TaxTMI 
TaxTMI 
1984 (12) TMI 336
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....ut by undue influence, coercion and fraud. According to the appellant, the first respondent, her Manager Venkatarama Naidu and her husband (appellant's husband) were in a position to dominate her will having regard to the relative positions they occupied as against her. It is her further case that Ex. B 2 transaction is a most unconscionable one under which the first respondent had obtained an unfair advantage. She further alleged that she is an illiterate and at the time of execution and registration of Ex. B 2, she was not apprised of the nature and particulars of the transaction. Her further complaint is that D. W. 4, the first respondent's manager threatened that if Ex. B 2 sale deed was not executed, both her husband and herself would be sent to jail. It is her further case that the second respondent's guardian was quite aware of the fact that Ex B 2 sale is void and unenforceable and, therefore, the second respondent is not a bona fide purchaser for value. She also stated that she is the real owner of the suit property and the stand taken by the first respondent that she is benamidar for her husband is wholly baseless. 4. The first respondent's defence is t....
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....purchased the suit property for proper value without any notice of any defect in title. 5. O. S. 144 of 1968 is by the first respondent herein against the appellant and her husband for recovery of Rs. 1186-63 being the principal and interest due on Ex. B 1, promissory note dated 20-7-1965, executed for Rs. 9672-51 representing the balance due by the appellant's husband in respect of Rs. 25000 for which he had to account to the first respondent. It is unnecessary to refer to the defence taken by the appellant's husband in this action because though the trial Court dismissed the suit even as against him, he did not prefer any appeal against the judgment and decree made by the learned single Judge of this Court in A. S. 844 of 1971 setting aside the order of dismissal. It is needless to state that the judgment and decree of the learned single Judge of this Court had become final vis-a-vis the appellant's husband (first defendant in O. S. 144 of 1968). The appellant's defence in that action is that she did not execute Ex. B 1; nor did she receive any consideration therefore; even otherwise the consideration under it is illegal, void and opposed to public policy and t....
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....the suit pronote is true? 2. Whether the suit pronote was executed in the circumstances as mentioned in the written statement of defendants 1 and 2? 3. Whether it is not supported by consideration? 4. Whether it is illegal and opposed to public policy? 5. To what relief if any is plaintiff entitled? The trial Court held issues 1 to 4 in favour of the appellant and her husband the other defendant in the suit and therefore dismissed the suit with costs. 8. On appeal, the learned single Judge of this Court framed four points for determination and they are : - 1. Whether it is true that P.W. 4 had misappropriated the amounts belonging to the appellant with regard to her business as Burmah Shell agent? 2. Whether the execution of Ex. B 2 sale deed by P.W. 1 is vitiated by exercise of undue influence, coercion and fraud? 3. Whether the property at Tindivanam sold under Ex. B 2 to the appellant was the absolute property of P.W.1 in whose name the title deed stood or was it purchased by P.W. 4 out of his funds in the name of P.W. 1 not intending to make P.W. 1 the exclusive beneficial owner of the said property? and....
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....ned trial Judge. If so, the principle enunciated by the Supreme Court will operate with more vigour here than in a case where both the trial Judge and the learned single Judge of this Court sitting in first appeal concurred with the findings of facts. 11. As the appeal L.P.A. 77 of 1978 is more comprehensive, we propose to deal with it in the first instance. It is also convenient to advert to the defence taken by the second respondent even at the outset. His principal defence is that he is a bona fide purchaser for value without any notice of any defect in title. We may add that as regards the other defence, viz. the appellant is only a benamidar for her husband, it would be dealt with by us in due course. It is needless to state that even if the defence of the first respondent were to be negatived yet the second respondent is entitled to succeed if he were to successfully establish his defence that he is a bona fide purchaser for value as aforesaid. 12. The immediate question that arises for consideration is whether the appellant had adduced proof of the second respondent's guardian's knowledge of the defect in title, In the instant case, we find that there is intrin....
