Ladli Prasad Jaiswal v. Karnal Distillery Co., Ltd., & Ors.

Judgment

original jurisdiction is a court immediately brlow the Division Bench of the High Court which derides an appeal from his decision. The right to ap pea 1 against the judgm'!nt of a single Judge whether exercising original jurisdiction or exercising appellate jurisdiction to a Division Bench is governed by the same clause of the Letters Patent. If for certifying a case for appeal to this Court in a pro· I S.C.R.. ceeding tried in exercise of the original jurisdiction the judgment of a single Judge is to be regarded as the decision of the court immediately below a Division Bench to which an appeal is filed under the Letters Patent, it is difficult to discover any logical ground for holding that the judgment of a single Judge in exercise of appellate jurisdiction is not such a decision.

Clause 10 of the Letters Patent of the Lahore High Court (which continues to apply to the Punjab High Court) provides, in so far as it is material:- "And we do further ordain that an appeal shall lie to the said High Court of Judicature x x x x x x from the judgment (not being a judgment passed in the exercise of appellate jurisdiction in respect of a decree or . order made in the exercise of appellate jurisdiction by a Court subject to the superintendence of the said High Court x x x x x) of one Judge of the said High Court x x x x x and that notwithstanding anything hereinbefore provided an appeal shall lie to the said High Court from a judgment of one Judge of the said High Court x x x x x in the exerciseof appell11te jurisdiction in respect of a decree or order made in the exercise of appellate jurisdiction by a Court subject to the superintendence of the said High Court, where the Judge who passed the judgment declares that the case is a fit one for appeal; x x x Manifestly the clause confers an unqualified right of appeal to the High Court from the judgment of a single judge exercising original civil jurisdiction.

Similarly there is a right of appeal from a judgment of a single Judge hearing a civil appeal where the judgment is not in an appeal from an appellate decree. But against the judgment of a single judge exercising powers Ladli Pros•d JoiJ,,,.1 Irarnal Distill1<J Co., Ltd. Slaah, J, Lolli Prasod Jaiswll KlllMI Distill" y Co., Ltd. •/uJ/I, J. in appeal from an appellate decree, an appeal under the Letters Patent only lies if the Judge declares that the case is a fit one for appeal, and not otherwise. There is no warrant for making a distinction between an appeal filed against the judgment of a single J uage exercising original jurisdiction and a judgment in exercise of appellate jurisdiction. There is nothing in the context to support the plea that the expression 'court immediately brlow' includes a Judge of the ri.igh Court trying a proceeding in exercise of original jurisdktlon, i. e. sittin1~ as a court of first instance, but not a Judge exercising appellate jurisdiction.

The Constitution in cl. (1) (a) of Art. 133 hM expressly referred to a 'court of first instance' in prescribing the condition relating to the value of the subject-matter and if it was intended that for the purpose of deciding whether the judgment of the High Court sought to be appealed against affirmed the decision of the Court immediately below, the decision of a single Judge was to be ignored, if it was a judgment in exercise of appellate powers, but not when he was exercising original jurisdiction, an appropriate provision in that behalf would have been enacted. In the absence of any such enactment, the expression 'court immediately below' in Act. 133 (1) must mean the court from the decision of which an appeal has been filed to the High Court, whether such court is a single judge of the High Court or a Court subject to the superintendence of the High Court. In Wahid-iul-din v. Makhan Lal (') a full Bench of the Lahore High Court (Blacker, J., dissen · ting), held that for the purposes of s.

110 of the Code of Civil Procedure 1908 (which is in material terms identical with Art. 13:! of the Constitution) a Judge of a High Court sitting to hear not an original proceeding, but as a court of appeal cannot be considered a 'court immediately below' the Bench hearing the Letters Patent appeal from his judgment, (I) [1944] I.L.R. 26 Lah. 24. 1 s.c.R. 'Din Mohammad, J., delivering the principal judgment of the Court observed at p. 24 7 : "Wherever any provision is made for an appeal to the High Court, it is the High Court as such that is contemplated and not the Court or any individual Judge or a combination of different Judges. It is only for the sake of convenience facility of disposal that some cases are required to be heard by one Judge and some by more Judges than one.

The Court accordingly continues to be the same even if by any domestic arrangement an appeal from one Judge lies to a Bench of two Judges and must be taken to be the High Court in either case. x x x x It is obvious that the authorities dealing with a Judge of the High Court in the exercise of his original juris· diction can render no assistance in the disposal of this matter and it was for this reason that this distinction was emphasized when the question was formulated. A Judge sitting on the original side is merely discharging the func· tions of a trial Court and to all intents and purposes, therefore, he is a Court of first insta· nee and when an appeal is lodged against his order, as a Court he is immediately below the Court which hears the appeal. Such an appeal is provided for even in the Code of Civil Procedure itself as an appeal from an original decree.

This, however, is not the case when the same Judge sits on the appellate sicle and for the purposes of that appeal is the High Court in himself. Neither the Code of Civil Procedure nor the Punjab Courts Act contemplates an appeal to another Court from ·an order made in the High Court whether by one Judge or more than one and consequently the same analogy cannot apply." lAdJi Prasad Joiswol Earnol Dillillll'J Crt. Lhl. S/r4/J, /, The learned Judge further observed : "l cannot reconcile myself to the position th al a Judge sitting alone can be characterised as a tribunal inferior to the Letters Patent Bench, merely because the Bench has power to modify or reverse his judgment.

