Free consent- Undue Influence

 

Undue Influence is defined under section 16 of the Indian Contract Act, 1872 as-

“(1) A contract is said to be induced by "undue influence" where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.

(2) In particular and without prejudice to the generality of the foregoing principle, a person is deemed to be in a position to dominate the will of another—

[a] where he holds a real or apparent authority over the other or where he stands in a fiduciary relation to the other; or

[b] where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.

(3)Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other.

Nothing in this sub-section shall affect the provision of Section 111 of the Indian Evidence Act, 1872 (1 of 1872).”

In simple words, a person is said to be affected by undue influence when he, on account of the influence, consents to do something against his own will, which he would not have generally done. Undue influence is the domination of one mind by another.

“Undue influence is said to be a subtle species of fraud whereby mastery is obtained over the mind of the victim, by insidious approaches and seductive artifices. Sometimes the result is brought about by fear, coercion, importunity or other domination, calculated to prevent expression of the victim's true mind. It is a constraint undermining free agency, overcoming the powers of resistance, bringing about a submission of the other.” (Mahboob Khan v. Hakim Abdul Rahim)

It is also often confused with coercion. The general difference between coercion and undue influence was given in the case of Saxon v. Saxon. The Court opined that coercion has the component of physical compulsion, or physical threat to life or wrongful imprisonment or prosecution. Whereas, on the other hand, undue influence contains a mental domination. The parties have a relationship where one party, A trusts another party, B which forms an influence on A’s mind by B. B uses it to his advantage to obtain the consent of the A, which he would not have normally given, if not for the influence of B on A.

ELEMENTS OF UNDUE INFLUENCE-

The definition provided in section 16 gives out two essential elements of undue influence. They are,

1.     Such relationship between the parties where one party can dominate the will of the other.

2.     The use of the relationship by the party to dominate the will of the other.

The proof of both the conditions is needed to be established to avoid the contract on the ground of consent not being free due to undue influence.

I.                Relationship where one party can dominate the will of other.

To understand this element better, we need to gain clarity on the type of relations where a party is in a dominant position. In any relation, where there is active trust and confidence or, where the status of the parties is unequal so that one party is in such a position so as to dominate the will of the other. For example, the parties can have a relationship through marriage, blood, adoption, love, and so on. Sub section (2) of section 16 further sheds more light on this issue. It provides that a party is in a dominating position in any of the following cases-

i.                 Where the party has a real or apparent authority over the other-

 

A person is in a position to dominate another where he has authority over the other person. For example- boss and employee, judge and accused, and so on. Real authority refers to the premise that the party should actually have authority over the other person. A person (X) is said to have apparent authority over another (Y) where in reality he (X) does not have authority upon Y but it is by mistake of fact that the person getting influenced (Y) believes that the person dominating him (X) has authority. Therefore, no real authority exists but a fake show of authority allows the person (X) to dominate the other (Y). For example, a goon pretending to be a police inspector would be said to be having an apparent authority over a prisoner.  

 

ii.               Where the parties are in a fiduciary relationship-

 

Any relationship where trust is reposed in another and confidence is the basis of the relationship can be said to be a fiduciary relationship. For example- lawyer and client, priest and devotee, trustee and beneficiary, doctor and patient, guardian and ward, landlord and tenant, husband and wife, and so on are fiduciary relationships. The Allahabad High Court in Mannu Singh v. Umadat Pande, where a spiritual adviser induced his worshipper to bequeath him his whole property to gain merits in the next world, held that such consent given by the devotee was obtained by undue influence. Such relationships that are based on trust and confidence present with a possibility that the person in whom trust is placed will take advantage of it for his own personal benefit. For instance, a broker arranges a sale of property between his brother and his client. Here, there is a fiduciary relationship between the broker and his client. The broker did not reveal another high paying offer to the client because he wanted the client to sell the property to his brother. He convinces the client to sell the property at a lower price as no other buyer is available and the price of the particular property would decrease gradually. The client found about it later. The sale can be invalidated by the client if he wishes to as the consent was obtained through undue influence.

