Judgement Law. Rep. 68 Ind. App. 144 ( 1940- 1941) Bhowanipur Banking Corpn. Ltd. v. Sreemati Durgesh 44 Appeal (No. 79 of 1939) from a decree of the High Court (June 6, 1938) which had reversed a decree of the Court of the Subordinate Judge, 24-Parganas (April 23, 1935). The suit out of which this appeal arose was for the recovery of Rs. 63,236-10-3, being principal and interest due on a mortgage bond, dated June 27, 1925. The executant of the bond, the respondent, was the widow of one Kalidas Roy Chowdhury. The bond set out that Kalidas was indebted to the appellant bank in the sum of Rs. 1,78,965-4-7, that it was impossible for him to pay off the debt in full from his own resources, and that the mortgagor had determined to reduce her husbands debt as far as possible by borrowing money by mortgaging her own properties. By the document she borrowed Rs. 30,000 repayable with interest at the rate of nine per cent, per annum. The bond was registered. The appellant bank instituted the present suit on December 19, 1933, claiming a decree for Rs. 63,236-10-3, with interest, future and pendente lite, and in default of payment a decree for sale. The defendant, in her written statement, alleged (inter alia) that the bank had brought a false criminal case against her husband and her eldest son, and that during the pendency of that case the bank undertook to withdraw it if she executed the mortgage bond in question, and that under the apprehension of her husband and son being sentenced to imprisonment, and not having had an opportunity of getting advice from a disinterested person, she executed the document in suit. She pleaded that the mortgage bond, having been executed with the object and consideration of getting the criminal case withdrawn, was illegal, inoperative and void in law. The facts appear fully from the judgment of the Judicial Committee. The Subordinate Judge decreed the suit for Rs. 60,000, with interest at the bond rate from the date of suit. She pleaded that the mortgage bond, having been executed with the object and consideration of getting the criminal case withdrawn, was illegal, inoperative and void in law. The facts appear fully from the judgment of the Judicial Committee. The Subordinate Judge decreed the suit for Rs. 60,000, with interest at the bond rate from the date of suit. On appeal by the defendant the High Court (Nasim Ali and Henderson JJ.), in separate but concurring judgments, found that there was an agreement between the parties that the criminal case would be withdrawn if the dues to the appellant bank from Kalidas and his son were adjusted to the satisfaction of the appellant; that the object or purpose of the mortgage deed was the dropping of the criminal case ; that such object was illegal, and that the deed was therefore void. They accordingly passed a decree allowing the appeal and dismissing the suit. 1941. May 21, 22, 26. Sir Herbert Cunliffe K.C. and Wallach for the appellant bank. This was a simple suit on a mortgage bond, but when the defence appeared the whole character of the action was changed, the respondent alleging (inter alia) that the bank had brought a criminal charge against her husband and eldest son, but had promised to withdraw it if she (the respondent) would execute the mortgage in suit. She said, further, that the bank never gave, nor did she receive, any part of the consideration money alleged in the deed. That is a very sweeping case of fraud. It is submitted, first, that the High Court did not approach this case in the spirit in which a court should approach a charge of fraud, which must be clearly proved. The respondent, though a purdanashin lady, according to the evidence and the view of the Subordinate Judge, and the High Court do not appear to have disagreed, was an educated and intelligent woman, not without experience in business matters, and she had ample advice. The tests in Jones v. Merionethshire Permanent Benefit Building Society ([ 1891] 2 Ch. 587 ; [ 1892] 1 Ch. 173.) are to be applied in such a case as the present. In cases of this nature there must be sufficient evidence to justify the finding that the agreement said to be contrary to public policy, although not express—for it would seldom be in writing—must be implied in the circumstances. 