Madanlal Sohanlal vs The Province of West Bengal

G.K. Mitter, J.—This is a suit for recovery of a sum of Rs. 37,088-12-6 from the Province of West Bengal and the Province of East Bengal.

The Plaintiff alleges in the plaint that the Province of Bengal, as it then was prior to the partition of India, sold and/or agreed to sell to it in Calcutta 22,000 mds. of Bajra at Rs. 2-13 per maund on or about the 9th August, 1944. Pursuant to this the Plaintiff paid to the then Province of Bengal Rs. 61,875 as the price of the entire quantity but got delivery of only 8,812 mds. 35 srs. of Bajra against a delivery order for 22,000 mds. given to the Plaintiff. There was thus a failure to deliver the balance of 13,187 mds. 5 srs. The Plaintiff claims the sum of Rs. 37,088-12-6 as refundable on account of moneys had and received by the Government to the use of the Plaintiff or in the alternative as the amount paid by the Plaintiff, the consideration for which had totally failed. The Plaintiff also relies on a letter of 6th August, 1947, written by an Assistant Secretary to the Government of Bengal as containing an acknowledgment of liability. According to the plaint both the Defendants are liable to discharge the debts and liabilities of the former Province of Bengal in accordance with the provisions of the Indian Independence (Rights, Property and Liabilities) Order, 1947. The Province of East Bengal has not entered appearance or filed any written statement but the Province of West Bengal is contesting the suit. By the written statement filed herein the contesting Defendant pleads that 13,187 mds. 5 srs. of Bajra mentioned in paragraph 4 of the plaint -was declared unfit for human consumption and as such delivery thereof could not be given to or taken by the Plaintiff. With regard to the allegations about the sale or the agreement to sell and the other averments the Defendant is content to say it does not make any admission in regard to them. The Defendant further denies its liability to refund sum claimed in the plaint either as money had and received or for moneys paid, the consideration for which has failed.

No issue was raised about the terms of the contract or the payment of the money or the failure to deliver 13,187 mds. 5 srs. of Bajra. Counsel appearing for the Defendant suggested only two issues which were accordingly framed as below:

Was there an acknowledgment of liability as alleged in paragraph 7 of the plaint?

Is the Defendant No,. 1 liable to meet the Plaintiff''s claim as alleged in the plaint?

The documents disclosed consist of a few letters the following being the material ones: On the 9th August, 1944, the Plaintiff wrote to V.N. Rajan, Controller of Civil Supplies, Calcutta, in the following terms:

We purchased 22,000 mds. of good Bajra from you at Rs. 2-13 only per maund. We are herewith sending our cheque No. CR-07S955 in favour of the Controller of Finance, Department of Civil Supplies, Bengal, drawn on the United Commercial Bank Ltd. for Rs. 61,875 only, being the total price for the quantity purchased by us. After actual delivery, proper adjustments will be made.

If we get less than 22,000 mds. we shall get a refund of the proportionate amount of the price and vice-versa.

We would request you to kindly pass orders to deliver up the goods to us.

No reply to this letter is to be found in the brief but there is a letter from the said Controller of Distribution bearing the same date and worded as follows:

Herewith your Delivery (Received by you from office yesterday) Order for 22,000 mds. of Bajra.

It is understood that if you clear more than 22,000 mds. you will obtain a certificate to that effect from the officer in charge, R.B. Gardens and pay us the differrence, Clearance sould be made within 48 hours from today.

The receipt for Rs. 61,875 runs as below:

Office of the Controller of Wheat and Wheat Products, Bengal, P34, Mission Row Extension, Calcutta.

Received with thanks from M/s. Madanlall Sohanlall by Ch. No. CH078955 on United Commercial Bank the sum of Rupees Sixty-one thousand eight hundred and seventy-five only in part payment of about 22,,000 mds. J. Bajra, sold by Auction.

Sd. K.C. Chakravorty,

Sd. Cashier.

for Controller of Finance, Bengal.

