RELEVENT CASES: REGARDING COERCION


.GOBERDHANDASVS.JAIKISHENDAS(1900)22ALL224

The only grounds upon which the award was contested in the Court below and in

this Court are(1) that by reason of coercion or undue influence exercised on the mind of the
appellant there was no valid submission to arbitration; and (2) that there was no award in the sense
of a judicial determination by the arbitrators of the matters submitted, but the arbitrators merely
accepted a settlement of those matters by other persons, and mechanically signed an award which
was put before them for their signature.

There had been certain dealings between the appellant Gobardhan Das and one Gopal Das, the son
of the plaintiff respondent Jai Kishen Das. Gopal Das was a young man of twenty two. The
appellant was his cousin. It appears that the appellant got Gopal Das to execute a deed of sale of
Gopal Das' share in certain ancestral property.

There were two deeds, one was taken in the name of Gobind Das, a relative of the appellant, and
after that there was a further deed executed by Govind Das in the appellant's favour. On the 26th
November 1896, a complaint was filed before a Magistrate by Gopal Das against Gobardhan Das,
in which he charged the appellants with offences of criminal breach of trust and cheating under the
Indian Penal Code in connection with the execution of the deeds, and on the following day, the
27th, the Court directed that the case should be sent to the police for investigation. While it was still
under investigation the submission now in question was executed on the 4th December 1896. The
submission is signed by Jai Kishen Das and the appellant Gobardhan Das. It recites a dispute
between the executants; it states that "the parties are ready to have recourse to the Civil and
Criminal Courts," and that therefore, at the request of some of the relatives of the parties, in order to
settle the matter, they appoint certain persons as arbitrators, and declare that they will accept
whatever award the arbitrators may honestly make with respect to the dispute relating to the sale
deeds.

JUDGEMENT:

It might have taken a very different view of the submission and the award if the objection had been
taken in either the Court below or in this Court that the submission was void as being in part for an

unlawful consideration, or for an object opposed to public policy within the meaning of Section 23
of the Contract Act. It might very well have been contended that the submission had for its object
the stifling of a prosecution for offences not compoundable under the provisions of the Code of
Criminal Procedure, and if any such objection had been made, No such defence or issue has,
however, been raised, and I do not think we should go out of our way to raise it for the appellant,
when neither this Court nor the Court below has been asked to do so.

It was not the appellants' ease in the Court below, nor is it his case in this Court, that the agreement
of submission to arbitration is void on the ground that the object or the consideration of the
agreement is unlawful, that object or consideration being the stifling of a criminal prosecution. No
issue was joined on that point in the Court below, and no plea has been urged in the memorandum
of appeal to this Court to that effect. It is not necessary, therefore, to consider that question in this
appeal. The only ground, upon which the validity of the submission was questioned was that of
coercion, or undue influence.

It is clear that there was no coercion; and on the evidence it cannot be held that there was undue
influence within the meaning of Section 16 of the Contract Act. On this point I agree with the
observations of the learned Chief Justice and have nothing. As regards the award itself, the evidence
shows that it embodies the result of a settlement come to by the parties to which both of them
consented. They signed the award as indicating their acceptance of it, and it has not been proved
that the appellant's consent to the settlement was procured by undue influence.

KISHAN LAL KALRA VS. NDMC, AIR 2001 DEL 402:

The plaintiff was forced to sell his furniture etc. at Rs. 90,000/. This was at the instance of the
defendant who had threatened him with detention under MISA if plaintiff docs not do so. Therefore,
the defendant would be liable for the loss caused to the plaintiff on this account. I agree with the
counsel for the defendant that as jar as gratuity is concerned, the same is paid for the services
rendered by the workmen.

This amount plaintiff was to pay to his workmen (even if the license were to continue, till the end of
its usual term) on the expiry of term while dispensing with the services of the workmen. Therefore,
payment made by me plaintiff to his workmen on account of gratuity cannot be attributed to the
illegal dispossession of the plaintiff from the suit property. There cannot be a direct and concrete
evidence of such a loss. The damages on account of loss of profit are in the nature of prospective,
and therefore, necessarily contingent. It is now well established principle of law that the mere fact
damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of
paving damage.

