SOWDRA BAI Vs. SARASWATHI AMMAL

JUDGEMENT

(1.) On the 7 January, 1938, one Gangadhara Mudali falsely representing himself to be Govindaraja Mudali, the owner of a house and land known as No. 5, Muthia Naicken Street. Purasawalkam, Madras, induced the appellants to lend to him Rs. 2,000 on a mortgage of the property. The real owner had no knowledge of the fraud. As Gangadhara Mudali had no interest in the property the mortgage deed of course conferred no title. Again falsely representing himself to be Govindaraja Mudali, Gangadhara Mudali induced the respondent on the llth February, 1938, to advance Rs. 3,500 on a second mortgage of the property. Out of the Rs. 3,500 which the respondent agreed to advance she was to pay to the appellants Rs. 2.000 in discharge of the first mortgage. V. G. Sambasivamurthi Mudali, the son of Govindaraja Mudali, was a party to this second transaction, but a again his father had no knowledge of what was happening. Believing that Gangadhara Mudali was Govindaraja Mudali and that the appellants were first mortgagees of the property the respondent paid to them, the Rs. 2,000. When the fraud was discovered the respondent instituted the present suit in the City Civil Court to recover from, the appellants the Rs. 2.000 as a payment made in mistake of the facts. The case was tried by the Principal Judge of the City Civil Court, who held that the respondent had paid the Rs. 2,000 to the appellants under a mistaken belief that the mortgage executed in her favour had been executed by. the true owner and it was that mistake which had induced the payment. Consequently he granted the respondent a decree for the return of the payment of Rs. 2,000. The appeal is from this decision.

(2.) Section 72 of the Indian Contract Act states: A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it. There is here no ambiguity. If money is paid to a person by mistake he is bound to repay it. That the Rs. 2,000) was paid by the respondent to the appellants in the mistaken belief that they were prior mortgagees is not open to question and if the words used in Section 72 are to be given their ordinary meaning the decree must stand. For the appellants it is. however, contended that the case falls within the principle laid down in Aiken V/s. Short (1856) 1 H. & N. 210 : 156 ER. 1180, and that tinder the English common law a payment made by mistake cannot be recovered unless there is some privity between the payer and the payee. Consequently it is said that the section should be read subject to the qualifications imposed by the common law. I will discuss these contentions presently but before doing so I consider it desirable to quote the judgment of Parke, B, in Kelly V/s. Solan (1841) 9 M. & W. 54 : 152 E.R. 24, as it appears to me that Section 72 of the Contract Act embodies the principle there stated, a principle which was approved of by the House of Lords in R.E. Jones Ltd. V/s. Waring & Gillow Ltd. (1926) A.C. 670 In Kelly V/s. Solari (1841) 9 M. & W. 54 : 152 E.R. 24, Parke, B, said: 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 demand 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 Ms power, seems, from the eases cited, to have been founded on the dictum of Mr Justice Bayley, in the case of. Milnes V/s. Duncan (1827) 6 B. & C. 671 : 108 E.R. 598; 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 plaintiff 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 paid 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. In his speech in R.E. Jones Ltd. V/s. "Waring & Gillow Ltd. (1926) A.C. 670, Lord Shaw quoted in full the judgment of Parke, B.. and it was accepted as governing the case. There a gross fraud had been perpetrated, as in this case.

(3.) The facts in Aiken V/s. Short (1856) 1 H. & N. 210 : 156 ER. 1180, have nothing in common with the facts here. In 1846, one Edwin Carter, made a will by which he gave his property to his eight brothers and sisters in equal shares. In 1847, the testator died. In 1850, one of the brothers. George Carter, borrowed ?200 from one Francis Short, who died in 1853. The suit was by Short's widow who was the sole executrix of his will. George Carter was also indebted to a bank to which in 1855, he conveyed his interest in the estate of Edwin Carter subject to charges previously created by him. As security for the loan of ?200 obtained from Short, George Carter had mortgaged his interest in his brother's estate. After the conveyance to the bank the executrix of the will of Short applied to George Carter for payment of the ?200. He referred her to the bank; which thereupon paid her the ?200 in accordance with the terms rat the conveyance which it had obtained from George Carter. After all this had happened, a later will of Edwin Carter was produced, and under it Ggorge Carter merely received an annuity of ? 100 which was to cease upon his making an assignment. The bank then applied to the executrix for repayment of the ?200, and as she refused to comply with the demand a suit was instituted against her. It was held that the bank was not entitled to recover the money. In the course of his judgment Bramwell, B., said: In order to entitle a person to recover back money paid under a mistake of fact, the mistake must be as to a fact which, if true, would make the person paying liable to pay the money; not where, if true, it would merely make it desirable that he should pay the money. It is to be borne in mind that George Carter owed ?200 to the estate of Francis Short and in paying the executrix the bank was discharging a lawful debt. In the present case both the appellants and the respondent were victims of a gross fraud.