LexOUSEPH POULO AND THREE OTHERS versus CATHOLIC UNION BANK LTD. AND ORS.
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
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 Bank- Documents, 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 trans- action to prove that it was based on an agreement to stifle the prosecution. It must be able to show that on a certain consi- deration 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 considera- tion for it and subsequent events should not be allowed to con- fuse 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, c
Excerpt shown. Read the full judgment & AI analysis in Lexace.