License deed to the plaintiff was granted for five years from 1st June, 1968 by NDMC to run an
open air restaurant in Connaught Circus, New Delhi, which was so started and run under the name
and style of 'Ramble Open Air Restaurant'.
The lease rental was Rs.5,104.00 per month for the said land and Rs. 250.00 per month for the car
parking area. During June, 1973 the lease got extended by NDMC for another five years (up to 31st
May, 1978) at increased rental of Rs.6,380.00 per month for the land and Rs.312.50 per month for
the car parking. During June, 1975 Emergency was proclaimed under Article 352 of the
Constitution. While the lease was subsisting till June, 1978, the NDMC on 21st June, 1976 initiated
proceedings for eviction under Section 4 of the Public Premises (Eviction of Unauthorised
Occupants) Act, 1971 (for short "PP Act"). On

26th June, 1976 the plaintiff made a representation in detail to the NDMC explaining his investment
and praying that it should not be jeopardised.

On 24th July, 1976 the plaintiff filed a detailed reply before the Estate Officer to the show cause
notice.

On 3rd August, 1976 in the proceedings before Estate Officer, NDMC sought time to reply the
objection and the matter was adjourned to 22nd September, 1976 for evidence of NDMC. While
these proceedings were pending and were at the stage of NDMC's evidence, on 7th August, 1976
the NDMC took the law into its own hands and sent a

demolition squad with police force to take forcible possession of the premises without due process
of law, ignoring the fact that proceedings before the Estate Officer had already been initiated by the
NDMC. After demolishing the structures and under threat of a blank warrant of arrest under MISA,
possession was taken by the NDMC and the plaintiff was forcibly dispossessed.

On 22nd September, 1976, the case before Estate Officer was adjourned to 19th October, 1976 and
again to 4th December, 1976 at the instance of NDMC. NDMC absented on that date before Estate
officer and the case was again adjourned to 13th December, 1976 for recording evidence.

On 13th December, 1976 Mr. P.R. Gupta, Head Assistant of NDMC appeared and stated the
possession of the premises in question had been "recovered" from the plaintiff and NDMC did not
want to pursue the matter further and the case was dismissed. In March, 1977 Proclamation of
Emergency was revoked. The Plaintiff (after representations to the NDMC by letters dated 6th
December, 1975 issued a statutory notice on 10th May, 1977 to NDMC under Section 49 of the
Punjab Municipal Act, 1911 but to no effect. In July, 1979 the plaintiff filed the instant suit for
recovery of damages of his wrongful dispossession and loss of profits for the balance period of the
lease.

The defendant filed written statement in which it is admitted that proceedings were initiated against
the plaintiff under the provisions of PP Act. It is also admitted that the defendant licensed this
premises to one Smt. Kaushalya Pahwa after removing the plaintiff. However, the defense of the
defendant is that the premises were voluntarily surrendered by the plaintiff, and therefore, suit was
not maintainable.
When the license was for a particular period which had not expired, the defendant had no right to
terminate the said license prematurely and in any case dispossess the plaintiff without due process
of law. It was submitted that the defendant had itself initiated the proceedings under the provisions
of PP Act and while those proceedings were pending, the plaintiff was dispossessed forcibly. This
was clearly illegal and amounted to breach of contract.In the absence of any crossexamination of
the witnesses and/or any in rebuttal produced by the defendant, the court has to believe the narration
of facts as disclosed by the plaintiff. As per this testimony of the plaintiff, the plaintiff was forced to
sign the possession note under threat. The threat was that he would be arrested and detained under
MISA. As per the plaintiff he was shown a blank MISA warrant signed by the competent authority
and he was told that his name had to be filled in to detain him. Under these compelling
circumstances, he was forced to not only sign the possession note but also forced to part with his
entire belonging s for a paltry sum of Rs. 90,000/.

Since it cannot be measured with precision as to what profits the plaintiff would have earned had he
continued to run the restaurant for remaining term of the license and the

figure given by the plaintiff for the period he actually did business could be the best indicator. This
is what the plaintiff has done and based on this formula the plaintiff has been able to prove the
likely loss of Rs.5 lacs. The plaintiff is accordingly held entitled to the amount of

Rs.5 lacs under this head. The total amount of damages calculated in the aforesaid manner would
come to Rs. 9,11,525.12 paisa.

