Defendant Compendium

1. Abdul Jabbar v. Abdul Muthaliff

IN THE HIGH COURT OF MADRAS

Second Appeal No. 2557 of 1977

Decided On: 11.03.1981

Appellants: Abdul Jabbar

Vs.
Respondent: Abdul Muthaliff and Ors.
Hon'ble Judges/Coram:
Sethuraman, J.
Counsels:
For Appellant/Petitioner/Plaintiff: N.R. Chandran, Adv.
Subject: Contract
Catch Words
Mentioned IN
Acts/Rules/Orders:
Indian Contract Act, 1872 - Section 23
Cases Referred:
Palaniappa Chettiar v. Arunachalam, Chettiar, 1962 AC 294, (1962) 2 WLR 548; Sarjan
Singh v. Sardara Ali, (1960) AC 167, (1960) 2 WLR 180, (1960) 1 All ER 269;Bowmakers
Ltd. v. Barnett Instruments Ltd., (1945) 1 KB 65, 114 LJKB 41, (1944) 2 All ER
579; Holman v. Johnson, (1775) 1 Cowp 341, 98 ER 1120
Citing Reference:

Discussed

Mentioned

3
Case Note:

Contract - agreement - Section 23 of Indian Contract Act - appellant challenged validity

of Order which upheld permanent injunction against him - appellant argued that
consideration given for agreement remitted through unofficial channels hence agreement
was void and respondent not entitled to claim - as per Section 23 consideration of
agreement is lawful unless forbidden by law - in present case respondent contributed for
lawful construction and he could always claim that property - no illegality involved in
suit and claim not opposed to public policy - appeal dismissed.

JUDGMENT
Sethuraman, J.
1. This second appeal has been filed by the first defendant in O. S. No. 64 of 1972 in the Court
of the Subordinate Judge of Pudukottai. The plaintiff filed the above suit for a declaration that
he is the absolute owner of a rice mill known as 'Muthalif Rice Mill' and for a permanent
injunction restraining the defendants from interfering with his possession and enjoyment.
There are three defendants, who are the brothers of the plaintiff. According to the plaintiff his
father, who had some lands and a house sold them and settled down in a village called
Kulamangalam in or about 1941. He was not able to make both ends meet and the plaintiff left
for Kualalampur in or about 1952. The case of the plaintiff was that between 1962 and 1966
he had sent about Rs. 24,000 and between 1966 and 1971 further amounts totalling Rs. 24000
and that the remittances were subject to the understanding that the moneys belonged to the
plaintiff and that they had to be used for his benefit. It was stated by the plaintiff that with the
help of such funds the site over which the suit rice mill stands was purchased and the building
for the rice mill was also constructed and the rice mill was installed therein. The plaintiff had
the licence issued in his name and was in possession and enjoyment of the rice mill since July,
1972. As the first defendant entered the mill without the knowledge of the plaintiff and
removed the account books etc., the plaintiff bas come forward with the present suit for
declaration and injunction as mentioned above.

2. The defendants in their written statement pointed out that the remittances were to be utilised
for the benefit of the whole family, that the mill was never intended to belong exclusively to
the plaintiff and that the plaintiff had in the presence of respectable members, accepted in
writing the joint title of all the four brothers. According to the first defendant, he was
dispossessed only after the plaintiff obtained an order of interim injunction in the suit' and he
had not removed any account books etc., as alleged,
3. The learned Subordinate Judge, who tried the suit, decreed it and the defendants took the
matter in appeal, which was heard by the District Judge of Pudukottai. Considering the
evidence, the appellate court was of the view that the case of the defendants that the mill
should be treated and enjoyed as the common property was totally false and cannot be upheld.
The decree passed by the trial court was, therefore, confirmed. The first defendant alone had
filed the present second appeal, defendants 1 and 3 being impleaded as pro forma parties.

4. At the time of the admission of this second appeal, the following questions were formulated
for decision-

1. Whether the plaintiff violated the provisions of Sections 8 and 9 of the Foreign
Exchange Regulation Act in remitting moneys from Malaysia to this country and if
so whether his claim to the suit property said to have been acquired from out of those
funds be enforced: and
2. Whether the transaction pleaded by the plaintiff is against public policy?

5. A perusal of the written statement will show that the remittances by the plaintiff were
admitted and that the only other case was that the rice mill was set up not only with the funds
remitted by the plaintiff but also with the earnings of the other members of the family. In the
written statement, as drafted, it was not stated that there were any remittances through illegal
means. However, the case appears to have proceeded, even in the trial court on the basis that
the remittances were sent neither through banks nor through post, but only through individuals
re turning to India from Malaya. There were no account books to show whether the defendants
had their own personal earnings in India and how the moneys were remitted by the plaintiff. In
the absence of any documentary evidence, the case had to be decided only on the basis of the
oral and circumstantial evidence. There were several letters marked as Exs. A.3 to A.11, which
have been

considered by the courts below and from which an inference has been drawn that there was no
possibility that the rice mill could have been constructed with the earnings in India. In other
words, the finding is that the defendants could not have had any savings As far as the
remittances from abroad were concerned,

Exs. A.4 to A.8 have been referred to as showing that the plaintiff had been sending fairly
large amounts for the purpose of purchase of the site for the rice mill as well as the
construction of the building and purchase of the machinery. The licence for the rice mill was
obtained by the first defendant in his own name and from Ex.A.12, which is a letter written by
one Sulthan, who is the brother-in-law of the second defendant it is seen that the said Sulthan
had found fault with the first defendant in obtaining the licence in his own name and that the
first defendant had even would be transferred in the name of the plaintiff as soon as he
returned to India. The plaintiff was told that he need not have any apprehension on that score
and re quested him to arrange for remittances to discharge the amounts already due towards
the construction and also to meet the further expenses.

6. On the other hand, the defendants had relied on Exs. B-3 to B-5, and also Ex,, B-20 to B-
22, to prove that they had been borrowing moneys for the purpose of the construction. But
those transactions showed that the defendants were hard pressed even to raise small amounts
and from Ex. B-20 an inference had been drawn by the court below that the loan had been
borrowed only for meeting the family expenses and not for any investment. These exhibits
have been considered as not supporting the case of the defendants that they had invested funds
of their own. Thus, it is clear from the findings of the court below that the plaintiff alone had
been financing the construction of the rice mill. It is only on the basis of the admitted position
that the moneys were not sent through banks or recognised channel, but only through
individuals returning to India from Malaya, that the present case of the first defendant that
those remittances are illegal is built up. It is significant to note that there was no pleading on
this aspect and there was no evidence. Illegality of remittances cannot be presumed. It has to
be established as a fact by the person alleging it. There was not even an allegation on this
aspect. There was no issue and there was no evidence. Even assuming that these deficiencies
have to be ignored and that the matter has to be considered in the light of the remittances
being through non-official channels, the question is whether the plaintiff is disabled from
filing the present suit.

Section 23 of the Indian Contract Act runs as follows-

"The consideration or object of an agreement is lawful unless-

it is forbidden by law; or is of such a nature that, if permitted, it would

defeat the provisions of any law; or

is fraudulent; or involves or implies injury to the person or property of

another; or

the Court regards it as immoral, or opposed to public policy.

In each of these cases, the consideration or object of an agreement is said to he unlawful.

Every agreement of which the object or consideration is unlawful is void."

The contention of Mr. N. R. Chandran, learned counsel for the appellant was that the object of
the agreement was unlawful in the present case because remittances through unofficial
channels were forbidden by law or at any rate the object of an agreement was opposed to
public policy because the remittances through unofficial channels were contrary to the
provisions of the Foreign Exchange Regulation Act. According to him, it would follow that if
the consideration of an agreement is unlawful then it would be void.
7. It is necessary to determine what is the agreement with which we are now concerned and to
see if it involves any unlawful object. There are two stages to these transactions, (1) the
remittances and, (2) the construction of the rice mill. It is true that the remittances as such
through non-official channels were contrary to the provisions of the Foreign Exchange
Regulation Act. If the plaintiff had instituted the present suit for recovery of the money so
sent, then it could be held that the object of the agreement was unlawful and that it is,
therefore, void, so that no suit could be filed for recovery of such an amount. The contention
of Mr. N. R. Chandran is that even where the amounts remitted had undergone a
metamorphosis in the shape of other properties as in this case, the plaintiff would be debarred
from filing any suit In other words, his contention is that the money as such cannot be
recovered when remitted. The fact that this money had undergone some change in the shape of
a property cannot place the plaintiff in a better position. The argument, though attractive. has
to be rejected.

8. The construction of the rice mill by itself does not involve execution of any unlawful object.
Anyone could lawfully construct a rice mill and the person who has contributed for the
construction can always claim the property as his. To take an example, supposing A had
remitted in an illegal manner funks to B which B had invested in a bank and if B wants the
money back from the bank, the bank cannot be heard to say that the remittances were illegal
and that he cannot seek to recover the money.

9. The learned counsel for the appellant relied on the maxim, in pari delicto potior est
condition possidetis to support his plea that the plaintiff could not sue for declaration or
possession. This maxim has been examined by the Supreme Court on a number of occasions.
As the matter has been considered by the Supreme Court in the light of the decisions rendered
by the Privy Council and the British courts, a brief reference to some of those decisions will
not be out of place. Lord Mansfield stated in Holman v. Johnson, (1775) 1 Cowp 341 , that
"No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal
act."

The leading decision on this point is that of the Privy Council in Petherpermal Chetti v.
Muniandi Servai, (1908) 35 Ind App 98, where Lord Atkinson dealing with the effect of
benami conveyances which are motivated by the design to achieve an illegal or fraudulent
purpose, quoted from Mayne's Hindu Law, 7th Edn. page 595 para 466 the passage running as
follows:-
"Where a transaction is once made out to be a mere benami it is evident that the benamidar
absolutely disappear from the title. His name is simply an alias for that of the person beneficially
interested. The fact that A has assumed the name of B in order to cheat X can be no reason
whatever why a Court should assist or permit B to cheat A. But if A requires the help of the court
to get the estate back into his possession, or to get the title into his own name, it may be very
material to consider whether A has actually cheated X or not, If he has done so by means of his
alias, then it has ceased to be a mere mask, and has become a reality, It may be very proper for a
court to say that it will not allow him to resume the individual" which he has once cast off in
order to defraud others. If, however, he has not defrauded anyone, there can be no reason why
the court should punish his intention by giving his estate away to B, whose roguery is even more
complicated than his own . .......For instance, persons have been allowed to recover property
which they had assigned away....... Where they had intended to defraud creditors, who in fact,
were never injured.... But where the fraudulent or illegal purpose has actually been effected by
means of the colourable grant, then the maxim applies, 'in pari delicto potior est conditio
possidentis'. This court will help neither, party. Let the estate lie where it falls."

In Bowmakers Ltd. v. Barnett instruments Ltd., (1945) 1 KB 65, Dit Parcq. LJwho delivered
the judgment of the Court of appeal after quoting the maxim 'in pari delicto" observed:-
"The Latin maxim must not be understood as meaning that where a transaction is vitiated by
illegality the person left in possession of goods after its completion is always and of necessity
entitled to keep them. Its true meaning is that where the, circumstances are such that the Court
will refuse to assist either party, the consequence must, in fact follow that the party in possession
will not be disturbed. As Lord Mansfield said. the defendant then obtains an advantage 'contrary
to the real justice, and, so to say, 'by accident'."

In Waman Srinivas Kini Bhagwandas & Co., MANU/SC/0171/1959 : AIR1959SC689 v.

Ratilal Supp. ( The Supreme Court referred to the case of Bowmakers Ltd. v. Barnet
Instruments Ltd., (1945) 1 KB 65, cited above, with approval. In that case, a tenant, who
occupied an old building vacated it when there was a change of landlord, who put up a new
construction. He later became a tenant under the new landlord. There were sub-tenants in the
old building who also shifted to the new building. One of the terms of the tease was that the
landlord would permit the tenant to keep sub-tenants. However, the landlord brought a suit for
ejectment on the basis of the statutory provision which prohibits sub-letting. The tenant's
defence was that the statute did not apply to contracts between the landlord and tenant and,
therefore, it did not preclude sub-letting and that in any event the parties were in pari delicto.
The Supreme Court after referring to the case of Bowmakers Ltd. v. Barnett Instruments Ltd.,
pointed out that the suit for ejectment was not brought for the enforcement of the agreement
which recognised sub-letting, but for enforcing the right of eviction which flowed directly
from an infraction of the statute which itself provided a remedy. A distinction between a case
where the assistance of the court was sought in enforcing the object which was unlawful and a
case where the plaintiff came to the Court for a remedy against one who had contravened the
provisions of a statute, operating against sub-letting. was considered to be based on public
policy of the agreement and the relief against illegality could be had,
10. There were two other decisions rendered by the Privy Council just before and after the
aforesaid decision of the Supreme Court. In Sarjan Singh v. Sardara Ali,1960 AC 167, a case
arose or. the following facts. The policy of the Road Transport department of the Federation of
Malaya was to grant haulage permits only to persons who had possessed them before the war.
The defendant in that action was a road haulier who had apparently had a haulage permit
previously and had every chance of obtaining one, The plaintiff in that action was a lorry
driver. Who could not obtain a haulage permit for plying the lorry. Both of them entered into
an agreement, as a result of which the defendant brought in his own name a lorry with the
funds belonging to the plaintiff. The defendant executed a letter recognising the rights of the
plaintiff. Some time after the purchase, the plaintiff and the defendant fell out and the
defendant claimed the lorry as his and the plaintiff was only in the position of a driver
employed by him. When the plaintiff was absent from his, home, the defendant came and took
away the lorry and thereafter he refused to return it. The plaintiff then filed a suit for a
declaration that he was the owner of the vehicle or in the alternative for damages. The matter
reached the Privy Council it was held that the plaintiff was entitled to sue in trespass. At page
176, Lord ' Denning, speaking for the Privy Council, observed:-
"Although the transaction between the plaintiff and the defendant was illegal, nevertheless it was
fully executed and carried -out; and on that account it was effective to pass the property in the
lorry to the plaintiff. There are many cases which show that when two persons agree together in a
conspiracy to effect a fraudulent or illegal purpose - and one of them transfer's property to the
other in pursuance of the conspiracy - then, as soon as the contract is executed and the fraudulent
or illegal, purpose is achieved, the, property (be it absolute or special) which has been transferred
by the one to the other remains vested in the transferee notwithstanding its illegal origin; see
Scarf v. Morgan (1818) 4 M & W 270 , per Parke B. The reason is because the transferor, having
fully achieved his unworthy end, cannot be allowed to turn round and repudiate the means by
which he did it - he cannot throw over the transfer. And the transferee. having obtained the
property, can assert his title to it against all the world, not because he has any, merit of his own,
but because there is no one who can assert a better title to it

