# OUSEPH POULO AND THREE OTHERS v. CATHOLIC UNION BANK LTD. AND ORS

- **Citation:** [1964] 7 S.C.R. 745
- **Court:** Supreme Court of India
- **Decided:** 1964-04-15
- **Case number:** Civil Appeals Nos. 51 and 52 of 1962
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/ouseph-poulo-and-three-others-v-catholic-union-bank-ltd-and-ors-3114
- **Pages:** 11

## Headnote

7 S.C.R.
SUPREME COURT REPORTS
745
OUSEPH POULO AND THREE OTHERS
v.
CATHOLIC UNION BANK LTD. AND ORS.
IP. B. GAJENDRAGADKAR, C. J., K. N. WANCHOO AND DAS
GUPTA, JJ.]
Contract-Documents executed in favour of Bank as secu.
Tity for debts-Withdrawal.' of criminal complaint by BankDocuments, if executed for stifling prosecution-Test-Indian
Contract Act, 1872 (9 of 1872), s. 23.
Two of the defendants in the two suits out of which the
present appeals arose borrowed a sum of Rs. 80,024-4-9 from
the respondent Bank in course of their tusiness by pledging
their goods. The Bank discovered that there was shortage in
the goods deposited and through its Secretary lodged a com·
plaint- with the police that the said defendants, their father
and brother had in collusion with the local agent of the Bank
fraudulently removed part of the goods or, in the alternative,
had made a grossly inadequate deposit to cheat the Bank. The
Police re~stered the case and started investigation. The parties,
thereafter settled their differences by a transaction which con·
sisted, among others, of a hypothecation bond for Rs. 30,000/·
covering immovable property and a Karar for Rs. 35,000/-, which
were executed in favour of the Bank by the parent of the said
defendants, by the said defendants themselves and their brother
and his wife. On the Secretary of the Bank stating to the
Police that the Bank's claim had be'€n settled and any further
action would be unnecessary the criminal proceeding was
dropped. Thereafter the said relatives of the two defendants
who had executed the hvpothecation bond and the Karar
brought a suit for the cancellation of the said documents on
the ground that they had been executed to stifle the criminal
prosecution and were as such unenforceable under s. 23 of the
Indian Contract Act. The Bank sued for recovery of the amount
due on the Karar which was resisted on the same ground that
the document was unenforceable under s. 23 of the Contract Act.
The said defendant-debtors did not examine themselves.
They did not raise the plea of unenforceabibty in respect of a
hire-purchase agreement which formed a part of the transaction
in question and on which the Bank brought a suit against them
and got a decree. After the sa.id settl<ement these defendants
applied for further loan from the Bank. There was evidence
to show that an agreement to furnish addiltional security had
been reached between the said defendants and the Bank even
before the complaint was filed.
The trial Court held that both .the documents fell within
th~ mISch:ef of s. 23 of the Contract Act and decreed the first
suit and dism1s.sed the second. The High Court on appeal took
the co~trary view and reversed the decision of the tri<al Court
accordmgly. The plamt1ffs m the first suit appealed to this
Court.
Held: It was well settled that agreements made with the
sole pu~pose of stifling prosecution were opposed to nublic
pohc>: smce th~ consideration which supported such agreements
was itself agamst public policy and could not, thernfore, be
1964
April16
1964
0...ph Poulo and
30thm
v.
Catholic Union
Bank LW.. and
Otherr,
746
SUPREME COURT REPORTS
[1964}
enforced. In India however this doctrine was not applicable
either to compoundable offences or to offences which could be
compounded with the leave of the Court.
The onus was strictly on the party that impugned the transaction to prove that it was based on an agreement to stifle the
prosecution. It must be able to show that on a certain consideration proceeding from it the complainant in return promised
to discontinue the criminal proceeding and then alone the
transaction would be one against public policy.
