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Andhra Paper Mills Co. Ltd. v. State Of Andhra

Andhra Pradesh High Court
Mar 25, 1960
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Judgment Summary — Bhimasankaram, J.

Factual and Procedural Background

The suit giving rise to this appeal was filed by the appellant (the Official Liquidator of the Madras High Court) against the State (originally State of Madras, later State of Andhra and then Andhra Pradesh) for recovery of Rs. 25,000 paid by the plaintiff to the firm Short, Bewes & Co. The background facts as stated in the opinion are:

  • The Andhra Paper Mills Co. Ltd. went into liquidation; certain movable and immovable properties belonging to the company were purchased from the Official Liquidator by the State of Madras in 1948 for Rs. 25 lakhs.
  • The Government obtained possession on 17-5-1948 and the purchase money was paid to the plaintiff within about six months; no sale deed was executed until 1952–1953.
  • In mid-1952 (the plaint refers to "some time in June 1952" and correspondence in July 1952), Short, Bewes & Co., the plaintiff's legal advisers, forwarded a draft sale deed to the Government Pleader seeking approval and indicating arrangements were being made for execution and registration (and that the Government should be ready with Rs.10,000 as registration charges).
  • The Government Pleader advised on 9-12-1952 that the money was ready; the document was registered on 7-1-1953 with the Government paying necessary registration charges (and exempt from stamp duty).
  • After registration, Short, Bewes & Co. presented a bill for Rs. 25,000 for their services in preparing the deed. The plaintiff paid that sum and sued the State for recovery, pleading entitlement under Section 69 or Section 70 of the Indian Contract Act.
  • The trial court dismissed the plaintiff's suit; the present opinion is the appellate court's consideration of that dismissal.

Legal Issues Presented

  1. Whether the plaintiff (Official Liquidator) could recover from the State the sum of Rs. 25,000 paid to Short, Bewes & Co. under Section 70 of the Indian Contract Act, 1872 (i.e., whether the plaintiff "lawfully did anything for another, not intending to do so gratuitously" and the State "enjoyed the benefit" thereby obliging the State to compensate).
  2. Whether the plaintiff could recover the same amount under Section 69 of the Indian Contract Act, 1872 (i.e., whether the plaintiff was "interested in the payment" and the State was "bound by law to pay" such sum, entitling the plaintiff to reimbursement).
  3. Ancillary question: the relevance of the buyer/seller duties under Section 55 (clause (d), sub-section (1)) of the Transfer of Property Act concerning execution of conveyance and the obligations (or lack thereof) on buyer to tender a conveyance.

Arguments of the Parties

Appellant's (Plaintiff's) Arguments

  • The plaintiff asserted that Short, Bewes & Co. prepared a draft sale deed and forwarded it to the Government for approval; the Government Pleader approved the draft and arrangements were made for execution and registration.
  • The plaintiff relied on Sections 69 and 70 of the Indian Contract Act as the legal basis for recovery: (i) under Section 70, that something was lawfully done for the Government (not gratuitously) and the Government benefited and thus must compensate; and (ii) under Section 69, that the plaintiff was interested in paying and the Government was bound by law to pay, entitling reimbursement.
  • The plaint alleged that as vendees the Government were bound to meet all charges and expenses of sale "in the absence of a contract to the contrary" and that the purchaser-Government should bear all expenses of sale or pay for their performance by another.

Respondent's (State / Defendant) Position and Relevant Factual Points Noted in the Opinion

  • The opinion records that certain factual averments in the plaint were "not denied by the defendant" (for example, that a draft was forwarded to the Government Pleader in July 1952), but the Government had its own legal advisers and there is no contention that the Government asked Short, Bewes & Co. to render services for it.
  • The trial court found no proof that Short, Bewes & Co. sent a fresh draft in June 1952 as alleged and observed that in their four communications to the Government Pleader or Solicitor there was no hint the Government would be exposed to a claim of the magnitude sued for.
  • Evidence indicated the junior partner of Short, Bewes & Co. had substantially transcribed a standard form (Form No. 208 in Underhill's Encyclopaedia of Forms and Precedents) when submitting the draft in 1948; there was no evidence as to the precise nature of services rendered to the Government at registration.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Ramtuhul Singh v. Biseswar Lal, 2 Ind App 131 (Privy Council) Principle that mere benefit to a person by another's expenditure does not automatically create an obligation to repay; to sustain a suit there must be an obligation, express or implied, to repay. The court relied on this authority to emphasize that even if the Government benefitted by steps taken (or monies expended), that alone does not establish a legal obligation to reimburse the plaintiff; there must be an express or implied obligation to repay.
Sheo Nath Prasad v. Sarjoo Nonia, AIR 1943 All 220 (Full Bench) Discussed in relation to the applicability of Sections 69 and 70 of the Contract Act; cited for the proposition that payment to a third person for another may be governed by Section 69 rather than Section 70. The court referred to this case when observing doubt whether payments made to a third person on behalf of another fall within Section 70, suggesting Section 69 may be the more appropriate provision to consider.

