When original not produced before Court S.195(1)(b)(ii) not attracted.

As the document alleged to have been forged was not produced in the court the provisions on S.195(1)(b)(ii). 

Supreme Court of India

Sushil Kumar And Ors vs State Of Haryana And Ors on 8 December, 1987
Equivalent citations: 1988 AIR 419, 1988 SCR (2) 182
Bench: Sharma, L.

PETITIONER:

SUSHIL KUMAR AND ORS.

Vs.

RESPONDENT:

STATE OF HARYANA AND ORS.

DATE OF JUDGMENT08/12/1987

BENCH:

SHARMA, L.M. (J)

BENCH:

SHARMA, L.M. (J)

SEN, A.P. (J)

CITATION:

1988 AIR 419 1988 SCR (2) 182

1987 SCC Supl. 654 JT 1987 (4) 586

1987 SCALE (2)1248

ACT:

Power of Magistrate frame charges under Sections 471 and 474, Cr. P. C. in the absence of a complaint from a Civil Court-Bar of section 195(1)(b)(ii), Cr. P. C. thereon.

HEADNOTE:

%

The appellant Sushil Kumar filed a Civil Suit against the wife of respondent No. 2 and obtained, on the strength of a copy of a deed of partnership, a temporary injunction restraining the wife and her husband from interfering with the possession of some property. Thereupon the respondent No. 2 lodged a report with the police against the appellants, alleging that the partnership deed was a forged one and, accordingly, the appellants had committed offences punishable under ss. 465, 468, 471, 474, 120B and 420, I.P.C. The magistrate framed charges against the appellants under ss. 465, 468, 120B and 420, I.P.C., but refrained from framing charges under ss. 471 & 474, I.P.C., on the ground that, in the absence of a complaint from the Civil Court. he could not take cognizance under those sections. On a revision preferred by the State, the Additional Sessions Judge upheld the order of the magistrate. The respondent No. 2 then moved the High Court under s. 482 of the Code of Criminal Procedure 1973, which reversed the decision, holding that as the document was not forged during the period it was in Court Custody, the bar of s. 19(1)(b)(ii) Cr.P.C. was not attracted, and directed the magistrate to frame fresh charges. The appellants thereupon appealed to this Court by special leave against the order of the High Court.

Dismissing the appeal and confirming the direction of the High Court but on a different ground, the Court, ^

HELD: The original document, the deed of partnership, was not filed in the Civil Court and a temporary injunction was obtained on the strength of its copy. The reasoning given by the High Court in support of its judgment is not correct but that does not help the appellants. The Privy Council in Sanmukhsingh v. The King, [1949] L.R. 77 I.A. 7, observed that by production of a copy of the 182

allegedly forged document, it cannot be said that the document itself was given in evidence. This view accords with the plain grammatical meaning of the words and is also supported by the practical common sense. [184D, F-G] Since the document alleged to have been forged in the case was not produced in the Court, the provisions of section 195(1)(b)(ii) of the Code of Criminal Procedure have no application. The High Court’s direction is confirmed but on a different ground, as indicated.[184G-H] Sanmukhsingh v. The King, [19491 L.R. 77 I.A. 7 and Budhu Ram v. State of Rajasthan,[1963]3 S.C.R. 376, referred to.

JUDGMENT:

CRIMINAL APPELLATE JURlSDICTlON: Criminal Appeal No. 617 of 1987.

From the Judgment and order dated 20 3 1987 of the Punjab and Haryana High Court in Crl. Misc No. 5338-M of 1986

Prem Malhotra for the Appellants

S.C. Mohanta, C.V.S. Rao, A.K Goel, and B.P Singh for the Respondents

The Judgment of the Court was delivered by SHARMA, J. This appeal is directed against the judgment of the High Court of Punjab and Haryana reversing the order of the Judicial Magistrate, Hissar refusing to frame charges against the appellants under ss 471 and 474 of the Indian Penal Code. The dispute between the parties arose out of a difference between them in connection with a partnership business. The appellant Sushil Kumar filed a civil suit against Smt. Shakuntala Devi, wife of Inder Prakash, respondent No. 2. Relying upon a copy of a deed of partnership, he obtained a temporary injunction restraining her and her husband from interfering with the possession of a certain property The respondent No 2, thereupon. Iodged a report with the police against the appellants alleging that the partnership deed was a forged one and that they being parties to the forgery had committed offences punishable under ss. 465, 468, 47 1, 474, 120B and 420 IPC. A challan was submitted and the learned Magistrate framed charges against the appellants under ss. 465, 468, 120B and 420 IPC, but refrained from

184

framing any charge under ss. 471 and 474 IPC holding that he could not take cognizance under these sections in the absence of a complaint from the civil court.

2. The State preferred a revision and the Additional Sessions Judge, Hissar, who heard the application upheld the order of the Magistrate. The respondent No. 2, therefore, moved the High Court under section 482 of the Code of Criminal Procedure, 1973 (hereinafter referred to as the Code) and a learned Single Judge reversed the decision holding that as the document was not forged during the period it was in court custody the bar of Section 195(1)(b)(ii) of the Code was not attracted. The Magistrate was accordingly directed to frame fresh charges. The appellants, after obtaining special leave, are challenging this order in the present appeal.

3. According to the allegations in the first information report the partnership deed in question was forged by the appellant Sushil Kumar and Shiv Nandan in league with the officials of the Income tax Department and Sushil Kumar, thereafter, produced a copy of the forged deed in the suit. The original document was not filed in the civil court, and temporary injunction was obtained on the strength of its copy. We shall assume that the reasoning given by the High Court in support of its judgment is not correct but that does not help the appellants. Sub-section (1)(b)(ii) of Section 195 of the Code lays down that no court shall take cognizance of any offence described in the sections mentioned therein when such offence is alleged to have been committed in respect of “a document produced or given in evidence in a proceeding in any Court. Interpreting the similar language of the corresponding provision in the earlier Criminal Procedure Code of 1898, the Privy Council in Sanmukhsingh v. The King, [1949] L.R. 77 I.A. 7, observed that by production of a copy of the allegedly forged document it cannot be said that the document itself was given in evidence. This view, as pointed out, accords with the plain grammatical meaning of the words and is also supported by the practical common sense. The Judgment of the Judicial Committee was followed in Budhu Ram v. State of Rajasthan, [1963] 3 SCR 376. Accordingly, we hold that since the document alleged to have been forged was not in the present case produced in the court, the provisions of the section 195(1)(b)(ii) of the Code have no application. We, therefore, confirm the High Court’s direction, but on a different ground as indicated. The appeal is dismissed. S.L. Appeal dismissed.

Fraud includes two elements – deceit – and injury to person decieved – in absence of latter no fraud

Facts : Dr. Vimla purchased a car in the name of her minor daughter Nalini aged about 6 months. The price of tile car was paid by her. The transfer of the car was notified in the name of Nalini to the Motor Registration Authority. The insurance policy already issued was transferred in the name of Nalini after the proposal form was signed by Dr. Vimla. Subsequently, Dr. Vimla filed two claims on the ground that the car met with accidents. She signed the claim forms as Nalini. She also signed the receipts acknowledging the pay- ment of compensation money as Nalini. Dr. Vimla and her husband were prosecuted under sections 120 B, 419, 467 and 468 of the Indian Penal Code. Both the accused were acquitted by the Sessions Judge. The State went in appeal and the High Court convicted Dr. Vimla under s. 467 and 468 of the Indian Penal Code. Dr. Vimla came to this Court by special leave.

Held, that appellant was not guilty of the offence under s. 467 and 468 of the Indian Penal Code. She was certainly guilty of deceit because though her name was Vimla, she signed in all the relevant papers as Nalini and made the Insurance Company believe that her name was Nalini, but the said deceit did not either secure to her advantage or cause any noneconomic loss or injury to the Insurance Company. The charge did not disclose any such advantage or injury nor was there any evidence to prove the same. The entire transaction was that of Dr. Vimla and it was only put through in the name of her minor daughter. Nalini was in fact either a Benamidar for Dr. Vimla or her name was used for luck or other sentimental considerations. The Insurance Company would not have acted differently even if the car stood in the name of Dr. Vimla.

586

The definition of ‘false document’ is a part of the defini- tion of forgery’ and both must be read together. If so read, the ingredients of the offence of forgery relevant to the present case are as follows: (1) fradulently signing a document or a part of a document with an intention of causing it to be believed that such document or part of a document was signed by another under his authority ; and (2) making of such a document with an intention to commit fraud or that fraud may be committed.

The expression ‘fraud’ involves two elements, deceit and injury to the person deceived. Injury is something other than economic loss, that is, deprivation of property, whether movable or immovable or of money and it will include and any harm whatever caused to any person in body, mind, reputation or such others. In short, it is a non- economic or non-pecuniary loss. A benefit or advantage to the deceiver, will almost always cause loss or detriment to the deceived. Even in those rare cases where there is a benefit or advantage to the deceiver, but no corresponding loss to the deceived, the second condition is satisfied. Haycraft v. Creasy, 1801) 2 East 92, in re. London and Globe Finance Corporation Ltd., (1903) 1 Ch. 732 R. v. Welham, (1960) 1 All. E R. 260, Kotamraju Yenkatrayadu v. Emperor (1905) I. L. R. 28 Mad. 90, Surendra Nath Ghose v. Emperor, (1910) I. L. R. 38 Cal. 75, Sanjiv Ratnappa v. Emperor, A. I. R. 1932 Bom. 545 and Emperor v. Abdul Hamid, A. 1. R. 1944 Lah. 380, referred to.