The learned counsel for the defendant did not dispute and rather conceded that the court had the
power to grant interest on the aforesaid damages from the date of suit. The plaintiff would
accordingly be entitled to interest at the rate of 12 per cent per annum w.e.f. the date of institution of
this suit till decree. The plaintiff shall also be entitled to future interest at the rate of 12 per cent per
annum on Rs.9,11,525.12 paisa till the payment thereof . In view of the aforesaid discussion, the
suit of the plaintiff is decreed in the sum of Rs.9,11,525.12 paisa with cost as well as interest at the
rate of 12 per cent per annum w.e.f. 7th August, 1979 i.e. the date when the plaint was filed till the
decree and future interest at the rate of 12 per cent per annum. Decree sheet be drawn accordingly.

Salar Jung Sugar Mills Ltd. etc. Vs. State of Mysore and Ors.(1971 SC 0625):

The appellants are the India Sugars and Refineries Ltd. and the Salar Jung Mills Ltd. The India
Sugars and Refineries Ltd. is situated at Hospet in Bellary District in Mysore and the Salar Jung
Sugar Mills Ltd. Is situated at Munirabad in Raichur District in Mysore. In order to appreciate the
rival contentions on the first ground as to whether there was a purchase or sale of sugarcane the
relevant legislation has to be looked into and facts and circumstances have to be ascertained for
finding out as to what the actual transaction was. The Central Government was empowered by
Clause 3 of the Sugarcane Control Order, 1955 to fix the minimum price of sugarcane to be paid by
purchasers of sugar. Sale or purchase of sugarcane at a price lower than the price fixed under
Section 3 was prohibited.
The Central Government, however, could fix an additional price under certain circumstances and
contingencies. Clause 4 of the Order of 1955 gave the Government power to prohibit or restrict or
otherwise regulate export of sugarcane from any area for supply to different factories and also to
direct that no jaggery or sugar shall be manufactured from sugarcane except under and in
accordance with the conditions specified in a licence issued in that behalf.

The Mysore Sugarcane Order, 1955 determined the crushing capacity of the appellant Salar Jung
Sugar Mills Ltd. to be 1000 tons per day and the quantity of sugarcane required by the factory
during the crushing season to be 1,50,000 tons. The Order further stated that the factory was to
secure the quantity of sugarcane from the area specified in Schedule I and the quantity of sugarcane
to be supplied by each grower was fixed at 95 per cent of the sugarcane grown by the grower. 1966
'factory' means any premises including the precincts thereof in any part of which sugar is
manufactured by vacuum pan process, 'price' means the price or the minimum price fixed by the
Central Government from time to time delivered at thegate of the factory or sugarcane purchasing
center and 'reserved area' means any area where sugarcane is grown and reserved for a factory in
terms of the Order. Clause 3 of the 1966 Sugarcane Control Order dealt with minimum price of
sugarcane fixed by the Central Government having regard to (a) cost of production of sugarcane, (b)
the return to the grower from alternative crops on the general trend of prices of agricultural
commodities, (c) availability of sugar to the consumer at a fair price, (d) the price at which sugar
produced from sugarcane is sold by producers of sugar, and (e) the recovery of sugar from
sugarcane. Purchase and sale of sugarcane at a price lower than that fixed was prohibited.

At all relevant times sugarcane was declared to be an essential commodity. The various orders were
made for regulating the supply of sugarcane to the factories having regard to the crushing capacity
of the factory, the availability of sugarcane in the area and the need for production of sugarcane.
This co ordination between production and distribution of sugarcane on the one hand and
production and distribution of sugar on the other hung together as complementary to each other in
regard to the requirements of basic ingredient. The carving out of areas for production and
distribution of sugarcane is necessary to preserve continuity of supply and to prevent shortage and
defective distribution.

The regulation of supply of sugarcane by fixing the minimum price is an application of the principle
of utilitarianism which receives the approbation and goodwill of both the grower and the factory so
that then grower is assured of an economic competitive return and the factory is also assured of not
being scared by soaring and fluctuating price to thwart and impede production and manufacture of
sugar.

