1. This is a curious story and on the facts as I am about to find them gives rise to an interesting and difficult question of International Law.
2. After the outbreak of war, gold became exceedingly scarce in India and consequently enhanced in value. By a notification under Act XI of 1916, the Government of India made it illegal to import gold bullion or gold coins into British India and rendered gold so smuggled into the country liable to confiscation. This still further enhanced its value and offered additional temptation to smugglers. Many confiscations took place, some of which gave rise to suits tried before me.
3. In this case, the 1st defendant Syed Usuff delivered at Pondicherry through one P. Narayana Doss Mehta of Pondicherry a quantity of American Gold dollars, 378 in all to a man called Parameswara Iyer on the 22nd of January, 1920. They were to be taken to Madras and were to be delivered to Syed Usuff there. Parameswara Iyer was to be remunerated by some commission for his services. In point of fact, the dollars were seized by the Customs Officers at Chinnababu Samudram Railway Station and were confiscated to Government. The British authorities were willing to return the gold dollars on payment of a sum of Rs. 22,000 and odd, and it appears that Parameswara Iyer arranged with a Sowcar to raise the amount of the penalty, paid it to Government and got back the dollars. I have no doubt that he did so because he reckoned that the rate of exchange was going up and that he would make a small profit on the deal; and I have little doubt that he did make a profit and the parties though they have not any exact figures, seem to agree that the profit was probably somewhere about Rs. 4,000 or 5,000. It is alleged in the plaint that before he redeemed the dollars Parameswara Iyer gave Syed Usuff, the 1st defendant, the opportunity of redeeming the dollars for his own behalf through his agency and that Syed Usuff declined to find the money and relinquished the dollars. But no proof has been given of this and I am not prepared to believe it. It was somewhat half-heartedly contended for the plaintiffs that apart from this, as soon as the dollars were seized the fiduciary relation of Parameswara Iyer to Syed Usuff was ipso facto terminated and that Parameswara Iyer was at liberty to enter upon a transaction of redemption of the dollars without being in any way liable to account to Syed Usuff, his principal. I cannot accede to this contention. In my opinion so long as there was a possibility of redeeming the dollars with the chance of profit by so doing, Parameswara Iyer was bound to give his principal the option of redeeming them for the principal's benefit and was guilty of a breach of duty as agent if without taking that step he acquired the dollars for himself. Later on, Parameswara Iyer returned to Pondicherry where the plaintiffs who were his nephews were living and where he shared a house with them. On the 25th October, 1920 the 1st defendant served a process at Pondicherry upon Parameswara Iyer called a Sommation, a certified copy of which is before me. The effect of that document together with a petition to the Procureur de la Republique has been explained to me by Mr. M. David, an advocate practising at Pondicherry, and the document in the original is before me., I may add that there was also beford me a translation made by the English Judicial Interpreter of the Pondicherry Court which is so full of elementary blunders as to make its latter part meaningless. I have made myself a translation from the French which was accepted by the parties. What it -amounts to is an allegation of Abus de Confiance which may be taken roughly to correspond to an offence of criminal breach of trust under the Indian Penal Code, and the effect of it was that Parameswara Iyer could end the matter by meeting the demand or would be liable to criminal prosecution. The outcome of it was that after considerable discussion a promissory note for Rs. 4,000 payable at Madras was executed by the two plaintiffs the nephews of Parameswara, Iyer, in favour of Mir Hassan All, the 2nd defendant. The defendants' story is that Mir Hassan Ali was merely an outsider who provided the plaintiffs with cash to satisfy the demand of Syed Usuff and that the promissory note was given to him as a consideration for paying Ks. 4,000 in cash to Syed Usuff. I do not believe that and my finding is that no money in cash passed and that the proceedings were stopped in consideration of the signing of the promissory note. The promissory note was not met and this suit was instituted in this Court to set it aside, and O.S. No. 42 was instituted to enforce it by the present defendant. One suit is a corrollary of the other and the result of one determines that of the other.