It is not with an idea of implying any subordination of the Court of the Smgle Judge to the Letters Patent Bench that such an appeal is provided for by Letters Patent, it is merely with a view to provide a further safeguard in the interests of the litigant · that the domestic rules framed by the High Court permit a case to be heard by a Judge sitting alone." Abdur Rahman, J ., agreeing with Din Mohammad, J., observed : x when a suit or proceeding is decided on the original side, it cannot but be held to have been disposed of by the Court of first instance and should be of the value of ten thousand rupees or upwards before an appeal can be taken to the Privy Council under the first paragraph of section 110.

It is this Court of first instance which would usually be covered by the expression "the Court immediately below" used in the latter part of that section. x x x x Different considerations might prevail in construing the expressions "the Court of first instance" and "the Court immediately below" when "the Court immediately below" does not happen to be the Court of the first instance but as long as thev arc the same the decision of the Court of first instance whether it is by a Subordinate .J•1dge, a District Judge or a Judge of the High Court on its original side, where such a side e~ts, must be held to have been give~-by --; - Court immediately below the Court which · Ladii Puuad J•iswal affirms or upsets . that decision on appeal. Eatnal Distill1ry Viewed thus a Judge of a High Court sitting ca., Ltd • . on the original side will be the Court immediately below the Court hearing an appeal from his decision.

But the same . cannot be said of a Single Judge sitting on the appellate side who is , never "a Court of first instance" and cannot therefore be correctly described to have been presiding over the Court immediately . below the Court hearing an appeal from hiJ judgment under th! Letters Patent." We are unable to agree, for reasom already set out, with the view expressed by the learned Judges of the Lahore High Court~ There · is nothing in the phraseology used or the context_ which justifies the view that the expression 'the Court immediately below' is used ins. UO of Code of Civil Procedure . or in Art. 133 (1) of the Constitution in two-dffe- . rent semes, according as the court is trying . a proi::ee" ding in exercise of its original jurisdiction and in . exercise of its appellate jurisdiction. There is a decision of the Calcutta High Court - in Debendra Nath Das v. Bibudhendra Mansingh ('), decided by Jenkins, C. J., and N. R. Chatterjee, J., which has expressed a similar. view. · The learned Chief Justice in delivering the judgment of the Court observed at p. 93 : .

"It only rem aim to be seen whether. as·_ regards nature the r'quireinents of section 110 are fulfiU- . ed. ·The Court of first instance as well as· the lower Appellate Court decided adversely to the present applicant. On appeal to the High Court, a Single Judge reversed the decree of the lower (I) (1915) I.LR. 43 Cal. 90. SW, J. J96Z Lad Ii Prasad J .Uwa """"'' Fmtilltr} Co., Ltd. Appellate Court. From this judgment of a Single Judge there was an appeal to the High Court under clause 15 of the Charter with the result that the judgment of the Single Judge was reversed by a Bench of two Judges. It will thus be seen that the first judgment of the High Court reversed the decree of the Court immediately below, but that this reversal was afterwards in effect cancelled with the res11lt that the only effective judgment of the High Court affirmed the decision of the Court immediately below (section IIO, Civil Pn>cedure Code)."

The view appears prima facie to support the contention that in considering whether within the meaning of Art. l 33 (I) of the Constitution judgment of the Court immediately below the High Court is affirmed, the judgment of the Judge of the High Court trying the procP.eding as a court of appellate jurisdiction must be ignored. Any expression of opinion by the eminent Chief Jmtice wculd always be considered with the great deference and respect. It must, however, be stated that the observations of the learned Chief Justice were in the nature of obiter dicta, because in the view of the Court, the test of pecuniary valuation was satisfied and in the appeal a substantial question of law was involved, and on that account the Court was bound to certify the case. It was therefore strictly not necessary to consider whether the judgment affirmed the decision of the court immediately below.

It must also be observed that the learned Chief Justice equated the expression "Court immediately below" with the expression "Court subordinate" used in s. ll 5 of the Code of Civil Procedure. That is clear from the observations made by him "that a Judge sitting alone is not a Court subordinate tn the High Court, but performs a function directed to be performed by the High Court (clause 36, Letters Patent). And thus no decision of a Single Judge can be revised l S.C.R. SUPR~ME COURT REPORTS under section 115 of the Code." But as we have already pointed out the test for determining the right to appeal is not whether the judgment is of a.Oaurf subordinate, but whether the judgment is of a Oourf immediately below. The two expressions being diffe. rent, the same considerations do not apply in their interpretation. A similar view was also expressed in a •very recent juqgment by the Andhra Pradesh High Court decided on August 18, 1961: Vadiapatla Marayya v. Vallabhaneni Buchiramayya (which has not yet been officially reported). · There are however two earlier judgments of the Lahore High Court which have expressed a contrary view.

Minna Heatherly v. B. 0. Sen (') and Gopal Lal v. Balkissan ('). In these two cases it was hdd that a Single Judge of the High Court hearing an appeal is within the meaning of s. 110 of the Code of Civil Procedure 1908 a court immediately below the Division Bench of the High. Court hearing an appeal under the Letters Patent. The High Court of Nagpur in Kishanlal Nandlal v. Vithal Nagayya, ('), has preferred the earlier view of the Lahore High Court. In our judgment the appeal with certificate granted by the High Court under Art. 133 (1) (a) and (b) is competent, because a Single Judge of the High Court hearing either a proceeding as a Court of original jurisdiction or in exercise of appellate jurisdiction is a Court immediately below the Division Bench which hears an appeal against his judgment under the relevant clause of the Letters Patent. Bishan Narain.