V. Narasimha Raju v. V. Gurumurthy Raju, [1963] 3 S.C.R.
687 Maharaja Srish Chandra Nandy v. Sapravat Chandra A.LR.
1940 Cal. 337
Sudhindra Kumar Ray Chaudhuri v. Ganesh
Chandra Ga~guli, 1939 I.L.R. 1 Cal. 241 and Kamini Kumar
Basu v. Birendra Nath Basu, A.LR. 1930 P.C. 100, referred to.
Bhowanipur Banking Corporation Ltd. v. Dure

## Text

7 S.C.R.
SUPREME COURT REPORTS
745
OUSEPH POULO AND THREE OTHERS
v.
CATHOLIC UNION BANK LTD. AND ORS.
IP. B. GAJENDRAGADKAR, C. J., K. N. WANCHOO AND DAS
GUPTA, JJ.]
Contract-Documents executed in favour of Bank as secu.
Tity for debts-Withdrawal.' of criminal complaint by BankDocuments, if executed for stifling prosecution-Test-Indian
Contract Act, 1872 (9 of 1872), s. 23.
Two of the defendants in the two suits out of which the
present appeals arose borrowed a sum of Rs. 80,024-4-9 from
the respondent Bank in course of their tusiness by pledging
their goods. The Bank discovered that there was shortage in
the goods deposited and through its Secretary lodged a com·
plaint- with the police that the said defendants, their father
and brother had in collusion with the local agent of the Bank
fraudulently removed part of the goods or, in the alternative,
had made a grossly inadequate deposit to cheat the Bank. The
Police re~stered the case and started investigation. The parties,
thereafter settled their differences by a transaction which con·
sisted, among others, of a hypothecation bond for Rs. 30,000/·
covering immovable property and a Karar for Rs. 35,000/-, which
were executed in favour of the Bank by the parent of the said
defendants, by the said defendants themselves and their brother
and his wife. On the Secretary of the Bank stating to the
Police that the Bank's claim had be'€n settled and any further
action would be unnecessary the criminal proceeding was
dropped. Thereafter the said relatives of the two defendants
who had executed the hvpothecation bond and the Karar
brought a suit for the cancellation of the said documents on
the ground that they had been executed to stifle the criminal
prosecution and were as such unenforceable under s. 23 of the
Indian Contract Act. The Bank sued for recovery of the amount
due on the Karar which was resisted on the same ground that
the document was unenforceable under s. 23 of the Contract Act.
The said defendant-debtors did not examine themselves.
They did not raise the plea of unenforceabibty in respect of a
hire-purchase agreement which formed a part of the transaction
in question and on which the Bank brought a suit against them
and got a decree. After the sa.id settl<ement these defendants
applied for further loan from the Bank. There was evidence
to show that an agreement to furnish addiltional security had
been reached between the said defendants and the Bank even
before the complaint was filed.
The trial Court held that both .the documents fell within
th~ mISch:ef of s. 23 of the Contract Act and decreed the first
suit and dism1s.sed the second. The High Court on appeal took
the co~trary view and reversed the decision of the tri<al Court
accordmgly. The plamt1ffs m the first suit appealed to this
Court.
Held: It was well settled that agreements made with the
sole pu~pose of stifling prosecution were opposed to nublic
pohc>: smce th~ consideration which supported such agreements
was itself agamst public policy and could not, thernfore, be
1964
April16
1964
0...ph Poulo and
30thm
v.
Catholic Union
Bank LW.. and
Otherr,
746
SUPREME COURT REPORTS
[1964}
enforced. In India however this doctrine was not applicable
either to compoundable offences or to offences which could be
compounded with the leave of the Court.
The onus was strictly on the party that impugned the transaction to prove that it was based on an agreement to stifle the
prosecution. It must be able to show that on a certain consideration proceeding from it the complainant in return promised
to discontinue the criminal proceeding and then alone the
transaction would be one against public policy.
