Dhan Singh Yadav v. Badri Prasad

1. This is a plaintiffs' second appeal directed against the judgment and decree of the Senior Civil Judge, Ajmer, dated 20th August, 1059, whereby he dismissed the suit of the plaintiffs on the ground that they had no locus standi to bring this action.

2. Dhansingh Yadav and Ramdayal Sakarwal were employees of the General Post Office, Ajmer, in 1951. In the course of their official duty they were responsible for making payment of six 5 Years Cash Certificates of the value of Rs. 1,000/- each. These certificates were purchased on 13th September, 1937 and by process of renewal they were to mature after 15 years. The holder of these certificates Badri Parsad, defendant in this case, presented them at the General Post Office, Aimer, on 2oth September, 1951, when only 14 years had elapsed. Dhansingh Yadav and Ramdayal Sakarwal, however, on account of an error in calculation treated these certificates to have completed 15 years and thus paid Badri Parsad an excess amount in the sum of Rs. 487/8/-. It appears that in October, 1951, the error was discovered and by a letter of 22nd October, 1951 (Ex. A. 2) defendant Badri Parsad was informed by the Post Office to refund the excess payment made to him. It seems that Badri Parsad took no notice of the communications made by the Postal Department until 20th November, 1951. What this communication from Badri Parsad was it is not clear. There is only a reference made in the letter from Post Office dated 22nd November, 1951 (Ex. A-4). From this letter, I gather that some sort of request was made by Badri Parsad to regularise the excess payment but the Postal Department regretted their inability.

A reminder was issued on 29th November, 1951 (Ex. A-1) asking defendant Badri Parsad to refund the excess received by him. On 12th May, 1952, efforts appear to have been made for the recovery of this excess amount through the Collector, Bhilwara and this apparently occasioned resentment in the mind of Badri Parsad, who sent a lawyer's notice dated 27th May, 1952 (Ex. A. 5) accusing the Postal Department of carelessness in the encashment of the 5 Years Cash Certificates and pleaded his bona fide by alleging that he had not even taken the physical possession of the amount but got the same transferred to the Post Office Savings Bank Account the day the certificates were encashed, and that he has been thus put to a loss on account of the negligence of the clerk and supervisor of the General Post Office, Ajmer. The effect of this notice was that the Postal Department cancelled their direction to the District Magistrate, Bhilwara for the recovery of the excess payment by their letter of 25726th September, 1952 (Ex. A. 3). The Postal Department on the other hand held Dhansingh Yadav and Ramdayal Sakarwal, its own employees responsible for the mistake and called upon them to make good the amount in the first instance to the Post Office and if necessary to file a suit against Badri Parsad. From 1-9-1953, the recovery from the salaries of these two employees commenced by way of equal monthly instalments for the recovery of Rs. 487/87-.

On 28th October, 1953, these two employees Dhansingh Yadav and Ramdayal Sakarwal sent a notice to Badri Parsad (Ex. 1) demanding the payment of the excess received by him and eventually on 2-12-1953 a suit was instituted for the (recovery of the sum of Rs. 487/8/- against Badri Prasad by Dhansingh Yadav and Ramdayal Sakarwal. Defendant Badri Parsad contested the suit and pleaded that he believed that the cash certificates had matured and that with a view to avoid loss of interest, presented them to the General Post Office, Ajmer, for encashment. He contended that the plaintiffs were liable and responsible for the carelessness or negligence and the defendant should not be deprived of the interest of the 15th Year. The pleas of lack of jurisdiction of the Court and the non-maintainability of the suit on account of the non-joinder of the Postal Authorities and the Union of India were also raised.

The Second Additional Sub Judge, First Class, Ajmer, before whom the suit was instituted, framed as many as 13 issues. He found that the plaintiffs under bona fide mistake had paid a sum oi Rs. 487/87- in excess of the amount payable to the defendant; that this excess amount was being recovered and in fact had been entirely recovered before the decision from the plaintiffs by the Postal Authorities; that the amount which was overpaid to the defendant was recoverable from him; that the plaintiffs could institute a suit; and that the issue regarding the suit being pre-mature was abandoned by the defendant. The plea that the suit was bad on account of the non-joinder of the Union of India was also not upheld and in result a decree in the sum of Rs. 487/87- was passed in favour of the plaintiffs and against the defendant together with future interest from the date of decree till realization of the amount at the rate of six per cent per annum.