587 ; [ 1892] 1 Ch. 173.) are to be applied in such a case as the present. In cases of this nature there must be sufficient evidence to justify the finding that the agreement said to be contrary to public policy, although not express—for it would seldom be in writing—must be implied in the circumstances. One must not be misled by mere elements of suspicion; it is a question of proof. In this case an agreement between Kalidas, the respondents husband, and the bank is not enough ; it Law. Rep. 68 Ind. App. 144 ( 1940- 1941) Bhowanipur Banking Corpn. Ltd. v. Sreemati Durgesh 45 must be shown that the respondent herself was a party to the agreement. The present case is a long way from Jones’s case ([ 1891] 2 Ch. 587 ; [ 1892] 1 Ch. 173.). [Lord Atkin. In one sense this case is a stronger one, because here a prosecution was embarked upon, whereas in Joness case ([ 1891] 2 Ch. 587 ; [ 1892] 1 Ch. 173.) there was no prosecution.] [Reference was also made to Flower v. Sadler (( 1882) 10 Q. B. D. 572.) and Kamini Kumar Basu v. Birendra Nath Basu (( 1930) L. R. 57 I. A. 117.).] From the documentary evidence all the bank said was that if Kalidas settled up they would inform the magistrate that he had done so. They did in fact apply for the discharge of the accused ; the magistrate, however, need not have done so, but could have insisted on the trial going on. The arrangement may be said to be suspicious, but suspicion is not enough. It is a serious case, and there is what amounts to an allegation of fraud supported by extremely unreliable evidence. Even so far as the bank and Kalidas are concerned there is not sufficient ground for finding any agreement between them that if the mortgage was forthcoming the prosecution would be withdrawn. But even should it be found that there was, the test in this case is not an agreement between Kalidas and the bank at all, but one between the defendant and the bank. There is no proof that she relied on a promise to withdraw the criminal case, if such a promise ever existed. But even should it be found that there was, the test in this case is not an agreement between Kalidas and the bank at all, but one between the defendant and the bank. There is no proof that she relied on a promise to withdraw the criminal case, if such a promise ever existed. So far as the respondent is concerned, it is a long way from translating the suspicion which existed as to any arrangement between the bank and Kalidas into evidence that she knew, and that the bank knew that she knew. Wallach followed. W. W. K. Page, for the respondent, was not called upon to argue. June 23. The judgment of their Lordships was delivered by LORD ATKIN. This is an appeal from a decree of the High Court of Judicature in Bengal which reversed a decree of the Subordinate Judge in favour of the present appellants, the plaintiffs in the suit. The suit was to recover a sum due upon a mortgage bond executed by the respondent, and for the usual relief in a mortgage suit in default of payment. The bond, reciting that the husband of the mortgagor was indebted to the bank in the sum of Rs. 1,78,965, and that the mortgagor desired to reduce his debt by borrowing money by mortgage of her own property, provided that the mortgagor borrowed from the bank Rs. 30,000 and mortgaged to them the immovable property there stated. The plaint alleged that no part of the principal or interest had been paid. The defendant, by her written statement, set up a number of defences, such as that she was a purdanashin lady and was not fully advised of the nature of the bond, that she was coerced into executing it, that it was not duly executed or attested, and that she did not receive the consideration money. All these defences were negatived by the trial judge and nothing further has been heard of them. But the defence remained, which was also rejected by the trial judge but accepted by the High Court, and is the question in issue in the present appeal, that the mortgage bond in question was given as part of the consideration for a promise by the bank to withdraw criminal proceedings against one Kalidas, the mortgagors husband. If established, this would plainly afford a defence under s. 23 of the IndianContract Act (IX. If established, this would plainly afford a defence under s. 23 of the IndianContract Act (IX. of 1872). The law in regard to agreements to stifle prosecutions is reasonably clear. The Board were referred to the various considerations set out at length in the well known judgment of Vaughan Williams J. in Jones v. Merionethshire Permanent Benefit Building Society ([ 1891] 2 Ch. 587.). The learned judge is in fact doing nothing more than considering the elements that go to the making of a simple contract, for it is of the essence of the defence that the defendant should establish a contract whereby the proposed or actual prosecutor agrees as part of the consideration received, pr to be received, by him, either not to bring, or to discontinue, criminal proceed ings for some alleged offence. It is, of course, impossible for such a Law. Rep. 68 Ind. App. 144 ( 1940- 1941) Bhowanipur Banking Corpn. Ltd. v. Sreemati Durgesh 46 contract to be made unless both parties know of the proposed or actual proceedings. Vaughan Williams J. inadvertently says "must be cognisant of the crime.” Proof that there has actually been a crime committed is obviously unnecessary. But it is also, of course, necessary that each party should understand that the one is making his promise in exchange or part exchange for the promise of the other not to prosecute or continue prosecuting. 