V. Narasimha Raju v. V. Gurumurthy Raju, [1963] 3 S.C.R.
687 Maharaja Srish Chandra Nandy v. Sapravat Chandra A.LR.
1940 Cal. 337
Sudhindra Kumar Ray Chaudhuri v. Ganesh
Chandra Ga~guli, 1939 I.L.R. 1 Cal. 241 and Kamini Kumar
Basu v. Birendra Nath Basu, A.LR. 1930 P.C. 100, referred to.
Bhowanipur Banking Corporation Ltd. v. Duresh Nandini
Dasi, (1942) I.L.R. 1 Cal. 1, c0nsidered.
But in judging a particular agreement distinction must be
made between the motive for the agreement and the consideration for it and subsequent events should not be allowed to confuse the issue.
It was clear in the present case that the plaintiffs had failed
to discharge the onus that lay on them and the decision of the
High Court was, therefore, correct.
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 51
and 52 of 1962.
Appeals from the judgment and order dated
June 12, 1959 of the Kerala High Court in A.S. Nos. 538 and
539 of 1954.
'
V. A. Seyid Muhammad. for the appellants.
S. T. Desai and A.G. Pudissery, for the respondent No. L
April 15, 1964. The Judgment of the Court was delivered by
<Jajen-lra9adkar,OJ.
GAJENDRAGADKAR, C. J.-These two appeals arise from
two suits Nos. 5 of 1947 and 32 of 1951; and the main point
which they raise for our decision is whether the two documents
executed by the appellants and two of the respondents are
unenforceable as being opposed to public policy under section 23 of the Indian Contract Act (hereinafter called 'the
Act). The trial Court has answered this question in the affirmative; while the High Court of Kera la has ta ken a contrary
view.
Poulo Varghese and Poulo Thommi who are the sons
of Ouseph Poulo were carrying on trade in hill produce at
Alwaye and in the course of their business, they nad borrowed from the branch· of the Catholic Union Bank Ltd. at
Alwaye large amounts. In that connection, they had pledged
goods with the Bank as security for the loan and the same
had been deposited in a godown the key of which remained
with the Bank. It appears that on the 10th February, 1947.
..
1 S.C.R.
SUPREME COURT REPORTS
747
the Officers of the Head Office of the Bank inspected the
1964
_godown and it was discovered that there was considerable OUS£ph Poulo and
shortage of the goods pledged. Thereupon, the Secretary of
3 Othm
1he Bank lodged a complaint with the Police that Ouseph Oatltoli:·union
Poulo and his two sons who had dealings with the Bank as Bank Lid. and
well as Poulo Joseph, another son of Ouseph Poulo, had colOthe~
luded with the local Agent of the Bank and had fraudulently Gajendragadkar, 0.1.
'femove:I a substantial part of the pledged articles from the
godown. The complaint also alleged alternatively that if the
goods had not been fraudulently removed, then the security
offered by Poulo Varghese and Poulo Thommi was grossly
inadequate to cover the large amounts advanced to them, and
that was the result of cheating. The Police registered this
<:ase and investigations began. At that time the parties settled
their diffetences and the two documents in question were
executed.
The criminal complaint was filed on the 13th February
and the First Information Report was made on the 16th
February, 1947. On the 22nd
February, a hypothecation
bond (Ext. 26) was executed by Ouseph Poulo, his
wife, his three sons and the wife of another son in
favour of the Bank for Rs. 30,000 /-.
This bound covered
immovable properties belonging to the executants.
On the
27th February, 1947, another document was executed by the
same parties in favour of the Bank for Rs. 35,000/-; this document was called Kollappirivu Karar (Ext. B.). On the fiame
day a receipt was executed by Poulo Varghese and Poulo
Thommi which showed that the goods in the godown were
valued at Rs. 10,000 /- and were surrendered to the Bank in
partial satisfaction of the debts due from them to the Bank.
