vil Appeal No 1826 N of 1974
From the Judgment and Order dated 641972 of the Madhya Pradesh High Court in FA No 23 of 1966
MV Goswami for the Appellants
UA Rana and SK Agnihotri for the Respondents
The Judgment of the Court was delivered by SAIKIA J
This plaintiffs  appeal by special leave is from the appellate Judgment of the Madhya Pradesh High Court dismissing the appeal upholding the Judgment of the trial court dismissing the plaintiffs  suit on the ground of limitation
A registered firm Rai Saheb Nandkishore Rai Saheb Ju galki 599 shore Appellants was allotted contracts for manufacture and sale of liquor for the calendar year 1959 and for the subsequent period from 11
1960 to 313
1961 for Rs25620000 and Rs47190000 respectively by the Government of Madhya Pradesh who also charged 7 12 per cent over the auction money as mahua and fuel cess
As writ petitions challenging the Government s right to charge this 7 12 per cent were pending in the Madhya Pradesh High Court the Government announced that it would continue to charge it and the question of stopping it was under consid eration of the Government whose decision would be binding on the contractors
The firm appellants thus paid for the above contracts a total extra sum of Rs5460600
On 17101961 the Under Secretary to Government MP Forest Department Bhopal wrote the following letter No 10 130 X61 Exhibit D 23 to the Chief Conservator of Forests Madhya Pradesh Rewa Subject Levy of cess on liquor contractors
Under former MP Government Forest Depart ment memo No 4595 CR 73 XI dated 25th July 1953 a royalty at 7 12 per cent of the license fee for liquor shops was imposed on liquor contractors to cover the value of mahua  fuel extracted from the reserved or protect ed forests by the contractors for their still
The MP High Court has since decided that the levy of the aforesaid cess is illegal and the cess cannot be recovered from the liquor contractors
In pursuance of this decision Government desires that all process es whenever issued or proceedings instituted against liquor contractors for recovery of the mahua or fuel cess should forthwith be with drawn and no revenue recovery certificates should be issued in respect of this cess
Simultaneously no free supply of mahua or fuel should be permitted by virtue of the imposition mentioned above
Immediate compliance is requested
No  
X61 Dt
Bhopal the   661 Copy forwarded for immediate compliance to 600 1
Conservator of Forests Bilaspur 2
All Divisional Forest Officers Bilaspur Circle
Copy to CF Raipur Circle for similar auction in this cess levied in any division of his Circle
 On 2441959 the Madhya Pradesh High Court s Judgment in Surajdin vs State of MP declaring the collection of 7 12 per cent illegal was reported in 1960 MPLJ 39
Even after this decision Government continued to charge 7 12 per cent extra money
Again on 318
1961 the High Court of Madhya Pradesh in NK Doongaji vs Collector Surguja decided that the charging of 7 12 per cent by the Government above the auction money was illegal
This Judgment was reported in 1962 MPLI 130
It is the appellants  case that they came to know about this decision only in or about September 1962
On 1710
1964 they served a notice on Government of Madhya Pradesh under section 80 of the Code of Civil Procedure request ing the refund of Rs5460600 failing which a suit for recovery would be filed and later they instituted Civil Suit No of 1964 in the court of Additional District Judge Jabalpur on 24121964
The Government resisted the suit on inter alia ground of limitation
The trial court taking the view that Articles 62 and 96 of the First Schedule to the Limitation Act 1908 were applicable and the period of limitation began to run from the dates the payments were made to the Government held the suit to be barred by limi tation and dismissed it
In appeal the High Court took the view that Article 113 read with section 17 and not Article 24 of the Schedule to the  was applicable and held that the limitation began to run from 1710
1961 on which date the Government decided not to charge extra 7 12 per cent on the auction money and as such the suit was barred on 1712
1964 taking into consideration the period of two months prescribed by section 80 of the Code of Civil Procedure
Consequently the appeal was dismissed
The appellants  petition for leave to appeal to this Court was also rejected observing it was unfortunate that the peti tioners filed their suit on 2412
1964 and as such the suit was barred by time by seven days Mr MV Goswami learned counsel for the appellants submits inter alia that the High Court erred in holding that the limitation started running from 17161961 being the date of the letter Exhibit D 23 which was not communi cated to the appellants or any other contractor and there fore the appellants had no opportunity to know 601 about it on that very date with reasonable diligence under section 17 and the High Court ought to allow atleast a week for knowledge of it by the appellants in which case the suit would be within time
Counsel further submits that the High Court while rightly discussing that section 17 of the was applicable erred in not applying that section to the facts of the instant case wherefore the impugned Judgment is liable to be set aside