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 oil reparation being promised by the offender or his friends or relatives mercy shown by the injured party should be used as a pretext for avoiding the reparation promised. On the other hand, to insist on reparation as a consideration for a promise to abandon criminal proceedings is a serious abuse of the right of private prosecution. The citizen who proposes to vindicate the criminal law must do so wholeheartedly in the interests of justice, and must not seek his own advantage. It only remains to say that such agreements are from their very nature seldom set out on paper. Like many other contracts, they have to be inferred from the conduct of the parties after a survey of the whole circumstances. It is not difficult to apply these principles to the facts of the present case. It only remains to say that such agreements are from their very nature seldom set out on paper. Like many other contracts, they have to be inferred from the conduct of the parties after a survey of the whole circumstances. It is not difficult to apply these principles to the facts of the present case. Kalidas, the defendants husband, was a vakil of the High Court. He had been employed as legal adviser of the plantiffs bank. His brother, Taradas, had been manager; a nephew, Birendra, was a clerk in the bank. Kalidas and his son, Jitendra, had accounts with the bank, and apparently had been allowed overdrafts against security. In 1924 the bank discovered that both Kalidas and Jitendra had been allowed to overdraw far beyond the value of their securities. They suspended the manager, and began to require payment from Kalidas, without much apparent result. On April 1, 1925, the bank commenced criminal proceedings against Taridas, Kalidas, Jitendra, Birendra and one Parindra, also a nephew of Kalidas and a customer of the bank, charging them with conspiracy to cheat and defraud the bank of 3 to 4 lakhs of rupees. There were apparently other concurrent proceedings against the three accused other than Kalidas and his son Jitendra, but the nature of these was not fully explained. The order sheet of the magistrate is significant. Secs. 120B, 420, 408 and 406 I. P. C. 1-4. Summon accused under section 120B, 420, 408 and 406 I. P. C. for the 6th. 6-4. Accused appear. They will give P. R. of Rs. 2000 each, dated 15th April. 15-4. There is a talk of compromise. Date 24th April. 24-4. Parties want time. Date 29-4. Case adjourned to 4-5 at the request of both parties, on 29th April. which date either the P. W.’s to be produced or the case settled. Accused as before. 18-5. To Mr. I. J. Cohen for favour of disposal. 18-5-25. Parties not ready. Application for adjournment filed, put up on 1st June, 1925. Accused as before. 1-6-25. The complainant puts in a petition for time. To 15th June, 1925, for the last time (illegible). Accused as before. 15-6-25. Accused Kalidas Roy Chowdhury is reported to be ill m. c. filed and application for adjourn ment filed. To 29th June, 1925, for the last time (illegible). Accused as before. 29-6-25. Accused as before. 1-6-25. The complainant puts in a petition for time. To 15th June, 1925, for the last time (illegible). Accused as before. 15-6-25. Accused Kalidas Roy Chowdhury is reported to be ill m. c. filed and application for adjourn ment filed. To 29th June, 1925, for the last time (illegible). Accused as before. 29-6-25. The prosecution puts in a petition saying that under circumstances stated thereon they do not offer any evidence. Accused discharged under Section 253 Cr. P. C. Law. Rep. 68 Ind. App. 144 ( 1940- 1941) Bhowanipur Banking Corpn. Ltd. v. Sreemati Durgesh 47 Now while these proceedings were being adjourned after the "talk of compromise" on April 15, negotiations were proceeding between the bank and Kalidas, initiated by a letter of April 26, in which he states that though there is no substance in the criminal proceedings he is willing to place for settlement the dispute about the liabilities of his son and himself in the hands of an arbitrator. He suggests certain names and hopes "that the matter would thus be speedily brought to "termination." The bank are now pressing. On April 27 they accept the proposal for arbitration, as the arbitrator is willing to arbitrate expeditiously in a week