RAGHUNATH PRASAD V. SARJU PRASAD AND ORS. 1923


Author: Manvi Tokas, NorthCap University
                                                                   

COURT- BOMBAY HIGH COURT

APELLANT- RAGHUNATH PRASAD

DEFENDANT- SARJU PRASAD

BENCH- SHAW, CARSON, A. ALI AND L JENKINS

LAWS INVOLVED- INDIAN CONTRACT ACT(ICA) (1872)

DATE OF JUDGMENT- 18 DECEMBER, 1923









FACTS OF THE CASE-

The case arose from a decree made on November 9 1920, issued by Patna High Court. The parties involved were Raghunath Prasad, the appellant and Sarju Prasad as the defendant. Both father and son were joint owners of the property which was of considerable amount. According to a mortgage which was made on 27 May 1910, rupees 9,999 were borrowed by the son Sarju, from the father, Raghunath. Interest on the same deal was also made which clearly expressed consent by the son declaring that he shall pay the debt made in interest of 2% per month, and in case the payment was not made the interest will be taken as principle and will run as 2% per month thereon. In 11 years, the amount sky rocket due to non-payment upto 1,12,885 rupees.


CONTENTIONS OF THE PARTIES

Statement were made in defense by the son, Sarju(defendant) that father and son had quarreled during the time of the mortgage made between them. The son put very serious allegations against the father. There was record of criminal proceedings made by the father against the son which was before the initiation of the mortgage; for which the son had borrowed 1,000 rupees from the father to pay for the litigation of these criminal proceedings. The son, Sarju, contended that all this done by his father put him under a lot of mental distress causing him very serious mental problems all which pushed him to borrow more and more money from his father. Being in a state of Fiduciary relationship, the defendant claimed that as his father was in a position to dominate the will of him the contract was made with Undue Influence, wherein his father(appellant) took advantage of his position and unfairly used his position to gain advantage over the defendant. Futhermore, it was contended by the son that unconscionable advantage of his condition was taken by his father, Raghunath; thereby claiming the presumption of Undue Influence in the given case. 
The appellant, Raghunath Prasad, the father claimed be the rightful owner of the property that was mortgaged. Therefore, asserting his rights to the contract made between him and his son (defendant) Sarju Prasad, in which the rightful terms of payment with the interest was mentioned. The appellant, thereupon, demanded his rightful sharing in the same;
as well contending the non -existence of any Undue Influence in the case as well. Raghunath
Prasad claimed that the contract was laid down with voluntariness and no form of coercion or
Undue Influence was practiced, a valid contract was formed between the parties.The father, contended how he had taken no Undue Advantage of his son in the mortgage and the claims of mental distress and unconscionable advantage were false.
Therefore, in the given case Sarju Prasad contended the use of Undue Influence by his father against him; claiming the contract to be voidable under section 19A.


JUDGEMENT-

Ratio Decidendi-


In this case, it was stated by the “the burden of proving of proving that a contract was not adduced by undue influence falls on the personal who is in the position to dominate the will of another”; which in this case was the father, Raghunath Prasad. In the case, the court when looked over the evidence given by the defendant, came to the conclusion that there was no actual or proper evidence in the given case. What all the defendant had said and stated was not a proof concrete enough to convince any court. Statement of mental distress and the father(appellant) taking advantage of his dominant fiduciary relation upon the son, Sarju Prasad could not be proven.
The only valid proof in this case was that of the contract of mortgage between the two stating-

“I, the declarant, do promise that I shall pay interest on the said debt at the rate of 2 per cent,
per mensem on the 30th Jeth of each year. In case of non-payment of the annual interest, the interest will be taken as principal and interest will run thereon at the rate of 2 per cent, per mensem, that is, interest will be calculated on the principle of compound interest”.

These clearly stated conditions fulfilled the conditional of a valid contract under section 10 if ICA, making the mortgage between the father and the son legally valid.
The said defense by the defendant, Sarju Prasad, which included that of being under mental distress during the time of the mortgage, the father taking advantage of the fiduciary relationship and unconscionable advantage were invoking the section 16 of the ICA.

Section 16 of the Indian Contract Act laya down-
“A contract is said to be induced by undue influence wherein the relations subsisting between the parties are as such that one is in a position to dominate the will of another,
A party is said to be in a dominant position hen-
A real or apparent authority id over the other or a fiduciary relation
Taking advantage of people whose mental capacity has been infringed permanently or temporary or advantage of mental or bodily distress
Unconscionable advantage over the other”.

If all the three stated conditions are fulfilled a contract is said to be adduced by Undue Influence wherein the party whose consent is not free can anytime chose to make the contract void as per section 19A of the ICA.
All the conditions were invoked by the defendant in this very case but the same could not be concretely proved in the court of law. Mere statements of mental distress and advantage taken  by his father were not enough to prove his defense.