At page 177, it was added.-

"Their Lordships do not overlook the fact that the defendant remained registered as the owner of
the lorry and that no permission was given for the sale. but this did not prevent the property in it
passing to the plaintiff. The registration book is not in Malaya, any more than it is in England, a
document of title. The title passed by the sale and delivery of the lorry to the plaintiff. The
absence of registration would no doubt put the plaintiff in difficulty if he had to prove his title,
but it would not invalidate it.',

11. Another case arose for decision of the Privy Council in Palaniappa Chettiar v.
Arunachalarn Chettiar, 1962 AC 294, in which again Lord Denning spoke for the Privy
Council. In that case, the father owned 139 acres of land cultivated with rubber in Malaya.
Under the Rubber Regulations of 1934. a distinction was made between the holding of less
than 100 acres and holdings of more than 100 acres. If a man held more than 100 acres, the
permissible production was assessed by an assessment Committee. If he held less than 100
acres, it was assessed by the local District Officer. In order to avoid going before the
Assessment Committee, the father decided to transfer 40 acres of land in favour of his son, for
a purported consideration, which was not in fact paid. The transfer was duly registered and a
certificate of title issued to the son. Thereafter, the father wanted to sell the 40 acres to a third
party and asked his son to execute a power of attorney in his favour so as to enable him to
transfer the land to the prospective purchaser. The son refused to do so, and the father brought
the suit claiming that the son was the trustee of the 40 acres holding the property on trust for
him. The claim of the father was negatived. In the course of the judgment at page 302, it was
pointed out -
"If the fraudulent purpose had not been carried out, there might well have been room for
repentance and the father might have been allowed to have the land retransferred to him But
where the fraudulent purpose has actually been effected by means of the colourable transfer,
there is no room for repentance. The father has used the transfer to achieve his deceitful end and
cannot go back on it. He cannot use the Process of the Courts to get the best of both worlds - to
achieve his fraudulent purpose and also to get his property back. The Courts will say - 'Let the
estate lie where it falls In the earlier case Sarian Singh v. Sardara Alil 1960 AC .167, the plaintiff
founded his claim on his right of property in the lorry and its possession, and did not have to rest
his cause of action on an immoral or illegal act while in the case of Palaniappa Chettlar the father
had of necessity to put for ward, and indeed, assert, his own fraudulent purpose, which he had
fully achieved. It was held that though in the former case the suit was maintainable the Courts
should not lend their aid in the latter case to the father to obtain a retransfer from the son.

12. It is these cases, which were considered by the Supreme Court in Smt. Surosaibalini
Debi v. Phanindra Mohan Majumdar, MANU/SC/0250/1964 : [1965]1SCR861 . The
plaintiff in that case was employed at Calcutta in the Court of Wards, whose service rules did
not permit him to start or carry on any trade or business of his own. He arranged with his
father-in-law, who was the defendant in the suit, that the father-in-law should be held not to be
the owner of the business. However, the plaintiff was in actual management of the said
business. He had to leave Calcutta on medical advice and he put his father-in-law in
possession on the understanding that on his return the business should be handed over to him.
However, when he returned, his father-in-law refused to so hand over. The result of having the
business in the name of the father-in-law was also to escape from payment of Income Tax. The
plaintiff filed the suit for recovery of possession and he succeeded in the trial Court as well as
in the High Court. But when the matter came up before the Supreme Court on appeal, the
appeal was dismissed. There were two separate judgments, one by Shah, J. (as he then was) on
behalf of himself and Gajendragadkar C. J., and the other by Rajagopala Ayyangar, J. In the
course of the judgment, their Lordships pointed out that the object of the agreement at its
inception was not to evade tax, but to avoid the service rules, which were not statutory. At
page 867 (of SCR) {at p. 1368 of AIR) Shah J. stated:-
"It is. true that if the plaintiff seeks the assistance of the Court to effectuate an unlawful
transaction, the Courts will refuse to assist him. Where, however, the plaintiff is seeking to
enforce his title to property and it is not an integral part of his pleading which he must prove to
entitle him to relief that there was between him and the defendant an unlawful transaction or
arrangement which he seeks to enforce, the plaintiff will be entitled to the assistance of the
Court, even if the initial title of the plaintiff is routed in an illegal transaction. "

13. In the course of the judgment, reference was made to the distinction between (1) claims in
which a party to an action has to rely essentially upon a conspiracy to effectuate an illegal or
fraudulent purpose, to support his claim to the property transferred to or held out in the other
party's name and, (2) claims in which unlawful or unworthy object is fulfilled, the property is
owned by the claimant, and the claimant, seeks the assistance of the Court not to effectuate his
unlawful purpose, but in sub stance to enforce his title by a plea in detinue under a transaction
which was not tainted by illegality. Palaniappa Chettiar v. Arunachalarn Chettiar, 1962 AC
294, was taken to illustrate the first principle and Sarjan Singh v. Saxdara Ali, 1960 AC 167,
as illustrating the second principle, Rajagopala Ayyangar J also referred to the plaintiffs claim
to possession being independent of and wholly dissociated from the illegal transaction of the
original benami purchase which fell into line with Sarjan Singh's case, 1960 AC 167. Not
being tainted with illegality, the plaintiff's claim was found to be open to no objection.
14. The scope of the maxim in pari delicto potior est conditio defendentis was outlined in
Sitaram. v. Radhabai, MANU/SC/0012/1967 : [1968]1SCR805 . It was pointed out that the
maxim did not apply to three classes of cases, namely (a)where the illegal purpose has not yet
been substantially carried into effect (b)where the plaintiff is not in pari de licto with the
defendant and (c) where the plaintiff does not have to rely on the illegality to make out his
claim.
15. In the present case, the plaintiff has not relied on his illegality in order, to make out his
claim. He has provided the necessary funds for the construction of the property and his stand
in this behalf has been upheld by both the, Courts below. Therefore, he is merely trying to
recover his own property and the case squarely falls within the proposition (C) referred to
above. There is no question of any illegality or anything opposed to public policy involved in
the actual suit that was filed by the plaintiff here. The second appeal is, accordingly,
dismissed; but in the circumstances no order to costs.

16. Appeal dismissed.

2. Shrimati Sudhakar v. Sudhakar R. Bhatkar

IN THE HIGH COURT OF BOMBAY

Second Appeal No. 401 of 1986

Decided On: 04.03.1997

Appellants: Shrimati and Ors.

Vs.
Respondent: Sudhakar R. Bhatkar and Ors.

Hon'ble Judges/Coram:
R.M. Lodha, J.

Counsels:
For Appellant/Petitioner/Plaintiff: D.S. Sawant, Adv.

For Respondents/Defendant: A.A. Kumbhakoni, Adv.

Subject: Contract

Subject: Law of Evidence

Catch Words

Mentioned IN

Acts/Rules/Orders:
Contract Act, 1872 - Section 16(3)

Cases Referred:
Raghunath Prasad v. Sarju Prasad, (1924) 51 Indian Appeals 101, AIR 1924 PC 60; Afsar
Shaik v. Soleman Bibi, AIR 1976 SC 163; Shivgangawa Madiwalappa Vulavi v. Basangouda
Govindgouda Patil, AIR 1938 Bom 304; Smt. Koze v. Makhan Singh, AIR 1973 MP 252; Miti
Bewa v. Daitari Nayak, AIR 1982 Orissa 174;Smt. Jakri Devi v. Smt. Rama Dogra, AIR 1984
HP 11

Disposition:
Appeal Dismissed
Citing Reference:

Discussed

Distinguished

Relied On

Case Note:
[A] Indian Contract Act, 1872 - Section 16 - Undue influence - Section to be applied in a
particular order - Three aspects to be seen - First - Relations between the parties to the
extent of domination of will of other - Second -Whether contract has been induced by
undue influence - Third - burden of proof - Courts can not go into third aspect directly
leaving aside first two aspect.

[B] Indian Contract Act, 1872 - Section 16(3) - Undue influence - Burden of proof - Other
party's position to dominate the will and that he used that position to obtain unfair
advantage to be proved first - When transaction appears to be unconscionable person in
a dominating position must affirmatively prove that no domination was practised and
contract was not induced by undue influence.
 JUDGMENT

R.M. Lodha, J.

1. On 15-12-1980 the Civil Judge, Junior Division, Rajapur dismissed the plaintiffs suit for
declaration that the gift deed dated 15-12-1968 was not binding on her and other incidental
reliefs. The District-Judge, Ratnagiri affirmed the said judgment and decree on 18-2-1986.
This second appeal filed under Section 100 of Code of Civil Procedure is directed against the
aforesaid concurrent judgment and decree.

2. One Motiram Mugadum was originally owner of the suit properties comprising of survey
Nos. 158/9, 164/3, 48/6, 48/9, 44/8 and 31/4 situate at village Tulsawade and house property
being Grampanchayat No. 13 situate at village Tulsawade. Motiram Magadum died and after
his death Shrimati Motiram Sakharam Magadum (original plaintiff) became the owner and
was in possession and enjoyment of the aforesaid properties. The part of the house property
was let out by original plaintiff to village panchayat. Tulsawade for rent of Rs. 60/- per year
somewhere in the year 1967. Shri Sudhakar Raghunath Bhatkar (original defendant) was
Secretary and Gram Sevak of village Panchayat. Tulsawade and he was also talathi of the said
village. The original defendant was residing in the premises owned by the original plaintiff
and taken on rent by the village Panchayat from her. The original plaintiff and original
defendant are not related but they were well acquainted since the original defendant was
residing in the premises owned by the original plaintiff. The gift deed dated 15-12-1966 is the
bone of contention in the present litigation and according to the plaintiff the original defendant
took original plaintiff in confidence and took her to taluka place Rajapur on the pretext that
bhade chitti was to be executed but in garb thereof as later on she came to know that the
original defendant got the gift deed executed from her relating to entire property held by her.
The original plaintiff, according to her, came to know in the month of July 1976 that original
defendant had mortgaged the property to Ratnagiri District Land Development Bank. On 8-3-
1977 the original plaintiff accordingly filed a suit in the Court of Civil Judge, Junior Division.
Rajapur against the original defendant and the other defendants namely, Maharashtra State Co-
operative Land Development Bank with whom the properties were mortgaged praying therein
that the gift deed dated 15-12-1966 allegedly executed in favour of defendant No. 1 be treated
as cancelled and it be declared that defendant No. 1 has got no right in the said properties
pursuant to the said gift deed. The original plaintiff also sought the relief that it be declared
that the original defendant No. 1 had no right to mortgage the property with the Maharashtra
State Co-operative Land Development Bank and the said property was not liable for auction
for re-payment of loan in favour of original defendant No. 1. The original defendant No. 1
filed written statement and denied the averments made in the plaint .According to original
defendant No. 1 he looked after the original plaintiff as his mother for about 12 years and out
of love and affection for the original defendant No. 1, she gifted her property at her will and
volition by the gift deed dated 15-12-1966 which was duly registered. He set up the defence
that he was put in possession of the suit property by the original plaintiff on the date of
execution of the gift deed and that he has made improvements in the suit house from his own
income and loan. The original defendant No. I denied that the gift deed was obtained by
practising fraud or exerting undue influence. The trial Court framed issues and thereafter the
plaintiff examined herself and one witness Shri Sitaram Panchal. Though the original
defendant No. 1 did not examine herself but examined two witnesses on his behalf namely,
Shri Sitaram Narayan Chavan and Shri Kashiram Shivram Tanawadi. The gift deed dated 15-
12-1966 has been exhibited as Exhibit 56.

3. The trial Court after recording the evidence and hearing the learned Counsel for the parties
held that the original plaintiff has failed to prove that defendant No. 1 got executed the
registered gift deed in his favour by fraud and also that she was not entitled to the declaration
sought by her. Thus, me trial Court dismissed the suit which has been affirmed in appeal as
observed above.

4. At the time of admission of the second appeal, the substantial question of law was
formulated and that reads :--

"Whether in the context of admitted facts of the case, the burden of proving that the Gift-deed
was not executed by the original plaintiff on account of fraud practised on her was not upon
defendant No. 1, as also whether defendant No. 1 who was himself a Gram Sevak and Talathi
could not be said to have influenced the Gram Panchayat who passed the Resolution Exhibit 69
and whether the Resolution was not passed in most irregular manner?"

5. However, during the course of arguments, the learned Counsel for the parties submitted that
following substantial question of law arises in the second appeal and they advanced their
arguments on the question :

"Whether in the facts and circumstances of the case burden to prove that the Gift-deed Exhibit-
56 was not due to undue influence exerted by the defendant No. 1 was on the defendant No. 1 the
burden having not been discharged, whether the Courts below were justified in dismissing the
plaintiff's suit?"

6. Section 16 of the Indian Contract Act 1872 defines undue influence which reads thus :

"16. Undue influence defined.--(1) A contract is said to be induced by "undue influence"

where the relations subsisting between the parties are such that one of the parties is in a
position to dominate the will of the other and uses that position to obtain an unfair advantage
over the other.
(2) In particular and without prejudice to the generality of the foregoing principle, a person is
deemed to be in a position to dominate the will of another--

(a) Where he holds a real or apparent authority over the other, or where he stands in a fiduciary
relation to the other; or

(b) where he makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness, or mental or bodily distress.

(3) Where a person who is in a position to dominate the will of another, enters into a contract
with him, and the transaction appears, on the face of it or on the evidence adduced, to the
unconscionable, the burden of proving that such contract was not induced by undue influence
shall be upon the person in a position to dominate the will of the other.

Nothing in this sub-section shall affect the provisions of Section 111 of the Indian Evidence
Act, 1872 (1 of 1872).

7. Consent under Section 14 of the Indian Contract Act is said to be free where it is not caused
by coercion, undue influence, fraud, misrepresentation or mistake.

