The Supreme Court has referred to a larger bench the question of whether past judgments barring recovery of excess payments made under a mistake of law were decided without considering Section 72 of the Indian Contract Act, 1872. Section 72 entitles a person who pays money by mistake to recover it. The Court found that earlier precedents may not have adequately engaged with the statutory provision, creating a need for authoritative reconsideration of the rule against recovering such payments.

Section 72 of the Indian Contract Act, 1872 states: 'A person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it.' This provision creates a statutory right of restitution — an obligation to restore what was received unjustly. The doctrine it encodes is quasi-contractual liability, sometimes called the law of unjust enrichment.

Historically, English common law drew a sharp distinction between mistakes of fact (recoverable) and mistakes of law (irrecoverable). Indian courts imported this distinction despite Section 72 containing no such limitation. Landmark judgments — particularly those involving excess government salary payments — denied recovery on the ground that employees had already spent the money in good faith, relying on the equitable doctrine of 'change of position.'

The Supreme Court's referral challenges this approach. It signals that the textual width of Section 72 — which says 'mistake' without qualification — may override judge-made exceptions. The larger bench will decide whether the no-recovery rule rests on solid statutory ground or was built entirely on common law precedent that overlooked the Indian statute.

For CLAT PG, this is textbook territory: the examiner loves testing the interplay between a codified rule (Section 72) and equitable doctrines (estoppel, change of position), and whether statutory text can be narrowed by judicial gloss. The distinction between mistake of fact and mistake of law, and whether Section 72 covers both, is a precision point that separates genuine understanding from rote memorisation.