Case: Jammu &amp; Kashmir Bank Ltd Vs. Attar-Ul-Nissa &amp; Others

the money paid by mistake and reliance in this connection is placed on S. 72 of the Contract Act. There is no doubt that S. 72 of the Contract Act provides that a person to whom money has been paid or anything delivered by mistake or under coercion must repay or return it. That Section in our opinion will only apply when we are dealing with a case of two persons one paying the money and the other receiving the money on behalf of the person paying it. In such a case if the payment is made by mistake the person receiving the money must return it. But Section 72 in our opinion has no application to a case where money is paid by a person to a bank with instructions that it should be deposited in the account of a third person who is a constituent of the bank. As soon as the money is so deposited in the account of the third person, who is a constituent of the bank, the money becomes the money of the constituent, and it is not open to the bank in such circumstances to reverse the entry of credit made in the account of the constituent and in effect pay back the money to the person who had deposited it, even though it might have been deposited by mistake. 8. As soon as the money is credited into the account of the constituent, even though the person paying in may have paid it by mistake, it becomes the money of the constituent, and the bank cannot pay it back to the person who paid it to the account of the constituent on his representation that it was paid by mistake, without obtaining the consent of the constituent. As we have already said the legal position is that for the purpose of payment, Government was the agent of Sultan Mohd. and whatever money was paid to be credited to the account of Sultan Mohd., even though it was paid through Government, became his money and it could not be paid out of his account which is in substance the effect of reversing the entries without his consent. Section 72 could certainly have been availed of by Government against Sultan Mohd. and the Government could have sued Sultan Mohd. for return of the money which had been paid by mistake into his account. But the Government could not ask the bank to reverse the entries and thus in effect ask it to pay out the money from the account of Sultan Mohd. into which it had been deposited and the bank could not do so without taking the consent of Sultan Mohd. Further though Government was the agent of Sultan Mohd. for the purpose of payment of the money for liquidating the debt, the Government had no further authority on his behalf to ask the bank to pay back any sum once it had been credited into his account by Government. That could only be done on the authority of Sultan Mohd. and there was no authority in this case for paying back the sum paid in by mistake to Government, for the reversal of the entries in substance amounted to this. 9. It has been urged that on this view the bank would not be able to correct any mistake in the account of any constituent. That is not so. If, for example, a bank credits a cheque in favour of A by mistake into the account of B. the bank can always correct that mistake, for it had received the money on behalf of A. Similarly if the bank receives say Rs. 5,000/- on behalf of A from some person, but by mistake enters Rs. 50,000/- in As account, the bank can always correct that entry and mention the correct sum received. But the present case is very different from corrections of such mistakes. Here the bank had received certain moneys on behalf of Sultan Mohd. through treasury bills or hundis. There is no dispute that money was received for credit to the account of Sultan Mohd. and was correctly credited to that account. There was therefore nothing which the bank could correct, for the bank had made no mistake in making the entries. The bank in our opinion is not concerned with any mistake made by the Accountant General or the treasury in sending the amounts to the bank for the credit of the same to the account of Sultan Mohd. If the Accountant General or the treasury had made any such mistake it was open to them to recover the amount paid in by mistake from Sultan Mohd. But the bank could not reverse the entries and thus pay out money from the account of Sultan Mohd. without his authority. It is obvious that the bank hesitated to reverse the entries and only did it on the threat that the amount would be deducted from the subsidy paid to the bank by the Government. We have no doubt that the High Court was right that in such circumstances where the amount had been paid even though by mistake into the account of a constituent of the bank it was not open to the bank to reverse the entries at the instance of the person paying-in the money into the constituents account on the ground that the payer had made a mistake. We agree with the High Court that S. 72 has no application to the facts of this case. Learned counsel for the appellant has referred us to Imperial Bank of Canada v. Bank of Hamilton, 1903 AC 49 in this connection. We are of opinion that that case has no application to the present cases, for the facts therein were different The payment had been made by one bank to another bank by mistake, there is nothing to show that the money had been paid into a constituents account and thereafter any entry had been reversed in that case.