Jaigobind Prasad Sahu vs Mt. Hiria

Manohar Lall, J.—This is an appeal by the plaintiff against the decision of the learned Subordinate Judge of Shahabad dated 28th April 1937, by which his suit has been dismissed which was instituted on 29th September 1934, to claim the money due on a handnote dated 2nd October 1931, now found to be executed by one Jagdish Prasad, the deceased husband of the respondent Mt. Hiria, a minor, who has been sued through and under the guardianship of Shyamlal Bhagat. The sole question for determination in this appeal is whether this handnote was for consideration. The circumstances which led up to the execution of the handnote in suit and the institution of the suit giving rise to the present appeal have been well ascertained and are simple.

It appears that the plaintiff who is the maternal uncle of the deceased Jagdish Prasad used to look after and manage the affairs and properties of Jagdish Prasad from the time of his minority. Jagdish Prasad died in June 1933 at the age of about 21 or 22. The plaintiff''s case is that during the minority of Jagdish Prasad the plaintiff had to advance large sums of money from his own pocket in order to meet the litigation expenses and other necessary charges of the minor''s estate chiefly because the income received from the estate of the minor was not sufficient to meet the necessary expenses owing to the litigation in which the estate was involved and for various other causes which it is not necessary to relate here. It was in this state of affairs that the plaintiff began to advance money from his pocket from the year 1924 onwards, and his case further is that when Jagdish Prasad attained majority on 20th March 1931 he explained the accounts to his ward who after going through all the account books with the help of his munibs and gomasthas accepted his liability to the extent of Rs. 8216-6-0 together with interest amounting to Rs. 921-4-3 which was due for and up to 1987 Sambat.

The plaintiff''s case then is that in the year 1988 Sambat on 2nd October 1931 after giving credit to Jagdish Prasad for the amounts which were received from his estate in that year, and after deducting other items which were spent for Jagdish Prasad by the plaintiff, the balance of Rupees 8856-9-0 was struck. This balance was the result of the adjustment of accounts and was acknowledged by Jagdish across a one anna stamp in these words: "Made adjustment of accounts; Rs. 8856-9-0 was found due by me upto 2nd October 1931. (Sd.) Jagdish Prasad" (Ex. 1 in the case). On the same date Jagdish Prasad executed a handnote across four one anna stamps (Ex. 8 in the case) which recites that he "took a loan of Rs. 8856-9-0 from Jaigobind Prasad Sahu for expenses of suit" and promised to pay on demand the entire amount together with interest at the rate of 10 annas per cent, per mensem. The handnote bears the signature of Jagdish Prasad as well as his thumb impression. On the same date the plaintiff took a receipt from Jagdish Prasad (Ex. 9) by which Jagdish Prasad acknowledged the receipt of Rs. 8856-9-0 covered by the handnote dated 2nd October 1931. Although in the Court below on behalf of the defendants it was asserted that Jagdish Prasad was a minor on the date of these transactions of 2nd October 1931 and also that the handnote and receipt and acknowledgment were all forgeries but in view of the clear finding of the learned Subordinate Judge which has not been assailed before us on behalf of the respondents it must be assumed for the purpose of this appeal that the handnote in suit was duly executed by Jagdish Prasad who also signed the acknowledgment and the receipt already referred to.

The learned Subordinate Judge has come to the conclusion that the handnote in question as well as the acknowledgment and receipt although really executed by the deceased Jagdish Prasad were executed under undue influence which was exercised upon Jagdish who had just come of age by his guardian and agent, who was in a position of active confidence and observed:

I have not the least hesitation in holding that the account stated is an unconscionable bargain inasmuch as the major part of the account stated on which the consideration money of the handnote was founded was not recoverable from Jagdish Prasad who had never acted as a free agent in the transaction . It is clear that there was none at the time of the so called his abbakias well as of the execution of the handnote in suit except Jagdish Prasad who just emerged from his minority and who thus had no full and free opportunity of judging for himself. Under these circumstances and in view of the unconscionable nature of the transaction I think that the present case is brought within the four corners of Section 19 A, Contract Act, and as the burden of proving good faith of the transaction which lies on the plaintiff who was in a position of active confidence has not been discharged the claim on the handnote in suit is bound to fail.

Although the learned Subordinate Judge found that on a calculation of the advances made by the plaintiff in 1988 Sambat they amounted to about Rs. 1140 he refused to pass a decree even for this amount on the ground among others that the plaintiff did not render any account to Jagdish Prasad of the management of the estate during his minority. He observes that

it would be inequitable to give the plaintiff a part decree in respect of the advances made to Jagdish Prasad in the year 1988 Sambat as disclosed in his account book.

