhya Pradesh, AIR 1968 SC 1218 (1968 BLJR 774)	Affirms the view that obligations under Section 70 are founded in quasi-contract/restitution, not contract or tort; supports the same three-condition test.	Used to reinforce that Section 70 applies to prevent unjust enrichment and that this principle extends to the State where the statutory conditions are fulfilled.
Dominion of India v. Raj Bahadur Seth Bhikhrai Jaipuria, AIR 1957 Pat 586 (approved by Supreme Court in Bhikhraj Jaipuria v. Union of India, AIR 1962 SC 113)	Holds that contracts not in the prescribed form may be unenforceable against the State; in the railway context the contract was unenforceable where statutory form requirements were not met.	The trial court relied on this decision to hold the contract unenforceable; the appellate court distinguished it on the facts and ratio, holding that its reasoning did not prevent application of Section 70 in the present circumstances.
Bhikhraj Jaipuria v. Union of India, AIR 1962 SC 113	Supreme Court approval of the earlier Patna decision on non-enforceability of contracts not in prescribed form against a government instrumentality.	The opinion notes the approval but distinguishes the present facts and holds the ratio inapplicable to a restitution claim under Section 70.
Ram Swarup Maru v. State of Bihar, AIR 1969 Pat 340	Addresses application of restitutionary principles against the State; indicates Section 70 can furnish a basis for recovery against a government where conditions are satisfied.	The court cited Untwalia, J.'s view in this case approving application of Section 70 against the State and expressed respectful agreement with that view.
Kora Lukose v. Chacko Uthuprpan, AIR 1957 Ker 19 (Full Bench)	Full Bench authority on the applicable Article of Limitation to quasi-contract/statutory-liability claims (supports the view that Article 120 may apply rather than Article 110 in such cases).	The appellate court relied on this decision in concluding that Article 120 (and not Article 110) applies to the claim based on Section 70, with the result that limitation operates differently in Money Suit No. 66 of 1960.

Court's Reasoning and Analysis

The court proceeded in structured steps, staying closely to the materials and precedents cited in the opinion:

Recognition of Trial Findings: The Subordinate Judge had found that the fair rent for the lands was Rs. 10 per katha and that the alleged contract was void under Article 299(1). The trial judge had applied Article 110 of the Limitation Act, treated a 31 January 1959 letter as an effective acknowledgement and held claims prior to 1 February 1956 barred. However, on merits the trial judge accepted the plaintiff's case before dismissing for Article 299 non-compliance.
Primary Legal Obstacle — Article 299: The appellate court accepted that the alleged contract was hit by Article 299(1) and therefore unenforceable as a formal contract in the mode required by the Constitution. The plaintiff did not contest this legal finding on appeal.
Invocation of Section 70: The plaintiff sought recovery under Section 70 of the Indian Contract Act (quasi-contract/unjust enrichment). The court examined the controlling Supreme Court authorities (State of West Bengal v. B.K. Mondal; Mulamchand) and set out the three conditions necessary to apply Section 70: (i) lawful doing or delivery for another, (ii) not intended to be gratuitous, and (iii) the other party has accepted or enjoyed the benefit. The court accepted the juristic basis of restitution and held that Section 70 can operate against the government as well as private parties if those conditions are met.
Distinguishing Precedents Restricting Enforcement of Void Contracts: The court considered Dominion of India / Bhikhraj Jaipuria (contracts unenforceable where not in prescribed form) and explained that those cases dealt with a different factual and legal situation; their ratio did not preclude restitution under Section 70 when the statutory conditions for that remedy were satisfied.
Evidence and Quantum: The court addressed the respondents' contention that Section 70 had not been pleaded and that materials to fix quantum were lacking. The court found that the plaints expressly pleaded that the Department had taken the land at Rs. 10 per katha per month (with approval and sanction by the proper authority) and that sufficient materials for determining the quantum of compensation were on the record. Therefore, a remand for further evidence was unnecessary.
Limitation Analysis: The defendants relied on Article 110 (three-year period for arrears of rent). The appellant argued Article 110 was inapplicable to quasi-contract claims and that Article 120 applied instead. The court, relying on authority (including the Kerala Full Bench decision cited), concluded that Article 120 applies to the quasi-contractual claim under Section 70 and, specifically in Money Suit No. 66 of 1960, held the claim to be not barred by limitation from 1 February 1953 (but barred prior to that date). This overruled the trial judge's application of Article 110 as to that suit.
Interest: The court analysed the claim for antecedent interest and concluded there was no express or implied contract, usage, statutory provision or Interest Act basis to award interest prior to the decree. Because recovery was allowed on the basis of damages/compensation (quasi-contract), antecedent interest was disallowed. On equitable grounds the court awarded interest at 6% per annum from the date of the decree until payment.
Conclusion on Remedies: Applying the rationale above, the court found that the plaintiff could succeed on the basis of Section 70 (prevention of unjust enrichment), that sufficient material existed on record to determine quantum (given the pleaded rate of Rs. 10 per katha per month and related material), and that limitation for at least one of the suits had to be governed by Article 120.