This was followed by a hire-purchase agreement by which the
car owned by Poulo Thommi was transferred to the Bank and
the same was conveyed back to him on a hire-purchar,e a~ree
ment, the value of this car was taken to be Rs. 5,000/-. The
total amount due from Poulo Varghese and Poulo Thommi
to the Bank was Rs. 80,024-5-9. As a result of the transactions in which the parties entered, Rs. 10,000 /- were made
good by surrendering to the Bank the goods in the godown;
Rs. 5,000 /-
by trall6ferring the car; Rs. 30,000 /-
and
Rs. 35.000/- by the hypothecation deed and the Karar respectively; that left a balance of Rs. 24-5-9 which was paid in
cash. After this transaction had thus been concluded, on the
28th February the Secretary of the Bank made a statement
before the police that the Bank's claim had been settled and
that he and the Managing Director of the Bank was satisfied
that no goods had been removed from the godown as alleged
in the complaint and that in co!Iur;ion with the Agent of the
Bank, the debtors Poulo Varghese and Poulo Thommi had
1961
Otutph Paulo and
3 Others
v.
OaUiolie Union
Bank Ltd. and
Others
748
SUPREME COURT REPORTS
[1964}
cheated the Bank by over-valuing the goods pledg.ed, but that
no further action was necessary to be taken in that behalf. In
consequence, the crhninal proceedings were dropped. That.
in substance, is the nature of the transactions,. the character
of which falls to be detennined in the present appeals.
Gajendrol,/adlt:M, o.J.
On the 15th December, 1947, Ouseph Poulo, the father.
his son Joseph, Poulo's wife Aelia and Joseph's wife Thressia
filed a suit in forma pauperis seeking cancellation of the two
documents in question on the ground that they had been
executed to stifle criminal prosecution and that they were also
vitiated by undue influence. coercion and threat. The first
defendant to this suit was the Bank and defendants 2 and J
were the two debtors Poulo Varghese and Poulo Thommi, the
sons of OU6eph Poulo. This was suit No. 5/ 1947.
While this suit was pending, the Bank instituted suit
No. 32 of 1951 on the 26th February, 1951 and claimed to
recover the amount due on the Karar from all its executants.
The persons who had filed suit No. 5 /1947 were defendants
l. 2. 5 & 6 in this suit and defendants 3 & 4 were the debtors
Poulo Varghei;c and Poulo Thommi. These two sets of defendants filed two separate written statements; but the common
plea raised by them was that the document on which the
Bank's suit was based was unenforceable under s. 23 of the
Act. The trial Court substantially upheld this defence with
the result that suit No. 5/1947 was decreed and suit No.
3211951 was dismissed. The Bank took this matter before
the High Court by preferring two appeals Nos. 538 & 539 of
1954. The Hil!h Court has reversed the conclusion of the trial
Court in regard to the character of the impugned transaction
and in consequence. suit No. 5 /1947 has been dismi~sed and
suit No. 32/1951 has been decreed. That is how the plaintiffs in suit No. 5/1947 have come to this Court with a certificate issued by the High Court. During the course of this
judgment, we will refer to the Bank as the Bank. the versons
who brought 1mit No. 5 /J 947 as the plaintiffs and the two
debtors as defendants 2 & 3.
13efore dealing with the merits of the controversy between the parties, it is necessary to state briefly the true legal
position in regard to the agreements which are held to be
unenforceable on the ground that the consideration for which
they are made is opposed to public policy. It is well-settled
th:!! agreement~ which are made for stifling prosecution are
opposed to public policy and as such, they cannot be enforced.
The basis for this position is that the consideration which sup
ports such agreements is itself opposed to public policy. In
J ndia. this doctrine is not applicable to compoundable offences,
nor to· offences which are compoundable with the leave of the
-
7 S.C.R.
SUPREME COURT REPORTS
749
court where the agreement in respect of such offences is entered
1964
into by the parties with the leave of the Court. With regard Omeph Poulo and
to non-compoundable offences, however, the position is clear
3 Other•
that no court of law can allow a private party to take the adOatholi:·union
ministration of law in its own hands and settle the question Bank Ltd. and
as to whether a particular offence has been committed or not,
Other•
for itself. It is obvious that if such a course is allowed to be Gajendragadkar, o.J.
adopted and agreements made between the parties based
solely on the consideration of· stifling criminal prosecutions
are sustained, the basic purpose of criminal law would be defeated; such agreements may enable the guilty persons to
escape punishment and in some others they may conceivably
impose an unconscionable burden on an innocent party under
the coercive process of a threat of the criminal prosecution. In
substance, where an agreement of this kind is made, it really
means that the complainant chooses to decide the fate of the
complaint which he has filed in a criminal court and that is
clearly opposed to public policy.