8. Sub-section (3) of Section 16 provides that where a person who is in a position to dominate
the other and enter into contract with him and the transaction appears on the face of it, or in
the conveyance, to be unconscionable, the burden of proving that such contract was not
induced by undue influence shall lie upon the person in the position to dominate the will of the
other. Where a party to a contract seeks to set it aside on the ground of undue influence, it is
not sufficient for him under Section 16 of the Indian Contract Act to establish that the other
party was in a position to dominate his will. He must also prove that the other party has used
that position to obtain unfair advantage on him. It is only if the transaction appears to be
unconscionable by Sub-section (3) of Section 16 the burden of proof that the contract was not
induced by undue influence is upon the person who was in the dominating position. In that
situation such person must affirmatively prove that no domination was practised. In Raghunath
Prasad v. Sarju Prasad, (1924) 51 IA 101 : MANU/PR/0018/1923 : AIR 1924 PC 60 it has
been held,

"Before, however, addressing themselves to the authorities cited their Lordships think it desirable
to make clear their views upon, in particular, Section 16, Sub-section (3) of the Contract Act as
amended. By that section three matters are dealt with. In the first place the relations between the
parties to each other must be such that one is in a position to dominate the will of the other. Once
that position is substantiated the second stage has been reached namely, the issue whether the
contract has been induced by undue influence. Upon the determination of this issue a third point
emerges, which is that of the onus proband. If the transaction appears to be unconscionable, then
the burden of proving that the contract was not induced by undue influence is to lie upon the
person who was in a position to dominate the will of the other."

Sub-section (3) of Section 16 has to be applied in a particular order according to Privy

Council. First consideration is the relations between the parties to the extent that one was in a
position to dominate the will of the other. Once this condition is satisfied the second aspect
which is required to be seen is whether the contract has been induced by undue influence. It is
only on adjudication of this issue the third point emerges relating to burden of proof or onus
probandi. The consideration of the aforesaid matters has to be in that order only one after the
other and the said order cannot be disturbed. In other words, the Court cannot go into the
question of proof of onus probandi as the first issue leaving the other two issues namely the
relations between the parties to the effect that one was in a position to dominate the other and
whether the contract was induced by the undue influence to be left for decision later on. If that
be the approach, the mistake is bound to creep in because the transaction whether an
unconscionable or not is not the first thing to be determined but the last aspect to be seen in the
order of the circumstances referred to in Sub-section (3) of Section 16.

9. The Apex Court in Afsar Shaik v. Soleman Bibi, MANU/SC/0001/1975 : AIR 1976 SC
163 had occasion to deal with undue influence and Section 16 of the Indian Contract Act and
with reference to the decision of Prem Shah (supra) decided by Privy Council, held that it was
not sufficient for a person seeking relief to show that the relations of the parties have been
such that the one naturally relied upon on the other for advice and the other was in a position
to dominate the will of the first and dealing it. The Apex Court ruled that more than mere
influence must be proved so as to render influence in the language of law undue and upon
determination of this issue at the second stage, a third point emerges which is of the onus
probandi. If the transaction appears to be unconscionable, the Apex Court observed that the
burden of proving that it was not induced by undue influence is according to the law upon the
person who was in a position to dominate the will of the other.

10. Applying the aforesaid principles, the first thing that is required to be seen is whether the
relation between the original plaintiff and the original defendant No. 1 was such that one was
in a position to dominate the will of the other. That is what is required to be seen first while
determining first stage is whether one of the parties could influence the decision of the other.
In the facts on hand it would be seen that as it is there was no relationship between the original
plaintiff and original defendant No. 1. That fact is not only not disputed but rather admitted in
the plaint itself where the original plaintiff has averred that there was no relationship as such
between the parties i.e. the original plaintiff and original defendant No. 1. Merely because the
original defendant No. 1 was residing in the part of the house owned by original plaintiff as an
employee of the tenant, it cannot be said that the original defendant No. 1 was in dominating
position who could influence the plaintiff. Except this fact there is no material on record from
which any inference can be drawn that the original defendant No. 1 was in a position where he
could dominate and influence the original plaintiff. Influence in the eye of law has to be
contradistinguished with persuasion. Any and every persuasion by one party to the other to
contract cannot lead to inference or conclusion that such party has influenced the other party.
One may by his act and conduct convince and persuade the other party to do a particular act
and if the other party does such an act freely and of own volition may be to his or her
prejudice or to his or her disadvantage or even to his or her peril, it cannot be said that such act
was influenced by the other. May be therefore since the original plaintiff and original
defendant were living in one house and the original defendant who was being treated like her
son might have persuaded the original plaintiff to gift her entire property. By such persuasion,
it cannot be held that he has influenced the decision of the original plaintiff by dominating his
will over her. The first element of influence is, therefore, missing. The second stage whether
such influence was undue or not, therefore, cannot be said to have arisen. There is absolutely
no material much less reliable evidence to show that the original defendant No. 1 induced the
original plaintiff by undue influence for execution of the gift deed exhibit 56. Of course the
original plaintiff has deposed and sought to set up the case that the original defendant No. 1 on
the pretext of execution of bhade chitti took her to Rajapur and in the garb of execution of
bhade chitti got executed the document which turned out to be gift deed. However, the said
case is not only reliable but does not seem to be probable as well. It will be seen that Motiram
the original owner and the husband of the original plaintiff had died long back and perhaps
two decades before the execution of the gift deed in the year 1966. During this period of 20
years the original plaintiff had been getting the agricultural land cultivated from various
persons and was sustaining her livelihood therefrom. The original plaintiff was illiterate
having no formal education from school or college but she was intelligent enough to manage
her properties and was getting agricultural land cultivated from various persons from time to
time for about two decades and, therefore, from the available facts it cannot be inferred that
she would sign a document without understanding the purport of such document. Gift deed
exhibit 56 therefore, must have been signed by the original plaintiff after fully understanding
its effect. The gift deed admittedly is the registered document.

11. Mr. Sawant, the learned counsel for the appellant relied upon the decision of this Court in
Shivgangawa Madiwalappa Vulavi v. Basangouda Govindgouda Patil MANU/MH/0122/1937
: AIR 1938 Bom 304 in which the Division Bench of this Court has held thus at page 305-
306 :--

"We also believe the plaintiff that by various pretences and show of sympathy the defendant had
gained a position of dominance over the plaintiff at the material time. It is during the subsistence
of that relationship that the deed of gift was executed. It is now well established that in a Court of
equity, when a person obtains any benefit from another, whether under a contract or as a gift, by
exerting his influence which, in the opinion of the Court, prevents the grantor from exercising an
independent judgment in the matter in question, the latter can set aside the contract or recover the
gift. The Court of equity then imposes upon the grantee the burden, if he wishes to maintain the
contract or gift, (sic) proving that in fact he exerted no influence for the purpose of obtaining it."

12. Shivgangawa Madiwalappa Vulavi (supra) is a case where a young widow who had
inherited her brother's property had no relative to look after her and there was none who could
give her disinterested advice. Her husband's brother came and lived with her appropriating her
income. The widow quarrelled with him and during the quarrel she was thrown out of her
property. Through the advice and assistance of an influential watandar Patil she recovered her
property back. Patil lived with the widow in a stage of immorality and having obtained from
the widow of a gift of all her property drove her away. It was in these circumstances that this
Court held that the gift was presumably obtained through undue influence. This Court relied
upon the following :

"As to a certain well-known and easily ascertained class of women, well-known rules of law are
established, with the wisdom of which we are not now concerned. Outside that class it must
depend in each case on the character and position of the individual woman whether those who
deal with her are or are not bound to take special precautions that her action shall be intelligent
and voluntary and to prove that it was so in case of dispute."

The relation of paramour and mistress was included in such cases if the party obtaining the
benefit was in a position to dominate and influence the will of the other. In the present case,
the facts are entirely different. Here the widow over two decades looked after and managed her
property after the death of her husband and therefore original defendant No. 1 who was only
occupying part of the tenanted premises cannot be said to be in a position to dominate and
influence the will of the original plaintiff.

13. Another decision relied upon by the learned Counsel for the appellant is Smt. Koze v.
Makhan Singh MANU/MP/0057/1973 : AIR1973MP252 wherein the sale of the entire
property by an illiterate woman belonging to scheduled tribe was set aside on the ground of
undue influence and fraud because there was absence of (i) independent advice (ii) payment of
sale consideration to her (iii) urgency to sell the property to the vendee and (iv) reading over
the sale deed to vendor. In this background the Madhya Pradesh High Court held that since the
vendee was not able to establish that the sale was fair, reasonable and equitable, the sale would
not be allowed to stand and was set aside.

14-15. Smt. Koze's case (supra) has no application whatsoever in the facts of this case already
referred to here above.

16. The learned Counsel for the appellant then cited Miti Bewa v. Daitari
Nayak MANU/OR/0055/1982 : AIR1982Ori174 . The said ruling of the Orissa High Court
has no application in the present case. That was a case where suit was filed by illiterate lady
for declaration of title and setting aside sale deed executed by her on the allegation that the
sale deed was taken from her on the pretext of power of attorney by her son-in-law, who was
living with her for a score of years and was managing her property. The burden in these
circumstances was on the purchaser to prove intelligent execution of sale deed by the illiterate
lady.

17. Yet another case relied upon by Mr. Savant, the learned Counsel for the appellant is the
judgment of the Himachal Pradesh High Court, in Smt. Jakri Devi v. Smt. Rama
Dogra MANU/HP/0006/1984 . In that case an illiterate lady living separately from her
husband gifted practically all her landed property worth Rs. 2 lacs which had an apple orchard
to the donee who was her lover. In these facts, the Himachal Pradesh High Court held that the
transaction of gift deed by the illiterate lady in favour of her lover was a result of undue
influence exercised by the donee who was in a position to dominate the will of the owner.

18. Adverting to the present facts, it would be seen that the gift deed was attested by two
attesting witnesses and was written by a scribe. None of the attesting witnesses nor the scribe
was produced by the original plaintiff. Had the attesting witnesses or the scribe or any one of
them been examined by the original plaintiff, it would have thrown some light whether the gift
deed was executed by perpetrating fraud or exerting undue influence. According to the
statement made in the gift deed itself she had gifted her property to the donee out of love and
affection. Since the plaintiff has failed to prove that the original defendant was in dominating
position to affect her decision, the burden cannot be said to have been shifted upon the original
defendant No. 1 to prove that the gift deed at Exhibit 56 was not executed by inducing the
original plaintiff by undue influence. That stage of onus on the original defendant No. 1 did
not arise in the facts and circumstances of the present case. I, therefore, hold that in the facts
and circumstances of the case the stage of placing the burden on original defendant No. 1 to
prove that the document gift deed Exhibit 56 was not executed by inducing undue influence
had not arrived at and, therefore, the Courts below cannot be said to be unjustified in
dismissing the plaintiff's suit.

19. The original plaintiff has also died during the pendency of the appeal and her daughter
Smt. Chapabai had also died living behind her legal representatives who have been substituted
as appellants in the second appeal. The original defendant No. 1, respondent No. 1 herein,
Shri Sudhakar R. Bhatkar has however, filed an undertaking in the form of an affidavit that
in case if the second appeal is dismissed, to put an end to the dispute finally, he on his own
would pay to the appellants collectively a sum of Rs. 50,000/- from the date of the decision in
the manner in which he could deposit the said amount in the Court. The said undertaking in
the form of the affidavit is accepted and defendant No. 1 -- respondent No. 1 herein is
permitted to deposit the said amount of Rs. 50,000/- before the trial Court within six months
from today and the appellants would be at liberty to withdraw the said amount from the trial
Court. Though the second appeal filed by the original plaintiff is dismissed the gesture by
original defendant No. 1 is appreciated in the facts and circumstances of the case.

20. In the result, the appeal is dismissed with the observations as aforestated. No costs.
3.

IN THE HIGH COURT OF BOMBAY

Second Appeal No. 42 of 1926

Decided On: 24.02.1928

Appellants: Babasaheb Bhairojirao Ghorpade

Vs.
Respondent: Gopal Hanmant Kulkarni

Hon'ble Judges/Coram:
C.G.H. Fawcett and M.A.A. Khan, JJ.

Subject: Property

Catch Words

Mentioned IN

Disposition:
Appeal Dismissed

Citing Reference:

Discussed

Mentioned

2
Case Note:
Service inamCommutation by payment of quit rentKhushbhas inamAlienability.

Where lands originally assigned for service and therefore inalienable are subsequently
commuted for a quit rent and treated as "khushbhas inam", the tenure of the lands is
altered from service to rent so long as the donee's descendants continue to pay rent. Such
lands become alienable.

Rajah Mahendra Singh v. Jokha Singh (1973) 19 W.R. 211, p.c. and Sunderabai v.
Collector of Belgaum (1919) 21 Bom. L.R. 1148, p.c. followed

JUDGMENT

M.A.A. Khan, J.

1. The respondent purchased by a sale-deed dated October 13, 1910, the land in suit, from one
Fakirappa and brought this action against the appellant who was in possession. Both the lower
Courts have decreed the claim. Mr. Desai on behalf of the appellant has advanced two
contentions : (1) that the land in suit is a 'Khushbhas Inam which is inalienable and (2) the
respondent's claim is time-barred.

2. The appellant is the Inamdar, His case is that the land is of a service Inam tenure granted by
the Inamdar to one Irappa. On the death of Irappa his son Fakirappa agreed to render the
service attached to the tenure and so succeeded to the land. In the year 1911 Fakirappa being
no longer willing to render the service imposed by the tenure surrendered the land to the
Inamdar.

