Judgment Mahapatra, J. 1. Plaintiff Kuju Collieries Ltd. with its head office in Bombay is the appellant. It brought a suit (Title Suit No. 24 of 1954) in the court of the Subordinate Judge, Hazaribagh, against five defendants for declaration that the plaintiff had title to the mining properties in suit under the indenture of lease executed in favour of Hari Charan Singh J. D. and Co. Ltd. and for recovery of possession of the same. It also asked for mesne profits for three years preceding the date of the suit, amounting to Rs. 20,000 with future mesne profits and alternatively, it also asked for refund of Rs. 80,000, which it paid as a part of the consideration money to defendants 1 and 2 for the lease and also the money spent by it in connection with the lease. 2. The plaintiffs case, in brief, was that defendant 2, Raja Bahadur K. N. Singh, proprietor of an estate known as Ramgarh Raj in the Hazaribagh District, who was in possession of his estate in which coal mines were situate, gave a mining lease to defendants 3 and 4 in respect of an area described in the schedule of the plaint, which was to expire on the 6th of April, 1950. The plaintiff-company was carrying on business and running in the name of Hari Charan Singh J. D. and Co. Ltd. in 1949; and later, that name was changed to Kuju Collieries Ltd. in which name the present suit was instituted. On the 4th October, 1949, there was an agreement between defendant 2 in the name of defendant 1, a limited company created by him, and the plaintiff in the name of Hari Charan Singh J. D. and Co. Ltd. to the effect that on the expiry of the lease of defendants 3 and 4, defendant 1 will execute a lease in favour of the plaintiff. The premium and the royalty payable in that connection were also agreed upon and entered in the deed of agreement. Following that, on the 7th September, 1950, an indenture of lease was executed between defendant 1 and Hari Charan Singh J. D. and Co. Ltd. for a period of 99 years and for a consideration of Rs. 2,00,000, besides rents and royalties as mentioned in the document. Out of the aforesaid amount, a sum of Rs.
Following that, on the 7th September, 1950, an indenture of lease was executed between defendant 1 and Hari Charan Singh J. D. and Co. Ltd. for a period of 99 years and for a consideration of Rs. 2,00,000, besides rents and royalties as mentioned in the document. Out of the aforesaid amount, a sum of Rs. 50,000 was paid at the time of registration of that instrument on the 16th September, 1950, and subsequently another sum of Rs. 30,000 was paid by the plaintiff in August, 1951. The plaintiff executed a mortgage bond in favour of defendant 1 for the balance of the consideration money. In spite of these, possession was not delivered to the plaintiff; and hence the plaintiff instituted the present suit on the 22nd May, 1954. 3. The suit was contested by the defendants. The first two defendants pleaded that possession had been given in pursuance of the lease to the plaintiff, whereas defendants 3 and 4 raised the plea that the lease executed in favour of the plaintiff was void, as it was in contravention of the provisions of the Mines and Minerals (Regulation and Development) Act (Act LIII of 1948), 1948, and the Minerals Conservation and Development Rules made thereunder, which came into force on the 25th October, 1949. While this suit was pending, defendant 1 brought a mortgage suit against the plaintiff on the mortgage that they had executed. Both the suits were tried together and were dismissed on contest but without costs. The present appeal is only against the decree passed in the plaintiffs suit; and we shall confine to that. 4. The trial court dismissed the plaintiffs suit mainly on the ground that the plaintiff had acquired no title to the leasehold mining area because the lease that was executed in its favour was void; and neither declaration of title nor possession in respect of the property could be given to it. Its alternative prayer for refund of the part of the consideration which it had paid to the lessors was also refused as it was connected with the void lease, which could not be enforced in Court. Against this, the plaintiff has come in appeal. 5.
