This article is written by Shuvasmita Nanda, pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho.
In a contract, if a party is not paying any restitution or consideration against the service received, he is liable, which we state as a breach of contract in layman terms. However, legally the beneficiary is liable for unjust enrichment mentioned in Sections 68-72 of the Indian Contract Act, 1872. Unjust enrichment can be defined as a benefit received at the expense of another, which is neither legal nor can be comprehended as a gift, against which the beneficiary has to pay reimbursement or restitution. It means that an individual should not unfairly gain profit through unjust means causing loss to another.
In such a case, the beneficiary should provide restitution to the person suffering loss by paying a reasonable value against the benefit received. This article would analyze and understand the theory of unjust enrichment or unjust benefit and the importance of restitution in unjust enrichment. Furthermore, we would also define the concept and the point of the question analytically with proper case laws.
Evolution of the doctrine of unjust enrichment
The very first traces of the doctrine of unjust enrichment can be found in English Law in the rule of “assumpsit” or “had and received.” The doctrine’s idea could be tracked in the 18th-century judgment of Moses v. Archie McFarland, in which Judge Lord Mansﬁeld held that the respondent should reimburse the money or benefit to the plaintiff being bounded by the ties of natural justice and equity. This principle was predominantly applied by the court of equity in all its future judgments being based on general conscience. Later in the twentieth century, the principle was defined by American lawyers considering the broad principles of Joseph Story’s equitable jurisprudence.
In India, the first steps of the doctrine of Unjust Enrichment can be observed in the 1860s in Rambux Chittangeo v. Modhoosoodun Paul Chowdhry. In this case, the judgment was provided based on the jurisprudence of Robert Joseph Pothier and John Austin. Following years, the principle was developed and later codified in the Indian Contract Act, 1872, and later in the Central Excise and Customs Law (Amendment) Act, 1991. In the recent past, the most remarkable development in the doctrine was brought by the landmark judgment of the Indian Council for Enviro-Legal Action vs. Union of India and others, where few environmentalists brought the matter into light how enterprises are polluting or harming the fertility of the soil and contaminating the water body by dropping hazardous waste into them and not disposing of them in an appropriate manner. The Hon’ble Court, in this case, defined unjust enrichment and its relation with restitution and benefited considering the enterprises guilty, which would be further elucidated in the article.
Fundamentals of the doctrine of unjust enrichment
The doctrine of unjust enrichment is based on three key ingredients;
- The benefit of one person,
- At the expense of another,
- Making the person with benefits liable to compensate for the losses of another.
However, the doctrine has been named or defined by different courts in various forms prioritizing the idea of benefit and restitution. Nevertheless, the question always lies in its validity. The Hon’ble Supreme Court provided the answer to the same in the Indian Council for Enviro-Legal Action vs. Union of India and others.
Unjust enrichment or unjust benefit
In Indian Council for Enviro-Legal Action vs. Union of India and others, the Court referred to the case of Schock v. Nash that defined unjust enrichment as a benefit to the loss of another or the retention of money or property of another against the fundamental principles of justice or equity and good conscience.” The Court, by this statement, is précising on the idea of enrichment. It elucidates that when a person receives or gains a benefit; he is enriched; when the same benefit is gained or received by utilizing unjust or wrongful means, it is termed unjust enrichment. In simple terms, unjust enrichment is committed by the person whose act of enrichment is against the perennial fundamental principles of justice or equity.
Restitution and unjust enrichment
The doctrine of unjust enrichment is essential to the subject of restitution. The term ‘restitution’ is one of the fundamental bases of the doctrine. It has been stretched out to incorporate reinforcing or offering back something to its legitimate owner. However, it also includes payment, repayment, reimbursement, or reparation for benefits received from or for misfortune or injury caused.
Unjust enrichment is regularly alluded to or viewed as a ground for restitution; it is maybe more precise to see it as an essential, as ordinarily, there can be no restitution without unjust enrichment. The Hon’ble Supreme Court explained ‘Unjust enrichment’ and ‘restitution’ as the two shades of green; one inclining towards yellow and the other towards blue. With restitution, until the misfortune of others has not been wholly reimbursed, injustice to that degree remains. The courts have broad powers to allow restitution, and that is only the tip of the iceberg where it identifies abuse or resistance with court orders.