Mr Ujjwal A Rana the learned counsel for the respond ent submits inter alia that 17102961 having been the date on which the Government finally decided not to recover extra 7 12 per cent above the auction money the High Court rightly held that the limitation started from that date and the suit was clearly barred under Article 24 or 113 of the Schedule to the  and that though the records did not show that the Government decision was communicated to the appellants there was no reason why they with reasonable diligence could not have known about it on the same date The only question to be decided therefore is whether the decision of the High Court is correct
To decide that question it was necessary to know what was the suit for
There is no dispute that 7 12 per cent above the auction money was charged by the Government of Madhya Pradesh as mahua and fuel cess and the High Court subsequently held that it had no power to do so
In view of those writ peti tions challenging that power Government asked the contrac tors to continue to pay the same pending Government s deci sion on the question and the appellants accordingly paid
Ultimately on 17101961 Government decided not to recover the extra amount any more but did not yet decide the fate of the amounts already realised
There is no denial that the liquor contracts were performed by the appellants
There is no escape from the conclusion that the extra 7 12 per cent was charged by the Government believing that it had power but the High Court in two cases held that the power was not there
The money realised was under a mistake and without authority of law
The appellants also while paying suffered from the same mistake
There is therefore no doubt that the suit was for refund of money paid under mistake of law
The question is what was the law applicable to the case Nul ne doit senrichir aux depens des autres  No one ought to enrich himself at the expense of others
This doctrine at one stage of English common law was remedied by indebitatus assumpsit  which action lay for money had and received to the use of the plaintiff
It lay to recover 602 money paid under a mistake or extorted from the plaintiff by duress of his goods or paid to the defendant on a con sideration which totally tailed
On abolition of indebit atus assumpsit  courts used to imply a promise to pay which however in course of time was held to be purely fictitious
Lord Manslied in Moses vs Macferlan  at 10 12 explained the juridical basis of the action for money had and received thus This kind of equitable action to recover back money which ought not in justice to be kept is very beneficial and therefore much encouraged
It lies only for money which ex aequo et bono  the defendant ought to refund it does not lie for money paid by the plain tiff which is claimed of him as payable in point of honour and honesty although it could not have been recovered from him by any course of law as in payment of a debt barred by the Statute of Limitations or contracted during his infancy or to the extent of principal and legal interest upon a usurious contract or for money fairly lost at play because in all these cases the defendant may retain it with a safe conscience though by positive law he was barred from recovering
But it lies for money paid by mistake or upon a consideration which happens to fail or for money got through imposition express or implied or extortion or oppression or an undue advan tage taken of the plaintiff s situation contrary to laws made for the protection of persons under those circumstances
In one word the gist of this kind of action is that the defendant upon the circumstances of the case is obliged by the ties of natural jus tice and equity to refund the money In that case Moses received from Jacob four promissory notes of cash each
He endorsed these to Macferlan who by a written agreement contracted that he would not hold Moses liable on the endorsement
Subsequently however Macferlan sued Moses on the notes in a Court of Conscience
The Court refused to recognise the agreement and Moses was forced to pay
Moses then brought an action against Macferlan in the king s Bench for money had and received to his use
Lord Manslied allowed him to recover observing as above
Courts in England have since been trying to formulate a juridicial basis of this obligation
Idealistic formulations as aequum et bonum  and natural justice  were considered to be inadequate and the 603 more legalistic basis of unjust enrichment is formulated
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 ie based upon the civil law
 In Sinclair vs Brougham Lord Haldane said that law could de jure  impute promises to repay whether for money had and received otherwise which may if made defacto it would inexorably avoid
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
Another analysis of the obligation is of quasi contract
It was said if the defendant be under an obligation from the ties of natural justice to refund the law implies a debt and give this action rounded in the equity of the plaintiff s case as it were upon a contract quasi ex contracts as the Roman law expresses it As Lord Wright in Fibrosa Spolka vs Fairbairn Lawson 1943 AC 32 1942 pointed out the obligation is as efficacious as if it were upon a contract
Such remedies are quasi contract or restitution and theory of unjust enrichment has not been closed in English law
 Section 72 of the Indian Contract Act deals with liabil ity of person to whom money is paid or thing delivered by mistake or under coercion
