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Ladli Prasad Jaiswal Versus Karnal Distillery Co. Ltd.

Civil Appeal No. No. 535 of 1960 - Dated:- 17-12-1962 - Sinha, Bhuvneshwar P.(Cj), Gajendragadkar, P.B., Wanchoo, K.N., Gupta, K.C. Das And Shah, J.C. B. R. Tuli, S. K. Kapur and K. K. Jain, for the Appellant. M. C. Setalvad, Attorney-General for India,A. N. Khanna and Harbans Singh, for the Respondents. JUDGMENT: The judgment of the Court was delivered by SHAH, J.-One Kishori Lal Jaiswal started a "distillery business' in the name of Kishori Lal & Sons and set up a factory at Kamal .....

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mber 5, 1940 the joint Hindu Family of three branches was disrupted and the business of Kishori Lal & Sons was thereafter conducted as a partnership concern each branch having a third share therein. On March 23, 1941 a private limited company called the Karnal Distillery Company Ltd. was incorporated under the Indian Companies Act, 1913, and the business of Kishori Lal & Sons was taken over by that Company. Under the final allotment of shares made by the Company on August 1, 1941- 1005 s .....

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r ten years unless a notice of fifteen days within eight years was given by a two-third majority at a special general meeting held for the purpose of terminating his appointment as Managing Director, and that two third of the total number of members could expel a member of the Company. Ladli Prasad as Manag- ing Director of the Company drew an allowance of ₹ 1,800/- per month, a commission of 7 1/2 per cent on net profits of the Company, a motor-car allowance of ₹ 350/- per month wit .....

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f the family. At an extraordinary general meeting of the Company held on February 20, 1945 at which Shanti Prasad, Sajjan Lal, Madan Lal and Suraj Mukhi were present, it was resolved that Ladli Prasad be removed from his office of Managing Director and that Shanti Prasad be appointed Managing Director instead. But Ladli Prasad declined to hand over charge of the Managing Director's office to Shanti Prasad. A suit was thereupon filed by Shanti Prasad in the Court of the Subordinate Judge, Kar .....

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r the duration of the suit. Against that order Ladli Prasad appealed to the High Court of judicature at Lahore and obtained an order staying the operation of the order appointing receivers.On October 16, 1945 at an extraordinary general meeting of the Company held at the residence of Ladli Prasad at which all the members of the family were present certain special resolutions were passed. The effect of the resolutions was that:- (1) That each branch of the family should own 1170 shares and for th .....

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be a Director of the Company. (4) The maximum number of Directors was fixed at three and the quorum of the Directors' meeting was also fixed at three. (5) Every decision submitted to a meeting of the Directors or members was to be deemed to be passed only if the decision thereon. be unanimous, and the proceedings recorded being signed by the Chairman of the Company and all the Directors or the members, as the case maybe, present at the meeting. (6) Shanti Prasad was appointed Manager for fiv .....

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originally framed and he was discharged in respect of all previous accounts which were ratified and confirmed. (10) All contracts executed, business done, benefits derived by Ladli Prasad under the facilities granted to him by resolution dated April 30, 1941 of the Board of Directors were confirmed and ratified and all transactions recorded in the accounts of the Company for the period April 1, 1941 till the date of the resolution were ratified and it was resolved that the accounts of each of t .....

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) A large number of Articles of Association of the Company were amended in order to make them consistent with the special resolutions. Effect was given to these resolutions. Shanti Prasad assumed the office of Manager of the Company and took charge of the Company's properties, assets and business. Re- adjustment in share-holding of the members was also effected, Ladli Prasad having transferred the shares according to the terms of the resolution. But disputes started afresh. In a meeting of t .....

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esolutions were passed to the effect that, all amendments made in the Articles of Association by the resolutions dated October 16, 1945 do stand cancelled and the original Articles of Association of the year 1941 (including Art. 47 which authorised the Company by a 2/3rd majority to expel any member) do stand restored. It was also resolved that Ladli Prasad be removed from the dire- ctorate and Chairmanship of the Company, and in his place Suraj Mukhi be appointed Director of the Company at a re .....

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rs of the Company to rescind the resolutions, and failing to induce them to comply with the requisition, he filed a petition on May 1, 1946 in the High Court of judicature at Lahore for an order for winding up the Company. An order for winding up the Company was passed by a single judge, but was set aside in appeal by the High Court of Lahore by its order dated January 19, 1956. On November 26, 1946, Ladli Prasad filed a suit in the Court of the Senior Subordinate judge, Karnal for a declaration .....