J., was, it is true, hearing an appeal from an appellate decree and his powers were restricted, for a second appeal lies to the High Court only on the following grounds, namely :- (a) the decision being contrary to law or to some usage having the force of law; (I) A.l.R. (19271Lah.537. (21 (1931) 1.L.R. IS Lah. 3~8. (3) 1.L.R. (1955) Nag. 821. Ladli p;;;;;;;JJaiswal Karn!ll Distillery Co., Ltd., L4dJi I- rOSdd JaiswaJ Ktml4/ l!i•lillrry Co., LUI. Shah, J. (b) the decision having failed to determine some material issue of law or usage having the force of law; (c) a substantial error or defect in the procedure provided by this Code or by any other law for the time being in force, which may possibly have produced error or defect in the decision of the case upon the merits. Whether a particular transaction was vitiated on the ground of undue influence is primarily a decision on a question of fact. In Salgur Prasad v. Har Narain Das ('),the Privy Council held that in a suit to set aside a deed on the ground that it was procured by undue influence and fraud, the finding that it was so procured is a finding of fact and is not liable to be re-opened if fairly tried.

Under the Civil Procedure Code, a second appeal does not lie to the High Court, except on the grounds specified in the relevant provision of the Code, prescribing the right to prefer a second appeal, and the High Court has no jurisdiction to entertain a second appeal "on the ground of an erroneous finding of fact however gross or inexcusable the error may seem to be" ( Mussummant Durga Chou.dhrain v. Jawahir Singh Choudhri (')). 'But the challenge before Bishan Narain, J., to the decision of the District Judge was founded not on the plea that appreciation of evidence was erroneous, but that there were no adequate particulan of the pica of undue influence, that the particulars of facts on which undue influence was held established by the District Judge were never set np, that there was no evidence in support of the finding of the District Judge and that burden of proof on a misconception of the real nature of the dispute was wrongly placed on the plaintiff.

A decision of the first appellate Court reached after placing the onus wrongly or based on no evidence, or where there has been substantial error or defect in the procedure, producing (I) (1932) L.R. 59 I.A. 147. (2) (1890) L.R. 171.A. 122. error or defect in the decision of the case on the merits, is not conclusive and a second appeal lies to the High Court against that decision. 0. 6 r. 4 of the Code of Civil Procedure provides that in all cases in which the party pleading relies on any misrepresentation, fraud, breach of trust, wilful default, or undue influence, and in all other cases in which particulars 'may be necessary beyond such as are exemplified in the forms in the Appendix, particulars (with dates and items if necessary) shall be stated in the pleading. The reason of the rule is obvious.

A plea that a transaction is vitiated because of undue influence of the other party thereto, gives notice merely that one or more of a variety of insidious forms of influence were brought to bear upon the party pleading undue influence, and by exercising such influence, an unfair advantage was obtained over him by the other. But the object of a pleading is to bring the parties to a trial by concentrating their attention on the matter in dispute, so as to narrow the controversy to precise issues, and to give notice to the parties of the nature of testimony required on either side in support .of their respective cases. A vague or general plea can never serve this purpose; the party pleading must therefore be required to plead the precise nature of the influence exercised, the manner of use of the influence, and the unfair advantage obtained by the other.

This rule has been evolved with a view to narrow the issue and protect the party charged with improper conduct from being taken by surprise. A plea of undue influence must, to serve that dual purpose, be precise and all necessary particulars in su{lport of the plea must be embodied in the pleading : if the particulars stated in the pleading are not sufficient and specific the Court should, before proceeding with the trial of the suit, insist upon the particulars, which give adequate notice to the other side of the case in tended to be set up. Ladli Prasad Jaiswol KatnJJI Distill,,. Co., Ltd . . Shah, J. lAdli Prasad Jois1D1JI K.,naJ Disti/lny Co., lid. Skah, J. In Bluirat Dharma Syndicate v. Hari8h Chandra ('), the Privy Council emphasized the nece· ssity of particulars in the following terms :

"Their Lordships desire to call attention to the great difficulty which is occasioned both to persons charged with fraud or other improper conduct, and to the tribunal which are called upon to decide such issues, if the litigant who prefers the charges is not compelled to place on record precise and specific details of those charges. In the present case, the petitioner ought not to have been allowed to proct'ed with his petition and seek to prove fraud, unless and until he had, upon such terms as the Court thought fit to impose, amended his petition by including therein full particulars of the allegations which he intended to prove: Such cases as the present will be much simplified if this practice is strictly observed and insisted tipon by the Court, even if, as in the present case, no objection is taken on behalf of the parties who are interested in disproving the accusations." Similarly this Court in Bishnudeo Narain v. Seogeni Rai and .Jagernath ('), in dealing with the practice to be followed in a case where a plea of undue influence and coercion is raised, observed at p. 656 :

"It is also to be observed that no proper parti· culars have been furnished. Now if there is one rule which is better established than any other, it h that_in cases of fraud, undue influence and coercion, the parties pleading it must set fonh full particulars and the ca!e can only be decided on the particulars as laid. There can be no departure from them in evidence. General allegations are insufficient even to amount to an averment of fraud of which any court ought to take notice however strong the (1) (1917) 64 l.A. U6. (2) [1951) s.c.R. ~·a. I S.C.R. SUPREME OOURT REPORTS language in which they are couched may be, and the same applies to 'undue influence and Ladli Prasad Jaiswal coercion." The plea of undue influence and coercion by the Company and defendants 2 to 5 was raised in terms which were identical. The plea analysed in its component parts may be stated as follows :- (1)

