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PETITIONER: SETH GULABCHAND

       Vs.

RESPONDENT: SETH KUDILAL AND OTHERS

DATE OF JUDGMENT: 22/02/1966

BENCH: SIKRI, S.M. BENCH: SIKRI, S.M. GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N. HIDAYATULLAH, M. SHAH, J.C.

CITATION:  1966 AIR 1734            1966 SCR  (3) 623  CITATOR INFO :  R          1987 SC 294  (46)

ACT: Contract  Act 1872, s. 23--Suit for specific performance  of agreement  Finding  that consideration for agreement  was  a bribe-Whether such finding required to be based on proof  as in a criminal case-Whether s. 3 of Indian Evidence Act, 1872 applies same standard of proof in all civil cases.

HEADNOTE: G was one of a number of partners in a firm which carried on the business of acting as Managing Agents and Selling Agents of  a  company  owning a textile mill  in  Indore.   Serious disputes arose between the partners and soon thereafter  the Directors  of the managed company appointed a  committee  in November  1940,  of  which the appellant was  a  member,  to inquire  into  certain allegations made against  G  and  two other partbers of the managing agency firm. In  February  1941,  G entered into an  agreement  with  the appellant  to sell to him a share in the  partnership  which was to be transferred to G by virtue of an arbitration award on  the disputes between the partners.  In April  1941,  the committee  gave its final report which was favourable  to  G although the interim report of December 1940 had not been So favourable. Upon  G failing to transfer the share in the partnership  as provided  in the agreement of February 1941,  the  appellant filed a suit against the heirs and legal representatives  of G for specific performance of the agreement.  The High Court decreed the appellant’s suit, but on appeal to the  Division Bench  of  the  High Court, the decree  was  set  aside.   A further  appeal  to  the Full Bench of the  High  Court  was dismissed.  Both the Division Bench and the Full Bench  held that the agreement to sell a share in the partnership was  a bribe  offered  by  G to the appellant  to  write  a  report favourable to him. In  the appeal to this Court, it was contended on behalf  of the  appellant,  inter alia, that there was no  evidence  in support of the finding relating to bribery arrived at by the

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Full  Bench  and  that the said finding was  based  on  mere surmises; that the Full Bench had misdirected itself in  not adopting  a strict standard of proof and that where  bribery is  alleged  in  a civil case, the same  standard  of  proof should  be required as in a criminal case-, that in case  of circumstantial  evidence, the circumstances must be such  so as  to exclude any other reasonable possibility and that  if this principle was applied to the present case, the  finding of  bribery  must  be reversed as  the  facts  were  equally consistent  with  the appellant having acted  honestly;  and that immorality within Section 23 of the Indian contract Act is confined to sexual immorality. HELD  :  On the facts, the Full Bench did not  rely  on  any surmises and its findings were not vitiated. It  is clear from Section 3 of the Indian Evidence Act  that the  same standard of proof applies in all civil cases.   It makes  no  difference between cases in which  charges  of  a fraudulent or criminal character are made 624 and  cases in which such charges are not made.  But this  is not  to  say  that the Court will not,  while  striking  the balance  of  probability, keep in mind  the  presumption  of honesty  or  innocence  or  the nature  of  crime  or  fraud charged. [629 G-H] Weston  v.  Peary Mahan Dass (1913), I.L.R. 40 Cal.  898  at 916: disapproved. Jarat  Kumari  Dassi  v. Bissesur: I.L.R. 39  Cal.  245  and Prasannamayt  Debya v. Baikuntha Nath Chattoraj:  I.L.R.  49 Cal. 132; referred to. It  cannot be said that rules applicable  to  circumstantial evidence  in criminal cases would apply where a party, in  a civil  case,  is  alleged to have  accepted  a  bribe.  -The ordinary rules governing civil cases will continue to apply. [630 E] Raja  Singh  v.  Chachoo  Singh :  A.I.R.  1940  Patna  210; referred to. It was unnecessary to consider whether the consideration for the  agree. ment of February 1941 was unmoral or  not.   The caw  of  bribery is covered otherwise by Section 23  of  the Contract Act. [630 G]

