Muthuveerappa Chetti alias Vellayappa Chetti vs Ramaswami Chetti and Others

John Wallis, C.J.—The Subordinate Judge has found in this case--and we see no reason to differ from his finding on the evidence--that the

plaintiff was induced to pay Rs. 7,000 to the defendants in order that a criminal prosecution instituted by the defendants against the plaintiff for an

offence which was not compoundable should not be proceeded with. The agreement to stifle the criminal prosecution was illegal. and it is said that

money paid in pursuance of an illegal agreement cannot be recovered back. No doubt that is generally so according to the maxim in part delicte,

potior est conditio defendentis, but it appears to be well established that when a payment of money is obtained by means of such an agreement the

parties are not to be considered in pari delicto and that the money may be recovered back. In Bullen and Leake''s Precedents of Pleadings,

second edition, page 51, the law is stated as follows: ""But where the plaintiff having paid the money in execution of an illegal contract or for an

illegal purpose is not in pari delicto he may in some cases recover it: as when the money was paid under oppression, as the money paid by a

bankrupt to obtain his certificate [Smith v. Bromley 2 Dougl. 696n : 99 E.R. 441]: money paid by the defendant in a penal action to compound the

action [Williams v. Hedley (1807) 8 East 378 : 103 E.R. 388 : 9 R.R. 473 and Unwin v. Leaper 1 M. & G.747 :1 Drink 3 : 10 L.J.C.P. 41 : 4

Jur. 1037 : 56 R.R. 522. In Williams v. Hedley (1807) 8 East 378 : 103 E.R. 388 : 9 R.R. 473 an action for penalties had been brought by the

defendant against the plaintiff in respect of certain usurious transactions entered into by the latter, and to escape the penal action the plaintiff had

been induced to pay the persons who put forward Hedley the amount of a debt due to them by a third party, and it was held the money could be

recovered back. Similarly in Unwin v. Leaper 1 M. & G. 747 : 1 Drinke 3 : 10 L.J.C.P. 41 : 4 Jur. 1037 : 56 R.R. 522 the Jury were directed that

the money could be recovered if it had not been paid voluntarily but by coercion of the threatened penal actions. The Subordinate Judge held that

the evidence did not show coercion within the meaning of the Contract Act; but it is now settled that that is not the test. Kanhnya Lal v. National

Bank of India Ltd. 18 Ind. Cas. 949 : 40 C.P 598 : 17 C.W.N. 541 (1913) M.W.N. 406 : 13 M.L.T. 406 : 11 A.L.J. 413 : 15 Bom. L.R. 472 :

184 P.L.R. 1913 : 25 M.L.J. 104 : 40 I.A. 56 It makes no difference, in my opinion, here that money was found payable by the arbitrators as the

plaintiff''s consent to the arbitration was obtained by means of the criminal prosecution, or that it may have been really due, as in either case the

plaintiff is entitled to get back what was obtained from him by coercion.

The appeal must be allowed with interest at 6 per cent. from the date of plaint. No order as to costs. As regards the connected appeals I agree

with the judgment of my learned brother.

Seshagiri Aiyar, J.

The plaintiff was the agent of the defendants at Rangoon. He returned in 1905 to Madras. Disputes arose at once regarding the plaintiff''s

management. An attempt at mediation between the parties was not successful. About the end of 1907 matters came to a crisis. The defendants had

a plaint prepared to be filed against the plaintiff in August of that year (Exhibit C). In November, they instituted a complaint for criminal breach of

trust in respect of a pair of bangles. The plaintiff was arrested on a warrant on the 30th of November and was released on bail while the difference

between the parties was being adjusted. Two arbitrators were selected on the 1st of December, one by the plaintiff and the other by the

defendants. As a result of their mediation, the plaintiff paid Rs. 7,000 to the defendants and gave a hundi for Rs. 3,000. No evidence was offered

by the defendants at the adjourned hearing of the criminal prosecution and the plaintiff was acquitted.

Under these circumstances three suits were instituted in the Sub-Court of Madura East which have given rise to four appeals in this Court. The

plaintiff''s first suit was for damages for malicious prosecution. The Subordinate Judge awarded Rs. 200 as damages. In Appeal No. 177 of 1911,

the plaintiff complains against the inadequacy of the amount decreed. Appeal No. 178 of 1911 is by the defendants disputing the right to any

damages. Original Suit No. 75 of 1909 was brought by the plaintiff for the refund of the sum of Rs. 7,000 paid by him. The lower Court dismissed

the suit. Appeal No. 208 of 1910 is against that decree. The defendants instituted Original Suit No. 122 of 1909 to recover the Rs. 3,000 under

the hundi executed in their favour by the plaintiff. That suit was also dismissed. Appeal No 176 of 1911 is against that decision.