Its alternative prayer for refund of the part of the consideration which it had paid to the lessors was also refused as it was connected with the void lease, which could not be enforced in Court. Against this, the plaintiff has come in appeal. 5. Learned counsel conceded that the view taken by the trial Court of the lease was correct because under the Mines and Minerals (Regulation and Development) Act, 1948, and the rules framed thereunder, no mining lease (coal) can be given to a person without having a certificate of approval and without the previous permission of the Central Govt. The plaintiff did not have either. Thus neither the lease could be enforced nor possession secured through court on that basis. But, he urged that the alternative remedy, for which the plaintiff prayed in the suit, for refund of the part of the consideration, which it had paid, though in connection with the same lease, should have been allowed on principles embodied in Sections 65 and 72 of the Contract Act. He referred to the cases of Shiba Prasad Singh. V/s. Srish Chandra, AIR 1949 PC 297; the Sales Tax Officer, Banaras, V/s. Kanhaiya Lal Makund Lal, Saraf, AIR 1959 SC 135 ; and Mohan Manucha V/s. Manzoor Ahmad Khan, AIR 1943 PC 29 in support of that. Sections 65 and 72 are as follows :- - "65. When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it." 72. A person to whom money has been paid or any thing delivered, by mistake or under coercion, must repay or return it." Any payment made under a void agreement can be recovered under Sec. 65; and learned counsel pressed that the plaintiff lessee can have that benefit in this suit. Sec. 65 does not cover a payment which, by itself, is unlawful and forbidden. It will be fantastic if the void nature of a contract will give a benefit to a party which he could not have got even if the contract was valid.
Sec. 65 does not cover a payment which, by itself, is unlawful and forbidden. It will be fantastic if the void nature of a contract will give a benefit to a party which he could not have got even if the contract was valid. If a payment made or an advantage rendered could have been valid but for the voidness of the contract, that can be restored by the recipient to the other party according to the provisions under Sec. 65. In the present case, assuming that the lease was made to a holder of a certificate of approval and with the previous written permission of the Central Government, in which case it could have been enforceable, payment of premium under that lease would have been still invalid and punishable and could not have been enforced through court. What could not be recovered from the lessee in any event cannot be asked to be restored to him through court either in law or in equity. Thus, in my view, Sec. 65 will be of no help to the plff-lessee-appellant. 6. Section 72 does not speak of a contract, void or invalid. It only enables the payer to recover a payment made by mistake or under coercion from the payee. That payment may be in connection with a contract, directly or indirectly. The two illustrations given under that section clearly indicate that what could not have been legally due and could not have been enforced in law by the receipient may be recovered from him. The section does not make any distinction between mistake of law or mistake of fact. The mistake must be in thinking that the money paid was due when, in fact, it was not due. In case of coercion, of course, the position is different, because there the payer pays the money not under a mistake but under compulsion. 7. Sec.21 of the Contract Act provides that if a mistake of law has led to the formation of a contract, that contract will not be voidable for that reason. Sec.22 makes similar provision in case of a contract made under mistake as to a matter of fact.
7. Sec.21 of the Contract Act provides that if a mistake of law has led to the formation of a contract, that contract will not be voidable for that reason. Sec.22 makes similar provision in case of a contract made under mistake as to a matter of fact. If any payment is made under either of such two contracts, it cannot be said that the payment was made under mistake of law or of fact; it was paid because it was due under a valid contract; and if it had not been paid, the payment could have been enforced. The scope of the Section 72 is not limited to the non-existence of a subsisting contract. Even if there is a valid contract but a payment is made on a misconstruction of one of its terms under a misunderstanding of a scale of charges or with a mistaken belief of a particular liability. Section 72 will come to the aid of a payer of that nature. In the instant case, it is true that there was no subsisting contract but the premium was not paid by the plaintiff lessee under any mistake either in regard to the meaning of any term of that void contract or the calculation of the dues. Whether the plaintiff could plead that the contract was due to a mistake of law within the meaning of Sec.21 is a different matter; and we are not concerned with that, because that is not the case here, as it could not very well have been, because under the Mines and Minerals (Regulation and Development) Act it was void. But, for taking advantage of Section 72, the hurdle for the plaintiff-appellant is that there was no mistake or coercion under which the payment was made. There may have been some mistake about the formation of the principal contract, but no mistake there was about the money that was paid to the lessee. In that view of the matter, neither Section 65 nor Section 72 will come to the aid of the plaintiff to recover from the defdt. the part of the premium that he had paid. But the sections do not contemplate a payment which is prohibited by the statute. 8. None of the three decisions cited by learned counsel covers the situation like the present one.