On the 6th August, 1947, one M. Sarkar, Assistant Secretary to the Government of Bengal, wrote a letter to the Accountant-General of Bengal stating that he had been directed to convey the sanction of Government to the refund of Rs. 37,088-12-6 to Messrs. Madanlall Sohanlall out of a sum of Ra. 61,875 deposited by cheque dated 9th August, 1944, under the head "85A-Capital Outlay" as the price of 22,000 mds. of Bajra. A copy of this letter was sent to the Plaintiff. Then came the partition of the Province of Bengal into two distinct and separate provinces and on the 23rd December, 1947, the said M. Sarkar wrote to Messrs. Madanlall Sohanlall to the effect that the Bill for Rs. 37,088-12-6 had been submitted to the Application Committee, Writers'' Buildings, for orders. The other letters in the brief are copies of the notices u/s 80 sent to the Secretary, Department of Civil Supplies, Province of West Bengal, as also to an officer of the same cadre of the Province of East Bengal. Having failed to obtain any satisfaction from any of the Governments the Plaintiff instituted this suit on the 3rd November, 1949 and the written statement herein was. filed on the 7th March, 1950;

The Plaintiff did not examine any witness but the Defendant examined Monoranjan Sarkar, the officer responsible for writing several of the letters referred to above. This witness stated that in the year 1944 Bajra had been stored by the Government of Bengal in order to relieve the shortage of food which was then prevalent and in order to alleviate the famine conditions which were then existing. He was asked in examination-in-chief as to whether he remembered that the Plaintiff had entered into a contract with the Government of Bengal to purchase 22,000 mds. of Bajra and the answer was that they, meaning the Plaintiff, had'' offered to purchase. He admitted that the whole of the quantity deliverable was not given the Plaintiff and the benefit of that money had been received by the then Government of Bengal. In cross-examination he was shown a letter dated the 6th August, 1947, already mentioned and he agreed that the original document bore his signature.

There can be little doubt that there was an acknowledgment of liability by the Province of Bengal prior to the partition of India by the letter dated the 6th August, 1947. The only question which was canvassed at the Bar somewhat elaborately was whether after the partition of India the Province of West Bengal or the State of West Bengal was or is liable for meeting the Plaintiff''s claim in this case.

It is not in dispute that if the claim of the Plaintiff falls under Article 8 of the Indian Independence (Rights, Property and Liabilities) Order, 1947, it cannot be entertained against the Province of West Bengal, but if the claim is one which is properly governed by Article 10 of the Indian Independence (Rights, Property and Liabilities) Order, 1947, it would be a liability of the Province of West Bengal.

If the cause of action had been based on a breach of contract the. Plaintiff could not have succeeded in the suit against the Province of West Bengal unless it was in a position to prove further that the contract was for a purpose which as from the 15th August, 1947, was exclusively a purpose of that Province within the meaning of Article 8 of the Indian Independence (Rights, Property and Liabilities) Order 1947.

It was argued on behalf of the Defendant that the documents disclosed show that under the contract between the parties the Plaintiff had a right to get a refund in case less than 22,000 mds. of Bajra was delivered to it and vice Versa. Unfortunately, however, for the Defendant there was no issue raised as to the terms of the contract. By its written statement the Defendant was content to plead that it did not make any admission in regard to paragraphs 2; 3, 5 and 7 of the plaint. Consequently I must proceed on the assumption that the terms and conditions of the contract are those set out in paragraph 2 of the plaint and it does not lie in the mouth of the Defendant No. 1 to urge that the terms of the contract are to be found in the letters contained in the brief of correspondence marked Ex. A. It would appear from the documents disclosed that the stock of Bajra lying at the Botanical Gardens in Calcutta was disposed of by public auction and acquired by the Plaintiff. The terms and conditions under which the. auction was held do not appear from any document disclosed herein and the Plaintiff''s letter to the Controller of Civil Supplies dated 9th August, 1944 or the letter of the Controller of the same date cannot be held to constitute the bargain between the parties. A perusal of these two letters will show that the sale was already a fait accompli.

The cause of action for this suit as framed is for moneys had and received by the former Government of Bengal to the use of the Plaintiff or alternatively as the amount paid by the Plaintiff, the consideration for which has totally failed. It, therefore, becomes necessary to examine the nature of the Plaintiff''s cause of action.

