The Author, Jyoti Vats, is a 2nd year BA.LLB student at Panjab University, Chandigarh. She is currently interning with LatestLaws.com.

When anything is done against the decided norms and principles of justice and fairness, it is defined as an unjust act. A person will be said to have been enriched when he obtains some services, money, property or gift etc. from others. This enrichment can be fair or unfair, obtained directly or indirectly. For example, if a person receives a car from his parents on completion of his graduation, he is said to be justly enriched. When somebody wrongfully uses other’s property for his own use, it will be counted as unjustly enriched. In case a person derives some service or benefits from other person but doesn’t give him anything in return it will be called as unjust enrichment. This is usually against the standards of a civil society when one person enriches himself at the expense of another person. Therefore, unjust enrichment may be defined as retention of money, property or service against the fundamental principle of justice or equity and good conscience.

The principle of unjust enrichment states that no person can be enriched at another’s expenses and the person who enriches or obtains benefit at another’s expense and causing loss to another, he shall be required to reimburse or restitute a reasonable value of those services and money which he received unfairly. Plaintiff should be restituted for his loss by the defendant. The beneficiary shall make good the loss to plaintiff by giving him reasonable money in proportion to the loss caused to plaintiff. According to the doctrine of Unjust enrichment it would be wrong for plaintiff to retain the benefit by the beneficiary and without reimbursing him. It will go against the spirit of equity and justice.

The principle of unjust enrichment can be understood in three ways:

(i) Unjust enrichment can be interpreted as a principle of Aristotelian equity, providing correction when normally sound rules produce unjust results in particular cases.

(ii)  Unjust enrichment can be characterised as a ‘legal principle’ incorporating a broad ideal for justice, from which courts can deduce solutions to particular restitution problems.

(iii) Unjust enrichment can be understood simply as expressing a common theme of restitution cases.

According to Merriam Webster’s Dictionary of Law, “the retaining of a benefit (as money) conferred by another when principles of equity and justice calls for restitution to the other party; also: the retaining of property acquired especially by fraud from another in circumstances that demand the judicial imposition of a constructive trust on behalf of those who in equity ought to receive it. It is a doctrine that requires an equitable remedy on the behalf of one who has been injured by the unjust enrichment of another”.

Therefore, the law of unjust enrichment simply states that if person derives some kind of benefits from other person casing him loss, he shall be liable to reimburse the plaintiff. ‘Nemo Debet Locupletari ex Aliena Jactura.’ It is a legal maxim which means that no one should grow rich out of another person’s loss.

Let us try to understand it by taking a hypothetical situation. A and B enter into a contract to construct only garage. But B also constructs a driveway for A. Now, A is morally liable to pay B the reasonable amount of money for his work done.

The doctrine of unjust enrichment consists of three components which are as follows:

(i) A person, the defendant received benefit from another person

(ii)  another person incurred loss

(iii) defendant is liable to make good the loss to the plaintiff by reimbursing or restituting him.

Wherever these elements are present, the same circumstances shall constitute unjust enrichment. Where there a case of fraud or mistake or consideration, the plaintiff is entitled for the reimbursement. Even if a person tries to take advantage of his higher position and subsequently another suffered from loss, the person will restitute the same. Thus, it is a general rule that one can’t grow out of loss of another person.

Historical Background & development of Doctrine of Unjust Enrichment: Earlier, the Jurists and lawyers didn’t know about the principle of unjust enrichment or unjust profit. But it was seen that a number of remedies were given in the cases that later named as cases of unjust enrichment. The person who was not competent to enter into any contract for example an infant or an unsound mind person etc., was held to be eligible to enter into contract but only for the basic necessaries like food, education and clothes. It was also laid down that the amount shall be recovered from the property of beneficiaries. The Principle of unjust enrichment has its roots in English Law based on the rule of “Assumpsit” or “had and received”.

Lord Mansfield in Moses v. Mcfarlon, held that defendant is obliged by the ties of natural justice and equity to refund the money or profit to the plaintiff. Thereafter, 18th century onwards the courts of equity started to exercise a general jurisdiction to grant relief where there is unjust for a recipient of property to retain the property himself. The law so developed was based on the conscience that no should be allowed should be allowed to enrich himself at the expense of other. The natural laws and equity intended to emphasis the justice to the innocent party on moral basis which later codified in the form of Indian Contract Act, 1872 and Sections 68 to 72 deals with the restitution of money or services in case of unjust enrichment. In India, the doctrine of unjust enrichment has been codified not only in the Contract Act, 1872 (Sections 68-72) but also in the Central Excise and Customs Law (Amendment) Act, 1991. This was further developed by the various judgements of courts.

One of the landmark judgements is Indian Council for Enviro-Legal Action v. Union of India, where some environment activist brought the matter into light how chemical industries are polluting or damaging the soil fertility and polluting the river by releasing its hazardous waste into them without even disposing them off in a proper manner. The court held that the chemical industries would pay the remedial measures required to restore and purify the water and land. Court was of opinion that no one can take advantage of his own wrong. The concept of unjust enrichment was defined as retention of money or services by beneficiaries would be against the law of equity and good conscience. It was decided if a person has retained services, thereby causing loss to another, defendant is liable to reimburse the plaintiff. Defendant can’t take benefit or retain the things which in equity and good conscience belong to another. Law can’t allow anybody to retain unjust benefit. The court is obliged to revere or neutralize the unjust enrichment or unjust benefit.

