Sales Tax Officer, Banaras & vs Kanhaiya Lal Mukundlal Saraf on 23 September 1958
Mohammad Atik Saiyed 20BAL055 (BA LLB) BATCH: 2025
SALES TAX OFFICER, BANARAS & OTHERS (Petitioner)
VS KANHAIYA LAL MUKUNDLAL SARAF (Respondent) In the Supreme Court of India on 23/09/1958.
CITATION: 1959 AIR 135, 1959 SCR SUPL. (1)1350
Bench: BHAGWATI, NATWARLAL H., DAS, SUDHI RANJAN (CJ), SINHA, BHUVNESHWAR P., SUBBARAO, K., WANCHOO, K.N...
ISSUE
Whether Section 72 of the Indian Contract Act applies to the facts of the present case?
Section 72 is in the following terms: “A person to whom money has been paid, or anything delivered by mistake or under coercion, must repay or return it.”
Facts of the case
A registered firm, paid sales tax in respect of its forward transactions in pursuance of the assessment orders passed by the sales tax officer for the years 1949- 51, but in 1952, the Allahabad High Court has held in Messrs.
The respondent applied for a refund of the amounts paid, by a writ petition under Art. 226 of the Constitution. It was contended for the sales tax authorities that the respondent was not entitled to a refund because of the following reasons.
Sources
Since the monies which had been received by the Government had not been retained but had been spent away by it, the respondent was disentitled to recover the said amounts.
The amounts in dispute were paid by the respondent under a mistake of law and were therefore irrecoverable.
The payments were in discharge of the liability under the Sales Tax Act and were voluntary payments without protest;
The High Court concluded that s. 72 of the Indian Contract Act applied to the present case and the State Government must refund the money unlawfully received by it from the respondent on account of Sales Tax.
Decree
It was held that where there is a clear and unambiguous provision of law which entitles a party to the relief claimed by him, equitable considerations can't be imported and, in the instant case, the fact that the Government had not retained the money paid by the respondent but had spent them away in the ordinary course of business of the State would not make any difference, and under the plain terms of s. 72 Of the Act the respondent was entitled to recover the amounts.
The terms "mistake" in Section 72 Of the Indian Contract Act comprises 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 laboring 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, however,
to questions of estoppel, waiver, limitation or the like.
The state of mind of the respondent would be the only thing relevant to consider in this context and once the respondent established that payments were made by it under a mistake of law mistake of fact, he is entitled to recover the money and the party receiving the same is bound to repay/return them irrespective of any consideration whether the money had been paid voluntarily, subject however to questions of estoppel.
Sales Tax Officer, Banaras & ... vs Kanhaiya Lal Mukundlal Saraf on 23
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Transcript
Sales Tax Officer, Banaras & vs Kanhaiya Lal Mukundlal Saraf on 23 September 1958
Mohammad Atik Saiyed 20BAL055 (BA LLB) BATCH: 2025
SALES TAX OFFICER, BANARAS & OTHERS (Petitioner) VS KANHAIYA LAL MUKUNDLAL SARAF (Respondent) In the Supreme Court of India on 23/09/1958. CITATION: 1959 AIR 135, 1959 SCR SUPL. (1)1350
Bench: BHAGWATI, NATWARLAL H., DAS, SUDHI RANJAN (CJ), SINHA, BHUVNESHWAR P., SUBBARAO, K., WANCHOO, K.N...
ISSUE
Whether Section 72 of the Indian Contract Act applies to the facts of the present case? Section 72 is in the following terms: “A person to whom money has been paid, or anything delivered by mistake or under coercion, must repay or return it.”
Facts of the case
A registered firm, paid sales tax in respect of its forward transactions in pursuance of the assessment orders passed by the sales tax officer for the years 1949- 51, but in 1952, the Allahabad High Court has held in Messrs.
The respondent applied for a refund of the amounts paid, by a writ petition under Art. 226 of the Constitution. It was contended for the sales tax authorities that the respondent was not entitled to a refund because of the following reasons.
Sources
Since the monies which had been received by the Government had not been retained but had been spent away by it, the respondent was disentitled to recover the said amounts.
The amounts in dispute were paid by the respondent under a mistake of law and were therefore irrecoverable.
The payments were in discharge of the liability under the Sales Tax Act and were voluntary payments without protest;
The High Court concluded that s. 72 of the Indian Contract Act applied to the present case and the State Government must refund the money unlawfully received by it from the respondent on account of Sales Tax.
Decree
It was held that where there is a clear and unambiguous provision of law which entitles a party to the relief claimed by him, equitable considerations can't be imported and, in the instant case, the fact that the Government had not retained the money paid by the respondent but had spent them away in the ordinary course of business of the State would not make any difference, and under the plain terms of s. 72 Of the Act the respondent was entitled to recover the amounts.
The terms "mistake" in Section 72 Of the Indian Contract Act comprises 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 laboring 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, however, to questions of estoppel, waiver, limitation or the like.
The state of mind of the respondent would be the only thing relevant to consider in this context and once the respondent established that payments were made by it under a mistake of law mistake of fact, he is entitled to recover the money and the party receiving the same is bound to repay/return them irrespective of any consideration whether the money had been paid voluntarily, subject however to questions of estoppel.