Because of the resolution dated October 16, 1945 the plaintiff "succeeded in getting dictatorial powers over the Company, practically usurping all the p6wers of the General body of the shareholders . and thereby purporting to deprive them to exercise even those rights which they" were "legally entitled to exercise under the law" ; (2) "These resolutions which gave the plaintiff a complete veto over the affairs of the Company (which is not permissible under any valid constitution) were obtained by the plaintiff at the point of a dagger" ; (3) "That the plaintiff was refusing to hand over charge of the inoneys, books and the entire assets of the Company and using the funds of the Company for ruinous litigation against the defendants who on the other hand were having to prosecute their c~es out of their meagre funds which too were dwindling fast" ; (4)

"Taking foll advantage of his position . and knowing fully well the resources of the defendants, the plaintiff succeeded in coercing the defendants in submitting to his dictations and virtually compelled Kamal Distillny c •. , Ltd. Shah, J. LoJJi PTAJOJ J•isw.l them to pass ,these unconstitutional resolutions." K.,,,.1 Distil/ey CA.,W. It may be observed that though issue No. 1 raised a plea both of coercion and undue influence as vitiating the ~resolutions, no attempt was made to rest the right to relief on a case of coercion in the Courts below and in this Court. Shali, J. The first part of the case of the defendants amounts to a plea that by the resolutinr:3 dated October 16, 1945 that plaintiff acquin:d a position of domination over the affairs of the Company and over the defendants. What the second part means it is difficult to appreciate.

The language used is somewhat extravagant : it is not the case of the defendants that they were compelled to agree to the resolutions by threats of physical violence. By the third part it is affirmed that the plaintiff unlawfully refused to part with the moneys, books and the assets of the Company and commenced litigation with the aid of the funds of the Company whereas the defendants had to rely upon their own resources which were limited. Presumably this has reference to the refusal of the plaintiff to comply with the resolution of February 20, 1945 and to litigation which ensued between the parties after the resolution was passed. It is difficult to regard this as a plea' precisely expressing thac the plaintiff was in a position to dominate the will of the defendants.

The last part of the plea is that taking advantage of his position and knowing that the position of the defendants was precarious he succeeded in compelling the defendants to su.bmit to his dictation and compelled them to pass the resolutions. The pleading which was regarded as one of undue influence also suffers from a lack of particulars. How the plaintiff took advantage of his position· as a person in possession of the assets of the Company and by what device he compelled the defendants to submit to his will has not been stated. Section 16 of the Indian Contract Act, which incorporates the law relating to undue influence in its application to contracts is but a particularisation of a larger principle. All transactions procured in the manner set out therein, are regarded as procured by the exercise of undue influence. Section 16 of the Contract Act provides : " (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 po~ition 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 anotherwhere 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 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 jufluence shall lie upon the person in a position to dominate the will of the other., 196i - lAdli l'raSid J.Uw•l Kamal Distilllr.1 Co,, Ltd. Sluih, J. lodli Prasdd JaisW1SI X at1141 Di1tilln, Co., lid. Shah, J. 300 SU PRE.ME COURT REPORTS [1964) VOL. Nothing in this sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872." The doctrine of undue influence under the common law was evolved by the Courts in England for granting protection against transactions procured by the exercise of insidious forms of influence spiritual and temporal.

The doctrine applies to acts of bounty as well as to other transactions in which one party exercising his position of dominance obtains an unfair advantage over another. The Indian enactment is founded substantially on the rules of English common law. The first sub-section of s. 16 lays down the principle in general terms. By sub· s~ction (2) a presumption arises that a person shall h~ deemed to be in a position to dominate the will of another if the cnnditions set out therein arc fulfilled. Sub·section (3) lays down the conditions for raising a rebuttablc presumption that a transaction is procured by the exercise of undue influence. The reason for the rule in the third sub-section is that a person who has obtained an advantage over another by domi[)at· ing his will, may also remain in a position to suppress the requisite evidence in support of the plea of undue influence.

A transaction may be vitiated on account of undue influence where the relations between the parties are such that one of them is in a position to dominate the will of the other and he uses his pmition to obtain an unfair advantage over the other. It is manifest that both the conditions have ordinarily to be established by the person seeking to avoid the transaction : he has to prove that the other party to a transaction was in a position to dominate his will and that the other party had obtained an unfair advantage by usin~ that position. Clause (2) lays down a sptcial presumption that a person is deemed to be in a position to dominate the will of another where he holds a real or apparent authority over the other .. or where he stands in a fiducfary 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-section (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-section· (3) 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 trans· action 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.

Assuming that in this case a plea of undue influence was attempted to be raised by para· graph 4 of the Company's written statement and paragraph 6 of the written statement of the other defendants, defendants 2 to 5 have not submitted themselves for examination before the Court. The burden of proving undue influence primarily lay upon the defendants who were setting up the plea. The. manner in which the case on behalf of the defendants was conducted reflects little credit upon those in charge of the case. The primary issue on which the defendants sought to defend the suit raised the plea of undue influence and coercion in relation to the resolution dated October 16, 1945, and we should have expected the defendants to open the case and lead evidence in suppor.t of their plea. But Laili Prasad Jaiswal Emal Distillery Co., ltd. Shah, J. na lM1l "-' Jl!bwl ll- Dillill"7 Co., UL SW.

J. on December 11, 1950 after the second defendant Shanti Prasad produced a number of documents which he was summoned to produce, the plaintiff for some reason not apparent on the record opened the case. Counsel for the plaintiff stated that the plaintiff was at that stage to be examined only on the issue of which the onus lay upon the plaintiff and that the plaintiff would be examined in rebuttal after the defendants closed their case and that he will examine the remaining witnesses mentioned in his list in rebuttal. Manifestly at that stage the evidence of the plaintiff led expressly on issues other than the first issue of undue influence could not be directed to rebutting any presumption of undue influence, for there was before the Court no evidence proving the facts on the proof of which alone the presumption under sub-s. (3) of s. 16 may arise and the burden of proof shift.