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....espondent is stated in Ex. A 41 and asserted by D.W. 6 in his cross-examination. The evidence of D.W. 6 is that he was not shown as guardian in Ex. B 34, that his mother (the second respondent's grandmother) is the guardian of the second respondent and that it is the said grandmother who gave the reply Ex. A 41. It is also essential to notice at this stage that it is not the case of the second respondent that though the grandmother is the guardian D.W. 6 looked after, all the transactions since negotiation till the execution and registration of Ex. B 35 because the said guardian is very old. For a reference to Ex. A 41 discloses that the said reply was sent under instructions of the minor's grandmother. We had just now referred to the evidence of D.W. 6 in cross examination. He also asserted that it is his mother who is the guardian and gave instructions contained in Ex. A 4 1, reply notice obviously meaning that instructions were given by her to the counsel. While so, there is every force in the contention advanced by Mr. Kesava Aiyangar, learned counsel for the appellant, that in the light of the above admitted evidence, non-examination of the minor's grandmother is f....
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....-title and that though he saw Ex. B 2, he did not care to read the contents thereof. He further deposed that he does not know in whose favour the prior title stood and under what circumstances the sale deed came to be executed by the predecessor-in-title, obviously referring to Ex. B 1. Even in the chief examination he would add that because the first respondent was doing business in a large scale, he thought that he could purchase the property. This admission on the part of D.W. 6 is enough to conclude that no enquiry at all was made on behalf of the minor purchaser notwithstanding that the documents themselves reveal that defect. If, according to D.W. 6, D.W. 4 was simply trusted and D.W. 4 brought about all the transactions resulting in the execution and registration of Ex. B 35, it is reasonable to infer that the minor's guardian is not a bona fide purchaser for consideration without notice of the defect. In the last but the third and fourth paras of the judgment of the learned single Judge, of this Court, this aspect has been dealt with. According to the learned Judge : "There is absolutely nothing to indicate that a perusal of the sale deed Ex. B. 2 by any person....
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.... is the registration copy of Ex. B. 35. A reference to Ex. A. 38 shows that the registration copy was applied for on 1-6-1966 and it was prepared and delivered on 3-6-1966. As between 3-6-1966 and 25-7-1966 when Ex.A. 41 was issued, the interval was only about 2 months. It is pertinent to notice what P.W. 1deposed is: (Matter in Vernacular omitted - Ed.) Factually P.W. 1 made no reference to Ex.A. 37 when she said that she gave notice 2 months after. On the other hand, her evidence is so clear that she gave notice 2 months after she obtained the registration copies of Ex. B. 2. and B. 35. If so, the reasoning of the learned Judge referred to above cannot be sustained. It is true that P.W. 1 had stated that the second defendant came to her daughter's house and asked her whether she (second defendant) could purchase the suit property for which she (P.W. 1) told her that since the said property is involved in a case, she should not purchase the same. The learned Judge is not right when he stated that P.W. 3 had deposed that P.W. 1 did not come to his house at all during the relevant period for his evidence is - (Matter in Vernacular omitted - Ed.) -14. It i....
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....wife and husband, or concubine and paramour, the payment of consideration by the husband or paramour, as the case may be, would not be decisive, for, it is most likely that the husband or paramour intended to benefit the wife or the concubine. We had already referred to the inconsistency as regards source of title to P.W. 1 or P.W. 4 as between Ex. B. 2 and. Ex. B. 35. We recall the same at this juncture to point out that there is no consistency in the defence on this vital aspect. In Ex. B. 2, it is recited that out of the earnings of P.W. 4, the suit property was purchased. However, nothing was elicited from P.W. 4, as to the date of his employment, particular of his employment, particulars of - his salary and his savings. It has to be immediately pointed out that none of the defence witnesses had ever spoken to these relevant matters. Thus, no satisfactory evidence is placed before the Court in proof of the means of P.W. 4 at the time of purchase under Exs. A. 2 and A. 3. It may not be out of place to point out that from the evidence it is possible to conclude that P.W. 4 would not have been in employment at the time of Exs.A. 2 and A. 3. According to D. W. 5. P.W. 4 had 18 year....
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....d to her or not." Two possibilities emerge from the above observations. The first is that he did not want to disturb the finding of the learned trial Judge while the other is that the learned Judge would have proceeded on the assumption that the real owner is P.W. 1, but yet her case regarding undue influence, coercion and fraud was not established. 17. According to Mr. Kesava Aiyangar, learned counsel for the appellants, the respondents restricted their defence that P.W. 4 is the real owner but failed to plead a case in the alternative to the effect that even assuming that P.W. 1 is the real owner, yet the case of undue influence and coercion is not true. He would further submit that in the absence of an alternative pleading, the Court shall not look into the evidence on this aspect. Relying upon the decision in Atta Md. v. Emperor, AIR 1930 PC 57 (2), the learned counsel would urge that the prohibition is addressed to the Court whereby the Court is refrained from looking into the evidence because there is no pleading on that matter. A proper reading of the written statement filed by the first respondent clearly shows that though such an alternative plea is not expressly ple....