 

Supreme Court of India

Dr. Vimla vs Delhi Administration on 29 November, 1962
Equivalent citations: 1963 AIR 1572, 1963 SCR Supl. (2) 585
Bench: Subbarao, K.

PETITIONER:

DR. VIMLA

Vs.

RESPONDENT:

DELHI ADMINISTRATION

DATE OF JUDGMENT:

29/11/1962

BENCH:

SUBBARAO, K.

BENCH:

SUBBARAO, K.

IMAM, SYED JAFFER

AYYANGAR, N. RAJAGOPALA

MUDHOLKAR, J.R.

CITATION:

1963 AIR 1572 1963 SCR Supl. (2) 585

CITATOR INFO :

D 1963 SC1577 (7,9,10)

RF 1976 SC2140 (10)

ACT:

Criminal Trial-Meaning of ‘dishonestly’ and ‘ fraudu- lently’-Meaning of ‘false document’ and ‘forgery’-Indian Penal Code, 1860 (Act 45 of 1860), ss. 24, 25, 463, 464, 467, 468.

HEADNOTE:

Dr. Vimla purchased a car in the name of her minor daughter Nalini aged about 6 months. The price of tile car was paid by her. The transfer of the car was notified in the name of Nalini to the Motor Registration Authority. The insurance policy already issued was transferred in the name of Nalini after the proposal form was signed by Dr. Vimla. Subsequently, Dr. Vimla filed two claims on the ground that the car met with accidents. She signed the claim forms as Nalini. She also signed the receipts acknowledging the pay- ment of compensation money as Nalini. Dr. Vimla and her husband were prosecuted under sections 120 B, 419, 467 and 468 of the Indian Penal Code. Both the accused were acquitted by the Sessions Judge. The State went in appeal and the High Court convicted Dr. Vimla under s. 467 and 468 of the Indian Penal Code. Dr. Vimla came to this Court by special leave.

Held, that appellant was not guilty of the offence under s. 467 and 468 of the Indian Penal Code. She was certainly guilty of deceit because though her name was Vimla, she signed in all the relevant papers as Nalini and made the Insurance Company believe that her name was Nalini, but the said deceit did not either secure to her advantage or cause any noneconomic loss or injury to the Insurance Company. The charge did not disclose any such advantage or injury nor was there any evidence to prove the same. The entire transaction was that of Dr. Vimla and it was only put through in the name of her minor daughter. Nalini was in fact either a Benamidar for Dr. Vimla or her name was used for luck or other sentimental considerations. The Insurance Company would not have acted differently even if the car stood in the name of Dr. Vimla.

586

The definition of ‘false document’ is a part of the defini- tion of forgery’ and both must be read together. If so read, the ingredients of the offence of forgery relevant to the present case are as follows: (1) fradulently signing a document or a part of a document with an intention of causing it to be believed that such document or part of a document was signed by another under his authority ; and (2) making of such a document with an intention to commit fraud or that fraud may be committed.

The expression ‘fraud’ involves two elements, deceit and injury to the person deceived. Injury is something other than economic loss, that is, deprivation of property, whether movable or immovable or of money and it will include and any harm whatever caused to any person in body, mind, reputation or such others. In short, it is a non- economic or non-pecuniary loss. A benefit or advantage to the deceiver, will almost always cause loss or detriment to the deceived. Even in those rare cases where there is a benefit or advantage to the deceiver, but no corresponding loss to the deceived, the second condition is satisfied. Haycraft v. Creasy, 1801) 2 East 92, in re. London and Globe Finance Corporation Ltd., (1903) 1 Ch. 732 R. v. Welham, (1960) 1 All. E R. 260, Kotamraju Yenkatrayadu v. Emperor (1905) I. L. R. 28 Mad. 90, Surendra Nath Ghose v. Emperor, (1910) I. L. R. 38 Cal. 75, Sanjiv Ratnappa v. Emperor, A. I. R. 1932 Bom. 545 and Emperor v. Abdul Hamid, A. 1. R. 1944 Lah. 380, referred to.

JUDGMENT:

CRIMINAL APPELLATE, JURISDICTION: Criminal Appeal No. 213 of 1960.

Appeal by special leave from the judgment and order dated March 24, 1960, of the Punjab High Court (Circuit Bench)Delhi in Criminal Appeal Case No. 41-D of 1958. H. L. Anand, and K. Baldev Mehta, for the appellant. V. D. Mahajan and P. D. Menon, for the respondent. 1962. November 29. The Judgment of the Court was delivered by

587

SUBBA RAO J.-This appeal by Special leave raises the question as to the true meaning of the expression “fraudulently’ in s. 464 of the Indian Penal Code. The facts either admitted or found by the courts below may be briefly stated. The appellant is the wife of Siri Chand Kaviraj. On january 20, 1953, she purchased an Austin 10 Horse Power Car with the registration No. DLA. 4796 from Dewan Ram Swarup in the name of her minor daughter Nalini aged about six months at that time. The price for the car was paid by Dr. Vimla. The transfer of the car was notified in the name of Nalini to the Motor Registration Authority. The car at that time was insured against a policy issued by the Bharat Fire & General Insurance Co., Ltd., and the policy was due to expire sometime in April, 1953. On a request made by Dewan Ram Swarup, the said policy was transferred in the name of Nalini. In that connection, Dr. Vimla visited the Insurance Company’s Office and signed the proposal form as Nalini. Subsequently, she also filed two claims on the ground that the car met with accidents. In connection with these claims, she signed the claim forms as Nalini and also the receipts acknowledging the payments of the compensation money as Nalini. On a complaint made by the company alleging fraud on the part of Dr. Vimla and her husband, the police made investigation and prosecuted Dr. Vimla and her husband Siri Chand Kaviraj in the Court of Magistrate 1st Class Delhi. The ‘Magistrate committed Dr. Vimla and her husband to Sessions to take their trial under ss. 120-B, 419, 467 and 468 of the Indian Penal Code. The learned Sessions judge held that no case had been made out against the accused under any one of those sections and on that finding, acquitted both of them. The State preferred an appeal to the High Court of Punjab and the appeal was disposed of by a Division Bench of that court comprising Falshaw

588

and Chopra,JJ. The learned judges confirmed the acquittal of Siri Chand; but in regard to Dr.Vimla, they confirmed her acquittal under s. 419 of the Indian Penal Code, but set aside her acquittal under ss. 467 and 468 of the Code and instead, convicted her under the said sections and sentenced her to imprisonment till the rising of the court and to the payment of a fine of Rs. 100/- or in default to under-, go simple imprisonment for two weeks. Dr. Vimla has preferred the present appeal by special leave against her conviction and sentence.

The facts found may be briefly summarised thus : Dr. Vimla purchased a motor car with her own money in the name of her minor daughter, had the insurance policy transferred in the name of her minor daughter by signing her name and she also received compensation for the claims made by her- in regard to the two accidents to the car. The claims were true claims and she received the moneys by signing in ,he claim forms and also in the receipts as Nalini. That is to say, Dr. Vim] a in fact and in substance put through her transactions in connection with the said motor car in the name of her minor daughter. Nalini was in fact either a benamidar for Dr. Vimla or her name was used for luck or other sentimental considerations. On the facts found, neither Dr. Vimla got any advantage either pecuniary or otherwise by signing the name of Nalini in any of the said documents nor the Insurance Company incurred any loss, pecuniary or otherwise, by dealing with Dr. Vimla in the name of Nalini. The Insurance Company would not have acted differently even if the, car stood in the name of Dr. Vimla and she made the claims and received the amounts from the insurance company in her name. On the said facts, the question that arises in this case is whether Dr. vimla was guilty of offences under ss. 463 and 464 of the Indian Penal Code.

589

Learned Counsel for the appellant contends that on the facts found, the appellant would not be guilty of forgery as she did not “fraudulently” sign the requisite forms and the receipts in the name of Nalini, as. by so signing, she did not intend to cause injury to the insurance company. In other words, the contention was that a person does not act fraudulently within the meaning of s. 464 unless he is not only guilty of deceit but also he intends to cause injury to the person or persons deceived, and as in the present case the appellant had never had the intention to cause injury to the insurance company and as on the facts found no injury had been caused at all to the company, the appellant could not be found guilty under the said sections. Before we consider the decisions cited at the Bar it would be convenient to look at the relevant provisions of the Indian Penal Code.

Section 463 : Whoever makes any false document or part of a document with intent to cause damage or injury, to the public or to any person, or to support any claim or title, or to cause any person to part with property or to enter into any express or implied contract, or with intent to commit fraud or that fraud may be committed, commits forgery.