After the plalliciff concluded his evidence on the issues on which the plaintiff offered to lead evidence, on behalf of the defendents two witnesses Mohan Singh and Raghu Nandan were examined. Mohan Singh said nothing which might have a bearing on the plea of undue influence. Raghu Nandan made certain equivocal statements about examination of accounts at the meeting of October 16, 1945 and further stated that the compromise pursuant to which the resolutions were passed was arrived at about midnight of October 15, at the residence of the plaintiff Ladli Prasad, and that to his knowledge the defendants had no other source of income except the director's remuneration. Beyond this he appears to have said nothing which directly supported the defendant's case of undue influence.

Thereafter followed a baffling series of applications made with a view to _protract the procecdmg in the suit, presumably to procure a situation in which the principal defendant Shr,11ti Prasad may avoid going mto the witness box. By diverse applications the proceeding was protracted till May 1953, but neither 1 $.C.R. SUPREME COURT R,EPORTS Shanti Prasad nor the othel! memben of the family appeared before the· Court for e.xamination as' ~; Pruu l.U.cl witnesses in support of the defendants' case of undue ir.,,.. ~"'' inflµence. An· application submitted on April 27, c.., Ll'- 1953 after the case was set down for judgment for sw, 1, the · examination of Shanti Prasad was rightly rejected by the Subordinate.Judge. · A bare perusal of the statements and the cour.se which the procee· dings have taken leads to the only conclusion that the defendants did not desire to give evidence.in support of their plea of undue influence and to subject themselves to cross-examination.

There may arise cases in which even though the burden lies on the defendants to prove their case of undue influence they may establish it from admissions made by the plaintiff or his witnesses· or from 6ther evidence, and without giving their own testimony, but this, in our judgment, is not such a case. · Before directing our attention to the findings of the District Judge from which undue influence wu infeitred, it is. necesllary to reiterate certain undisputed . facts. Ladli Prasad was the eldC9t male member in the family but the family had severed its joint status in 1940 and the business of the family was taken over by a private limited company, in which the three branches held'shares. Under the Articles of Association as originally framed in 1941, Ladli Prasad was dra\Ving from the Company an allowance of Rs. 1800/- per mensem, a commission of 7!% o~ the net profits of the Company and the car allowance of Rs. 350/· per mensem and an allowance of Rs. 30/· per day during tours together with a new car every third year for use, whereas the other directors were getting only Rs. 250/· per mensem, and Rs. 25/- for every meeting of directors attended.

Defendants 2 to 5 revolted against this disparity in the scale of remuneration and by resolution dated February 20, 1945 removed Ladli Prasad from the Managing Directorship of Lldli Prasad JaisUJdl Kanwl Di.rti/l<ry Ca., Ltd. Shah, J. the Company. This step of the defendants led to litigation. Shanti Prnsad claimed to enforce hiJ rights under the resolution, and Ladli Prasad sought to retain possession asserling that the resolution was invalid. There were thereafter negotiations for settlement of the disputes, at which several near relations and employees of the Company were present, and certain terms of compromise were agreed upon pursuant to which in the meeting dated October 16, 1945 held at the residence of Ladli Prasad resolutions were passed, which had the effect of equalising the share holding of the three branches, and the remuneratioo drawn by them.

Ladli Prasad was also given complete discharge from liability for his previous dealings, resolutions of February 20, 1945 were cancelled, and amendments were made in the Articles of Association requiring that all decisions of the Board of Directors shall be unanimous. Thereafter by the special resolution passed in the extraordinary General Meeting dated March 28, 1946, the resolutions dated October 16, 19i5 were cancelled, the plaintiff-Ladli Prasad-was removed from his post of Chairman, and also of Director, and Shanti Prasad was appointed Managing Director. The resolutions dated October 16, 1945 were acted upon, equalisation of share holding was effected by transfer of shares, and Shanti Prasarl assumed the office of Manager of the Company, and presumably dividend declared at the meeting and remuneration settled were accepted.

The defendants did not institute any proceeding to have the resolutions declared null and void on the ground that they had been secured by undue influence, and the plea that they were invalid was set up for the first time in the suit instituted by the plaintiff.

In support of his conclusion that undue influence was exercised by the plaintiff upon defendants 2, 4 and 5, the District Judge recorded the findings that the plaintiff was the eldest male member of the . family, and there was no one to look after the interests of defendants 2 to 5; that the plaintiff had taken into his possession a!l the jewellery belonging to defendants 2 to 5 and this jewellery was restored to them after the compromise of October 16, 1945; that after the joint family was dissolved and the business of Kishori Lal & Sons was taken over by the Company, plaintiff received as much as Rs.3000/· per month as salary, daily allowance, motor-car allowance and under other miscellaneous heads, whereas the other Directors received only an allowance of Rs. 250/· per month and a fee of Rs 25/- per day for attending the meetings of the Board of Directors; that the plaintiff had started another Company in the name of J agatjit Distilling and Allied Industries, Hamira from which he made large profits and had "become a business magnate"; that at the time of the compromise the financial position of the defendants was "helpless and miserable" and they were not doing any other business and had no other source of income.

After the operation of the order appointing Receiver passed by the Subordinate Judge, Kamal was stayed by '\he High Court of Lahore, defendants 2 to 5 were not in a position to defend .. their Tights because of lack of financial resources j!.nd the plaintiff took advantage of their helplessness and dictated terms which were not fair; and that the plaintiff was interested in creating a deadlock and thereby to make large profits from his separate concem,-the Jagatjit Distilling and Allied Industries.