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 795 of 1963. Appeal  by special leave from the judgment and decree  dated November  24,  1958,  of the Madhya Pradesh  High  Court  at Indore in Civil Special Appeal No. 5 of 1949. C.   B. Agarwala, J. D. Patel, J. B. Dadachanji 0. C. Mathur and Ravinder Narain, for the appellant. M.   P.  Amin, C. B. Sanghi V. M. Amin and L N. Shroff,  for the respondents. The Judgment of the Court was delivered by Sikri,  J. This appeal by special leave is directed  against the judgment and decree of the Full Bench of the High  Court of Madhya Pradesh in Civil Special Appeal No. 5 of 1949, and arises   out  of  a  suit  filed  by  the  appellant,   Seth Gulabchand,  hereinafter  referred  to  as  the   plaintiff, against  heirs and legal representatives of  Seth  Govindram Seksaria,  on  the original side of the High  Court  of  the former Indore State for specific performance of an agreement dated February 28, 1941, entered into between the  plaintiff and the deceased Govindram.  Sanghi, J., decreed the suit on June  11,  1948.   Against this  judgment  and  decree,  the defendants filed an appeal to a Division Bench of the Madhya

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Bharat  High Court and the plaintiff also preferred a  cross appeal.  The Division Bench accepted the defendants’ appeal, reversed  the  judgment  and  decree  of  Sanghi,  J.,   and dismissed  the  plaintiff’s suit as also his  cross  appeal. Thereafter the plaintiff filed an appeal under S. 25 of  the Madhya  Bharat  ’High Court of Judicature Act, 1949,  as  it stood  before it was amended by Madhya Bharat Act No.  3  of 1950.   When this appeal came up for hearing before  a  Full Bench  of  the  Madhya Pradesh  High  Court,  a  preliminary objection  as to the competency of the appeal was  taken  on behalf of the defendants-respon- 625 dents.   The  Full  Bench  held  that  the  appeal  was  not competent,  but this Court, on appeal, held that the  appeal was  competent and remitted the case to the High  Court  for decision  on  merits.  On remand the Full Bench  upheld  the decision  of  the Division Bench and dismissed  the  appeal. The matter is now before us. In view of the arguments urged before us by learned  counsel for the appellant, Mr. C. B. Aggarwala, it is not  necessary to  give in detail the history of the disputes  between  the parties, or all the points that were debated before the High Court.   To appreciate the arguments addressed to us  it  is only necessary to give the following facts. Govindram Seksaria, Brijlal Ramjidas, Bilasrai Joharmal  and four  other  persons entered into a deed of  partnership  on July  17,  1935 for carrying on the business  of  acting  as Managing  Agents and Selling Agents of Indore  Malwa  United Mills  Ltd.,  a  company owning a textile  mill  in  Indore. Serious  disputes arose between the partners.  The Board  of Directors  of the Company appointed a Committee in  November 1940  to  enquire  into  certain  allegations  made  against Govindram  Seksaria,  Brijlal and Bilasrai.   The  Committee consisted  of Mr. R. C. Jall as Chairman, and  Seth  Hiralal and the plaintiff as members.  In the meantime, the partners referred their differences to the arbitration of Col.   Dina Nath,  the  Prime Minister of the former Holkar  State.   On February  8, 1941, the Arbitrator gave an award, inter  alia deciding  that  Govindram Seksaria should buy up  the  five- annas  shares of Brijlal Ramjidas and Bilasrai  Joharmal  at par and that the latter should sell their respective  shares of  annas two and a half each in the rupee at par  and  also sell  the debentures held by them to Govindram  Seksaria  at par.  On February 12, 1941, Brijlal and Bilasrai  instituted a suit in the Bombay High Court against Govindram and  other partners  of the Managing Agency contesting the validity  of the  award made by Col.  Dina Nath.  They failed before  the Bombay  High Court and ultimately before the Privy  Council. On November 5, 1947, a deed of assignment of the  four-annas share of Brijlal and Bilasrai was executed in favour of  the defendants  as legal representatives of Govindram,  who  had died in the meantime in May 1946.  On November 6, 1947,  the plaintiff  instituted  the  suit out of  which  this  appeal arises. Various  issues  were  raised in this suit but  it  is  only necessary to mention issue No. 4, which was as follows: "Was the agreement to sell the two and a half annas share  a bribe  offered  by  the  deceased  Seth  Govindram  to   the plaintiff to write a report favourable to him, the plaintiff being  a member of the Committee of three persons  appointed by the Directors of the Malwa Mills, Indore to 626 enquire  into and report on the management of the  Mills  by Seth Govindram?" Both  the Division Bench and the Full Bench on  appeal  have