It says A person to whom money has been paid or anything delivered by mistake or under coer cion must repay or return it Illustration b to the section is A Railway Company refuses to deliver up certain goods to the consignee except upon the payment of an illegal 604 charge for carriage
The consignee pays the sum charged in order to obtain the goods
He is entitled to recover so much of the charge as was illegally excessive
 Our law having been codified we have to apply the law
It is true as Pollock wrote in 1905 in the preface to the first Edition of Pollock and Mulla s Indian Contract and Specific Relief Acts The Indian Contract Act is in effect   a code of English law
Like all codes based on an existing authoritative doctrine it assumes a certain knowledge of the principles and habits of thought which are embodied in that doctrine
 It is therefore helpful to know those fundamental notions in the common law which are concisely declared with or without modification by the text
 There is no doubt that the instant suit is for refund of money paid by mistake and refusal to refund may result in unjust enrichment depending on the facts and circumstances of the case
It may be said that this court has referred to unjust enrichment in cases under section 72 of the Contract Act
See   and  The next question is whether and if so which provision of the will apply to such a suit
On this question we find two lines of decisions of this Court one in respect of civil sulks and the other in respect of peti tions under Article 226 of the Constitution of India
Though there is no constitutionally provided period of limitation for petitions under Article 226 the limitation prescribed for such suits has been accepted as the guideline though little more latitude is available in the former
A tax paid under mistake of law is refundable under section 72 of the 
In Sales Tax Officer vs Kanhaiya Lal where the respondent a regis tered firm paid sales tax in respect of the forward trans actions in pursuance of the assessment orders passed by the Sales Tax Officer for the year 1949 51 in 1952 the Allaha bad High Court held in Ms Budh Prakash Jai Prakash vs Sales Tax Officer Kanpur that the levy of sales tax on forward transactions was ultra vires
The respondent asked for a refund of the mounts paid filing a writ peti tion under Article 226 of 605 the Constitution
It was contended for the Sales Tax Author ities that the respondent was not entitled to a refund because 1 the amounts in dispute were paid by the respond ent under a mistake of law and were therefore irrecovera ble 2 the payments were in discharge of the liability under the Sales Tax Act and were voluntary payments without protest and 3 inasmuch as the monies which had been received by the Government had not been retained but had been spent away by it and the respondent was disentitled to recover the said amounts
This Court held that the term mistake in section 72 of the comprised within its scope a mistake of law as well as a mistake of fact and that under that section a party is entitled to recover money paid by mistake or under coercion and if it is established that the payment even though it be of a tax has been made by the party labouring under a mistake of law the party receiving the money is bound to repay or return it though it might have been paid voluntarily subject howev er to questions of estoppel waiver limitation or the like
On the question of limitation it was held that section 171c of the would be applicable and that where a suit will be to recover monies paid under a mistake of law a writ petition within the period of limita tion prescribed ie within 3 years  of the knowledge of the mistake would also lie
 It was also accepted that the period of limitation does not begin to run until the plain tiff has discovered the mistake or could with reasonable diligence have discovered it
The money may not be recoverable if in paying and re ceiving it the parties were in pan delicto
In Kiriri Cotton Co Ltd vs Ranchhoddas Keshavji Dewani  where the appellant company in consideration of granting to the respondent a sub lease asked for and received from him a premium of Sh
10000 and the latterclaimed refund thereof the Privy Council held that the duty of observing the law was firmly placed by the Ordinance on the shoulders of the landlord for the protection of the tenant and the appellant company and the respondent were not therefore in pari delic to in receiving and paying respectively the illegal premium which therefore in accordance with established common law principles the respondent was entitled to recover from the landlord and that the omission of a statutory remedy did not in cases of this kind exclude the remedy by money had and received
In the instant case also the parties could not be said to be in pari delicto in paying and receiving the extra 7 12 per cent
Had the appellants not paid this amount they would not have been given the contracts
In D Cawasji 
Co vs The State of Mysore  Anr
   the appellants paid certain amount to the Government as 606 excise duty and education cess for the years 195 1 52 to 1965 66 in one case and from 1951 52 to 1961 62 in the other
The High Court struck down the provisions of the relevant Acts as unconstitutional