The court also stated that restitution and unjust enrichment, alongside a cross-over, must be considered based on the two phases, i.e., pre-suit and post-suit. In the former case, it is a substantive law (or common law) right that the court will consider; however, in the latter case, when the parties are under the watchful eye of the court and any act/omission, or essentially lapse of time, brings about the hardship of one, or unjust enrichment of the other, the court’s jurisdiction to equalize and do equity is autonomous. It should be promptly used; else, it will permit the court’s process, alongside time delay, to do injustice.
While managing the matter, the Hon’ble Court also alluded to cases where the Courts have practised their intrinsic powers and applied the principles of justice and equity in the issue of unjust enrichment. The court referred to the discoveries in Padmavati v. Harijan Sevak Sangh, wherein the Delhi High Court held that the litigation process had been extended to deny the privileges of an individual and to partake in the products of illicit acts. In such situations where the court finds that one of the parties is utilizing the court as a tool by propagating illicit acts or has sustained an illegal possession, the court should impose costs on such parties, which ought to be equivalent to the benefits inferred by the party and the hardship and trouble endured by the legitimate individual.
In order to prevent these trivial suits and prevent individuals from procuring a rich collection of illicit demonstrations through the court, the objective of the judicial system must be to discourage unjust enrichment utilizing courts as a tool. The expenses forced by the Courts in all cases ought to be the actual costs equivalent to the loss endured by the legitimate individual.” While summarizing the judgment, the Hon’ble Court expressed that while adjudicating, the courts should keep in view that ‘it is the obligation and commitment of the court to offset any unjust enrichment and gratuitous increase made by any party by summoning the jurisdiction of the court.
Remedies for unjust enrichment
Various remedies have been provided for unjust enrichment under Sections 68 to 72 of the Indian Contract Act, 1872. These sections provide remedies considering the various circumstances. Section 68 of the Act provides remedies to the person who supports and provides life-saving necessities to another individual who is not capable of entering into a contract or to whom he is legally bound to support. In the case of Jai Indra Bahadur Singh v. Dilraj Kaur Money was advanced to a minor for his sister’s marriage, which under this section was found to be necessary and can be recovered from his property.
Section 69 provides remedies to the person who is interested in the payment of money that another is bound by law to pay and who therefore pays it is entitled to be reimbursed by the other. In Govindram Gordhandas Seksaria v. the State of Gondal, the party had consented to buy certain plants; he was permitted to recover from the dealer the measure of effectively overdue municipal taxes paid by him to save the property from being sold at the auction.
Section 70 provides a remedy to a person who does an act or delivers something, not gratuitously, causing benefit to another person, then the person who benefited is liable to provide compensation or affect the restoration of the thing delivered. In the case of Great Eastern Shipping Company Limited v. Union of India, the plaintiff, in this case, did not gratuitously deliver a coal carriage to a defendant’s union. The defendant being benefited by the service had to reimburse the plaintiff for the provided service.
Section 71 provides a remedy to the owner of a good or property from a person who finds the owner’s goods or belongings and takes them into his custody by providing him with the same responsibility as that of the bailee. In the case of Newman v. Bourne and Hollingsworth, the plaintiff lost his ring in the defendant’s shop. One of the defendant’s servants found the ring in the shop and then kept it in a cupboard, Later when the plaintiff came back to the shop in search of his ring, it was stolen. Here the defendant was held liable for not taking care of the same.
Section 72 provides a remedy to the owner of goods whose belonging was delivered to another by mistake or under coercion. The person who receives it should return it as per this section. In the case of Associated Cement Company limited v. Union of India, the railway authorities were bound to reimburse the extra fare as they considered that the goods would need to be carried for a longer route.
Recently, the doctrine of unjust enrichment has received a broader implication; the courts have started considering it in wider meaning utilizing it in cases dealing with various subjects such as tax collected erroneously. However, the development is not enough, and there is still a long path to cover, such as the remedies provided by the Indian Contract Act are still constrained, not covering many other forms of illicit activities like fraud, undue influence, and many more. The doctrine is still evolving and will evolve more through the court’s interpretations serving the necessity of conventional statutory rules and regulations.
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