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held this issue to be proved and it is common ground that if the  decision  of  the Full Bench on this  issue  cannot  be successfully  assailed,  no  further point  arises  and  the appeal must fail. We may here state the primary facts and the findings of  the Division Bench and the Full Bench.  After the award was made Govindram addressed a letter to Mr. Jall as a member of  the Enquiry  Committee on February 13, 1941, intimating  to  him that  the  Prime Minister of the Holkar State had  given  an award  on February 8, 1941, in his favour, and forwarding  a copy  of the award.  On the same date Govindram addressed  a similar  letter  to the plaintiff.  A day or two  after  the receipt of this letter by the plaintiff Govindram met him at his  house and made him an offer of making him a partner  of the  managing  agency firm by assigning two and  half  annas shares out of the share of Brijlal and Bilasrai which he was to get under the award.  The next day the plaintiff accepted the  offer  and  on February 28,  1941,  the  agreement  was concluded  between the parties.  A day before the  agreement was signed by the parties, Gulabchand, Plaintiff,  addressed a letter to Mr. Jall, the Chairman of the Enquiry Committee, on  February  27,  1941, for holding  the  meetings  of  the Committee  daily so as to expedite its report.  On  February 8, 1941, Govindram met Mr. Jall, and offered to sell to  him one  anna share, which he rejected saying that " as  he  was the member of the Enquiry Committee, it would look as if  he was making the offer to please him." The Committee gave  its final  report  on  April 7, 1941, which  was  favourable  to Govindram,  although the interim report dated  December  16, 1940, was none too favourable to him.  The plaintiff had  no previous experience of the working of any Mill and had never been a managing agent of any textile mill.  Govindram was  a rich man and a millionaire.  In 1942 Govindram suggested  to the  plaintiff  that the share to be sold to him  should  be reduced  to one and a half annas, but the plaintiff did  not accept  the  suggestion.   Later, in  1942,  when  Mr.  Jall questioned  Govindram  about the intended reduction  in  the share  which was to be sold to the plaintiff, Govindram  re- plied that he did not really intend to give any share to the plaintiff or anyone and that he proposed to give the  entire four-annas share to the Holkar State by way of charity. From  all these facts the Division Bench inferred  and  con- cluded  that  the  offer of two and a half  annas  share  by Govindram to the plaintiff, Gulabchand, was a bribe in order to  induce him to report in his favour and was  accepted  as such  by Gulabchand.  This conclusion was challenged  before the Full Bench on various grounds, but the Full Bench upheld the decision.  The Full Bench 627 found that in making the offer of the sale of two and a half annas share to the plaintiff Govindram did not care for  the plaintiff’s  money or his services in the management of  the mill because "Govindram continued to manage the Mill without the  plaintiff, putting him off by saying that the  contract would be fulfilled after the end of the litigation initiated by  Bilasrai  and Brijlal, and after the  Enquiry  Committee gave  its  final  report  Govindram  actually  suggested   a reduction  in the share and even told Mr. Jall that  he  was not  going  to sell it to the plaintiff or to  anyone.   The ostensible  reason  given for the  intended  partnership  of Gulabchand  is ’too thin to hide the real reason’,  and  its recital  in the agreement is odd in itself" The  Full  Bench found  that the balance-sheets tendered in evidence  in  the case showed that Govindram had earned enough money by way of selling  and  managing  agency commission  and  it  was  not