The doctrine of unjust enrichment is gradually evolving with the interpretation by the court and has become the basis of the ‘Restitution’. It has been observed by the courts that unjust enrichment can be referred as a ground for Restitution because with any unjust enrichment or unjust profit there can never be a restitution.

Remedies available for unjust enrichment:

Under Indian Contract Act, 1872 various remedies have been provided under Sections 68 to 72 which deal with various circumstances of unjust enrichment. The remedies are as follows:

1. According to section 68 of the Act, if a person is not capable of entering into a contract and he is supplied with the basic necessities of life, the amount for supplying the necessaries will be recovered form the property of that person. For an instance, A, a physically disabled person, is supplied food and other necessaries required for his survival by B. B is entitled to recover that amount from the property of A.

In case of Jai Indra Bahadur Singh v. Dilraj Kaur, it was held that money advanced by minor for the marriage of his sister is necessary and the same is recoverable from the minor’s property.

2. Section 69 states that a person who is interested in the payment of money which another is bound by law to pay, and who therefore pays it is entitled to be reimbursed by the other.

3. According to Section 70, if a person, by mistake or somehow, not gratuitously, does any act or delivers something to other and the other person uses or gains some benefit out of that service or gift, the former shall be entitled for compensation to the extent of the benefit he derives. Thus, it simply says if any person gains something out of the act or service of another, he shall make restitute the same. For example, if A, a delivery boy, unknowing leaves some gifts to the house of B. B uses those gifts. B is liable to pay reasonable amount of gifts to A.

In a very famous case of ‘Great Eastern Shipping Company Limited v. Union of India’, the plaintiff lawfully carried a cargo of coal and delivered it to the defendant’s union. Plaintiff didn’t do it gratuitously and defendant also accepted the same. So, the defendant was held liable to make compensation to plaintiff.

4. According to Section 71 of Act, a person who finds goods belonging to another and takes them into his custody is subject to the same responsibilities as that of bailee. He will also a duty to return the goods after the true owner is find. He is supposed to take reasonable care of goods and not to make unauthorized use etc. He shall be liable to make compensation if he has not taken reasonable care of goods or, if he makes unauthorized use of the goods or, if he doesn’t return the good within a specified time after the owner is found. He shall be liable for any loss or destruction of the goods. He is supposed to take care of the goods like a prudent man. If he fails, he will make compensation. Let take a case law to understand in a better way:

In the case of Newman v. Bourne and Hollingsworth, A, a customer of B’s shop, forgot his ring in B’s shop. One of B’s servant took that ring and placed in an almirah. When A came to the shop of B to ask for the ring. The ring was stolen. B was held liable to not to take care the things.

5. According to Section 72 of the Act, if someone gets money or receives something from another, by mistake, or by coercion, the former must repay or return it. For an instance, A and B jointly owe 100 rupees to C, A alone pays the amount to C and B not knowing of this fact, pays 100 rupees over again to C. Then C is bound to repay the amount to B.

There was a situation in which Indian railway asked the passenger for extra fare, under mistakenly beliefs that the train would go through a long route. The court asked the railway to return the extra-money received from the passenger

CONCLUSION:

After analyzing the above-mentioned instances, it becomes clear that for any civilized system of law it is most important to provide remedies for the unjust enrichment. Such remedies don’t fall under the jurisdiction of the Contract law and Tort, but within a third category i.e. Quasi-Contract or Restitution. The aim of the Quasi-Contract seems putting an obligation on the defendant to make restitution of the benefit which he derives from other, causing him loss thereby. The Law Commission of India considered these provisions of Contract Act to be inadequate because it does not mention all the situations or circumstances concerning unjust enrichment. There are various situations which usually don’t fit into the categories mentioned in the enactment. So, it is suggested to insert a residuary Section where all the remaining circumstances can put together arising out of unjust enrichment.

Therefore, the theory of Unjust Enrichment restricts a person from taking advantage from the loss of another person by making the former liable to restitute him and make good the loss. Where court is satisfied with the view that one party has enriched himself causing loss to another party thereby and the beneficiary has not given anything in return, it may order to person who gains benefit from another’s loss to make compensation or restitute the services or money. This theory also prohibits a person from taking advantage of position of another person.

This article serves as an attempt to understand the views of the Indian Courts regarding unjust enrichment. Generally, it is seen that the court give its verdict in favor of plaintiff. Our law has always responded to every situation in a very disciplined manner. The law has tried to put an obligation on the defendant to restitute the things of other which in justice, equity and good conscience belongs to another person. The Sections from 68 to 72 of Indian Contract Act provide for the remedies for unjust enrichment which is a basis of restitution. But with the time things require some alteration or amendments. Section 71 deals with the things delivered by only mistake and coercion. As there can be many other ways like fraud, misrepresentation and undue-influence by which things can also be delivered or received. So, it is suggested that provision relating to fraud, misrepresentation and undue-influence can also be inserted in the enactment.


References:

1) http://www.legalservicesindia.com/article/1351/Theory-of-Unjust-Enrichment.html

2) http://www.law.upenn.edu/live/files/335-weinribunjustenrichmentpdf

3) http://www.mondaq.com/indi/contracts-and-commercial-law/725214/unjust-enriched-in-india-an-introspection

4) http://www.merriam-webster.com/legal/unjust%20enrichment

5) https://shodhganga.inflibnet.ac.in Chapter-IV UNJUST ENRICHMENT UNDER INDIAN CONTRACT ACT,1872

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Jyoti Vats