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njunction restraining the Company, Shanti Prasad, Suraj Mukhi, Sajjan Lal and Madan Lal (who were impleaded respectively as defendants I to 5) from acting upon or carrying into effect the resolutions passed in the meetings dated March 3, 1946 and March 28, 1946 and all meetings held after March 28, 1946. The defendants by separate written statements resisted the suit contending inter alia that the defendants 2 to 5 were coerced by Ladli Prasad taking advantage of his position, into passing the r .....

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the suit was laid upon the defendants, they did not attend the Court for examination as witnesses. By his judgment dated May 25, 1953, the Subordinate judge observed that the written statement did not contain any 'substantial particulars of the plea of coercion or undue influence', and that the defendants having failed to submit themselves to give evidence in support of their plea of coercion or undue influence despite several opportunities given in that connection, a strong presumption .....

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a of undue influence and coercion was not substantiated; and that the resolutions dated October 16, 1945, were not invalid. He further held that the resolutions passed at the Directors' meeting dated March 3, 1946, and at the extra-ordinary general meeting on March 28, 1946, were unauthorised and invalid; that by holding the meeting on March 28, 1946, in breach of the Articles of Association and the resolutions dated October 16, 1945, it was intended to play a fraud on Ladli Prasad by commit .....

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e under pressure exercised by the plaintiff induced to give their consent to the resolutions in the meeting held on October 16, 1945, and on that account the resolutions were ineffective. He observed that Ladli Prasad took undue advantage of his dominating position qua the affairs of the Company and compelled the defendants 2 to 5 to pass the resolutions and thereby obtained an unfair advantage in that he was absolved from all liability incurred by him in the course of his management prior to th .....

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al and ultra vires, but as the plaintiff Ladli Prasad had filed his suit relying on the resolution dated October 16, 1945, which was invalid, no relief could be awarded to him. In appeal against the decree of the District judge dismissing the suit filed by Ladli Prasad, Bishan Narain, J., of the High Court of Punjab observed that the findings of the District judge "travelled for beyond the pleadings", and only two facts which were pleaded were proved by the evidence viz. that the High .....

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istrict judge that the resolutions dated March 3, 1946, and March 28, 1946, were invalid because no notice was given to Ladli Prasad of the proceedings, and in the light of his findings granted a decree for declaration and injunction as prayed but subject to the proviso that the decree shall not affect the rights and liabilities of third parties who were not members of the Company, unless thereby the rights of the plaintiff Ladli Prasad, and the Company were adversely affected. Against this judg .....

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Shanti Prasad to submit himself to examination before the Court in support of his case though improper could not be considered as fatal to a decision in favour of the defendants. They observed : "I feel convinced that Ladli Prasad was throughout in a position of commanding influence over his brother and younger nephews, and in consequence thereof, he benefited himself very substantially. This superiority and position of vantage that he occupied continued up to and even after the 16th Octobe .....

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on account of undue influence and this Ladli Prasad has failed to establish. They summarised their conclusions on the issue of undue influence as follows :- "To sum up, the conclusion of the District ..Judge on the first issue to the effect that the resolutions mentioned in para 6 of the plaint and passed at the Extraordinary General Meeting. dated the 16th October., 1945 were ineffective as having been passed under undue influence, was a finding of fact; and this conclusion had been arrive .....

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o to show : a) that the plaintiff was in a position to dominate the will of the defendants and used that position to obtain unfair advantage for himself over the other ; (b) that he held an authority over them which was real and apparent by dint of his being formerly a karta and later on an elder brother in loco parents. He stood in a fiduciary relation to the other standing in a position of active confidence ; (c) that the plaintiff in consequence of the resolutions passed on the 16th of Octobe .....

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, 1946 and March 28, 1946 were not binding upon Ladli Prasad, but the claim made by Ladli Prasad for a permanent injunction could not be entertained because "equity declines to lend its aid to a person whose conduct has been inequitable in relation to the subject matter of the suit and that if the prayer of Ladli Prasad was granted, it would result in a deadlock and the Company's working and affairs would come to a stand still necessitating the winding up of the Company." They sugg .....

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) of the Constitution this appeal is preferred. Two questions arise at the threshold in this appeal :- (1) Whether it was competent to the High Court to grant a certificate under Art. 133 (1) (a) or (b) of the Constitution; and (2) Whether in reversing the decree of the District judge, Bishan Narain, J., trans- gressed the restrictions imposed upon the powers of the High Court by s. 100 of the Code of Civil Procedure. Article 133 (1), in so far as it is material, provides that an appeal shall li .....

