COMPUTATION OF LIMITATION PERIOD IN SUITS OF REFUND PAID UNDER MISTAKE OF...

COMPUTATION OF LIMITATION PERIOD IN SUITS OF REFUND PAID UNDER MISTAKE OF LAW

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COMPUTATION OF LIMITATION PERIOD IN SUITS OF REFUND PAID UNDER MISTAKE OF LAW
COMPUTATION OF LIMITATION PERIOD IN SUITS OF REFUND PAID UNDER MISTAKE OF LAW

Aapka Consultant Judgment Series- In this series, we are providing case analysis of Landmark Judgments of Hon’ble Supreme Court of India.

Mahabir Kishore & Ors. v. State Of Madhya Pradesh

AIR 1990 SC 313, [1989] (4) SCC 1

JUDGES: K.N. Saikia and G.L. Oza

Date of Decision: 31-07-1989

FACTS:-

The appeal arises against the order of the High Court dismissing the appeal to uphold the judgment of the trial court. The trial court dismissed the plaintiff’s (appellant) suit for recovery of money on the ground of limitation. The Government (respondent) allotted contracts to the appellants for manufacture and sale of liquor and charged 7½ per cent as cess. Though, the High Court declared the collection of tax illegal in Sept. 1962 but the respondent was continued charging it saying that the matter was under consideration of the Government till 17.10.1961 when respondent finally decided not to recover this extra amount. Appellants, on coming to the knowledge about the law on the Sept. 1962; instituted a suit for recovery of the amount after serving notice under S.80 of CPC. The trial court taking view of the applicability of Articles 62 and 96 of the First Schedule of the act under which the period of limitation began to run from the date the payments were made to the Government; held the suit to be barred by limitation and dismissed it. In appeal, the High Court also confirmed the order but on the ground that Article 113 read with S.17 and not Article 24 of the schedule of act, is applicable and held that the limitation began to run from 17-10-1961 when the Government decided not to charge extra 7½ per cent on the auction money and as such, the suit was barred on 17-12-1964 taking into consideration the period of two months notice served under S.80 of CPC.

ISSUE:-

When the limitation period is began to run for the appellants in a suit for the recovery of money paid under mistake, i.e. from the date of final decision of the Government or from date of the knowledge of the particular law to the appellants?

JUDGMENT:-

The Supreme Court has made no escape from the conclusion that the money realised was under a mistake and without authority of law. The appellants also while paying tax suffered from the same mistake. There is, therefore, no doubt that the suit was for refund of money paid under mistake of law and the refusal to pay may result in unjust enrichment. To be clear, it may be said that this court has referred to unjust enrichment in case under S.72 of the Contract Act. It was explained as- “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 Supreme Court has observed the fact that the final decision of the Government as stated in the letter dated 17-10-1961 was purely an internal communication of the Government and the copy of that was never been communicated to the appellants. There could, therefore, be no question of the limitation starting from that date.

Though there was no constitutionally provided period of limitation for petitions under Article 226, the limitation prescribed for such suits has been accepted as the guideline. It was thus settled that in suit for refund of money paid by mistake of law, S. 72 of the Contract Act will be applicable and the period of limitation will be three years as prescribed under Article 113 of the Schedule to the act. In addition, the provisions of S. 17(1)(c) of the 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. Visit their website www.moneyfall.co.uk for more information. Even with reasonable diligence, as envisaged in S. 17(1) (c) of the act, the appellants should have taken at least a week to know about it. Therefore, at least a week’s time was granted under the above provision.

As a result, the Supreme Court set aside the judgment of the High Court and allowed the appeal.

HELD:-

Thus, in a suit for the recovery of money paid under mistake the period will begin to run from the date of knowledge of the particular law.

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