Finally the learned Subordinate Judge did not accede to the prayer made on behalf of the plaintiff that the plaintiff was at least entitled to the amount which he paid in order to meet the necessary debts and other necessities of Jadgish Prasad for which his estate was relieved by the payments made by the plaintiff. The reason why this prayer of the plaintiff was rejected is thus stated by the learned Subordinate Judge:

It is clear that except a vague evidence that some part of the advances must have been employed for payment of rents or revenue, there is no satisfactory evidence that the advances made by the plaintiff in the period of minority of Jagdish Prasad was so employed and that there was an imminent danger of minor''s property being sold up.

Mr. Mahabir Prasad who presented the case on behalf of the appellant with his usual ability and subtlety argued that the decision of the learned Subordinate Judge ought not to be upheld because (1) when the case set up by the defence, that the handnote in suit was forged, has been disbelieved the plaintiff is entitled in law upon proof of its execution by Jagdish Prasad to a decree against his estate in the hands of his widow and (2) that it was not open to the learned Subordinate Judge to frame an issue as to undue influence at the time of the argument when no such issue could properly arise upon the pleadings and the issue which did arise upon the pleadings was whether the handnote in suit was obtained without consideration while fiduciary relationship subsisted between the plaintiff and Jagdish Prasad (see issue 2).

I propose to consider the former contention first. The case set out by the plaintiff in the plaint is very simple and is contained in para. 1 to the effect that Jagdish Prasad, the husband of the defendant, executed a hand note on 10th October 1931 for Rs. 8856-9-0 in lieu of debt in favour of the plaintiff and having fixed his thumb impression thereon made it over to the plaintiff and also executed a receipt on the same date for his satisfaction.

In the deposition of the plaintiff which is at p. 1 he amplified the case by stating that Jagdish Prasad had transactions with the plaintiff on account of books, hisab kitab was made, Jagdish Prasad accepted his accounts and Rs. 8856-9-0 was found due for which the acknowledgment and the handnote were written. A little later in the evidence he stated that Jagdish was aged 19 when he executed the handnote and that the accounts in the bahi khatas commenced from 1924-25 and the money was spent in litigation, in the marriage of his sister and of his own marriage and his household expenses and added: "These details will be apparent from my account books." It should be stated here that the plaintiff did not produce any account books for the period other than the period beginning from 3rd April 1931 to 2nd October 1931 when the adjustment was said to have been made and for a few months later.

At one stage of the argument Mr. Mahabir Prasad suggested that as the account books for the period other than the period for which they were produced were not relevant to the case of the plaintiff no inference should be drawn against him for the non-production of the earlier account books and that it was the duty of the defendant to have called for those account books. But this argument is not available to the learned Counsel for the appellant because I find that at p. 10 the witness stated definitely that the previous account books were missing and although he searched for them he could not find the same.

The learned Subordinate Judge did not believe this statement of the plaintiff and in my view was perfectly justified in drawing an inference against him from the non-production of the account books. After the arguments were concluded before us on 14th August 1940, Mr. Mahabir Prasad filed an application on 15th August 1940, asking for permission to produce the books of account for the period prior to 1988 "in order to prevent any adverse inference being made against the appellant for their non-production." The petition states in para. 3 that the appellant made a diligent search and found the missing account books after he was directed to look after them by Mr. Mahabir Prasad. This statement is in direct contradiction to the statement made by the plaintiff at p. 10. Apart from this it is not understood why the plaintiff slept over the matter from 28th April 1937, when the judgment delivered by the learned Subordinate Judge had apprised him of the view taken by that Court. If the plaintiff was diligent he could have easily moved this Court before the hearing began asking for additional evidence to be taken; but he did nothing of the kind and the arguments were concluded without the account books being produced. It is impossible for this Court at this stage to entertain this application which in the circumstances must be rejected.

The onus ordinarily is upon the plaintiff to prove his case when the defendant does not accept the case sought to be made out by the plaintiff. But Mr. Mahabir Prasad suggests that in this case the accounts stated are of the second type referred to by Lord Atkin in Siquiera v. Noronha AIR 1934 P.C. 144 and as the signature on that account has been proved to have been made by the deceased husband of the defendant, the onus shifts upon the respondent to prove that there was no consideration valid in law for the debts for which the acknowledgment was made.

