Raghunath Prasad v Sarju Prasad (1923) - Case Analysis
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Case Overview |
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Case Title |
Raghunath Prasad v Sarju Prasad |
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Citation |
(1924) 26 BOMLR 595 |
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Jurisdiction |
Bombay High Court |
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Date of the Judgment |
18th December 1923 |
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Bench |
Shaw, Carson, J Edge, A Ali, L Jenkin |
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Petitioner |
Raghunath Prasad |
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Respondent |
Sarju Prasad |
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Provisions Involved |
Section 16 of the Indian Contract Act, 1872 |
Introduction of Raghunath Prasad v Sarju Prasad (1923)
The case of Raghunath Prasad v Sarju Prasad (1923) centres around a dispute between a father and his son regarding a mortgage agreement. The primary issue in this case was whether the contract between the parties was induced by undue influence. The case highlights the applicability of Section 16 of the Indian Contract Act, 1872 which deals with contracts induced by undue influence and the question of whether the contract should be set aside due to unconscionable terms.
Historical Context and Facts of Raghunath Prasad v Sarju Prasad (1923)
The case at hand involves an appeal from a decree dated 9th November, 1920, by the High Court of Patna which revised an earlier decree from 25th September, 1917 which was adjudicated by the Subordinate Judge of Arrah.
Parties Involved
The Plaintiff Raghunath Prasad was the father of the defendant Sarju Prasad. Both Plaintiff and Defendant were co-owners of a large joint family property.
Dispute Over Property
A dispute arose between the Plaintiff Raghunath Prasad and Defendant Sarju Prasad regarding the holding and division of the joint family property. Due to the ongoing dispute the father, Raghunath Prasad (Plaintiff) initiated criminal proceedings against his son Sarju Prasad (Defendant).
Mortgage Agreement
The Defendant, Sarju Prasad in order to safeguard himself he mortgaged his properties to his father (Plaintiff) and borrowed Rs. 10,000. At a compound interest rate of 24% the loan was granted.
Excessive Debt Growth
The interest on the borrowed amount increased which caused the debt to grow from Rs. 10,000 to Rs. 1,12,885, which was more than eleven times the original loan amount.
Contention of the Defendant
The Defendant Sarju Prasad contended that the Plaintiff Raghunath Prasad had taken unconscionable advantage of his mental distress by demanding an excessive rate of interest. He invoked Section 16 of the Indian Contract Act, 1872, which deals with undue influence. He claimed that the agreement should be set aside due to this undue influence.
Issue addressed in Raghunath Prasad v Sarju Prasad (1923)
The main question which was addressed in this case was whether the contract between the Plaintiff Raghunath Prasad and Defendant Sarju Prasad was induced by the Undue Influence?
Legal Provisions involved in Raghunath Prasad v Sarju Prasad (1923)
In the case of Raghunath Prasad case Section 16 of the Indian Contract Act, 1872 played a significant role. The following is the analysis of this provisions -
Section 16 of the Indian Contract Act
Section 16 deals with ‘Undue influence’. It states that -
- 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.
- 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--
- where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other
- 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.
- 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.
It is important to note that nothing in this sub-section shall affect the provisions of section 111 of the Indian Evidence Act, 1872.
Judgment and Impact of Raghunath Prasad v Sarju Prasad (1923)
The Bombay High Court in Raghunath Prasad case laid down a three-step process for the determination whether a contract was induced by undue influence. The three-step process is as follows-
- To determine if one party was in a position to dominate the other the relationship between the parties must be examined
- The Court must analyze whether the contract was actually induced by undue influence.
- The burden of proof (onus probandi) lies on the party in a dominant position who must prove that the contract was not influenced by undue pressure particularly if the transaction appears to be unconscionable
In Rahunath Prasad v Sarju Prasad the Bombay High Court observed that the borrower had failed to demonstrate that the lender was in a position to dominate his will and that the contract was induced by undue influence. Therefore, the conditions of the three-step process were not satisfied. The Bombay High Court allowed the interest rate from the date of the loan execution.
Conclusion
The Bombay High Court in Raghunath Prasad v Sarju Prasad (1923) held that the borrower had failed to prove that the lender dominated his will. The Court ruled that the contract was not induced by undue influence and upheld the interest rate from the date of the loan's execution.
FAQs about Raghunath Prasad v Sarju Prasad (1923)
What was the main issue in the Raghunath Prasad v Sarju Prasad case?
The main question which was addressed in this case was whether the contract between the Plaintiff Raghunath Prasad and Defendant Sarju Prasad was induced by the Undue Influence.
What is Section 16 of the Indian Contract Act 1872?
Section 16 of the Indian Contract Act, 1872 deals with undue influence. It occurs when one party to a contract is in a position to dominate the will of the other and uses that power to obtain an unfair advantage.
What was the decision of the Bombay High Court?
The Bombay High Court held that the defendant failed to prove that the plaintiff was in a position to dominate his will, and therefore, the contract was not induced by undue influence. The court upheld the interest rate as per the terms of the contract.