Ghasi v. Gangabisan

1. The second appeal arises out of a suit to enforce a bond dated 24-10-1918 (Exh. P-4) for a consideration of 7 manis and 5 maunds and 2 kuros grain said to be due on still older bonds. It contains a stipulation for repayment of the debt on 1-5-1920, with interest, and provides for payment of Badhi also. The present claim is made up of principal plus sawai badhi and darsawai, total claim aggregating 11 manis, 2 maunds and 1 kuro valued at Rs. 1,100/- at the rate of Rs. 100/- per mani. The defendant is an illiterate rustic. He has denied the claim in toto. He did not admit having executed any grain bond or [received any consideration. He however admitted that there were only cash dealings between the parties in respect of which plaintiff obtained a decree against him in Suit No. 246 of 1921 in the Court of Munsif, Harda, and that there remained no debt due by him to the plaintiffs. His contention was that the plaintiffs fraudulently got inserted in the money bonds words provided for charging of kasar badhi in the shape of grain sawai, per year, besides interest on cash at the rate of rupee one per cent, per mensem. He pleads that, although, there was no agreement about this kasar, advantage was taken of his illiteracy to insert such stipulation, without his knowledge, lie also pleaded that the kasar in the shape of grain was penal, and that plaintiffs were not entitled to the grain claimed. The agreement to give kasar was also said to be void as being without consideration. The rate of grain was also disputed. In the oral pleadings recorded by the Judge, the plaintiffs admitted that they had no grain account books; that they had never advanced any grain to defendant; their dealings with the defendant began prior to 1913 on the basis of a bond for Rs. 99/- which they alleged was returned to the defendant; and that the account of the previous bond and other dealings was made up on 18-1-1913 and Rs. 190-13-3 and 3 maunds grain was found due, and for this the bond (Ex. P-1) was executed. Again an account was made on 23-12-15 and on that day fresh bonds (Exhibits P-2 and P-3) were executed by the defendant in consideration of the old debt; one was for cash portion (Exh. P-3) and the other for grain portion (Exh. P-2). The cash bond was for Rs. 342/. An account of this cash bond (Exh, P-3) was made on 24-10-18 and a fresh bond (Exh. P-5) for Rs. 486/- was given by the defendant. On the basis of that bond (Exh. P-5) the plaintiffs obtained a decree in Suit No. 246 of 1921. The account of grain bond (Exh. P-2) was similarly made on 24-10-18 with the result that bond (Exh. P-4) on which the suit is based, came into being. The plaintiffs complained that the defendant made no repayments. The defendant was further examined and he still maintained that fraud, was practiced on him. He denied having taken back any bond for Rs. 99/-.

2. These pleadings gave rise to the following issues:—

1. Did the defendant execute the bond and acknowledge the grain in suit?

2. Did he execute the bond dated 23-12-15 and acknowledge its consideration?

3. Are these bonds for valid and legal consideration?

4. Was the clause regarding the kasar in the previous bonds inserted through fraud and without the knowledge of the defendant? If so, is the consideration of the bond illegal and not binding on the defendant?