In dealing with such agreements, it is, however, necessary
to bear in mind the distinction between the motive which may
operate in the mind of the complainant and the accused and
which may indirectly be responsible for the agreement and
the consideration for such an agreement. It is only where the
agreement is supported by the prohibited consideration that
it falls within the mischief of the principle that agreements
which intend to stifle criminal prosecutions are invalid. The
sequence of events, no doubt, has relevance in dealing with
this question; but from mere sequence it would not be safe to
infer the existence of the prohibited consideration. If in order
to put an end to criminal proceedings, an agreement is made
in the execution of which persons other than those who are
charged in a criminal court join, that may afford a piece of
evidence that the agreement is supported by the consider.ation
that the criminal proceedings should be terminated. n the
nature of the liability imposed upon a debtor by a previoUB
dealing is substantially altered with a view to terminate the
criminal proceedings, that itself may be another factor which
the Court may take into account in deciding whether the agreement is supported by the prohibited consideration.
But in
weighing the different relevant considerations in such a case,
courts must inevitably enquire: did one party to the transaction make his promiBe in exchange or part exchange of pro-
. mise of the other "not to prosecute or continue prosecuting"?
As Lord Atkin observed in Blrowanipur Banking Corporation
Lftl. v. Durgeslr Nandini Desi('). "In all criminal cases reparation where possible is the duty of the offender, and is to be
encouraged. It would be a public mischief if on reparation
f') (1942) I.L.R. I Cal. 1.
750
SUPREME COURT REPORTS
[1964]
1964
being made or promised by the offender or his frienm or rela-
°'"'Ph Pouw and tives mercy shown by the injured party should be used as a
3 Other!
pretext for avoiding the reparation promised". That, however, ·
Oatlwli~·Union
is not to say that if reparation is made as a consideration for
Bank Ltd. and
a promise to give up criminal proceedings, it would not
Ou.era
amount to an abuse of the right of private prosecution and
Gajendragadkar, o.J. would not attract the provisions of s. 23 of the Act. The main
point to remembyr is that the party challenging the validity of
the impugned transaction must show that it was based upon
an agreement to stifle prosecution. If it is shown that there was
an agreement between the parties that a certain consideration
should proceed from the accused person to the complainant
in return for the promise of the complainant to discontinue
the criminal proceedings, that clearly is a transaction w'1ich
is opposed to public policy (vide V. Narasimha Raju v. V.
Gurumurthy Raju('), Maharaja Srish Chandra Nandy v.
Supravat Chandra('), Sudhindra Kumar Ray Chaudhuri v.
Ganesh Chandra Ganguli('); and Kamini Kumar Basu, v.
Birendra Nath Basu(').
What then are the facts in this case on which the plaintiffs seek to challenge the correctness of the conclusion of the
High Court that the impugned transactions are not invalid?
Dr. Seyid Muhammed for the plaintiffs has urged that in dealing with the present dispute between the parties, it is essential
to remember that the complaint filed by the Bank against
defendants 2 & 3 is found to be not a bonafide complaint and
that, according to him, shows the true complexion of the impugned transactions. It is true that the trial Court has found
that the complaint made by the Bank was not bonafide and
the High Court has not in terms reversed that finding because
the High Court disbelieved the direct evidence led by the
plaintiffs and held that the agreement alleged by them was not
proved. Dr. Seyid Muhammed, therefore, contends that there
is a finding recorded by the trial Court which has not been
reversed in appeal, and so, we should deal with the main point
in the light of this finding. If we had been satisfied that the
complaint filed by the Bank was deliberately and dishon.estly
filed, that no doubt would have assisted the plaintiffs to a very
large extent; but after carefully considering the material evidence on this point, we are satisfied that the trial Court was
in error in coming to the conclusion that the Bank had filed
the complaint ma/afide. The complaint in terms made three
material allegations. It alleged that though the goods pledged
by defendants 2 and 3 were of a very low value, they were
(') [1963] 3 S.C.R. 687.