Section 464 : A person is said to make a false document- First–Which dishonestly or fraudulently makes, signs, seals or executes a document or part of a document, or makes any mark denoting the execution of a document, with the intention of causing it to be believed that such document/or part of a document was made, signed, sealed or executed by or by the authority of a person by whom or by whose authority he knows that it was not made, signed, sealed or executed, or at a time

590

at which he knows that it was not made, signed, scaled or executed; or

The definition of “false document” is a part of the definition of “forgery”. Both must be read together. If so read, the ingredients of the offence of forgery relevant to the present enquiry are as follows , (1) fraudulently signing a document or a part of a document with an intention of causing it to be believed that such document or part of a document was signed by another or under his authority ; (2) making of such a document with an intention to commit fraud or that fraud may be committed. In the two definitions, both mens rea described in s.464 i. e., “fradulently” and the intention to commit fraud in s. 463 have the same meaning. This redundancy has perhaps become necessary as the element of fraud is not the ingredient of other in- tentions mentioned in s. 463. The idea of deceit is a necessary ingredient of fraud, but it does not exhaust it; an additional element is implicit in the expression. The scope of that something more is the subject of may decisions. We shall consider that question at a later stage in the light of the decisions bearing on the subject. The second thing to be noticed is that in s. 464 two adverbs, “dishonestly” and “fraudulently” are used alternatively indicating thereby that one excludes the other. That means they are not tautological and must be given different meanings. Section 24 of the Penal Code defines “dishonestly” thus :

“Whoever does anything with the intention of causing wrongful gain to one person or wrongful loss to another person, is said to do that thing dishonestly”. “Fraudulently” is defined in s. 25 thus:

” A perosn is said to do a thing fraudulently if he does that thing with intent to

591

defrand but not otherwise”.

The word “defraud” includes an element of deceit. Deceit is not an ingredient of the definition of the word “dishonestly” while it is an important ingredient of the definition of the word “fraudulently”. The former involves a pecuniary or economic gain or loss while the latter by construction excludes that element. Further) the juxtaposition of the two expressions “‘dishonestly” and “fraudulently” used in the various sections of the Code indicates their close affinity and therefore the definition of one may give colour to the other. To illustrate, in the definition of “dishonestly”, wrongful gain or wrongful loss is the necessary enough. So too, if the expresssion “fraudulently’ were to be held to involve the element of injury to the person or persons deceived, it would be reasonable to assume that the injury should be something other than pecuniary or economic loss. Though almost always an advantage to one causes loss to another and vice versa, it need not necessarily be so. Should we hold that the concept of fraud” would include not only deceit but also some injury to the person deceived, it would be appropriate to hold by analogy drawn from the definition of “dishonestly” that to satisfy the definition of “‘fraudulently” it would be enough if there was a non- economic advantage to the deceiver or a non-economic loss to the deceived. Both need not co-exist.

Let us now consider some of the leading text book writers and, decisions to ascertain the meaning of the word “fraudulently”.

The classic definition of the word “fraudulently” is found in Steplien’s History of the Criminal law of England, Vol. 2, at p. 121 and it reads

“I shall not attempt to construct a definition which will meet every case which might

592

be suggested, but there is little danger in saving that whenever the words “fraud” or intent to defraud” or “fraudulently” occur in the definition of a crime two elements at least are essential to the commission of the crime : namely, first, deceit or an intention to deceive or in some cases mere secrecy ; and secondly, either actual injury or possible injury or to a risk of possible ‘injury by means of that deceit or secrecy…………. This intent is very seldom the only, or the principal, intention entertained by the fraudulent person, whose principal object in nearly every case is his own advantage…………….. A practically conclusive test of the fraudulent character of a deception for criminal purposes is this : Did the author of the deceit derive any advantage from it which could not have been had if the truth had been known ? If so it is hardly possible that the advantage should not have had an equivalent in loss or risk of loss to someone else, and if so, there was fraud.”

It would be seen from this passage that “‘fraud” is made up of two ingredients, deceit and injury. The learned author also realizes that the principal object of every fraudulent person in nearly every case is to derive some advantage though such advantage has a corresponding loss or risk of loss to another. Though the author has not visualized the extremely rare situation of an advantage secured by one without a corresponding loss to another, this idea is persued in later decisions.

As regards the nature of this injury, in Kenny’s Outline of Criminal Law, 15th Edn., at p. 333, it is stated that pecuniary detriment is unnecessary.

In Haycraft v. Creasy (1) LeBlanc, observed (1) (1801) 2 East 92.

593

“by fraud is meant an intention to deceive; whether it be from any expectation of advantage to the party himself or from the ill-will towards the other is immaterial.” This passage for the first time brings out the distinction between an advantage derived by the person who deceives in contrast to the loss incurred by the person deceived. Buckley. J., in Re London & Clobe Finance Corporation Ltd. (1) brings out the ingredients of fraud thus : “To deceive is, I apprehend, to induce a man to believe that a thing is true which is false, and which the person practising the deceit knows or believes to be false. To. defraud is to deprive by deceit: it is by deceit to induce a man to act to his injury’ More tersely it may be put, that to deceive is by falsehood to induce a state of mind; to defraud is by deceit to induce a course of action.”

The English decisions have been elaborately considered by the Court of Criminal Appeal in R. v. Welhant (2). In that case, hire-purchase finance companies advanced money on a hire-purchase form and agreement and on credit-sale agreements witnessed by the accused. The form and agreements were forgeries The accused was charged with offences of Uttering forged documents with intent to defraud. It was not proved that he had intended to cause any loss of once to the finance companies. His intention had been by deceit to induce any person who was charged with the duty of seeing that the credit restrictions then current were observed to act in a way in which lie would not act if he had known the true facts, namely, not to prevent the advancing of large sums of money exceeding the limits allowed by law It, the time. The Court held that the said intention amounted to intend to defraud.

(1) (1903) 1 ch.. 732.

(2) (1960) 1 All. E. R. 260, 264, 266.

594

Hilbery, J., speaking for the court, pointed out the distinction between deceit and defraud and came to the conclusion that ,to defraud” is to deprive by deceit.” Adverting to the argument that the deprivation must be something of value, i. e. economic loss, the learned judge observed

“We have, however, come to the conclusion that this is too narrow at view. While, no doubt, in most cases of an intention to defraud the intention is to cause an economic loss’ there is no reason to introduce any such limitation. Provided that the intention is to cause the person deceived to act to his real detriment, it matters not that lie suffers no economic loss. It is sufficient if the intention is to deprive him of a right or to induce him to do something contrary to what it would have been his duty to do, had lie not been deceived.”

On the basis of the said principle it was held that the accused by deceit induced the finance companies to advance moneys contrary to the credit restrictions and that he was guilty of the offence of forgery. This decision is therefore a clear authority for the position that the loss or, the injury caused to the person deceived need not be economic loss. Even a deprivation of a right without any economic consequences would be enough. This decision has not expressed any definite opinion on the question whether a benefit to the accused without a corresponding loss to the person deceived would amount to fraud. But it has incidentally touched upon that aspect. The learned judge again observed.

“……………………………… This the appellant was doing in order that he might benefit by getting further loans.”

This may indicate that a benefit derived by the 595

person deceiving another may amount to an act to defraud that other.

A full Bench of the Madras High Court , in Kotamraju Venkatrayadu v. Emperor (1) had to consider the case of a person obtaining admission to the matriculation examination of the Madras University as a private candidate producing to the Registrar a certificate purporting to have been signed by the headmaster of it recognized High School that he was of good character land had attained his 20th year. It was found in that case that the candidate had fabricated the signature of the headmaster. The court held that the accused was guilty of forgery. White, C.J., observed : “Intending to defraud means, of course, something more than deceiving.”

He illustrated this by the following example: “A tells B a lie and B believes him. B is deceived but it does not follow that A intended to defraud B. But, as it seems to me, if A tells B a lie intending that B should do something which A conceives to be to his own benefit or advantage, ‘and which, if done, would be to the loss or detriment of B, A intends to defraud B.”

The learned Chief justice indicated his line of thought, which has some bearing on the question now raised, by the following observations :

“I may observe, however, in this connection that by s. 24 of the Code a person does a thing dishonestly who’ does it with the intention of causing wrongful gain or wrongful loss. It is not necessary that there should be an intention to cause both. On the analogy of this definition, it might be said that either an intention

(1) (1905) I.L.R. 28 Mad. 99,96,97.

596

to secure a benefit or advantage on the one hand, or to cause loss or detriment on the other, by means of deceit, is an intent to defraud.”

But, he found in that case that both the elements were present. Benson,J., pointed out at p. 114 : “I am of opinion that the act was fraudulent not merely by reason of the advantage which the accused intended to secure for himself’ by means of his’ deceit, but also by reason of the injury which must necessarily result to the University and, through it to the public from such acts if unrepressed. The University is injured, if through the evasion of its byelaws, it is induced to declare that certain persons have fulfilled the conditions prescribed for Matriculation and are entitled to the benefits of Matriculation, when in fact, they have not fulfilled those conditions, for the value of its examinations is, depreciated in the eyes of the public if it is found that the certificate of the University that they have passed its examinations is no longer a guarantee that they have in truth fulfilled the conditions on which alone the University professes to certify them as passed, and to admit them to the benefis of Matriculation.” Boddam, J., agreed with the learned Chief justice and Benson, J. This decision accepts the principle laid down by Stephen, namely, that the intention to defraud is made up of two elements, first an intention to deceive and second, the intention to expose some person either to actual injury or risk of possible injury but the learned judges were also inclined to hold on the analogy of the definition of “dishonestly” in s. 24 of the Code that intention to secure a or advantage to the deceiver satisfies the second con- dition

597

The Calcutta High Court dealt with this question in Surendra Nath Ghose v. Emperor (1) There, the accused affixed his signature to a kabuliat which was not required by law to be attested by witnesses, after its execution and registration, below the names of the attestings witnesses but without putting a date or alleging actual presence at the time of its execution. The court held that such an act was not fraud within the first clause of s. 464. of the Penal Code inasmuch as it was not done dishonestly or fraudulently within the meaning of ss. 24 and 25 thereof. Mookerjee, J., defined the words “intention to defraud” thus:

“The expression, “intent to defraud” implies conduct coupled with intention to deceive and thereby to injury in other words, “defraud” involves two conceptions, namely, deceit and injury to the person deceived, that is, infringement of some legal right possessed by him, but not necessarily deprivation of property.”

