Muthuveerappa Chetty alias Vellayappa Chetty vs Ramaswami Chetty and Others

John Wallis, C.J.—The Subordinate Judge has found in this Wallis, 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 pari delicto 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 Prece dents 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 (1760) 2

Doug. 696; money paid by the defendant in a penal action to compound the action; Williams v. Hedley (1807) 8 East. 878 and Unwin v. Leaper

(1840) 1 M. & G. 747. In Williams v. Hedly (1807) 8 East. 878 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 pat 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 (1840) 1 M. & G. 747, 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 is not the test: Kanhaya Lai v. National Bank of India Ld (1913) ILR 40 Calc. 598 (P.C.). 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 percent, 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 Ayyar, 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 bw 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 adjust-d. ''.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 Subordinate-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. 10. 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. I 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 defendant''s 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 Nattu

Kottai Chettis that the transaction was not closed between the parties), (3) 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 come 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: Majibar Rahman v. Muktashed Hossain

ILR (1912) Calc. 113 and Mottai v. Thanappa ILR (1914) Mad. 385 are directly in point. In Jones v. Merionethshire Building Society (1892) 1

Ch. 173 Lord Justice Lindley says, u If any bargaining could be shown here to stifle a prosecution for a criminal act, the action certainly could not

be maintained."" Lords 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.

Rangachariyar 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. The arbitrator''s decision may show that the claim was honest, but when

it is given with the object of stifling a pending prosecution, the consideration is opposed to public policy. It is true that in directing the payment, care

should be taken to see that parties are placed 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 Balakrishna v. Bubaji Mula ILR (1914) 38 Bom. 709, that the defendant should not be estopped from showing that the money

which he seeks to retain was really due to him: see also Cocks v. Masterman (1829) 9 B. & C. 902 and Imperial Bank, of Canada v. Bank of

Hamilton (1908) A.C. 49. 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 pressing 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 Ld I L.R. (1913) Calc. 598 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 Amjadennissa Bibi v. Rahim Buksh Shikdar (1916) 42 Calc. 286. is distinguishable from the present case. It was a

compoundable offence and the learned Judge 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 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 (1848) 2 Ex. 805. Mr. Rangachariyar relies on Flower v. Sadler (1882) 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 Caldecott (1876) 4 Ch.D 150 also there was no arrest. In Smith v. Monteith (1844) 3 M. & W. 427 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.