Federal Bank v. Joseph — 1990 DIGILAW 156 (KER)

Judgment :- This is an appeal by the plaintiff. Plaintiff is a Bank. The suit was one for recovery of an amount of Rs.30, 000/- and interest on that amount from the first defendant, who was a customer of the plaintiff. The first defendant had N.R.E. Account No.5/80.On 5-4-1982 he produced before the plaintiff's branch at Kidangara, an instrument, Ext.A1 dated 29-3-1982. It was in the form of an order for payment of Rs.30, 000/-. Ext.A1 has been issued by the International Finance & Exchange Corporation, Doha, Qatar. Ext.A1 contains the following: "Pay The Federal Bank Ltd. (Kidangara br ) NRE A/C NO: 5/80 M.P. Joseph or order amount Ind. rupees thirty thousand only". Further it is seen stated in Ext. A1, payable at Syndicate Bank - Code No. 115, Baker Junction, and Kottayam. Accepting Ext. A1, the Branch Manager of the plaintiff-Bank credited an amount of Rs. 30,000/- in the account of the first defendant. It was done on 5-4-1982 itself. The Branch Manager sent Ext. A1 for collection to the Syndicate Bank, Kottayam Branch, though there is no clear evidence in this case as to when exactly it was sent. It was seen that Ext. A1 was dishonoured by the Syndicate Bank and the Bank issued a memo on 8-4-1982. This memo was received by the plaintiff-Bank only on 12-4-1982. 2. The first defendant issued a Savings Bank withdrawal form for Rs. 37,000/-. This Savings Bank withdrawal form is Ext. A2. It is dated 10-4-1982. Obviously since there was credit in the account of the first defendant, on that date the amount was paid. When the Bank came to know that Ext. A1 was dishonored, it demanded the amount from the first defendant. Ext. A1 was dishonored with the noting 'refer to drawer'. It means that there is no money available to honor Ext. A1. Though the plaintiff demanded the amount of Rs.30, 000/- from the first defendant, he declined to pay the amount and that necessitated the institution of the suit. 3. The first defendant contended that he is not liable to pay the amount to the Bank. According to him, he has deposited Rs. 30,000/- with the International Finance & Exchange Corporation and got Ext. A1 and so when he has paid consideration for Ext. A1, he has no liability to pay the amount to the plaintiff-Bank. 3. The first defendant contended that he is not liable to pay the amount to the Bank. According to him, he has deposited Rs. 30,000/- with the International Finance & Exchange Corporation and got Ext. A1 and so when he has paid consideration for Ext. A1, he has no liability to pay the amount to the plaintiff-Bank. According to him, plaintiff-Bank can seek appropriate remedy against the Syndicate Bank or the International Finance & Exchange Corporation. 4. The court below considered the evidence and the law applicable to the facts revealed in the case. It was found by the court below that Ext. A1 is not a negotiable instrument within the meaning of the Negotiable Instruments Act. It seems that the first defendant represented that Ext. A1 is equivalent to a draft or a cheque and so even before collecting the amount under Ext. A1; credit can be given to the first defendant. Normally when a cheque is presented by a customer, if the cheque is of a different Bank, usually only after collection, the amount will be credited in his account. But if the Branch Manager has got confidence in the customer, in certain cases, the amount will be credited even on the presentation of the cheque and in that event, the customer can obtain the amount under the cheque from the Bank. In this case also what really happened was that the Branch Manager reposed some confidence on the first defendant and credited the Amount in his account even before collecting the amount under Ext. A1. When once it was credited, the first defendant got an entitlement to withdraw the amount from his account by issuing a cheque or withdrawal form and he has withdrawn the amount on 10-4-1982. So it is clear that a credit entry was made in the account of the first defendant on the basis of Ext. A1, which is found to be not a negotiable instrument at all. Obviously the credit entry made by the Branch Manager is a mistake committed by him. In fact, the first defendant had absolutely no entitlement to get credit in his account on the basis of Ext. A1 before collection of the amount under Ext. A1. So the credit entry of Rs.30, 000/- given in the account of the first defendant will not give any entitlement to him to withdraw that amount from his account. 5. In fact, the first defendant had absolutely no entitlement to get credit in his account on the basis of Ext. A1 before collection of the amount under Ext. A1. So the credit entry of Rs.30, 000/- given in the account of the first defendant will not give any entitlement to him to withdraw that amount from his account. 