Appeals Nos. 177 and 178 of 1911 can be disposed of shortly. I am unable to agree with the learned Subordinate Judge that the prosecution

for criminal breach of trust was instituted without reasonable and probable cause. The plaintiff admits that he purchased a pair of bangles for Rs.

10 with a view to sell it at a profit. It is also admitted that it was not sold. His case is that he melted the bangles and sold the gold for Rs. l0. No

explanation is given as to why this extraordinary procedure was adopted. He is unable to point to any other instance in which a similar thing was

done. Prima facie, the explanation is very suspicious. By melting, the cost of making is lost. The entry of the sale of gold does not carry the matter

any further. The plaintiff was in the habit of purchasing gold for making bangles. He has been selling gold also. The entry as to the sale of the gold

for Rs. 10-4-0 may relate to the purchased gold and not to the melted gold. The total quantity of gold accounted for excluding this item is found by

the Subordinate Judge not to exceed the quantity purchased. � think the explanation of the plaintiff is. unconvincing. At any rate the defendants

cannot be said to have had no reasonable or probable cause for believing that the plaintiff misappropriated the bangles. The immediate occasion

and, very likely, the motive for instituting the complaint was to put pressure on the plaintiff to render true and proper accounts of his agency; but

that is not enough; the plaintiff is bound to prove that the prosecution was launched without reasonable and probable cause, and not simply that it

was improper or had an ulterior object. It was said that the evidence given by the defendants'' agent at the conclusion of the criminal trial showed

that the defendants were satisfied that the bangles were accounted for. The parties having settled their civil rights it was part of the compact that the

criminal prosecution should not be pressed. Consequently evidence as little incriminating as possible was given at the final trial. This evidence does

not indicate that the defendants had no grounds for preferring the complaint. In my opinion, the plaintiff has failed to prove his case. Appeal No.

178 of 1911 must be allowed and Appeal No. 177 of 1911 must be dismissed. The result will be that Original Suit No. 198 of 1908 is dismissed

with costs throughout.

In dealing with the other two appeals, I accept in their entirety the findings of the learned Subordinate Judge. No serious attempt was made on

either side to show that he was wrong: and the evidence fully supports his conclusions. Briefly stated, the facts established are: (1) that the plaintiff

failed to render proper accounts of the business, (2) that the salary chit was not returned to him (an almost conclusive indication among Nattukottai

Chetties that the transaction was not closed between the parties), 1 M. & G. 747 : 1 Drinke 3 : 10 L.J.C.P. 41 : 4 Jur. 1037 : 56 R.R. 522 that

the defendants were prepared to institute a suit against the plaintiff for nearly Rs. 30,000, (4) that the defendants resorted to the expedient of a

criminal prosecution to coerce the plaintiff to coma to terms, (5) that the plaintiff was arrested, (6) that while on bail the parties referred their

differences to two arbitrators and (7) that as a result of the mediation it was agreed that the prosecution against the plaintiff should not be pressed,

provided he gave Rs. 7,000 at once and executed a hundi for Rs. 3,000 more. On these facts the question is, whether the defendants are entitled

to recover the amount due on the hundi and whether the plaintiff is entitled to the money paid by him. There can be no doubt on the first question.

As the document was given with a view to stifle the prosecution, Courts cannot give a decree on the hundi. Section 23 of the Contract Act makes

the consideration illegal. Nujebar Rahman v. Muktashed Husain 15 Ind. Cas. 259 : 40 C.P 113 : 16 C.W.N. 854, Mottai Reddy v. Thanappa

Reddy 26 Ind. Cas. 181 : 37 M.P 385 are directly in point. In Jones v. Merionethshire Building Society (1892) 1 Ch. 173 : 61 L.J.Ch. 138 : 65

L.T. 685 : 40 W.R. 273 : 17 Cox, C.C. 389 Lord Justice Lindley says: '' If any bargaining could be shown here to stifle a prosecution for a

criminal act, the action certainly could not be maintained."" Lord Justices Bowen and Fry are equally emphatic. The Subordinate Judge was,

therefore, right in dismissing the suit. The appeal should be dismissed with costs.

