Decided On-: 18 December, 1923
Bench-: Shaw, Carson, J Edge, A Ali, L Jenkin
FACTS
The case involves a dispute between a father, Mr. Raghunath Prasad Sahu, and his son, Sarju Prasad Sahu, over their family property. The father took legal action against his son, leading to a court decree in 1917. To address legal issues, Sarju Prasad borrowed around ten thousand rupees from his father by mortgaging his properties. However, he ended up paying a high compound interest rate of 24 percent over eleven years, resulting in an interest amount of Rs 1,12,885. Sarju Prasad argues that his father took advantage of his mental distress, imposing unfair interest rates. He claims undue influence under Section 16 of the Indian Contract Act, 1872.
ISSUES
The central issues in this case revolve around the concept of 'free consent' and the legal implications of undue influence. The key concern is whether consent is genuinely free, as the presence of undue influence allows the affected party to potentially annul the contract. Establishing undue influence renders the contract voidable.
To substantiate a claim of undue influence, the plaintiff must show that the relationship between them and the defendant was such that the defendant could control the will of the plaintiff due to:
Real or apparent authority.
Fiduciary relationship.
Impairment of mental capacity due to age, illness, or mental or bodily distress suffered by the plaintiff.
JUDGMENT
The court highlighted that proving undue influence requires demonstrating a relationship where one party can dominate the will of the other. Lord Shaw, referencing sub-section (3) of Section 16 of Indian Contract Act 1872, outlined the sequential process: establishing the dominating relationship, assessing if undue influence affected the contract, and addressing the burden of proof.
The party in a position to dominate the other's will bears the burden of proving that the contract wasn't induced by undue influence. The court stressed the importance of recognizing the relationship before evaluating the fairness of the agreement.
In this case, the borrower failed to show that the lender could influence his will. The established relationship was that of lender and borrower, which wasn't sufficient to prove dominance of will. Citing precedents like Dhanipal Das v. Raja Maneshar Bakhsh Singh, Maneshar Bakhsh Singh v. Shadi Lal, Sundar Koer v. Sham Krishen, the court disagreed with Abdul Majeed v. Khirode Chandra Pal.
The court adjusted the High Court’s decree, permitting compound interest at a rate of two per cent per annum on the principal from the bond’s execution until September 25, 1917. Following this, simple interest at a rate of six per cent per annum was allowed from September 25, 1917, until the date of realization. The other parts of the High Court’s decree were upheld.
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