1958 (9) TMI 57 - SC - VAT / Sales Tax

Whether section 72 of the Indian Contract Act applies to the facts of the present case? Held that - None of the contentions urged before us on behalf of the appellants in regard to the non-applicability of section 72 of the Indian Contract Act to the facts of the present case avail them and the appeal is accordingly dismissed with costs.

Summary

Issues Involved:
1. Applicability of Section 72 of the Indian Contract Act.
2. Whether payments made under a mistake of law can be recovered.
3. Voluntary nature of payments and their recoverability.
4. Application of the principle of estoppel.

Detailed Analysis:

1. Applicability of Section 72 of the Indian Contract Act:
The primary issue for determination was whether Section 72 of the Indian Contract Act applies to the facts of the present case. Section 72 states: "A person to whom money has been paid, or anything delivered by mistake or under coercion, must repay or return it." The Court noted that the section does not distinguish between a mistake of law and a mistake of fact, encompassing both within its scope. The Court emphasized that the plain terms of the statute must be given their legal effect without resorting to the previous state of law or the law in other countries unless there is ambiguity.

2. Whether Payments Made Under a Mistake of Law Can Be Recovered:
The Court observed that the respondent paid sales tax under the U.P. Sales Tax Act for forward transactions in silver bullion, which was later held ultra vires by the High Court of Allahabad. The respondent sought a refund of these amounts. The Court reiterated the Privy Council's interpretation in Shiba Prasad Singh v. Maharaja Srish Chandra Nandi, affirming that Section 72 covers mistakes of law. Therefore, if a party pays money under a mistake of law, believing it to be due when it is not, they are entitled to recover it.

3. Voluntary Nature of Payments and Their Recoverability:
The Court addressed the appellants' argument that the payments were voluntary and without protest, thus not recoverable. The Court rejected this contention, stating that the voluntary nature of the payment does not preclude recovery if it was made under a mistake of law. The Court clarified that Section 72 does not differentiate between payments made voluntarily and those made under coercion when it comes to mistakes of law or fact. The Court also noted that the payments were made under a mistaken belief that the tax was due, which was established as a mistake of law.

4. Application of the Principle of Estoppel:
The appellants argued that the respondent should be estopped from claiming a refund as the State had already spent the money. The Court dismissed this argument, stating that estoppel could not apply when both parties were under a mistake of law. Estoppel arises when one party's conduct leads another to act to their detriment. However, in this case, both parties were equally mistaken about the law. The Court also rejected the notion that equitable considerations could override the clear terms of Section 72, emphasizing that the statutory provision must be applied as written.

Conclusion:
The Court concluded that Section 72 of the Indian Contract Act applies to the present case, allowing the respondent to recover the amounts paid under a mistake of law. The voluntary nature of the payments and the fact that the State had spent the money did not preclude recovery. The appeal was dismissed with costs, affirming the respondent's right to a refund under Section 72.