or so, but the matter must be placed before the arbitrator by the 29th without fail. If the submission was not signed by the 29th the reference "would stand automatically cancelled." The submission was signed on April 30 ; and on May 14 the arbitrator made his award that Rs. 1,54,650 was due from Kalidas and Rs. 55,500 from Jitendra, for which Kalidas also was liable. On May 16 Kalidas makes proposals for paying his liabilities by transferring to the bank all his securities and conveying to the bank certain named premises. "I have already told "you that I have no cash money to pay. I am willing to "execute an agreement pending the completion of the necessary "documents of transfer, and in the meantime, as arranged "before, the criminal case against us will be withdrawn." The bank obviously cannot let this last statement remain unanswered. "The directors cannot do anything about the "criminal case. They deny that there was any arrangement "with him about his criminal case. It is only his civil liability "to the bank which he wanted to settle by arbitration and the "directors agreed. "The directors cannot do anything about the "criminal case. They deny that there was any arrangement "with him about his criminal case. It is only his civil liability "to the bank which he wanted to settle by arbitration and the "directors agreed. But they can only say before the court "this, that the liability of Kalidas and his son has been fully "adjusted with the bank when Kalidas makes payment of the "sum decreed against him." They go on to say that the suit can only be adjusted by payment or by mortgaging properties of value double the amount for which they are the security. On May 20 Kalidas for the first time suggests that he may give the bank a property with a net income of Rs. 7000 a year, which was in fact the property the subject of the present suit. The bank reply on May 22 that they will take the property in mortgage as security for such portion as it is worth. They add the significant sentence "For the balance Kalidas Babu, "if he wants a settlement, must make arrangement without "delay." Negotiations as to the mortgage of the property in question must have commenced after this, for on June 27 the defendant first appears on the scene by signing on the bank form a proposal for the mortgaging of the property in suit, which states that the title deeds have been already supplied, and states the amount required as Rs. 30,000. At this date the criminal proceedings stood adjourned from June 15 to June 29 "for the last time." On June 25 the draft mortgage prepared by the bank was sent to the defendant, and on June 27 it was executed and registered. Thirty thousand rupees was handed to the defendant, Rs. 25,000 was paid by her husband to the bank in respect of his debt on the same day ; and, as found by the judge, Rs. 5000 was retained by the defendant until July 25, when it was paid into the bank on her behalf by Jitendra. Of this sum Rs. 2338 was retained by the bank for the costs of the mortgage and another mortgage of the same date by her husband, and the balance was drawn in different sums by the defendant over the next two or three months. Of this sum Rs. 2338 was retained by the bank for the costs of the mortgage and another mortgage of the same date by her husband, and the balance was drawn in different sums by the defendant over the next two or three months. As has been said, the mortgage was completed on June 27, the criminal case having been adjourned to June 29 for the last time. On that date a petition was presented to the court on behalf of the bank as follows ;— In the Court of the Honorary Magistrate, Alipore. Prokash Chandra Bose, versus Kalidas Rai Chowdhury and others Section 420/120B I. P. C. Law. Rep. 68 Ind. App. 144 ( 1940- 1941) Bhowanipur Banking Corpn. Ltd. v. Sreemati Durgesh 48 The humble petition of Prokash Chandra Bose complainant abovenamed. Most respectfully sheweth — That in the above case Babu Kalidas Roy Chaudhury and his son Babu Jitendra Kumar Roy Chaudhury have made up their differences with the bank and have voluntarily made arrangements for the payment of the moneys due from them. That the other three accused persons are undergoing trial in the Court of the Police Magistrate Alipore and a charge under Section 420/120B I. P. C. has been framed against them along with other charges and there is no necessity for another trial. That your petitioner therefore does not desire to further proceed with the case or adduce any evidence. Your petitioner therefore prays that your honour will be pleased to discharge the accused. And your petitioner, as in duty bound, shall ever pray. Alipore—29-6-25. It is difficult to see what more cogent proof