This view is in accord with the English decisions and that expressed by the Full Bench of the Madras High Court. This decision does not throw any light on the other question whether advantage to the deceiver without a corresponding loss to the deceived would satisfy the second ingredient of the expression “intent to defraud”.

A division Bench of the Bombay High Court in Sanjiv Ratnappa v. Emperor (2) had also occasion to consider the scope of the expression “fraudulently” in s. 464 of the Penal Code. The court held that for an act to be fraudulent there must be some advantage on the one side with a corresponding loss on the other. Adverting to the argument that an advantage secured by the deceiver would constitute fraud Broomfield, J., observed thus

“I think in view of the Bombay decisions to which I have referred we must hold that that

(1) (1910) I.T..R. 38 Cal. 75, 89-90. (2) A.I.R. 1932 Bom. 545, 550.

598

is an essential ingredient in the definition of forgery. In the great majority of cases, the point is not very material…………… But there many occasionally be a case in which the element of loss or injury is absent and I think the present is such a case.”

This decision therefore does not accept the view of White C. J., of the Madras High Court.

A Division Bench of the Lahore High Court,, in Emperor v. Abdul had also expressed its view on the meaning of the word “fraudulently.” The learned Judges accepted Stephen’s definition but proceeded to observe as follows

“It may be noted in this connection that the word “‘injury” as defined in s. 44, Penal Code, is very wide as denoting “any harm whatever, illegally caused to any person, in body, mind, reputation or property.”

The learned judges were willing to assume that in almost every case an advantage to one would result in an injury to the other in the widest sense indicated by s. 44 of the Penal Code.

The other decided case cited at the Bar accept the necessity for the combination of a deceit by one and injury to other constitute an act to defraud and therefore, it is not necessary to multiply citations. No other decision cited-at the Bar throws any light on the further question, namely, whether an advantage secured to the deceiver without a corresponding loss to the deceived would satisfy the second condition laid down by the decisions.

To summarize : the expression “‘defraud” inoslves two elements, namely, deceit and injury to the person deceived. injury is something other than

(1) A.I.R. 1944 Lah. 380,382.

599

economic loss that is’, deprivation of property, whether movable or immovable, or of money, and it will include any harm whatever caused to any person in body, mind, reputation or such others. In short, it is a non economic or non- pecuniary loss. A benefit or advantage to the deceiver will almost always cause loss or detriment to the deceived. Even in those rare cases where there is a benefit or advantage to the deceiver, but no corresponding loss to the deceived, the second condition is satisfied.

Now let us apply the said principles to the facts of the present case. Certainly, Dr. Vimla was guilty of deceit, for though her name was Vimla, she signed in all the relevant papers as Nalini and made the insurance company believe that her name was Nalini, but the said , deceit did not either secure to her advantage or cause any non-economic loss or injury to the insurance company. The charge does not disclose any such advantage or injury, nor is there any evidence to prove the same. The fact that Dr. Vimla said that the owner of the car who sold it to her suggested that the taking of the sale of the car in the name of Nalini would be useful for income-tax purposes is not of any relevance in the present case, for one reason, the said owner did not say so in his evidence and for the other, it was not indicated in the charge or in the evidence. In the charge framed, she was alleged to have defrauded the insurance company and the only evidence given was that if it was disclosed that Nalini was a minor, the insurance company might not have paid the money. But as we have pointed out earlier, the entire transaction was that of Dr. Vimla and it was only put through in the name of her made minor daughter for reasons best known to herself. On the evidence as disclosed, neither was she benefited nor the insurance company incurred loss in any sense of the term. In the result, we allow the appeal and hold that the appellant was not guilty of the offence under 600

ss. 467 and 468 of the Indian Penal Code. The conviction and sentence passed on her are set aside. Fine, if paid, is directed to be refunded to the appellant, Appeal allowed.

Specific Performance of an Agreement vitiated by Fraud/Undue Influence.

Comment : In this case the plaintiff sought specific performance on the basis of an agreement to sell. defendant pleaded that the same was voidable on the ground of fraud and undue influence and was not meant to be acted upon and only meant as a security for repayment of debt. Court held mischief of S.92 not attracted – saved by proviso – 1, oral evidence led – undue influence proved as well as fraud – held not entitled to SP. 
Madras High Court
Lakshmi vs Muthusamy on 16 September, 2011

DATED: 16.09.2011

CORAM:

THE HONOURABLE MR.JUSTICE S.NAGAMUTHU

Second Appeal No. 1541 of 1998

and

C.M.P.No.13533 of 2004

1. Lakshmi

2. Sellavel

3. Pachayee … Appellants

VS

Muthusamy …Respondent

. . .

Prayer:- Second Appeal filed under Section 100 of C.P.C against the judgment and decree of the learned I Additional District Judge-cum-Chief Judicial Magistrate, Erode dated 13.02.1998 in A.S.No.27 of 1997 reversing the judgment and decree of the learned Subordinate Judge, Bhavani dated 07.10.1996 in O.S.No. 24 of 1996. . . .

For Appellants : Mr. T.Murugamanicakm

For Respondent : Mr. T.P.Manoharan

. . .

J U D G M E N T

The defendants in O.S.No.24 of 1996 on the file of the Subordinate Judge, Bhavani are the appellants and the plaintiff in the suit is the respondent herein.

2. The said suit was filed for specific performance based on a registered Sale Agreement dated 31.08.1994 entered into between the defendants and the plaintiff. The suit was dismissed by the trial Court. As against the same, an appeal was preferred by the plaintiff in A.S.No.27 of 1997 on the file of the I Additional District Judge cum Chief Judicial Magistrate, Erode. By decree and judgment dated 13.02.1998, the lower appellate Court allowed the appeal thereby setting aside the decree and judgment of the trial Court and decreed the suit as prayed for. As against the same, the defendants are before this Court with this Second Appeal.

3. The case of the plaintiff as could be culled out from the plaint is as follows: The defendants are the absolute owners of the suit property. On 31.08.1994, the defendants entered into a sale agreement with the plaintiff by which the defendants agreed to sell the suit property to the plaintiff for a valuable consideration of Rs.40,000/-. A sum of Rs.30,000/- was paid at the time of execution of the sale agreement itself as advance. The balance of sale consideration was, thus, Rs.10,000/-. As per the agreement, it was agreed upon that the plaintiff should pay the balance of sale consideration within five years from the date of sale agreement and get the sale deed executed in his favour. Ever since the date of agreement, the plaintiff was always ready and willing to perform his part of agreement and to get the sale completed in his favour. But the defendants did not come forward to receive the balance of sale consideration and to complete the sale in favour of the plaintiff. In those circumstances, the plaintiff issued a legal notice on 04.01.1996 to the defendants calling upon them to perform their part of contract. No reply whatsoever was sent by the defendants nor did they come forward to complete the sale in favour of the plaintiff. Therefore, the plaintiff filed the present suit for specific performance.

4. In the written statement, the defendants contended that it is true that they are the absolute owners of the suit property. But it is not true that they intended to sell the suit property to the plaintiff and further they did not execute the sale agreement dated 31.08.1994 with an intention to sell the suit property. Further, it is contended that they have never agreed to sell the suit property for Rs.40,000/- and they did not receive a sum of Rs.30,000/- as stated in the plaint. According to their specific case, the plaintiff is doing money lending business along with few other persons including one Mr.Uthirakumar under the name and style of "Sabari Arul Finance" at Oricheri Pudur village. The second defendant borrowed a sum of Rs.4,000/- from the said finance, thereby agreeing to repay the said amount with interest at the rate of 12%. But the second defendant was not able to pay the interest regularly for the said amount to the said concern. While so, his father had fallen seriously ill due to paralysis. In order to meet out the medical expenses for his ailing father, who was hospitalised in a private hospital at Erode, the second defendant borrowed yet another sum of Rs.10,000/- from the said "Sabari Arul Finance". As per the terms of the loan, the second defendant should have paid a sum of Rs.1,250/- per month for a total period of 10 months. Accordingly, he paid the dues for five months. The balance he could not pay since in the meanwhile, his father died. The balance amount to be paid to the said finance corporation was Rs.9,000/- under the above two transactions, besides interest. Since the second defendant could not pay the said amount, the plaintiff and other partners of the finance corporation along with few others, convened a Panchayat and in the Panchayat they wanted the defendants to execute a sale agreement as though the defendants had agreed to sell the property for Rs.40,000/- as a security for the loan amount. Since the defendants could not meet the pressure brought upon them for repayment of the loan amount and since the above alternative suggestion was believed to be true, they executed the said sale agreement dated 31.08.1994. The defendants were assured even before the execution of the sale agreement that as and when the defendants repay the loan amount of Rs.9,000/- with interest, the sale agreement would be cancelled and returned to them. Believing the same, the defendants executed the sale agreement. It is further stated by the defendants that the property would be worth more than 7,00,000/- . Therefore, according to them, they would not have agreed to sell the property for a paltry sum of Rs.40,000/- only. Therefore, though the sale agreement is a registered document, the same cannot be enforced in law for the reasons stated above. Thus, according to the defendants, the suit is liable to be dismissed.