The claim for the refund cannot be so easily disposed of. Lord Justice Bowen in the case above referred to says: ""There might be a difficulty in

recovering back money paid on account of the well-known ground which is shortly expressed in the maxim melior est conditio defendentis."" It may

be that if both parties are in pari delicto, the position of the defendant may give him an advantage. But where one party uses his position as

prosecutor to secure moneys which but for the arrest he would not have got, the principle of the parties being in pari delicto cannot apply. Mr.

Rangachariar foresaw this difficulty and contended that the payment was under the award of the arbitrators, and that a decree directing the refund

would offend against the principle of placing the parties in status quo ante. If, in this case, the defendants had pleaded that they were entitled to

retain the amount towards what is due to them from the plaintiff, I would have been inclined to direct the trial of an issue in that behalf. I agree with

the dictum in Shridhar Balkrishna v. Babaji Mula 28 Ind. Cas. 134 : 16 Bom. L.R. 586 that the defendant should not be estopped from showing

that the money which he seeks to retain was really due to him. See also Coeks v. Masterman (1829) 9 B.&C. 902 : 8 L.J.K.B. (o.s.) 77 and

Imperial Bank of Canada v. Bank of Hamilton (1903) A.C. 49 : 72 L.J.P.C. 1 : 51 W.R. 289 : 87 L.T. 457 : 19 T.L.R. 56. But that is not the

defendants'' case. Therefore the only question is, whether the money can be recovered having been paid as a consideration for not proving the

criminal prosecution. In the first place we have the statutory declaration in Section 72 of the Contract Act that a person to whom money is paid

under coercion must repay it. It was recently held by the Judicial Committee that the term coercion is not synonymous with the definition in the Act.

Kanhaya Lal v. National Bank of India Ltd. 18 Ind. Cas. 949 : 25 M.L.J. 104 : 40 I.A. 56. In my opinion the plaintiff would not have paid the Rs.

7,000 had he not been under arrest. He was coerced into paying the amount by the prosecution and by the promise to withdraw it. The decision in

Amjadenessa Bibi v. Rahim Baksh Sikdar 28 Ind. Cas. 713 : 42 C.P 286 : 19 C.W.N. 383 : 21 C.L.J. 642 is distinguishable from the present

case. It was a compoundable offence and the learned Judges found that the defendant did not use his dominant position to get the money. In effect

the finding was that there was no coercion. On the other hand Atkinson v. Denby (1861) 6 H.& N. 778 : 123 R.R. 824 : 9 W.R. 539 lays down

distinctly that if the agreement was to stifle a prosecution money can be recovered. Even if the payment was induced only in part by the agreement,

the whole consideration must fail. See Section 24 of the Contract Act and Clark v. Woods 2 Ex. 395 : 3 New Sess. Cas. 253 : 17 L.J.M.C. 189.

Mr. Rangachariar relied on Flower v. Sadler 9 Q.B.D. 83 : 46 J.P. 503 : affirmed. 10 Q.B.D. 572. In that case, there was no arrest. The party

lawfully bound to pay paid the amount as soon as he was threatened with a prosecution. The principle of that case is that there is nothing illegal in a

man recovering his just dues by the use of threatening language so long as there is no agreement to stifle a prosecution. The illegality consists not in

using questionable means to secure a lawful debt, but in agreeing to defeat public justice. In In re. Mapleback, Ex parte Calde-cott 4 Ch.D. 150 :

46 L.J.Bk. 14 : 35 L.T. 503 : 25 W.R. 103 : 13 Cox. C.C. 374 also there was no arrest. In Smith v. Monteith (1844) 13 M. & W. 427 : 2 D. &

L. 358 : 14 L.J.Ex. 22 : 9 Jur. 310 : 153 E.R. 178 : 67 R.R. 654 it was held that when a man is arrested under a process of law devised for

recovering money, he is not entitled to be paid back. This is obvious. Otherwise the provision of our Code for arrest in execution will be rendered

nugatory.

I am, therefore, constrained to hold that the plaintiff is entitled to the refund. As the claim of the defendants appears to have been just and

reasonable there will be interest at 6 per cent. per annum on the amount of the decree only from the date of the plaint. Each party will bear his own

costs throughout.