Judgement

Appeal (No. 117 of 1922) from a judgment and decree (November 9, 1920) varying a decree (September 25, 1917) of the Subordinate Judge of Arrah.

The suit was brought by the respondents to recover principal and interest under a mortgage dated May 27, 1910, in circumstances which are stated in the judgment of the Judicial Committee.

The trial judge made a decree under which the interest recoverable was at the rate of 2 per cent, per mensem simple interest, instead of compound interest with yearly rests as provided by the mortgage.

Upon appeal the rate of interest provided in the mortgage was allowed. The learned judges (Doss and Adami JJ.) were of opinion that under decisions of the Privy Council the defendants had not established a case entitling them to a reduction in the rate agreed.

1923. Nov. 16. De Gruyther K.C., H. N. Sen and Abdul Majid for the appellants. Having regard to the circumstances in which the loan was made, the appellant was in a position of helplessness, and the respondents were in "a position to dominate his will" within s. 16 of the Indian Contract Act. Having regard to the security, the rate of interest was usurious, and the transaction unconscionable within sub-s. 3. The onus was therefore on the respondents to prove that they had not used their position to obtain an unfair advantage. That onus was not discharged. [Reference was made to the cases cited in the judgment (See also Poosathurai v. Kannappa Chettiar ( 1919) L. R. 47 I. A. 1.), also to ss. 16 and 19a of the Indian Contract Act, 1872, as amended by Act VI. of 1899.]

Dunne K.C. and S. Hyam for the respondents were not called upon.

Dec. 18. The judgment of their Lordships was delivered by

LORD SHAW OF DUNFERMLINE. This is an appeal from a decree, dated November 9, 1920, of the High Court of Judicature at Patna, which varied a decree, dated September 25, 1917, of the Subordinate Judge of Arrah.

The suit is for recovery of the amount of principal and interest due by the appellant to the respondents (the plaintiffs) under a mortgage of date May 27, 1910 The Subordinate Judge gave decree in the mortgage suit, but only allowed simple interest. The High Court allowed compound interest.

The substantial question raised on the appeal is whether the appellant, in the circumstances proved in the case, fell within the protective provisions of s. 2 of the Indian Contract (Amendment) Act, 1899.

It may be convenient to set out that section in full " 2. Section 16 of the Indian Contract Act, 1872, is hereby repealed, and the following is substituted therefor, namely —

"16.—(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 holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other ; or

(6) 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 unconscionable, 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.

" Nothing in this sub-section shall affect the provisions of s. Ill of the Indian Evidence Act, 1872."

It is in the view of the Board by that section that the question arising between these parties falls to be settled, and not by reference to the legislation of other countries, e.g., the English Moneylenders Act. The statute to be here const