Decided on June 20,1935



John Wallis, J. - (1.) THIS is an appeal from a judgment and decree of the High Court at Patna, affirming the judgment and decree of the Subordinate Judge of Darbhanga and giving the plaintiff, the Maharajadhiraj of Dar-ibhanga, a mortgage decree against the five defendants (1) Babus Homeshwar Singh (2) Kuleshwar Singh (3) Chiteshwar Singh and (4) and (5) Padma-nandji Singh and Taranandji Singh, the minor sons of Kuleshwar Singh, on a mortgage executed by defendants Nos. 1 to 3 in the plaintiff's favour on February 20, 1923, for Rs. 5,40,506. The consideration for the mortgage was Rs. 2,29,214-10-4 owing to the plaintiff as shown in Sch. Ill ; Rs. 2,21,129-10-9 to be paid by the plaintiff to set aside a Court-sale of the defendant's properties which were the subject of a babuani maintenance grant made by the plaintiff's :grandfather to the grandfather of the defendants Nos. 1 to 3, and were stated to be worth forty lakhs of rupees ; and the balance of Rs. 90,000 odd as shown in Sch. IV to be paid by the plaintiff in discharge of the debts of defendant No.3, Chiteshwar Singh. The defendants' case was that the mortgage bond which was executed on February 20, 1923, three days before the expiry of the time limited for setting aside the Court-sale under Order XXI, Rule 89, of the Code of Civil Procedure, was obtained by the plaintiff by undue influence, misrepresentation and fraud.
(2.) IN support of the case of undue influence the defendants alleged that they had entered into negotiations with other people who were willing to advance them two lakhs of rupees which would have enabled them to set aside the Court-sale, and that not to borrow from outside people, they had also entered into negotiations with the plaintiff who agreed to advance them the two lakhs at simple interest not exceeding six per cent. , and to take separate bonds for one-third of that amount from defendants Nos. 1, 2 and 3, who had partitioned their properties in 1918, to be secured by mortgage of their separate properties ; and that thereupon they slackened their negotiations with other persons. The plaintiff kept putting them off, and on February 20, 1923, two clear days before the time limited for the deposit in Court of the purchase money and the compensation money payable to the auction-purchasers, the plaintiff refused to give them a loan except on the terms that all the defendants should execute a mortgage bond bearing compound interest at twelve per cent, and including, not only the sum required for the purpose of setting aside the Court-sale, but also all the plaintiff's claims as to some of which suits were pending, and also the debts due by Chiteshwar, defendant No.3, to other persons. It was further alleged that it had come to the defendants' knowledge that it was owing to the plaintiff's influence that some of the money-lenders had refused to make a loan ; and that the plaintiff had thus further frightened them, rendered them helpless, and placed them at his mercy and that they had no option but to accept the terms offered, as if the money was not deposited on February 23, they would lose their entire properties and be left paupers. The bond contained false statements, but there was no time for protest or alteration. The defendants knew very little English, and as the bond was only once read out hurriedly, they had no opportunity of consulting anyone or thinking over the terms. By reason of undue influence the plaintiff was in a position to dominate the will of the defendants, and took advantage of that influence to get them to consent to unfair terms which they proceeded to set out. They also claimed a reduction of interest under the Usurious Loans Act, 1918, on the ground that the interest was excessive or that as between the parties the transaction was unfair. Both the Courts below found that the defendants' case was false. As early as August 1922 they had applied to the plaintiff to whom they were already heavily indebted for a further loan. When their properties were sold in execution of a decree obtained by other creditors in January 1923, and they had thirty days ending on February 23 in which to set aside the Court-sale, they entered into negotiations with several moneylenders for a loan of two-lakhs which would have enabled them to set aside the sale. At some date prior to February 5 they also applied to the plaintiff who did not see them himself but negotiated with them through the estate officials. On or about February 5 they went to the palace about the rate of interest, and while they were waiting: there, the plaintiff asked Harnandan Dass, a pleader who had been calling on him, to see them and explain to them that he was not prepared to accept less than twelve per cent. He said he had to pay income-tax and super-tax, and that he: would eventually have to file a suit against them to recover the amount of the loan. He had several suits then pending against them in respect of previous loans. Subsequently to this interview, a draft bond was drawn up by the estate officials embodying the terms on which the plaintiff was prepared to make the loan, which was to include in addition to the money required for setting aside the Court-sale, the debts owing to the plaintiff, and also the debts owing by defendant No.3 Chiteshwar to other creditors and amounting to Rs. 90,000. These debts were not binding on the other defendants, as a complete partition between the three brothers had been effected in 1918, but a power-of-attorney, exhibit 8, given to their manager Chandra Bushan Thakur on February 10 shows that the defendants were contemplating raising a loan to discharge all their debts. Under the draft, compound interest at twelve per cent, was to be payable. On February 15 the defendants' manager and Harnandan Dass, already mentioned, had a meeting with the senior estate lawyer at which a copy of the draft exhibit 6 was discussed, and was afterwards initialled as " seen and approved " by the estate lawyer, and by Harnandan as " seen. " On the following day Harnandan was sent for to the defendants' house. They were in possession of a copy of the draft, and the terms were again discussed, and Harnandan was retained to negotiate on the defendants' behalf for the insertion of two further clauses reserving their right to cut jungle trees and settle rents with the tenants. Harnandan succeeded in getting the plaintiffs consent to the insertion of these two clauses, and his bill for the consultation and for settling the terms of the mortgage bond on February 17 and 18 was paid by the defendants on February 20-when the mortgage was executed.
(3.) ON or after February 16 two of the defendants, Kuleshwar and Chiteshwar, went to Calcutta where apparently negotiations with other moneylenders were still pending ; and on February 18 Chandra Bushan informed them by telegram that the terms were settled and the money ready. ON the 19th the defendant Homeshwar sent a further telegram stating that the stamp-paper had been purchased (which was not the case) and the terms settled and'- telling them to come immediately. They accordingly returned to Darbhanga on the morning of the 20th. The schedules which were settled by the agents. of both parties and were in accordance with the terms of the mortgage were not completed until that morning. The stamped paper was then purchased, and some hours were spent in writing out the mortgage and the schedules, At about four o'clock the deed was ready, and was duly executed by defendants Nos. 1 to 3. On these facts both the lower Courts have recorded a finding that the defendants have failed to establish that in this transaction the plaintiff was in a position to dominate the will of the defendants, and this finding is destructive of the case of undue influence set up by the defendants, having regard to the terms of Section 16 of the Indian Contract Act. 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 Indian Evidence Act, 1872.;

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