5. What was the rate of the grain on due date? What rate should be allowed to the defendant?

6. Is the defendant entitled to get instalment decree and if so, on what terms?

3. The first Court's findings were that the bond for Rs. 99/- was neither forthcoming nor, was it proved to have been returned to the defendant; but that the same appeared to have been suppressed by the plaintiffs. That it was not proved that the bond for Rs. 99 contained any stipulation about kasar, and that therefore, it was no wonder if the plaintiffs suppressed it. That the condition of kasar was Inserted for the first time in the bond (Exh. P-1), and that it was not made known to the defendant. That the fairness of the transaction evidenced by Exhibit P-1 was not beyond doubt. That there was no evidence to show that the account was properly explained to, and understood by, the defendant, before he was asked to execute Exhibits P-2 and P-3. That the plaintiffs were in a position to dominate the will of the defendant as the latter was their debtor of long standing. That the defendant executed Exhibits P-2 and P-3 without knowing their real nature. That the plaintiffs had failed to prove the fairness of the transaction in suit. That under the circumstances the stipulation for payment of the kasar in the shape of grain made it an unconscionable and hard bargain, and that the plaintiffs could not be allowed to enforce the obligation created by bond in suit Exhibit P-4, against the defendant, and that the suit was therefore liable to be dismissed. The suit was accordingly dismissed with costs by that Court. In appeal, the District Judge, Nimar, upheld the findings about the suppression of the bond of Rs. 99 for the reason that it would not suit plaintiffs case connected with their claim for grain as kasar, and that without that document it was not possible to see what the original agreement was, for want of other proof in the evidence; that there was no indication in Exhibit P-1 of how Rs. 190-13-3 and 3 maunds grain were arrived at. That on making calculations about the grain at the rate of Rs. 48/- per mani as deposed to by P.W 6 the amount comes to Rs. 190/- approximately. That there was no explanation by plaintiff how 3 maunds of grain, in addition, were due, and that the foundation of Exhibit P-1 was gone, and that 3 maunds had been added in Exhibit P-1 wrongly as they were not due. The District Judge accepted the learned Subordinate Judge's view that it was for the plaintiff to show that the bargain was not grossly unfair, and due to the dominance of plaintiffs' intellectual capacity. He also held that defendant would never have agreed to the terms if he had understood their real meaning and that he was acting in ignorance. That the calculations of interest involved were not such as an ordinary cultivator could do with any exactitude and that the bargain was not such as could be excluded from the category of unconscionable bargains, and that the transaction was not only a hard bargain but an unconscionable one also. The learned District Judge has bestowed pains in working out the rate of interest on the initial cash advance of Rs. 99 and he has stated the same in paragraph 2 of his judgment as being simple interest at Rs. 157 per cent, per annum throughout 12 years, or approximately 29 per cent, compound interest, and has added that nobody without some calculation could arrive at the exact effect of such terms; he very much doubted “if anybody looking at them would see that eventually the increase would work out at 157 per annum simple interest, or that in 12 years the original debt should become 20 times as great.”

4. The District Judge, however, differed from the Subordinate Judge's conclusions as to the clause for payment of kasar being inserted in Exhibits P-1, P-2 and P-3 without the defendant's knowledge, and finding that the evidence showed that the ‘document Exh. P-1 was read out, and that, on two occasions, two bonds for grain debt, and two for cash debts were separately executed by defendant in 1915 and 1918 and that, in the course of the suit defendant offered to compromise the claim for Rs. 900, he concluded that the stipulation for payment of kasar in the shape of grain, on cash loan must have been inserted with his full knowledge. He also held that in the absence of any evidence to rebut the plaintiff's proof that the bonds were duty read out and the defendant executed them with his eyes open, he was unable to accept the lower Court's finding to the effect that defendant did not know of the stipulation for kasar and that the agreement for kasar appeared for the first time in Exhibit P-1 and that too secretly without defendant's knowledge and approval; he further found that “the agreement was there from the very start and the terms were the same throughout”. In the end, he held there was no fraud but hard money-grabbing only.

5. In view of these findings, the Judge of the lower appellate Court thought it was not a case of time as held by the 1st Court, but one of a kind where a penal stipulation was fit to be relieved against, and the Judge accordingly allowed interest at 12 per cant, compound and omitted 3 maunds in the bond Exhibit P-1, found the total grain due at date of suit to be 8 manis 2 maunds and valuing the same at the rate of Rs. 100 charged in the plaint, reduced the claim to Rs. 816-8-0 and passed a decree for the same.

6. The defendant has corns up in 2nd appeal and has urged the following grounds:—

“1. That in the absence of any pleadings or evidence on the record the learned District Judge erred in holding that the terms as to interest of the bond of the year 1966 were exactly similar to those of the subsequent bonds.