(') 1939 LL.R. I Cal. 241.
(') A.IR. 1940 Cal. 337.
(') A.I.R 1930 P.C. 100.
7 S.C.R.
SUPREME COURT REPORTS
751
entered in the godown and in the relevant books as being
1961
worth a much larger amount. It also alleged that the goods, Ousepk Paula a.d
though of a cheap quality, were described as a very superior
3 Otker•
quality; and it also said that substantial part of the goods Oatlioli!'unio•
pledged had been removed from the godowns for the purpose
Bank Ltd.
of causing loss to the Bank and for making unlawful profit.
ou..r,
1:his complaint was filed against defendants 2 and 3 an.d plain-Gajendr;,;;ikar, o.J,
ttffs 1 and 2, and another son Ouseph Poulo who 1s not a
party to the present litigation. In regard to thi~ last allegation
of theft, the complaint also averred that the key of the
godown used to be with the agent of the Bank at Alwaye and
the 6aid agent had absconded. The complaint mentioned
that the lorry in which the goods were removed bore the registration No. 2923 and it belonged to the Qunani Motor Service.
When the Secretary of the Bank gave evidence he stated
that on an enquiry being made on the spot, it was learnt that
the goods had been removed in the particular lorry; but, later,
no evidence was forthcoming to support that report. He,
however, adhered to the case of the Bank that the goods which
were found in the godown were hopelessly inadequate to serve
as a security for the advance made to defendants 2 and 3. The
.. argument ;; that the allegation as to theft was dishonesty made
by the Bank in its complaint in order to apply coercive pressure against defendants 2 and 3 and the members of their
family.
Prima facie, this argument does appear to be attractive, and if it had been sustained, it might have helped the
plaintiffs a good deal.
There is, however, clear evidence on the record which
negatives this contention. As we have already seen, a receipt
was poosed in favour of the Bank surrendering the goods which
were found in the godown to the Bank and these goods have
been priced at Rs. 10,000 I-. It is common ground that the
goods which were pledged with the Bank were intended to
serve as a security for as much as Rs. 80,000 and odd; and so,
there can be no doubt whatever that the goods found did not
satisfy that requirement. The number of bags which were
mentioned in the receipt is 534; that again does not represent
the total bags of goods pledged with the Bank. So, it is
absolutely clear that the Bank realised on inspection of the
godown that the security offered was wholly in-adequate and
it may well be that on the spot some people reported that the
pledged goods had been removed.
That is why the Bank
stated aJ.l the material facts and alleged that either the substantial part of the goods which had been pledged had been removed, or the goods which had been pledged were not at all
enough to cover the amount advanced. In any case, the
agent of the Bank may have colluded with the debtors. Now,
in the view of the receipt passed by the debtors and the members of their family in favour of the Bank in which the value
752
SUPREME COURT REPORTS
[1964]
1961
of the goods found in the godown has been determined at
Ousepll. Paulo awl Rs. 10,000 /-, it would be unreasonable to suggest that the
i: Others
complaint made by the Bank was not bonafide.
v.
OatbAJlie Union.
Baal: Lid. and
ou.e,.,
Gajewlragadkar, 0.