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....udge and point No. 4 as formulated by the learned Judge of this Court. 20. Before we proceed to assess the evidence in this case, it is useful to look at the position of law. Immediately it has to be noticed that the appellant's case is not that the document is void ab initio as offending S. 23 of the Contract Act, but is voidable by virtue of undue influence, coercion and fraud practiced on her both by P.W. 4 and D.W. 4. S. 16 of the Contract Act defines what is undue influence. S. 16 reads as follows - "16(1) A contract is said to lie 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 holds 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 permane....
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....he ingredients referred to in S. 16(3) were to be established by the appellant the burden would be on the respondents to satisfactorily prove that Ex.B. 2 sale was not induced by undue influence. The concomitant position is that if the burden is not discharged, the presumption shall prevail. It is further significant to notice that either on the evidence or on the face of the transaction it is enough if it appeared to be unconscionable. In other words, it is enough for the appellant to substantiate that the transaction was prima facie unconscionable and that she was under the domination of her husband P.W. 4 and the, first respondent's manager D.W. 4. To put it differently, positive proof that the transaction is unconscionable is dispensed with to raise a statutory presumption and the statutory presumption would be in force until the burden is rebutted. According to the learned counsel for the appellant, this import of Cl. (3) of S. 16 was not noticed by the learned Judge of this Court and the result was the learned Judge threw the burden wrongly on appellant. This, according to the learned counsel, has to a greater extent vitiated the judgment of the learned Judge. He would fu....
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....loan than his already encumbered estate. He approached his creditor for a further loan of Rs. 7000 but the latter was unwilling to lend it either on the security of the husband's encumbered lands or on a promissory note. So the only security, which could be offered, was the wife's land. The wife was quite illiterate; unable to read or write, but could sign her name. Her husband managed the wife's property entirely; she was a submissive wife, and if her husband told her to execute a document she did so at his bidding and without informing herself of the contents. The wife's property brought some income on which the family had to depend and the wife executed the mortgage deed for Rs. 7000 for the husband's benefit and received nothing out of the amount herself. On those facts the Privy Council held that the wife was acting under the influence of her husband for whose benefit the mortgage was being executed and that the creditor who benefited by the transaction had notice of the facts, which raised presumption, and hence he was in no better position than the husband who exercised influence. It was further held that it was unnecessary to decide whether there was act....
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....ansaction was the result of undue influence exercised by the debtors, the nature of the transaction would suffer the same infirmity. In Subbash Chandra v. Ganga Prosad [1967]1SCR331 the facts are as follows :- "The suit in, the present case was for declaring that a deed of settlement executed by the plaintiff's father and the plaintiff's sister in favour of the plaintiff's brother's son in respect of certain properties was fraudulent, collusive and invalid and for cancellation of the said document. The trial Court dismissed the suit. However in appeal the High Court proceeded on the basis that in the circumstances of the case and in view of the relationship of the parties the trial Court should have made a presumption that the donee had influence over the donor and should have asked for proof from the respondents before the High Court that the gift was the spontaneous act of the donor acting under circumstance which enabled him to exercise an independent will and which would justify the Court in holding that the gift was the result of a free exercise of the donor's will. The High Court went on to presume from the great age of the donor that his intellig....
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....f fraud. These conditions remained unsatisfied in the present case. I (iii) On the evidence in the case the trial Court was right in its conclusion that the donor was fully aware of the fact that he had transferred the property to defendant No. 1. It had not been established that he was of unsound mind. iv) There could be no presumption of undue influence merely because the donor and the donee were nearly related to each other. Nor could the fact that a grandfather made a gift of a portion of his properties to his only grandson a few years before his death show that the transaction was unconscionable". It is relevant to notice that the Supreme Court has only quoted the following observations from Raghunath Prasad v. Sarju Prasad, (1924) 51 Ind App 101 : AIR 1924 PC 60 - "The unconscionableness of the bargain is not the first thing to be considered. The first thing to be considered is the relations of these parties. Were they such as to put one in a position to dominate the other?" 24. A reading of the judgment of the Supreme Court will reveal that except what they have quoted above, the learned judges have not expressed their views one way or the ot....
