CASE STUDY ON

QUASI-CONTRACTS.
( S EC - 6 9, 7 0 O F T HE I N D I A N C O N T RA C T A C T , 18 7 2)

Submitted to:

Sudhanshu Singh

SAYEED RAHMATULLAH 69

ARONAB SINHA 72

MBA-II, MBR1070T

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 DAAYAN AGENCY
VS.
NIRDAY BANK LTD. AND DHARMA SIDDHANT.

FACTS:

Appellant: Daayan Agency

Respondent: Nirday Bank Ltd. And Dharma Siddhant.

The brief facts are that,

 In a scheme called employment scheme for educated unemployed youth,

the second respondent herein applied vide his application dated April 20,
1993, based on a recommendation of the District Industrial Centre, Indore,
for the sanction of a loan of Rs. 25,000 to set up a tyre re-treading industry.

 The second respondent obtained a proforma invoice from the appellant

for supplying a tyre re-treading machinery, that under exhibit A-4, the first
respondent issued a pay order in favour of the appellant on April 30, 1993,
for a sum of Rs. 26,174.75 which sum included a sum of Rs. 1,174.75
deposited by the second respondent with the first respondent, that the pay
order specifically stated that the said payment was being made on account
of supply of machinery as per the appellant's proforma invoice No.
SRM/1/92-93, dated February 6, 1993, which has been marked as exhibit
A-3 in the suit, that contrary to the understanding between the parties, the
appellant failed to supply the machinery as per the proforma invoice
though the appellant claimed to have supplied the same in its letter dated

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 July 9, 1993, exhibit A-5, that subsequently the appellant admitted under
exhibit A-6 that the machinery were not really supplied and the statement
made under exhibit A-5 was a mistake, that the appellant issued a post-
dated cheque dated August 16, 1993, for the entire sum of Rs. 26,174.75
under exhibit A-7, in favour of the first respondent agreeing to arrange for
necessary funds to honour the cheque, that subsequently the appellant
failed to honour the said cheque by advising its bankers to stop payment
under exhibit A-8, that the purpose for which the loan was sanctioned was
defeated and that necessary complaint against the appellant and the second
respondent was also preferred by the first respondent for cheating.

 In the above-stated circumstances, the first respondent claimed a sum of

Rs. 27,548.20 as the amount due as on April 30, 1994, against the appel-
lant and the second respondent herein.

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ISSUES:

 The appellant in its written statement contended that the appellant was nei-
ther a co-obligant, nor a guarantor nor a surety to the loan
sanctioned in favour of the second respondent,
 that there was no contract between the appellant and the first re-
spondent-bank,
 that the appellant did not have any transaction with the first respond-
ent,
 that the proforma was issued at the instance of the second respondent
agreeing to supply the machinery and that the manager of the first
respondent-bank prevented the appellant from supplying the ma-
chinery.
 The appellant contended that he did not receive any amounts from
the first respondent.

 The appellant threw the blame on the manager of the first respondent-bank
saying that the manager has attempted to make money from the appellant
and prevented the appellant from supplying the machinery as per the
proforma.

 It was also contended that subsequently the second respondent purchased

the machinery and started the works as per the directions of the first re-
spondent-bank and that the appellant was having a delivery note and a re-
ceipt for the payments made to the second respondent, at the instance of
the then manager, of the respondent-bank.

 The appellant therefore, stated that he was not liable to pay any amount to
the first respondent.

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Judgement:

Having heard learned counsel for the parties, I find that there is absolutely no
bona fides or truth in any of the stand taken by the appellant either before the trial
court or before this honourable court.
By virtue of the operation of Sections 69 and 70 of the Indian Contracts Act, there
are sufficient materials to establish privity of contract between the first respond-
ent and the appellant.
Section 70 of the Contract Act reads thus:
'Where a person lawfully does anything for another person or delivers anything
to him, not intending to do so gratuitously and such other person enjoys the ben-
efit thereof, the latter is bound to make compensation to the former in respect of,
or to restore, the thing so done or delivered.'