Dissatisfied with this judgment and decree, the defendant Badri Parsad preferred an appeal before the District Judge, Ajmer, who transferred it to the Court of the Senior Civil Judge, Ajmer, for disposal. According to the first appellate Court, it stood proved that the over-payment in the sum of Rs. 487/8/- was made on account of a bona fide mistake and this amount was recoverable under Section 72 of the Indian Contract Act, even though there was no privity of contract between the plaintiffs and the defendant. He, however, held that the plaintiff-respondents had no locus standi to sue the defendant because they were merely employees of the Postal Department and whatever they did was done on behalf of the Department and not in their individual capacity. In the eye of law, therefore, it was the department of the Post Office that paid the money to the defendant and not the plaintiffs, and, therefore, the money is to be repaid or returned to that department only. In other words, it was the department only that could have sued the defendant and not the plaintiffs. He felt fortified in this conclusion by taking an illustration of under-payment and posing the question that in a case like that the plaintiffs could not have been sued by the defendant but only the Postal Department and, therefore, he accepted the appeal and dismissed the suit with costs. It is again this judgment and decree that the present appeal has been preferred.

3. The first interesting question which arises for determination is whether the plaintiff-appellants had any locus standi to bring the present suit on account of overpayment made to the defendant. Section 72 of the Indian Contract Act lays down that a person to whom money has been paid, or anything delivered by mistake or under coercion, must repay or return it. The section does not say to whom the repayment or the return has to be made. The Senior Civil Judge seemed to think that the repayment must be made to the party who paid it and it is, on that assumption that he had proceeded to hold that it was only the Union of India representing the Postal Department to whom repayment under the provisions of section 72 had to be made and not its employees. The learned Civil Judge was right when he held that the principle enunciated in Section 72 of the Indian Contract Act was applicable regardless of the fact whether a privity of contract did or did not exist between the parties. There is ample authority for the proposition that the doctrine embodied in this section of the Indian Contract Act has for its foundation the doctrine of equity that whatever has been done under a mistake has to be repaired. That being the position of law the only question is who has the right to claim the repayment or return of money of anything delivered by mistake or under coercion.

Section 72 of the Indian Contract Act is located in Chapter V of the said Act, the title where is very significant, namely, "Of certain relation resembling those created by contract". For the various situations in which relations of this kind come into existence illustration (a) to Section 68 is an eloquent example. It reads : A supplies B, a lunatic, with necessaries suitable to his condition in life. A is entitled to be reimbursed from B's property. His liability arises notwithstanding the fact that B, who is a lunatic was incapable to contract. Even Section 72 itself says that payment made by mistake has to be repaid. Mistake of fact has the effect of destroying the very foundation of a contract. A reference in this connection be made to Section 20 of the Indian Contract Act. Therefore, the liability which arises under Section 72 is not dependant on the existence of a contract but arises on account of an advantage taken by a person due to a mistake of or coercion on another. Both the Courts below have held that there has been an over-payment due to a mistake of fact and that the mistake was bona fide and excess payment therefore was recoverable under Section 72 of the Contract Act.

The only question which now remains to be determined is as to who can enforce this liability. Paragraph 3 of Section 73 of the Contract Act lays down that when an obligation resembling that created by contract has been incurred and has not been discharged, any person injured by the failure to discharge it is entitled to receive the same compensation from the party in default, as if such person had contracted to discharge it and had broken his contract. In the case before me an obligation resembling one created by contract was incurred by Badri Parsad which he neglected to discharge and the persons injured by the failure to discharge are Dhansingh Yadav and Ramdayal Sakarwal and, therefore, they are entitled to receive the same compensation from Badri Parsad who is, in default as if Badri Parsad had contracted to discharge it and had broken his contract. The learned counsel for the respondent urged that there was no contract between Badri Parsad on the one hand and Dhansingh Yadav and Ramdayal Sakarwal on the other. Para 3 of section 73 gives the liability arising under Section 72 the label of a contract when in point of fact it may not exist. The use of the expression 'as if in paragraph 3 of section 73 justifies this conclusion. From this provision it seems to me that a party, who is ultimately injured on account of the failure to discharge a liability under Section 72, has a right to enforce that liability against a person who is guilty of a default in the performance of an obligation.

