NAGPUR HIGH COURT

                                         Nagorao Govindrao Ayachit

                                                         Vs

                                         Governor-General In Council

                                             S.A. No. 205 of 1947

                                           (R. Kaushalendra Rao, J.)

                                                   31.07.1950

                                                  JUDGMENT

R. Kaushalendra Rao, J.

1. This appeal arises out of an action for recovery of money paid under mistake which is
regarded as a particularly troublesome class of action. The appeal is by the deft. who lost in both
the Cts. below.

2. The facts of the case are not in question. The applt. is the wahiwatdar of the Ayachit Temple, a
very old temple in the city. One Dhanpalsingh alias Tatyarao Deshmukh used to visit the temple.
In December, 1939, he told the applt. that he had to fulfil a vow by feeding one thousand
Brahmins as he had been blessed with a son. The applt. was further told that Dhanpalsingh was
new to the place and so he would get money from Raipur from his father-in-law to the applt.'s
address. After a few days the applt. received three money orders totalling Rs. 1,772.
Dhanpalsingh appeared the next day and collected the money from the applt. Baying that they
would go to make purchases in the market for feeding the Brahmins. While they were going to
the market Dhanpalsingh slipped away into a lane and disappeared with the money.

3. It was the applt.'s report to the police which ultimately led to the prosecution and conviction of
Dhanpalsingh. It was discovered that the money orders were forged. Three money orders for Rs.
10, Rs. 69-3 and RS. 28-8 0 sent to different persons at Nagpur were forged for Rs. 600, Rs. 600
and 572-8-0 respectively as sent from Raipur by one Ramachandra Dewaji Tatyarao Deshmukh
to be payable to the applt. Dhanpalsingh was awarded a sentence of 2 years R. I. and was ordered
to pay a fine of Rs. 2000. Out of the fine, if recovered, the Ct. ordered the payment of Rs. 1772
to the City Post Office as compensation. Though Dhanpalsingh was sent to prison, the amount of
fine could not be recovered from him. The suit out of which the present appeal arises was,
therefore, instituted by the Governor-General in Council against the applt. for refund of money
paid under mistake.

4. The only question is one of law whether the Respondent can in the circumstances of the case
recover the amount of the money orders from the applt. According to the view of the learned
appellate Judge the words of Section 72, Contract Act, are unambiguous and leave no room to
the applt. to escape from liability to refund the money. In support of his decision the Judge relied
on Kelly v. Solari1, and R. E. Jones, Ltd. v. Waring and Gillows, Ltd2.

5. In Kelly v. Solari, (1841) 152 e. R. 24 : (9 m. and w. 54) (supra) Baron Parke expounded the
principle of cases of refund on account of mistake in fact thus :

        "I think that where money is paid to another under the influence of a mistake, that is, upon
        the supposition that a specific fact is true, which would entitle the other to the money, but
        which fact is untrue, and the money would not have been paid if it had been known to the
        payer that the fact was untrue, an action will lie to recover it back, and it is against
        conscience to retain it; though a remand may be necessary in those cases in which the
        party receiving may have been ignorant of the mistake. The position that a person so
        paying is precluded from recovering by laches, In not availing himself of the means of
        knowledge in his power, seems, from the cases cited, to have been founded on the dictum
        of Bayley J. in the case of Milnes v. Duncan3,) and with all respect to that authority, I do
        not think it can be sustained in point of law. If, indeed, the money is intentionally paid,
        without reference to the truth or falsehood of the fact, the pltf. meaning to waive all
        inquiry into it, and that the person receiving shall have the money at all events, whether
        the fact be true or false, the latter is certainly entitled to retain it; but if it is pail under the
        impression of the truth of a fact which is untrue, it may, generally speaking, be recovered
        back, however careless the party paying may have been, in omitting to use due diligence
        to inquire into the fact. In such a case the receiver was not entitled to it, nor intended to
        have it."

