Satyanarayana Raju, J.:— These appeals arise out of judgment and decree of the Court of the Subordinate Judge, Nellore, in O.S No. 239 of 1953.
2. For a better appreciation of the contentions raised in these appeals, it will be convenient to give a brief sketch of the antecedent events which have culminated in the present litigation. On Polur Veerabrahmayya, a resident of Nellore, died on December 18, 1942. His wife predeceased him. At the date of his death Veerabrahmayya was possessed of a terraced house, a vacant site and wet land of the extent of ac. 5-78 cents, situated in the villages of Yellayapalem and Chimareddipalem. The 1st defendant, who is the wife's brother of Veera-brahmayya claimed his properties under a will dated December 17, 1942, alleged to have been executed by Veerabrahmayya. Shortly after the testator's death, the 1st defendant filed O.S No. 149 of 1943 on the file of the District Munsif's Court N??? ??? establish his ??? under the will and to recover possession of the properties mentioned in the plaint schedule. The trial Court dismissed the suit on March 16, 1946. Against the adverse decision of the trial Court, the 1st defendant was obliged 10 prefer an appeal; but he had not the necessary funds to prosecute the appeal. In this situation, after approaching several people for financial assistance for carrying on the litigation in its further stages the 1st defendant applied to the plaintiff for advancing him the necessary funds for prosecuting the appeal. The plaintiff having acceded to the request of the 1st defendant he and the defendant entered into an agreement, which was subsequently reduced to writing on June 29, 1946. Pursuant to the agreement, (he plaintiff advanced certain sums required for filing and conducting the appeal in the District Court, Nellore. The appeal filed by the 1st defendant in the District Court was eventually allowed on March 6, 1947. The appellate decision was confirmed by the High Court of Madras in S.A No. 1824 of 1948 on October, 22, 1952. After the successful termination of the litigation, which resulted in establishing the 1st defendant's title to the properties left by Veerabrah-mayya, under his will, the plaintiff called upon the 1st defendant to execute a registered sale deed in his favour in respect of a ¾th share of the propertus decreed to the 1st defendant in the above litigation. This, according to the plaintiff, was what he was entitled to under the agreement Ex. A-8, dated 29th June, 1946. Not having obtained satisfaction from the 1st defendant, the plaintiff instituted the suit, out of which the above appeals arise, for specific performance of the agreement by the execution of a deed of conveyance in respect of a ¾th share of the properties comprised in the schedules appended to the plaint. The 1st defendant resisted the suit on several grounds. He denied having executed the suit agreement Ex-A-8. He pleaded that the plaintiff did not advance any monies for prosecuting the litigation nor rendered any services. The further ground of defence was that the agreement, even if true, was not a fair and reasonable one.
3. Defendants 2 to 17, who are lessees of the 1st defendant, remained ex parte.
4. On the above contentions, the lower Court framed a comprehensive issue which is:—
Whether the agreement set up by the plaintiff is true and valid?
5. After a consideration of the evidence adduced by the parties, the lower court found that the 1st defendant executed Ex. A-8 and that the plaintiff had borne the expenses of the prior litigation in the District Court as well as in the High Court. The learned judge, found that the agreement to take a ¾th share in the suit properties was an unconscionable transaction and that the case was not a fit one for passing a decree for specific performance of the agreement. The learned Judge, however, held that the plaintiff was entitled to a decree for the amounts advanced by him, which he estimated at Rs. 3,395/-, and in addition, to a sum of Rs. 2,000/- towards interest and damages, i.e Rs. 5,395/- in the aggregate.
6. Aggrieved by the said decree, the 1st defendant has preferred the earlier appeal, wherein it is contended that on the finding recorded by the trial Court viz., that Ex. A-8 represented an unconscionable transaction, the suit should have been dismissed. In the other appeal, preferred by the plaintiff; it is contended that the suit agreement embodies a fair and reasonable bargain and that the lower Court should have granted a decree for a ¾th share of the properties obtained by the 1st defendant in the earlier litigation.
7. That the defendant has executed the suit agreement, Ex. A-8, in favour of the plaintiff does not admit of any controversy. At least, before us, no serious attempt has been made to establish that the agreement has not been executed by the 1st defendant.