there could be of an agreement to stifle a prosecution. "The accused" "have .... made arrangements for the payment of the "moneys due from them." .... "Your petitioner therefore "does not desire to proceed further with the case.” The reason why this petition is in this ingenious form, and was acceded to by the magistrate, is probably that suggested by the Chief Justice in his judgment in the similar case against Kalidas which is also under appeal. The accused were charged under ss. 120B, 420, 408, and 406 of the Indian Penal Code. As the Chief Justice said, "s. 120B is the offence of conspiracy "to commit a criminal offence and is not compoundable. "Sect. The accused were charged under ss. 120B, 420, 408, and 406 of the Indian Penal Code. As the Chief Justice said, "s. 120B is the offence of conspiracy "to commit a criminal offence and is not compoundable. "Sect. 406 is an offence to commit a criminal breach of trust, "and is not compoundable. Sect. 408 is the offence of criminal "breach of trust by a clerk or servant, and is not compoundable. "Sect. 420 is the offence of cheating by dishonestly inducing "the delivery of property and is, with the permission of the " Court before whom the prosecution for such offence is pending, "compoundable by the person cheated (s. 345 C.P.C.). It "may be due to inadvertence, or it may not be, that the "petition for the discharge of the accused mentioned s. 420 "but not ss. 406 and 408. In any event, the accused were "discharged in respect of all the offences, not merely s. 420, "but also ss. 120B, 406 and 408, which are non-compoundable." The case therefore seems to be one in which the prosecutors have plainly stated that they have compounded a non-compoundable offence, and it cannot be disputed that part of the terms of composition was the mortgage given by the defendant. But the evidence does not rest there. The defendant and her son Satyendra both gave evidence that the defendant was told by her husband that there were criminal proceedings pending and that the mortgage was for the purpose of having them withdrawn. It is true that they are both unreliable witnesses in that some of their evidence as to the payment of the consideration, the facts of the execution and other matters is untrue. But this only means that a statement made by such a witness cannot be relied on unless supported by independent evidence. When the bank state before the magistrate that there is talk of compromise, take adjournments obviously to arrange the compromise, make a compromise which includes taking the mortgage in question, and then ask to withdraw the case because of the compromise, there seems little doubt that the lady and her son were in this respect telling the truth. When the bank state before the magistrate that there is talk of compromise, take adjournments obviously to arrange the compromise, make a compromise which includes taking the mortgage in question, and then ask to withdraw the case because of the compromise, there seems little doubt that the lady and her son were in this respect telling the truth. It was contended that even if the illegal agreement with Kalidas were proved, yet there was no reliable evidence that the wife knew of the criminal proceedings, and that she would have come to the relief of the husband merely to discharge the civil debt. Their Lordships must not be taken to accede to the view that even on this state of facts the wifes security obtained by the husband to effectuate his unlawful agreement would not be invalidated. But from the Law. Rep. 68 Ind. App. 144 ( 1940- 1941) Bhowanipur Banking Corpn. Ltd. v. Sreemati Durgesh 49 facts of this case the knowledge of the wife seems an irresistible inference. Their Lordships therefore agree with the decision of the High Court, though they do not follow the reasoning of one of the learned judges that the money consideration to the wife was illusory. It was real enough; but it was not the only consideration. They desire also to point out that the learned Subordinate Judge has attached undue weight to the fact that here there was a debt really due from Kalidas. In this class of case that fact seems irrelevant if the agreement to abandon a prosecution is part of the consideration for payment of the debt. In most cases of this kind there is a debt or a liability. Indeed, if there were not, a demand and receipt of money in consideration of refraining from or withholding a prosecution would apparently in itself be a criminal offence. Their Lordships will humbly advise His Majesty that this appeal be dismissed. The respondent, having relied on an infringement of public policy, has successfully maintained on appeal her contention, and is entitled to her costs of this appeal.