In Writ Petitions before the High Court claiming refund the appellants contended that the payments in question were made by them under mis take of law that the mistake was discovered when the High Court struck down the provisions as unconstitutional and the petitions were therefore in time but the High Court dis missed them on the ground of inordinate delay
Dismissing the appeals this Court held that where a suit would lie to recover monies paid under a mistake of law a writ petition for refund of tax within the period of limitation would lie
For filing a writ petition to recover the money paid under a mistake of law the starting point of limitation is from the date on which the judgment declaring as void the particular law under which the tax was paid was rendered
It was held in D Cawasji supra that although section 72 of the Contract Act has been held to cover cases of payment of money under a mistake of law as the State stands in a peculiar position in respect of taxes paid to it there are perhaps practical reasons for the law according different treatment both in the matter of the heads under which they could be recovered and the period of limitation for recovery
PN Bhagwati J as he then was in Madras Port Trust vs Hymanshu Inter national  deprecated any resort to plea of limitation by public authority to defeat just claim of citizens observing that though permissible under law such technical plea should only be taken when claim is not well founded
Section 171c of the  provides that in the case of a suit for relief of the ground of mistake the period of limitation does not begin to run until the plaintiff had discovered the mistake or could with reasonable diligence have discovered it
In a case where payment has been made under a mistake of law as contrasted with a mistake of fact generally the mistake become known to the party only when a court makes a declaration as to the invalidity of the law
Though a party could with reasonable diligence discover a mistake of fact even before a court makes a pronouncement it is seldom that a person can even with reasonable diligence discover a mistake of law before a judgment adjudging the validity of the law
ES Venkataramiah J as his Lordship then was in Shri Vallabh Glass Works Ltd vs Union of India   where the appellants claimed refund of excess duty paid under Central Excise and Salt Act 1944 laid down that the excess amount paid by the appellants would have become refundable by virtue of section 72 of the 607 if the appellants had filed a suit within the period of limitation and that section 171c and Article 113 of the would be applicable
In Commissioner of Sales Tax UPv
Ms Auriaya Chamber of Commerce Allahabad   the Supreme Court in its decision dated May 3 1954 in Sales Tax Officer vs Budh Prakash Jai Prakash 1954 5 STC 193 having held tax on forward contracts to be illegal and ultra vires the UP Sales Tax Act and that the decision was applicable to the assessee s case the assessee filed several revisions for quashing the assessment order for the year 1949 50 and for subsequent years which were all dismissed on ground of limitation
In appeal to this Court Sabyasachi Mukharji J while dismissing the appeal held that money paid under a mistake of law comes within mistake in section 72 of the Contract Act there is no question of any estoppel when the mistake of law is common to both the assessee and taxing authority
His Lordship observed that section 5 of the Limitation Act 1908 and Article 96 of its First Schedule which prescribed a period of 3 years were applicable to suits for refund of illegally collected tax
In Salonah Tea Co Ltd  Ors
vs Superintendent of Taxes Nowgong and Ors
   the Assam Taxa tion on Goods carried by Road or Inland Waterways Act 1954 was declared ultra vies the Constitution by the Supreme Court in Atiabari Tea Co Ltd vs State of Assam  A subsequent Act was also declared ultra vires by High Court on August 1 1963 against which the State of Assam and other respondents preferred appeals to Supreme Court
Meanwhile the Supreme Court in a writ petition Khyer bari Tea Co Ltd vs State of Assam   declared on December 13 1963 the Act to be intra vires
Consequently the above appeals were allowed
Notices were therefore issued requiring the appellant under section 72 of the Act to submit returns
Returns were duly filed and assessment orders passed thereon
On July 10 1973 the Gauhati High Court in its Judgment in Loong Soong Tea Es tate s case Civil Rule No 1005 of 1969 decided on July 10 1973 declared the assessment to be without jurisdic tion
In November 1973 the appellant filed writ petition in the High Court contending that in view of the decision in Loong Soong Tea Estate s case he came to know about the mistake in paying tax as per assessment order and also that he became entitled to refund of the amount paid
The High Court set aside the order and the notice of demand for tax under the Act but declined to order refund of the taxes paid by the appellant on the ground of delay and laches as in view of the High Court it was possible for the appellant to know about 608 the illegality of the tax sought to be imposed as early as in 1963 when the Act in question was declared ultra vires
Allowing the assessee s appeal Mukharji J speaking for this Court held In this case indisputably it appears that tax was collected without the authority of law