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...., or where he stands in a fiduciary relation to the other or where he enters into a transaction with a person whose mental capacity is temporarily or permanently affected by reason of age, illness or mental or bodily distress. Where it is proved that a person is in a position to dominate the will of another (such proof being furnished either by evidence or by the presumption arising under sub-sec. (2)) and he enters into a transaction with that other person, which on the face of it or on the evidence adduced, appears to be unconscionable the burden of proving that the transaction was not induced by undue influence lies upon the person in a position to dominate the will of the other. But sub-sec. (13) has manifestly a limited application: the presumption will only arise if it is established by evidence that the party who had obtained the benefit of a transaction was in a position to dominate the will of the other and that the transaction is shown to be unconscionable. If either of these two conditions is not fulfilled the presumption of undue influence will not arise and burden will not shift. No doubt, in that case the Supreme Court, on the evidence, stated that the High C....
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....sising on the finding that P.W. 4, the appellant's husband, had embezzled the moneys of the first respondent as her employee and also pointed out that it is not uncommon that a Hindu dutiful wife would sacrifice her personal property for the sake of her husband. According, to the learned Senior Counsel, it is the feeling of reparation that has persuaded the appellant to voluntarily execute Ex.B. 2. Had the facts been so simple as suggested by the learned Senior Counsel and had the appellant's husband been once and for all exonerated in lieu of Ex.B. 2 transactions, it might be that the transaction cannot be presumed to be unfair or unconscionable. As a matter of fact, these submissions prevailed upon the learned single Judge of this Court as can be seen from his reasoning :- "To save him from his predicament, P.W. 1 should have agreed to execute Ex.B. 2 as well as to join the execution of the promissory note and that would have been the natural reaction of any wife when she finds that her husband has misappropriated a huge amount of his employer and therefore he had to make good the amount" and "the contention of Mr. A R. Narayanaswami is that what P.W. 1and P.W. 4 have don....
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....-7-1965 at Gingee at the first respondent's company premises. First of all this case was not pleaded. Secondly this particular aspect was not put to P.W. 1, in the course of cross examination. Further, even. D.W. 5 the first respondent herself had not spoken to this in the witness box. Above all, for the first time, this is whispered by D. W. 4, the first respondent's manager in his cross examination and the relevant evidence is that on 16-7-1965 after meals D.W. 4 went to Gingee and asked P.W. 4 to get, P.W. 1 and that P.W. 1 on 16th evening agreed to execute the sale deed. It is also relevant to, notice that his further statement is to the effect that he did not instruct his counsel to put this case to P.W. 1 and P.W. 4 because he thought that it was wholly unnecessary. It is this piece of evidence which was accepted by the learned Judge in spite of the infirmities stated supra and also to be stated infra. On the top of all, the above statement of 4 in the cross examination can hardly be reconciled with his evidence in chief. In the chief examination D.W. 4 had stated that on 6th evening the stamp papers for Ex.B. 2 work arranged to be purchased at Tindivanam and that, th....
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....and P.W. 3 can hardly be accepted on the materials in this case. It is relevant to notice that P.W. 2 is an attestor to Ex.B. 2. It is equally relevant to notice that a fair reading of his evidence will disclose that he was not present right through the transactions resulting in the execution of Ex.B. 2. He did say as follows:- (Matter in vernacular omitted - Ed.) The reference to criminal case is comprehensive enough to take into its fold the threat of P.W. 1 and P.W. 4 being sent to jail. It is very important to notice that this statement of P.W. 2 was not challenged in the cross examination. Ruining to the evidence of P.W. 3, it will be seen that this witness also was not present right through the transaction P.W. 3 in chief examination had deposed as follows - (Matter in ' vernacular omitted - Ed.) We fail to understand as to how there is any inconsistency between the evidence of P.W. 2 and P.W. 3 with regard to the threat extended to P.W. 1. It is needless to state that the evidence of a witness should be read as whole while a comparison is made with that of the testimony of another witness. It is rather hazardous to expect that the corroboration by....
