1. The plaintiffs, a firm, of money-lenders at Poona, have filed this suit as a summary suit against the defendant, a Lieutenant in the Indian army, to recover the sum of Rs. 6409-12 alleged to be due for principal and interest on a demand promissory note for Rs. 6000 given to them by the defendant on the 14th September 1906. By an order of the 5th May 1907 the defendant was given liberty to defend the suit and his affidavit of the 1st May was taken as his written statement. The execution of the note is admitted and the questions I have to decide are (1) what were the true facts relating to the transactions between the parties and (2) whether the defendant is entitled to relief under Sections 16 and 19 of the Contract Act or otherwise.
2. It appears that on the 30th July the defendant, who was then stationed at Aurangabad, wrote to the plaintiffs asking them to come to him to arrange a loan. On the 1st August the plaintiffs replied asking for Rs. 10 to pay their travelling expenses. The original correspondence is not forthcoming but Ex. A is the draft of plaintiffs' letter of the 1st August, Ex. U is the entry crediting Rs. 10 to suspense account on the 14th August received for expenses from defendant and Ex. W is the entry debiting the Rs. 10 to the suspense account on the 18th August when the money had been used for the journey to Aurangabad. Defendant said he did not remember asking the plaintiffs to come to Aurangabad, they had come to see Captain Oliphant who lived in the same bungalow with him and he took the opportunity to negotiate a loan. I think it more probable that the plaintiffs are right and that defendant at Captain Oliphant's suggestion wrote to the plaintiffs asking them to come to him. When the plaintiffs Chetring Surajmal met the defendant the following arrangement was arrived at. The defendant was to sign a bond for Rs. 4000 repayable by 32 monthly instalments of Rs. 125. The rate of interest was fixed at If per cent per mensem and interest was to be deducted at this rate for 32 months. Defendant was to hand over a policy on his life for Rs. 5000. The defendant says that the full interest was deducted amounting to Rs. 2240 and that he only received Rs. 1760 as follows : a cheque on Grindley Groom and Co. for Rs. 1230, Rs. 30 in cash and a chithi for Rs. 500. As the plaintiffs had no stamped paper and as defendant had not got the policy with him it was arranged that the stamped paper should be sent from Poona and that when the plaintiff received the bond duly executed and the policy they would send the Rs. 500 in exchange for the chithi. On the other hand Chatring Surajmal says that defendant objected to so much being deducted for interest as he wanted Rs. 2500 in cash and after some bargaining only Rs. 1655 were deducted for interest and Rs. 615 were paid in cash instead of Rs. 30 as alleged by the defendant; [His Lordship after discussing the evidence in detail continued: ]
3. I find therefore that the defendant received in cash Rs. 1760 on the bond of the 23rd August 1903 and Rs. 100 on the promissory note for Rs. 6000.
4. The question then arises whether the defendant under the circumstances of the case is entitled to any relief, from the liability he took upon himself by signing the note for Rs. 6000 In England Courts of Equity have always granted relief against unconscionable bargains : Beynon v. Cooke (1875) L. R, 10 Ch. 389. This doctrine was discussed in Kamini Sundari v. Kali Prossunno ILR (1885) Cal. 225 their Lordships of the Privy Council say at page 228 :' But assuming the validity of the mortgage, a question arises, whether under the circumstances, the rate of interest exacted did not amount to an unconscionable bargain such as a Court of Equity will give relief against' and after referring to Beynon v. Gooke the judgment proceeds ' This equitable doctrine appears to have a strong application to the facts of this case, where we have the borrower, a purdanashin lady; the lender her own mukhtar, the security ample, the interest exorbitant and unconscionable'. The Allahabad Court in Lalli v. Ram Prasad ILR (1886) All. 74 and Madho Singh v. Kashi Ram ILR (1887) All. 228 applied this doctrine. The guestion arises however since the Contract Act was amended by Act VI of 1899) whether Section 16 as it now stands is exhaustive and displaces the principle of justice equity and good conscience. The Allahabad Court has answered this question in the negative: Kirpa Ram v. samiud-din Ahmad Khan ILR (1003) All, 884; and in Balkirshan Das v. Madan Lal ILR (1907) All. 303 Knox J. says : 'From a careful consideration of the above cases I am prepared to hold that even where no undue influence has been brought to bear on the man or any unfair advantage shown to have been taken of him the bargain may still be an unconscionable one.' This seems to go considerably further than the decision of the Privy Council in Kamini Sundari