Court's Reasoning and Analysis

The court proceeded by first clarifying the law on buyer and seller duties and then analysing the applicability of Sections 70 and 69 of the Indian Contract Act to the pleaded facts.

On buyer/seller obligations (Transfer of Property Act, s.55(1)(d)):

  • The court quoted clause (d) of sub-section (1) of Section 55 of the Transfer of Property Act: the seller is bound on payment or tender of the price to execute a proper conveyance when the buyer tenders it to him at a proper time and place.
  • The court explained the common misstatement in commentaries that "it is the duty of the buyer to tender a conveyance." It clarified that this does not mean the buyer is under a legal obligation enforceable against him to tender a conveyance; rather it means the seller cannot complain that the buyer failed to tender if the buyer does not do so.
  • Thus, even if a seller prepares a conveyance, that act does not equate to performing an act which the buyer was bound by law to perform; no one can compel the buyer to tender a conveyance.

On Section 70 (conditions and application):

  • The court listed the conditions required for Section 70 to apply: (a) a person must do something for another or deliver anything to him; (b) it must be lawfully done; (c) it must not be intended to be gratuitous; and (d) the other person must enjoy the benefit.
  • Applying those conditions, the court found the plaintiff did not "do" anything for the Government in the relevant sense: the plaintiff paid Short, Bewes & Co., but the plaint did not allege that the plaintiff himself performed services for the Government.
  • The court stressed that Short, Bewes & Co. prepared the draft under instructions of their client (the liquidator/plaintiff), and a solicitor preparing a document under instructions acts for that client, not for a third party. Therefore Short, Bewes & Co. could not reasonably be said to have been acting for the Government.
  • Consequently, payment by the plaintiff to his own solicitors cannot be equated with doing something for the Government such that the Government "enjoyed the benefit" in the sense required by Section 70.
  • The court also expressed doubt whether payment to a third person for another is properly covered by Section 70 at all, citing Sheo Nath Prasad as authority for thinking Section 69 may be more appropriate in such circumstances.

On Section 69 (conditions and application):

  • To succeed under Section 69, the claimant must establish (a) that he was interested in paying the money and (b) that the other person (here, the Government) was bound by law to pay it.
  • The court found neither condition fulfilled. It held that the plaintiff was not "interested" in paying money to Short, Bewes & Co. for services purportedly rendered to the Government — at best the services were rendered to the plaintiff under his instructions and the solicitors must look to their client for payment.
  • As to the second condition, there was no contention or evidence that the Government ever asked Short, Bewes & Co. to provide services; the Government had its own legal advisers. The court therefore concluded the Government was not shown to be "bound by law" to make the payment to those solicitors.

Additional factual and evidentiary observations:

  • The court noted the trial court's finding that there was no proof of a fresh draft being sent in June 1952 as alleged by the plaint; the court also noted that the firm's communications to government contained no indication that the Government would be liable for the substantial claim.
  • There was no evidence about the precise nature of the services rendered to the Government at registration; the Government must have been represented by its own legal agents at registration, and it would be unreasonable to expect the Government to pay both its own advisers and another firm for overlapping work.
  • The court observed that Short, Bewes & Co.'s initial draft (in 1948) substantially transcribed a standard form and that a seller may well consult his own legal advisers before executing a conveyance; such acts by the seller's solicitor do not discharge any obligation towards the buyer.

On the basis of the above legal reasoning and the trial court's factual findings, the court concluded that the plaintiff had failed to establish a right to recover the Rs. 25,000 under either Section 70 or Section 69.

Holding and Implications

Holding: The appellate court affirmed the decision below and dismissed the appeal, directing that the appeal be dismissed with costs.

