ABSTRACT

The case Kanhaya Lal vs. The National Bank of India deals with one of the most prominent act
of India established in 1872 , Indian Contract Act. The case revovels around the section 15 and
72 of Indian Contract which mentions coercion. The case is about a property being taken away
and the application of law of contract with respect to the the concept of coercion. The suit is
about the plantiff (Seth Kanhaya Lal) wanting to recover the money paid and also the damages
from the respondent (The National Bank of India) even though the payament made by plaintiff
was voluntary. So the suit is focusing on the ‘coercion’ and what can be termed as coercion.

FACTS

The plaintiff was the sole proprietor of the cotton mills which were under of Delhi Cotton Mills
Pvt. Ltd. The limited company and The National Bank of India were under the contract and the
National Bank of India, in some law suit with it, obtained a money decree and warrant of
attachment against the mills, premises and property therein and wrongfully took possession of
the machinery, land and property and in order to have the property back, the company would
have to pay 83,005 rupees to bank. According to plaintiff, the manager of the bank along with
peons entered the mill and undertook the control of machinery and movable property. When
the plaintiff was facing loses, he decided that the civil court proceedings will take a lot of time
and as he was technically outstated from his own company, he decided to pay the damages and
re-claim his own land. Now he moves to the district court in order to seek justice and claims
83,005 rupees he paid for his property and 10,000 additional damages.

ISSUES

1. Is the national bank of India liable for coercion?

2. Is Seth Kanhaya Lal liable to obtain both the damages and the original price he paid
for his land?
3. Did the payment done by Kanhaya Lal can be considered voluntary?

Rules

The rules applicable are from the Indian Contract Act 1872, section that states – What
agreements are contracts. -All agreements are contracts if they are made by free consent of
parties competent to contract for a lawful consideration and with a lawful object and are
hereby expressly declared to be void1. Also, the section stating – Liability of a person to whom
money is paid or thing delivered by mistake or under coercion. – A person to whom money has
been paid or anything delivered by mistake or under coercion, must repay or return it2. The
case and the council tries to interpret different ways of the term ‘coercion’. Article mentions in
detail that when a person can get his money back and the idea of coercion is more clearly
interpreted there.

ANALYSIS

In order to make a complete systematic study of this case one has to refer to the past history of
the case between two parties. These two parties had a lawsuit in august 28 1902. Seth Kanhaya
Lal, the proprietor of the cotton mills in subzi mandi area filed a case in district court, the
respondents filed preliminary pleas and hampered with facts. The first plea they made was that
“the suit as framed will not lie.” After the proceedings, the main question was whether any
cause of action took place and does coercion occur in the same manner mentioned in section
10. Also, the district court judge stated that the contract was not exhaustive. The plaintiff can
claim that the money he paid but as he paid it voluntarily and there was no cause and reason
for the actions other than the act itself, the court did not grant him the compensation and
dismissed his pleas. The lack of evidence3 was in favour of the respondents and the decision
was made in favour of the respondent bank.

What court considered that the payment made by the plaintiff was what one can say voluntary
and plaintiff was not obliged to pay. Also, there was no specific evidence to prove that the
respondent bank in any way was dominating the plaintiff directly. The judgement given was
on 18 November 1902 and his case was dismissed with intention to save the time by shortening
proceedings and cost the court had to bear with. The plaintiff filed the suit in chief court and
his plea of recovery of money was dismissed on the ground that there was no cause of action
and any decision given under section 102 of Civil procedure code was not applicable in the
chief court as well. They also made the decision in favour respondents. This brings us to the
present scenario of the case.

1
Section 10 of Indian Contract Act, 1872
2
Section 72 of Indian Contract Act, 1872
3
Section 102 of Civil Procedure Code 1882.
When the case was put forth the privy council, the council deemed it necessary to consider the
allegations put forth by the plaintiff as true facts. The two major disagreements were brought
upon. First one was that as the property seized was an attachment the plaintiff can get remedy
in Civil Procedure Code4. But the main issue was that it was not justified by lack of evidence
that coercion took place. As the coercion took place did not satisfy the definition mentioned as
– “Coercion” is the committing, or threatening to commit, any act forbidden by Indian Penal
Code, or unlawful detaining, or threatening to detail, any property to the prejudice of any
person whatever, with the intention of causing any person to enter into an agreement.5 As there
was lack of evidence, the judges believed that the argument was not sound and it was just
misinterpretation of the term with reference to the section 10 and effect in section 15.

The rest of the basic sections which talk about the free consent and undue influence, fraud etc.
As the section before talks that free consent is one of the major element of valid contract, it
shows dependency of both the terms. It is therefore implied that Coercion is completely reliable
as the terms "with the intention of causing the person to enter into an agreement" makes it
bounded to the context of free consent. "A railway company refuses to deliver up certain goods
to the consignee except upon the payment of an illegal charge for carriage. The consignee pays
the sum charged in order to obtain the goods. He is entitled to recover so much of the charge
as was illegally excessive."6 Referring to this example, plaintiff is liable of the amount he paid
to own his property back. But here the term coercion is just a word without legal bindings and
the actual legal term for that situation is extortion and is used in other surrounding.
Now the only available remedy for plaintiff was section 697 and 708 to get a decree against the
Delhi Cotton Mill Company Limited. The judges though think that those rules are irrelevant
and are unstainable. The court reaching the conclusion after argument that money paid by the
true owner to prevent the sale of his property under an execution could be recovered back.9
The respondent then tried to defend their side said that in the present case, the sale was not
inevitable and in the reference case the sale was inevitable. Court reached to the conclusion
that the greater or less probability of a sale taking place does not affect the ratio decidendi of
the case. In that way, according to the Privy Court, the result of court should be on the favour
of the plaintiff and the Chief Court should obtain a decree against the respondent bank.
CONCLUSION
The difference between the term ‘coercion’ is specifically distinguished in the case and the
judgement. The term is more open to interpret and not restricted to follow up the in the context
of its placement in the act. The main issue was that did the coercion took place or does the
voluntary payment was amount to free consent. In the case as seen the voluntary payment does

4
Section 278 of Civil Procedure Act
5
Section 15 Indian Contract Act
6
Manupatra Legal Database. Example of justification of term coercion.
7
Reimbursement of person paying money due by another, in payment of which he is interested.
8
Obligations of person enjoying benefit of non- gratuitous act
9
Dooli Chand v. Ram Kinhen Singh L.R. 8 Ind. Ap. 93
not amount to coercion as even though the plaintiff did give money consent, he had to pay them
so that he does not have to face worse consequences that he already did. The respondent bank
did create the situations for plaintiff to pay up. The appreciative part was where the court made
the decision of making the fact of sale being inevitable or evitable irrelevant and considered
the plaintiff to be liable to receive the damages. This was an important case with conflicting
ideas about a special term and its reference with the sections used before, and the standard and
open mindedness of interpretation of coercion.