v. Kali Prosunno ILR (1885) Cal. 225. On the other hand in Hari v. Ramji ILR (1904) 28 Bom 371 Jenkins C.J. says : 'If it is argued that Section 16 is not exhaustive and that it does not displace the principle of justice, equity and good conscience, then accepting but without admitting the argument as correct we still think defendant's: position no stronger,' The judgment of the Privy Council in Sundar Koer v. Sham Krishen the latest authority on the point, appears to show that Section 16 is exhaustive. Their Lordships say at p. 16: ' There is no evidence of any actual exercise of undue influence by the mortgagees or of any special circumstances from which an inference of undue influence could be legitimately drawn, except that the mortgagor was in urgent need of money.' In Dhanipal Das v. Raja Maneshar Bakhsh (1906) L.R 33 IndAp 118 their Lordships held the borrower was under a peculiar disability and the position of the parties was such that the lender was in a position to dominate his will. Urgent need of money will not place the parties in that position'. I deduce from those two passages that there must be evidence of undue influence as required by Section 16 and that a high rate of interest which would induce a Court of Equity to give relief against a bargain as being on that account hard and unconscionable, is not by itself sufficient evidence of undue influence, there must be additional circumstances. But I am prepared to hold that where there is evidence of such additional circumstances they should be considered in the light of justice and equity. Where the parties to the transaction are not on an equal footing, where it appears that the borrower was not aware of the real nature of the bargain, so that he put his signature to adocument which in fact imposed very different terms to those appearing on the face of it, when the actual rate of interest is many times higher than what appears on the document, where the borrower when pressed for payment for what appears due on such a document has to renew on still more exorbitant terms, I consider that all these are additional circumtances sufficient to make out a primafacie case of undue influence so as to throw the onus on the lender to disprove it. In this case the defendant, a lieutenant in the Indian Army of the age of 24 and the plaintiffs were not on an equal footing. I am quite certain the defendant was not aware of the nature of the bargain he was agreeing to when he signed the bond for Rs. 4000 and to de monstrate this it is advisable to show clearly the real nature of instalment bonds like the one in question. On the face of the bond the bargain appears to be that a loan for Rs. 4000 is given at 21 per cent, per annum repayable by 32 instalments of Rs. 125 per month, interest deducted in advance. Assuming I am correct in finding that only Rs. 1760 were actually advanced in cash the principal was repayable by 55 per month As the defendant was to pay Rs. 125 at the end of the first month Rs. 55 represented principal and Rs. 70 interest so that for the use of Rs. 55 for one month defendant paid interest at the rate of about 1524 per cent per annum. As further instalments were paid of course the rate of interest would decrease down to about 47 per cent, for the last instalment, but I have roughly ascertained the average rate to be about 190 per cent, per annum. When the bond was renewed by execution of the promissory note, tif I am right in holding that only Rs. 100 were paid in cash, not only was future interest added to the Rs. 3,000 due on the old bond but the defendant bound himself to pay interest on the whole amount of the note at 24 per cent, per annum. The defendant having established aprima facie case of undue influence, I find that the plaintiffs have not satisfied the onus required by Section 16 to prove that the contract was not induced by undue influence, that there is evidence on consideration of all the circumstances of the case of undue influence and that therefore the defendant is entitled to relief under Section 19A on the terms that he repay the amount actually advanced with interest at the rates agreed upon. Considering the security I do not think those rates require adjustment. There will therefore be a decree for the plaintiff for the amount found due on an account being taken as follows. The defendant will be debited with Rs. 1760 with interest at 21 per cent, per annum from the 17th August 1903 and Rs. 100 with interest at 24 per cent, from 14th September till judgment and will be credited with the instalments paid by him with interest from the respective dates of payment at 21 per cent, on Rs. 1000 and 24 per cent, on Rs. 50 till judgment. Defendant to pay plaintiffs' costs up to 25th July 1907 and the costs which were properly incurred in taking a consent decree on the footing of defendant's letter. As to all other costs each party must pay their own costs.