1964 Supreme(AP) 147

Andhra Pradesh High Court
Judges : NARASIMHAM, P.CHANDRA REDDY
Village Panchayat of Jangareddigudem - Appellant
Versus
Kommireddy Narasayya - Respondent
Decided On : 07-28-64

A person who has received any advantage under an agreement or contract which is void or becomes void is bound to restore it, or to make compensation for it, to the person from whom he received it.

Headnote:

CONTRACT - Auction - Bidder - Highest Bidder - Acceptance of Bid - Execution of Muchilika - Failure to Execute - Collection of Fees - Suit for Recovery of Bid Amount - Applicability of Sections 65 and 70 of the Indian Contract Act - Principle of Unjust Enrichment.

Fact of the Case:

The respondent was the highest bidder at an auction for the right to collect fees in weekly and daily markets and cart stands in Jangareddigudem Panchayat Board for the year 1951-52. The auction was held by the President of the said Panchayat Board on 10-3-1951 and knocked down in favor of the respondent for Rs. 4,150.00. The auction sale was confirmed by the Panchayat Board by its resolution dated 21-3-1951. The respondent failed to deposit the one-fourth of the bid amount within the time allowed and execute the required muchilika. Nevertheless, he exercised his right to collect the said fees from 1-4-1951 to 31-1-1952; but he paid a sum of Rs. 984/ only on 17-7-1951 which was short of the required deposit. The Panchayat Board gave a notice Ex. B. 1 dated 29-12-1951 that his right was canceled for having violated the conditions of the auction and calling upon him to pay the arrears of the installments that were due from him. The respondent replied denying the allegations with the result that on 1-2-1952 the appellant reauctioned the right for February and March, 1952. The Panchayat Board therefore filed the suit claiming the aggregate of the 10 monthly installments in arrears for the period from 1-4-1951 to 31-1-1952 with interest thereon.

Finding of the Court:

The court held that the respondent was bound to restore the advantage or to make compensation for it, as he had collected the market fees in the purported exercise of his right under the agreement. The court also held that the respondent had not made collections in contravention of the agreement, but under the agreement whose terms could not be enforced because a registered mutchilika as contemplated by the parties was not executed. The court further held that Section 70 of the Indian Contract Act was applicable to the facts of the case, as the respondent had enjoyed the benefit of making collections and the Panchayat Board did not intend to permit him to make collections gratuitously. The court also held that the plaintiff would be entitled to relief under Section 65 or under Section 70 of the Indian Contract Act or on the principle of unjust enrichment.

Issues: 1. Whether the respondent was bound to restore the advantage or to make compensation for it, as he had collected the market fees in the purported exercise of his right under the agreement? 2. Whether the respondent had made collections in contravention of the agreement? 3. Whether Section 70 of the Indian Contract Act was applicable to the facts of the case? 4. Whether the plaintiff would be entitled to relief under Section 65 or under Section 70 of the Indian Contract Act or on the principle of unjust enrichment?

Ratio Decidendi: 1. The court held that the respondent was bound to restore the advantage or to make compensation for it, as he had collected the market fees in the purported exercise of his right under the agreement. The court reasoned that the respondent had enjoyed the benefit of making collections and the Panchayat Board did not intend to permit him to make collections gratuitously. 2. The court held that the respondent had not made collections in contravention of the agreement, but under the agreement whose terms could not be enforced because a registered mutchilika as contemplated by the parties was not executed. 3. The court held that Section 70 of the Indian Contract Act was applicable to the facts of the case, as the respondent had enjoyed the benefit of making collections and the Panchayat Board did not intend to permit him to make collections gratuitously. 4. The court held that the plaintiff would be entitled to relief under Section 65 or under Section 70 of the Indian Contract Act or on the principle of unjust enrichment.

Final Decision: The court set aside the judgment of Krishna Rao, J. and restored that of the first appellate court, that is to say, the additional District Judge, West Godavari at Eluru, in A. S. No. 166 of 1954, with the modification that the interest granted is reduced to 6 % per annum. The appellate will get proportionate costs throughout.