Holding and Implications

Core Ruling: The appeals were allowed. The suits were decreed as indicated in the opinion and the plaintiff was awarded relief on the basis of compensation under Section 70 of the Indian Contract Act; interest at 6% per annum was awarded from the date of the decree until payment. Costs were awarded to the appellant.

Key subsidiary holdings and practical consequences:

The court upheld that a contract may be void under Article 299(1) and thereby unenforceable as a formal contract, but that such a voidness does not necessarily preclude a claimant from recovering under the restitution/quasi-contract doctrine embodied in Section 70 of the Indian Contract Act, provided the statutory conditions for Section 70 are met.
The court concluded that Section 70 applies against the State where its conditions are fulfilled and that precedents finding unenforceability of defective contracts (e.g., Jaipuria decisions) do not automatically negate restitution claims where the facts differ.
On limitation, the court held that Article 120 (and not Article 110) governs claims founded on quasi-contract/statutory liability in the circumstances of Money Suit No. 66 of 1960; accordingly the claim in that suit was held not barred by limitation from 1 February 1953 (claims prior to that date were barred). This altered the trial court's limitation-based cutoff for that suit.
Antecedent interest was disallowed because there was no contractual or statutory basis for such interest; interest was, however, allowed from the date of decree at 6% per annum until payment.
Direct effect on the parties: the State/defendants are made liable to pay the decretal amounts (as assessed on the basis indicated in the opinion), together with costs; limitation bars relate to particular historical cut-off dates as determined by the court.
On broader precedent: the court relied on and applied existing authorities concerning Section 70 and limitation; the opinion does not purport to lay down a new legal principle beyond applying and reconciling existing case law to the facts. (The judgment distinguishes earlier cases and applies existing principles to allow restitution in the factual matrix before it.)

This summary is limited strictly to the matters and findings expressly set out in the provided opinion.

Show all summary ...

Kanhaiyaji, J.:— These two appeals of the plaintiff arise out of one judgment passed by the Subordinate Judge, Darbhanga, and were heard together as common questions of law and fact were involved his both the appeals, and, therefore, this judgment will govern both of them.