2. That the learned District Judge erred in thinking that the rate of, grain in Sambat 1969 was Rs. 48 per mani and the finding of the learned Judge as to the terms? of the bond for Sambat 1966, based upon this misconception is therefore wrong.

3. The lower appellate Court is wrong in thinking that there was evidence on the plaintiffs' side proving that accounts ware explained to the defendant at the time of the execution of Exhibits P-2, 3 and 4.

4. That the plaintiffs having failed to prove what was due at the date of the execution of Exhs. P-1, P-2, P-3 and P-4, the appellate Court was wrong in making up the accounts on an imaginary basis and holding that Rs. 816-8-0 were due under Exhibit P-4.

5. That even on the basis of 12 p.c p.m compound interest allowed by lower appellate Court the amount due does not some to more than Rs. 550.

6. That, in the absence of any issue on the point, the lower appellate Court should have rejected the solitary evidence of P.W 3 as to compromise.

7. That on the finding that the defendant was an illiterate cultivator and the plaintiff a professional money lender it should have been held that the burden of proof as to the fairness of the transaction lay on the plaintiff and the plaintiff having failed to discharge this burden it should have been held that the condition of kasar and the subsequent manipulation of account on its oasis was done without the defendant's knowledge and undertaking.

8. That in any event the stipulation as to kasar was penal and should have been more liberally relieved against since the rate of grain admittedly increased every year.”

7. It is argued that the lower appellate Court's finding that approximately Rs. 190 were due on the date of Exhibit P-1 and that 3 maunds grain was included in it and was not outside it, is itself based on a misconception of the evidence on record. The bond Exhibit P-1 was executed in Sambat 1969 (1913). On reading the deposition of P.W 6, I find that the rate given by P.W 6 for that year is Rs. 35-12-0 and not Rs. 48 per mani. The District Judge has therefore clearly erred in taking Rs. 48 as the rate for his calculations. This change in the rate would reduce the figure of Rs. 190 found by the lower appellate Court by about Rs. 47 i.e, the net amount would come to Rs. 143/- only. On a careful scrutiny of the extracts of entries of plaintiffs' accounts books (Exh. P-9) I find that the sum of Rs. 99 which formed the consideration of the original bond said to be returned, was advanced on 16-6-1909 and that Rs. 22/- were repaid towards it on 6-2-1910. Calculating interest on Rs. 99 at Rs. 1/- per cent per mensem up to date of repayment and crediting the repayment first towards interest and the balance towards principal, the amount that remained unpaid on 6-2-10 stands at Rs. 84-9-11. Calculating inst rest on it from 6-2-10 to 18-1-1913, the date of bond Exhibit P-1 the exact amount of interest due comes to Rs. 29-0-5 which with the principal sum of Rs. 84-9-11 makes a total of Rs. 113-10-4 only. The other transactions which the defendant had with the plaintiffs' firm during that period would, after charging interest and giving credit for the repayments made, be represented by the balance which makes up the total of Rs. 190-13-3 found due on 18-1-1913. I therefore uphold the objection raised in ground No. 2 and find that the amount due on the bond for Rs. 99 on 18-1-1913 does not come to Rs. 191-2-0 as erroneously held by the lower appellate Court. It comes to Rs. 113-10-4 only that day. Ground No. 2 therefore succeeds.