3. To take the second point first: Both the lower Courts have held that the appellant went into
possession of the land in the year 1911 and that his adverse possession did not commence until
July or August 1911. The suit was brought in 1922 within the period of twelve years required
for the perfection of a title by adverse possession. Mr. Desai has argued that Fakirappa did not
pay the assessment on this land since 1904 and in the year 1912 the appellant paid the arrears
of assessment from 1905 to 1912. From that circumstance he wants us to infer that Fakirappa
was not in possession of the land from 1905 and that the appellant's possession began, in 1905.
In view of the admission made by the appellant before the trial Court and the concurrent
finding of the two Courts, that the appellant entered into possession of the land in 1911 only
we do not agree with Mr. Dasai contention that the appellant must be deemed to be in
possession since 1905 and to have acquired a good title to the land by adverse possession. The
non-payment of assessment by Fakirappa from 1905 does not necessarily prove that he was
then dispossessed by the appellant. The point of limitation taken by Mr. Desai, in our opinion,
fails.
4. With regard to the first point, the land is described in the accounts of the Inamdar for 1857-
62-65 and 68 as "Khushbhas Inam." That appears under the sub-heading "Bakshis Inam to
those who render service." That sub-heading is under the main heading "lands in the
possession of those who do not render service." The meaning to be attached to the term
"Khushbhas Inam" is discussed at length in the judgments of both the Courts. Our attention
has been called to the meaning of "Khushbhas" appearing in Wilson's glossary of Judicial and
Revenue Terms 1855. There "Khushbhas" is said usually to mean in the Deccan and in other
places "a cultivator holding land at an easy or quit rent". Khushbhas evidently is a corruption
of this word 'Khushbhas'. It is clear from this description that no service is attached to the
tenure. The lower appellate Court has thus stated the point:

Whatever the true meaning of the word may be, it appears reasonably clear from the main
bending that the land was never burdened with service.

5. In its opinion the sub-heading "Bakshis Inam to those who render service" is very probably
a later unauthorised addition; we concur in that opinion. The burden of proof is on the
appellant to show that the land is inalienable. The appellant has failed to discharge that burden.
The appeal, in our opinion, should be dismissed with costs.

C.G.H. Fawcett, J.

6. I would only add a few words. Assuming that originally this land was service land, to the
extent that the holder had to render certain service to the Inamdar, and that accordingly under
the ordinary rule of lands assigned for service to State, they might originally have been
inalienable, still the use of the word "khushbhas," as explained by my learned brother, points
to the fact that any such service was subsequently commuted for a quit rent. Accordingly, as
laid down in the Privy Council case of Rajah Mahendra Singh v. Jokha Singh (1873) 19 W.R.
211, p.c. (which relates to a similar case where service had been commuted for quit rent) that
fact alters the tenure from service to rent, as long as the donee's descendants continue to pay
rent. This case is referred to by this Court in Brendon v. Sundrabai (1913) 16 Bom. L.R. 164,
p.c. and the view that this Court adopted in that case about the alienable nature of the land
there in suit was approved by the Privy Council in Sunderabai v. Collector of Belgawm (1918)
21 Bom. L.R. 1148 p.c.
4.

IN THE HIGH COURT OF DELHI

I.A. No. 1771/2014 in CS(OS) No. 260/2014

Decided On: 30.01.2014

Appellants: Aspective Vanijya Pvt. Ltd. and Anr.

Vs.
Respondent: Industrial Financial Corporation of India (IFCI) Ltd.

Hon'ble Judges/Coram:
Manmohan Singh, J.

Counsels:
For Appellant/Petitioner/Plaintiff: Mr. Sumit Bansal, Mr. Ateev Mathur, Ms. Richa Oberoi &
Ms. Jagriti Ahuja, Advs.

For Respondents/Defendant: Mr. P.S. Bindra, Adv.

Subject: Civil

Catch Words

Mentioned IN

Acts/Rules/Orders:
Indian Contract Act, 1872 - Section 176

Cases Referred:
Co-operative Hindusthan Bank Ltd. and Anr. vs. Surendra Nath Dey and
Ors. MANU/WB/0173/1931 ; GTL Limited and Ors. vs. IFCI Limited and
Anr.MANU/DE/3641/2011

Disposition:
Application Dismissed

Industry: Finance

Citing Reference:
Discussed

Case Note:
Civil - Interim injunction - Present application filed for granting interim injunction in
respect of selling of shares of Applicant on non payment of loan amount - Whether
Applicant entitled of interim injunction in present facts and circumstances - Held,
appeared that Applicant-plaintiff had failed to pay second installment in respect of loan
amount - Said amount due was even not paid after expiry of 12 days - Applicants were
fully aware about stipulated clause of agreement that in case Applicant had not paid loan
amount then Respondent was at liberty to sell shares of Applicant - Respondent-
defendant as per agreement had invoked securities and issued letter to Applicants to
clear dues within three days from date of notice - Thereafter, another notice was issued
by Respondent before selling shares - Considering facts, Applicant not entitled for
interim injunction against Respondent - Application dismissed.

JUDGMENT

Manmohan Singh, J.

1. The abovementioned suit for permanent injunction has been filed by five plaintiffs, namely,
Aspective Vanijya Pvt. Ltd., Subhchintak Vancom Pvt. Ltd., Snehpushp Barter Pvt. Ltd., REI
Steel and Timber Pvt. Ltd. and REI Agro Limited, against the defendant,
namely, Industrial Financial Corporation of India Ltd. The facts of the matter are that the
plaintiff No. 5 by letter dated 11th June, 2012 approached the defendant with a request to avail
financial assistance. After considering the said request, the defendant by letter dated 27th June,
2012 agreed in principal to sanction a Corporate Loan of an amount not exceeding Rs. 100
crores to plaintiff No. 5 on the terms and conditions set out in the said letter. In view of the
same, plaintiff No. 5 and the defendant entered into a Corporate Loan Agreement dated 12th
July, 2012 whereby a corporate loan of an amount not exceeding Rs. 100 crores was extended
by the defendant to plaintiff No. 5. The said loan was provided at an interest rate of 14.5% per
annum which was payable monthly on reducing balance. In terms of the said loan agreement,
the interest was payable on 15th of each month as set out in Schedule II of the loan agreement.
The loan was repayable in terms of Clause 1.8 of the Corporate Loan in 5 equal quarterly
installments of Rs. 20 crores which was to commence after a moratorium period of 12 months
from the date of first disbursement. Thus, the tenure of the loan was 27 months including 12
months moratorium period as was specified in Clause 1.15 of the Loan Agreement.

2. Article II of the Loan Agreement provided the provision of security cover of minimum of
2.25 times of the loan amount. Out of the aforesaid security by way of pledge of shares
equivalent to the loan amount was to be created and a minimum cover of 1.25 times of the
loan amount was to be provided by creating first pari pasu charge on the fixed asset of plaintiff
No. 5 (Rice Division). The plaintiff No. 5 created a first charge in respect of its immovable
properties in terms of the details given below:-

3. For the purpose of creating security by way of pledge of shares, the plaintiffs No. 1 to 4
which are the promoter companies of plaintiff No. 5 pledged their respective shares of plaintiff
No. 5 with the defendant and in that respect, the said plaintiffs, i.e. plaintiffs No. 1 to 4
individually entered into Share Purchase Agreements dated 12th July, 2012. In terms of the
said agreement for pledge of shares, the shares were pledged as per the following details:-
4. The said plaintiffs No. 1 to 4 also executed respective undertakings for non-disposal of
shares and power of attorney in favour of the defendant for the purpose of completing the
pledge of shares. Similarly, for the purpose of creating hypothecation of shares, plaintiff No. 5
executed a Deed of Hypothecation thereby hypothecating its movable properties as described
in Schedule II of the said Deed of Hypothecation in consideration of availing loan from the
defendant.

5. It is further the case of the plaintiffs that plaintiff No. 5 made payment of monthly interest,
which was approximately Rs. 1.05 crores, to the defendant since August, 2012. The
moratorium period of 12 months for repayment of principal amount of the loan expired in July,
2013 and the first quarterly payment fell due in October, 2013 when the plaintiff No. 5 was to
pay Rs. 20 crores in terms of the repayment schedule as contained in the Loan Agreement. The
plaintiff No. 5 paid the first installment of Rs. 20 crores on 15th October, 2013 and has also
paid the interest till December, 2013. The second quarterly installment towards repayment of
the principal amount fell due on 15th January, 2014.

6. The case of the plaintiff No. 5 is that the said quarterly installment of Rs. 20 crores could
not be paid due to market crunch. The plaintiff No. 5 issued a letter dated 14th January, 2014
to the defendant, inter-alia, explaining that there has been an inordinate delay in realization of
the receivables by plaintiff No. 5 resulting into temporary mismatch of its cash availability
position and also tried to explain its inability to pay the principal and interest due on 15th
January, 2014. The request was made by plaintiff No. 5 to the defendant to give an extension
till end of March, 2014 to pay the same. The defendant by e-mail dated 15th January, 2014
informed the plaintiff No. 5 about the non-payment on the due date and that they would
present the post-dated cheques to the Bank. Another e-mail dated 16th January, 2014 was sent
by the defendant whereby plaintiff No. 5 was called upon to clear all the dues within three
business days. However, on the same date, plaintiff No. 5 again requested the defendant for
extension of time till March, 2014.
7. The defendant on 22nd January, 2014 addressed a letter to all the plaintiffs by way of notice
under Section 176 of the Indian Contract Act, 1872 (in short, called the "Act") advising all the
plaintiffs to clear the dues within three days from the date of notice, failing which the
defendant sought to sell the security/shares pledged by plaintiffs No. 1 to 4 with the defendant
to clear the outstanding. It was specifically mentioned in the said letter that the same be treated
as a notice under Section 176 of the Act.

8. When the suit as well as the interim application was listed before Court on 28th January,
2014, the learned counsel for the plaintiffs pressed for an ad-interim injunction order. The
same was not issued except the summons and notice were issued to the defendant for the next
day, i.e. for 29th January, 2014. At that time, the learned counsel for the plaintiffs informed the
Court that the defendant has sold the shares for more than Rs. 90 lacs on 28th January, 2014
and they may sell the same further in case a short date is not given. Therefore, one day notice
was issued to the defendant.

9. When the matter was taken up on 29th January, 2014, the learned counsel for the plaintiff
again pressed for an interim order. Since there was hardly any time to file the reply on behalf
of the defendant, Mr. P.S. Bindra, learned counsel for the defendant strongly opposed the
interim prayer made in the application and made his submissions on the basis of
material/documents placed on record by the plaintiffs. Left with no option to the Court, but to
hear the submissions of the parties as the interim prayer sought by the plaintiffs was opposed
by the defendant.

10. In order to appreciate the arguments of Mr. Sumit Bansal, learned counsel for the
plaintiffs, the relevant clauses of the Corporate Loan Agreement dated 12th July, 2012 are
reproduced hereunder:-

1.1 AMOUNT AND TERMS OF LOAN:

The Borrower agrees to borrow from the Lender and the Lender agrees to lend to the Borrower,
on the terms and conditions contained herein in this Agreement executed between the parties on
the date set hereinabove (hereinafter referred to as the "Loan Agreement"), Corporate Loan not
exceeding Rs. 100.00 crore (Rupees One hundred Crore Only) (hereinafter referred to as "the
Loan") for the purpose set forth in Schedule I hereto.

1.2 INTEREST:

The Borrower shall pay to the Lender interest at the rate of 14.50% per annum payable monthly,
linked to repo rate after the date of sanction (but never below the interest at the rate of 14.50%
per annum payable monthly), on the principal amount of the Loan outstanding from time to time.
The said interest shall be payable monthly on 15th of each month ("Interest Payment Date"),
more particularly set out in Schedule II hereto. However in no case, the interest rate shall be
below the stipulated rate of interest of 14.50% per annum during the currency of the loan.

1.4 DEFAULT INTEREST:

(i) In case of default in the payment of installment(s) of principal, and/or interest and/or all
other monies on their respective due dates, the defaulted amount shall carry interest at the rate
of top of the interest band rate (presently 18.50% per annum) over and above the rate of
interest, on compound basis, payable under this Loan Agreement as may be amended from
time to time as also liquidated damages of 2.00% per annum over and above the default rate of
interest.

(ii) All interest, principal and other monies which shall accrue under the provisions of the
Loan Agreement, shall also be payable in the manner and on the date as mentioned in the Loan
Agreement, for payment of interest on the principal amount of the loans.

1.5 LIQUIDATED DAMAGES:

In case of default in payment of installment of principal, interest, upfront fee and all other
monies (except liquidated damages) on their respective due dates, the Borrower shall pay on the
defaulted amounts, liquidated damages @ 2% per annum for the period of default. Liquidated
damages shall be payable in the manner and on the dates as specified in the Loan Agreement for
payment of interest. Arrears of Liquidated damages shall carry interest at the rate of top of the
interest band rate (presently 18/50% per annum) on the Loan as applicable on the date of default
or at the applicable rate under the Loan Agreement, whichever is higher.

1.8. REPAYMENT

The Borrower undertakers to repay the Loan in 5 (five) equal quarterly installments of Rs.
20.00 crore (Rupees Twenty Crore) each, after a moratorium of 12 (twelve) months from the
date of first disbursement.

The Borrower undertakes to repay the principal amount of the Loan in accordance with the
Amortization Schedule set forth in Schedule III hereto.

However, the Lender shall have the right to reset the repayment-schedule in its absolute
discretion, if the circumstances so warrant. In that event the Borrower shall repay the Loan in
accordance with the repayment schedule as may be stipulated by the Lender which repayment
schedule shall be final and binding on the Borrower.

11. Mr. Bansal referred to the Default Interest Clause 1.4 which stipulates that in case of
default in paying the installment of principal and/or interest on the due dates, the defaulted
amount shall carry interest at the rate of top of the interest band rate (presently 18.50% per
annum) over and above the rate of interest, on compound basis, payable under the Loan
Agreement. His argument is that the plaintiffs may pay the second installment of Rs. 20 crores
along with interest by 31st March, 2014 instead of the due date, i.e. 15th January, 2014 with
interest at band rate and plaintiffs would also pay rest of the three installments of Rs. 20 crores
each as per the schedule. It is prayed that an interim order against the defendant be passed
restraining it from selling the shares of plaintiffs No. 1 to 4, otherwise, a great prejudice would
be caused to the plaintiffs, as the Default Interest clause 1.4 could apply in the present
circumstances. On the other hand, no harm would cause to the defendant who ultimately
would get the amount along with interest of band rate as per the clause referred.

12. Mr. Bansal has also relied upon Clause 1.8, i.e. Repayment, and argued that the said clause
grants the right to the defendant to reset the repayment schedule and the plaintiff No. 5 shall
under this clause definitely repay the loan in terms of the repayment schedule as may be
stipulated by the defendant and the said repayment schedule shall be final and binding upon
the plaintiffs. He submits that the defendant should agree with the suggestion of repayment
schedule.

