top-rated free essay

Law of Restitution

By rajdeepc11 Mar 31, 2013 3315 Words
The law of restitution and the principle against unjust enrichment has developed to a great extent under common law alongside the law of contract and the law of tort. Essentially, for a claim to be made under the unjust enrichment principle, there are four questions which are relevant – first, has the defendant been benefitted/enriched; secondly, was the enrichment at the plaintiff’s expense; thirdly, was the enrichment unjust; and finally, are any defenses available. The first and the third category were recently elaborated on by the UK Court of Appeal, in Gibb v. Maidstone & Tunbridge Wells, [2010] EWCA Civ 678.  The issue arose (in obiter, as the case was decided by the majority on another point) as to whether the foregoing of a claim can be considered to be a ‘benefit’. Lord Justice Laws stated the principle thus:

“If everything else is equal I can see no principled distinction between a benefit consisting in money paid and a benefit consisting in a claim foregone. For the purpose of this branch of the law the material benefit may take many forms…”

The approach that ‘benefit’ need not be only monetary is clearly borne out on precedent – there are several cases where the receipt of a service has been considered to be a benefit. A view was taken (Beatson, The Use and Abuse of Restitution) that pure services – i.e. services which do not produce an end product – are non-beneficial. This argument has however been criticized on strong grounds elsewhere (Burrows, The Law of Restitution).

In India, principles of restitution would be dealt with under the Contract Act. Section 70 requires that where a person lawfully does anything for another person, or delivers anything to that other person, not intending to do so gratuitously, and the other person enjoys the benefit thereof, he is bound “to make compensation to the former in respect of, or to restore, the thing so done or delivered.” On a literal reading, this is somewhat confusing – is there a restitutionary remedy under this section or is there a compensatory remedy? This same issue also arises on the text of Section 65 of the Contract Act which deals with payments made under a void contract. Here too, the section uses the words “bound to restore it, or to make compensation for it…” The fundamental difference between restitution and compensation is that the former is concerned with the return of the benefit derived by the defendant while the latter is concerned with compensating the loss suffered by the plaintiff. The two are conceptually different – and the difference can result in different practical outcomes too. Going further in Indian law, Section 72 states that a person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it. This section does not contemplate pure services; and again, is restricted to mistake/coercion. So where does that leave the law of restitution in India? Will the law of restitution as a matter of common law continue to apply outside the Contract Act? 

The Supreme Court considered the question in Mahabir Kishore v. State of Madhya Pradesh. The Court stated:

“The doctrine of 'unjust enrichment' is that in certain situation it would be 'unjust' to allow the defendant to retain a benefit at the plaintiff's expense. The relatively modern principle of Restitution is of the nature of quasi contract. But the English law has not yet recognised any generalised right to restitution in every case of unjust enrichment. As Lord Diplock has said, "there is no general doctrine of "unjust enrichment" recognised in English law. What it does is to provide specific remedies in particular cases of what might be classed as unjust enrichment in a legal system i.e. based upon the civil law."

The principle of unjust enrichment requires: first, that the defendant has been 'enriched' by the receipt of a "benefit"; secondly, that this enrichment is "at the expense of the plaintiff"; and thirdly, that the retention of the enrichment be unjust. This justifies restitution. Enrichment may take the form of direct advantage to the recipient wealth such as by the receipt of money or indirect one for instance where inevitable expense has been saved…”

The last sentence of the second paragraph is noteworthy – it would appear then, that the proposition highlighted by the Court of Appeal in Gibb v. Maidstone recently was already covered under the Supreme Court’s broad reading of what constitutes ‘enrichment’. However, the first paragraph quoted above requires additional comment. While it may be true at the time the Supreme Court decided the case that there was no law of restitution as such clearly recognised; subsequently, the House of Lords has laid to rest all doubt in this regard in Lipkin Gorman v. Karpnale [1991] 2 AC 548. Subsequently, however, High Courts have clarified that recourse to the law of restitution would be available even outside the Contract Act as a matter of common law. After quoting the Supreme Court decision, one High Court has noted (Ganganagar Sugar Mills v. Madanlal Ramswaroop), “It may be seen that provisions under Chapter V of Contract Act only gives some of the instances of obligations arising from certain circumstances, not arising from contract but on general principle, to wit to prevent a man from retaining the money of or some advantage derived from another which it is against conscience that he should keep in the words of Lord Wright. But the fact that Contract Act gives statutory recognition to some of the circumstances, does not preclude availability of remedy of restitution in other cases…”

Much more recently, in Jay Vee Rice & General Mills v. State of Haryana (Civil Appeal 8236/2010, judgment dated September 23, 2010), the Supreme Court has cited with approval the dicta of Lord Wright Fibrosa v. Fairbairn, [2943] AC 32, which has subsequently formed the platform for the law of restitution to launch itself in England. Consequently, common law developments in this area would continue to be of relevance to Indian law, whether or not the principles laid down in the Contract Act are relevant.