8. In view of the concurrent findings of the two Courts that the original bond for Rs. 99 has been deliberately suppressed by plaintiffs because it would not suit their case, I also uphold the contention of the appellant urged in ground No. 1 to the effect that the terms as to interest of the bond for Rs. 99 of 1966 Sambat have not been proved to be similar to those of the subsequent bonds Exhibits P-1, P-2 and P-4. This ground is clearly directed against the lower appellate Court's finding at the end of paragraph 6 of the judgment that ‘the agreement was there from the very outset and that the terms were the same throughout.” I can find no sound basis for this finding in view of the District Judge's own finding to the contrary, in the earlier part of paragraph 6 of the judgment, to the following effect:—

“I think the defendant is entitled to draw an adverse inference that the bond would not suit the case of the plaintiffs. That the only way in which would not fit the case would be connected with grain as kasar for the cash loan, is admitted. It would appear likely then that originally no kasar was agreed to. Without that document it is not possible to see what the original agreement was for there is no proof of it at all in the evidence. Hence even assuming that the agreement was the same throughout, this foundation for Exhibit P-1 in respect of grain is gone”.

9. The different parts of the judgment under appeal are inconsistent, one with the other, and I do not think, such inconsistent findings are in any way binding on the 2nd appellate Court. I therefore hold that the terms of the first bond for Rs. 99 are not proved to contain any stipulation for payment of kasar in the shape of grain, as stated in the bonds Exhibits P-1, P-2, and P-4 and that consequently the insertion of the clause relating to the payment of such kasar in those Exhibits was unwarranted on that account.

10. The next question is, was the stipulation inserted by the debtor with the deliberate intention of incurring a legal obligation to pay kasar in the shape of grain on the cash loan, in any of the Exhibits P-1, P-2 and P-3? This forms the subject of the grounds Nos. 3, 6 and 7. The lower appellate Court says there is evidence to prove that the documents were read out and therefore the insertion of the clause must have been with defendant's knowledge and that his subsequent conduct in offering to pay Rs. 900 affords clear indication that he must have agreed to bind himself to pay the kasar at the rate of 3 maunds of grain added for each Rs. 100 per year the grain increasing at 25 per cent, in default. I fail to see how the mere reading out of the clause would have cleared the vision of the ignorant rustic and made it possible for him to realise the exact effect of such terms on his own interest. The District Judge says in another part of the judgment (paragraph 8) that he felt “sure that the defendant would never have agreed to these terms, if he had understood their Teal meaning. He was acting in ignorance.” In view of these observations of the learned Judge, I am not prepared to hold that the defendant's mind went with the pen of the writer when he touched it in token of his acceptance of bonds (marked Exhibits P-1, P-2 and P-4) containing the aforesaid clause, even after they were read out to him. The conclusion that he accepted the bonds with knowledge of the clause, is one which, in the peculiar circumstances of the case, and in view of the other findings of the District Judge and also of the heavy burden that lay on the plaintiffs who seek to obtain the benefit of the contract, to prove the fairness of their transactions, I am not prepared to accept as binding against me in 2nd appeal. The law casts as veil of protection upon ignorant agriculturists just like Pardanashin ladies when they deal with professional money lenders. Nandlal Kalar v. Radha [1905] 1 N.L.R 76 and every fact establishing the perfect good faith of the transaction and its consideration must be proved by the creditor who seeks to obtain the benefit of the contract. The defendant circumstanced as he was, was under no obligation to adduce any evidence by way of rebuttal. The lower appellate Court's view that the defendant gave no evidence in rebuttal cannot therefore avail plaintiffs who if at all must succeed or fail on the strength of their own case and not on the weakness of their adversary's case. They have not proved that the accounts were explained to the defendant, and that the latter actually understood them. The District Judge's view is that accounts or the calculations were not such as could be easily Understood by each and everybody; so, the mere reading of the contends of the bonds before a rustic debtor would, I must say, give him no mental cognition of the effect the stipulation would have on his interest. The transaction in suit has been concurrently fund to be not only a hard but also an unconscionable bargain. It is therefore the duty of the Courts in India to enforce the letter of the law however technical it may be, against obviously harsh and unconscionable bargains of this nature. “The exploitation of the necessitous, of the careless and inexperienced is a trade to be extirpated in the interest of the whole community as contrary to individual morality as well as to public policy:” Muthu Krishna Iyer v. Sankaralingam Pillai [1913] 36 Mad. 229 , 24 M.L.J 135 , 18 I.C 417 , 13 M.L.T 20 (F.B) quoted with approval in Abdul Majeed v. Khirode Chandra Pal [1915] 42 Cal. 690 , 29 I.C 843 , 19 C.W.N 809. The parties here were not at arm's length. The defendant was an ignorant rustic and the plaintiffs took unfair advantage of his ignorance in exacting from him hard and unconscionable terms for payment of excessive interest for which in truth and fact there was even no foundation. It is argued that Section 16 of the Contract Act deals with cases of undue influence only and as there is no plea of undue influence, the Court should not have gone into the nature of the bargain. It is said that excessive rate of interest could not of itself be evidence of the fact that there was undue influence, or that the transaction was harsh and unconscionable. This argument is best refuted in the following words, and at the risk of repetition, I cite the words of Lord Loreburn L.C in Samuel v. Newbold [1906] A.C 461 , 75 L.J Ch. 705 , 95 L.T 209 , 22 T.L.R 703 quoted in Abdul ??? v. Khirode Chandra Pal [1915] 42 Cal. 690 , 29 I.C 843 , 19 C.W.N 809.