5. Based on the above pleadings, the trial Court framed the following issues:

"i. Whether the plaintiff is entitled for a decree for specific performance?

ii. Whether the sale agreement dated 31.08.1984 was needed to be acted upon?:

iii. Whether the Panchayat alleged by the defendants is true and if so, whether it would bind the plaintiff?

iv. To what relief the plaintiff is entitled for"

 

6. In order to prove their respective claims, the parties have let in evidence both oral and documentary. On the side of the plaintiff, he was examined as P.W.1 and as many as six documents were exhibited. Ex.A.1 is the sale agreement in question. Ex.A.2 is the legal notice issued by the plaintiff.Exs.A.3 to A.5 are postal acknowledgments. Ex.A.6 is the original title deed standing in the name of Mr.Karuppa Gounder. On the side of the defendants, the second defendant was examined as D.W.1 and one K.L.Periyasamy was examined as D.W.2 and as many as five documents were exhibited. Ex.B.1 and B.2 are the receipts for repayment of the amount towards loan secured by the second defendant to Sabari Arul Finance. Ex.B.3 is the letter from Sabari Arul Finance for repayment of the loan amount. Ex.B4 is the demand notice from the Sabari Arul Finance for repayment of the loan amount and Ex.B.5 is the legal notice issued on behalf of one R.Uthirakumar.

7. Having considered all the above materials, the trial Court dismissed the suit and the same was reversed by the lower appellate Court. That is how, the defendants are before this Court with this second appeal.

8. While admitting the second Appeal, this Court framed the following substantial questions of law:

"1. Whether the judgment of the lower appellate Court is vitiated in that it has not followed the principles laid down in A.I.R.1982 S.C page 1 wherein it has been held that an agreement of sale need not be strictly construed in terms of Section 92 of the Indian Evidence Act, when there is evidence to show that the agreement was intended to be a security for a financial transaction?

2. Whether the lower appellate Court misread the evidence and failed to consider the materials on record in granting the relief of specific performance as prayed for in the plaint ?"

 

9. During the course of hearing, this Court found that an additional substantial question of law in respect of the burden of proof should also be framed. Accordingly, the following additional substantial question of law is framed:

"Whether the lower appellate Court was right in fastening the burden of proof on the defendants that the said sale agreement was obtained by undue influence ?"

10. The learned counsel on either side advanced arguments on the additional substantial question of law as well. As a matter of fact, both the counsel argued the matter on 15.09.2011 at length on all the substantial questions of law as well as on facts and at the request of the learned counsel for the respondent/plaintiff for further arguments, the matter was adjourned from yesterday to toddy. Today also, the learned counsel on either side have advanced arguments at length on all the substantial questions of law including the additional substantial question of law and also placed reliance on a number of judgments, which I will make reference at the appropriate stages of this judgment.

11. The learned counsel for appellants would take me through the oral as well as documentary evidence and submit that though the sale agreement is a registered one, the presumption arising thereof is rebutted by way of documents as well as oral evidence. The learned counsel would submit that the loan transaction between "Sabari Arul Finance" and the second defendant has been duly established. The learned counsel would further submit that the fact that the plaintiff is one of the partners of "Sabari Arul Finance" is also not disputed. The learned counsel would further point out that Mr.Uthirakumar is yet another partner of the said finance concern and he has demanded repayment of Rs.20,000/- from the plaintiff under Ex.A.5. All these aspects, according to the learned counsel, would go to show that the plaintiff was in a dominant position over the defendants and accordingly, they got the sale agreement executed in his favour by undue influence. The said sale agreement is, therefore, voidable, the learned counsel contended. Since the defendants have avoided the said agreement, the same cannot be enforced. Therefore, according to the learned counsel, the lower appellate Court was not right in decreeing the suit.

12. Per contra, the learned counsel appearing for the respondent/plaintiff would vehemently contend that there was no issue before the lower appellate Court about the voidability of the contract on the ground of undue influence. Therefore, according to him, the arguments advanced by the learned counsel for the appellants that the sale agreement is voidable at the option of the defendants on the ground of undue influence, cannot be heard at all. The learned counsel would further submit that when the execution of sale agreement is admitted, the defendants are precluded from letting in any oral evidence contrary to the terms of the contract in view of the bar contained in Section 92 of the Evidence Act. The learned counsel would further submit that since the sale agreement is a registered document and the execution of the same is also not disputed, there shall be a presumption that it contains only the truth and the terms of the contract are, therefore, enforceable in law. The learned counsel would further submit that assuming that the second defendant has secured loan from the finance corporation, namely, "Sabari Arul Finance, it has got nothing to do with the sale agreement. The sale agreement has not been executed in favour of "Sabari Arul Finance" and it has been executed only in favour of the plaintiff. Incidentally, the plaintiff is also a partner of the finance corporation. On that score, according to the learned counsel, it cannot be held that the plaintiff was in a dominant position over the defendants. Thus, according to the learned counsel, the essential requirements of Section 16(3) of the Indian Contract Act have not been in any manner satisfied by the defendants and therefore, the burden has not been shifted upon the plaintiff to prove the absence of undue influence. The learned counsel would further submit that the lower appellate Court has considered all the above facts and has rightly decreed the suit, which does not require any interference at the hands of this Court.

13. I have considered the above submissions. As of now, there is no dispute between the parties that the sale agreement under Ex.A.1 was executed by the defendants in favour of the plaintiff. The main dispute is as to whether the sale agreement was intended to be acted upon and the terms of the agreement are true. In order to resolve this dispute, the question whether the defendants are free to let in any evidence contrary to the terms of the sale agreement, in view of the bar contained in Section 92 of the Indian Evidence Act needs to be answered first. The learned counsel relies on a judgment of this Court in Mrs.K.Rajeswari & Others Vs M.V.Shanmugam reported in 2011-4, Law Weekly, 164, wherein this Court has held in paragraph 13 of the judgment as follows: "As per Section 92 of the Indian Evidence Act, since Ex.A.1 sale agreement is a registered document, the appellants/defendants are excluded from letting in any oral agreement contra to the written registered document. Proviso 3 to Section 92 of the Indian Evidence Act shows that the existence of any separate oral agreement, constituting a condition precedent to the attaching of any obligation under any such contract, grant or disposition of the property, may be proved and so, it is the duty of the appellants/defendants to prove the same. Except the oral ipse dixit of the appellants/defendants and Exs.A.12 and 14, no other document or no supporting evidence is available."

14. There can be no doubt that a party to a contract is debarred from letting in any evidence contradicting, varying, adding to or subtracting from its terms. But there are also provisos to Section 92 of the Indian Evidence Act. The first proviso to Section 92 of the Indian Evidence Act permits letting in any evidence to prove fraud, intimidation, illegality, want of due execution, want of capacity in any contracting party, want or failure of consideration or mistake in fact or law. In the case relied on by the learned counsel, it was not argued before the Court that the facts of the said case would fall within any of the provisos to Section 92 of the Indian Evidence Act. It was in those circumstances, the learned Judge has held that the evidence let in by the party to the contract in order to contradict the terms of contract cannot be permitted.

15. In the case on hand, the facts are totally distinguishable. In this case, in the written statement, it has been very clearly stated that there was no consideration passed at all. Further, it has also been stated that the sale agreement was obtained from the defendants by making a representation that the said sale agreement would never be enforced and as soon as the loan amount is repaid, the same will be cancelled and returned to the defendants. This shows that there was a specific pleading regarding undue influence and fraud played upon the defendants. In such view of the matter, I hold that the evidence let in by the defendants in this case to prove that the sale agreement was not intended to be acted upon since it was not supported by consideration and since it was obtained by undue influence and fraud, cannot be eschewed from consideration. Thus, the first argument of the learned counsel for the respondent based on the judgment of this Court in K.Rajeswari’s case deserves only to be rejected.