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or question respecting property of the like amount or value ; or (c) that the case is a' fit one for appeal to the Supreme Court; and, where the judgment, decree or final order appealed from affirms the decision of the Court immediately below in any case other than a case referred to in sub-clause (c), if the High Court further certified that the appeal involves some substantial question of law. The High Court has not certified the case under sub-clause (c) of Art. 133(1). There is also no .....

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hat an appeal against the judgment of a single judge to a Division Bench under cl. 10 of the Letters Patent is a 'domestic appeal' within the High Court and in deciding whether the decree of a Division Bench in an appeal under the Letters Patent from a decision of a single judge exercising appellate jurisdiction affirms the decision of the Court immediately below, regard must be had to the decree of the Court subordinate to the High Court, against the decision of which appeal was preferr .....

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below. But the two expressions have not the same meaning. A court subordinate to the High Court is a court subject to the superintendence of the High Court. whereas a court immediately below is the court from whose decision the appeal has been filed. If the two expressions are equated, the right of appeal against the decree of the High Court sitting in appeal over the decision of a single judge exercising original jurisdiction would be severely restricted for in such an appeal whether the judgm .....

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rcise of original jurisdiction of the High Court and the condition as to valuation is satisfied, an appeal lies as a matter of course, i.e. without satisfying the condition that it involves a substantial question of law. This view can be justified only if a single Judge of a High Court trying a suit or proceeding in exercise of the original jurisdiction is a court immediately below the Division Bench of the High Court which decides an appeal from his decision. The right to appeal against the jud .....

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nd 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 thejudgment (not being a judgment passed in the exercise of appellate jurisdiction in respect of a decree or order made in .....

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h Court, where the judge who passed the judgment declares that the case is a fit one for appeal; x 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 in appeal from an a .....

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cise of original jurisdiction, i. e. sitting as a court of first instance, but not a judge exercising appellate jurisdiction. The Constitution in cl. (1) (a) of Art. 133 has 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 .....

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the High Court. In Wahid-ud-din v. Makhan Lal (1) a full Bench of the Lahore High Court (Blacker, J., dissenting), held that for the purposes of s. 110 of the Code of Civil Procedure 1908 (which is in material terms identical with Art. 133 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, (1) [1944] I.L.R. 26 Lah. .....

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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 x X. It is obvious that the authorities dealing with 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 functions of a trial .....

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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." The learned judge further observed: "I cannot reconcile myself to the position that 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 th .....

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rst 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 &q .....

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ourt 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 his judgment under the Letters Patent." We are unable to agree, for reasons already set out, with the view expressed by the learned judges of the Lahore High Court. .....

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, 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 remains to be seen whether as regards nature the requirements of section I I 0 are fulfilled. 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 (1) (1915) I.L.R, 43 Cal. 90. Appellate Court. Fro .....

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10, Civil Procedure Code)." The view appears prima facie to support the contention that in considering whether within the meaning of Art. 133 (1) 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 proceeding as a court of appellate jurisdiction must be ignored. Any expression of opinion by the eminent Chief Justice would always be considered with the great deference and respect. It must, however, be .....

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on "Court immediately below" with the expression "Court subordinate" used in s. 115 of the Code of Civil Procedure. That is clear from the obs- ervations made by him "that a judge sitting alone is not a Court subordinate to 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 under section 115 of the Code." But as we have already pointed out the test for .....

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the Lahore High Court which have expressed a contrary view. Minna Heatherly v. B. C. Sen A.I.R. (1927) Lah. 537 and Gopal Lal v. Balkissan (1931) I.L.R. 13 Lah. 318. In these two cases it was held 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, I.L.R. .....

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t 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; (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 hav .....

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ivil 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 Choudhrain v. Jawahir Singh Choudhri (1890) L.R. 17 I.A. 122. . But the challenge before Bishan Narain, J., to t .....

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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 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.o. 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 influ .....

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uch 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 t .....

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before proceeding with the trial of the suit, insist upon the particular, which give adequate notice -to the other side of the case intended to be set up. In Bharat Dharma Syndicate v. Harish Chandra (1917) 64 I.A. 146, the Privy Council emphasized the necessity 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 ' .....

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ed if this practice is strictly observed and insisted upon 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 [1951] S.C.R. 548, 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 particulars have .....

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same applies to undue influence and i 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 powers of the General body of the shareholders and thereby purporting to deprive them t .....

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litigation against the defendants who on the other hand were having to prosecute their cases out of their meagre funds which too were dwindling fast" (4) "'Taking full 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 them to pass these unconstitutional resolutions." It may be observed that though issue No. 1 raised a plea both of coercion .....