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..... 5 (first respondent) is concerned, it is very significant to notice that she made no reference to P.W. 1. Also in Ex.A. 40 which is the reply notice sent at the instance of the first respondent, there is no reference that instructions for the notice were conveyed by the first respondent through her manager D.W. 4. On the other hand, a reading of Ex.A. 40 will reveal that the first respondent herself had personally given instructions for the said reply. In the reply notice it is alleged that P.W. 1 was aware of her husband having misappropriated Rs. 25000, that the first respondent came to know about the same, the matter was discussed in the presence of P.W. 1, P.W. 4 and certain other persons who were interested in them and P.W. 1 and P.W. 4. This, according to the averment suggests that there must have between a discussion between the first respondent on the one hand and the appellant her husband and others on the other. But this vital aspect is not spoken to by D. W. 5 herself in her evidence. We had just now referred to the fact that D.W. 5 made no reference to P.W. 1. On the other hand, a reading of her evidence as a whole would show that she had met P.W. 4 only and all the t....
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....een from the evidence of D.W. 5 that she was not personally aware of the alleged misappropriation. According to her, it is D.W. 4 who told her that P.W. 4 had misappropriated. Now if we turn to the testimony of D.W. 4 we will find that it is too difficult to act on his testimony. We have just now pointed out as to how his evidence is unworthy of acceptance. It is rather surprising that D.W. 1, who is an employee under D.W. 5 drawing a salary of Rs. 500 was able to amass much fortune as conceded by him in the course of cross-examination. The evidence recorded on 16-9-1971 shows that besides several investments in the name of his daughter and his wife he is owning a bus and a bungalow in the city of Madras opposite to Grama Vidyodaya. According to him he purchased the bungalow for Rs. 49000 while a bus for Rs. 35000. Besides he owns a house in Chittoor. Further he owns a lorry since 1965. He is now an Income Tax assessee. We would also like to point out that his evidence as regards the alleged agreement between him and P.W. 1 whereby P.W. I agreed to execute the sale deed is but false. Above all D.W. 5 admitted that P.W. 4 was in her service for 18 years and till the alleged misappro....
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....perty in Ex. B2 refer to 4 boundaries, the measurements, municipal door Number ward number and survey numbers. These particulars, as already stated, were furnished by P.W. 4 from memory. The suggestion put at the instance of the appellant is that they got the particulars from the mortgagee bank and P.W. 4 could not have given such particulars from memory. We prefer the stand taken by the appellant to the evidence of D.W. 4 and D.W. 5 because it is too difficult to believe that P.W. 4 was able to carry all the particulars in his memory and also the figure due to the Co-operative Bank to the last pie. Thus, in our, view, the evidence of D.W. 4 is not only interested but is equally unsatisfactory to commend acceptance. We had already discussed the evidence of D.W. 4 and D.W. 5. Thus, a fair assessment of the evidence of D.Ws. 1 to 5 would go to show that there is no consistency in the defence on vital matters such as whether P.W. 4 is the real owner and P.W. 1 is the ostensible owner of the suit property and what really persuaded P.W. 1 to convey her property for her husband's alleged defalcation. In short, the evidence of D. Ws. do not carry conviction to us. A. The consequenc....
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....that both her husband and D.W. 4 were in a position to dominate her will and used that position to obtain an unfair advantage over her by taking Ex. B2. She and also her- husband was threatened to be put behind the bars. The evidence of P.W. 1 that she is an illiterate and could only sign her name is not challenged in the course of cross examination. So too she had spoken that the contents of Ex. B6 were read over to her. There is also ample evidence that she first refused to sign but only after the threat by D.W. 4 did she execute Ex. B2. When she stated in re-examination that the property was worth Rs. 15,000/, in 1965 and though there was subsequent cross-examination her statement about valuation was not challenged. It may be interesting to notice, at this stage, the testimony of D.W. 5. According to her, she did not ascertain the value of the suit property. Even D.W. 4 had simply stated (Matter in vernacular omitted - Ed.) What is its market value is not spoken to by D.W. 4. The facts, which fell for consideration by the Privy Council in Tungabai v. Yeshwant Jog are, on all fours, or identical to the facts in the present case save the difference that in that case the wife....