4. On these facts as I have found them a clean point of law arises. It is clear that by the law of France that which was done was perfectly legal and did not amount to duress or coercion or undue influence. But it is said that as the lex loci solutionis was Madras in British India the British Law must be applied and that by that law the transaction could not stand, and a number of authorities was cited. Of these I shall refer first, to the most direct, the case of Kaufman v. Gerson (1904) 1 K.B. 591 decided by the English Court of Appeal.
5. In that case, a wife entered into an agreement in France to pay monies to a person who had employed her husband in a fiduciary capacity and who alleged that the husband had appropriated the money entrusted to him to his own use thereby committing a criminal offence according to the Law of France. The consideration for her promise to pay was the forbearance of the principal, the plaintiff in the English action from prosecuting his agent, her husband, in France. I have been at pains to consider exactly what principle the Court of Appeal applied in refusing to enforce as they did refuse to enforce, the contract, and I think it is clear what principle the Court conceived itself to be applying from a perusal of the judgment of Collins, M.R. He cites two passages from Story's Conflict of Laws and one from Westlake on Private International Law, on which it is evident that he based his judgment. One of these passages from Story is. as follows : 'All such contracts, even though they might be held valid in the country where they are made, would be held void elsewhere, or at least ought to be, if the dictates of christian morality or of even natural justice, are allowed to have their due force and influence in the administration of international jurisprudence.' 'Such' contracts are defined as 'contracts which in their own nature are founded on moral turpitude or are inconsistent with the good order and solid interests of society.' Westlake's words are as follows : 'Where a contract conflicts with what are deemed in England to be essential public or moral interests, it cannot be enforced here.' Collins M.R. sums it up in his own words as follows : 'Where an English Court is asked to enforce a contract made in a foreign country, it is entitled to enquire whether, though the contract might be valid according to the laws of that country, it violates some moral principle which, if it is not, ought to be universally recognised.' It is common knowledge that the decision in Kaufman v. Gerson (1904) 1 K.B. 591 was by no means universally accepted by the legal profession as being correct. And Prof. Dicey in his Conflict of Laws gives very cogent reasons for such doubts. In substance he urges two main arguments against it. The first is that the rule of the French Courts ought not to be held by a British Court to be contrary to natural justice or public policy, and the learned author says this : 'French civilization and morality is as high as our own. The presumption should always be in favour of the justice of the French Law and after all there is no patent injustice in allowing a person to escape from criminal prosecution by making compensation to the sufferer whom he has damaged.' The second objection he urges is that the decision of the Court of Appeal is irreconcilable with the judgment of the Court of Exchequer Chamber in the case of Santos v. Midge (1860) 8 C.B. 861 and that it is the common understanding of English lawyers that decisions of the Court of Exchequer Chamber are binding on the English Court of Appeal as constituted under the Judicature Acts. The next case to which I propose to refer is the case of Moults v. Owen (1907) 1 K.B. 746. In that case the plaintiff had lent money to the defendant in order to enable him to play baccarat at a club in Algiers and the defendant had given a cheque there drawn on an English Bank to repay the sum of money so lent. The majority of the Court of Appeal held that an action brought upon the cheque would not lie as the transaction was governed by English Law and that the cheque must be deemed to be given for an illegal consideration within the English Gaming Acts. Fletcher Moulton, L.J. dissented and I think that the effect of his opinion may be summarised in this way, that he considered that the English Gaming Acts only purported to forbid gaming within the realm and could not be held to forbid British subjects subject to the jurisdiction of the English Courts from gaming in foreign countries where such gaming was not illegal. Once more it is common knowledge that the correctness of the decision was much convassed in professional circles. It may be that the decision may be justified on the narrow ground that the prohibition contained in the Gaming Acts is part of the law of procedure, merely enacting that a suit shall not be brought