Counsel for the appellants extracted the famous dictum of Sir Henry Maine and submitted that the
orders in the present case were retrograde step and the clock was put back by reversing the
historical evolution from status to contract. What was emphasized by counsel for the appellants was
as follows : The various Orders had the effect of bringing into existence the status of delivery by the
growers and acceptance by the factory of sugarcane as a result of the statutory orders and there was
no area of bargain. There was no element of will. There was no aspect of assent. The entire
transaction was nothing but a regimentation of pattern of automatic supply and acceptance.

It was also said on behalf of the appellants that tax on purchase of sugarcane could not be collected
by the appellants as tax. The High Court relying on the decision in Tata Iron & Steel Company v.
State of Bihar [1958] S.C.R. 1355 said that the mere circumstance that the appellant could not
collect from the purchasers of the sugar the amount the factories had paid as purchase tax on
sugarcane would not alter the nature or quality of tax. This Court in the case of Tata Iron and Steel
Company said 'This is further made clear by the fact that the registered dealer need not, if he so
pleases or chooses, collect the tax from the purchase and sometimes by reason of competition with
other registered dealers he may find it profitable to sell his goods and to retain his old customers
even at the sacrifice of the sales tax. This also makes it clear that the sales tax need not be passed on
to the purchasers and this fact does not alter the real nature of the tax which, by the express
provisions of the law, is cast upon the seller'. It therefore follows that the appellants cannot impeach
the imposition or levy of sale tax on the ground that the appellants could not collect from the
purchasers of sugar the purchase tax paid by the appellants on purchase of sugarcane.

Another contention was raised on behalf of the appellants that the authorities had not taken into
account the varying rates of tax on purchase of sugarcane levied by different States while
computing the cost of production of sugar in different States and fixing different selling prices of
sugar. The High Court rightly did not entertain this contention because there were no materials to
support the contention. For these reasons, the appeals fail and are dismissed with costs. There will
be one set of hearing fees.

U.P. Cooperative Cane Unions Federations Vs. West U.P. Sugar Mills Association and Ors. etc.
AIR2004SC3697

The controversy raised in these appeals by special leave and Transfer Petitions basically relates to
the competence of the State Government to fix the State Advised Price for purchase of sugarcane by
an occupier of a sugar factory over and above the minimum price fixed by the Central Government.
The validity of the procedure adopted for ensuring the payment of the aforesaid price to a sugarcane
grower is also under challenge.

The Sugarcane grower or the sugarcane growers' cooperative society and the occupiers of sugar
factories have to compulsorily enter into an agreement in accordance with UP Sugarcane (Supply
and Purchase) Order, 1954 (hereinafter referred to as 1954 Order) and the State Government can
issue directions for recording of State Advised Price in the agreements which have to be executed
for supply of

sugarcane. Shri Dwivedi has also urged that parchas are issued to the sugarcane growers and in
exercise of the power conferred by 1953 Act, the State Government can direct that the State
Advised Price be recorded in the parchas which are issued to sugarcane growers.
Learned counsel has also submitted that the Central Government does not take into consideration
the various bye products like molasses, bagasse and press mud which are produced during the
course of production of sugar and the sugar mills make considerable amount of money from the sale
of aforesaid byeproducts especially since molasses has been decontrolled after 1991. The State
Government, having regard to the local conditions and also the amount earned by the sugar factories
from the aforesaid bye products, fixes the price of the sugarcane which is more realistic. Learned
counsel has further submitted that there is no repugnancy between the minimum price fixed by the
Central Government and the State Advised Price fixed by the State Government and the view to the
contrary taken by the High Court is clearly erroneous in law.

The provisions referred to above have been made for the benefit of the sugar factory so that it is
assured of and gets a continuous supply of freshly harvested sugarcane in quantity according to its
crushing capacity and for the whole duration of the crushing season. No doubt the cane grower also
gets some advantage in the sense that purchase of his yield is assured but at the same time many
limitations and restrictions are imposed upon him. In view of the aforesaid statutory provisions, the
position of a cane grower becomes entirely different from that of a farmer producing any other kind
of agricultural crop where there are absolutely no restrictions upon him. He is at absolute liberty to
harvest his crop at his convenience without being dictated by a third party, to sell it to anyone
whomsoever he likes and whenever he wants. It is in this scenario, which is not the creation of the
cane grower but of the statutory provisions operating in the field, that we have to examine the
question whether the State has any authority or power to fix the price of the sugarcane supplied to a
producer of sugar (sugar factory).