8. The next of the questions is whether the plaintiff has advanced the expenses necessary for the conduct of the litigation in the District Court, Nellore, and in the High Court, Madras, and has otherwise fulfilled the terms of the agreement.
9. The material recitals in Ex. A-8 are as follows:—
“As there are no sources of getting money, and as no money is available for receiving as debt, from others, for attempting to prefer an appeal against the said judgment I consulted others for investing to this litigation, so that I will give (them) half of the land that is likely to come as a result of the litigation, in full discharge of the invested amount. It was known to you, and you requested that if a ¾th share of properties is given, you will meet the expenses of litigation form here after, and that you will pay Rs. 1,180-0-0 including the principal and interest due under the pronote executed in favour of Kaku Rami Reddi borrowed for meeting the previous expenses of litigation, I agreed for it…………
“Soon after the 1itigation (appeal proceedings) is decided completely in my favour, I will give you the ¾th of the decree scheduled properties, which are due, and take the remaining ¼th share. Regarding the ¾th share of property, which is to be given to you, I will execute a deed of sale as per your request, at your expense.”
10. There is abundant evidence adduced by the plaintiff that he had repaid the debt evidenced by Ex. A-9, which is the promissory note admittedly executed by the 1st defendant in favour of Rami Reddi. The account books of the advocate at Nellore who conducted the appeal show that a sum of Rs. 800/- was expended in that Court. The accounts of the advocate, who was engaged for the conduct of the second appeal, also show that the expenses of the litigation of the second appeal at Madras were met by the plaintiff. It is not necessary now to re-assess the evidence on this question. It is sufficient-to say, that we are in agreement with the finding reached by the lower court with regard to this part of the case. Nor are we persuaded that there is any error in the conclusion reached by the lower Court that the actual sum spent by the plaintiff for the conduct of litigation in the two appellate Courts was Rs. 3,395/-.
11. The important question for consideration, however, is with regard to the validity of the agreement. Initially, it may be observed that the English law in regard to champerty and maintenance does not apply to India for it has been laid down that the mere fact of an agreement being champertous is not of itself sufficient to render it void but it must be shown in addition that it is contrary to public policy. There is a long line of authority which establishes that a fair agreement to supply funds to carry on a suit in consideration of having a share in the property, if recovered, is not per se opposed to public policy and is not illegal. This was the view taken by the Privy Council as early as 1876 in Ram Coomar Condoo v. Chunder Canto Mookerjee 1876 L.R 4 I.A 23..
12. As pointed out by their Lordships of the Privy Council in Ram Sarup v. The Court of Wards I.L.R 1940 Lahore 1 at page 12..
“It is essential to have regard not merely to the value of the property claimed but to the commercial value of the claim. This is to be estimated by the parties in advance of the result; and where they have weighed the probabilities in a manner which has not operated unfairly, it is more reasonable to regard this as confirming their shrewd estimate of the chances, than to condemn the agreement out-right as unfair, by reason of the possibility that a great gain to the claimant would have to be shared with the financier. The uncertainties of litigation are proverbial; and if the financier must needs risk losing his money, he may well be allowed some chance of exceptional advantage.”
13. The 1st defendant, notwithstanding his assertion to the contrary, was not possessed of sufficient means to prosecute the appeal. Without undertaking expensive litigation, his claim, though just, could not be established. He was, therefore, constrained in his own interest in resorting for financial aid to persons willing to take a risk, and the plaintiff was justified in helping him to his rights upon the terms that he would share in the fruits of the litigation, if the 1st defendant succeeded, and lose his money if he failed.
14. It, however, remains for us to consider whether the provision in the agreement that the plaintiff should have a ¾th share in the property, is fair and reasonable. It is well settled though it is clearly not conclusive, that the proportion to be retained by the claimant is an important matter when judging the fairness of a bargain made at a time when the result of the litigation was problematical. In numerous cases, which have come before courts, the quantum of the shire which the financier should get in the fruits of the decree has always been held to be a matter of vital importance in judging the fariness or otherwise of a financing agreement. In Ram Sirup v. Court of Wards, which went up to the Privy Council, the agreement provided that the financier should bear all the expenses of the case and in return therefor should get a 3 anna share of the immovable property recovered, provided that it should be increased to 4 annas should the case be taken up on appeal to the Privy Council. Their Lordships held that the agreement was valid and binding.