Besides, in dealing with this dispute, it ~ essential to
remember that defendants 2 and 3 have not entered the witness-box at all. They have left it to their· father, mother,
"brothers and sister-in-law to fight this litigation. At every
stage of the proceedings in both the suits, we come across
poinlB of dispute on which defendants 2 and 3 alone could
have given evidence. Did they pledge goods worth the amount
advanced to them? If yes, did the Agent remove them, or were
the goods which were originally pledged not of enough value
and by collusion with the Agent, representation was made and
accepted that they were valuable? On all these matters, it was
necessary that defendants 2 and 3 should have taken the oath
to support the case made by the plaintiffs when they challeng ..
ed the validity of the transactions in question. The High Court
has seriously commented on the fact that defendants 2 and 3
have deliberately avoided to face the witness-box. In our
opinion, in the circumstances of this case, this comment is
fully justified.
There is another piece of evidence which is equally material and which is in favour of the Bank and that evidence
relates to the subsequent conduct of defendants 2 and 3.
We
have already noticed that a motor car belonging to one of the
debtors was sold to the Bank for Rs. 5 ,000 I - and taken back
on hire-purchase agreement. Indeed, this hire-purchase agreement is a part of the transaction which settled the dispute between the parties. It appears that the debtors failed to pay
the instalments under the hire-purchase agreement and that
led to a suit by the Bank. In this suit, the debtors filed an
elaborate written statement containing 21 paragraphs; but we
do not see any allegation that the hire-purchase agreement was
a part of a transaction which was invalid and as such, the
claim made by the Bank was not sustainable. In fact, this
suit was decreed in favour of the Bank. The conduct of defendants· 2 and 3 in not raising a plea agaimt the validity of
the hire-purchase agreement is not without significance.
Similarly, it appears that after the impugned transaction
took place between the parties, defendants 2 and 3 applied to
the Bank for further advance on the 11th April, 1947 and
Mr. Ramakrishna Nair who is the principal witness for the
plaintiffs in the present litigation and who was the Legal Adviser of the Bank, 1mpported the debtor's request for advance.
This request was, however, turned down and it is obvfous that
the failure of the Bank to accommodate the debtors ultimately
led to the present plea that the transactions in question are
•
7S.C.R.
SUPREME COURT REPORTS
753
invalid. Therefore, we are satisfied that the subsequent con-
~
duct of defendants 2 and 3 clearly showrs that they are not O....pA Paulo •nil
prepared to take the risk of facing cross-examination and that
a Otlier•
is the reason that they have left it to their relatives to fight the aalllol:-union
Present litigation.
Balli: Lid. anli
OtTier.
It is in the light of this background that we have to consi-a~enclragadkar,O.I,
der the oral evidence in the case. The main witnesses on
whose teritimony Dr. Seyid Muhammed has relied are Mr. Nair
P.W. I and Mr. Pillai P.W. 3. Mr. Nair is a practising lawyer
and was at the relevant time the Municipal Chairman of
Alwaye, whereas Mr. Pillai was a Municipal Councillor at
that time.
According to Mr. Nair, he took part in the execution of the relevant documents and advised the Bank. He
stated that the documents were so executed for settling the
criminal case. He also added that he told defendants 2 and 3
that if the mortgage deed and the agreement were got executed, the criminal case could be dropped and his explanation
wars that he made that statement because the Managing Director and the Bank's Secretary Joseph had told him to that effect.
It appears that for assisting the Bank in filing the criminal
complaint, this lawyer had claimed Rs. 500 /-, but the Bank
paid him only Rs. 200 /-. That was one reason why he was
dissatisfied. It also appears that he recommended to the
Bank to give a loan to some persons including defendants 2·
and 3 and his recommendation letters were ignored by the
Bank. That was another reason why he was not feeling
happy with the Bank. The High Court has taken the view
that the statements made by this witness cannot be regarded
as reliable or trustworthy; and we are not prepared to hold that
the view taken by the High Court is so erroneous that we
should reverse it.
In any case, reading the evidence of this
witness ars a whole, we would be reluctant to come to the conclusion that there was an agreement between the Bank and
defendants 2 and 3 at the relevant time which would attract
the provisions of s. 23 of the Act. Our reluctance is based on
the somewhat unsatisfactory character of the evidence given
by this witness as well as on the fact that defendants 2 and 3
~ho could .have given evidence on this point have not stepped
mto the witness-box. The onus to prove the illegal character
of the transactions was obviously on the plaintiffs and their
failure to examine defendants 2 and 3 must largely contribute
to the final decision on the issue .