Daiichi Karkaria Private Ltd., Bombay


Vs. Oil & Natural Gas Commission Bombay and another AIR1992

The plaintiff is a company incorporated under the provisions of the Companies Act, 1954 carrying
on business, inter alia, of manufacture of speciality chemicals. The 1st defendant is a statutory
Corporation constituted under the provisions of the Oil and Natural Gas Commission Act, 1959.
The 2nd defendant is a nationalised Bank.

On 4th May 1984, the defendant No. 2 furnished a Bank Guarantee in favour of the defendant No. 1
at the instance of the plaintiff in a sum of Rs. 1,50,00,000/, a copy whereof is annexed as Exhibit `T'
to the plaint in this suit. The said bank guarantee recites that the defendant No. 1 purchaser had
placed a supply order dated 12th December 1983 with the plaintiff for supply of Four Point
Depressant/Flow Improver, DaitrolityMNF1206, hereinafter referred to as "the said goods". It was
recited in the said bank guarantee that the plaintiff had requested the defendant No. 1 to give an ad
hoc payment up to an amount not exceeding Rs. 1,50,00,000/in that behalf.

Prior to the execution of the said Bank guarantee, it was contemplated by the parties, rightly or
wrongly, that the Government of India might perhaps be persuaded to refund the amount of
Customs duty paid by the plaintiff on the raw material used by the plaintiff in manufacture of goods
to be supplied to defendant No. 1 under the said order. In this context, it was recited in the said
order that the defendant No. 1 had agreed to make ad hoc payment to the plaintiff not exceeding Rs.
1,50,00,000/-, provided the plaintiff undertook to refund the said amount to defendant No. 1 within
10 days from the date of receipt of "refund of the customs duty on the imported raw material" from
the concerend authorities or within six months from the date of the guarantee, whichever was
earlier, and the plaintiff agreed to furnish to defendant No. 1 a bank guarantee for a sum of Rs.
1,50,00,000/- in that behalf.

It was recited in the said bank guarantee that defendant No. 2 irrevocably and unconditionally
guaranteed as a prime obliger to repay the amount which may be received by the plaintiff as ad hoc
payments, the maximum liability being to the extent of Rs. 1,50,00,000/-. The defendant No. 2
agreed to pay the said amount without any demur merely on a demand from defendant No. I staling
that the plaintiff had failed to repay the said amount Rs. 1,50,00,000/- or part thereof or that the
amount claimed was for any loss or damage caused, to be suffered or would be caused or suffered
due to nonpayment to the defendant No. I of the amounts so received. It was also recited in the said
bank guarantee that any such demand made on the bank by defendant No. 1 shall be conclusive. It is
not necessary to state anything more about the contents of the said bank guarantee at this stage. It is
the case of the defendant No. 1 that relying upon the said bank guarantee furnished by the 2nd
defendant, the defendant No. 1 paid three different sums of Rs.25 lacs. Rs. 95 lacs and Rs. 28 lacs,
aggregating to Rs. 1,48,00,000/-, to the plaintiff on 26th May 1984 and 6th July 1984 respectively,
as a loan to be returned by the plaintiff to defendant No. 1 in the manner set out in the bank
guarantee. By its letter dated 16th December 1989, the defendant No. I invoked the said bank
guarantee and called upon the 2nd defendant to pay the said amount. The defendant No. 1 addressed
several letters also to defendant No. 2 invoking said bank guarantee. The said bank guarantee has
been extended by the plaintiff from time to time and is operative up to 28th February 1991.

On 27th December 1989., the plaintiff filed the present suit for a declaration that the impugned
demand made by defendant No. 1 on the 2nd defendant to make payment under the said bank
guarantee was fraudulent, void, illegal and of no effect whatsoever. The plaintiff has sought a
permanent injunction against defendant No. 1 from enforcing the said bank guarantee against
defendant No. 2 from making any payment on the said bank guarantee.