5. Before me there is no serious dispute as regards the finding that Ext. A1 would not constitute a negotiable instrument. The court below, after finding that Ext. A1 is not a negotiable instrument, held that not being a negotiable instrument, plaintiff had no business to credit the amount and so the plaintiff is not entitled to recover the amount on the basis of not collecting the amount under Ext. A1, I fee! That this finding is not correct. The credit was given in the account of the first defendant on the basis of Ext. A1 and when once Ext.A1 is found to be of no value, that credit itself is without any basis and that will not enable the first defendant to claim that amount, which is seen credited in his account. It can be treated only as a wrong entry in his account. This I say because if the first defendant has approached the Bank at a time when the Bank came to know that Ext. A1 was dishonored, can the first defendant insist payment of Rs. 30,000/- simply because the Bank has acted as a collecting agent? In effect, the plaint if Bank was only a collecting agent. While acting as a collecting agent, because of the confidence in the customer, before collection the Bank has credited the amount in the account of the first defendant. This, as I said earlier, will not give any entitlement to the first defendant for claiming Rs.30, 000/- from the Bank. So long as the first defendant has no claim to receive Rs.30, 000/- from the plaintiff-Bank, the first defendant has got the liability to payback the amount to the plaintiff-Bank. The court below found that the claim made by the' Bank on the basis of Ext. A1 instrument is not a negotiable instrument. But the court below considered the matter under S.70 of the Contract Act and held that S.70 of the Contract Act is available to the plaintiff on the facts disclosed in the case. The court below found that the claim made by the' Bank on the basis of Ext. A1 instrument is not a negotiable instrument. But the court below considered the matter under S.70 of the Contract Act and held that S.70 of the Contract Act is available to the plaintiff on the facts disclosed in the case. But since the plaintiff has not pleaded a case under S.70 of the Contract Act, the court declined to grant a decree. 6. Counsel for the appellant submitted that S.70 of the Contract Act is squarely applicable in this case. Further he submitted that there is sufficient pleading To attract S.70 of the Contract Act. S.70 of the Contract Act runs thus: - " 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". Admittedly, the first defendant has received the amount and he has no entitlement to receive the amount. On this broad fact, it can be concluded that if the first defendant is not disgorged the amount he has received it will amount to allowing him to have unjust enrichment. S.70 of the Contract Act is based on the theory of unjust enrichment or unjust benefit. It is said that in Ss.69 and 70 of the Contract Act the principle of unjust enrichment is very much embedded. Further, certain decisions go to the extent of stating that these Sections are wider in scope than the doctrine as applied in England and go far beyond it -vide (1958) A.AP. 427 (Cf. A.R.G. Krishnamurthi & Co. v. Sitaramayya) and (1938) A. M. 960 (Golab Chand v. M.J.V. Miller). 7. S.70 of the Contract Act is made applicable even in case of erroneous accounts, where accounts are shown to be erroneous or are drawn up and assented to by parties under a common mistake as to their rights and obligations, the accounts may be directed to be reopened and in that case, the law implies an obligation to repay the money, which was an unjust enrichment. This case will squarely come under this principle. This case will squarely come under this principle. The account of the first defendant requires to be reopened and when once it is reopened, it can be seen plainly and clearly that as regards Rs. 30,000/- there is unjust enrichment for the first defendant, which has to be disgorged. 8. In A.I.R.1974 S.C. 602 (Thomas Abraham and others v. The National Tyre and Rubber Co. of India Ltd.), the Supreme Court has held that an amount paid on an incorrect calculation is repayable under S.70, see also (1877) 9 Ch. D. 529 at p. 533 (Williamson v. barbour) and Halsbury's Laws of England, 3rd Edn. Vol. 26 Para. 1725 at page 927, which reads thus:- "Accounts settled under common mistake. Where accounts are drawn up and assented to by parties under a common mistake as to their rights and obligations, the accounts may be directed to be opened". Even in a case when an account is stated and the balance paid, it can be opened on the ground of a mistake - see Daniell v. Sinclair (6 App, Cas.181) and Thomas v. Hawkes (8 M. & W. 140). In (1975) A.M.103 (Nankchand Shadurain v. Tinnevelli Tuiticorn Electric Supply Co. Ltd.), excess price paid by a buyer because of wrong weight and wrong calculation given in the invoice is found refundable to the buyer as no person can enrich himself unjustly due to a mistake wanton or otherwise. 