An action for money had and received was the remedy originally available under the English law in cases of quasi-contracts. Many attempts have from time to time been made to define this term. Professor Winfield defines Quasi-contracts as follows: "Liability not exclusively referable to any other head of the law,, imposed upon a particular person to pay money to another particular person on the ground that non-payment of it would confer on the former an unjust benefit." (1)

The substratum of the law of quasi-contracts seems to be that a person ought not to be allowed to retain benefits or advantages unjustly at the cost of another and that in such cases there arises a right to obtain restoration of the benefit or the advantage. One of the forms of action which used to be availed of under the old English law in cases of this type was the action of accounts. This was usually resorted to in a case where A received money on behalf of B and failed to account for it or where A handed over money to B with a request to pay it to C in which case C could recover money from B by such an action. Another form was the action of debt which was used for the recovery of statutory penalties, forfeiture under bye laws, judgment debts etc. A still more popular form of action was that of an "indebitatus assumpsit" which really meant contractual duties implied from the acts of the parties. According to Winfield "indebitatus assumpsit" came to be used as a remedy on a contract genuinely implied, i.e., a contract founded not upon any fiction of law, but upon an interpretation of facts by the Court which led it to the genuine conclusion that the parties had actually agreed to enter into the transaction which the law inferred from their conduct to be a contract.

The development of this branch of law really starts from the judgment of Lord Mansfield in Moses v. Macferlan (1760) 2 Burr 1005 where his Lordship observed: "If the Defendant be under an obligation, from the ties of natural justice, to refund, the law implies a debt, and gives this action (indebitatus assumpsit) founded in the equity of the Plaintiff''s case, as it were upon a contract (quasi-ex-contractus, as the Roman law expresses it) "It lies only for money which, ex aequo et bono, the Defendant ought to refund. It does not lie for money paid by the Plaintiff, which is claimed of him as payable in point of honour and honesty, although it could not have been recovered from him by any course of law; But it lies for money paid by mistake; or upon a consideration which happened to fail; of for money got through imposition (express or implied) or extortion; or oppression; or an undue advantage taken of the Plaintiff''s situation, contrary to laws made for the protection of persons under those circumstances."

The above view of Lord Mansfield has been criticised by later Judges, some of whom have described it as too widely expressed. In Sinclair v. Brougham, (1914) A.C. 378 the above dicta of Lord Mansfield and the historical development of the law on the subject was examined at some length by the House of Lords. According to Viscount Haldane, L.C.: "Notwithstanding the wide scope of the remedy so described (indebitatus assumpsit) I think that it must be taken to have been given only, as I have already said, where the law could consistently impute to the Defendant at least the fiction of a promise. And it appears to me that as matter of principle the law of England cannot now, consistently with the interpretation which the Courts have placed on the statutes which determine the capacity of statutory societies, impute the fiction of such a promise'' where it would have been ultra vires to give it." In Sinclair''s case a Building Society borrowed money which it had no power to borrow and the House of Lords came to the conclusion that the lenders could not recover the amount lent as money received to their use as the law could not imply a promise to pay moneys, which the Society had no power to borrow. Agreeing'' with the order proposed Lord Sumner observed: "Historically, the actios lor money had and received was not devised by the Court of Chancery nor was it applied there either in form or in substance. It was a form of assumpsit, already old in Lord Mansfield''s time, and his own citation of earlier actions of this sort should be enough to show, if that were necessary! that he never thought otherwise. It was said to be a ''liberal'' action in that it was attended by a minimum of formality and was elastic and readily capable of being adapted to new circumstances. The action has been described as ''liberal'' because the party waives all torts, trespasses, and damages." His Lordship went on to discuss the various cases wherein Moses v. Macferlan (Supra) was dissented from and expressed the view that "There is no ground left for suggesting as a recognizable ''equity'' the right to recover money in personam merely because it would be the right and fair thing that it should be refunded to the prayer."

In Sinclair v. Brougham (Supra) the ratio decidendi was that an action for money had and received would not lie where the law could not imply a promise to pay moneys on the part of the Defendant. According to Chitty, "Aequum et bonnum or natural justice, however theoretically objectionable as vague and uncertain, may still play a part in the administration of this branch of the law." This has clearly been brought out in the case of Fibrosa Spolka Akcyjna v. Fairbairn Lawson Combe Barbowr Ltd. (1943) A.C. 32 and this case was relied on at the bar and will be dealt with by me hereafter.