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necessary  for  him  to  find a  financial  partner  in  the plaintiff and that Govindram was prepared to give the entire four  annas  share he had obtained under the  award  to  the Holkar State in charity was in itself an indication that the offer of two and half annas share to Gulabchand was not made by  Govindram  on account of his own  financial  stringency. After  considering  various facts the Full  Bench  concluded that  "the share in the managing agency partnership  of  the mills  was,  therefore, not one which could be  parted  away easily  by a partner or could be had by anyone for the  mere asking and readiness to furnish the necessary  proportionate capital  and  to  purchase the debentures  of  the  required amount,  without any more.  That "any more" in  the  present case,  is, as the learned Judges of the Division Bench  have suggested, nothing else than the anxiety of Govindram to get a  favourable  report  from the Enquiry  Committee  and  the willingness  of  the  plaintiff to oblige him  by  making  a favourable report.  Taking into consideration the facts  and circumstances narrated in the judgment of the Division Bench at  pages  170 to 173 of the printed paper book,  and  those summarised above, the conclusion at which the learned Judges arrived  that the transaction was in the nature of bribe  to the  plaintiff  appears to us to have all  the  commendation which commonsense and the realities of the case can give it. It is one which legitimately can be drawn from the facts and circumstances proved in the case and in accordance with  the probabilities  of  the  case.   It  cannot,  therefore,   be maintained  that  the  defendants have  not  discharged  the burden  of  the proof that lay on them of  establishing  the plea  of bribe.  They were not required -to prove that  fact beyond reasonable doubt as in a criminal case." Mr.  C.  B.  Aggarwala,  while  admitting  that   concurrent finding&  of fact cannot ordinarily be assailed before  this Court,  contends that in this case there is no  evidence  in support  of  the findings arrived at by the Full  Bench  and that  the findings are based on mere surmises.   He  further says that the Full Bench has misdirected 628 urges that where bribery is alleged in a civil case the same standard  of  proof  should be required  as  in  a  criminal matter.   He further urges that the High Court  should  have held  that Hiralal’s evidence was not  admissible.   Another argument urged by him is that there was no proof at all that the  plaintiff was a party to the intention of Govindram  to bribe  him.   He  says that there is  presumption  that  the plaintiff acted honestly and no material has been placed  to displace that presumption. We  see  no force in Mr. Aggarwala’s first  contention  that there is no evidence in support of the findings of the  Full Bench  or that the findings are based on mere surmises.   It is true that there is distinction between a probability  and a mere surmise.  But in this case we are satisfied that  the Full Bench did not rely on any surmises. The real complaint of Mr. Aggarwala in this case seems to be that as bribery was alleged the Full Bench should have  gone into  the question of bribery as if it was a criminal  case. In  this connection he relied on the following  observations made by Woodroffe, J., in Weston v. Peary MohanDass(1). "And speaking for myself where, whatever be the form of  the proceeding,  charges of a fraudulent or  criminal  character are made against a party thereto, it is right to insist that such charges be proved clearly and beyond reasonable  doubt, though the nature and extent of such proof must  necessarily vary according to the circumstances of each case.  There  is a  presumption  against crime and misconduct, and  the  more