13. Lastly, it is argued by him that the alleged notice under Section 176 of the Act issued by
the defendant on 22nd January, 2014 to the plaintiffs is in a complete arbitrary and highhanded
manner which is contrary to the spirit of Section 176 of the Act. In support of this submission,
learned counsel has mainly relied upon the two decisions; one given by the Calcutta High
Court in a case of Co-operative Hindustan Bank Ltd. and another vs. Surendra Nath Dey and
others, MANU/WB/0173/1931 : AIR 1932 Calcutta 524, and the second decision of this
Court in the case of GTL Limited vs. IFCI Ltd. & Ors., reported as MANU/DE/3641/2011 :
182 (2011) DLT 696.

14. Mr. Bansal states that in view of the above said circumstances as well as the relevant
clauses mentioned in the Loan Agreement, the discretion should be exercised in favour of the
plaintiffs who may ultimately pay the interest @ 18.5% per annum for the delayed period. The
balance of convenience also lies in favour of the plaintiffs and against the defendant. This
Court should pass the interim order in favour of the plaintiffs and against the defendant.

15. Mr. P.S. Bindra, learned counsel appearing on behalf of the defendant has refuted all the
submissions of the learned counsel for the plaintiffs. He states that as far as the Clause 1.8 is
concerned, under the said clause, it is absolutely the discretion of the defendant to reset the
repayment schedule. However, in the present case, his client is not agreeable to exercise such
discretion. As far as the Clause 1.4 is concerned, he argues that the said clause is applicable
only when the loan is rescheduled and under those circumstances, the defendant is to charge
the interest at the band rate of 18.50% per annum. He further states that Clause 1.8 for
reschedule of repayment has been exercised with many other borrowers who ultimately failed
to make the repayment despite of postponement of the installments and the defendant had to
suffer a great loss.

16. Mr. Bindra states that the defendant is a financial institution; the entire business is of
rotation of money and it survives on interest and receipt of money in time. The defendant has a
huge staff and expenditures and in case, the money is blocked in this manner, the business of
the defendant will come to a stand-still. He states that the defendant has rightly exercised its
discretion under Clause 1.8 by not rescheduling the loan as per the Article VI, Clause 6.1, i.e.
Events of Default and Remedies. He has referred the Clause 6.1, (a) & (b) which read as
under:-

ARTICLE-VI

EVENTS OF DEFAULT AND REMEDIES

6.1 If one or more of the events specified in this Section (hereinafter called "Events of
Default") happen(s), the Lender may, by a notice in writing to the Borrower, declare the
principal and all accrued interest on the Loan to be due and payable forthwith and the security
created in terms of Article-II of this Agreement shall become enforceable.

EVENTS OF DEFAULT

(a) DEFAULT IN PAYMENT OF PRINCIPAL SUM OF THE LOAN

Default has occurred in the payment of principal sum of the Loan on the due dates.

(b) DEFAULT IN PAYMENT OF INTEREST

Default has been committed by the Borrower in payment of any installment of interest on the
loan on the due dates.

17. Mr. Bindra has also referred four agreements for pledge of shares, executed by plaintiffs
No. 1 to 4, dated 12th July, 2012 wherein as per Clause 15, the plaintiffs No. 1 to 4 have
agreed that in case of default in principal or interest by the plaintiff No. 5, the defendant would
have right to sell the pledged shares in the market after giving a notice of the same and without
any intervention of Court. The said Clause 15, which is the common clause in all the
agreements for pledge of shares, reads as under:-

15. That in case of default in principal or interest by the Borrower, or non top-up of shares the
Lender shall have inter-alia unqualified right to sell the pledged shares in the market after giving
a notice of the same and without any intervention of court.
18. He argues that Clauses 6.1 and 1.8 are to be read together in the present case. The value of
shares of the plaintiffs is increasing day-by-day. The defendant intends to sell the shares up to
the amount due which would be about 5% of the total shares. As far as charge of immovable
properties is concerned, the said properties have also been under the charge of various
financial institutions. If law of pari pasu would apply, the defendant would get hardly any
amount. Thus, the defendant has no intention to exercise its discretion for repayment schedule
under Clause 1.8 of the Loan Agreement.

19. It appears from the statement made in the plaint and the documents filed that on 14th
January, 2014, plaintiff No. 5 has issued a letter to the defendant admitting that due to an
inordinate delay with regard to receivable amount, plaintiff No. 5 is not in a position to repay
the installment amount and interest due on 15th January, 2014. Thus, an extension of time till
end of March, 2014 was sought. On 14th January, 2014 itself, the defendant informed the
plaintiff No. 5 that the defendant is not agreeable to the proposed time extension and requested
the said plaintiff to clear the dues on time. On 14th January, 2014, again a request was sent for
extension of time. However, the defendant did not agree, rather on 15th January, 2014, the
defendant sent an e-mail to the plaintiff No. 5 which reads as under:-

Dear Sir,

Please refer to the trailing mail below. The principal and interest dues amounting to Rs.
21,05,77,301/- are due for payment today i.e. 15/01/2014. This is to inform you that in case of
non payment of the same by end of day today, we shall present the Post Dated Cheque
submitted by you tomorrow (i.e. 16/01/2014), to our bankers for collection. Please ensure to
maintain sufficient balance in your account to honour the said payment.

Regards,
Trishya Shukla
Manager

20. On 16th January, 2014, a letter was issued by the defendant addressed to plaintiff No. 5,
the relevant extracts of the same read as under:-

Re: Corporate Loans of Rs. 100 crore-Notice of Event of Default

This has reference to the loan facility of Rs. 100 crore sanctioned to you vide our LOI dated
June 27, 2012. In this connection, please refer to the correspondence resting with our E-mail
dated January 09, 2014 and January 15, 2014 advising you to ensure timely payment of dues
amounting to Rs. 21,05,77,301/- which were to be paid on 15/01/2013.
2. In this connection, we regret to observe that REIAL is in default in payment of dues of IFCI
to the tune of Rs. 21,05,77,301/- as under:

Principal Installment: Rs. 20 crore

Interest Installment: Rs. 1.06 crore

3. Please note than an "Event of Default" as per Article VI, Clause (a) and clause (b) of the
Loan Agreement dated July 12th, 2013 executed by you in respect of the captioned loan has
occurred on account of non-payment of our above mentioned dues. You are, therefore, advised
to immediately clear all dues within three business days, failing which, IFCI shall be
constrained to take necessary action as per the Financing Documents, by enforcing all or any
of the securities available to IFCI in terms of the financing documents which are in the form of
pledge and mortgage.

21. Mr. Bindra, learned counsel for the defendant has informed the Court that the plaintiffs
have deliberately not filed the second page of the said letter which shows that copies of the
same was sent to plaintiffs No. 1 to 4 also. He states that the plaintiffs have made incorrect
statement in para 18 of the plaint. His argument is that in the said letter, the event of default as
per Article VI, Clause 6.1, (a) & (b) of the Loan Agreement dated 12th July, 2013 was
specifically indicated to all the plaintiffs. Thus, the plaintiffs cannot say that the defendant
cannot enforce the securities available in terms of the financial documents which are in the
form of pledge and mortgage.

22. With regard to the argument addressed by Mr. Bansal in respect of the notice under
Section 176 of the Act, Mr. Bindra states that there is a full compliance of the said provision,
as the said notice under Section 176 of the Act was sent to all the plaintiffs. He states that the
said notice dated 22nd January, 2014 has to be read with earlier notice dated 16th January,
2014 in which the events of default were communicated to all the plaintiffs as well as invoking
the securities.

23. After having gone through both the letters dated 16th January, 2014 and 22nd January,
2014, I am of the considered view that there is a complete compliance of Section 176 of the
Act before selling the pledged shares by the defendant. In case, both the letters are read
together, it appears that the complete information was given to the plaintiffs and reasonable
time was also granted by the defendant to the plaintiffs. However, the interest amount with the
installment due was not paid by the plaintiffs. Therefore, in the letter dated 22nd January,
2014, it was specifically mentioned that the defendant would be constrained to sell the shares
pledged by the plaintiffs No. 1 to 4.
24. As far as the decisions referred by the learned counsel for the plaintiffs are concerned, both
are distinguishable on the following reasons:-

(i) In the case of Co-operative Hindustan Bank Ltd. (supra), there was only an intimation
given by the lender to the borrower that arrangement would be made for a sale but it was not
specific notice for sale of shares. However, in the present case, if both letters dated 16th
January, 2014 and 22nd January, 2014 are read, it is clear that the letter dated 16th January,
2014 was issued to the plaintiffs to invoke the securities and the second letter dated 22nd
January, 2014, specifically informed the plaintiffs that in case of failure to clear all dues, the
defendant would be constrained to sell the shares pledged by the plaintiffs. Thus, I am of the
view that firstly, the notice is mandatory and secondly, reasonable notice of sale has to be
given. Both requirements in the present case are fulfilled. Thus, the submissions of the
plaintiffs on this issue are rejected.

(ii) So far as the second decision in the case of GTL Limited (supra) is concerned, no notice
for sale was given, thus, the Court had come to the conclusion that shares may be sold after the
issuance of valid notice required under Section 176 of the Act.

25. Under these circumstances, it appears that plaintiff No. 5 has failed to pay the second
installment which was due on 15th January, 2014. The said amount due was even not paid
after the expiry of 12 days. The plaintiffs are fully aware about the stipulated clause 6.1, (a) &
(b) of the agreement. The defendant as per the agreement has invoked the securities and issued
the letter dated 16th January, 2014. Thereafter, another notice dated 22nd January, 2014 under
Section 176 of the Act was issued by the defendant before selling the shares. Thus, I am not
inclined to issue an interim injunction in the above said matter otherwise it would amount to
modifying the relevant clauses of the agreement which is not permissible in law unless both
parties are agreeable. The application being I.A. No. 1771/2014 is accordingly dismissed.
5.

IN THE HIGH COURT OF RAJASTHAN (JAIPUR BENCH)

Civil Revn. Petn. No. 52/84

Decided On: 12.03.1984

Appellants: State Bank of Bikaner and Jaipur

Vs.
Respondent: Firm Ballabh Das and Sons

Hon'ble Judges/Coram:
K.S. Sidhu, J.

Counsels:
For Appellant/Petitioner/Plaintiff: D.K. Soral and P.D. Mathur, Advs.

For Respondents/Defendant: P. Mridul, B.P. Agrawal and A. Gupta, Advs.

Subject: Contract

Catch Words

Mentioned IN

Acts/Rules/Orders:
Specific Relief Act, 1963 - Section 38; Contract Act, 1872 - Section 176; Rajasthan Court Fees
and Suits Valuation Act, 1961 - Section 23(1), Rajasthan Court Fees and Suits Valuation Act,
1961 - Section 26

Disposition:
Petition Allowed

Case Note:
SPECIFIC RELIEF ACT, 1963 - Section 38 and RAJASTHAN SUITS VALUATION &
COURTS FEES ACT, 1961--Sections 23(1)(a) & 26--Suit for recovery of goods pledged
with Bank--Market price of goods in lakhs-Addl--Munsiff Magistrate granting
temporary injunction--Pecuniary jurisdiction of Addl. Munsiff Rs. 5,000/- --Held, order
of temporary injunction is without jurisdiction.
This is, in substance, a suit for recovery of the pledged goods, in as much as the firm is
seeking a decree against the Bank directing it to deliver the goods to the firm against the
payment of price calculated at the rate of Rs. 6,350/- per tonne. The plaint which is in reality
covered by Section 23(1)(a) Rajasthan Court Fees and Suits Valuation Act, 1961, has been
sought to be veiled to give the appearance of being a plaint in a suit for injunction covered by
Section 26 of the said Act. The court must look to the substance rather than the form of the
relief in order to adjudge the question of court fees and jurisdiction. Obviously, the market
value of goods in dispute runs into lacs of rupees. The Additional Munsif in whose court the
suit has been filed and who passed the impugned order of temporary injunction can entertain
suits of a value not exceeding five thousand rupees. I must, therefore, hold that the impugned
order is liable to be set aside on the ground of jurisdiction as well.

Revision allowed

ORDER

K.S. Sidhu, J.

Note:- The revision petition listed above was allowed on March 8, 1984, with the remarks that
reasons for the acceptance will be given later Reasons are given as follows:

Reasons.

1. This petition of revision under Section 115 of the Civil P. C. by the defendant in a suit.
pending before the Additional Munsif. Jaipur City, is directed against the appellate order of the
Additional Civil Judge. Jaipur city, affirming the order of the Additional Munsif, whereby the
latter had granted a temporary injunction in favour of the plaintiff in the suit restraining the
defendant from selling the goods pledged by the plaintiff with the defendant to a third party
and further mandating the defendant in effect to deliver the goods to the plaintiff at the rate of
Rs. 6350/- per metric tonne.

2. The suit in which the extraordinary order of temporary injunction as aforementioned, was
passed by the trial court and affirmed by the lower appellate court, has been filed by M/s. Bal-
labhdas and Sons, hereinafter called the firm, against the State Bank of Bikaner and Jaipur,
hereinafter called the Bank, for perpetual injunction restraining the Bank from selling the
pledged floods to a third party, and as the relief clause further proceeds, "from refusing to give
delivery of the goods to the plaintiff at the rate of Rs. 6350/- per metric tonne including import
duty and miscellaneous charges", and from committing breach of contract in any other
manner, Ignoring the diversionary verbiage, snarl words and irrelevant 'facts which constitute
the bulk of the 60 pages of the plaint, the material facts, as gathered from the record, are as
follows. The firm applied for and obtained from the Bank a letter of credit, dated Feb. 27,
1981, for the purpose of importing prime quality CR 'steel sheets and other similar goods
specified in the said letter from M/s. Mercantile Trading Co. of Hong Kong. The letter of
credit issued by the Bank authorised M/s. Mercantile Trading Co. to draw on the firm bills for
a sum not exceeding 11.95 lacs U. S. dollars, and the Bank undertook to honour the documents
on presentation. The goods valuing 11.78,839.96 lacs U. S. dollars were shipped by the
suppliers on Feb. 10, 1982. i. e. within the stipulated period of shipment. The goods were
expected to be landed in India by the middle of April 1982. It appears that the firm which was
originally confident of raising its own funds for retiring the documents, paying import duty
and meeting other expenses for getting the delivery of the goods on landing was unable to do
so. The firm therefore once again approached the Bank for help. Much against its earlier
assurances in writing to the Bank that it would not be needing any cash credit facility for
getting the goods cleared and obtaining their delivery, the firm wrote to the Bank on March 3.
1982. requesting for a cash credit pledge limit of Rs. 115 lacs. By its letter, dated. April 1.
1982, the Bank sanctioned an ad hoc cash credit pledge limit of Rs. 115 lacs for a period of
three months from the date of the landing of the goods on the terms and conditions as specified
in the said letter. The firm signed the said letter accepting ail the terms and conditions therein.
The firm pledged the bills of lading and the imported goods as collateral and security for the
loans granted. It also undertook to deposit Rs. 12.50 lacs in addition to the earlier deposit of
Rs. 7.50 lacs, by way of margin money. The firm also agreed to deposit additional amount,
over and above the agreed minimum of Rs. 20 lacs by way of margin, in the event of variation
in the exchange rate. Another important condition. accepted by the firm as a part and parcel of
the cash credit pledge contract, reads as under:

YOU will also be required to deposit in advance with our D. N. Road Bombay branch the
custom duty, auxiliary duty, ad valorem charges, warehouse charges, clearing agent's
commission and all other miscellaneous charges in connection with taking delivery of the
goods from Bonded Warehouse for storage with the Bank's approved clearing Agent.
Thereafter the floods will be delivered to you only against full payment for ultimate sale to the
actual users.