It was held that the plaintiff has made out a strong prima facie case establishing at this stage that the
1st defendant had procured the consent of the plaintiff to the stipulation in the bank guarantee for its
invocation irrespective of non-receipt of the amount of refund of Customs duty as a result of
economic duress and fraud committed by it on the plaintiff and the special equities of the situation
also warrant grant of an injunction in favour of the plaintiff as sought for.

I must, however, state that the plaintiff has not made out an equally strong prima facie case on the
second question i.e. whether the plaintiff has approbated or affirmed the varied transaction by
renewal of the bank guarantee after the economic duress has ceased to operate on the mind of the
plaintiff. On this aspect as to whether the plaintiff's conduct after release of Rs. 1,48,00,000/- by
defendant No. 1 to the plaintiff is consistent with the 1st defendant's case of approbation of the
transaction or with the plaintiff's case that the said extensions of the bank guarantee were also
obtained by the 1st defendant as a result of duress exercised would, in any event, require recording
of oral evidence at the trial. At this stage, both the sides appear to have an equally arguable case on
this aspect and it cannot be said that the plaintiff has a strong case and the 1st defendant has a
weaker case. I am of the opinion that the plaintiff shall suffer an irreparable loss unless the plaintiff
is protected by grant of an interim injunction. I am recording this prima facie conclusion for
completion of record, although this aspect is not much relevant in bank guarantee cases.
DURESS RELEVANT CASE LAWS

DURESS TO THE PERSON

Barton v Armstrong [1976] AC 104

A (the former chairman of a company) threatened B (the managing director) with death if he did not
agree to purchase A’s shares in the company. There was some evidence that B thought the proposed
agreement was a satisfactory business arrangement both from his own point of view and that of the
company. B executed a deed on behalf of the company carrying out the agreement. He sought a
declaration that the deed was executed under duress and was void.

The Privy Council held that if A’s threats were “a” reason for B’s executing the deed he was entitled
to relief even though he might well have entered into the contract if A had uttered no threats to
induce him to do so.

The onus was on A to prove that the threats he made contributed nothing to B’s decision to
sign.

DURESS TO GOODS

Skeate v Beale (1840) 11 Ad&El 983

A tenant who was threatened with the levying of distress by his landlord in respect of rent owed,
promised to pay part immediately and the balance within one month. When the tenant failed to pay
the balance, as agreed, the landlord brought an action for the balance. The tenant pleaded that the
distress was wrongful in that a smaller sum only was owed. He had consented to the agreement
because the landlord threatened to sell the goods immediately unless the agreement was made. This
plea of duress was rejected.

Maskell v Horner [1915] 3 KB 106

Toll money was taken from the plaintiff under a threat to close down his market stall and to seize
his goods if he did not pay. These tolls were, in fact, demanded from him with no right in law. The
Court of Appeal allowed the plaintiff to recover all the toll money paid, even though the payments
had been made over a considerable period of time. Lord Reading CJ stated that if a person pays
money, which he is not bound to pay, under a compulsion of urgent and pressing necessity or of
seizure, he can recover it as money had and received under the law of restitution.It was held that
there was a wider restitutionary rule that money paid to avoid goods being seized or to obtain their
release could be recovered. Further ,it was held that in the present case there was a compulsory
agreement to enter into, whereas in Skeate the agreement was entered into voluntarily.

NOTE: The distinction between the Skeate v Beale line of cases and the decision in Maskell v
Horner is hard to follow, and it has been pointed out that the peculiar result would follow that
although an agreement to pay money under duress of goods is enforceable, sums paid in pursuance
of such an agreement by the coerced can be recovered in an action for money had and received
under the law of restitution.

The Sibeon and The Sibotre [1976] 1 Lloyd’s Rep 293

Kerr J stated: “if I should be compelled to sign a lease or some other contract for a nominal but
legally sufficient consideration under an imminent threat of having my house burnt down or a
valuable picture slashed through without any threat of physical violence to anyone, I do not think
that the law would uphold the agreement… The true question is ultimately whether or not the
agreement in question is to be regarded as having been concluded voluntarily.”