9. Counsel for the respondent submitted that in order to attract S.70 of the Contract Act, several requirements enlisted in the Section have to be complied. He said that it contemplates a person doing something lawfully for another person or a person lawfully delivering something to another person. He said that here, plaintiff has not done anything within the meaning of a person lawfully does'. According to him, the expression 'does' does not include the payment of money. I cannot agree. The expression 'does will include payment of money also. 10. Counsel referred me to the Full Bench decision of the Allahabad High Court reported in AIR 1943 Allahabad 220 (Sheo Nath Prasad v. Sarjoo Nonia and another). This decision of five judges was concerned mainly with the application and interpretation of S.91 of the Evidence Act. I cannot agree. The expression 'does will include payment of money also. 10. Counsel referred me to the Full Bench decision of the Allahabad High Court reported in AIR 1943 Allahabad 220 (Sheo Nath Prasad v. Sarjoo Nonia and another). This decision of five judges was concerned mainly with the application and interpretation of S.91 of the Evidence Act. Separate judgments were written by Collister, J. Bajpai, J., Hamilton, J., Dar, J. and Mathur, J., Mathur, J. has made an observation that payment of money to another will not come within the net of "a person lawfully does". In the judgment of Mathur, J. there is a reference to the Full Bench decision reported in AIR 1932 Ough235 (Kunwar Bahadur v. Suraj Baksh ). The main judgment of the Full Bench case was delivered by Srivasatava, J., which was agreed to by Sir Wazir Hasan, C.J. but on very different grounds. The third Judge, Raza, J. only recorded the concurrence and that case also was on the question of application of S.91 and the exclusion of parol evidence in regard to apromissory note. This Full bench decision of Ouch was not approved by the Full Bench decision reported in AIR 1943 Allahabad 220. Considering the judgment of Sir Wazir Hasan, C.J., Ivlathur, J. said: "His opinion was that the payment of the amount by the plaintiff to the defendant at the latter's request was a lawful act not intended to be done gratuitously by the plaintiff and, therefore, the defendant was bound to make compensation to the plaintiff in respect of the payment. With all respect to the Hon'ble Judge, I must hold that S.70 does not contemplate the case of payment of money and it will be doing violence to the language of the Section to hold that the words' lawfully does anything' mean payment of money. Sulaiman and Kendall JJ. Also applied S.70, Contract Act," in AIR 1929 All. 254 (Kundan Lai and another v. Sahu Bhikkari Das - Ishwar Das and another). 11.1 think, it is difficult to say that payment of money has to be excluded while interpreting the content and width of the expression 'lawfully does anything'. I feel that the expression 'lawfully does anything would mean payment of money also. In AIR 1929 Allahabad 254, Sulaiman, J. has said very clearly that S.70 is applicable in the case of payment of money also. I feel that the expression 'lawfully does anything would mean payment of money also. In AIR 1929 Allahabad 254, Sulaiman, J. has said very clearly that S.70 is applicable in the case of payment of money also. The court observed thus: "That the hundis were not the documents embodying the whole of the contract between the parties but they were executed in token of the advance made by the plaintiffs is partially admitted by both the defendants, inasmuch as in their written statement they pleaded that the hundis were executed by way of security for the prospective losses in certain transactions. Suraj Bhan, one of the defendants who was examined as a witness in this case, also stated that he was approached by Dal Chand of Bombay to clear off the Bombay account and that the hundis were written partly for the losses of the Bombay transaction and partly as security for the future transactions to be made by Kundal Lai. We further think that even if the plaintiffs were not able to prove the whole contract by this additional evidence they could succeed if their suit were treated as one for recovery of the amount had and received or for compensation for the amount paid by them on behalf of the defendants to the creditor of the latter under S.70, Contract Act. The suit, therefore, cannot necessarily fail because the hundis are not admissible in evidence". 12. I may also refer to the Full bench decision of the Madras High Court relied on by Allahabad High Court in A.I.R.1943 Allahabad 220, viz., AI.R.1938 Madras 785 (Perumal Chettiar v. KamakshiAnimal). In this case also Justice Varadachariar was not concerned mainly with the application of S.70 of the Contract Act. As an obiter observation, Varadachariar, J. said that'It only remains to add that S.70, Contract Act, which has sometimes been appealed to, is scarcely appropriate to a case of money let to the defendant. There is no possibility in such a case or even a contemplation of the "thing delivered" being restored - which obviously means in specie; and lending money to the defendant cannot be described as something done for the defendant'. Lending is not Equivalent to simple payment of money. It involves a contract, an executory contract with a promise to repay the amount paid. 13. Lending is not Equivalent to simple payment of money. It involves a contract, an executory contract with a promise to repay the amount paid. 13. S.70 has been applied in the matter of building contracts where the contractor has done something beyond the terms of the contract and which has been accepted by the other party. There, the contractor is entitled to a decree for money and money only. There are several cases where applying S.70, Contract Act without restoring the objects in specie the court directed payment of money. I prefer to follow the decision reported in AI.R.1929 Allahabad 254. 