3. The Bank retired the documents, took delivery of the floods and arranged for their storage
in the bonded were-house on April 16. 1982. Instead of paying the debt, which the firm was
thus owing to the Bank, and redeeming the pledged goods, the firm began to question the very
basis of the agreement of cash credit pledge limit. It addressed a letter. dated. July 14, 1982. to
the Bank complaining that it could not properly negotiate the terms of the cash credit pledge
agreement and that it had been compelled to sign on the dotted line because it was anxious to
clear the goods without any further loss. This letter was followed by similar other letters in
which the firm accused the Bank of many acts of omission and commission, causing heavy
losses to the firm. Finding that these baseless allegations against the Bank were counter-
productive, the firm changed its stance and requested the Bank in Oct. 1982 for the
accommodation of redeeming the goods in instalments on payment at the rate of Rs. 3605/-
per metric tonne. The Bank did not agree and instead, insisted on the firm offering a definite
and time bound programme for repayment of the entire amount of debt along with interest due
under the cash credit pledge' account. The firm did not come out with any viable proposal,
thus compelling the Bank to give notice to the firm of its intention to sell the pledged goods to
realise the amount due from the firm. The firm replied that it had customers in view who were
willing to purchase the goods at the rate of Rs. 7500/- per metric tonne and that the Bank
would be selling the goods at a lower price at its own risk. The Bank wrote back on Nov. 16.
1982. that the firm may cite firm offers in that behalf within a period of one week from the
date of receipt of the said letter failing which the Bank would be at liberty to sell the goods at
the best available price without any further reference to the firm. This led the firm to file the
suit, out of which this revision petition has arisen, in the court of the Additional Munsif and
obtain the temporary injunction from him restraining the Bank from selling the goods and
mandating the Bank to deliver the goods to the firm at the rate of Rs. 635Q/- per metric tonne.

4. It will be seen from the above narration of facts that if the courts below had bestowed
proper care and attention to the sifting, so to say, of grain from the chaff of the plaint in the
instant case, it would have become at once clear to them that the firm had no prima facie case
at all, and that it was trying to both approbate and reprobate, and had filed the present suit in
an attempt to abuse the process of a court which had no pecuniary jurisdiction in the matter, It
is a matter of regret that both the courts below were unable to discover these plain facts which
become so apparent on a bare perusal of the plaint.

5. As for approbation and reprobation, let us take up the agreement of cash credit pledge limit,
dated. April 1, 1982. It is on the basis of this agreement that the firm has averred in the plaint
that the transaction between it and the Bank is a pledge and that it is entitled to the delivery of
goods to it by the Bank on payment of the debt of the Bank calculated at the rate of Rs. 6350/-
per metric tonne. In paragraph 28, of the selfsame Plaint, the firm challenged this agreement as
null and void ob initio on the ground that its consent to it had been caused by coercion and
undue influence. The firm is then seeking to specifically enforce what counsel describes as a
variation in the terms of the original contract. It is alleged, that in the course of mutual
discussion between the parties and their solicitors on Oct. 29, 1982, the representatives of the
Bank proposed that the firm could take delivery of the goods on payment at the rate of Rs.
6350/- inclusive of import duty and other charges, and that the representatives of the firm
accepted this offer. A little later, in the plaint, the firm however pleaded that subsequently on
its request for a written confirmation of the so-called oral contract dated Oct. 29. 1982, the
Bank did not confirm it as required by the firm and instead notified the firm of its intention to
sell the pledged goods to realise the debt which the firm was owing to the Bank.

6. It will then be seen that the plaint discloses no cause of action either for the grant of the
relief of perpetual injunction against the Bank or for the specific performance of any contract.
Section 38. Specific Relief Act. 1963, lays down, inter alia, that perpetual injunction may be
granted to prevent the breach of an obligation existing in favour of the plaintiff. 'Obligation' as
defined in Section 2 of the same Act means a duty enforceable by law, nOW the plaint does
not contain facts which, if proved, would impose on the Bank an obligation to refrain from
selling the pledged Hoods, On the contrary, the averments made in the plaint would show that
the firm is suing the Bank as a pawnee, requiring the latter to refrain from selling the goods.
Let alone the firm having any right and the Bank being subject to any corresponding
obligation not to sell the goods. Section 176. Contract Act confers a right on the Bank as a
pawnee, to sell the pledged goods after giving notice to the pawnor. It is admitted in the plaint
that notice as contemplated by Section 176 Contract Act had already been served by the Bank
on the firm before the institution of this suit. Thus the plaint does not disclose any cause of
action for the grant of the relief of perpetual injunction as prayed.

7. Similarly, it does not disclose any cause of action for specific performance of any contract
requiring the Bank to deliver to the firm the pledged goods against payment by the firm of an
amount calculated at the rate of Rs. 6350 per metric tonne. As already indicated, the firm has
not pleaded facts which, if proved, would establish its case that a new contract had come into
being between the parties on Oct. 29. 1982, whereby the Bank had agreed to redeem the goods
on payment at the rate of Rs. 6350 per metric tonne.

8. On a proper construction of the plaint and the relief claimed therein, it is obvious that this is
in substance, a suit for recovery of the pledged goods, inasmuch as the firm is seeking a decree
against the Bank directing it to deliver the goods to the firm against the payment of price
calculated at the rate of Rs. 6350/- per tonne. The plaint which is in reality covered by
Section 23(1)(a) Rajasthan Court Fees and Suits Valuation Act. 1961, has been sought to be
veiled to give the appearance of being a plaint in a suit for injunction covered by Section 26 of
the said Act. The court must look to the substance rather than the form of the relief in order to
adjudge the question of court fees and Jurisdiction. Obviously, the market value of the goods
in dispute runs into lacs of rupees. The Additional Munsif in whose court the suit has been
filed and who passed the impugned order of temporary injunction can entertain suits of a value
not exceeding five thousand rupees. I must therefore hold that the impugned order is liable to
be set aside on the ground of jurisdiction as well

9. For all these reasons , the revision petition is allowed and the impugned order dated Jan. 27.
1084. of the Additional Civil Judge Jaipur City affirming the order dated Jan. 13. 1984. by the
Additional Munsif Jaipur City, is set aside. Instead, the firm's application for temporary
injunction under Order 39, Rules 1 and 2 C.P.C. is dismissed.
6.

Bombay High Court

Raghunath Prasad vs Sarju Prasad on 18 December, 1923

Equivalent citations: (1924) 26 BOMLR 595

Author: Shaw

Bench: Shaw, Carson, J Edge, A Ali, L Jenkins

JUDGMENT Shaw, J.

1. This is an appeal from a decree, dated November 9, 1920, of the High Court of Judicature at
Patna, which varied a decree, dated September 25, 1917, of the Subordinate Judge of Arrah.

2. The suit is for recovery of the amount of principal and interest due by the appellant to the
respondents (the plaintiffs) under a mortgage of late May 27, 1910. The Subordinate Judge gave
decree in the mortgage suit but only allowed simple interest. The High Court allowed compound
interest.

3. The substantial question raised on the appeal is whether the appellant, in the circumstances
proved in the case, fell within the protective provisions of Section 2 of the Indian Contract
(Amendment) Act, 1899. It may be convenient to set that section out in full:--

2. Section 16 of the Indian Contract Act, 1872, is hereby repealed, and the following is
substituted therefor, namely:--

16.--(1) A contract is said to be induced by 'undue influence' where the relations subsisting
between the parties are such that one of the parties is in a position to dominate the will of the
other and uses that position to obtain an unfair advantage over the other.

(2) In particular and without prejudice to the generality of the foregoing principle, a person is
deemed to be in a position to dominate the will of another:--

(a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary
relation to the other; or

(b) where he makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness, or mental or bodily distress.

(3) Where a person who is in a position to dominate the will of another, enters into a contract
with him, and the transaction appears, on the face of it or on the evidence adduced, to be
unconscionable, the burden of proving that such contract was not induced by undue influence
shall lie upon the person in a position to dominate the will of the other Nothing in this sub-
section shall affect the provisions of Section 111 of the of the Indian Evidence Act, 1872.

4. It is in the view of the Board by that section that the question arising between these parties
falls to be settled, and not by reference to the legislation of other countries, e. g., the English
Moneylenders Act. The statute to be here construed is the Indian Contract Act as amended. It is
accompanied with danger to invoke as authority in an Indian case expressions which merely
connote the principles which underlie a particular English statute, and form a guide to its
interpretation. As will be seen this general observation is required by reason of the citation of
certain authorities alluded to in the judgment of the Subordinate Judge and referred to in the
argument before their Lordships' Board.

5. The appellant is a member of a joint undivided family owning a property of considerable

value, including inter alia, 186 villages, assessed to revenue for about Rs. 17,000 annum.

6. The mortgage is dated May 27, 1910. It is for the sum of Rs. 9,999 borrowed from the
plaintiffs. The rate of interest is covered by the following provision:--

I, the declarant, do promise that I shall pay interest on the said debt at the rate of 2 per cent, per
mensem on the 30th Jeth of each year. In case of non-payment of the annual interest, the interest
will be taken as principal and interest will run thereon at the rate of 2 per cent, par mensem, that
is, interest will be calculated on the principle of compound interest.

7. There can be no question that these terms were high: if payment was not made the sum due on
the mortgage would speedily mount up. By the decree of the High Court which was pronounced
on November 9, 1920, it is seen that the original debt of Rs. 10,000 had reached, with interest
and costs calculated up to May 8, 1921, more than a lac of rupees, viz., Rs. 1,12,885. In eleven
years the stipulation for interest at 24 per cent, compound had magnified the sum covered by the
mortgage more than elevenfold. It is upon these facts, coupled with one other about to be
mentioned, that the appellant takes his stand.

8. The statement in the defence admits that at the time of the execution of the mortgage the
defendant was owner of one half of a valuable joint family property. The owner of the other half
was his father. Father and son had quarrelled. Serious allegations are made by the son against the
father; whereas it appears that the father had instituted criminal proceedings against the son.
Shortly before the date of the mortgage the defendant had borrowed Rs. 1,000 from the plaintiffs
so as to enable him to defend himself in these criminal proceedings. It is alleged that they caused
him great mental distress, and that he required more money to conduct his litigations. That is the
story.
9. Evidence was taken in the case. It is sufficient to say that the defendants gave no evidence at
all. It is quite plain that no Court can accept a story thus unproved by its author as establishing a
case either of mental distress or of undue influence under the Indian Contract Act. The only case
which the appellant has is the case derived from the contents of the mortgage itself.

10. It is argued with force that these are unconscionable, and that it is the duty of the Court in
India to step in either to rescind the contract or to rectify the bargain. It was the latter course
which was argued for in the present case. In support of this argument much reliance was placed
upon the judgment pronounced by Lord Davey in Dhanipal Das v. Raja Maneshar Bakhsh Singh.
(1906) L.R. 33 I.A. 118, s.c. 9 Bom. L.R. 304, 306.

11. Before, however, addressing themselves to the authorities cited their Lordships think it
desirable to make clear their views upon, in particular, Sub-section 3 of Section 16 of the Indian
Contract Act as amended. By this sub-section three matters are dealt with. In the first place the
relations between the parties to each other must he such that one is in a position to dominate the
will of the other. Once that position is substantiated the second stage has been reached, viz., the
issue whether the contract has been induced by undue influence. Upon the determination of this
issue a third point emerges, which is that of the onus probandi. The burden of proving that the
contract was not induced by undue influence is to lie upon the person who was in a position to
dominate the will of the other.

12. Error is almost sure to arise if the order of these propositions be changed. The
unconscionableness of the bargain is not the first thing to be considered. The first thing to be
considered is the relations of these parties. Were they such as to put one in a position to dominate
the will of the other? Having this distinction and order in view the authorities appear to their
Lordships to be easily properly interpreted.

13. In the judgment of this Board in Dhanipal Das v. Raja Maneshar Bakhsh Singh, (1906) L.R.
33 I.A. 118. the outstanding effect was that the borrower who mortgaged the estate was actually,
at the date of the transaction, under the control of the Court of Wards. He was treated, to use the
language of Lord Davey, as "under a peculiar disability" and placed in a position of helplessness,
and the lender was proved to have been aware of that and, therefore, in a position to dominate the
borrower's will. Lord Davey thus expressed the Board's view (p. 126):--

Their Lordships are of opinion that although the respondent was left free to contract debt, yet he
was under a peculiar disability and placed in a position of helplessness by the fact of his estate
being under the control of the Court of Wards, and they must assume that Auseri Lal, who had
known the respondent for some fifty years, was aware of it. They are therefore of opinion that the
position of the parties was such that Auseri Lal was 'in a position to dominate the will' of the
respondent within the meaning of the amended Section 16 of the Indian Contract Act. It remains
to be seen whether Auseri Lal used that position to obtain an unfair advantage over the
respondent.

