Bahore Mahton vs Juro Sahu and Others

Wort, J.—This appeal by the defendant arises out of an action on a bond dated 20th September 1916. The consideration for the bond was Rs. 190 which was made up of Rs. 55 then borrowed and a sum of Rs. 135 borrowed on an earlier bond dated 22nd September 1912 The interest under the later bond was at the rate of Rs. 2-5-6 pre mensem with yearly rests. The plaintiffs however limited their claim to a sum of Rs. 2,100 whereas in fact the amount due under the bond, principal and interest at the date of the suit amounted to Rs. 3,600 The trial Court reduced the interest to Rs. 24 per annum, simple; but on appeal before the learned Additional District Judge the plaintiffs were given interest at the contract rate as the learned Judge was of the opinion that the Usurious Loans Act did not apply and as the necessary facts entitling him to exercise his jurisdiction u/s 19a, Contract Act, had not been established. Section 19a gives. Court power to void a contract obtained by undue influence defined in Section 16, Contract Act, which imposes such terms and conditions as to a Court may seem just. The only substantial argument raised in this case is that as the contract on the face of it appears to be unconscionable, it must be deemed to have been obtained by undue influence, in exercise of our jurisdiction u/s 19a, Contract Act. Unfortunately for the defendant, although he set up certain substantial, defences such as that there was no necessity for the loan (the loan having been obtained by the father of the present defendant), he omitted entirely to raise this question of undue influence. Had the question been raised and had the Court come to the conclusion that the necessary facts were, existing to establish that prima facie the contract was obtained by undue influence, the onus would have been on the plaintiffs under Sub-section (3) of Section 16 to establish that it had not been obtained by undue influence. But it was necessary first of all for the plaintiffs to plead it and then, as has been pointed by their Lordships of the Judicial Committee of the Privy Council in Ragunath Prasad Sahu v. Sarju Prasad 1924 PC 60, to establish that the parties were in a position of the one dominating then will of another. That, if I may be permitted to say so with respect, is clear from a reading of section itself which provides:

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

Sub-section (3) to which I have already made reference provides inter alia:

The burden of proving that such contract was not induced by undue influence shall lie upon the person to dominate the will of the other.

The learned Judge in the Court below has held that there is no evidence in this case, and neither is there any finding of the learned Judge of the lower Court, that the creditors were in a position to dominate the will of the other.

That being so, the matter is, in my judgment, concluded. If the finding had been to the effect that there is no evidence of undue influence, it might have been said by the defendant that the onus being on the plaintiff to establish how far the finding as to undue influence affected the case, the plaintiff would have to fail. But the finding as it stands is quite clear. There is no evidence, nor is there a finding (says the Judge), that one party dominated the will of the other. Reliance is placed upon Illus (c) to Section 16 which in my judgment in no way betters the case for the appellant. The illustration runs thus:

A being in debt to B the money-lender of his village, contracts a fresh loan on terms which appear to be unconscionable. It lies on B to prove that the contract was not induced by undue influence.

Although illustrating the section, it cannot add to it, and it is clear from a reading of the section together with the illustration that it is an illustration of Sub-section (3) of Section 16 of the Act and does in no way affect the principle laid down by their Lordships of the Judicial Committee in the case to which I have referred that it is essential in the first instance to show as a fact that the lender was in a position to dominate the will of the borrower. For those reasons in my opinion the decision of the learned Additional District Judge was right. Whatever we may think of the transaction the defendant is not entitled to any relief at our hands. In those circumstances the appeal fails and must be dismissed with costs.

Rowland, J.

I agree. The Munsif thought it proper to reduce the rate of interest on finding that it was exorbitant. The District Judge quite rightly pointed out that this could not be done unless the case came within some statute or principle of law which would justify interference with the contract. The mortgage bond having been executed in 1916 was not a transaction- to which the Usurious Loans Act of 1918 could apply Therefore, as pointed out by the District Judge it only remained to consider whether the borrower could be given relief u/s 16, Contract Act. He decided this point in the negative on finding that there was no evidence in the case, nor any finding by the Munsif, that, the creditors were in a position to dominate the will of the debtor. It has been argued before us in appeal that, if we are to follow Section 16 Illus. (c), Contract. Act, we ought to hold that the burden lay on the plaintiffs to show the absence, of undue influence. The illustration in question is in these terms:

A being in debt to B the money-lender of his village, contracts a fresh loan on terms which appear to be unconscionable. It lies on B to prove that the contract was not induced by undue influence.

In support of this contention reliance is placed for the appellant on the Privy Council decision of Dhanipal Das v. Muneshar Bakhsh Singh (1906) 28 All 570. No doubt in the circumstances of that case it was held that the lender was in a position to dominate the will of the borrower and that the latter should be relieved from the terms of a bargain which appeared to be unconscionable. But there were in that case other circumstances besides the mere fact of previous in debtedness from which to draw the inference that the lender was in a position to dominate the will of his debtor. Where there is no such circumstance beyond the mere fact of antecedent debt, we get the position which was dealt with by the Privy Council in Ragunath Prasad Sahu v. Sarju Prasad 1924 PC 60. In this decision their Lordships examined the terms of Section 16, Contract Act, as amended in 1899 and said that:

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 and they refused to regard the mere relation of creditor and debtor as being a circumstance from which they would draw the inference of the former being in a position to dominate the will of the latter. The illustrations, and in particular Illus. (c) to Section 16, were not referred to by their Lordships in that judgment, but that makes no difference to the binding nature of their Lordships pronouncement. In the present case there was not only no attempt made by the defendant to establish that the borrower was dominated by the lender at the time of the transaction, but in his written statement the defendant expressly denied that his father was under any necessity to take the loan at the time of the execution of the bond. Therefore it is impossible to give the defendant any relief (under Section 16, Contract Act. At the last moment, and as a sort of supplement to his argument, the learned Advocate for the appellant hinted that the rate of interest might be reduced on the ground that the loan being taken, by the Karta of a joint family and the plaintiffs seeking to enforce it against the junior members of the family after the death of the borrower, it would lie on the plaintiffs to establish the necessity not only for borrowing money but also for borrowing at the high rate of interest, entered in the bond. I express no opinion on whether this line of defence might have succeeded had it been taken in due time in the first Court or even in the lower appellate Court. But it raises questions of fact which ought to have been the subject of a separate issue, and it is too late to raise those questions now. Accordingly I agree that the appeal should be dismissed.