A decided case which comes very near to the one before me is Anrudh Kumar v. Lachhmi Chand, 115 Ind Cas 114: (AIR 1928 All 500). In this case one Anrudh Kumar received certain compensation in a land acquisition proceeding from the Land Acquisition Officer representing the estate of one Baldeo. The real heir of Baldeo claimed this amount from Anrudh Kumar and the learned Judges deciding the case held that Anrudn Kumar was bound to repay the compensation, which he had erroneously received, to the one who was entitled to receive it. It was held that a person to whom money due to another is paid by mistake is bound to refund the money with interest to the person who is really entitled to it. This liability was also spelt on account of the provisions of Sections 72 and, 73 of the Indian Contract Act.

The learned counsel for the respondent invited my attention to Punjab Industrial Agency, Ltd. v. Mercantile Bank of India, Ltd., AIR 1930 Lah 852 and urged that in view of the reasoning of this case the plaintiffs must fail in their present suit. The facts of this case were that a firm S arranged with P a Mercantile Bank, for an overdraft. S drew a cheque on the said Bank on 14th, September, 1522 for Rs. 2,000/- in favour of D. Before the cheque was presented for payment S countermanded payment by a letter to the Bank dated 3-1-1923. D presented the cheque for payment on 3-2-1923 to the Bank and the cheque was cashed in forgetfulness of the order of countermand by S. The Bank discovered the mistake on 19th March and demanded refund of the amount paid to D and on refusal by D, the Bank instituted a suit. It was held that the Bank P was not entitled to recover money after a cheque had been cashed on a plea of mistake unknown entirely to the payee of the cheque. This case is clearly distinguishable. When S issued a cheque to D, D was entitled to recover the money and he recovered it: Under S. 31 of the Indian Negotiable Instruments Act the drawee of the cheque having sufficient funds of the drawer in his hands, properly applicable to the payment of such cheque must pay the cheque when duly required so to do. D who received the money in this case was entitled to receive it and the drawee had no option under Section 31 but to pay it excepting for the orders of the countermand. If on account of its own mistake the Bank failed to take notice of the letter in time D who was entitled to receive money under cheque was not bound to refund it to the Bank. In the case before me Badri Parsad was not entitled to receive the excess payment. It may also be observed that in this Lahore case (2) the provision of section 73 also were not brought to the notice of the learned Judges.

The learned counsel for the respondent invited my attention to the Sales Tax Officer, Banaras v. Kanhaiya Lal Makund Lal Saraf, AIR 1959 SC 135. All that this authority lays down is that the term 'mistake' used in Section 72, Contract Act, has been used without any qualification or limitation whatever and comprises within its scope a mistake of law as well as a mistake of fact. Dealing with a case of an over-payment of tax their Lordships have held that once it is established that the payment, even though it be of a tax, has been made by the party labouring under a mistake of law the party is entitled to recover the same and the party receiving the same is bound to repay or return it. The learned counsel's emphasis was that the party who had received the same is bound to repay or return it, to the one who paid it and in case before me, his submission is that the party receiving this over-payment was Badri Parsad and the party entitled to repayment is Postal Department and it was the Postal Department which was entitled to get the refund. I have already discussed that the language of Section 72 merely lays down a doctrine of equitable restitution, without specifying the party to whom restitution has to be made. The enforcement of the liability arising under Section 72 of the Indian Contract Act is available to a person injured due to the failure to discharge the liability. Such a question was not before their Lordships of the Supreme Court and this decision, therefore, does not give any assistance to - the learned counsel for the respondent.

Another case to which my attention was drawn by the learned counsel for the respondent is Jagadish Prosad Pannalal v. Produce Exchange Corporation Ltd., AIR 1946 Cal 245. In this case a firm entered into a contract with a company for the purchase of one wagon of maize starch at a particular rate. The maximum price fixed by the Government was a rupee higher than the one fixed between the firm and Company. The Company loaded the goods and in the mean time the Government order brought the price very much lower than the one fixed between the parties. The firm filed a suit to recover the difference between the contract price and the maximum price fixed by the Government. The learned Judge deciding the case held that Section 72 of the Contract Act was inapplicable. From the bare outlines of the facts of this case it is abundantly clear that this does not give any assistance to the, learned counsel for the respondent.