2. The plaintiff filed two suits for recovery of rent in respect of the same land for different periods. It is the common case of the parties that, in all, 1 bigha 2 kathas of land of the plaintiff as per details given at the foot of the plaints was taken by the Public Works Department of the State of Bihar for dumping coal and tar. 11 Kathas of land was taken with effect from the 1st April, 1957, whereas 10 kathas of land from the 1st July 1950 and 1 katha of land from the 1st May, 1947. As regards the last item of 1 katha, it is also the common ground that rent to the plaintiff was paid at the rate of Rs. 10 per katha per month from the 1st May, 1947 to the 31st July, 1951, in First Appeal No. 262 of 1963 arising out of Money suit No. 66 of 1960, rent in question was claimed from the 1st August, 1951 to the 31st March, 1959, in respect of 1 katha of land and from the 1st July, 1950, in respect of 10 kathas of land and likewise from the 1st April, 1957 in respect of 11 kathas of land. In First Appeal No. 297 of 1965 arising out of Money Suit No. 31 of 1962, rent was claimed in respect of the lands from the 1st April, 1959, to the 31st March, 1962, at the rate of Rs. 10 per katha per month. The case of the plaintiff is that the land in question was taken by the Public Works Department at the rate of Rs. 10 per katha per month, and, in spite of demand, no payment was made for the period in question. So he was obliged to file the two suits for the recovery of the arrears of rent along with interest at the rate of one per cent per month thereon and other incidental expenses like cost of notice under Section 80 of the CPC.

3. The State of Bihar through the Secretary, Public Works Department, Government of Bihar, and the Collector of Darbhanga are the defendants in each suit. The two defendants filed separate written statements, but their defence was almost identical. The occupation of the land for keeping the stock of coal and tar was not denied. However, the plaintiff's claim of rent at the rate of Rs. 10 per katha per month was denied. As regards the aforesaid one katha of land, it was stated on their behalf that Rs. 10 per month was the rent not only for the land but also for a house standing thereon. As regards the other items of 10 kathas and 11 kathas, it was contended that the Department had not taken those lands at the rate of Rs. 10 per month, but the rent of the land was to be paid in accordance with the fair rent to be fixed by the District Magistrate, Darbhanga. Another defence put forward on their behalf was that the claim of the plaintiff was bad inasmuch as there was no written contract as required by Article 299(1) of the Constitution of India. In Money Suit No. 66 of 1960, bar of limitation was also pleaded.

4. In this connection, it is better to mention here that the averment in the plaint that the rent of the land was fairly assessed by the District Magistrate in 1958 at the rate of Rs. 10 per katha per month was not denied, but it was contended by the defendants that subsequently in pursuance of a letter dated the 10th June, 1959, from the Chief Engineer to the District Magistrate, the rent was revised and fixed at Rs. 3/- per katha per month at which rate the defendants expressed their readiness to pay the rent for the period in question. The defendants admitted that no payment had been made to the plaintiff for the period in question.

5. The material findings of the learned Subordinate Judge are that the fair rent of the lands in question for different periods involved in the two suits was Rupees 10/- per Katha, that the suits were hit by the provisions of Article 299(1) of the Constitution and that Article 110 of the Limitation Act was applicable which provides a period of three years for such suit for arrears of rent from the time when the arrears became due. The letter from the Under-Secretary to the Accountant General; Bihar, dated the 31st January, 1959 (Ext. 1.Gha) should be taken to be an effective acknowledgment, and, accordingly, the claim in question prior to the 1st February, 1956, was barred. Although, on merit, the learned Subordinate Judge found the plaintiff's case well established, but he dismissed the suit for non-compliance with the provisions of Article 299 of the Constitution.

6. There is no written agreement or contract executed between the plaintiff and any officer of the Public Works Department. Article 299(1) of the Constitution provides that “all contracts made in the exercise of the executive power….of a State shall be expressed to be made by the Governor of the State… and all such contracts shall be executed on behalf of ……the Governor by such persons and in such manner as he may direct or authorise”. It was argued in the court below that in this case the Department had utilised the land of the plaintiff during the period in question for the purpose of dumping coal and tar in pursuance of an agreement which, however, did not comply with the provisions of Article 299, and, therefore, the defendants having derived benefit should be held liable for the claim in question. However, the learned Subordinate Judge, relying on a Bench decision of this Court in Dominion of India v. Raj Bahadur Seth Bhikhrai Jaipuria, AIR 1957 Pat 586 held that the contract was unenforceable against the State.