16. Nextly, the legal issue involved is the applicability of Section 16 of the Indian Contract Act. The contention of the learned counsel for the appellants is that under Section 16(3) of the Indian Contract Act, the burden is upon the plaintiff to prove the absence of undue influence on his part in the matter of execution of Ex.A.1 sale agreement. To the contra, it is the contention of the learned counsel for the respondent that the burden is only upon the appellants/defendants to prove the same. For this proposition, the learned counsel for the respondent relied on a judgment of the Hon’ble Supreme Court in Krishnamohan Kul alias Nani Charan kul and another Vs Pratima Maity and others reported in (2004) 9 Supreme Court Cases 468. The learned counsel placed reliance on paragraph 12 of the said judgment wherein the Hon’ble Supreme Court has held as follows: "The onus to prove the validity of the deed of settlement was on Defendant 1. When fraud, mis-representation or undue influence is alleged by a party to the suit, normally, the burden is on him to prove such fraud, undue influence or mis-representation. But when a person is in a fiduciary relationship with another and the latter is in a position of active confidence the burden of proving the absence of fraud, mis-representation or undue influence is upon the person in the dominating position, and he has to prove that there was fair play in the transaction and that the apparent is the real, in other words, that the transaction is genuine and bona fide. In such a case, the burden of proving the good faith of the transaction is thrown upon the dominant party, that is to say, the party who is in a position of active confidence. A person standing in a fiduciary relation to another has a duty to protect the interest given to his care and the court watches with jealously all transactions between such persons so that the protector may not use his influence or the confidence to his advantage. When the party complaining shows such relation, the law presumes everything against the transaction and the onus is cast upon the person holding the position of confidence or trust to show that the transaction is perfectly fair and reasonable, that no advantage has been taken of his position. This principle has been ingrained in Section 111 of the Indian Evidence Act."

17. In my considered opinion, this judgment, instead of supporting the case of the plaintiff, would only go to support the case of he appellants/defendants. That was a case where the fiduciary relationship between the plaintiff and the defendant was pleaded. In those circumstances, the Hon’ble Supreme Court has held that it is the initial burden of the party, who pleads such relationship to prove the same. In our case, what is pleaded is not fiduciary relationship between the plaintiff and the defendants, instead it is pleaded that the plaintiff was in a position to dominate the will of the defendants to obtain unfair advantage over the defendants. Before discussing this issue further, let me extract Section 16 of the Indian Contract Act, which reads as follows: "16. ‘Undue influence’ defined: (1) A contract is said to be induced by "undue influence" where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.

2. In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another:

a. where he hold a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or

b. where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.

(3) Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be inconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other. "

18. A close reading of Section 16 would go to show that sub-section (2) creates a fiction of domination on the part of certain persons on the will of others. Sub-Section 2 (a) states that where a person holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other, it shall be deemed that such person is in a position to dominate the will of the other. Therefore, what is required of for the defendants in this case is to prima facie prove the real or apparent authority of the plaintiff over the defendants. It needs to be underlined that it is not required in all cases that in order to presume domination the authority should be proved to be real. Instead, according to sub-Section 2(a) of the Indian Contract Act, it would be suffice if an "apparent authority" over the other is proved.

19. In this case, the plaintiff is admittedly a partner of the finance corporation, namely "Sabari Arul Finance". From Exs.B.1 to B.4, it has been clearly established that the second defendant had borrowed money and he was not in a position to repay the same. It is also not in dispute that the second defendant’s father was suffering from paralysis and he was in the hospital undergoing treatment and ultimately, he died. Thus, it has been established that the second defendant was in need of money to meet the medical expenses of his father. The first loan secured by the second defendant was prior to 02.08.1994. Ex.B.1 would go to show that a sum of Rs.10,000/- had been borrowed by the second defendant from "Sabari Arul finance". The term of repayment is ten installments. On 02.08.1994, the second defendant has paid a sum of Rs.1,250/- towards monthly installment. This document is not in dispute. Ex.B.2 is another receipt issued by "Sabari Arul Finance" for repayment of loan amount on 29.10.19904. Ex.B.1 relates to the loan account No.69 whereas Ex.B.2 relates to the loan account No.104. As per Ex.B.1, the principal amount was Rs.10,000/- whereas according to Ex.B.2, the principal amount is Rs.4,000/- Therefore, these two receipts relate to two different loans extended by "Sabari Arul Finance" to the second defendant. Thus, it is crystal clear that even before the execution of Ex.A.1, sale agreement, the second defendant had secured loan from "Sabari Arul Finance". Ex.B.3 is a letter from "Sabari Arul Finance" dated 09.02.95. In the said letter, it has been stated that though the second defendant secured loan four years before, the same was not repaid in toto. This would go to clearly show that from 1991 onwards the loan amount was due from the second respondent to "Sabari Arul finance". Ex.B.4 is yet another letter dated 11.01.1995 from "Sabari Arul Finance". In this letter, it is clearly stated that the loan amount secured by the second defendant was Rs.10,000/-. It is further stated in the said letter that unless the amount was repaid within four days, action would be taken against him. Ex.B.5 is a legal notice issued by one R.Uthirakumar, who is admittedly a partner of the said Finance corporation. It is dated 08.07.1995. It is stated in the said notice that on 10.07.1994, the second defendant borrowed a sum of Rs.20,000/- and executed a promissory note to repay the same with interest at the rate of 12% p.a. It is further stated in the said notice that despite demand, the amount had not been repaid and therefore, legal action would be taken for the same. All these documents would clearly go to show that atleast from the year 1991, the second defendant had fallen in huge arrears towards the loan obtained from "Sabari Arul Finance", in which, the plaintiff and one Uthirakumar are the partners. During cross examination, P.W.1 has tacitly admitted that he was a partner of the said finance corporation besides Uthirakumar. It is also in evidence that the second defendant and his family members were in a financial crunch and they were not in a position to repay the loan amount. The plaintiff and Uthirakumar being the creditors, were, therefore, in a dominating position over the defendants. From the evidences available, it has been clearly established by the defendants that the plaintiff was holding authority over the defendants which is,if not real, atleast apparent. Once this is so proved, it shall be deemed as per Section 16(2) of the Indian Contract Act, that the plaintiff was in a position to dominate the will of the defendants. Thus, the defendants have satisfied the legal requirements of Section 16 of the Indian Contract Act. Thus, they have proved undue influence.

20. The learned counsel for the respondent would submit that mere proof of domination over the will of the defendants would not be sufficient and instead it is the duty of the defendants to prove that the sale agreement was not executed for consideration. This argument is based on Section 101 of the Evidence Act. In my considered opinion, but for the special rule of evidence, provided in Section 16 of the Indian Contract Act, Section 101 of the Evidence Act would have come to rescue the plaintiff. Section 101 of the Evidence Act is a general provision relating to the burden of proof whereas Section 16 of the Contract Act is a special provision in respect of the burden of proof of undue influence in the matter of a contract. Therefore, Section 16 of the Contract Act shall have overriding effect over Section 101 of the Evidence Act. A close reading of Section 16 (2) of the Contract Act would go to show that once the initial burden of proving the position of the plaintiff to dominate the will of the defendant is discharged, the burden is shifted on the plaintiff to prove absence of undue influence. In other words, onus is cast upon the plaintiff to prove that the transaction was fair, reasonable and true (See para 12 of the judgment of the Hon’ble Supreme Court in Krishnamohan Kul ‘s case cited supra)

21. Now, the question is whether the plaintiff has discharged the burden of proving absence of undue influence. The plaintiff has examined only himself to speak about the execution of the sale agreement and he has not examined any other person including the attestors of the document to speak about the genuineness of the sale agreement. But the contention of the learned counsel for the respondent is that since the sale agreement (Ex.A.1) is a registered document, there shall be a presumption that the contents of the said document are true and genuine. For this proposition, the learned counsel relied on a judgment of the Hon’ble Supreme Court in Vimal chand Ghevarchand Jain and others VS Ramakant Eknath Jadoo reported in (2009) 5 Supreme Court Cases, 713. In paragraph 36 of the said judgment, the Hon’ble Supreme Court has held as follows: " If the appellants were able to prove that the deed of sale was duly executed and it was neither a sham transaction nor represented a transaction of different character, a suit for recovery of possession was maintainable. A heavy onus lay on the respondent to show that the apparent state of affairs was not the real state of affairs. It was for the defendant in a case of this nature to prove his defence. The first appellate court, therefore, in our opinion, misdirected itself in passing the impugned judgment insofar as it failed to take into consideration the relevant facts and based its decision on wholly irrelevant consideration."

22. Placing reliance on the said judgment of the Hon’ble Supreme Court, the learned counsel would submit that since in this case, Ex.A.1 is a registered sale agreement, there shall be a presumption of the genuineness of the document and the burden to prove the contrary is upon the defendants. The said argument, though attractive, does not persuade me. The presumption as stated in the judgment of the Hon’ble Supreme Court is very limited, only to presume the execution of the sale agreement and thereafter, the onus will be on the respondent to show that the apparent state of affairs was not the real state of affairs. That is not a case where Section 16 of the Indian Contract Act which provides for the burden of proof of absence of undue influence, was dealt with by the Hon’ble Supreme Court. That is a case where the Hon’ble Supreme Court was concerned with Sections 91, 92 ,103 and 114 of the Evidence Act. As I have already stated, in this case, though there may a presumption of execution of Ex.A.1, that will not be suffice for the plaintiff to contend that the transaction indicated in the said sale agreement is true and genuine in view of Section 16 of the Indian Contract Act. In this case, since the defendants have proved the position of the plaintiff to dominate the will of the defendants, the burden to prove absence of undue influence is very heavy upon him. Therefore, the judgment of the Hon’ble Supreme Court relied on by the learned counsel for the respondent does not in any manner go to advance the case of the plaintiff. It is not explained to the Court as to why the other persons, such as, the attestors of Ex.A.1 who would have witnessed a sum of Rs.30,000/- being paid by the plaintiff to the defendants and in respect of the other terms agreed upon between the parties have not been examined. Even the scribe has not been examined. In the absence of any other witness, who was a witness to the sale agreement being entered into between the plaintiff and the defendants, in my considered opinion, going by the factual background such as the dominating role the plaintiff had over the defendants, I am of the view that it is not safe to rely on the evidence of P.W.1 alone to hold absence undue influence on the part of the plaintiff. Thus, in my considered opinion, the plaintiff has failed to discharge his burden of proving the absence of undue influence and thus the transaction is genuine.