“In my opinion this contention cannot be maintained, nor ought a Court of Law to be alert in placing a restricted construction upon the language of a remedial Act. The section means exactly what it says, namely, that if there is evidence which satisfies the Court that the transaction is harsh and unconscionable, using those words in a plain and act in any way technical sense, the Court may re-open it, provided, of course, that the case meets the other condition required. Those are only illustrations, and, as in the case of fraud, it is neither practicable nor expedient to attempt any exhaustive definition. What the Court has to do in such circumstances is, if satisfied that the interest or charges are excessive, to see whether in truth and fact and according to its sense of justice the transaction was harsh and unconscionable. We are asked to say that an excessive rate of interest could not be of itself evidence that it was so. I do not accept that view. Excess of interest or charges may of itself be such evidence, and particularly if it be un-explained. If no justification be established, the presumption hardens into a certainty.”

11. The only explanation offered has been found to be non-existent and there is therefore no justification for upholding the bargain, which on the face of it is hard and unconscionable and comes within the purview of the amply extended powers of Courts under Sections 16 and 74 of the Contract Act.

12. Much is made of the evidence of P.W 3 as to the alleged offer of a compromise but this could not necessarily give rise to the inference that the defendant must be aware of the Clause about kasar from the very beginning. It is just possible that he thought, he might purchase peace by paying plaintiffs something in the nature of what is called “hush money.” Moreover the testimony of P.W 3 is wholly uncorroborated and as such ought not to carry much weight, in the peculiar circumstances of the case. In any case it is wholly insufficient to outweigh the effect of the other strong circumstances, which show the utter absence of the initial agreement to pay kasar and to fix defendant with liability for kasar apart from the original agreement. The initial foundation on which the plaintiffs staked their case having gone, they cannot cling to subsequent superstructures which have no independent binding effect without the foundation and which must therefore remain hanging in the air. This disposes of grounds Nos. 3, 6 and 7 of the memorandum of appeal. In view of these findings, and also of the fact that the cash portion of the debt was covered by the bonds Exhibits P-3 and P-5, and that the plaintiffs have recovered a judgment on the basis of Exhibit P-5, in respect of the same, the inevitable conclusion is that the bond Exhibit P-4 is a bond without consideration and that the suit based thereon must therefore fail it is not therefore necessary for me to consider grounds Nos. 4, 5 and 9 and determine what was actually due to plaintiffs on the date of the bond Exhibit P-2 or on the date of the bond Exhibit P-4 or even at the date of the present suit.

13. The result is that the appeal succeeds and is allowed and the plaintiffs' suit is dismissed with costs throughout. The defendant will get his costs in all the Courts from the plaintiffs.

14. Appeal allowed.