Doctrine of Unjust Enrichment in Indian Law: Its Basis in Sections 68 to 72 of the Indian Contract Act, 1872, the Three Requisites, Restitution and the Defences

Unjust enrichment is the principle that a person who has been enriched at another's expense, in circumstances the law regards as unjust, must give the benefit back. It is not a principle of contract, and the obligations it generates arise by operation of law rather than from any agreement. The Indian Contract Act recognises it in a chapter headed, with deliberate care, certain relations resembling those created by contract. The drafters refused to call these obligations contracts because they are not, and understanding that is the key to the whole subject: the claim is measured by the defendant's gain, not by the claimant's loss, and it requires no promise, no consideration and no capacity.

1. The Basis in the Act

Chapter V contains five sections and does not use the expression unjust enrichment. The Supreme Court has nonetheless held that the chapter rests on that principle and that the three requisites of a claim in unjust enrichment must be established.

Section	Situation	Obligation created
68	Necessaries supplied to a person incapable of contracting, or to anyone he is legally bound to support	Reimbursement from the property of the incapable person
69	A person interested in the payment of money which another is bound by law to pay, and who therefore pays it	Reimbursement by the person bound to pay
70	A person lawfully does something for another, or delivers anything to him, not intending to do so gratuitously, and the other enjoys the benefit	Compensation, or restoration of the thing done or delivered
71	A person finds goods belonging to another and takes them into his custody	The duties of a bailee under Sections 151 to 153
72	Money paid or a thing delivered by mistake or under coercion	Repayment or return

2. The Three Requisites

The Supreme Court stated the elements in Mahabir Kishore v. State of Madhya Pradesh, (1989) 4 SCC 1, drawing on the classical formulation.

The defendant has been enriched by the receipt of a benefit. The benefit may be money, goods, services, the discharge of a liability or the saving of an expense.
The enrichment is at the expense of the plaintiff. There must be a direct correspondence between the defendant's gain and the plaintiff's disadvantage.
The retention of the enrichment is unjust. This is not an appeal to general fairness; it requires a recognised ground, such as mistake, compulsion, total failure of consideration, or the fact that the benefit was conferred under an ineffective transaction.

⚠ The measure is the defendant's gain, not the plaintiff's loss

This single difference separates restitution from both contract and tort. Damages for breach under Section 73 put the plaintiff in the position he would have occupied had the promise been performed, and damages in tort restore him to the position before the wrong. Restitution does neither: it strips the defendant of what he has received. The consequence is that a claimant who has spent a great deal and conferred a small benefit recovers only the benefit, which is why wasted expenditure is irrecoverable under Section 65 on frustration; and a claimant who has spent little and conferred a large benefit may recover far more than he lost.

3. The Historical Foundation

📖 Moses v. Macferlan, (1760) 2 Burr 1005

Facts: Moses endorsed promissory notes to Macferlan on an express written undertaking that Moses would not be liable on the endorsement. Macferlan nonetheless sued Moses on the notes in a court which refused to receive evidence of the undertaking, and recovered. Moses then brought an action for money had and received to recover the sums.

Held: Lord Mansfield allowed the claim and, in doing so, laid the foundation of the modern law of restitution. The action for money had and received lies where the defendant has received money which in justice and equity he ought to refund. It covers money paid by mistake, money paid on a consideration that has failed, money got through imposition, extortion or oppression, and money obtained by an undue advantage taken of the plaintiff's situation. The obligation arises from the ties of natural justice and is enforced as though it were founded on a promise, the law implying a promise where none was made.

Ratio: An obligation to restore may be imposed by law, independently of any agreement, where the defendant has received money which he ought not in justice to retain. This is the origin of the quasi-contractual claim and of Chapter V of the Act.

The device of the implied promise which Lord Mansfield used has been abandoned. Indian law never adopted it, and the heading of Chapter V, relations resembling those created by contract, shows that the drafters understood the obligations to arise by operation of law. The Supreme Court has repeatedly said that Section 70 creates a liability independent of contract, most clearly in State of West Bengal v. B. K. Mondal & Sons, AIR 1962 SC 779.

4. The Modern Indian Exposition

📖 Indian Council for Enviro-Legal Action v. Union of India, (2011) 8 SCC 161

Facts: Industrial units which had caused severe environmental damage had, over many years of litigation, retained the benefit of orders and of the delay in complying with directions to meet the cost of remediation. The Court was concerned with whether and how a party could be made to disgorge the benefit obtained from protracted proceedings and from the use of money it ought to have paid.

Held: The Supreme Court restated the principle of unjust enrichment at length. A person who has been unjustly enriched at the expense of another is required to make restitution. The juristic basis is not that the defendant has done a wrong, but that he has obtained a benefit in circumstances in which it would be against conscience to keep it. The Court held that no litigant should be permitted to gain from the pendency of proceedings, and that the doctrine of restitution requires the court to place the parties, so far as possible, in the position they would have occupied but for the litigation, including by awarding interest on sums wrongfully retained.