The District Judge inferred from these findings that the plaintiff Ladli Prasad was in a position to dominate the will of defendants 2 to 5, that he could exert undue influence upon them because "they were in a very wretched position being hard pressed by the lack of money"; that the near relations of the family were present at the meeting to protect the interests of the family and they could not be expected to safeguard the interest of defendants 2 to 5; and that Ladli Prasad J aisu1a1 E11rnal Distil/tr;· Co., Ltd. oh.Ji, I. L.Jli PrdSMI Jaisuud l\om•l Di.Jtilltt,J c.., ltd. Shoh, I. there was no evidence that defendants 2 to 5 received advice from any one else, or that they gave their· consent to the compromise with free exercise of their volition.

He held that the plaintiff got himself absolved from all liability to account for his dealing with the assets of the company since he commenced management as a .Managing Director, and that he 'obtained by the resolution a powrr of ·veto' and managed to get himself appointed a permanent Director. The learned Judge, therefore, concluded relying upon the "presumption of undue influence on account of the above-mentioned facts" that the defendants 2 to 5 were induced by the exercise of undue influence and coercion to give their consent to the minut~s of the meeting held on October 16, l 945 and the plaintiff had failed to adduce any satisfactory evidence to rehut the prfsumption. In our view the conclusions of the District Judge could not be regarded as binding upon the High Court in second appeal, for he rai~ed the inference of undue influence from facts which were never pleaded and proved, and he relied upon the presumption under s.

16 (3) without the conditions prescribed therebv being fulfilled. The only facts on which the defendants relied in support of their pica in their written statement were that the plaintiff was in posscision of the books, and assets of the Company ; that he used the funds of the Company for litigation, and that taking full advantage or his position the plaintiff succeeded in coercing the defendants to submit to his dictation. The first avcnncnt w:i.s admitted and the other two were denied by the plaintiff.

There is no pica and no evidence on the r~cord to prove that there was no one to look after the interest of defendant~ 2 to 5 that all the jewellery of the defendants was prior to October· 16, 19!5 in the possession of the plaintiff; that the plaintiff had made large profits from Ja~atjit Distilling and Allied Industries; that the plaintiff was interested in creating a deadlock with a view to securi: benefit for his concern J agatjit Distiller; that .the financial position of the defendants was "helpless and miserable"; that the defendants were not in a position to de.fend their Tights because of lack of financial resources; and the plaintiff on that account dictated terms of compromise which were not fair. Again the presumption under s. 16 (3) could not come to.the aid of the defendants. The two conditio!lS on the proof of which alone the presumption arises are that the plaintiff was in a position to dominate· the will of the defendants, and the transaction was unconscionable.

It was not pleaded by the defendants that as the eldest male member of the family, the plaintiff. was in position to dominate the will of the defendants; nor was there evidence to show that he h<lld any real or appare.nt authority over the defendants. on that account. Admittedly on February 20, 1945 the defendants had by a resolution of the Company removed the plaintiff from the post of Managing Director. · It is true that the plaintiff refused to accept the validity of that resolution, and declined to hand over management of the affairs of the Company to Shanti Prasad; but that does not establish that he was in a position to dominate the ' will of the defendants. Again the transaction cannot be called unconscionable. The Plaintiff Ladli Prasad was under the original appointment drawing an allowance exceeding Rs. 3000/- per month and held the largest single block .of shares and occupied the office of Managing Director.

By the resolution his remuneration was reduced to Rs, 900/-, he was deprived . of his office of Managing Director and his share holding was also reduced and made equal to that of the other branches of the family. It is true tlrat he became Chairman of the Board of Directors, but on that account he acquired no superior rights. All resolutions of the Board of Directors had under the amended Articles to be unanimous and no member co11ld be removed by the other;. These resolutions Ladli Pr.,ad Jaiswal Kamal Distili,,., Co., Ltd. Shah, J, Lai/Ji hasod /lli11Hl Kamal Distill1r7 c..,1.Jd. Shah, J. operated as much to the benefit of the defendants 2 to 5 as of the plaintiff. It is true that by the resolutions passed at the meeting all previous dealings of the plaintiff were validated and he was absolved from liability in respect of those transactions.

The plaintiff has affirmed on oath that this was so because accounts were 'gone into' before the meeting, and the defendants have not entered the witness box to depose to the contrary, though the burden of proving that unfair advantage was obtained by the plaintiff lay upon the defendants. Undoubtedly a resolution which absolved the plaintiff from liability for all his past dealings, without settling accounts, may appear prima f acie unfair, but the District J u<lge did not hold that accounts were not scrutinised before the resolutions of October 16, 1!145 were passed, In any event there is no evidence on the record that accounts were not scrutinised and accepted by the defendants 2 to 5 before the compromise which culminated in the impugned re~olutions. The only evidence on behalf of the defendants was of Raghu Nandan- Works Manager of the Kamal Distillery. He stated "the compromise was finalised at about 12 and 1 A. M. at night.

I stayed outside for some time, but at the time of finalising of the compromise, I was prc~cnt at the place where the compromise had taken place. The accounts were gone into at that time. So far as I know accounts were never sent for during the talk of compromise. x x x S. P. Jaiswal insisted on sreing the accounts, but abruptly he signed the compromise." In crossexamination he stated "I do not know if parties had been carrying on the negotiations about the compromise some 5 or 6 days before same was arrived at, but I know that they were there on the 15th x x I do not know when the compromise (talks) started. The compromise was finalised between the night of the 15th and I 6th, and on the morning of the 16th, I was told to take office records to Karna!." The plaintiff Ladli Prasad has deposed that the accounts were scrutinised before the resolutions.