Obitor Dicta

Some cases for influence were taken such as case of Dhanipal Das v. Maneshar Baksh Singh, in which the personal who took the money and also mortgaged his estate was actually under the ‘state of transactions’ of the ‘court of wards’. He was treated badly and in the words of Lord Davey as “someone of disability in apposition of helplessness”, and the person who gave the money was proved to have known of that fact, therefore it was proved that the lender had in fact taken undue influence of the other. The case was followed by another one of Maheshar Baksh Singh v. Shadi Lal,  in which a bond suit was given by a talukdar without the permission of the ‘court of wards’ after his estate has been put under it. A similar judgment was followed in this case as well as the Lord Collins held that it was proved that the talukdar or the lender did in fact took advantage over the other therefore the contract being that of undue influence. Another case Sundar Koer v. Sham Krishen, a crucial judgment was made by the Lord Davey, ‘that in the given case no actual evidence was available which could directly point towards the existence of undue influence”.
The case of undue influence must by all facts prove the existence of unfair advantage,
unprovable facts or statements cannot by accepted or considered by the court.



OPINIONS OF JUSTICES-

The judgment was laid by Justice Shaw who expressed that “the evidence in hand was
enough and that it’s safe to say that the defendant gave no evidence at all”. “It is quite plain to
say that no court can accept a story thus unproved by its author thus establishing a case”
either of mental distress or of undue influence of the ICA,1872. “It is sufficient to say that in
the given case the burrower was sui juris (of age / independent); had full power of bargaining
and getting into a mortgage”. In the given case it was said “even if the contract seems
unconscionable, a remedy under ICA does not come into view until the initial fact of
dominance of will has been established. Once the fact is established then the unconscionable
nature of the bargain and the burden of proof on the issue of Undue Influence comes into
operation. In the present case for reasons stated, these stages are not reached”





SUMMARY-

Raghunath Prasad v. Sarju Prasad (1923), stands as a landmark case in the context of Undue
Influence under Indian Contract Act.
Through the case, it can be learned that Undue Influence talks about controlling the
mind of the victim; and it differs contrastingly from coercion and duress which means
physical compulsion and forcing any party into a contract even a stranger respectively. It was
held in Someshwar Dutt v. Tribhuvan Dutt that the facts of undue influence range
themselves from coercion or duress. Unfair advantage is the most essential factor of a
contract based on Undue Influence, it “refers to advantage or enrichment through unjust
means” as laid down in by the court in Ganesh Narayan Nagarkak v. Vishnu Ramchandra
Saraf.
The contract based on undue influence as said in section 16 of ICA, talks about the real or
apparent authority a party has over the other and uses the authority as an advantage over the
other. Real authority for example could be a police officer whereas an apparent authority
could be that of pretending as a real authority.
Another crucial aspect is taking advantage of the mental capacity of the other person. It was
held in Inder Singh v. Dayal Singh that “undue influence arises when one person takes
advantage of other’s mental capacity temporarily or permanently”.
Other aspect includes the Fiduciary relationship occurring between the parties to a contract
for example father and a son. In such a relation where one is in a position to dominate the will
of another and uses that position to gain unfair advantage; the contract is said to have been
laid down by Undue Influence.
In this case of Raghunath Prasad v. Sarju Prasad, as a mortgage existed and due to its non-payment by the defendant, Sarju, he invoked the defense of undue influence as per section 16 of ICA. His statements of defense were not accepted in the court as they lacked evidence to concretely prove them. As in the words of Justice Shaw, “It is sufficient to say that in
the given case the burrower was sui juris (of age / independent); had full power of bargaining
and getting into a mortgage”. In the given case it was said “even if the contract seems
unconscionable, a remedy under ICA does not come into view until the initial fact of
dominance of will has been established. Once the fact is established then the unconscionable
nature of the bargain and the burden of proof on the issue of Undue Influence comes into
operation. In the present case for reasons stated, these stages are not reached”.
Therefore the contract was not declared void and the defendant was legally bound to pay the said amount.


CONCLUSION

Raghunath Prasad v. Sarju Prasad and Ors. (1923), therefore has a landmark judgment
in the context of Undue Influence as laid down in the Indian Contract Act of 1872. The case with its righteous judgment laid down by the bench of Bombay High Court, stood with the
ideas of justice, equity and good conscience. Through the case
it can be comprehended that no court can be expected to accept a statement without full
proof of facts; in the case of undue influence the case must by all facts establish the existence
of Undue Influence of ICA. Burden of proving the existence of undue influence in a contract lies upon the
party which is dominated.

FAQS

What is meant by Undue Influence?

Undue Influence refers to as per section 16 of Indian contract act, 1872 ,when a party who is in a position to dominate the will of the another, takes advantage of his/her position to enter into a contract.

How is Undue Influence different from coercion?

In Undue Influence there is advantage taken by one over the other in cases of fiduciary relationship, or taking advantage of one’s mental or bodily distress and unconscionable advantage whereas in coercion the will of another person is forced through threats or intimidation.

Is a contract made through Undue Influence valid?

A contract adduced through undue influence is voidable at the choice of the person whose will has been dominated as per section 19A of the Indian contract act 1872.

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