 

iii.             Where one party is mentally unstable due to age, body, mental or bodily distress-

 

When the mental capacity of a person is temporarily or permanently damaged, he is said to be in distress. The reasons behind the distress can be old age, extreme bodily or mental illness, or any other infirmity. Thus, this category includes people who are susceptible to any kind of influence by reason of mental distress. For example, Rucha, an illiterate 80-year-old woman is taken care of by her niece, Kashish. A gift deed is executed by Rucha gifting all her properties to Kashish. A presumption of undue influence arises here.

 

II.             The use of the relationship by the party to dominate the will of the other.

Only the existence of an interconnection where a party is a dominant position does not prove that consent was obtained through undue influence. There should be sufficient proof that;

i.                 The party in authority (X) has used his position to get the other party (Y) over whom the authority exists to do something deviating from his (Y) natural will, or

ii.               The confidence in the relationship was abused by the person in whom trust is reposed, or

iii.             The other party has exploited the mental distress of a party and influenced them to do something which they would not do in their right mind.

 

BURDEN OF PROOF-

Both of the above conditions need to be proved beyond doubt by the plaintiff to establish that his consent was obtained through undue influence. It is not enough if the party just shows that there was a relation, and it could have been used to influence him. It is necessary that the plaintiff proves that the relation was actually used to influence him. Therefore, the original burden of proof lies on the plaintiff i.e. the person alleging that the consent was not free and was obtained through undue influence. However, in certain cases (presumption) the burden of proof rests on the dominating party.

 

Presumption-

In some cases, when the proof of a relationship is established where one party was in a position to dominate the will of another then the presumption arises that he might have exploited his position to get an unfair advantage. In such cases, the person who is in the dominant position has to prove that he did not use his position to influence the other party.

Such presumption is generally raised in the following types of cases:-

I.                Unconscionable bargains-

 

As discussed in the previous articles, adequacy of consideration does not invalidate the contract but it helps in proving that the consent given was not free. Unconscionable bargains refer to unfair contracts. Where one party is in a stronger position than the other, having the ability to dominate the will of the other and there is proof of the contract being unfair to the weaker party then the burden of proof lies on the stronger party to prove that he did not use his stronger position to influence the weaker party. For example, in the case of Wajid Khan v. Raja Ewaz Ali Khan, an old and illiterate woman bestowed financial benefit on her managing agent under the guise of a trust, without any valuable consideration. It was held by the Lordships that,

 

“All the facts of the case go to show that there was active undue influence. The onus is on the grantee to show conclusively that the transaction is honest, bona fide, well-understood, the subject of independent advice and free from undue influence.”

 

Unconscionable bargains are mostly witnessed in moneylending transactions. For example:

·       where a wife borrowed some money at an 100% interest rate, in order to file for an appeal in a maintenance suit as she had no other means for maintenance (Rannee Annapurni Nachiar v. Swaminatha Chettiar);

·       transactions where a person gives away all of his property, etc.;

·       a submissive woman gave security of her stridhan to pay the debt of her husband. Presumption of undue influence by husband is raised in such a case. (Tungabai Bhratar Purushottam Shamji Kumbhojkav v. Yeshvant DinkarJog)

For a presumption to arise, only the unconscionability of the bargain is not enough. It needs to be proven that one party was in a dominant position than the other. Both the conditions i.e. dominant position and unconscionable bargain need to be established to raise a presumption of undue influence. This rule was established in the case of Raghunath Prasad Sahu v. Sarju Prasad Sahu. In this case, A, and his father, B were joint owners of their joint family property. Criminal proceedings were instituted against A. A pledged his property to B at a very high-interest rate in order to be able to make his case in Court. A contended that a presumption of undue influence arises here as B had taken unfair advantage of his mental distress by putting up a very high-interest rate.  Their Lordships in the Privy Council held that there will be no presumption of undue influence in such a case. The Privy Council opined that,

 

“The unconscionableness of the bargain is not the first thing to be considered. The first thing to be considered is the relations of these parties. Were they such as to put one in a position to dominate the will of the other?”

 

The only relation proved between the parties was that of a lender and a borrower. It was not proved that the lender was in a position to exploit the decision of the borrower. The first requirement was not fulfilled, thus there is no presumption raised.