6. The principle enunciated in Kelly v. Solari, (1841) 152 e. r. 24 : (9 m. and w. 54) (supra) was
affirmed by the House of Lords in R. E. Jones, Ltd. v. Waring and Gillow, Ltd5., The facts in the
case before the House of Lords were these. One B who was without means was indebted to the
Respondents on account of furniture obtained under a hire-purchase agreement. b went to the
Appellants . and falsely represented that he would on behalf of International Motors appoint the
Appellants , as agents for the sale of a new car called "Roma" if they would give him an order
and make a deposit. He further told the Appellants . the Respondents a firm of high standing
were the principals who were financing the International Motors. The Appellants . placed with B
an order for 500 Roma cars and gave him a cheque for #5000 payable to the Respondents The
cheque was made over by B to the Respondents for clearing his own account under the hire-
purchase agreement and taking the furniture. On discovering the fraud the Appellants . sued the
Respondents for recovery of #5000 was paid under mistake of fact. The House of Lords held that
under the rule laid down in Kelly v. Solari5, the Appellants . were entitled to recover the sum paid
under the cheque. The decision was, however, not unanimous. Viscount Cave L. C. who was in
the minority with Lord Atkinson was of the view that the Appellants . were precluded on the
ground of estoppel from recovering the money. According to the Lord Chancellor there is a great
body of authority in favor of the view that where a person to whom money has been paid by
mistake has been misled by the payer's conduct and on the faith of that conduct has acted to his
own detriment, the payer cannot in law-as surely he cannot in fairness-insist on repayment. 'Lord
Shaw of Dunfermline observed that though various attempts had been made not to attack the rule
in Kelly v. Solari, (1841) 152 E. R. 24 : (9 M. and W. 54) (supra), but to set up a species of
estoppel by reason of the carelessness of the person who was misled into the mistake in fact, that
decision has remained of paramount authority as part of the law of England. Lord Sumner and
Lord Carson held that the circumstances of the case did not give rise to any application of the
doctrine of estoppel.

7. I am relieved from the necessity of considering the merits of the two lines of thought to be
found in the decision of the House of Lords. Section 72, Contract Act, under which the question
in the present appeal has to be decided has recently been considered by their Lordships of the P.
C. in Saiba Prasad v. Srish Chandra6, The learned Dist. J., while deciding this case had not the
decision of the P. C. before him. The decision makes it clear that the law in India goveramg
actions for recovery of money paid under mistake is not the same as in England. Under the
common law, it is well established that a person cannot recover money paid under a mistake of
law, the reason given being that no one can plead ignorance of the law. See William Whiteley Ltd.
v. The King7, and Baylis v. London (Bishop)8, According to their Lordships of the P. C. Section
72, Indian Contract Act, makes no distinction between mistakes of fact and mistakes of law. The
decision of Sen J. in Jagadish Prosad v. Produce Exchange Corporation, Ltd9., that a payment
made under a mistake of law which is not the origin of a contract can be recovered under section
72 has been approved in Shiba Prasad v. Srish Chandra, AIR 1949 PC 297 : 76 I. a. 244 (supra).
Further Lord Eeid who delivered the judgment of the Board observed:

        "It may be well to add that their Lordships' judgment does not imply that every sum paid
        under mistake is recoverable no matter what the circumstances may be. There may in a
        particular case be circumstances which disentitle a pltf. by estoppel or otherwise."

8. The limitation under which a claim for refund of money has to be dealt with under the
common law was emphasized by the Ct. of Appeal in Baylis v. London10 (Bishop) Under that law
the legal and equitable considerations applicable to an action of this kind seem to have become
so crystallized notwithstanding, the very liberal pronouncements of Lord Mansfield in Lady
Windsor's Case; Sedler v Evans11, and Moses v. Macferlan12 that it is now not possible for a
Judge to invent any new doctrine not already recognized in the reported decisions. (See the
judgment of Far well L. J. and Lord Sumner, then Hamilton L. J.). But no such limitation need
hamper a Judge dealing with a case under section 72, Contract Act.