the part of the premium that he had paid. But the sections do not contemplate a payment which is prohibited by the statute. 8. None of the three decisions cited by learned counsel covers the situation like the present one. In AIR 1949 PC 297, the mining lease stipulated rates of royalty payable by the lessee, which were linked with the rise or fall in the railway freight for carriage of coal from the mining area. There was a controversy between the parties as to which rate was applicable when the railway freight was once decreased and then increased. The lessee asked for refund of a certain sum of money, which was paid at a higher rate of royalty under a mistake. But that was refused. The lessor insisted upon the higher rate and instituted a suit for recovery of royalty at that rate. The trial Court held in favour of the lessee to the effect that royalty was payable at the lower rates during the period involved; but at the same time it held that the lessee was not entitled to set off past over-payments against such royalty as claimed in the suit. On that footing the suit was decreed for a certain sum of money. In appeal, this Court confirmed that though it allowed some additional interest. Both parties went to the Judicial Committee against that, the lessor in appeal and the lessee by way of a cross objection. Their Lordships took the same view as the courts below about the rate of royalty; but on the other aspect of the case, which is relevant for our purposes, it was held that the lessee was entitled to recover the excess payments by way of set off. Their Lordships observed that the lessee may have acted on inadequate information or may have taken a wrong view of the legal rights or he may have continued paying at me old higher rates without giving any thought to the matter; and it was clear that he had no intention to make a present to the lessor of money which was not due. The payment was obviously made under a mistake; and that was sufficient to bring the case within Section 72. What the lessee had paid in excess of the dues of royalty was not forbidden under the law.
The payment was obviously made under a mistake; and that was sufficient to bring the case within Section 72. What the lessee had paid in excess of the dues of royalty was not forbidden under the law. It was a mistake in regard to the rate of royalty to which the excess payment was due. In the instant case, the position is entirely different. In AIR 1959 SC 135 , a registered firm at Banaras, which was the respondent in the appeal, was assessed to sales tax for the years 1948-49, 1949-50 and 1950-51 on its forward transactions in Silver Bullion; and the deposits made by it on that account were appropriated towards the assessed liability. The Allahabad High Court on February 27, 1952, held in another case Budh Prakash Jai Prakash V/s. Sales Tax Officer, Kanpur; AIR 1952 All 764 that the levy of sales tax on forward transactions was ultra vires, whereupon the respondent firm applied to the Sales Tax Officer for the refund of the amount of the sales tax paid by it. That was refused. An application under Article 226 of the Constitution of India, was filed by the plaintiff-firm in the High Court asking for a writ of certiorari for quashing the three assessment orders and a writ of mandamus requiring the Sales Tax Officer to refund the amounts collected from the firm. This was allowed. By a certificate granted by that Court, the Sales Tax Officer went in appeal to the Supreme Court. The main question canvassed at that stage was whether Section 72 of the Indian Contract Act would apply to the facts of that case. The argument on behalf of the appellant-Sales Tax Officer, Banaras, was that money paid under a mistake of law was not covered under Section 72; and, therefore, could not be restored to the payer. This was not accepted by the Court, which observed that the term "mistake" 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. Their Lordships reviewed the position in law in England, in the United States and in Australia, where monies paid voluntarily, that is to say, without compulsion or extortion or undue influence and with a knowledge of all facts, cannot be recovered although paid without any consideration.