There is a danger, however, that unjust enrichment would be used in every case of perceived injustice or inequity - something that would result in great uncertainty and would result in the substitution of what the law regards as unjust with subjective notions of inequity. The risk of this approach already exists through dicta in Sahakari Khand Udyog v. Commissioner of Central Excise, (2005) 181 ELT 328 (SC), which leaves open the proposition that the law of restitution would apply in all cases where the retention of benefit is contrary to justice or against equity (see thejudgment of the Bombay High Court in Shah Paper v. Union of India, (2010) 250 ELT 346 (Bom)). The better, principled approach is stated by Professor Burrows, “… the question of what is unjust is not to be answered by a vague appeal to individual morality: it is a reference to what the decided cases show as unjust…” Gibb v. Maidstone again offers some guidance with how enrichment should be treated as unjust:

“There is, I think, something of a tension … between these two propositions. (1) The categories of unjust enrichment claims cannot be closed, for if they were this branch of the law would be condemned to ossify for no apparent reason; and nothing could be further from the common law's incremental method. But (2) such a claim must fall "within one of the hitherto established categories of unjust enrichment" which suggests (at least) that the categories rather than any overriding principle are paramount. The authorities' reluctance to assert first principles may be ascribed to the justified fear of the palm tree: if the principle of unjust enrichment does no more than to invite one judge after another, case by case, to declare that this or that enrichment is inherently just or unjust, it is not much of a principle … we may see at once that clear reasoning is at least required for the elaboration of any extension of unjust enrichment. Clear reasoning, if it allows a claim in seemingly new circumstances, will provide clear analogues with other cases. No doubt this is what Mann J had in mind when he qualified his reference to established categories by the phrase "or some justifiable extension thereof"…”

Perhaps, such an incremental approach could be adopted in Indian law too. 

Doctrine Of Restitution
In Halsbury’s Laws of England, it is stated, “Any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or some benefit derived from, another which it is against conscience that he should keep.”[4] The doctrine of restitution contemplates the case where property has been received by a decree-holder in execution of a decree, and the decree, or part thereof, is subsequently varied of reversed on appeal by the judgement-debtor, or even in a separate suit[5] or otherwise, as for instance, on an application under the Bengal Money Lenders Act or Agriculturist Relief Act.[6] The principle of restitution has been statutorily recognised in s 144 of the Code of Civil Procedure. It does not confer any new substantive right to the party not available under the general law, but merely regulates the power of the court in that behalf. It is the paramount duty of all court to ensure that they do no injury to any litigant. Inherent Power Of The Court To Grant Restitution

Section 144 of the Code of Civil Procedure is not the fountain source of restitution, it is rather a statutory recognition of a pre-existing rule of justice, equity and fair play. The jurisdiction to make restitution is inherent in every court and can be exercised whenever justice of the case demands.[7] Statutory Provision

The power of a court to grant restitution is not confined to the cases covered by the provisions of this section. It extends also to cases which do not come strictly within s 144. Under s 151 courts has inherent power to order restitution irrespective of s 144.[8] Where the standard rent fixed by the Rent Controller under the West Bengal Premises Rent Control Act 1950, was reduced in appeal, it was held that a claim for restitution of the excess rent paid under the order of the controller was not maintainable under this section but it could be sustained on general principles of restitution.[9] The principle of the restitution will be of no avail as against a party to the suit who get the property otherwise than under the decree or the order of the court. Hence, where the petitioner gets the possession of the property under executive order, its restitution cannot be ordered.[10] Judicial Pronouncements 

As said by Cairns, LC, in Rodger v. Comptoir descompte de Paris:[11] “One of the first and highest duties of all courts is to take care that the act of the court does no injury to any of the suitors and when the expression, the act of the court is used, it does not mean merely the act of the primary court, or of any intermediate court of appeal, but the act of the court as a whole from the lowest court which entertains jurisdiction over the matter up to the highest court which finally disposes case.” In Jai Berham v. Kedar Nath Maewari, [12]a sale in execution of a decree as set aside on the grounds that the sale certificate comprised property different from that which was attached. The property was purchased by a stranger to the decree, and the price paid by him in to court was applied towards satisfaction of the decree. The judgement-debtor applied for possession. The Lordship of the Privy Council said:

“It is the duty of the court under section 144 of the Civil Procedure Code to place the parties in the position which they would have occupied for such decree or such part thereof as has been varied or reserved. Nor indeed does this duty or jurisdiction arise merely under the said section. It is inherent in the general jurisdiction of the court to act rightly and fairly according to the circumstances towards all parties involved.” The Allahabad High Court has however taken the view that a case for restitution would fall within the terms of s 144, even when the decree is set aside in a separate suit,[13] or where the court itself sets aside its own ex parte decree.[14] This view has now been confirmed by the Amendment Act 1976 which declares in express terms, that the restitution is available in cases where a decree is set aside or modified in another subsequent suit filed in another court for that purpose. The High Courts of Madras,[15] Madhya Pradesh,[16] and Patna [17] have also held that s 144 will apply when the decree or order is reversed, otherwise than in appeal as in an independent proceeding or by the legislation. When a sale was set aside on an application under O 21, r 90, the judgement-debtor was awarded mesne profits under s 151 from the decree-holder purchaser for the period he was in possession.[18] In the case of Amba Lal v. Ramgopal,[19] A, in execution of a money decree, brought property to sale as of his judgement –debtor and purchased himself. B and C who held decrees against the same judgement-debtor, applied for rateable distribution. A, therefore, paid the sale proceeds into court and they were rateably distributed between A, B and C. Co-sharers of the judgement then obtained a decree exempting part of the property from the operation of the sale. The amount available for rateable distribution was, therefore, reduced and A was entitled to a proportionate refund from B and C. In a Bombay case, possession of land was delivered under a decree. Subsequently, ad interim stay was granted under O 41, r 5. It was held that possession could not be ordered to be restored either under s 144 or under s 151. The plaintiff, in a suit for injunction against the defendants for restraining them from interfering with the construction of a wall in a passage, wrongly obtained an ex parte interim injunction by misleading the court, inasmuch as the sale deed, on the basis of which the plaintiff claimed ownership of the suit property was not placed before the court and the defendants were not heard before passing the order of interim injunction. After obtaining the decree, the plaintiff completed the construction of the wall and then applied for the withdrawal of the suit and prayed for dismissal of the injunction application, as ‘not pressed’. It was held that the order passed by the court under s 151 for demolition of the wall would be justified, even if s 144 was not applicable.[20] In the exercise of their inherent power, the courts have applied the principle of s 144 to other cases which were not strictly within the terms of the section. Thus, where A sued B to establish his right to a fund in court, and B was allowed to draw the money on giving an undertaking to the court to repay it if A succeeded in the suit, and A succeeded in establishing his title, it was held that though the undertaking given by B did not provide for the payment of interest, the court had inherent power to order B to repay the money with interest.[21] Landlord, in suppression of the material fact and in brazen violation of the provisions of WB Municipal Act, succeeded in demolishing the suit premises with the help of police and the chairman of the local corporation. It was held that the court can direct restitution of tenant in demolished premises by directing landlord and municipality to reconstruct the building, if necessary, and put the tenant in original possession.[22] In S. Prabhavathi vs Rohini Kilaru And Anr.[23], the Supreme Court while observing that s 144 of CPC incorporates only a part of the general law of restitution and not exhaustive, laid down as under: “The jurisdiction to make restitution is inherent in every court and will be exercised whenever the justice of the case demands. It will be exercised under inherent powers where the case did not strictly fall within the ambit of Section 144, Section 144 opens with the words "where and in so far as a decree or an order is varied or reversed in any appeal, revision or other proceeding or is set aside or modified in any suit instituted for the purpose...." Jamaluddin v. Mirza Quader Baig, it was held that for restoration of possession to the tenant, who was dispossessed by the landlord from the suit premises forcibly in violation of the orders of interim injunction, there is no necessity of filing a petition under Section 144 of CPC. The Court can restore possession in exercise of its inherent powers under Section 151 of CPC. Similarly, In Sujit Pal v. Prabir Kumar Sun, it was held that when the plaintiff in a suit for permanent injunction and declaration of tenancy was forcibly dispossessed in violation of the interim injunction, the civil Court can invoke its inherent power to grant temporary mandatory injunction by directing the police to restore possession. The inherent jurisdiction to pass an order in restitution can be exercised by a persona designate entrusted with functions of a court as for example by a district munsiff to whom the decree is transferred for execution under s 66 of the Madras Village Courts Act 1889.[24] Conclusion

Even if a case is not come under the section 144 of the CPC, s. 151 gives an inherent right to the courts to grant restitution in order to dispense justice to the parties. It is not necessary that if the case is not covered under the specified provision then no restitution can be granted it is inherent in the courts to grant restitution for meeting  **********************************

1. Concise Oxford English Dictionary (2002) at p. 1220
2. Per Subba Rao, J. in Mahijibhai Mohanbhai v. Patel Manibhai, AIR 1965 SC 1477 at p. 1482 3. Black’s Law Dictionary, seventh end, p1315, as quoted in Southern Eastern Coalfields Ltd. V. State of Madhya Pradesh AIR 2003 SC 4482 4. Halsbury’s Law of England (4th Edn.) at p. 434.

