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Case: Raghunath Prasad v/s Sarju Prasad

Background Of Case
The case is out of the landmark cases when it comes to 'free consent.' Undue influence is such a thing where consent is not said to be free and the party whose consent was taken, has the option to avoid the contract. Hence, if there is Undue influence there, the contract is voidable. To prove undue influence, the plaintiff has to establish that the relations between him and the defendant was such that the latter is in the position to prevail the will of the former by reason of:
  1. Real or apparent authority.
  2. Fiduciary relationship.
  3. Mental capacity is moved by account of age, illness or mental or bodily distraint of the plaintiff.

In Bombay High Court - (1924) 26 BOMLR 595
Petitioner: Raghunath Prasad
Respondent: Sarju Prasad
Date of Judgement: 18 December, 1923
Bench: Shaw, Carson, J Edge, A Ali, L Jenkin

Facts Of The Case
This case is an appeal from one decree, dated November 9, 1920, of the High Court of Judicature at Patna, which variegated a decree, dated September 25, 1917, of the Subordinate Judge of Arrah.

The defendant, Sarju Prasad Sahu and his father, the plaintiff in the case, Mr. Raghunath Prasad Sahu were equivalent owners of a sizeable joint family property. They disputed and fought regarding the holding. Due to this, the father started criminal proceedings against his son.

The defendant mortgaged his properties to the plaintiff to defend himself and acquire from the plaintiff around ten thousand rupees at a compound interest of 24 per cent. In the course of eleven years, the rate of interest on the amount borrowed increased more than elevenfold, viz., Rs/-1,12,885. The defendant's contention was such that the lender had assumed unconscionable advantage of his mental distraint by demanding high rates of interest and therefore, there should be inference of undue influence i.e. Section 16 of the Indian Contract Act, 1872.

The Lordships observed that no inference of undue influence could be brought out from the case. Lord Shaw referred to sub-section (3) of Section 16 and determined as follows:
"In the first place the relationship between the parties must be of such order that one is in a position to dominate the will of the another. Once that position is established the second stage has been reached, viz., the issue if the contract has been elicited by undue influence. Upon the uncovering of this issue a third point surfaces, which is regarding the onus probandi.

The burden of proving that the contract was not evoked by undue influence is to lie upon the individual who was in a place to dominate the will of the other individual. Error is almost sure to come up if the order of these propositions are changed. The unconscionableness of the agreement is not the first thing to be thought out. The first thing to be thought out is the relationship between these parties. Were they such as to put one in a position to influence the will of the other individual? Having this differentiation and order in view the authorities seem to their Lordships to be easily properly understood."

The borrower, in the case failed to establish that the lender was in a position to influence his will. The only relation that was established was that of the lender and the borrower. So, it was not proved if the lender was in a place to dominate the will of the borrower and consequently, the borrower got no relief. The first requisite of Section 16 was not consummated.
The Lordships also trusted these precedents, below:
  1. Lord Davey in Dhanipal Das v. Raja Maneshar Bakhsh Singh.
  2. Dhanipal Das v. Raja Maneshar Bakhsh Singh
  3. Maneshar Bakhsh Singh v. Shadi Lal
  4. Sundar Koer v. Sham Krishen
  5. Abdul Majeed v. Khirode Chandra Pal (The Lordships dissented from this case while declaring the judgement).

The verdict of the case is given down below:
"Their Lordships are of the opinion that the decree of the High Court should be variegated by allowing compound interest on the principal at the rate of two per cent, per annum from the date of the carrying into action of the bond until September 25, 1917, and thereafter simple interest at the rate of six per cent, per annum up to the date of realization, and that in other respects the decree of the High Court should be affirm, and they will humbly counsel His Majesty accordingly."
  • Upheld the decree of the high court by allowing compound interest on the principal at 2% per mensen from the date of the execution of bond till September 25, 1917
  • After September 25, 1917 a simple interest on the principal amount at a rate of six percent per year up to the time of realization.

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