An action for money had and received lies, according to Chitty, "When the Defendant has received money, which in justice and equity belongs to the Plaintiff, under circumstances which render the receipt a receipt by the Defendant to the use of the Plaintiff." An action will sometimes lie where although there has not been an entire failure of consideration-some part of the consideration has wholly failed. Thus, where the Plaintiff ordered and paid for certain goods, of certain specified weights at a certain price, but, on the arrival of the goods, it was discovered that less than the specified quantities had been shipped, it was held that the Plaintiff might recover the sum overpaid. In Deveux v. Connolly (1849) 8 C.B. 640 the Plaintiffs, merchants in London, ordered of the Defendant, a merchant at Singapore, two parcels of 25 tons and 150 tons respectively of terra japonica "provided it could be laid down at London, all charges included at 18s per ewt." The Defendant sent to the Plaintiffs invoices and bills of lading representing that two parcels, respective of those Weights, which had been shipped to their order, and, at the same time, drew bills upon them for the price, which the Plaintiffs paid. Upon the arrival of the goods in London the net weight proved to be 24 tons and 1323/4 tons only. The Plaintiffs took the goods and sold them; and then brought an action for money had and received to recover back the sum overpaid, as upon a partial failure of consideration. The Plaintiffs succeeded in getting judgment in their favour. In the words of Cresswell, J., it was "a simple case of failure of consideration; and the Plaintiffs are entitled to recover the excess as money had and received to their use."

The claim of a party who has paid money under a contract, to recover it on the ground that the consideration for which he paid it wholly failed came up for elaborate discussion in Fibrosa Spolka Akcyina v. Fairbairn Lawson Combe Barbwwr Ltd. (1943) A.C. 32 where the decision in the well-known case of Chandler v. Webster (1904) 1 K.B. 493 was overruled. In the Fibrosa case the Respondent had agreed to sell to the Appellants certain machinery for �. 4,800-0-0 of which one-third was to be paid with the order. Delivery was to be given within three to four months from, the settlement of final details and the goods were to be packed and delivered c.i.f. Gdynia in Poland. One of the conditions to which the sale was subject was

Should dispatch be hindered or delayed by any cause whatsoever beyond our reasonable control, including war a reasonable extension of time shall he granted.

Only �. 1,000 out of the sum of �. 1,600 to be paid with the order was in fact paid. War broke out between Germany and Poland on 1st September, 1939 and between Great Britain and Germany on 3rd September, 1929. On and after 23rd September, 1939, Gdynia was occupied by the Germans. The Plaintiffs claimed: - (a) damage for breach of contract, (b) specific performance, and (c) or alternatively return of � 1,000 with interest. The main defence taken was that the contract had been frustrated by German occupation of Gdynia in September, 1939 and the Appellants could not recover the sum of � 1,000. The trial Judge dismissed the action and his judgment was upheld by the Court of Appeal. The House of Lords reversed the decision of the Court of Appeal. According to Viscount Simon, "To claim the return of money paid on the ground of total failure of consideration is not to vary the terms of the contract in any way. The claim arises not because the right to be repaid is one of the stipulated conditions of the contract, but because, in the circumstances that have happened, the law gives the remedy." His Lordship went on to add: "It does not follow that because the Plaintiff cannot sue on the contract he cannot sue de-hors the contract for the recovery of a payment in respect of which consideration has failed." According to his Lordship, "Once it is realised that the action to recover money for a consideration that has wholly failed rests, not on a contractual bargain between the parties, but, as Lord Summer said in Sinclair v. Brougham (Spur) upon a notional or imputed promise to repay or if it is preferred to omit reference to a fictitious promise, upon an obligation to repay arising from the circumstances, the difficulty in the way of holding that a prepayment made under a contract which has been frustrated can be recovered back appears to me to disappear." His Lordship approved of the decision in Rugg v. Minett (1809) 11 East 209. In this case turpentine was sold in casks by auction at a certain price per cwt. Excepting two the quantity contained in each cask was marked on the outside; the casks were to be taken at this marked quantity except the last two, out, of which the seller was to fill up the rest before they were delivered to the purchasers and the deposit was to be paid by the buyers at the time of the sale and the remainder within 30 days of the delivery of the goods. The buyers had the option of keeping the goods warehoused at the charge of the seller for these 30 days. The buyers employed the warehousemen of the seller as their agents, who filled up some of the casks out of the last two but left the bungs out in order to enable the Custom House Officer to gauge them; but before they could be filled up, a fire occurred in the warehouse within the thirty days. It was held that the property had passed to the buyer in all casks which were filled up because nothing remained to be done by the seller but the property in the casks not filled up remained with the seller. In the result the buyer''s action for moneys had and received by the sellers to their use was allowed to succeed only in respect of the sum attributable to the casks which had not been filled up.

