Wrongful gains obtained through different means are considered to be unjust and it is essential that legal steps must be taken to make sure that the person who obtained wrongful gains is punished by either imposing a fine on him/her/they or through other modes of punishment as followed by the law of the particular country. India is a country in which there are two systems through which justice is delivered; they are the criminal justice system and the civil justice system. Under the civil justice system, there are various types of laws such as property law, contract law, tort law and laws related to the family. Contract law is a body of laws that governs and regulates the contracts which are signed between two or more people. The Doctrine of Restitution is a provision under civil law through which the wrongful gain obtained by one party can be restored back to the party who is the rightful owner of the same. This research article aims to explain how the Doctrine of Restitution which is predominantly a part of the Civil Procedure Code, 1908 plays an important part in delivering justice in the area of contract law in India.
Meaning and Definition of Doctrine of Restitution
According to the Oxford dictionary the meaning of ‘restitution’ is ‘the act of giving back something that was lost or stolen to its owner’ and the meaning of ‘doctrine’ is a belief or set of beliefs held and taught by a Church, a political party, and others.’ The Doctrine of Restitution under the law is based on this meaning. In simple terms, it means to make sure that an aggrieved party who was entitled to receive something receives it from the party who wrongfully tries to establish a claim over it.
According to Section 144 of the Civil Procedure Code, 1908 Doctrine of Restitution is a provision through which the court issues orders for restoring the loss which a party has suffered due to the wrongful gains acquired by the other party.
For example, A was in a contractual agreement with B who agreed to deliver 100 kgs of rice to A. Advance money of Rs.1000 was paid by A to B. Due to unavoidable emergencies from B’s side, he was unable to deliver the 100 kgs of rice to A. Under such circumstances B is obligated by law to return the advance amount to A as he was not able to deliver the goods and keeping the advance money with himself would amount for a loss towards A. The reason for A getting his advance back and the process of B actually giving back the money is known as the Doctrine of Restitution.
Section 2 (12) of the Civil Procedure Code, 1908 defines ‘mesne profits’ of property as those profits which the person in wrongful possession of such property actually received or might with ordinary diligence have received therefrom, together with interest on such profits, but shall not include profits due to improvements made by the person in wrongful possession. This means that profits made by the person out of the wrongful possession of the property are mesne profits but they do not include the profits which the person in wrongful possession of the property made after making any changes on the same.
For example, in the property dispute case of C vs. D, the High Court of Diva ruled in favour of C by passing a judgment that C is the rightful owner of the property in dispute. D appealed to the Supreme Court which then ruled in favour of D and passed a judgment which included that C should transfer the ownership of the property in dispute to D. C is obligated under the Doctrine of Restitution to transfer the property rights to D along with the profits if any which would have been generated by C through the disputed property. The disputed property was a bungalow which was surrounded by a garden. In the same garden, C had built a kennel for his dog at his own expense. Under the Doctrine of Restitution C is not obligated to transfer the property rights of the kennel to D considering the fact that he made improvements on the property of D out of his own expenses.
Meaning and definition of Contract
According to Section 2(h) of the Indian Contract Act, 1872 ‘An agreement enforceable by law is a contract.’ An agreement converts into a contract when one person agrees to behave in a certain way or not behave in a certain way for consideration from the other person. ‘Consideration’ under the law means any monetary value or in kind which holds value in the eyes of the law. For example, A agrees to buy B’s car for a sum of Rs. 6,00,000. Here the sum of Rs. 6,00,000 is a consideration which is why this agreement between A and B can be termed a contract.
The Doctrine of Restitution under the Indian Contract Act, 1872
Section 65 of the Indian Contract Act, 1872 states that ‘when an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it.’ This explanation is similar to that of the Doctrine of Restitution defined in the Civil Procedure Code, 1908. The reason why Section 65 is important in contract law is that if this method of delivering justice is followed then the intensity of the violation of the rights of the people can be reduced. There are times when the terms of the contract signed by both parties cannot be fulfilled due to unavoidable circumstances or there are times when the judgment of the higher court contradicts the judgment of the lower court due to which there is a change in the terms of the contract. It is not necessary that the judgment given by the higher court covers the terms agreed upon in the contract as at times it may even contradict the terms laid down in the contract. This is when the Doctrine of Restitution is used as a means to make sure that the terms and conditions of the contract which was signed prior to the higher court’s judgment are not violated and the higher court’s order is also obeyed.
