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Indian Contract Act, 1872 · Chapter V: Of Certain Relations Resembling Those Created by Contract

Section 72: Liability of person to whom money is paid, or thing delivered, by mistake or under coercion

In plain words

A person who has received money or anything else by mistake or under coercion must repay or return it.

Example: A railway company refuses to release goods unless an illegal charge is paid. The consignee pays it and can recover the illegally excessive part.

A simplified explanation, prepared with AI assistance from the official text below and checked automatically against it for numbers and cross-references. The official text is the law and prevails over this summary. Not legal advice.

Read the in-depth explanation, with key Supreme Court rulings ↓

Official text

A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it.

Illustrations

(a) A and B jointly owe 100 rupees to C, A alone pays the amount to C, and B, not knowing this fact, pays 100 rupees over again to C. C is bound to repay the amount to B.

(b) A railway company refuses to deliver up certain goods to the consignee, except upon the payment of an illegal charge for carriage. The consignee pays the sum charged in order to obtain the goods. He is entitled to recover so much of the charge as was illegally excessive.

Source: India Code (indiacode.gov.in), the consolidated text published by the Legislative Department, Government of India. Text as updated on India Code on 15 October 2026. Words in square brackets [ ] were inserted or substituted by later amending Acts, and *** marks words omitted by an amendment. The amendment footnotes are not reproduced here. Official text on India Code.

Understanding this section

Section 72 requires a person to whom money has been paid, or anything delivered, by mistake or under coercion, to repay or return it.

Mistake includes mistake of law

The Supreme Court held in Kanhaiya Lal Mukundlal Saraf (1959) that 'mistake' in section 72 is not limited to mistake of fact; tax paid under a mistaken belief that it was legally due could be recovered. This differs from section 21, which concerns the validity of contracts.

Unjust enrichment and tax refunds

In Mafatlal Industries (1996) a nine-judge Bench held that refund claims for excise and customs duty must ordinarily be pursued under those statutes. A claimant who has passed the burden of the tax on to customers cannot get a refund, because the refund would unjustly enrich the claimant rather than restore a loss.

Coercion

Coercion here is understood in its ordinary sense, wider than the definition in section 15. Payments made under protest to avoid an illegal threat, such as disconnection or seizure, can be recovered.

Key Supreme Court rulings

  • Sales Tax Officer v. Kanhaiya Lal Mukundlal Saraf AIR 1959 SC 135

    Where taxes are paid under a mistake of law, the person paying is entitled to recover them from the State on establishing the mistake, as a consequence of section 72.

  • Mafatlal Industries Ltd. v. Union of India 1996 INSC 1514

    All claims for refund of excise or customs duty must be filed and adjudicated under the Central Excises Act or the Customs Act; a suit or writ is maintainable only where the levying provision is unconstitutional. Refund is subject to the principle of unjust enrichment.

Common mistakes

  • Assuming money paid under a mistake of law can never be recovered.
  • Ignoring unjust enrichment where the burden has been passed on.
  • Reading 'coercion' narrowly by reference to section 15.

Read with: Section 21 Indian Contract Act, 1872, Section 70 Indian Contract Act, 1872, Section 15 Indian Contract Act, 1872

Prepared with AI assistance as a study aid. Every ruling listed was checked against the Supreme Court's own judgments on this site, and quoted words appear in those judgments; linked names open the full judgment. Read the judgments themselves before relying on them. Not legal advice.

Supreme Court judgments citing the section 72