Their Lordships reviewed the position in law in England, in the United States and in Australia, where monies paid voluntarily, that is to say, without compulsion or extortion or undue influence and with a knowledge of all facts, cannot be recovered although paid without any consideration. In absence of any latent or patent ambiguity in the language of Section 72 and following the dictum laid down by the Judicial Committee in AIR 1949 PC 297, their Lordships observed that the language is wide enough to cover not only a mistake of fact but also a mistake of law. They upheld the decision of the Allahabad High Court allowing the refund of the sales tax paid by the respondent firm under a mistaken view of the legal position. What was paid by the firm by way or sale tax was not prohibited under the law, but was not simply due from it. In the instant case, irrespective of the position of law in regard to the mining lease, the payment of any premium is expressly prohibited under the Act. 9. Similarly, the case of AIR 1943 PC 29 has no application to the facts of the present case. A property, which was under the control of the Collector till the auction sale was cancelled on payment under Order 21, Rule 89, Civil Procedure Code, was mortgaged by the judgment debtor without the permission of the Collector. Paragraph 11 of Schedule 3 of the Civil Procedure Code imposes an incapacity on the judgment debtor to affect his property as long as it is under attachment, but does not lay a general incapacity to contract. The lender, who advanced money on that mortgage security, continued to receive payment of interest for about ten years, whereafter he brought a suit on mortgage, in which it was discovered that the contract of mortgage was void under paragraph 13 of Schedule 3 of the Civil Procedure Code. He wanted to recover the loan under Sec. 65 of the Indian Contract Act, which was allowed on the ground that the mortgage was an open and honest transaction and its invalidity was at the time obscured by the difficulty in applying the law correctly to the particular facts of the execution proceeding and to the terms of the orders as recorded by the Collector.
The security was not discovered to be void until after the suit was instituted upon the mortgage. The mortgagor defendant was liable to restore what he had received under that void contract. Here again the advance of loan was not unlawful under any provision of law. 10. Learned counsel for the respondent drew our attention to the case of Ramekbal Singh V/s. Harihar Singh, AIR 1962 Pat 343 , which arose out of a suit for recovery of money paid as dowry at the time of the Tilak ceremony in connection with a marriage. The Bihar Dowry Restraint Act, 1950, makes such payment and receipt of down unlawful and penal. In that view, the plaintiff was held not entitled to sue for recovery of what he had paid by way of dowry. There, the suit itself was based on the forbidden and void contract. To me, it appears that this decision is on all fours to the facts of the present appeal. 11. There is an essential difference between a contract void for illegality and contracts void on any other ground. In cases other than illegality, the law is prepared to adjust the rights of the parties in respect of acts of performance done in the belief that the contract was valid and binding, Sections 65 and 72 of the Indian Contract Act are such provisions. They will not extend to contracts which are void for initial illegality, otherwise the results will be disastrous to the society and public policy. If A paying some money to B to libel C is allowed to recover that through Court, on the basis that R received that under a void agreement and therefore should restore it to A, there will be an encouragement for unscrupulous persons to invade with impugnity upon the security of individuals of civilized society. The right of restitution (restitution in integrum) is excluded in respect of all acts of performance of a contract void for illegality. If an illegal contract will have to be an essential constituent of a cause of action, the Court will refuse its aid. The principle of ex turpi causa non oritur actio which is exclusively applicable to cases of illegality means that no person can claim any right or remedy on the basis that he was a party to an illegal transaction, whether a contract or otherwise. 12.
The principle of ex turpi causa non oritur actio which is exclusively applicable to cases of illegality means that no person can claim any right or remedy on the basis that he was a party to an illegal transaction, whether a contract or otherwise. 12. No Court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. "If, from the plaintiffs own stating or otherwise, the cause of action appears to arise ex turpi causa, or as the transgression of a positive law of this country, there the court will say that the plaintiff has no right to be assisted. It is upon that ground the court goes; not for the sake of the defdt. but because the Court will not lend its aid to such a plaintiff." Lord Mansfield, C. J., in Holman V/s. Johnson, (1775) 98 ER 1120. 13 Apart from the other forms of intrinsic illegality or an agreement, a contract, the making of which is forbidden, is also illegal. Rules 49 and 51 of the Mineral Conservation and Development Rules made under Act LIII of 194S prohibit and penalise the payment of any premium. So both the contracts for the mining lease and for premium were illegal. The appellants suit was on the cause of action arising out of that contract. Paragraphs 5, 6, 7 and 15 of the plaint unmistakably show that. The alternative claim for refund of the premium is also related to the illegal agreement. Illegality is a permissible plea for the defdt. though he also was a party to the illegal contract. There are, however, some well recognised exceptions to the rule and principle against restitution, but the present case does not come under any of them, 14. For ail these reasons, plaintiff cannot succeed even in respect of his claim for recovery of the premium paid by him for the mining lease. The appeal is, therefore, dismissed and the decree of the Court below is affirmed. In the circumstances of this case, the parties will bear their own costs in this Court. G.N.Prasad, J. 15 I agree.