23. As per Section 19(A) of the Indian Contract Act, if an agreement for sale has been obtained by undue influence, it is voidable and the same can be avoided at the option of the party whose consent was so caused by undue influence. In this case, by filing the written statement, the defendants have avoided the contract. Therefore, in law, the said contract cannot be enforced.

24. At this juncture, I have to refer to the next argument advanced by the learned counsel for the respondent, who would submit that though fraud is also alleged, the same has not been proved. A perusal of the written statement would go to show that there was a plea that fraud was played upon the defendants to execute the sale agreement in as much as the defendants gave assurance that the sale agreement would be kept without enforcing and the same would be returned if the loan amount is repaid. Thus, by giving false assurance amounting to fraud, the document was obtained.

25. There is no special provision in the Indian Contract Act regarding the burden of proof of fraud. There is no legal presumption in favour of the person who pleads fraud. As per Section 101 of the Evidence Act, fraud is a fact which is to be proved by the person who pleads fraud. Section 17 of the Indian Contract Act defines fraud as follows: "Fraud" means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent or to induce him to enter into the contract"

1. the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;

2. the active concealment of a fact by one having knowledge or belief of the fact;

3. a promise made without any intention of performing it;

4. any other act fitted to deceive;

5. any such act or omission as the law specially declares to be fraudulent.&

26. Here, sub-Section 3 of Section 17 needs to be underlined, which suggests that a promise made without any intention of performing it amounts to fraud. In this case, according to the defendants, a promise was made that the sale agreement will be kept as a security and the same would be returned to the defendants as soon as the loan amount was repaid. According to the learned counsel for the respondent, this aspect has not been proved by the defendants at all. The learned counsel would point out that though it is alleged that the sale agreement was obtained at the instance of Panchayatdars, no Panchayatdar has been examined. I find some force in the argument of the learned counsel for the respondent in this regard. In this regard the defendants would have examined the Panchayatdars. However they have examined an independent witness as D.W.2. His evidence would go to show the circumstances under which the sale agreement Ex.A.1 was executed. The circumstances, which I have culled out herein above, the position of the defendants and the evidence of D.Ws 1 and 2 would all go to prove that a false assurance was given by the plaintiff that the sale agreement would be returned as soon as the repayment of loan amount was made. Thus, in my considered opinion, the defendants have also proved fraud on the part of the plaintiff.

27. Yet another contention of the learned counsel for the respondent is that there was no issue regarding undue influence and fraud and thus the plaintiff had no occasion to meet the said pleas. I have given my anxious consideration to this submission; but I find no force in the same for, there were pleadings, the parties had identified the disputes (issues), contested the same and let in evidence. So, absence of an issue in this respect has not caused any prejudice to the plaintiff resulting in failure of justice. Therefore, this argument is rejected.

28. Lastly, one of the terms of Ex.A.1 needs to be considered. According to the same, out of the total consideration fixed at Rs.40,000/-, a sum of Rs.30,000/- was paid and the balance of Rs.10,000/- was to be paid in five years . It needs to be noticed that the plaintiff is not a poor man. He was doing money lending business. He was also a partner of the "Sabari Arul Finance". Whether such an affluent person would have gained five years’ time to pay a paltry sum of Rs.10,000/- is another suspicious circumstance. D.Ws.1 and 2 would say that the property would be worth more than Rs.7,00,000/- whereas, the sale agreement was entered into only for partly sum of Rs.40,000/- . This also creates some more doubt about the genuineness of Ex.A.1.These suspicious circumstances also go to support the case of the defendants.

29. In view of the foregoing discussions, I hold that Ex.A.1 is not a genuine document and it is voidable because it suffers from the vices of undue influence as well as fraud. Therefore, there can be no decree passed for specific performance based on the said document. Accordingly, I answer all the substantial questions of law. The lower appellate Court has failed to consider these aspects in their proper perspective.

30. In the result, the appeal is allowed; the decree and judgment of the lower appellate Court is set set aside and the suit shall stand dismissed. No costs. Connected miscellaneous petition is closed.

Specific Performance of an Agreement executed by Vendor alone

Supreme Court of India
Alka Bose vs Parmatma Devi & Ors. on 17 December, 2008
Author: P Sathasivam
Bench: R.V. Raveendran, P. Sathasivam

SUPREME COURT OF INDIA

RECORD OF PROCEEDINGS

CIVIL APPEAL NO(s). 6197 OF 2000

ALKA BOSE Appellant (s)

VERSUS

PARMATMA DEVI & ORS. Respondent(s) Date: 17/12/2008 This Appeal was called on for judgment today. For Appellant(s) Mr. Ranjan Mukherjee,Adv.

For Respondent(s) Mr. Shekhar Prit Jha,Adv.

Hon’ble Mr. Justice P. Sathasivam pronounced the judgment of the Bench comprising Hon’ble Mr. Justice R.V. Raveendran and Hon’ble Mr. Justice P. Sathasivam.

The appeal is dismissed in terms of the signed judgment. No costs.

(R.K.DHAWAN) (VEERA VERMA) COURT MASTER COURT MASTER (Singed Reportable judgment is placed on the file)

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 6197 OF 2000

Aloka Bose …. Appellant (s) Versus

Parmatma Devi & Ors. …. Respondent(s) JUDGMENT

P. Sathasivam, J.

1) Challenge in this appeal is to the order dated 7.9.1999 passed by the Division Bench of the High Court of Patna, Ranchi Bench allowing L.P.A. No.29 of 1993 (R) filed by Smt. Parmatma Devi – first respondent herein. 2) The facts of the case, in a nutshell, are as follows: By virtue of a written agreement of sale on 7.9.1979, one Kanika Bose (since deceased) had agreed to sell to the first respondent the southern portion of house being Holding No. 786-C, Ward No.1, Mohalla Barmasia under Giridih Municipality for a consideration of Rs.34,500/-. The first respondent paid a sum of Rs.2001/- as earnest money and part payment and a further sum of Rs.2000/- on 10.10.1979 to Kanika Bose on a condition that the sale deed would be executed within three months and balance consideration money would be paid at the time of execution of the sale deed. As Kanika Bose did not execute the sale deed, on 6.12.1979, the first respondent instituted suit being T.S. No. 54 of 1979 for specific performance in the Court of Subordinate Judge, Giridih, Bihar. In the said suit, the defendant – Kanika Bose filed her written statement denying the averments made in the plaint. By judgment dated 28.09.1983, the subordinate Judge, Giridih decreed the suit against the defendant. Challenging the said decree, the defendant preferred a first appeal before the High Court of Patna, Ranchi Bench and the same was registered as First Appeal No. 111 of 1983 (R). By judgment dated 04.10.1993, learned single Judge allowed the first appeal and dismissed the suit. Against the said judgment, the first respondent herein filed L.P.A. No. 29 of 1993(R). A Division Bench of the High Court, by the impugned judgment dated 7.9.1999 allowed the said L.P.A. by setting aside the judgment dated 4.10.1993 passed by the learned single Judge and restoring the judgment and decree of the trial court. Aggrieved by the said judgment, Kanika Bose-the defendant has preferred this appeal by way of special leave before this Court. Pending appeal, Kanika Bose died on 27.5.2007. On an application for bringing the legal heirs on record, three legal representatives were brought on record i.e., Aloka Bose as appellant and other two legal heirs as proforma respondent Nos. 2 & 3. 3) We have heard Mr. Ranjan Mukherjee, learned counsel appearing for the appellant. On the contentions urged, the following points arise for consideration in this appeal:

i) Whether an agreement of sale (Ext.2) executed only by the vendor, and not by the purchaser, is valid?