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heinous and improbable a crime is, the greater of  necessity is  the  force  of the evidence required  to  overcome  such presumption.   I cannot myself imagine a Court saying  to  a party, who, as in this case, may be a person holding a  high and responsible position, with a previous unblemished record : "It is true that I have reasonable doubts whether you  did the grossly criminal acts with which you are charged, but  I find  that you did so all the same." And this  exclusion  of reasonable doubt is all that the so-called "criminal  proof" requires." Fletcher, J., the Trial Judge, relying on Jarat Kumari Dassi v.  Bissesur(2)  to which Woodroffe, J., was  a  party,  had overruled  the point that the standard of proof in  a  civil case,  in which a charge ,of a criminal character  is  made, was  the  same  as if the parties were  being  tried  for  a criminal  offence.   He observed that in  India,  under  the Indian Evidence Act, there is no rule that the standard  ,of proof in a case like the present must be the same as if the (1) (1913) I.L.R. 40 Cal. 898 at 916. (2) I.L.R. 39 Cal. 245 :16 C.W.N. 265. 629 defendants were being tried on a criminal charge.  This case (Jarat   Kumari  Dassi  v.  Bissesur)(1)  was  followed   in Prasannamayi  Debya ,v.  Baikuntha Nath  Chattoraj(2).   The Division  Bench followed these observations of  Jenkins,  C. J., in Jarat Kumari Dassi’s(1) case : "Demonstrations,  or  a  conclusion at  all  points  logical cannot be expected nor can a degree of certainty be demanded of  which the matter under investigation is  not  reasonably capable.   Accepting  the  external  test  which  experience commends,  the Evidence Act in conformity with  the  general tendency of the day adopted the requirements of the  prudent man as an appropriate concrete standard by which to  measure proof The  Evidence  Act is at the same time  expressed  in  terms which  allow  full effect to be given  to  circumstances  or conditions  of probability or improbability, so that  where, as in this case, forgery comes in question in a civil  suit, the  presumption against misconduct is not without  its  due weight  as  a  circumstance  of  improbability,  though  the standard  of proof to the exclusion of all reasonable  doubt required in a criminal case may not be applicable." In  s.  3 of the Indian Evidence Act,  the  words  "proved", "disproved" and "not proved" and defined as follows : "Proved.--A   fact  is  said  to  be  proved   when,   after considering the matters before it, the Court either believes it to exist, or considers -its existence so probable that  a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists." "Disproved.-A  fact  is  said to be  disproved  when,  after considering the matters before it, the Court either believes that  it does not exist, or considers its  non-existence  so probable  that a prudent man ought, under the  circumstances of the particular case, to act upon the supposition that  it does not exist." "Not  proved.-A  fact is said not to be proved  when  it  is neither proved nor disproved." It  is apparent from the above definitions that  the  Indian Evidence Act applies the same standard of proof in all civil cases.   It  makes  no difference  between  cases  in  which charges  of a fraudulent or criminal character are made  and cases  in which such charges are not made.  But this is  not to  say that the Court will not, while striking the  balance of  probability, keep in mind the presumption of honesty  or innocence  or the nature of the crime or fraud charged.   In

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our (1) I.L.R. 39 Cal. 245 . 16 C.W.N. 265. (2) I.L.R 49 Cal. 132. 630 opinion,  Woodroffe,  J., was wrong in insisting  that  such charges must be proved clearly and beyond reasonable doubt. Hiralal’s evidence was sought to be ruled out on the  ground that what he had stated in his evidence had not been put  to the plaintiff.  HiralaI had deposed that after the award the plaintiff  saw  him  and  told  him  that  there  was   some settlement  between him and Govindram.  It is not  necessary to decide this point because the Full Bench did not base its findings on Hiralal’s. evidence. Mr.  Aggarwala, relying on Raja Singh v.  Chaichoo  Singh(1) further  urges that in case of circumstantial  evidence  the circumstances  must  be  such -so as to  exclude  any  other reasonable possibility and he says that if this principle is applied to this case the finding of bribery must be reversed as  the  facts  are equally consistent  with  the  plaintiff having  acted  honestly.   Meredith,  J.,  had  observed  as follows "Now  it is well-settled that where fraud is to be  inferred from  the circumstances, and is not directly  proved,  those circumstances   must  be  such  as  to  exclude  any   other reasonable  possibility.  In other words, the  criterion  is similar  to  that  which  is  applicable  to  circumstantial evidence in criminal cases." We are unable to agree with these observations.  As we  have said  before,  the fact that the party is alleged  to  -have accepted  bribe in a civil case does not convert it  into  a criminal  case, and the ordinary rules applicable  to  civil cases apply.  The learned counsel has not been able to  cite any  other  authority to show that there is any  such  well- settled proposition, as stated by Meredith, J. Coming  to  the  next  contention,  the  fact  whether   the plaintiff was a party to the intention of Govindram to bribe him  has to be judged like any-other fact on the balance  of probability.   We are not satisfied that the Full Bench  has misdirected itself in any manner in finding this fact. In the end Mr. Aggarwala urges that immorality within s.  23 of the Indian Contract Act is confined to sexual immorality, but  we  are  not concerned with the  question  whether  the consideration  is  immoral or not.  The case of  bribery  is clearly covered otherwise by s. 23. In  the result we hold that the findings of the  Full  Bench are,  not  vitiated  and  must  be  accepted.   The  appeal, therefore, fails and is dismissed with costs. Appeal dismissed. (1)  A.T.R. 1940 Patna 210 at 203. 631