Indeed the appellant had to pay the tax in view of the notices which were without juris diction
It appears that the assessment was made under section 93 of the Act
Therefore it was without jurisdiction
In the premises it is manifest that the respondents had no authority to retain the money collected with out the authority of law and as such the money was liable to refund
 The question there was whether in the application under article 226 of the Constitution the Court should have refused refund on ground of laches and delay the case of the appel lant having been that it was after the Judgment in the case of Loong Soong tea Estate the cause of action arose
That judgment was passed in July 1973
The High Court was therefore held to have been in error in refusing to order refund on the ground that it was possible for the appellant to know about the legality of the tax sought to be imposed as early as 1973 when the Act in question was declared ultra vires
The Court observed Normally speaking in a society governed by rule of law taxes should be paid by citizens as soon as they are due in accordance with law
Equally as a corollary of the said statement of law it follows that taxes col lected without the authority of law as in this case from a citizen should be refunded because no State has the right to receive or to retain taxes or monies realised from citizens without the authority of law
 On the question of limitation referring to Suganmal vs State of MP AIR 1965 SC 1740 and Tilokchand Motichand vs HB Munshi  his Lordship observed that the period of limitation prescribed for recovery of money paid by mistake started from the date when the mistake was known
In that case knowledge was attributable from the date of the Judgment in Loong Soong Tea Estate s case on July 10 1973
There had been statement that the appellant came to know of that matter in October 1973 and there was no denial of the averment made
On that ground the High Court was held to be in 609 error
It was accordingly held that the writ petition filed by the appellants were within the period of limitation prescribed under article 113 of the Schedule read with section 23 of the 
It is thus a settled law that in suit for refund of money paid by mistake of law section 72 of the Contract Act is applicable and the period of limitation is three years as prescribed by Article 113 of the Schedule to the Indian and the provisions of section 171c of that Act will be applicable so that the period will begin to run from the date of knowledge of the particular law where under the money was paid being declared void and this court be the date of judgment of a competent court declaring that law void
In the instant case though the Madhya Pradesh High Court in Surajdin vs State of MP declared the collection on 7 12 per cent illegal and that decision was reported in  the Government was still charging it saying that the matter was under consideration of the Government
The final decision of the Government as stated in the letter dated 1710
1961 was purely an internal communication of the Government copy whereof was never communicated to the appellants or other liquor contractors
There could there fore be no question of the limitation starting from that date
Even with reasonable diligence as envisaged in section 171c of the  the appellants would have taken at least week to know about it
Mr Rana has fairly stated that there was nothing on record to show that the appellants knew about this letter on 1710
1961 itself or within a reasonable time thereafter
We are inclined to allow at least a week to the appellants under the above provision
Again Mr Rana has not been in a position to show that the statement of the appellants that they knew about the mistake only after the judgment in Doongaji s case reported in  in or about September 1962 whereafter they issued the notice under section 80 CPC was untrue
This statement has not been shown to be false
In either of the above cases namely of knowledge one week after the letter dated 1710
1961 or in or about September 1962 the suit would be within the period of limitation under Article 113 of the Schedule to the 
In the result we set aside the Judgment of the High Court allow the appeal and remand the suit
The records will be sent down forthwith to the trial court to decide the suit on merit in accordance with law expeditiously
The appellants shall be entitled to the costs of this appeal
RN J
Appeal allowed


Summary:
A complaint was filed against the appellant on January 131953 and the Special Magistrate trying him commenced the recording of evidence on July 4 955
During the trial the Criminal Procedure Code Amendment Act 26 of 955 came into force on January 2 1956 which introduced section 342 A in the Code of Criminal Procedure
The appellant made an application to the Magistrate claiming the right to appear as a witness on his own behalf under section 342 A in disproof of the charges made against him
The Magistrate rejected the application on the ground that section 342 A could not be applied to pending proceedings which would be according to the procedure laid down in the unamended Code Held that on a plain construction of section ii6 of the amending Act which provided for procedure to be followed in pending cases section 342 A was clearly applicable in such cases
Under the general law also a change in procedure operates retrospectively