Implications:

  • Direct effect: The plaintiff's suit for recovery of Rs. 25,000 (the sum paid to Short, Bewes & Co.) fails; the trial court's dismissal is upheld and the plaintiff remains liable for the amount he paid to his solicitors.
  • Legal principle emphasized: Mere benefit to a party from monies paid by another does not create an obligation to repay in the absence of an express or implied obligation; preparation of a draft by a solicitor under instructions of his client is an act done for that client and not for a third party, so payment to such solicitor is generally recoverable from the client rather than from a third person who may later benefit.
  • No broader precedent was announced beyond applying established provisions (Sections 69 and 70 of the Indian Contract Act and Section 55 of the Transfer of Property Act) to the particular facts; the court expressly treated the claim as failing on the pleaded facts and evidence rather than establishing a novel rule.

Result recorded in the opinion: "Appeal dismissed." (Paragraph 27.)

Show all summary ...

Bhimasankaram, J.:— The appellant filed the suit out of which this appeal arises against the State of Andhra, now Andhra Pradesh, for recovery of a sum of Rs. 25,000/- in the following circumstances.

2. The Andhra Paper Mills Co. Limited went into liquidation and the appellant who was the Official Liquidator of the Madras High Court was in charge of the liquidation proceedings. Certain properties, moveable and immovable belonging to the Company were purchased from him by the State of Madras for a sum of Rs. 25 lakhs in the year 1948 and the transaction was approved by the Madras High Court which at that time had jurisdiction in the matter. The Government obtained possession of the properties purchased by them on 17-5-1948 and the purchase money was fully paid to the plaintiff in about six months later. No sale deed, however, was drawn up until the year 11952. According to the plaint case (and this averment is not denied by the defendant) in July 1952 Short, Bewes and Co., who were the legal advisers of the liquidator, forwarded to the pleader doing Government work in the State of Madras a draft of the sale deed to be executed by the liquidator and in their letter accompanying it stated that arrangements were being made for the due execution of the deed and that the Government should be ready with the sum of Rs. 10,000/- being the registration charges for the document of sale. On 9-12-1952 Messrs Short, Bewes and Co., were advised by the Government Pleader that the money was ready and a date might be fixed for the registration of the deed. The document was actually registered on 7-1-1953, the Government paying only the necessary registration charges, being exempt from liability to pay the stamp duty.

3. Some time after the registration, Messrs Short, Bewes and Co., submitted to the plaintiff a bill for a sum of Rs. 25,000/- for their services. In preparing the deed. The plaintiff paid the sum and, as according to him, all the expenses in connection with the conveyance should be incurred by the vendee, he filed the present suit for the recovery of that sum from the State of Andhra (since, the State of Andhra Pradesh) which is answerable under law — this is not in dispute — for all the liabilities that the Madras State should have carried with regard to this matter but for the Andhra State Act No. XXX of 1953.

4. The case of the plaintiff is that Messrs Short, Bewes and Co., submitted a draft sale deed for approval of the Government and that the legal advisers of the Government, after revising it, approved of it and it was that draft that was ultimately engrossed upon the deed that was registered. He says that he is entitled to claim the sum from the State either under Section 69 or under Section 70 of the Indian Contract Act. Before we enter into the merits of the claim, we consider it necessary to read the relevant passage in the plaint. In paragraph 4 of the plaint it is stated as follows.—

“The plaintiff submits that although the Government entered into possession of the Mills as early as May 1948, the document of sale was not executed or registered till the plaintiffs legal Advisers Messrs Short Bewes and Co., moved in the matter some time in June 1952, sending a draft sale deed to the Government Pleader. In so doing they never intended to do anything gratuitously. The Government Pleader, acting for the defendant-Government, replied on 18-7-1952 intimating that the defendant duly approved of the draft sale deed and that necessary arrangements may be made for the execution of the deed by the plaintiff”.

5. In para 6 of the plaint, it is stated that the Government.

“as vendees were bound to meet all the charges and expenses of sale, in the absence of a contract to the contrary.”

6. This point is amplified in para 7 of the plaint, wherein it is asserted that

“the purchaser-Government should bear all the expenses of sale and that it was their duty to tender a proper conveyance to the plaintiff and that the party so charged with that duty must perform the duty themselves or pay for its performance by another.”

7. In view of these allegations as to a buyer's duties, we would first refer to Section 55 of the Transfer of Property Act which enacts the law relating to the rights and liabilities of buyer and seller in the absence of a contract to the contrary. The portion of that section which is relevant is clause (d) sub-section (1) of that Section which says that the seller is bound on payment or tender of the amount due in respect of the price, to execute a proper conveyance of the property when the buyer tenders it to him for execution at a proper time and place.