5. Jogendra Nath Singh v. Hira Shahu AIR 1948 All 252 (FB); Maqbool Alam v. Khodaija Begum AIR 1949 6. Alpati Ankamma v. Pvulari Basava AIR 1945 Mad. 360.
7. Kavita Tehran v. Balsara Hygiene Products Ltd., (1994) 5 SCC 380: AIR 1995 SC 441. 8. KN Krishnappa v. TR Gopal Krishna Setty AIR 1997 Kant 152; Kaku Singh v. Gobind Singh AIR 1959 Punj. 468 9. Ram Prasad v. British Insulated Calenders Cables Ltd. AIR 1954 Cal 13 10. Montharampallipadipura Attakoya v. Neelathupura Kunhiseethikoya Thangal AIR 1996 Ker 286 11. (1871) LR 3 PC 456

12. AIR 1992 PC 269, 49 IA 351
13. Supra 5.
14. Allahabad Theartres Ltd. V. Ram Sjiwan Misra (1949) ILR All 313. 15. Ankamma v. Basavapunniah AIR 1945 Mad 360 
16. Choudhry Hari Ram v. Pooran Singh AIR 1962 MP 295
17. Harihar Sao v. Bhagwan Das AIR 1963 Pat 333
18. Ram Rattan v. Banarsi Lal AIR 1930 Pat 280, Pat 280
19. AIR 1933 All 218
20. Rakesh Singhal v. Fifth Addl. District & Session Judge, Bulandshahr AIR 1990 All 12 21. Alagappa v. Muthukumara (1918) 41 Mad 316; Indra Chand v. Forbes (1917) 3 Pat LJ 149 22. Priya Brata Maity v. State of West Bengal AIR 2000 Cal 32. 23. AIR 2006 Andhra High Court

24. Padma Gowda v. Yuvaraja Hedge AIR 1960 Mys 377

Cite This Document

Related Documents

  • law memo

    ...This judgment is subject to final editorial corrections approved by the court and/or redaction pursuant to the publisher’s duty in compliance with the law, for publication in LawNet and/or the Singapore Law Reports. BNJ (suing by her lawful father and litigation representative, B) v SMRT Trains Ltd and another [2013] SGHC 286 High C...

    Read More
  • law law

    ...TASK 1 Explain the reference to legal principle and relevant case law, the legal aspect of placing the ‘Klick’ clock in the shop window with a price tag attached. Ann antiques has a rare ‘Klick’ clock on its shop with price tags of €1,000 attached. In spite of its wording the sign in the window does not constitute a legal offe...

    Read More
  • Land Law Registration

    ...The law of the land comprises a crystallized expression of values cast in sharp relief against the landscape of the law. (Gray and Gray, Elements of Land Law) What key values or aims does English Land Law promote and evaluate the balance struck by them. Provide illustrations of relevant cases and statute in this regard. The En...

    Read More
  • business law

    ... NAME: FIN NO.: BATCH NO.: MODULE: BUSINESS LAW LECTURER: MR MAHADEVAN LUKSHUMAYEH Question: In early 2013, Beauty property developer negotiated with Stylish over a new house in the eastern sector of Singapore. Beauty and Stylish had various meetings about the cost and finish of the house. At one of their meetings, Stylish asked ...

    Read More
  • Role of Law

    ...Functions of Law LAW/421 October 6, 2014 Rachel De Angelo ...

    Read More
  • Common Law

    ... Assignment On Common Law Submitted To: Dr. Simon Palmquist Word Count: 1,919 Table of Contents Question 1................................................................................................................ 02 Question 2...........................................................................

    Read More
  • sports law

    ... Coaches Contracts Lee Fulcher 4/18/14 Sport Law Dr Kuchler A contract is a written or spoken agreement that is concerning employment, sales, or tenancy, that is intended to be enforceable by law. Which means nothing if both parties do not sign it. In today’s time of multi million dollar contrac...

    Read More
  • Law assignment

    ... Question 1a Not all agreement is a legally enforceable contract, only certain time of agreement with co-hold to the rule of law of contract will become enforceable and such criteria have to be satisfied. A contract to be legally binding or enforceable must include 4 essential elements as follow: 1) The relevant legal capacity to enter in...

    Read More

Discover the Best Free Essays on StudyMode

Conquer writer's block once and for all.

High Quality Essays

Our library contains thousands of carefully selected free research papers and essays.

Popular Topics

No matter the topic you're researching, chances are we have it covered.