He also argues that in view of Section 118, Negotiable Instruments Act (26 of 1881)--the present suit being a suit on a handnote--the Court is bound to presume that the handnote in suit was drawn for consideration until the contrary is proved by the defendant. I do not think the case relied upon by the learned Counsel for the appellant helps him to the extent to which he desired. In Siquiera v. Noronha AIR 1934 P.C. 144, Lord Atkin, who delivered the judgment of the Board came to the conclusion that

in this particular case, the account stated is in fact an account form which there arises a promise made for good consideration to pay the balance shown in the account,

and then proceeded to point out that there are two forms of accounts stated, namely:

An account stated may only take the form of a mere acknowledgment of a debt, and in those circumstances, though it is quite true it amounts to a promise and the existence of a debt may be inferred, that can Via rebutted, and it may very well turn out that there is no real debt at all, and in those circumstances there would be no consideration and no binding promise. But, on the other hand, there is another form of account stated which is a very usual form as between merchants in business in which the account stated is an account which contains entries on both sides, and in which the parties who have stated the account between them have agreed that the items on one side should be set against the items upon the other side and the balance only should be paid; the items on the smaller side are set off and deemed to be paid by the items on the larger side, and there is a promise for good consideration to pay the balance, arising from the fact that the items have been set off and paid in the way described.

Lord Atkin then drew attention to the definition of accounts stated which was indicated by Viscount Cave in Camillo Tank Steamship Co. Ltd. v. Alexandria Engineering Works (1921) 38 T.L.R. 134, but in that quotation occurs the following important condition:

subject to this, that where some of the items are such that, if they had been actually paid, the party paying them would have been able to recover them back as on a failure of consideration, the account stated would be invalidated.

That has been explained by Lord Atkin to mean:

By that must lie meant, in view of many subsequent authorities, would be invalidated to the extent of those items which are objected to on that footing.

This is exactly the case of the defendant here. It may be noticed also that the case in Siquiera v. Noronha AIR 1934 P.C. 144 was not a case which dealt with a transaction like the present between a guardian and a ward who had just emerged out of minority. Their Lordships of the Judicial Committee had again to consider the question of accounts stated in a later case reported in AIR 1934 147 (Privy Council) where Lord Wright who delivered the judgment of the Board considered this question as a matter of principle and made this observation regarding the case in Siquiera v. Noronha AIR 1934 P.C. 144:

It does not appear from Lord Atkin''s opinion that the authorities in the Indian Courts were cited in that case, and some distinction may be drawn between the relationship of the parties in that case as contrasted with the relationship of the appellants and respondents in the present case. Hence their Lordships do not feel able to treat that decision as conclusive of the present appeal.

As I have already pointed out, the relationship between the parties in the present case are entirely different from the relationship of the parties which were being considered in the AIR 1934 147 (Privy Council) . It is important to bear in mind these observations of Lord Wright which are found at p. 385:

Indeed, the essence of an account stated is not the character of the items on one side or the other, but the fact that there are cross items of account and that the parties mutually agree the several amounts of each and, by treating the items so agreed on the one side as discharging the items on the other side pro tanto, go on to agree that the balance only is payable. Such a transaction is in truth bilateral, and creates a new debt and a new cause of action. There are mutual promises, the one side agreeing to accept the amount of the balance of the debt as true (because there must in such cases be, at least in the end, a creditor to whom the balance is due) and to pay it, the other side agreeing the entire debt as at a certain figure and then agreeing that it has been discharged to such and such an extent, so that there will be complete satisfaction on payment of the agreed balance. Hence, there is mutual consideration to support the promises on either side and to constitute the new cause of action.

Then follows this important statement:

The account stated is accordingly binding, save that it may be re-opened on any ground--for instance, fraud or mistake--which would justifysetting aside any other agreement.

In my opinion the passage last quoted is ample authority for the view that in the particular circumstances of each case the parties are entitled to show that the account stated should be re-opened on the ground of fraud or mistake--the question of onus depending upon the nature of the relationship that subsists between the parties and the surrounding circumstances which are established in case, Attention may also be drawn to the relevant observation of Lord Shaw when delivering the judgment of the Board in Raghunath Prasad v. Sarju Prasad A.I.R.1924 P.C. 60, a case from Shahabad. At p. 105 His Lordship examined the scheme of Section 16, Sub-clause 3, Contract Act, as amended and observed:

By that section three matters are dealt with. In the first place the relations between the parties to each other must be such that one is in a position to dominate the will of the other. Once that position is substantiated the second stage has been reached, namely the issue whether the contract has been induced by undue influence. Upon the determination of this issue a third point emerges, which is that of the onus probandi. If the transaction appears to be, unconscionable, then the burden of proving that the contract was not induced by undue influence is to lie upon the person who was in a position to dominate the will of the other. Error is almost sure to arise if the order of these propositions be changed. The unconscionableness of the bargain is not the first thing to be considered. The first thing to be considered is the relations of these parties. Were they such as to put one in a position to dominate the will of the other? Having this distinction and order in view the authorities appear to their Lordships to be easily properly interpreted.