14. If we go deep into the principles on which a creditor is allowed to sue on original consideration, when he fails to sue on an incomplete negotiable instrument, we can see the principles embodied in S.70 of the Contract Act. There are several decisions allowing a creditor to sue on original consideration on failure of bills of exchange or a promissory note. I need not quote those decisions here. In A.I.R.1929 Allahabad 254, the Division Bench cited those decisions also in support of the proposition that S.70 is applicable when the hundis embodying the contract between the parties cannot be put into action. In these circumstances, I feel that it is a proper case where S.70 of the Contract Act can be invoked. The finding of the court below is that S.70 of the Contract Act is applicable. 15. As I said earlier, the court below though found that S.70 of the Contract Act is applicable, said that there is no proper pleading in regard to S.70 of the Contract Act and so the court cannot grant a decree relying on the principles under S.70 of the Contract Act. I have gone through the plaint. All the facts necessary for attracting the requirements under S.70 of the Contract Act are discernible from the averments in the plaint. All the circumstances are in great detail have been stated in the plaint. 16. Counsel for the respondent referred me to two decisions reported in A.I.R.1977 S.C. 329 (Union of India v. Sita Ram Jaiswal) and A.I.R.1977 S. C. 2082 (Dew Sahal Palliwal v. Union of India and another). The circumstances revealed in the case reported in A.I.R.1977 S.C. 329 are quite different. 16. Counsel for the respondent referred me to two decisions reported in A.I.R.1977 S.C. 329 (Union of India v. Sita Ram Jaiswal) and A.I.R.1977 S. C. 2082 (Dew Sahal Palliwal v. Union of India and another). The circumstances revealed in the case reported in A.I.R.1977 S.C. 329 are quite different. In paragraph 7 of the above decision, it is stated that "The plaint lacked the two other essential features to constitute a cause of action under S.70 of the Indian Contract Act. These were that the respondent delivered the goods lawfully to the appellant and that the appellant enjoyed the benefits thereof. Essentially those are the two requirements which ought to have been stated for attracting S.70 of the Indian Contract Act. Here it is stated that Ext. A1 was produced by the first defendant and pursuant to Ext. A1, Rs. 30,000/- was credited in the account of the first defendant. This will constitute delivery of the property or it will constitute that something has been done not intending to be done gratuitously. It is also seen that the first defendant has withdrawn the amount on 10-4-1982. When once the first defendant has withdrawn the amount he has accepted it and so there are clear averments to attract S.70 of the Indian Contract Act. I do not think that this decision (AI.R.1977 S.C. 329) is applicable to the facts of the case. In AI.R.1977 S.C. 2082 the facts are totally dissimilar to the facts of this case. It is a suit for vacant possession of the suit premises and there it was said that S.70 has no application, since there is no allegation in the plaint to support any pleadings under S.70 of the Indian Contract Act. The court found that there was no enforceable contract and the delivery is not clean by virtue of S.70 of the Contract Act. The court also found that the suit cannot be decided applying the principles under S.70 of the Contract Act, In fact, in paragraph 7 of the judgment, the Supreme Court held that there was a greater hurdle and that hurdle was insurmountable for the appellant since the entire cause of action was misconceived. It is stated thus:- "If Gaya Prasad had taken possession and if Gaya Prasad according to the appellant is a trespasser the suit would lie against Gaya Prasad. It is stated thus:- "If Gaya Prasad had taken possession and if Gaya Prasad according to the appellant is a trespasser the suit would lie against Gaya Prasad. It is admitted that the respondent is no longer in possession and was not in possession of the premises after he had delivered possession to Gaya Prasad. If any decree was passed in favour of the appellant against the respondent obviously if the decree had to be executed it could not be executed against the respondent. Therefore the only remedy that the appellant had was to file a suit against Gaya Prasad. The appellant chose not to do Of course, the court below relied on these two decisions and I would say that the court below has gone wrong in relying on these two decisions on the facts unfolded in the case. 17. In the result, I feel that the plaintiff is entitled to a decree. The judgment and decree of the court below are necessarily to be set aside. I do so. I pass a decree directing the first defendant to pay an amount of Rs. 30,000/- to the plaintiff. In regard to interest, since the decree is passed applying S.70 of the Contract Act, it is in the nature of compensation and so I think that interest can be awarded only from the date of decree. So I direct that the first defendant has to pay interest at the rate of 12% per annum on the said amount of Rs. 30,000/- from the date of decree. Appeal is disposed of as above. No costs.