ii) Whether the plaintiff has satisfied and established her case for decree for specific performance under Section 16(c) of the Specific Relief Act, 1963. 4) The main contention urged on behalf of the defendant is that the signature found in the agreement was forged and in any event, in the absence of signature of the purchaser, Ext.2 is neither a complete nor a valid agreement; and consequently the plaintiff is not entitled to enforce the same. In this respect, it is relevant to point out that the learned trial Judge framed specific issues, namely, Issue Nos. 5 and 6 and discussed the same in detail. In the plaint, the plaintiff has asserted that an agreement of sale was duly executed by the defendant and she had put her signature in token of its execution after receiving the earnest money. In order to prove the genuineness of the agreement of sale (Ext.2), the plaintiff has asserted that defendant had executed the said agreement. She also got the signature of the defendant in the agreement of sale Ext.2 examined and compared with the admitted signature of the defendant through handwriting expert P.W.1 Syed Ekbal Taiyab Hussain Raza who opined that the signature on the agreement of sale as well as specimen signatures of the defendant are one and the same. Apart from the expert evidence, plaintiff has also produced P.W.3 – Shankar Lal, a land broker, who asserted on oath that the defendant had put her signature in the agreement of sale. Apart from this, P.W. 4 – Jagdish Prasad, brother of the plaintiff’s husband and P.W. 9 – Ishwari Prasad Budholia, husband of the plaintiff also asserted that the defendant Kanika Bose had put her signature in the agreement of sale in their presence. As stated earlier, it is not the case of the defendant that she did not put any signature in the agreement of sale. On the other hand, she had given an explanation how her signature was obtained on a blank paper. Though defendant has also examined one expert D.W. 2 S.K. Chatterjee, the trial Court has concluded that the said D.W.2 has not compared all the signatures alleged to have been put by the defendant in the agreement of sale nor examined those endorsements which are alleged to be made by the defendant Kanika Bose. Since the trial Court analyzed and compared the opinion of two experts with materials placed before them and preferred to accept the opinion of expert examined by the side of the plaintiff, there is no reason to dispute the said conclusion. In the light of the controversy the Division Bench of the High Court also compared the signature found in other documents such as vakalatnama, written statement with that of the signature found in Ext.2 and concluded that the signature found in the agreement of sale was that of the defendant Ms. Kanika Bose. We are of the view that there is no valid reason to disturb the above factual finding based on acceptable materials. The learned Single Judge of the High Court committed an error in taking a contrary view. 5) The defendant submitted that a contract for sale, like any other contract, is bilateral in nature under which both vendor and the purchaser have rights and obligations. It is submitted that an agreement for sale being a contract for sale, creating a right in the purchaser to obtain a deed of conveyance in terms of the agreement under which, the vendor agrees to convey to the purchaser, and the purchaser agrees to purchase, the subject-matter of the agreement for an agreed consideration, subject to the terms and conditions stipulated in the said agreement, it is bilateral. It is therefore contended that an agreement of sale is neither complete nor enforceable unless it is signed by both parties. 6) Certain amount of confusion is created on account of two divergent views expressed by two High Courts. In S. M. Gopal Chetty vs. Raman [AIR 1998 Madras 169], a learned Single Judge held that where the agreement of sale was not signed by the purchaser, but only by the vendor, it cannot be said that there was a contract between the vendor and the purchaser; and as there was no contract, the question of specific performance of an agreement signed only by the vendor did not arise. On the other hand, in Md. Mohar Ali vs. Md. Mamud Ali [AIR 1998 Gauhati 92], a learned Single Judge held that an agreement of sale was an unilateral contract (under which the vendor agreed to sell the immovable property to the purchaser in accordance with the terms contained in the said agreement), that such an agreement for sale did not require the signatures of both parties, and that therefore an agreement for sale signed only by the vendor was enforceable by the purchaser.

7) We find that neither of the two decisions have addressed the real issue and cannot be said to be laying down the correct law. The observation in Md. Mohar Ali (supra) stating that an agreement of sale is an unilateral contract is not correct. An unilateral contract refers to a gratuitous promise where only party makes a promise without a return promise. Unilateral contract is explained thus by John D. Calamari & Joseph M. Perillo in The Law of Contracts (4th Edition Para 2-10(a) at pages 64-65):

"If A says to B, `If you walk across the Brooklyn Bridge I will pay you $ 100,’ A has made a promise but has not asked B for a return promise. A has asked B to perform, not a commitment to perform. A has thus made an offer looking to a unilateral contract. B cannot accept this offer by promising to walk the bridge. B must accept, if at all, by performing the act. Because no return promise is requested, at no point is B bound to perform. If B does perform, a contract involving two parties is created, but the contract is classified as unilateral because only one party is ever under an obligation."

All agreements of sale are bilateral contracts as promises are made by both – the vendor agreeing to sell and the purchaser agreeing to purchase. On the other hand, the observation in S.M. Gopal Chetty (supra) that unless agreement is signed both by the vendor and purchaser, it is not a valid contract is also not sound. An agreement of sale comes into existence when the vendor agrees to sell and the purchaser agrees to purchase, for an agreed consideration on agreed terms. It can be oral. It can be by exchange of communications which may or may not be signed. It may be by a single document signed by both parties. It can also be by a document in two parts, each party signing one copy and then exchanging the signed copy as a consequence of which the purchaser has the copy signed by the vendor and a vendor has a copy signed by the purchaser. Or it can be by the vendor executing the document and delivering it to the purchaser who accepts it. Section 10 of the Act provides all agreements are contracts if they are made by the free consent by the parties competent to contract, for a lawful consideration and with a lawful object, and are not expressly declared to be void under the provisions of the Contract Act. The proviso to section 10 of the Act makes it clear that the section will not apply to contracts which are required to be made in writing or in the presence of witnesses or any law relating to registration of documents. Our attention has not been drawn to any law applicable in Bihar at the relevant time, which requires an agreement of sale to be made in writing or in the presence of witnesses or to be registered. Therefore, even an oral agreement to sell is valid. If so, a written agreement signed by one of the parties, if it evidences such an oral agreement will also be valid. In any agreement of sale, the terms are always negotiated and thereafter reduced in the form of an agreement of sale and signed by both parties or the vendor alone (unless it is by a series of offers and counter-offers by letters or other modes of recognized communication). In India, an agreement of sale signed by the vendor alone and delivered to the purchaser, and accepted by the purchaser, has always been considered to be a valid contract. In the event of breach by the vendor, it can be specifically enforced by the purchaser. There is, however, no practice of purchaser alone signing an agreement of sale.

8) The defendant next contended that the agreement of sale in this case (Ex.2) was clearly in a form which required signatures of both vendor and purchaser. It is pointed out that the agreement begins as : "Agreement for sale between Kanika Bose and Parmatma Devi" and not an "Agreement of sale executed by Kanika Bose in favour of Parmatma Devi". Our attention is also drawn to the testimonium clause (the provision at the end of the instrument stating when and by whom it was signed) of the agreement, which reads thus : "In witnesses whereof, the parties hereto have hereunto set and subscribed their respective hands and seals on these presents." It is therefore contended that the agreement specifically contemplated execution by both parties; and as it was not so executed, it was incomplete and unenforceable. We have carefully examined the agreement (Ex.2), a photocopy of which is produced. The testimonium portion in the agreement is in an archaic form which has lost its meaning. Parties no longer `subscribe their respective hands and seals’. It is true that the format obviously contemplates signature by both parties. But it is clear that the intention of the parties was that it should be complete on signature by only the vendor. This is evident from the fact that the document is signed by the vendor and duly witnessed by four witnesses and was delivered to the purchaser. Apart from a separate endorsement made on the date of the agreement itself (7.9.1979) by the vendor acknowledging the receipt of Rs.2001 as advance, it also contains a second endorsement (which is also duly witnessed) made on 10.10.1979 by the vendor, acknowledging the receipt of a further sum of Rs.2000 and confirming that the total earnest money received was Rs.4001. This shows that the purchaser accepted and acted in terms of the agreement which was signed, witnessed and delivered to her as a complete instrument and that she then obtained an endorsement thereon by the vendor, in regard to second payment. If the agreement was not complete, the vendor would not have received a further amount and endorsed an acknowledgement thereon on 10.10.1979. Apart from the above, the evidence of the witnesses also shows that there was a concluded contract. Therefore, even though the draftsman who prepared the agreement might have used a format intended for execution by both vendor and purchaser, the manner in which the parties had proceeded, clearly demonstrated that it was intended to be executed only by the vendor alone. Thus we hold that the agreement of sale (Ext. 2) signed only by the vendor was valid and enforceable by the purchaser.

9) The trial Court as well as the Division Bench of the High Court on the analysis of the materials in the form of oral and documentary evidence concluded that the vendee had performed her part by paying the earnest money and sent a notice conveying her willingness and readiness to pay the balance of sale consideration. The said notice was acknowledged by the defendant. The clauses in the agreement clearly show that the vendor had to perform and fulfill the terms of agreement by executing the sale deed on receipt of the consideration. We have already adverted to the fact that the vendee had performed her part of the contract.

10) The trial Court and the Division Bench also concluded that the plaintiff had fulfilled the conditions as stated in Section 16(c) of the Specific Relief Act and in that event the plaintiff is entitled decree for specific performance which was rightly granted by the trial Court. Though learned counsel for the appellants pointed out that the claim of the plaintiff that she was put in possession of a portion of the suit property in part performance was not accepted by the trial Court, in the light of the categorical findings about the validity of Ext. 2 and satisfactory proof of other conditions for granting the decree for specific performance, we are unable to accept the said contention. On the other hand, we agree with the conclusion arrived at by the Division Bench and hold that the agreement of sale was enforceable and the trial Court has rightly granted decree which was affirmed by the Division Bench of the High Court.

11) Looked at from any angle, the judgment of the Division Bench of the High Court setting aside the order of the Single Judge and affirming the judgment and decree of the trial Court, does not warrant any interference by this Court. Consequently, the appeal fails and the same is dismissed. No costs.

…………………………………J.

(R.V. Raveendran)

…………………………………J.

New Delhi; (P. Sathasivam)

December 17, 2008.