1987 (4) TMI 488 - HC - Indian Laws

Court Rules: Return Money Received by Mistake, Defendant Liable for Refund

The High Court upheld the trial court's decision that a person who receives money by mistake is obligated to return it, as per Section 72 of the Contract ... - Issues Involved:1. Whether the recipient of a certain sum of money by mistake is required to return the same with interest or notRs.2. Whether the plaintiff is entitled to interest on the mistaken credit of Rs. 1,00,000/-Rs.Issue-wise Detailed Analysis:1. Whether the recipient of a certain sum of money by mistake is required to return the same with interest or notRs.The plaintiff, a bank, filed a suit for the recovery of Rs. 1,00,000/- plus interest, alleging that the defendant had received a mistaken credit of Rs. 1,00,000/- on 21-6-1980. The defendant denied the claim, contending that the accounts had been settled and that the claim was not maintainable. The trial court found that the second credit on 21-6-1980 was indeed a 'mistaken credit' or 'double payment' without any T.T. advice from R.S. Puram Branch, Coimbatore, and held the defendant liable to refund the same with interest. The defendant appealed against this judgment.The High Court upheld the trial court's finding, stating that a person to whom money is paid by mistake is bound to repay or return it, as per Section 72 of the Contract Act. The court emphasized that the documentary evidence and oral testimonies provided by the plaintiff's witnesses were unimpeachable, establishing that the second credit was a mistake.2. Whether the plaintiff is entitled to interest on the mistaken credit of Rs. 1,00,000/-Rs.The court considered whether the plaintiff was entitled to claim interest on the mistaken credit. The plaintiff argued that the defendant should pay interest as the money belonged to the bank and remained with the defendant for a considerable period. The defendant contended that there was no agreement or trade practice for the payment of interest on such mistaken credits.The court noted that interest could be awarded for the period prior to the institution of the suit if there was an agreement for payment, usage of trade having the force of law, or under provisions of substantive law. However, in this case, the claim for interest was neither based on usage of trade nor on an agreement. The court also found no basis for awarding interest on the grounds of equity, as there was no pleading warranting the exercise of equity jurisdiction.The court examined the possibility of awarding interest based on quasi-contract but found it unsustainable, referring to the Privy Council's decision in Bengal Nagpur Railway Co. Ltd. v. Ruttanji Ramji. The court then considered whether the liability to pay interest arose under the Trusts Act or the Interest Act, 1978. It concluded that the defendant was a 'constructive trustee' and liable to pay interest under Section 4 of the Interest Act, 1978, which applies when the obligation to pay money arises by virtue of a fiduciary relationship.The court determined that the fiduciary duty to restore the amount arose on 21-6-1980, the date of the mistaken credit. It held that the defendant was liable to pay interest at the rate of 9% per annum from 21-6-1980 till the date of filing the suit, and at the rate of 6% per annum from the date of the suit till the date of realization, as per Section 34 of the C.P.C.Conclusion:The appeal was partly allowed, modifying the trial court's decree. The defendant was directed to pay interest on Rs. 1,00,000/- at the rate of 9% per annum from 21-6-1980 till the date of filing the suit and at the rate of 6% per annum from the date of the suit till the date of realization. Each party was ordered to bear their own costs.