It has to be remembered that in pursuance of the resolutions dated October 16, 1945 Shanti Prasad assumed the office of Manager of the Company, and it is common ground that the books of account were in his possession since that date. The books were originally under the control of the plaintiff : since the resolutions they were with the defendants and the defendants have not led any evidence to show that in respect of his dealings for the period he was in management the plaintiff Ladli Prasad was liable to the Company. It cannot in the circumstances be held that the High Court was bound by the findings recorded by the District Judge. .For reasons already mentioned the conclusion on the issue of undue influence was based on allegations which were never pleaded and proved.

Bish an Narain, J., was therefore right in holding that the findings of the District Judge travelled beyond the pleadings of the defendants, and "that besides the facts that the plaintiff is the eldest surviving brother and· the High Court stayed the operation of the order appointing the Receivers, there is no evidence in support of the findiags of the District Judge." On a review of the evidence, which Bishan Narain, J., was entitled in the circumstances to embark upori, he came to the conclusion that the defendants had failed to establish the plea of undue influence. The Division Bench of the High Court in appeal under cl. 10 of the Letters Patent held on an elaborate review of the evidence that the conclusion of the District Judge on the issue of undue influence was cor~ect. We must examine the findings recorded by the Division Bench, because the decision that the conclusions of the District Judge were not binding upon Bishan Narain, J., does not effectively dispose of the appeal.

This Court must decide whether on LaJli Prasad Ja;sw:tl Kartllll Dittill"Y Co., Ltd. Shah, J. LUJi Prasad JllislMi Ka111al DiJtilltr)' Co., Lui., Shah, J. 310, SUPREME COURT RF.PORTS (1964] VOL. the pleading of the -defendants and tlie evidence on the r~cord, the conclusion of the High Court may independently of the findings of the District Judg~ be sustained. The High Court observed that as "the karta and elder brother, the plaintiff Ladli Prasad was in a position to dominate the will of the defendants and that he obtained an unfair advantage over them.

In coming to that conclusion the learned Judges relied upon "the Hindu Shastric injunctions and highly cherished Hindu sentiments that an elder brother in relation to his younger brothers or an uncle in relation to his fatherless nephews is placed on a high. pedesta I next after parents" and inferred that the plaintiff must be deemed to be in loco parentis to tlle defendants and that he not only held an authority which is both real and apparent but he stood in a fiduciary relationship and taking advantage of his position he could and did dominate the will of the defendants.

The learned Judges 1ecognised that the case of the defendants suffered from the infirmity that they did not offer to be witnesses in the case, but they observed that "the:r omission in that behalf though improper could not be considered fatal because· having regard to the circumstances, undue influence could be inferred, the plaintiff Ladli Prasad having been in a position of superiority and a position of vantage which he continued to occupy till October J 6, l!l45." In our judgment, there is no evidence to support the finding that Ladli Prasad was <JUa the other members in loco ])'.Jrenlis. The three branches of the family had separated in 1940, and were living apart. It is true that Ladli Prasad was drawing remuneration which was many times the remuneration drawn by the other branches but the validity of the resolutions under which he commenced drawing that remuneration has never been challenged.

By February 1945 the disputes between Ladli Prasad on the one hand, and the other members had come to a head, SUPREME COURT REl'ORTS and by the resolution dated February 20, 1945 Ladli Prasad was removed from his office of Managing Director. This was an "open revolt" against whatever authority Ladli Prasad may have once possessed. Shanti Prasad filed a suit against Ladli Prasad to secure custody of the assets of the Company as Managing Director, and obtained an order for appointment of a Receiver of the assets. It would be a complete perversion of the true situation to hold in this case in the light of the Circumstances that merely because Ladli Prasad was the eldest male member, he was in 'loco parentis' qua defendants 2 to 5. It may be noticed, that this ground that Ladli Prasad stood in the relation similar to that of a parent qua defendants 2, 4 and 5 was never pleaded by the defendants.

The defendants were represented by their Ir-~)'ers in the two suits which were filed since February 20, 1945 ahd it is difficult ·to· accept that though litigating in Court in assertion of the rights claimed by them, they were so much under the influence of Ladli Prasad (who at the material time was only about 27 years of age) that they could not secure independent advice. For reasons already mentioned the resolutions were, unless it was established that the plaintiff Ladli Prasad was given a discharge without scrutiny of aceounts, not uncon1cional:ile. Negotiarions for a compromise were c;irried on for more than five days and several relations of the parties who were obviously interest.ed ih defendants 2 to 5 were present. If the plaintiff had attempted to . exercise his authority over the defendants some reliable evidence should have.been forthcoming in' that behalf.

The circumstance·. that none of the defendants gave evitience in support· qf their plea, even after protracting the proceedings for more than two years raises a strong presumption against them that they realised the infirmity of their case and were not willing to submit themselves to cross-examination. Raghu Nandan who was practically the ·only witness examined by the defendant to depose to what Laili Prasad Jaiswa/ Kamal Distillery c,,,, Lt«. Shah, J. Latlli PrOJ"JJ J.Ullldl K•11.t Distal/'? c •. ,w. Skalt, J. transpired at the negotiations and the meeting which culminated in the impugned resolutions has not 1aid anything which may even indirectly support their case. The case that the plaintiff refused to part with the jewellery of the defendants, and on that account was able to compel the defendants, to agree to the reaolutiom was never pleaded and nq,evidence was given by the defendants in that behalf.