9. The pronouncement of Lord Reid not only gives countenance to the view expressed
by the Lord Chancellor in R. E. Jones Ltd. v. Waring and Gillow, Ltd13.,
but also permits the Ct. to hold that the circumstances in a particular case disentitle the pltf. to
recover what was paid under mistake. It is not possible to devise a single formula which will
cover all the cases in which the pltf. must be held to be disentitled to recover what was paid
under mistake. Reference may, however, be made to Solomon Jacob v. The National Bank of
India Ltd., Aden14, Raghunath v. Imperial Bank of India, Ltd15., China and Southern Bank Ltd. v.
Te Thoe Seng16, and Punjab Industrial Agency, Ltd. v. Mercantile Bank of India, Ltd17., as
examples of cases in which the pltfs. failed to recover what was paid under mistake.

10. If the reason for the rule that a person paying money under mistake is entitled to recover it is
that it is against conscience for the receiver to retain it, then when the receiver has no longer the
money with him or cannot be considered as still having it as in a case when he has spent it on his
own purposes-which is not the case here-different considerations must necessarily arise.

11. It was not disputed before me that the applt. and the Respondent were both victims of fraud
perpetrated on them by Dhanpalsingh. The applt. was used as but a conduit pipe by
Dhanpalsingh for fraudulently obtaining the money from the Respondent The applt. paid the
money to Dhanpalsingh labouring under the very mistake which induced the Respondent to
deliver the money orders to the applt. The learned counsel for the Respondent contended that the
applt. had been careless in permitting Dhanpalsingh to make use of the address of the applt. and
he should, therefore, bear the loss. I do not agree. I do not think, as far as carelessness is
concerned, that the applt. can be charged with carelessness of any greater degree than that of the
employees of the Respondent who made the forgery of the money orders possible and delivered
more than one money order for a higher sum without there having been any corresponding
remittance from Raipur. In any case the fact that the applt. permitted Dhanpalsingh to use the
applt's address in no way influenced the Respondent in making the payment to the applt. On the
contrary, because the Respondent paid the money to the applt. as though it had been sent from
Raipur, the applt. was induced to pay the money to Dhanpalsingh. When the money was
received, the applt. believed that the money was meant for Dhanpalsingh as told by him earlier.
The conduct of the applt. is above board. The applt. was misled by the resp's conduct and on the
faith of that conduct altered his own position before the discovery of the mistake. In my view,
these circumstances are sufficient to disentitle the Respondent from recovering the money. The
loss must, therefore, lie where it fell.

12. The appeal is allowed with costs in all the Cts. The decree of the lower appellate Ct. is set
aside and the suit is dismissed.
Appeal allowed.

Cases Referred.

1(1841) 152 E. R. 24: (9 M and W 54)
21926 a. C. 670: (95 l. j. k. b. 913)
3(1827) 6 B. and C. 671 : 108 e. R. 598
41926 A. C. 670 : (95 L. J. K. B. 913)
5(1841) 152 e. r. 24 : (9 m. and w. 54)
6 AIR 1949 PC 297 : (76 I. a. 244)
7(1909) 101 L. T. 741 at p. 745
8(1913) 1 ch. d. 127 at p. 137 : (82 L. J. Ch. 61)
9 AIR 1946 Cal 245 : (80 G. L. J. 170)
10(1813) 1 Ch. d. 127 at p. 187 : (82 L. J. Ch, 61)
11(1766) 98 E. R. 34 : (4 Burr 1984)
12(1760) 97 E. r. 676 : (2 Burr 1005)
13(1926) a. C. 670 : (95 L. J. k. B. 913)
1442 Bom. 16 : (a I. r. (4) 1917 Bom. 119)
1550 Bom. 49 : (AIR 1926 Bom 66)
163 Rang 477 : (AIR 1926 Ran 14)
1711 Lah. 667 : (AIR 1930 Lah 852)