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Allahabad High Court
Mahmud-Un-Nissa And Ors. vs Barkat-Ullah And Ors. on 21 May, 1926
Equivalent citations: AIR 1927 All 44
Author: Daniels


Daniels, J.

1. This is an appeal by the plaintiffs arising out of a suit for enforcement of a hypothecation bond of the year 1910 for a sum of Rs. 1,500 with compound interest at 12 per cent. per annum. The property hypothecated consisted of two groves and the house of the executants. The appeal raised two questions, one of the application of Section 16 of the Indian Contract Act, and the other of the application of Section 60(c) of the Code of Civil Procedure. The trial Court decreed the suit. The District Judge has dismissed it on the ground that the bargain was procured by undue influence within the meaning of Section 16 of the Contract Act, and has further held that in any case a decree for sale of the house could not have been granted in view of Section 60(c) of the Coda of Civil Procedure. For the latter proposition he has relied on the decision in Ram Dial v. Narpat Singh [1911] 33 All. 136. That decision has since been overruled by the Full Bench case of Mubarak Husain v. Ahmad A.I.R. 1924 All. 320. In view of the Full Bench decision it is impossible to support the District Judge’s finding on this point.

2. The bond in suit was executed in lieu of two earlier mortgage bonds of the years 1898 and 1899. The principal of these two bonds was Rs. 100 and Rs. 99 respectively and the property mortgaged by them consisted of the two groves also mortgaged under the bond in suit. One of these two earlier bonds carried compound interest at Rs. 3/2 per cent. per month, with annual rests. The other carried simple interest at Rs. 3 per cent. per month. At the time of execution of the bond in suit the amount due under these two earlier bonds had admittedly amounted to a sum in excess of Rs. 5,000, namely, Rs. 4,515 under the bond bearing compound interest and Rs. 504 under the bond bearing simple interest, no payment at all towards interest or principal having apparently been made under either bond. At the time of execution of the bond in suit the creditor remitted a sum of approximately Rs. 3,500 due under the bond bearing compound interest and took a fresh mortgage for a sum of Rs. 1,500 Rs; 1000 of which was treated as being due under the bond bearing compound interest and Rs. 500 under the bond bearing simple interest. No further advance was taken. The learned District Judge in dealing with the case has first held that owing to the previous loans and the huge amount which had become due under them he defendants were in the clutches of the money-lender. Having held this, he goes on to say that it was incumbent on the plaintiffs to establish that the new contract was not unconscionable and was not induced by undue influence.

3. In thus laying the burden the learned District Judge was in error. The law as laid down in Section 16 of the Contract Act, has been explained by the Privy Council in a number of cases and nowhere more clearly than in the recent case of Raghunath Prasad v. Sarju Prasad A.I.R. 1924 P.C. 60. Before the burden can be laid on the creditor not one element but two elements must be established. It must first be shown that the creditor was in a position to dominate the will of the borrower. It must also be shown that the transaction appears either on the face of it or on the evidence adduced to be unconscionable. Here the learned District Judge has laid the burden upon the creditor on finding the first of these two elements only.

4. The question whether the creditor was in a position to dominate the will of the borrower is largely a question of fact, and in view of Illustration (c) to Section 16 of the Contract Act we are not prepared to dissent from the finding of the learned District Judge on this point. We are, however, unable to hold that the transaction in suit was unconscionable. On the contrary, the creditor appears to have acted with considerable moderation. He remitted more than two-thirds of the amount due to him and the rate of interest which he charged was a rate commonly prevailing in similar transactions, and it has not been possible even for the respondents’ learned Counsel to urge that it was such as to render the transaction unconscionable. The respondents’ learned Counsel has relied largely on the transactions of 1888 and 1899. Those transactions are not, however, in suit, and even if the interest under them was high, this would not in itself have been sufficient under the rulings of their Lordships of the Privy Council in Balla Mal v. Ahad Shah [1918] 16 A.L.J. 905 (P.C.), and other well-known cases to have entitled the borrower to set them aside.

5. In our opinion we are not entitled to treat the transaction in suit as unconscionable merely because it was in lieu of earlier loans which carried a very high rate of interest. We hold, therefore, that the respondents have failed to establish the elements necessary to throw on the creditor the burden of proving that the transaction was not procured by undue influence.

6. We, therefore, set aside the decree of the learned District Judge and restore the decree of the learned Subordinate Judge but extend the time of payment to two months from this date. In view of the fact that the amount for which the creditor has obtained a decree exceeds by many times the principal originally advanced, we direct that the parties bear their own costs both in this Court and in the Court below.

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