in an English Court on such a consideration. (See Collins, M.R. at page 753 of the Report of the case and Westlake's Private International Law, page 421, Vth Edition). There is no doubt whatever that the lex fori prevails as to all questions of procedure and if the provisions of the Gaming Act were rightly considered as merely part of the law of procedure, the wider objections to the case disappear and of course there disappears with them its applicability to this case. No one can suggest that the English law as to duress and coercion as affecting the validity of contracts is other than substantive law. I now turn to the case of Santos v. Illidge (1860) 8 C.B. 861. In that case it was held that a contract for the sale of slaves to be performed in Brazil at a time when slavery was not illegal by the law of Brazil was enforcible in England. As Prof. Dicey points out, it is difficult to believe that compounding an offence is more obviously contrary to natural justice than slave trading. Several other English cases were cited of which I need only refer to the judgment of the House of Lords in Ertel Bieber & Co., v. Rio Tinto Co. (1918) A.C. 260 and the connected cases. The importance of the decision is not because of its direct bearing upon this case, for no one would contest the principle that the law against trading with the enemy is so vital to the existence of the state that Courts of Law in England must declare it to be against public policy whatever be the law of the country, in which such contracts were made; I cite it because of its apparent endorsement of the decision of Kaufman v. Gerson (1904) 1 K.B. 591 and its explanation of the case of Santos v. Illidge (1860) 8 C.B. 861. Santos v. Illidge, as explained by Lord Atkinson at page 299, is to be taken as turning on the construction of the English statutes prohibiting slave-trading, especially 6 & 7 Victoriac 98, Section 5. Lord Atkinson and Lord Parker explain the case as merely deciding that the English statutes only prohibited slave-trading in the British Empire and did not purport to bind British subjects from slave-trading outside the limits of the Empire and that the case therefore must be treated, in the words of Lord Parker, 'as turning not upon any general rule of public policy but on the construction of a particular statute.'
6. If the matter rested there, I should find myself in very great difficulty. On the one hand, there is the decision of Kaufman v. Gerson (1904) 1 K.B. 591 apparently approved in the House of Lords and the view of the majority of the Court of appeal in Moulis v. Owen (1907) 1 K.B. 746. On the other, I have the dissenting judgment of Fletcher Moulton, L.J., in that case and the weighty opinion of Prof. Dicey. I do not think I can rely on Santos v. Illidge partly because the House of Lords has explained it as turning on the language of a particular statute and partly because I confess to a reluctance to accept the implied doctrine that slave trading in any part of the world is not repugnant to natural justice, a proposition which I think is really involved in Santos v. Illidge. While the decisions of the English Courts are not strictly binding on Indian judges, I myself would regard it as intolerable presumption to take a view opposite to that taken by the English Court of Appeal and the House of Lords, though I am perfectly free to say that if I were left to my own discretion, I should feel quite unable to act on the view that the provisions of the law of France, a country in many ways intellectually more developed than England were to be treated as in violation of the fundamental principles of natural justice. But I think, sitting in an Indian Court, my position is different from what it might otherwise be for two reasons. The first is that the compounding of criminal offences is so far from being regarded by the statute law of this country as being a violation of natural justice that the Code of Criminal Procedure contains a list of offences which are expressly made compoundable by money compensation. It is perfectly true that a Criminal breach of trust is not one of those offences, but I do not think that that affects the position that the Indian law does not regard the conception of evading criminal proceedings by monetary compensation as one wholly and from its very nature to be discountenanced. The second and determining consideration is this. I. sitting as a single judge on the Original Side of this Court, are bound by the authority of any decision I of a bench of the Court and there has been cited to me the case of Subraya Pillai v. Subraya Mudaliar (1867) 4 M.H.C.R. 14. I am unable to distinguish the facts of that case from the facts of the present one and in my opinion it concludes me from deciding this case otherwise than in favour of the defendants and the corresponding case in favour of the Plaintiffs.