. ~· Pillai who is the other witness on whose evidence the
plamtiffs rely has been characterised by the High Court as
!-mtrustw?rth}'.; but the infirmity in the evidence of this witness
1s that !tis eV!dence does not clearly or expreS6ly lead to the
C10nclus1on that there was an agreement between the parties
1964
011aeph Poulo and
3 Other&
v.
754
SUPREME COURT REPORTS
[1964J
that the document should be executed by the debtors in consideration for the Bank withdrawing the criminal proceedings.
The answers which he gave are somewhat vague and indefinite,
and it would be unsafe to make the said answers the basis of
a definite finding against the Bank.
Oarlwlic Union
Banl· Llci. and
Otllera
. -
The last witness on whose evidence Dr. Seyid MuhamGajendragadkar, C.J. med has relied is plaintiff No. I, the father, P.W. 7.
His evidence is obviously interested and the fact that he has taken
upon himself to speak to a traw,action when di;fendants 2 and
3 who were directly concerned in the transaction did not come
to give evidence, considerably detracts from the value of his
statements. Therefore, having carefully considered the evidence in the light of criticism made by the High Court, we
are not prepared to accept Dr. Seyid Muhammad's argument
that he has made out a case for reversing the conclusion of
the High Court.
In this connection, we ought to mention another point
w4icl:i is not irrelevant. The evidence given by the Secretary
of the Bank, Joseph, shows that soon after the godown w:is
im;pected and before the complaint was filed, defendants 2
and 3 offered to the Bank to make up for the deficiency in the
value of the pledged goods. They appealed to the Bank that the
discovery made by the bank on inspection of the godown should
not be disclosed to anybody and that they would immediately
furnish sufficient additional security. In order . .-to carry out
this promise, they in fact delivered to the Bank certain documents of title in respect of the property which was ultimately
mortgaged to the Bank; but all the documents of title were
not handed over and that is where the matter stood when the
complaint was filed.
Later, the two impugned documents
were executed and the complaint was withdrawn. The point
on which Mr. Desai for the Bank has relied is that the evidence
of the Secretary shows that an agreement to furnish additional
security had been reached between defendants 2 and 3 on the
one hand and the Bank on the other even before the complaint
was filed, and so, it would be unreasonable to suggest merely
from the sequence of subsequent events that the impugned
documents were executed with the object, and for the consideration, of stifling the criminal prosecution. Mr. Desai argues,
and we think rightly, that where the validity of an agreement
is impeached on the ground that it is opposed to public policy
under s. 23 of the Act, the party setting up the plea must be
called upon to prove that plea by clear and satisfactory evidence. Reliance on a mere r,equence of events may tend to
obliterate the real difference between the motive for the agreement and the consideration for it. Did the parties offer to give
security and execute the documents in consideration for the
withdrawal of the criminal complaint by the Bank?-that is
the question which has to be decided in the present appeals,
.... ...
.
u;·
7 S.C.R.
SUPREME COURT REPORTS
755
and in proving their case, the plaintifis are expected to lead
1964
satisfactory evidence; and in our opinion, the High Court is, Otueph Paulo and
on the whole, right when it came to the conclusion, that the
a Other•
evidence led by the plaintiffs iJS far from satisfactory. Thereh 1 .v.u .
fore, we are satisfied that the view taken by the High Court
CiJ..:k·~14~::,,
is right and cannot be reversed.
0111ers
The result is, the appeals fail and are dismissed with costsGojerwlragadkar, C.J.
one set of hearing fees.
The appellants have been allowed
to file their appeals in forma pauperis, and so, we direct that
they should pay court-fees which they would have had to pay
if they had not been allowed to appeal as paupers.
Appeals dismissed .