Keeping in view the above principles of law it is now necessary to find the facts which are satisfactorily established in this case. [His Lordship then discussed evidence and concluded that the sum of Rs. 8216 plus the interest thereon, namely Rs. 921-4-3 must be deleted from the amount acknowledged.] The next question which arises is whether the plaintiff is entitled to any decree on the other items which have not been challenged before us. The accounts are printed at pages 110 to 115. But here again the plaintiff is in a difficulty. The credit side of the entry shows that the plaintiff received a sum of Rs. 2449-3-3 from the defendant in the year 1988 Sambat beginning from 8th April 1931. The debit side of the entry (after deducting Rs. 8216 and the interest thereon) shows a sum of only Rs. 2168-12-3 due from the defendant up to 2nd October 1931. This leaves a credit in favour of the defendant.

But Mr. Mahabir Prasad argued that the sum received, namely Rs. 2449-3-3, should be credited either towards the sum of Rs. 8216 or to a portion thereof, because, he argued, the circumstances are that some money was due to the plaintiff for the advances which he had made.

But after I have found that the plaintiff has been unable to establish that Rupees 8216 was due from the defendant''s husband it is impossible to assume that the amount due was Rs. 2449-3-3. It was then argued, as it was argued before the learned, Subordinate Judge, that as the plaintiff has admittedly spent some money for the marriage expenses of Jagdish and his sister and also for other necessities of the estate he should be reimbursed to that extent. But here again the difficulty is, as has been referred to already when dealing with the evidence of the plaintiff, that he has no material from which a satisfactory conclusion can be drawn. All that he says is that by mere guess he can say that Rs. 2500 or Rs. 3000 was spent in the marriage of his sister and a similar amount was spent on the marriage of Jagadish himself. The statements may be referred to at page 17 of the paper book and it may be noticed that towards the end of the first paragraph he says that the income which he subsequently received from the property of Jagdish was credited in the account books of the plaintiff but still the witness could not say if the amount which he alleged to have spent out of his own pocket was deducted from the payments received or not. The other oral evidence consists of the statement of the same witnesses whom I have disbelieved above. For instance, Ram Kailash Rai, P.W. 4, although he came to prove about the marriage expenses of Jagdish and his sister but in the last line of his examination in chief he was unable to say who met the expenses of these marriages.

All that Dhanpat Rai, P.W. 7, says is that the marriage expenses used to be given by Joy Gobind Sahu. This does not help the plaintiff but it is an admitted case that the money received from the estate of the defendant passed through the hands of the plaintiff. The only witness on the point is P.W. 8 Kanhaiya Rai, who stated that Jagdish himself used to tell the witness that in the marriage of his sister Rs. 2500 or 3000 was spent and "he said that his mama''s money was being spent." The witness makes a similar statement about the marriage expenses of Jagdish himself. Having reviewed the evidence as a whole I am not surprised that the learned Subordinate Judge came to the conclusion in these words:

It is clear that except a vague evidence that some part of the advances must have been employed for payment of rents or revenue, there is no satisfactory evidence that the advances made by the plaintiff in the period of minority of Jagdish Prasad was so employed and that there was an imminent danger of minor''s property being sold up.

I, therefore, reach the same conclusion as that arrived at by the learned Subordinate Judge whose appreciation of evidence in this simple case cannot and ought not to be lightly interfered with by the Appellate Court. The circumstances under which the acknowledgment was said to have been made are so suspicious that it must be held that the plaintiff has been unable to prove the correctness of the amount said to have been acknowledged by Jagdish Prasad. In this view it is unnecessary to consider the question whether Jagadish Prasad was unduly influenced by the plaintiff to execute the handnote, the acknowledgment and the receipt referred to so many times above.

Mr. Mahabir Prasad referred to a number of authorities which deal with the question as to whether a minor is debarred from challenging the validity of a handnote executed by him after he comes of age for a consideration, part of which consists of his promise to pay for the amount advanced to him or for him during the period of his minority.

Owing to some apparent contradiction between the decisions of the Allahabad High Court in Narain Singh v. Chiranji Lal AIR 1924 All. 730 and Bindeshari Bux Singh Vs. Chandika Prasad and Another , the matter was referred to a Pull Bench which was decided by a majority judgment reported in Suraj Narain Dube Vs. Sukhu Aheer and Another .

Attention was also drawn to the Calcutta case of a Single Judge reported in Mt. Kundan Bibi v. Sree Narayan 11 C.W.N. 135, and some assistance was sought to be drawn from the case reported in Gregson v. Aditya Deb (90) 17 Cal. 223, while attention was drawn by the respondent to the case in Gobind Ram v. Piranditta AIR 1935 Lah. 561.

But it is unnecessary to consider this aspect of the question because I have arrived at the conclusion that there was no consideration in fact for the advance said to have been made during the minority of Jagdish and the advances admittedly made after Jagdish become major have been held by me to be wiped off by the payments made by him to the plaintiff as evidenced by his own account books.

For these reasons the appeal fails and must be dismissed with costs.

Chatterji J.

I agree.