Ladli Pra.tad deposed that he had some jewellery belonging to the defendants 2 to 5, and that the defendanu were in pcmcssion of his own j ewell.cry, and after the meeting of October 16, 1945 the jewellery was exchanged. There is again no evidence that the defendents were at the material time in financial difficulties. Admittedly partition of joint family assets had taken place, and the different branchea had obtained their shares in severalty except in the businCM. Defendants have also led no evidence as to what their financial resources in 1945 were, and the assumption made by the High Court in that behalf are not warranted. It is true that because of resolution No. 12 requiring every decision of the Board of Directors to be unanimous, and deletion of Art. 4 7, if the Directors quarrell«;d, creation of an impasse may be visualised, but by the resolutions the plaintiff acquired no overriding privilege. J.fis right.s were the same as of the other branches of the: family.

On the question as to what transpired at and before the meeting dated October 16, 1945 there is the evidence of Devi Prasad which may be briefly referred to. He has deposed that he was present at the meeting and that the compromise was arrived at by the free consent of the parties and no undue influence was exercised by any party on the other. The compromise talks had begun a week earlier,. and the account books of the Karna! Distillery Company were produced at the time of the compromise, and the books were examined by defendants 2 to 5 and some objections raised during the talks of compromise were settled after seeing the books of account. The witness also produced a copy of the minutes of the meeting which had taken place at 10-30 A.M. on October 16, 1945 stating that the same were typed by him. There was substantially no cross-examination of this witness on the evidence given by him that the account books were examined during the negotiations for compromise.

The finding of the High Court that the books of account were never examined and the plaintiff pursuaded the defendants to give him a complete discharge in respect of the liabilities incurred by him for his transactions was never pleaded in the written statement, though it was an important parti· cular which if true would have been pleaded. Even assuming that on the general plea of undue influence it was open to the defendants to lead evidence on this matter, the defendants have not chosen to lead any reliable evidence to show that that books of account were not examined and entries were not verified, and the equivocal evidence made by the witness Raghu Nandan has no evidentiary value at all.

It is true that the plaintiff had started another Company in the name of J agatjit Distilling and Allied Industries but even if that circumstance has any bearing on the issue of undue influence there is again little evidence that he had made large profits and had acquired influence and power thereby. The appointment of receivers by the Court oC Subordinate Judge, Kamal was stayed by the High Court, but that single circumstance will not justify an inference that the defendants were effectively prevented . from prosecuting their claim. There is no evidence to show that the plaintiff was interested in creating a deadlock so as to prevent the smooth and successful business of the Company. The only two facts viz. that the plaintiff was the eldest member and that he was before the resolu - tion dated February 20, 1945 receiving very much larger sums of money from the Company as his remuneration in comparison with the remuneration Ladli Pro1t1i Jailwol Kamal Distilll'.1 Co., Lid.

SliaA, J. wi/1 "'""'' Jai1u·al Con«al DiJlil/41} Co., Lill. Shalr, J. received by the defendants, viewed in the light of the other circumstances will not justify an inference that the plaintiff was in a position to dominate the will of the defendants. For reasons already stated the High Court was in error in relying upon the presumption antler sub-section (3) of s, 16, because in our view the evidence does not justify the conclusion that the plaintiff was in a position to dominate the will of the defendants and that the resolutions gave an uncons· cionablc advantage to the plaintiff. We must add that the decisions of the District Court and Division Bench of the High Court, suffered from serious infirmities in that they wrongly placed the onns of proof upon the plaintiff, and reached a conclusion that the plaintiff failed to prove that the resolutions were not obtained by the exercise of undue influence.

It was urged that in any event, at this late stage-sixteen years after the date on which the resolutions were passed by the defendants at the meeting dated March 28, 19,15-this Court would not be justified in declaring the actions of the defendants in pur>uance of the resolutions, invalid, for they would affect third parti<lS who must have dealt with the Company on the footing that the manangement of the Company had authority to transact business. But the plaintiff has unauthorisedly been dcpri vcd of his rights by the arbitrary conduct of the defendants. All the Courts below have held that the resolutions dated .March 28, 1946 are invalid. The High Court declined to grant relief to the p' :iintiff, for in their view the plaintiff had disentitlcd himself to equitable relief because of his previous .com;luct in exercising undue influence, and thereby securing an unfair advantage to which hew.as not lawfully entitled.

It is unnecessary to enter upon a discussion of the question whether in the circumstances it was a sufficient gtound for depriving the plaintiff of relief, for we are of opinion that subject to the reservations made by Bishan Narain, J., which fully protect third parties, I 3i5 relief should be awarded. Before the learned Judge, counsel for the plaintiff gave an undertaking that he will not question the dealings of the defendants qiw third parties, and requested expressly that the prayer for declaration that all acts of the Company and the defendants which affected him personally qua the members of the Company may alone be declared invalid. That, in .our judgment, should be sufficient to meet any objection which may be raised by the defendants on the score of delay. It was also submitted that the plaintiff has lost his right to the shares since the suit was instituted because the Company had enforced its lien and had sold the shares of the plaintiff in enforcement of the lien.

The validity of that action of the Company has been challenged in a separate proceeding, and we need express no opinion on that question. All the Courts have come to the conclusion that the reso· lutions dated March 3, 1946 and Ivfarch 28, l!lt6 were invalid and not binding on the plaintiff. Therefore, any action taken by the defendants pursuant to those resolutions may prima facie be regarded as ineffective. . On that view of the case, this appeal must be allowed and the decree passed by Bishan Narain, J., must be restored with costs in this Court and before the Division Bench. · Appeal allowcrl . Ladli Prasad Jai5wal Karnal J)islil/ery Co., Ltd. Shah, J.