 

It is not necessary that in every case where the parties are related by blood, marriage, or adoption, a presumption of undue influence would be established. (Subhas Chandra Das Mushib v. Ganga Prasad Das Mushib)

 

II.             Pardanashin Women

 

The term ‘pardanashin’ literally means veiled. There is no hard and fast definition in the Indian Statutes as to who is to be considered as a Pardanashin Woman. The term has been generally used to refer to a class of women who are secluded from ordinary social intercourse because of which she is subject to certain disabilities like infirmity, illiteracy, ignorance, inexperience, which do not allow her to understand the consequences of her actions. Due to the disabilities of this class of women, special protection from law is granted to them. The basis of this principle is equity and good conscience.

 

Therefore, any contract with a pardanashin woman will be said to have a presumption of undue influence. The contract can be invalidated by her unless the other party proves that consent was given freely by her after she understood the nature of the transaction and the effects of it.

 

The burden of proof in case of a contract with a pardanashin woman was explained by the Privy Council in the case of Kalibakhsh Singh v. Ram Gopal Singh. The court held that,

 

“In the first place, the lady was a pardanashin lady, and the law throws around her a special cloak of protection. It demands that the burden of proof shall in such a case rest, not with those who attack, but those who found upon the deed, and the proof must go so far as to show affirmatively and conclusively that the deed was not only executed by, but was explained to, and was really understood by, the grantor. In such cases it must also, of course, be established that the deed was not signed under duress, but arose from the free and independent will of the grantor.”

 

A claim that a woman lives in some degree of seclusion is not enough proof that she is a pardanashin woman. For example, if a woman who puts tenants and communicates to men other than her family in case of business is not a pardanashin woman. (Shaik Ismail v. Amir Bibi)

 

The courts have come up with another similar class called as quasi-pardanashin women. This class refers to women who do not fall under the category of pardanashin women but are so similar to them in kinship and in habits and are secluded from the social ordinary intercourse in such a way that they develop a similar incapacity related to business as is ascribed to pardanashin women. Therefore, the same amount of protection should be granted to this class as is given to the class of pardanashin women. (Hodges v. Delhi & London Bank Ltd.)

 

Therefore, a transaction with a pardanashin lady who does not know her way around the world raises a presumption of undue influence.

In the above two situations, there is generally a presumption of undue influence established.

 

EFFECT OF UNDUE INFLUENCE ON CONTRACT-

Where it is proved that the consent given for a contract was not free and was obtained by undue influence the contract may be avoided by the person whose consent was not free. This rule is described under Section 19-A of the Indian Contract Act, 1872.

“When consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused.

Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it has received any benefit thereunder, upon such terms and conditions as to the Court may seem just.”

Therefore, an agreement, the consent of which is obtained through undue influence can be set aside unconditionally or upon certain terms and conditions. However, a party cannot avoid such contract if he being aware of the right to rescind, affirms the contract or if he does not take action in a reasonable period of time.

 

BY

LAWVASTUTAH

 

REFERENCES-

1.     Indian Contract Act, 1872

2.     Pollock & Mulla, The Indian Contract and Specific Relief Acts, 16th edition.

3.     Avtar Singh, Contract and Specific Relief, 12th edition.

4.      Halsbury’s Laws of India Contract, 2e 2015.

5.     Mahboob Khan v. Hakim Abdul Rahim, AIR 1964 Raj 250.

6.     Saxon v. Saxon, (1976) 4 WWR 300, 305, 306 (BC SC).

7.     Mannu Singh v. Umadat Pande, ILR (1888-90) 12 All 523.

8.     Wajid Khan v. Raja Ewaz Ali Khan, , (1890-91) 18 IA 144.

9.     Rannee Annapurni Nachiar v. Swaminatha Chettiar, ILR (1909-11) 34 Mad 7.

10.  Tungabai Bhratar Purushottam Shamji Kumbhojkav v. Yeshvant DinkarJog, AIR 1945 PC 8.

11.  Raghunath Prasad Sahu v. Sarju Prasad Sahu, (1924) 19 LW 470: AIR 1924 PC 60.

12.  Subhas Chandra Das Mushib v. Ganga Prasad Das Mushib, AIR 1967 SC 878: [1967] 1 SCR 331.

13.  Kalibakhsh Singh v. Ram Gopal Singh, (1913-14) 41 IA 23, 31.

14.  Shaik Ismail v. Amir Bibi, (1902) 4 Bom LR 146.

15.  Hodges v. Delhi & London Bank Ltd, (1899-1900) 27 IA 168, 175-76.