According to Lord Macmillan, "Neither party was to blame for circumstances arising out of hostilities which rendered the contract impossible of performance." His Lordship thus summarised the position-"In return for their money the Appellants have received nothing whatever from the Respondents by way of fulfilment of any part of the contract. It is thus a typical case of total failure of consideration. Money paid must be repaid." Lord Wright dwelt at some length on the history of this form of action and observed: "The writ of indebitatus assumpsit involved at least two averments, the debt or obligation and the assumpsit. The former was the basis of the claim and was the real cause of action. The latter was merely fictitious and could not be traversed, but was necessary to enable the convenient and liberal form of action to be used in such cases. This fictitious assumpsit or promise was wiped out by the Common Law Procedure Act 1852 Yet the ghosts of the forms of action have been allowed at times to intrude in the ways of the living and impede vital functions of the law The claim for money had and received always rested on a debt or obligation which the law implied or more accurately imposed, whether the procedure actually in vogue at any time was debt or account or case or indebitatus assumpsit." His Lordship further observed that where the Defendant had received the Plaintiff''s money in advance on account of the purchase price and the contract, became abortive for any reason not involving fault on the part of the Plaintiff there was no intention to enrich the Defendant and the position must be the same where the consideration, if it was severable, had entirely failed as to the severable residue as in Rugg v. Minett (Supra). According to His Lordship, "The same event which automatically renders performance of the consideration for the payment impossible, not only terminates the contract as to the future, but terminates the right of: the payee to retain the money which he has received only on the terms of the contract performance."

The Indian Contract Act contains some provisions regarding the obligation to refund moneys or to restore benefit in cases which under,the law of England would give rise to causes of action for moneys had and received. Section 65, Section 70 and Section 72 of the Contract Act afford examples in point. Section 73 provides for payment of compensation in cases where obligations resembling those created by contract have been incurred and not discharged.

It will be noticed that in the Fibrosa case (Supra), their Lordships treated a claim for refund of moneys paid in respect of a contract which had been frustrated by reason of commencement of hostilities as a claim dehors the contract and as arising from the fact that there was a total failure of consideration. The case also shows that such a claim ought still be allowed if the failure of consideration was not total and absolute but related only to a severable portion of the contract as in the case of Rugg v. Minett (Supra). The obligation to repay whether dependent upon a fiction of law of implied promise to pay or whether based upon a total failure of consideration, is clearly without the four corners of the contract and as such cannot be said to come within the ambit of Article 8 of the Indian Independence (Rights, Property and Liabilities) Order, 1947.

In my view such a liability would be in respect of an "actionable wrong other than breach of contract" within the meaning of Clause 10 of the said Order. What is an actionable wrong other than a breach of contract has been the subject-matter of elaborate discussion in the case of The State of Tripurm v. The Province of East Bengal (1951) S.C.R. 113 Mukherjee, J., as he then was, observed that this was not meant to include only cases of torts and that "in any case where the appropriate remedy was not a claim for unliquidated damages but for injunction or some other relief, it would not rank as tort though all the same it would be an actionable wrong." It has been held by Bose, J. in Bindusthan Housing and Land Development Trust Ltd. v. State of West Bengal (1954) 59 C.W.N. 405 that the liability to pay compensation for requisition of a house under the Defence of India Act, 1939, is an actionable wrong within the meaning of Clause 10. I myself have held in B.K. Mondal and Sons v. State of West Bengal Suit No. 972 of 1949 (unreported), that the liability to pay compensation u/s 70 of the Contract Act also falls within this clause. There can be little doubt in view of the foregoing that the liability to restore or refund the money on failure of consideration would also fall to be similarly treated.

The answers to the issues raised are as follows:

There was an acknowledgment of liability as alleged in paragraph 7 of the plaint.

The Defendant No. 1 is liable to meet the Plaintiff''s claim under the provisions of Clause 10 of the Indian Independence (Rights, Property and Liabilities) Order, 1947. There will, therefore, be a decree for Rs. 37,088-12-6 against the Defendant No. 1 with interest on judgment at 6 per cent, and eosts. The money is to be paid within three months from date. Certified for 2 Counsel.