14. This case was followed in terms in the case of Maneshar Bakhsh Singh v. Shadi Lal (1909)
L.R. 36 I.A. 96; in which the bond in suit was given by a talukdar in Oudh without the
knowledge and consent of the Court of Wards after his estate had been placed under it. In these
circumstances the former case was followed, and Lord Collins expressed the opinion of the
Board to be that they are satisfied that in this case also the borrower was placed in such a
condition of helplessness that the lender was 'in a position to dominate his will,' and that he used
that position to obtain an unfair advantage over the appelant.

15. It is sufficient to say that the borrower in the present case was sui juris, had the full power of
bargaining and of burdening his estate, that his estate was not under the Court of Wards and that
he lay under no disability. With regard to his helplessness nothing whatsoever is proved in the
case except the bare fact that he being a man of wealth as owner of one-half of certain joint
family property wished to obtain and did obtain certain monies on loan. The only relation
between the parties that was proved was simply that they were lender and borrower.

16. It is an entire mistake to represent the decisions of this Board as being wanting in light upon
the last mentioned case. For in Sundar Koer v. Sham Krishen (1906) L.R. 34 I. A, 9, 16, the exact
point was referred to by Lord Davey in the course of the judgment read by him (p. 16):--

There is no evidence of any actual exercise of undue influence by the mortgagees or of any
special circumstances from which an inference of undue influence could be legitimately drawn,
except that the mortgagor was in urgent need of money. The learned counsel for the appellant
argued that the mortgagees wore thereby placed in a position 'to dominate the will' of the
mortgagor, and cited a recent decision of this Board--Dhanipal Das v. Raja Maneshar Bakhsh
Singh. In that case, however, the borrower was ' a disqualified proprietor ' under the Oudh Land
Revenue Act, 1870, and his estate was under the management of the Court of Wards, and it was
on that ground that their Lordships held that the borrower was under a peculiar disability, and the
position of the parties was such that the lender was ' in a position to dominate his will.' There is
nothing of that kind in the present case, and their Lordships are not prepared to hold that urgent
need of money on the part of the boriower will of itself place the parties in that position.

17. This precisely fits the situation of these parties. It has not been proved,--it might be said that
it has not even been attempted to be proved,--that the lender was in a position to dominate the
will of the borrower.

18. In these circumstances, even though the bargain had been unconscionable (and it has the
appearance of being so) a remedy under the Indian Contract Act does not come into view until
the initial fact of a position to dominate the will has been established. Once that fact is
established, then the unconscionable nature of the bargain and the burden of proof on the issue of
undue influence come into operation. In the present case, for the reasons stated, these stages are
not reached.

19. Their Lordships think it right to observe that the judgment now pronounced is not in accord
with the principles laid down by the Appellate Civil Court of Calcutta in Abdul Majeed v.
Khirode Chandra Pal (1914) I.L.R. 42 Cal. 690. that "where there is ample security, the exaction
of excessive and usurious interest, in itself raises a presumption of undue influence which it
requires very little evidence to substantiate." Their Lordships think this decision to be wrong.
There is no such presumption until the question has first been settled as to the lender being in a
position to dominate the borrower's will. Their Lordships are further of opinion with reference to
the citation of Smuel v. Newbold [1906] A.C. 461., that that case does not form any authority in
the construction of the Indian Contract Act. The case was determined under the Moneylenders
Act, 1900, as it expressly bears. The issue was thus stated by Lord Macnaghten (p. 468):--

It seems to me that the construction of the Moneylenders Act, 1900, is plain enough, and that the
evidence before your Lordships is more than sufficient to show that this case is within the
mischief which the Act was designed to remedy.

20. In the view of the Board cases of that character form no precedent for a decision of the
present appeal which is rested on another and very differently worded statute.

21. Their Lordships are of opinion that the decree of the High Court should be varied by
allowing compound interest on the principal at the rate of two per cent, per mensem from the
date of the execution of the bond until September 25, 1917, and thereafter simple interest at the
rate of six per cent, per annum up to the date of realization, and that in other respects the decree
of the High Court should be affirmed, and they will humbly advise His Majesty accordingly.

22. The appellants will pay the costs of the appeal.

7.

Gauhati High Court

Jyotirindra Bhattacharjee vs Sona Bala Bora And Ors. on 5 April, 2004

Equivalent citations: AIR 2005 Gau 12, (2004) 3 GLR 184

Author: A Saikia

Bench: P Naolekar, A Saikia

JUDGMENT A.H. Saikia, J.

1. Both the appellant and respondents instituted two Title Suits against each other in the Court of
District Judge/Additional Deputy Commissioner, Shillong claiming their respective right, title
and interest over the same plot of land with three houses standing thereon, i.e., suit land in
question. The appellant filed Title Suit being T. S. No. 3(H)/78 against the respondents for
declaration of right, title and interest, as absolute owner in the suit property and also for recovery
of vacant possession by evicting the respondents therefrom as well as mesne profit. On the other
hand, the respondents as plaintiff Nos. 1 to 5 instituted the suit being T. S. No. 12(H)/79 praying
for declaration that (1) the predecessor-in-interest, Late Bhagirath Bora, the vender of the
appellant, had no absolute right, title and interest over the suit property even though allotment
was given in his name, (2) the Sale Deed executed by him vide Sale Deed dated 21.9.1977 was
illegal and void, (3) Late Bora, arrayed as defendant No. 1, was bound by compromise
agreement dated 10.6.1977 and (4) the respondents/plaintiffs had preferential right of purchase.

2. The brief facts, as have been noticed from the pleadings of the rival parties in both the suits,
and not being in disputes, are that Late Bora took settlement of the suit land, being plot No. 31
with an area of 176 acrs. At Oackland, Shillong from the Govt. and Patta No. 15 dated 28.8.1975
was issued in his favour. He constructed houses thereon by investing his own money and taking
loan from the Government. He was living on a cottage in the northern portion of the land with
his family, i.e., respondents being his wife and children. He, being a Hindu governed by the
Dayabhaga School, was the absolute owner of the suit property. On 21.9.1977, the appellant
purchased the suit land by a registered deed of sale for consideration of Rs. 69,000. After
execution of such sale, the vendor on vacating the houses in question, delivered the vacant
possession to the appellant but the respondents, being wife, sons and daughters of vendor Late
Bora, objected to such sale and picked up quarrel with them who were residing thereon, they did
not join the vendor in giving the delivery of possession of the suit property for which the
appellant could not get possession of any part of the suit premises. However, the competent
authority, i.e., Deputy Commissioner, East Khasi Hills by his order dated 24.10.1977 allowed the
mutation in favour of the appellant in Mutation Case No. 99/77. Thereafter, by dint of Sale Deed
as well as mutation order, the appellant got Holding No. 85 on the said premises from Shillong
Municipality Board.

3. On the basis of the admitted factual matrix as noted above, the plaintiff filed Title Suit being T.
S. No. 3(H)/78 praying for the relief as already mentioned hereinabove and the same was resisted
by the respondents by filing written statement. The respondents in their Title Suit No. 12(H)/79,
reiterating the averments made in the written statement submitted in the Title Suit No. 3(H)/78,
claimed that though the Patta was granted in the name of Late Bhagirath Bora, the respondents
being his wife and children, made substantial contribution in terms of cash, materials and labour
towards the construction of houses in question and as such, they being co-owners and having
equal right over the suit property, had also right, title and interest over the same and Late Bora
alone did not acquire any absolute right, title or ownership over the suit property for which he
lacked any legal right to transfer the same to the appellant to the exclusion of the respondents.
They also averred that soon after his retirement in 1968 Late Bora, being husband and father of
the respondents, did not take any interest in the family and used to pick up quarrels with the
family members off and on. He began to suffer mentally and behaved in an abnormal manner. In
the year 1972-73, the mental condition of Late Bhagirath Bora further deteriorated and in the
month of June, 1977 he lost his balance of mind and became so such quarrel some that he even
initiated a proceeding under Section 107 Cr.PC against the respondent. But somehow the said
proceeding ended in a compromise to the effect that if he wanted to sell the suit property, the first
offer would be given to the respondents but in fact he sold the property collusively and
fraudulently to the appellant. In view of such factual background, the respondents claimed in
their Title Suit that the vendor of the appellant, Late Bora had no absolute title and possession
over the suit land and at that relevant time he had no saleable right and Late Bora was bound by
the terms of the compromise effected between them on 10.6.1977 for which the respondents had
preferential right and also the right of pre-emption in the purchase of the suit property.

4. The trial court took up both the title suits together for hearing. On perusal of the rival
pleadings of the parties, the Court framed as many as seven issues. Concentrating itself only on
one broad issue as to whether on the evidence the plaintiff, i.e., the appellant, in Title Suit No.
3(H)/78 was entitled to get the suit property, the learned District Judge, by his judgment and
order dated 12.7.1985 came to the finding that the mutation granted in favour of the appellant
was without possession. It may be mentioned herein that the trial court did not discuss or
appreciate the evidence led by the parties nor recorded findings on different issue framed by it.
Accordingly, the trial Court dismissed the Title Suit No. 3(H)/78 filed by the appellant ordering
that he should get back his entire amount of Rs. 69,000 paid as consideration of the sale of the
suit property which would be refunded by the respondent No. 1, Mrs. Sonabala Bora within a
period of six months from the date of the judgment failing which the appellant should be entitled
to realize the same as money decree.
5. Two appeals being FA No. 2(SH)86 (74/85) and FA No. 6(SH)88 (75/ 85) were preferred by
the appellant against the common judgment and order dated 12.7.1985 passed by the learned
District Judge, Shilling above mentioned before this Court. On consideration of the submission
of the learned counsel for the parties, the learned Single Judge formulated three points for
determination of the matter. Those were :

(1) Whether late Bhagirath Bora - Respondent No. 6 was the sole owner of the suit property and
had saleable right, title over the property.

(2) Whether at the time of execution of the registered sale deed the respondent No. 6 was not
mentally sound and whether execution of the sale deed conferred right, title and interest to the
appellant.

(3) Whether the appellant obtained possession of the property.

6. As regards Point No. 1, taking into consideration the testimony of PW 1, the appellant himself,
PW 2, PW 3 and DW 1, respondent No. 1 herein, in T. S. No. 3(H)/78 preferred by the appellant
and PW 1 who was examined as DW 1 in the said Suit No. 3(H)/78, PW 2 and PW 3 in Title Suit
No. 12(H)/78, the Court found that the land was actually settled for the welfare of the family
though it remained in the name of Late Bora and hence it could not be said that Late Bora along
had rights, title and interest over the property. Further, it was held that taking the preponderance
of the evidence, the houses standing on the land were constructed with the substantial
contribution of the respondents especially, the respondent Nos. 1 and 2. Hence it was held that
since Late Bora was not the sole owner of the property, he alone could not transfer the entire suit
land to the appellant and as such the appellant had no right to sue.

7. So far Point No. 2 is concerned, the learned Single Judge held that Late Bora was not mentally
sound at the time of execution of the Sale Deed and, therefore, Sale Deed executed by him, did
not confer any right, title and interest on the appellant. In order to arrive at the decision of mental
unsoundness of the appellant, the learned Single Judge in para 15 of the impugned judgment
observed "On the other hand there is some oral evidence in favour of the respondents to indicate
that Late Bora was suffering from mental imbalance. Besides, the conduct of late Bora itself
indicates that he was not a normal person in view of the fact that he instituted a case against his
wife and children, picked up quarrel with the members of his family, remained away from the
house for a long period and transferred the entire property by way of sale rendering the members
of the family home-less. These are few indications of improper mental condition. Of course,
merely because a person instituted a case against wife and children or remained away from his
house cannot be said to be indications of unsound mind. But if all these are taken together will
surely indicate that Late Bora was not mentally sound at the time of execution of the sale deed
and, therefore, the sale deed executed by him did not confer any right, title and interest on the
appellant."
8. In discussing Point No. 3, the learned Single Judge simply held that since the appellant was
not able to show by adducing proper evidence that Late Bora could deliver the entire property,
the appellant at no point of time occupied the suit property.

9. In view of the above finding, the learned Single Judge by his judgment and order dated
3.3.1994 dismissed both the appeals affirming the judgment of the trial court.

10. Being aggrieved by the aforesaid judgment and order, these two Letters Patent Appeals have
been preferred by the appellant.

11. Heard Mr. B. C. Das, learned counsel for the appellant and Mr. R. P. Sarma, learned counsel
appearing for the respondents.

12. From the extensive arguments so advanced by the learned counsel for the rival parties, it
appears that the entire matter revolves around two issue : (1) whether the respondents had also
acquired right, title and interest in respect of the suit land along with Late Bora when concededly
the suit land was settled with Late Bora by the Govt. granting him patta which was, after the sale
to the appellant, endorsed in the name of the appellant as proved by Exbts. 5 and (2). Whether
Late Bora was mentally unsound at the time of execution of the sale deed.

13. Keeping these two cardinal issues in mind, now let us note the arguments cavanssed on
behalf of the contesting parties.

14. Assailing the impugned judgment, Mr. Das, learned counsel for the appellant, has strenuously
argued that the learned Single Judge went wrong in holding that the vendor of the appellant, Late
Bora, was not the sole owner of the suit property and he was not mentally sound at the time of
execution of the Sale Deed. He has pressed into service two arguments-firstly, according to him,
under the law it is the Patta which confers upon the holder with a permanent heritable and
transferable right of the use and occupancy in land. When Late Bora acquired his ownership by
dint of duly registered Sale Deed, not documentary evidence was produced by the respondents to
show that they also acquired joint title to the suit land. To substantiate these submissions, Mr.
Das has relied on a decision of this Court reported in 1998 (2) GLJ 527 (Smt. Amiya Bala Dutta
and Ors. v. Mukul Adhikari and Ors.). In the said case, this court held that the Patta holder is
deemed to be the land holder and has the permanent, heritable and transferable right of use and
occupancy. Therefore, his contention is that the respondents at no circumstances can put their
claim of right and title over the suit land, though, assuming but not admitting, they had their
substantial contribution in acquiring the land and subsequent construction of houses thereon.
Arguing his second point, Mr. Das, learned counsel for the appellant, has submitted that there
was no pleadings to the effect that at the time of execution of the Sale Deed, Late Bora was
suffering from mental unsoundness. It is submitted that it was the burden of the respondents and
not of the appellant to establish that at the relevant time when the Sale Deed was executed, Late
Bora was of unsound mind but the Learned Single Judge committed grave error of law and on
facts placing the burden upon the appellant to establish the factum that the vendor was mentally
sound at the time of execution of the Sale Deed. Referring to Section 12 of the Contract Act,
1872 (hereinafter called as 'the Act'), Mr. Das has argued that a person is said to of unsound mind
if, he is, at the time of making any contract, not capable of understanding it and of forming a
rational judgment as to its effect upon his interests. According to him, when the Deed of
Compromise was effected between Late Bora and respondents on 10.6.1977, after the withdrawal
of the criminal proceeding under Section 107 Cr.PC initiated by the vendor of the appellant
against the respondents upon which much reliance has been placed by the respondents, they
themselves had admitted the fact that Late Bora was of sound mind as they prayed for a
declaration in their T. S. No. 12(H)/78 to the effect that Late Bora was bound by the said
Compromise Deed and as such the validity of the Sale Deed executed on 21.9.1977, cannot be
questioned on the ground of unsound mind of Late Bora.