8. It is found stated in some of the commentaries of the Contract Act and also in some cases that it is the duty of the buyer to tender a conveyance. This statement is liable to be misunderstood. It does not mean that the buyer is under an obligation to the seller to tender a conveyance and that if he does not do it, the seller can compel him to do so it really means that the seller himself is not under a duty to tender a conveyance and that the buyer, if he has not tendered a conveyance, has no right to complain that the seller has not executed one.

9. Therefore it cannot be said that if a seller himself prepares a conveyance, he is doing something which the buyer is under law bound to do. It is true that as between the seller and buyer, the seller need not do anything at all as regards the tendering of a conveyance. If the buyer is not interested in obtaining a conveyance, he takes the consequences whatever they are. But he is not compellable by anybody to tender it. In the present case the Government could have waited indefinitely without asking for the execution of a conveyance although it was manifestly to their interest to take a sale deed; but nobody could compel them to do it; nor can it be said that the law required them to do so.

10. We shall now proceed to consider the applicability of Sections 69 and 70 of the Indian Contract Page: 59Act to the facts of the case which, we may say, are not really in dispute. These sections are in these terms:

“69. A person who is interested in the payment of money which another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the other.

70. Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.”

11. We shall deal first with the claim under S. 70 because it is more convenient to do so. The conditions necessary for the applicability of S. 70 are these: A person should do something for another person or deliver anything to him; what he does or delivers should have been lawfully done or delivered; he should not have intended to do it gratuitously; the person for whom the tiling is done or to whom the thing is delivered should have enjoyed the benefit thereof.

12. Now in the present case, what has happened is that the plaintiff has paid a sum of money to Short, Bewes & Co. He has not delivered anything to the Government. The question therefore is whether, in making the payment the plaintiff could be said to have done anything for the Government. In the allegations above extracted from the plaint, there is no statement that the plaintiff himself did anything for the Government. What is stated in paragraphs 4, 6 and 7 is that Short, Bewes & Co., when they prepared the theft sale deed did not intend to do it gratuitously and as it was the duty of the Government to rentier a proper conveyance to the plaintiff, they must either perform that duty or pay for its performance by another. The language used in these paragraphs would seem to indicate a claim rather under S. 69 than one under Section 70 of the Contract Act, although the words “not intending to do so gratuitously” which occur in S. 70 are adopted in paragraph 4 of the plaint.

13. It is the case of the plaintiff himself, as stated by P.W 1 (a partner of the liquidator) that it is the liquidator who instructed Short, Bewes & Co., to prepare a draft and send it on to Government for approval. From the evidence it would appear that in the year 1948, Short, Bewes and Co., forwarded a draft to the then Government Pleader, but it is not made clear as to what happened to that. Indeed the plaint makes no mention of that draft.

14. The plaint, as is clear from the allegations in para 4 quoted above, refers to the sending of a draft sale deed some time in June 1952. It is with reference to that draft that P.W 1 has stated that the liquidator gave instructions to his legal advisers to prepare one and send it on to the Government for its approval. If, therefore, Short, Bewes, & Co., prepared a draft in the year 1952, they did so under instructions of their own client. A solicitor when he prepares any document under instructions from his client is acting only for him and not for any other.

15. So Short, Bewes & Co., in preparing the sale deed, cannot be said to have done it for a third party, that is for the Government. Nor can it be reasonably said that when the liquidator paid Short, Bewes & Co. for that service he was making the payment for another; still less can it be said that by that payment, as such, the Government received and enjoyed any benefit Moreover as observed by the Privy Council in Ramtuhul Singh v. Biseswar Lal, 2 Ind App 131:

“..it is not in every case in which a man has benefited by the money of another, that an obligation to repay the money arises………. To support such a suit there must be an obligation express or implied to repay.”

16. It is no doubt true that a solicitor is not to be supposed to have intended to do any professional service gratuitously but if he was doing it under instructions from his client, he must look to his own client for reimbursement. If the solicitors in this case forwarded the draft deed to the Government they did so at the request of their client. Although the buyer cannot insist that the seller should tender a conveyance, he may well accept one that the seller tenders to him. The correspondence would show that the Official Liquidator being an officer under the supervision of the Court was anxious to complete the transaction although he had already been paid the full purchase money. If one looks at the matter from the point of view of an ordinary vendor and vendee, the plaintiff could hardly be said to have been any longer interested in what remained to be done to complete the transaction.