4. It is urged by respondent's counsel that the question of recovery of Rs. 487/8/- cannot be raised unless the Postal Certificates which the defendant Badri Parsad presented are returned to him. It is, however, conceded by the learned counsel for the respondent that Badri Parsad was entitled to present for encashment those postal certificates even at the end of the 14th year or on the date on which he presented them. If the Postal Department had neglected to encash the certificates when they were presented on the date of their presentation Badri Parsad could have had a reasonable grievance to make. The Postal Department had no other option but to encash them. But Badri Parsad had no right to receive an excess payment. It was then urged that Badri Parsad offered to keep the amount with the Postal Department in the shape of cash certificates but the Department replied that this could not be done under the rules. In this state of fact Dhansingh Yadav and Ramdayal Sakarwal having been injured on account of the non-fulfilment of liability by Badri Parsad are entitled to institute the suit and the learned Civil Judge, was in error when he held that they had no locus standi to institute the suit.

5. The learned counsel for the respondent then urged that the suit may fail as it is premature. ' I have already noticed that the suit was instituted on 1-12-1953. The recoveries commenced from the salary of the two employees, the plaintiff-appellants before me, from September, 1953- From a certificate on record (Ex. 4) it is proved that a sum of Rs. 487/8/- has been deducted from the salaries of Dhansingh Yadav and Ramdayal Sakarwal. The plea that the suit was pre-mature was raised before the trial Court but at the time of the decision this plea was abandoned. A reference to the decision on issue No. 7 by the trial Court may be made for this purpose. The learned counsel urges that it was raised in the first appellate court but it was not decided by the Court. A plea which he abandoned in the trial court, it is extremely doubtful if it was available to the defendant in the first appellate court (sic). Be that as it may, a reference to Ex. 4 would show that by the time the suit came to be decided all the instalments for the payment of Rs. 487/8/- were paid. A court is competent to take into account facts subsequent to the institution of a suit provided such cognizance had the effect of eliminating multiplicity of proceedings. Both on account of the fact that the plea was abandoned in the trial court and also because by the time the suit came to be decided all the instalments were fully paid, in my opinion, the trial court and the first appellate court were fully justified in not considering this aspect of the matter. If the plea was not abandoned the plaintiffs might have even sought an appropriate amendment of the plaint. There is no substance in this argument of the respondent.

6. The next argument urged by the learned counsel for the respondent is that the suit must fail because of the non-joinder of the Union of India. Order 1 Rule 9 C. P. C. lays down that no suit shall be defeated by reason of the mis-joinder or non-joinder of parties and the Court may in every suit deal with the matter in controversy so far as regards the rights and interests of the parties actually before it. A failure to join any party, therefore, does not on that account alone entail the dismissal of a suit. There is a distinction between the non-joinder of a necessary party and that of a proper party. A party is necessary for the purposes of a litigation when in his absence the Court cannot pass an effective decree at all and a party is proper whose presence would assist the Court in adjudication of the controversy. The first question that arises for consideration is whether the Union of India was a necessary party. At its best' the Union of India compensated its loss by collecting it from the plaintiffs, and on the basis of their certificate they have no interest left in the resultant effect of the mistake of over-payment. The presence of the Union of India was, therefore, not necessary for an effective adjudication of the cause between the parties. If the Union of India was not & necessary party, nothing turns on its absence even if it is assumed that it was a proper party. For the determination of the liability of the plaintiffs qua the defendant; the presence of the Union of India was not necessary. The enforcement of liability being available to the plaintiffs against the defendant according to paragraph 3 of section 73 the matter could have been adequately adjudicated. This argument of the learned counsel for the respondent has also no substance and must be rejected.

7. No other point was pressed before me by the parties.

8. The result is that this appeal is allowed, the judgment and decree of the Senior Civil Judge are set aside and that of the trial Court restored.

The plaintiffs shall get costs of all the three courts from the defendant.

9. The learned counsel for the defendant prays for leave under Section 18 of the Rajasthan High Court Ordinance. Leave is allowed.