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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 l .....

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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 .....

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he 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 (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 unconsci .....

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ine 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 subsection (2) a presumption arises that a person shall be deemed to be in a position to dominate the will of another if the conditions set out therein are fulfilled.' Sub-secti .....

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em is in a position to dominate the will of the other and he uses his position 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 using that position. Clause (2) lays down a special presumption that a person is deemed to be in a .....

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ion (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 .....

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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 support of their plea. .....

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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 plaintiff I concluded his evidence on the issues on which the plaintiff offered to lead evi .....

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e 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 proceeding in the suit, presumably to procure a situation in which the principal defendant Shanti Prasad may avoid going into the witness box. By diverse applications the proceeding was protracted till May 1953, but .....

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e 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 other 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 was in .....

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car allowance of ₹ 350/- per mensem and an allowance of ₹ 30/- per day during tours together with a new car every third year for use, whereas the other directors were getting only ₹ 25O./- per mensem, and ₹ 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 Director-ship of' the Company. This step of the defendant .....

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ffect of equalising the share holding of the three branches, and the remuneration 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 1 .....

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olutions 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 .....

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and a fee of ₹ 25/per day for attending the meetings of the Board of Directors; that the plaintiff had started another Company in the name of Jagatjit 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 or .....

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red from these findings that the plaintiff Ladli Prasad was in a position to dominate the will of defendant-, 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 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 there was no evidence that defendants 2 to 5 re .....

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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 minutes of the meeting held on October 16, 1945 and the plaintiff had failed to adduce any satisfactory evidence to rebut the presumption. In our view the conclusions of the District Judge could not be regarded as binding upon the High Court in second appeal, for he raised the inference of undue influence from facts .....

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tation. The first averment was admitted and the other two were denied by the plaintiff. There is no plea and no evidence on the record to prove that there was no one to look after the interest of defendants 2 to 5 that all the jwellery of the defendants was Prior t October 16, 1945 in the possession of the plaintiff; that the plaintiff had made large profits from jagatjit Distilling and Allied Industries; that the plaintiff was interested in creating a deadlock with a view to secure benefit for .....

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osition 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 held any real or apparent 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 t .....

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f Managing Director. By the resolution his remuneration was reduced to ₹ 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 that he became Chairman of the Board of Directors, but on that account lie acquired no superior rights. All resolutions of the Board of Directors had under the amended Articles to be unanimous and no member could be removed by the others. These resoluti .....

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ntage 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 facie unfair, but the District judge did not hold that accounts were not scrutinised before the resolutions of October 16, 1945 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 culminat .....

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ted on seeing 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 s x x x I do not know when the compromise (talks) started. The compromise was finalised between the night of the 15th and 16th, and on the morning of the 16th, I was told to take office records to Karnal." The pla .....

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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. Bishan Narain,J., was therefore right in holding that the findings of the District Judge travelled beyond the pleadings of the .....

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l 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 influencc was correct. 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 the pleading of the defendants and the evidence on the record, the conclusion of the Hig .....

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fatherless nephews is placed on a high pedestal next after parents" and inferred that the plaintiff must be deemed to be in loco Parent to the defendants and that he not only held an authority which is both real and apparent but lie stood. in a fiduciary relationship and taking advantage of his position he could and did dominate the will of the defendants, The learned judges recognised that the case of the defendants suffered from the infirmity that they did not offer to be witnesses in the .....

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ad 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 remu- neration 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, and by the resolution dated February 20, 1945 Ladli Prasad was removed from his office of -Managing Director. .....

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endants 2 to 5. It may be notice, 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 lawyers in the two suits which were filed since February 20, 1945 and 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 o .....

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evidence should have been forthcoming in that behalf. The circumstance that none of the defendants gave evidence in support of 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 transpired at the negotiations and the meeting which .....

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and after the meeting of October 16, 1645 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 branches had obtained their shares in severalty except in the business. Defendants have also led no evidence as to what their financial resources in 1945 were, and the assump- tion made by the High Court in that behalf are not warranted. It is true t .....

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posed 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 Karnal 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 al .....

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red by him for his transactions was never pleaded in the written statement, though it was an important particular 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 v .....

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fectively 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 resolution dated February 20, 1945 receiving very much larger sums of money from the Company as his remuneration in comparison with the remuneration received by the defendants, viewed in the light of the .....

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District Court and Division, Bench of the High Court, suffered from Serious infirmities in that they wrongly placed the onus 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, 1945-this Court would not be justified in de .....

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