17. We may add that it is a matter of some doubt whether a case of payment of money to a third person for another would at all be covered by Section 70 of the Indian Contract Act, the more appropriate section being, perhaps, S. 69: vide Sheo Nath Prasad v. Sarjoo Nonia, AIR 1943 All 220 (FB).

18. Therefore, it seems to us that unless the plaintiff is able to establish that he has a right to recover this amount under S. 69, he must fail.

19. Now, in order that S. 69 may apply the person who claims reimbursement must satisfy these two conditions. He must show firstly that he was interested in paying the money and secondly, that the other person was bound by law to pay it. In our opinion, neither of these conditions of, S. 69 is fulfilled in this case. It cannot be said that the plaintiff was interested in paying any money to Short, Bewes & Co., for services rendered by them to the Government — even it, the services are to be considered as having been rendered to the latter.

20. He might himself have been liable to pay for the services asked for by him; and if he acted as the agent (by express or implicit authorization) of the Government, he would not be liable at all on his own account but in neither case could he be said to be interested in making a payment which another was bound to make, even if his solicitors rendered their services to the Government at his request. No case of compensation to an agent for expenses incurred by him on account of his principal has been set up in the plaint or raised in Page: 60the Court below or argued before us. Nor is it even asserted that the liquidator was in any way interested in paying the money.

21. As regards the second condition, the position is no less clear against the claim. The only reasonable way of attempting to show that this condition has been fulfilled is by showing that the Government was bound to make the payment to Short, Bewes & Co. Now it is not contended that the Government ever asked for the services of these solicitors: The Government had their own legal advisers and were in no need of other assistance: Nor can it be said, as already shown, that Short, Bewes & Co., were as a matter of fact acting for the Government.

22. We may observe before concluding that the plaint does not specify with any degree of clarity the basis upon which the claim is based.

23. We wish also to make here some observations on the factual aspects of the case. The trial Court has found that there is no proof that Short, Bewes & Co., sent a fresh draft sale-deed to the Government some time in June 1952, as alleged in para 4 of the plaint with respect to which the suit claim is made. It has pointed out, further, that although Short, Bewes & Co., addressed four communications to the Government Pleader or Solicitor in none of them was there any hint that the Government would be exposed to this heavy claim.

24. It is worthy of note that all that the junior partner of Short, Bewes & Co., Mr. Neelavantam seems to have done when he submitted the draft in 1948, was substantially to transcribe Form No. 208 in Vol. 12 Underhill's Encyclopaedia of Forms and Precedents, as borne out from Ex. B-3 dated 30-4-1948. That was subsequently revised and presumably adopted to suit the facts of the case by the Government Pleader and Solicitor. Then again, the claim made by the plaintiff, for the charges, as set out in Ex. A-9, a communication dated 20-1-1953 addressed by him to the Secretary to the Government of Madras, is for fees for “preparing and registering” the deed of conveyance.

25. There is no evidence as to the exact nature of the services Short, Bewes & Co., are supposed to have rendered to the Government at the time of the registration. P.W 1 has nothing to say about that, and the Government must undoubtedly have been represented by its own legal agents at the time of the registration. It cannot be right and proper that the Government should pay not only their legal advisers for revising a draft deed based upon a standard form and also for investigation of the title — which latter service really is perhaps the most substantial part of a legal adviser's service in a transaction of sale — and for assistance at registration as well as for service rendered by Short Bewes & Co.

26. The latter it would be reasonable to suppose, were doing services to their own client to help him to complete the transaction, although he was under no further obligation to the buyer than to execute a tendered conveyance. It may also be noticed that although the deed may have to be tendered by the buyer, the seller may well have to consult his legal advisers before executing it. In this case instead of waiting to approve a draft prepared by the Government's solicitors, the plaintiffs' solicitors copied out a standard form of conveyance? and despatched it to the Government Solicitor In-order that a proper conveyance may eventually result. When a seller's solicitor approves a draft prepared by the buyer or submits to the buyer a draft he is prepared to approve, he is surely not discharging any obligation towards the buyer. For these reasons, we think that the decision of the lower Court dismissing the plaintiff's suit was right and accordingly direct that this appeal should be dismissed with costs.

FD/G.M.J

27. Appeal dismissed.