Exceptions to the Doctrine of Restitution under Contract Law
There are a few types of contracts for which the Doctrine of Restitution does not apply. They are as follows:
1. Where a contract is known to be void
The Doctrine is not applicable to contracts or agreements which are not enforceable in a court of law. For example, P enters into a contract with Q in which P agrees to pay Rs. 10,000 to Q if Q murders S. Q agrees to this condition and P pays an advance amount of Rs. 5,000 to Q. After taking the money from P, Q does not commit the murder. In such a case since the contract is illegal P cannot go in a court of law to get his advance money back from Q. Doctrine of Restitution will not be applicable here.
2. Where a contract has been entered into between incompetent persons
There is a certain type of people in society who according to law, are incompetent to sign a contract with any person. People suffering from insanity, intoxication and minors are those types of people with whom even if a third – party signs a contract; it will not hold any value under the eye of the law. The doctrine of Restitution will not be applicable here as the contract entered into between these types of people is void ab initio (void from the beginning.)
3. Where the party is required to give some earnest money as security and later on defaults
This provision deals with a situation like paying application money for a residential scheme. Now if a person fails to allot money in the future then his application money will also be forfeited and he cannot claim his earlier earnest money by revoking the Doctrine of Restitution.
Application of the Doctrine of Restitution under Contract law
In the Mohori Bibee vs. Dharmodas Ghose case of 1903, Dharmodas Ghose was a minor who mortgaged his property to a money lender Brahmo Dutt against a loan of Rs. 20,000. The attorney of Dutt was well aware of the fact that Dharmodas Ghose was a minor. Dharmodas Ghose through his mother and guardian sued Dutt that the mortgage was void due to the minority of Dharmodas. The Court of First Instance ruled in the favour of Ghose but on appeal, the High Court of Judicature at Fort William upheld the decision. When the appeal was filed in front of the Privy Council, Dutt had passed away but the proceeding was continued by his heirs. The Privy Council held that any contract entered into by a minor is a void contract which is why the heirs of Dutt were obligated under law to transfer the property rights of the property to Dharmodas and the Doctrine of Restitution was not applied here. A similar judgment was also passed in the case of Leslie (R) Ltd. vs. Sheill (1903), in which a minor deceived a moneylender with respect to his age by informing the moneylender that the minor had actually attained the age of majority and secured some amount. The moneylender sued the minor for the restitution of money. The court ruled that the minor is not liable as he was incompetent to contract which is why the moneylender cannot acquire any money from the minor.
In the case of Sadasiva Panda vs. Prajapati Panda and another, the defendant agreed to sell his property to the plaintiff for a sum of Rs. 5000. The plaintiff paid an advance of Rs. 2600 to the defendant and told him to execute the sale deed by handing over the possession of the property to the plaintiff after which the plaintiff would pay the remaining sum of Rs. 2400 to the defendant. The defendant in the meanwhile accepted the sum of Rs. 2600 and refused to hand over the ownership rights to the plaintiff as the defendant had already sold the property to another person other than the plaintiff. The plaintiff filed a case against the defendant under Section 65 of the Indian Contract Act, 1872. The court held that in this case, the Doctrine of Restitution is applicable as there was a sale deed between the plaintiff and the defendant as the plaintiff had paid an advance of Rs. 2600 to the defendant. The act of the defendant to sell the property to another person other than the plaintiff is a wrongful act as it breaks the rules of the contract signed between the plaintiff and the defendant and results in wrongful monetary gains for the defendant and loss for the plaintiff. The plaintiff was eligible for restitution of money from the defendant.
The mentioned case laws provide a perception as to how the Doctrine of Restitution is applied in cases where an individual obtains his/her/their gains which would result in the loss of another. Law as a field of study as well as a field of practice attempts to explain to people the difference between right and wrong. The Doctrine of Restitution constitutes an important part of the contract law as it makes a provision in the legal system of the country to make sure that no person is a victim of losses which he/she/they is/are not liable for. I believe that as a lawyer it is my duty to educate the layman about his/her/their rights which the Constitution had bestowed upon us and to also help the public understand the technicalities of the legal system in a simpler way as it is sometimes difficult for people to understand the same due to language barriers, not being able to afford education and so on. This article is an honest attempt for the same.