Restitution for money paid by mistake supports equitable interest at proved commercial borrowing rates and future compensation.

Money mistakenly credited to a current account and retained after demand was treated as recoverable under Section 72 of the Indian Contract Act, 1872 on restitutionary principles. Interest was held awardable on equitable grounds even though the Interest Act, 1978 did not exhaust the field, and Section 4(1) was read as preserving interest payable under other rules of law. Because the defendant used the bank's funds in a commercial setting for a prolonged period, compensation for loss of use of money was allowed at the proved overdraft rates, with quarterly rests, and both pre-suit, pendente lite, and future interest were awarded.

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Issues: Whether the plaintiff bank was entitled to recover interest, and at what rate, on money mistakenly credited to and withdrawn from the defendant's current account.

Analysis: The amount was credited to the defendant's account by mistake and retained after demand for repayment. Section 72 of the Indian Contract Act, 1872 applies to money paid by mistake and is founded on restitutionary equity. The court held that interest may be awarded on equitable grounds even where the Interest Act, 1978 does not exhaust the field, and that Section 4(1) of the Interest Act, 1978 preserves interest payable under any enactment or rule of law. As the defendant retained and used the bank's money for a long period in a commercial setting, the bank was entitled to compensation for the loss of use of money. The rate adopted was the overdraft rate proved on record, namely 18% per annum up to 31.03.1985 and 17.5% per annum thereafter, with quarterly rests.

Conclusion: Interest was held payable against the defendant, both pre-suit and pendente lite, at the rates proved by the bank, and future interest was also awarded at 17.5% per annum on the principal amount.

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