7. Mr. J.C Sinha, appearing for the plaintiff-appellant, did not contest the finding of the trial Court that the alleged contract was hit by the provisions of Article 299 of the Constitution and was void, but he submitted that the claim of the plaintiff could be allowed by applying the principle of section 70 of the Indian Contract Act. In the first instance the principles of law enunciated by the Supreme Court in State of West Bengal v. B.K Mondal and Sons, AIR 1962 SC 779 and in Mulamchand v. State of Madhya Pradesh, 1968 BLJR 774 : AIR 1968 SC 1218 have got to be appreciated. Gajendragadkar, J. (as he then was) pointed out in the case of State of West Bengal, AIR 1962 SC 779 that three conditions must be satisfied before the section aforesaid could be invoked. The conditions are:

“The first condition is that a person should lawfully do something for another person or deliver something to him. The second condition is that in doing the said thing or delivering the said thing he must not intend to act gratuitously and the third is that the other person for whom something is done or to whom something is delivered must enjoy the benefit thereof.”

8. As pointed out in that case as also by Ramaswami, J. in Mulamchand's case, AIR 1968 SC 1218, “the juristic basis of the obligation in such a case is not founded upon any contract or tort but upon a third category of law, namely, quasi-contract or restitution.” What section 70 prevents is “unjust enrichment” says Gajendragadkar, J. in the former case, “and it applies as much to individuals as to corporations and Government. But in all such cases not only the two conditions but also the third condition must be fulfilled that the other party has accepted the thing delivered and has enjoyed the benefit thereof”.

9. If the contract is void, it is void for both. Neither party can claim a specific performance of it or damages for breach of it or its enforcement in any other manner. Any party, however, by satisfying the requirements of section 70 of the Indian Contract Act can base its claim on that footing. In that case also the principles enunciated by the Supreme Court will be applicable equally to the citizens, corporation and the Government. This view, I find, is expressed by Untwalia, J., in Ram Swarup Maru v. State of Bihar, AIR 1969 Pat 340, with which I respectfully agree.

10. In AIR 1957 Pat 586 approved by the Supreme Court in Bhikhraj Jaipuria v. Union of India, AIR 1962 S.C 113, plaintiff Bhikhraj Jaipuria conducted grocery business in the name and style of ‘Rajaram Viiaikumar’, in the town of Arrah. The Divisional Superintendent, East Indian Railway, under three ‘purchase orders’ agreed to buy and the plaintiff agreed to sell certain quantities of foodgrains for the employees of the East Indian Railway. The plaintiff made some supplies of the foodgrains under the different contracts in time but failed to supply the entire quantity by the stipulated dates; and, hence the Railway Administration later declined to accept delivery of foodgrains offered to be supplied by the plaintiff. The plaintiff sued the Railway Administration claiming compensation for breach of the contract. The suit for compensation was dismissed, because the contract between the Dominion of India and the plaintiff was not in the form required by section 175(3) of the Government of India Act and as such the contract was not enforceable and, therefore, the Dominion of India could not be sued for compensation for breach of the contract. Therefore, the facts of the case relied on by the trial court as also the ratio decidendi of that case are entirely different and have no application to the present case. The applicability of section 70 of the Indian Contract Act does not depend upon the existence of a contract binding on the parties, and it does not provide for contractual liability. The basis for compensation under this section is not the same as of contractual rights but would be in a proportion to the benefit enjoyed by the party for whom a thing was done or to whom a thing was delivered.