It is also useful to refer to Section 69 which reads thus:

'A person who is interested in the payment of money which another is bound by
law to pay and who therefore pays is entitled to be reimbursed by the other.'

Applying the above provisions to the facts of this case, it is found that the conduct
of the first respondent in effecting the pay order based on proforma invoice issued
by the appellant under exhibit A-3, for and on behalf of the second respondent,
the said payment being not gratuitous in nature, needless to say that the appellant
having enjoyed the benefit thereof, was bound to perform as a party to the contract
to supply the machinery to the second respondent. Therefore, what is left to be
considered is whether the appellant has acted in conformity with the provisions
of Section 70 of the Indian Contract Act.
From the pleadings, documents and the evidence available on record, I could say
that the appellant received the sum of Rs.26,174.75 being the invoice value under
exhibit A-3 from the first respondent on behalf of the second respondent. He also
confirmed the encashment of the pay order, exhibit A-4 under exhibit A-6 ; that
though it was stated by the appellant that machinery was delivered under delivery
note No. 73, dated June 23, 1993, the same was subsequently retracted by saying
that it was by mistake, meaning thereby, that the machinery was not supplied to
the second respondent. As far as the return of the sum of Rs. 26,174.75 was con-
cerned, though the appellant initially issued a cheque in favour of the first re-
spondent for the said amount under exhibit A-7, he subsequently allowed the said
cheque to bounce by issuing directions to his bankers to stop payment. Under
such circumstances when the oral evidence of the appellant, DW-1 is examined,
I find that though initially he stated that the machinery was not supplied, he would
admit that one machine was supplied ; that the remaining sum was paid over to

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the second respondent; that in his account it is written as though both the ma-
chines were supplied to the second respondent and that in his written statement
he did not refer to the supply of one machine alone to the second respondent.
Though the appellant attempted to throw the entire blame on the then manager of
the first respondent bank there is total lack of material evidence on this aspect.
The said statement was only a self-serving statement and that it was the then
branch manager of the first respondent-bank who prevailed upon the appellant to
return the money to the second respondent to issue a cheque in favour of the first
respondent, etc.
All the above statements in my opinion are all made only to cover up the lapses
committed by it in the matter of supply of machinery to the second respondent.
The fact remains that without supplying the machinery to the second respondent,
the appellant appropriated the sum advanced by the first respondent. Thus, the
whole transaction is squarely covered by Section 70 of the Contract Act.

The trial court on a thorough analysis of the evidence has correctly found that the
appellant was solely liable to pay back the money to the first respondent-bank. I
do not find any legal infirmity in the judgment of the trial court in reaching the
said conclusion. On the other hand, I find material and concrete evidence in sup-
port of the first respondent for launching the suit against the appellant and the
second respondent and having regard to the various documents available on rec-
ord and the admissions of DW-1, it was the appellant who was liable to meet the
claim of the first respondent made in the suit. The whole transaction being one
coming within the provisions of Sections 69 and 70 of the Indian Contract Act, it
cannot be held that the appellant was not a necessary party to the suit proceedings.
The judgment and decree of the trial court is, therefore, confirmed. Having regard
to the untenable stand taken by the appellant and the various contradictions in it,
I feel it is a fit case where the appeal should be dismissed with costs.
In the result, the appeal is dismissed with costs.

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Conclusion
 The person who is interested in the payment of money, should have paid
for the protection of his own interest. If the payment is not bonafide for
the protection of his own interest, but is made without any such notice,
then he shall be having no right for reimbursement.
 The thing should not be done or delivered gratuitously. If the benefit to
the other person has been done by a person gratuitously i.e., without any
intention to get a reward, he shall not be able to give any right under this
section. The section requires other person to use his right of rejecting the
thing, if he so likes. The section is applicable for those acts only which
are done with the intention of being paid for. Services freely rendered,
without any co-operation of a reward for them do not lie under the pre-
view of this section.

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