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]7. We are of opinion that this contention of the respondents is correct, and the High Court was right in the view it took of the legal position. It is true that on the facts shown there was double payment for a certain period due to mistake on the part of Government. The question however is whether it was open to the bank to reverse the entries in the manner it did without reference to Sultan Mohd. It has not been and cannot be disputed that it is not open to the bank to debit the account of a constituent like Sultan Mohd. with any sum without the authority of the constituent. What is however contended on behalf of the appellant is that Government paid the sum twice over by mistake and it was entitled to ask the bank to return the money paid by mistake and reliance in this connection is placed on S. 72 of the Contract Act. There is no doubt that S. 72 of the Contract Act provides that a person to whom money has been paid or anything delivered by mistake or under coercion must repay or return it. That Section in our opinion will only apply when we are dealing with a case of two persons one paying the money and the other receiving the money on behalf of the person paying it. In such a case if the payment is made by mistake the person receiving the money must return it. But Section 72 in our opinion has no application to a case where money is paid by a person to a bank with instructions that it should be deposited in the account of a third person who is a constituent of the bank. As soon as the money is so deposited in the account of the third person, who is a constituent of the bank, the money becomes the money of the constituent, and it is not open to the bank in such circumstances to reverse the entry of credit made in the account of the constituent and in effect pay back the money to the person who had deposited it, even though it might have been deposited by mistake8. As soon as the money is credited into the account of the constituent, even though the person paying in may have paid it by mistake, it becomes the money of the constituent, and the bank cannot pay it back to the person who paid it to the account of the constituent on his representation that it was paid by mistake, without obtaining the consent of the constituent. As we have already said the legal position is that for the purpose of payment, Government was the agent of Sultan Mohd. and whatever money was paid to be credited to the account of Sultan Mohd., even though it was paid through Government, became his money and it could not be paid out of his account which is in substance the effect of reversing the entries without his consent. Section 72 could certainly have been availed of by Government against Sultan Mohd. and the Government could have sued Sultan Mohd. for return of the money which had been paid by mistake into his account. But the Government could not ask the bank to reverse the entries and thus in effect ask it to pay out the money from the account of Sultan Mohd. into which it had been deposited and the bank could not do so without taking the consent of Sultan Mohd. Further though Government was the agent of Sultan Mohd. for the purpose of payment of the money for liquidating the debt, the Government had no further authority on his behalf to ask the bank to pay back any sum once it had been credited into his account by Government. That could only be done on the authority of Sultan Mohd. and there was no authority in this case for paying back the sum paid in by mistake to Government, for the reversal of the entries in substance amounted to this9. It has been urged that on this view the bank would not be able to correct any mistake in the account of any constituent. That is not so. If, for example, a bank credits a cheque in favour of A by mistake into the account of B. the bank can always correct that mistake, for it had received the money on behalf of A. Similarly if the bank receives say Rs. 5,000/- on behalf of A from some person, but by mistake enters Rs. 50,000/- in As account, the bank can always correct that entry and mention the correct sum received. But the present case is very different from corrections of such mistakes. Here the bank had received certain moneys on behalf of Sultan Mohd. through treasury bills or hundis. There is no dispute that money was received for credit to the account of Sultan Mohd. and was correctly credited to that account. There was therefore nothing which the bank could correct, for the bank had made no mistake in making the entries. The bank in our opinion is not concerned with any mistake made by the Accountant General or the treasury in sending the amounts to the bank for the credit of the same to the account of Sultan Mohd. If the Accountant General or the treasury had made any such mistake it was open to them to recover the amount paid in by mistake from Sultan Mohd. But the bank could not reverse the entries and thus pay out money from the account of Sultan Mohd. without his authority. It is obvious that the bank hesitated to reverse the entries and only did it on the threat that the amount would be deducted from the subsidy paid to the bank by the Government. We have no doubt that the High Court was right that in such circumstances where the amount had been paid even though by mistake into the account of a constituent of the bank it was not open to the bank to reverse the entries at the instance of the person paying-in the money into the constituents account on the ground that the payer had made a mistake. We agree with the High Court that S. 72 has no application to the facts of this case. Learned counsel for the appellant has referred us to Imperial Bank of Canada v. Bank of Hamilton, 1903 AC 49   in this connection. We are of opinion that that case has no application to the present cases, for the facts therein were different The payment had been made by one bank to another bank by mistake, there is nothing to show that the money had been paid into a constituents account and thereafter any entry had been reversed in that case.