Ratio: Unjust enrichment is a substantive principle of Indian law. Restitution requires restoration of the benefit obtained, and a party who has retained money or advantage through the pendency of proceedings must disgorge it.

5. Where the Principle Operates Outside Chapter V

Section 65, requiring restoration of an advantage received under an agreement discovered to be void or a contract that becomes void.
Section 64, requiring the party rescinding a voidable contract to restore benefits received.
Restitution of taxes and other payments to the State, where money has been collected without authority of law. Sales Tax Officer, Banaras v. Kanhaiya Lal Mukundlal Saraf, AIR 1959 SC 135 allowed recovery under Section 72 for a mistake of law, and Mafatlal Industries Ltd. v. Union of India, (1997) 5 SCC 536 afterwards held that such claims must ordinarily follow the machinery of the taxing statute and that a refund will be refused where the claimant has passed the burden on, unjust enrichment thus operating as a defence as well as a cause of action.
Restitution on reversal of a decree under Section 144 of the Code of Civil Procedure, 1908, which is the procedural expression of the same principle.
Tracing and account in equity, and the principle that no one may retain the fruits of his own wrong.

6. Defences

A subsisting contract governs. Where a valid contract covers the matter, the parties' rights are determined by it and there is no room for restitution. A quasi-contractual claim cannot be used to obtain a better bargain than the one that was made.
Change of position. Where the defendant has irretrievably altered his position on the faith of the receipt, restitution may be refused to that extent.
The claimant has passed on the burden, which is the defence recognised in Mafatlal for indirect tax refunds and which prevents the claimant from being himself unjustly enriched.
Voluntary payment with knowledge. A person who pays knowing the facts and the doubt, or who pays to settle a disputed claim, has not paid under mistake or compulsion.
Illegality and knowledge of invalidity. Section 65 does not assist a party who knew the transaction was void, as Kuju Collieries Ltd. v. Jharkhand Mines Ltd., (1974) 2 SCC 533 holds.
Limitation. A suit for money paid by mistake or for money had and received is governed by Article 113 of the Limitation Act, 1963 read with Section 17, time running from the discovery of the mistake.
Incapacity. Sections 64 and 65 do not reach a minor's agreement, and relief against a minor is confined to the benefit he or his estate actually retained, under Section 33 of the Specific Relief Act, 1963.

Three requisites, the measure of recovery, and the defences

7. Unjust Enrichment Compared with Contract and Tort

	Contract	Tort	Unjust enrichment
Source of the obligation	The agreement of the parties	A duty imposed by law on everyone	A duty imposed by law on the recipient of a benefit
What must be shown	A valid contract and its breach	A wrong and resulting damage	Enrichment, at the plaintiff's expense, which it is unjust to retain
Measure of recovery	The expectation: the position had the promise been performed	The position before the wrong	The benefit received by the defendant
Is fault required?	No; breach is enough	Usually yes	No. The defendant may be entirely innocent
Is capacity required?	Yes, under Section 11	No	No; Section 68 operates precisely against a person incapable of contracting

8. The Position Stated Shortly

Unjust enrichment requires enrichment of the defendant, at the plaintiff's expense, which it would be unjust to retain, per Mahabir Kishore.
Chapter V of the Act, Sections 68 to 72, gives the principle statutory form under the heading of relations resembling those created by contract.
The obligations arise by operation of law, need no promise, consideration or capacity, and are measured by the defendant's gain.
Moses v. Macferlan founded the action for money had and received on the ties of natural justice, using an implied promise which modern law has discarded.
Indian Council for Enviro-Legal Action restates unjust enrichment as a substantive principle and requires a party to disgorge benefits retained through the pendency of proceedings.
The principle also operates through Sections 64 and 65, through Section 144 of the Code of Civil Procedure, 1908, and in claims for refund of unauthorised exactions.
Kanhaiya Lal permitted recovery for a mistake of law under Section 72; Mafatlal qualified it for indirect taxes and made passing on a defence.
A subsisting contract excludes restitution, and the claim cannot be used to improve on the bargain the parties made.
Other defences include change of position, voluntary payment with knowledge, knowledge of invalidity under Kuju Collieries, limitation, and incapacity.

9. Related Topics and Provisions

Topic or provision	Connection
Necessaries Supplied to a Person Incapable of Contracting under Section 68	The first of the five quasi-contractual obligations
Reimbursement of a Person Paying Money Due by Another under Section 69	The second, and the meaning of interested in the payment
Types of Contracts	Quasi-contract as a category, and why it is not a contract
Remission and Restitution under Sections 63 to 66	Sections 64 and 65 in detail
Mistake of Fact vs Mistake of Law	Section 72 and the recovery of money paid
Sections 68 to 72, Indian Contract Act	Chapter V
Sections 64 and 65, Indian Contract Act	Restoration on rescission and on voidness
Section 144, Code of Civil Procedure, 1908	Restitution on reversal of a decree
Section 33, Specific Relief Act, 1963	Restitution against a person pleading incompetence