11. Mr. Sinha argued that applying the principle of Section 70 of the Contract Act, the suit should be decreed and the plaintiff should be given compensation at the rate of Rs. 10/- per katha per month, as claimed. Learned counsel, appearing for the respondents, submitted that the suits may be dismissed as no such plea had been taken in the trial court. It was pointed out that the necessary materials for holding the amount of compensation are not on the record. According to them, the only material on which compensation could be allowed is the revised fair rent fixed by the Collector at Rs. 3/-. If a very technical and strict view was to be taken of the plaints, it can be said that on the facts alleged in them, no claim under section 70 of the Indian Contract Act could be maintained; but for the application of the principles of section 70 of the Indian Contract Act, such a strict and technical view of the plaint could not be taken. If there is sufficient evidence to show to what extent the respondents have been benefited, there can be no difficulty in allowing the appeal and decreeing the suits of the plaintiff.

12. In the plaints, it is specifically mentioned that the land was taken by the defendants at a rental of Rs. 10/- per katha ner month which was approved and sanctioned by the proper and concerned authority, and all the materials reauisite for determining the quantum of compensation are on the record. Therefore, I do not feel inclined to agree with the learned Counsel for the respondents that the suits should be remanded to the trial court for decision after allowing the parties to adduce further evidence.

(In Paragraphs 11 and 12, the judgment discusses the evidence on record to find as to what is the reasonable rent payable for the lands occupied by the Department. The judgment continues:)

13. The bar of limitation has been pleaded in Money Suit No. 66 of 1960 and that also with regard to the claim regarding the land in respect of 10 kathas and 1 katha. As for one katha of land, the claim is from the 1st August, 1951, and as for 10 kathas of land the claim is from the 1st July, 1950, to the 31st March, 1959. It was argued in the court below for the defendants that Article 110 of the Limitation Act applied to the case, which provides a period for three years for suits for arrears of rent from the time the arrears became due. The trial Judge accepted the contention of the defendants but held that the letter of the Under Secretary to the Government written to the Accountant General, Bihar, on the 31st January, 1959 (Ext. 1.gha) communicating sanction of the Government for payment of rent at the monthly rate of Rs. 10/- per katha should be taken as effective acknowledgment, and, accordingly, the claim in question with effect from the 1st February, 1956 may be held to be alive and the claim prior to this date was barred.

14. Mr. Sinha, appearing for the appellant, contended that in this case Article 110 was not applicable. When a contract becomes void, relationship of landlord and tenant ceases. In this case, it has been held that the contract on which the plaintiff claimed relief was void. The obligation to pay compensation has been treated only as an obligation of a person enjoying the benefit of a non-gratuitous act under Section 70 of the Contract Act. Being a statutory liability, the only Article available for its breach is Article 120 of the Limitation Act, 1908. The claim under Section 70 of the Contract Act cannot be considered as one based on contract but on quasi-contract. Therefore, Article 110 has no application. This view is supported by a Full Bench decision of the Kerala High Court in Kora Lukose v. Chacko Uthuprpan, AIR 1957 Ker 19. My conclusion, therefore, is that it is Article 120 and not Article 110 that applies to the case, and, as such, the claim in Money Suit No. 66 of 1960 has to be held as not barred by limitation from the 1st February, 1953. The claim prior to the 1st of February, 1953, is held barred.

15. The plaintiff has also claimed interest in both the suits. There is no express or implied contract for payment of interest. Interest for a period prior to the commencement of the suit is claimable either under an agreement or usage or trade or under a statutory provision or under the Interest Act for a sum certain where notice is given. In this case, none of these conditions exist. Interest antecedent to a suit is not a matter of procedure. It can be only allowed if the plaintiff succeeds in establishing one of the above requirements of law. The claim of the plaintiff in these suits is being allowed on damages, and, therefore, I do not feel inclined to allow interest from the dates of the suits to the date of the decree. Therefore, the plaintiff's claim for interest prior to the date of the decree including the period prior to the dates of the suits is disallowed. The plaintiff, however, on cquitable grounds will get interest at the rate of six per cent per annum from the date of the decree to the date of payment of the decretal amount. For the reasons given above, both the appeals are allowed with costs. The suits are, accordingly, decreed, as indicated above.

Bahadur, J.:— I agree.

16. Appeals allowed.