15. In Subhadrayamma v. Venkatapati Raju I.L.R 48 Madras. 230. the financier agreed that money up to two lakhs of rupees should be advanced for the purpose of the conduct of a suic, in which the claimant sought to recover a zamindari estate, in consideration for which, if the suit should be successful, 3/16ths of the movable and immovable property in dispute should be conveyed to the financier. There was a further provision that though the financier might have financed the suit in the original Court and should refuse to make further advances, and they should be obliged to get financial help elsewhere and conduct the appeals themselves, they should sell only ⅓rd of the property (i.e ⅓rd of 3/16ths), viz., 1/16 of the property recovered by the claimant. This agreement was held to be lawful and was enforced by the Privy Council.
16. In another case, Ramanamma v. Viranna a ¼th share was provided to the financier in the event of the claim being successful. In none of the cases did the financier's share exceed a moiely of the property to be recovered.
17. Sri Padmanabha Reddi, appearing for the 1st defendant, has, however, argued that in Raja Mokham Singh Raja v. Rup Singh, the agreement was to give a ⅛th share. There the High Court of Allahabad, reversing the decree of the Subordinate Judge, had held that the financier should recover from the plaintiff the amount actually expended by him (the financier) with interest thereon at 2 per cent per annum. Their Lordships of the Privy Council reached the conclusion that the agreement was not contrary to public policy but nevertheless held that it was extortionate and unconscionable so as to be inequitable against the borrower. On this conclusion, they affirmed the decision of the High Court.
18. Sri Venugopala Reddi, however, relied upon a decision of the Madras High Court in Navaneetha Krishna Swami Devasthanam v. Rakmani & Co. There, under the agreement, the financier had not only to advance the money but also had to look after the litigation, by engaging vakils, securing the records, paying the lawyers, and, in fact, to do everything on his behalf. He had to advance also further sums over and above one lakh of rupees. It was found as a fact that he had spent in all a sum of Rs. 7,96,000/-, including interest. The agreement provided that besides a share in the fruits of the decree, the financier should get a bonus of five lakhs of rupees and to have the income of the private lands, which were part of the subject-matter of the litigation. The learned Judges of the Division Bench held that the agreement to pay a bonus of five lakhs of rupees should not be considered to be extortionate or unconscionable. On the facts of that particular case and in view of the finding that the financier had spent nearly a sum of 8 lakhs of rupees, the conclusion that the agreement was not extortionate or unconscionable could be clearly supported.
19. In the present case, however, the agreement provides that the plaintiff should get a ¾th share of the property, a proportion which in no decided case was held to be a fair and reasonable bargain.
20. On a consideration of all the circumstances of the case, the learned trial Judge granted a decree in favour of the plaintiff for the public expenditure incurred by him, and to this he added a sum of Rs. 2,000/- towards what he termed ‘damages’ and the interest on the amount advanced by the plaintiff. It is a matter of common knowledge that apart from public expenses, which a party incurs in litigation, there arc innumerable items of private expense which are not always brought into account. The learned trial Judge might not have been “justified in using the expression ‘damages’ but what he seems to have really meant was that in addition to the interest on the monies spent by the plaintiff, there would be other expenses which are not of a public nature.
21. The jurisdiction to decree specific performance is discretionary and as provided by S. 22 of the Specific Relief Act, the Court is not bound to grant such relief merely because it is lawful to do so; but the only limitation is that the discretion of the Court should not be arbitrary but should be sound and reasonable, guided by judicial principles and capable of correction by a Court of appeal.
22. In this case, we are clearly of opinion that the lower Court was right in not granting specific performance of the agreement, which would have had the result of giving a ¾th share of the property to the plaintiff.
23. We consider that the lower Court was right in granting instead a decree for the sum actually expended in Court plus Rs. 2,000/-. We, therefore affirm the decree of the lower Court in its entirety.
24. The result is that both the appeals must fail and they are accordingly dismissed with costs.
25. Appeals dismissed.
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