15. On the point of unsoundness of mind under Section 12 of the Act, Mr. Das has taken us
through two judgments namely, (1) Tilak Chand Charan Das v. Mahandu reported in AIR 1933
Lahore 458 and (2) Kanhaiyalal v. Harsing Laxman Wanjari reported in AIR 1944 Nagpur 232.
In Tilak Chand's case (supra), it was observed that the onus of proving unsoundness at the time
of execution of the document was on a person who challenged the validity of the documents
when in Kanhaiyalal's case (supra), it was held that for the purpose of Section 12 of the Act, the
test of unsoundness of mind was whether the person was incapable of understanding the business
concerned and its implications and mere weakness of mind was not sufficient.

16. Mr. Sarma, learned counsel appearing on behalf of the respondents, has resisted the
contentions of learned counsel for the appellant claiming that the learned Single Judge was
absolutely correct and right in holding that Late Bhagirath Bora was not the absolute owner
because the respondents being the wife and children of Late Bora, had joint interest in the suit
property wherein they had their substantial contribution on the construction of the houses over
the suit land and being the members of the Hindu family, they became co-shares of the suit
property. That apart, Late Bora, was not mentally sound during the relevant period as well as at
the time of execution of the Sale Deed. The said factum was well proved by his erratic behavior
and the quarrelsome attitude which led to the institution of criminal proceeding under Section
107 Cr.PC against them that was culminated by the execution of the Compromise Deed which
was not disputed by the appellant. Heavily replying on the Compromise Deed executed on
10.6.1977, Mr. Sarma has forcefully contended that in the said Compromise Deed in one of the
clauses, i.e., Clausen 3(i) Late Bora, being the first party, categorically agreed that he would
make a Gift Deed of the house and land on which house stood and in which the respondent,
being the second party in the said compromise Deed, resided, in favour of respondent No. 1, i.e.,
Smt. Sonabala Bora and therefore, a right of co-shares had very much accrued in favour of the
respondents.
17. At this stage, Mr. Sarma has faintly argued that being the co-sharers of the property in
question, the respondent had right of pre-emption over the same. It is also argued by Mr. Sarma
that the instant suit filed by the appellant before the trial court was hit by Order 23, Rule 1 (4)
CPC though admittedly the said point was not raised either before the trial court or the learned
Single Judge. Referring to the deposition of the appellant, PW 1 in T. S. No. 3(H)/78, Mr. Sarma
has submitted that the appellant had categorically admitted that he filed four successive suits
before the learned Munsiff on the same subject matter and on the same cause of action seeking
the same relief and all those four suits were dismissed on withdrawal as he did not take any
interest and on this count alone by attraction of Order 23, Rule 1(4) CPC, the appellant was
precluded from instituting the present Title Suit in respect of such subject-matter. Much reliance
has been placed on the following judicial decisions :

(1) Suit. Nirmala v. Hari Singh reported in AIR 2001 Himachal Pradesh 1.

(2) Goyal MG Gases Ltd. and Ors. v. Punjab Wireless Systems Ltd. and Ors. reported in AIR
2002 Delhi 159.

18. In the above cited case it was held that once the suit was withdrawn the plaintiff was
debarred from filing subsequent suit on the same cause of action in respect of the same property.
According to Mr. Sarma since the property and cause of action were same in those earlier four
suits, the filing of the present suit was hit by Order 23, Rule 1(4) CPC.

19. We have carefully perused the impugned judgment rendered by learned Single Judge and the
materials available on records including the rival pleadings of the parties in both the Title Suits
and the relevant evidence of the parties. It appears that the learned Single Judge was wrong and
incorrect in holding that the vendor of the appellant Late Bora was not the sole owner of the suit
property. It is nobody's case that the land in question was not settled with Late Bora. Admittedly,
after settlement of the land by the Govt. a Patta being Patta No. 15 was issued in favour of Late
Bora in respect of the suit land. Once, Patta has been issued, applying the ratio of the Amiya Bala
Dutta's case (supra), it can be safely held that Late Bora acquired right of ownership over the suit
land and hence he had permanent, heritable and transferable right of use and occupancy over the
same. It was also admitted that the respondents could not prove any such title by proving any
documentary evidence. Mere substantial contribution in the construction of the house, not being
supported by any reliable evidence oral or documentary, did not confer any right upon the
respondents over the suit property. Even Compromise Deed which was executed by the parties
and which was also heavily relied upon by the respondents, manifestly goes to prove that the
Late Bora was the actual owner. This would be better clarified if we have a cursory look into the
Compromise Deed dated 10.6.1977 which read as under :

"1. The Second Party is the dear and near relations of the First Party being wife and sons of the
First Party.
2. The present complaint arises out of alleged proposed sale of houses owned by the First Party
wherein one of the houses the Second party along with the First Party resides.

3. The First Party now proposes to withdraw the present complaint preferred against the Second
party as the matter has since been settled and compromised between them to keep family peace
and prestige on the following terms and conditions -

(i) the First Party owns three separate houses situated in the same compound. The First Party
shall make a deed of gift of the house and land on which the house stands and in which the
Second Party now resides, in favour of Smt. Sonabala Bora wife of the First Party.

(ii) The aforesaid Deed of Gift mentioned in the foregoing paragraphs shall be executed and
registered at the Sub-Registrar's office Shillong simultaneously at the time when the First Party
sells the other two houses to the purchasers by executing Sale Deed in the Sub-Registrar's Office,
Shillong.

(iii) The First Party agrees that a cement brick wall at his own expense shall be constructed for
identification of proper boundary separating the other two houses which are proposed to be sold
to him. Also the First Party agrees to build and construct at his own expenses a sanitary latrine
for the house which is given as a gift to his wife Smt. Sonabala Bora as mentioned in para (i).

(iv) The first party shall open a Saving Bank Account of Rs. 10,000 in the name of his wife Smt.
Sonabala Bora to be operated by her in the State Bank of India, Shillong, from the sale proceeds
of the two houses received by him, she will be at liberty to utilize the same for the education of
her son and welfare for her children and family.

(v) The Second Party have agreed and shall not put any hindrance whatsoever in sale of the two
houses - by the First Party to the Purchase of his own choice. And the Second Party shall give
vacant possession of the two houses to be sold to the First Party on or before 20th June, 1977
from the tenants now occupying the two houses."

20. From the terms and conditions mentioned in the above Compromise Agreement, one gets a
clear indication that the respondents had admitted the ownership of Late Bora over the suit land,
In view of the same, there is no hesitation for us to hold that Late Bora was the rightful owner of
the property in question and as such he had a saleable right over the property in order to execute
the Sale Deed in favour of the appellant. That being so, the question of declaring right and title
over the suit premises in favour of the respondents does not arises at all.

21. Next question is whether Late Bora had suffered from mental sickness at the time of
execution of the Sale Deed. On this point also the learned Single Judge committed an error of
law in holding that burden to establish that Late Bora was a person of sound mind at the time of
execution of the Sale Deed lied upon the appellant. It is settled law that onus of proving of
unsoundness of mind of a person always rests upon him who alleges such state of mind of
person. Therefore, we are disinclined to accept the findings recorded by the learned Single Judge
as has been noticed in para 7 of this judgment. How the facts that he instituted a case against his
wife and children, picked up quarrels with the members of the family, remained away from the
house for a long period and transferred the entire property by way of sale rendering the members
of the family homeless, could indicate that Late Bora was not a normal person. More importantly
when there was no pleadings either in the written statement filed by respondents in T.S. No.
3(H)/78 or in the plaints filed by them in T. S. 12(H)/79 as regards the mental position of Late
Bora at the time of execution of the Sale Deed; the learned Single Judge was absolutely wrong in
taking the view that if all those indications were taken together that would surely indicate that
Late Bora was not mentally sound at the time of execution of the Sale Deed and the Sale Deed
executed by him did not confer any right, title and interest on the appellant although it was
observed therein that of course, merely because a person instituted a case against wife and
children or remained away from his house, could not be said to be indications of unsound mind
Pertinent it to note that there is nothing on record to prove that Late Bora was ever medically
examined to support the contention of the respondents that he was of unsound mind.

22. With regard to the submission to the effect that the appellant was precluded from filing the
Title Suit No. 3(H)/78 put forward on behalf of the respondents, this Court does not find any
materials available on record to substantiate such claim. The records including the rival
pleadings do not reveal withdrawal or abandonment of any such suit prior to institution of Title
Suit No. 3(H)/78 except the statement of the appellant made in his deposition as referred by Mr.
Sarma. That being so, we are of the view that the provision of Order 23 Rule 1 (4) CPC has no
applicability in the case at hand. Similarly, the plea of right of pre emption taken by the
respondent cannot also be approved in view of the fact that the law of pre-emption is not
applicable in the State of Meghalaya.

23. For the foregoing reasons and discussions, we are of the firm opinion that the vendor of the
appellant, Late Bora had clear and absolute right title and interest over the suit land and at the
time of execution of the Sale Deed in favour of the appellant, he was a person of sound mind and
thus the appellant acquired a valid title and interest over the suit land by virtue of the said Sale
Deed executed by Late Bora in his favour. Consequently, the impugned judgment and order
dated 3.3.1994 passed by the learned Single Judge is set aside and quashed. The Title Suit No.
3(H)/78 filed by the appellant is hereby decreed and the appellant is entitled to get total relief
sought in the said suit.

24. In the result, both the LPA succeed and stand allowed.
8.

Poker Is a Game of Skill

Posted on September 24, 2013 by Sean Carroll

Via the Seriously, Science? blog comes what looks like a pretty bad paper:

Is poker a game of skill or chance? A quasi-experimental study

Gerhard Meyer, Marc von Meduna, Tim Brosowski, Tobias Hayer

Due to intensive marketing and the rapid growth of online gambling, poker currently enjoys
great popularity among large sections of the population. Although poker is legally a game of
chance in most countries, some (particularly operators of private poker web sites) argue that it
should be regarded as a game of skill or sport because the outcome of the game primarily
depends on individual aptitude and skill. The available findings indicate that skill plays a
meaningful role; however, serious methodological weaknesses and the absence of reliable
information regarding the relative importance of chance and skill considerably limit the validity
of extant research. Adopting a quasi-experimental approach, the present study examined the
extent to which the influence of poker playing skill was more important than card distribution.
Three average players and three experts sat down at a six-player table and played 60 computer-
based hands of the poker variant Texas Holdem for money. In each hand, one of the average
players and one expert received (a) better-than-average cards (winners box), (b) average cards
(neutral box) and (c) worse-than-average cards (losers box). The standardized manipulation of
the card distribution controlled the factor of chance to determine differences in performance
between the average and expert groups. Overall, 150 individuals participated in a fixed-limit
game variant, and 150 individuals participated in a no-limit game variant. ANOVA results
showed that experts did not outperform average players in terms of final cash balance

(Its a long abstract, I didnt copy the whole thing.) The question Is poker a game of skill or
chance? is a very important one, not least for legal reasons, as governments decide how to
regulate the activity. However, while its an important question, its not actually an interesting
one, since the answer is completely obvious: while chance is obviously an element, poker is a
game of skill.

Note that chance is an element in many acknowledged games of skill, including things like
baseball and basketball. (Youve heard of batting averages, right?) But nobody worries about
whether baseball is a game of skill, because there are obvious skill-based factors involved, like
strength and hand-eye coordination. So lets confine our attention to decision games, where all
you do is sit down and make decisions about one thing or another. This includes games without a
probabilistic component, like chess or go, but here were interested in games in which chance
definitely enters, like poker or blackjack or Monopoly. Call these probabilistic decision games.
(Presumably there is some accepted terminology for all these things, but Im just making these
terms up.)

So, when does a probabilistic decision game qualify as a game of skill? I suggest it does when
the following criteria are met:

1. There are different possible strategies a player could choose.

2. Some strategies do better than others.
3. The ideal dominant strategy is not known.

It seems perfectly obvious to me that any game fitting these criteria necessarily involves an
element of skill whats the best strategy to use? Its also obvious that poker certainly qualifies,
as would Monopoly. Games like blackjack or craps do not, since the best possible strategy (or
least bad, since these games are definite losers in the long run) is known. Among players using
that strategy, theres no more room for skill (outside card-counting or other forms of cheating.)

Nevertheless, people continue to act like this is an interesting question. In the case of this new
study, the methodology is pretty crappy, as dissected here. Most obviously, the sample size is
laughably small. Each player played only sixty hands; thats about two hours at a cardroom table,
or maybe fifteen minutes or less at a fast online site. And any poker player knows that the
variance in the game is quite large, even for the best players; true skill doesnt show up until a
much longer run than that.

More subtly, but worse, the game that was studied wasnt really poker. If Im understanding the
paper correctly, the cards werent dealt randomly, but with pre-determined better-than-
average/average/worse-than-average hands. This makes it easy to compare results from different
occurrences of the experiment, but its not real poker! Crucially, it seems like the players didnt
know about this fake dealing. But one of the crucial elements of skill in poker is understanding
the possible distribution of beginning hands. Another element is getting to know your opponents
over time, which this experiment doesnt seem to have allowed for.

On Black Friday in 2011, government officials swept in and locked the accounts of players
(including me) on online sites PokerStars and Full Tilt. Part of the reason was alleged corruption
on the part of the owners of the sites, but part was because (under certain interpretations of the
law) its illegal to play poker online in the US. Hopefully someday well grow up and allow
adults to place wagers with other adults in the privacy of their own computers.