Professional Documents
Culture Documents
Agreement Signed Under Pressure
Agreement Signed Under Pressure
Agreement Signed Under Pressure
under Pressure”
LEB Assignment
IBS Hyderabad
Submitted by: Aagam Maniar
Section: J
AGREEMENT SIGNED UNDER PRESSURE:
Case Summary/Facts:
• June 1928, Sarkara Amarendra Nath joins the then Bengal-Nagpur Railway
in a “cash and pay Branch”.
• Later that month, Nath is called upon to furnish a bond for the purpose of
indemnifying the Railways against any loss it might sustain by reason of his
neglect toward his duty. Also, he was directed to sign a bond and furnish
security up to Rs. 30,000 for the same.
• 1954, the Union Of India forfeited a sum of Rs. 10,000 from Nath’s security
deposit.
• Sarkara Amarendra Nath filed a suit against Union of India holding that the
forfeiture was illegal and void.
ISSUES:
• NATH argued that he had been made to sign the bond under undue
influence.
COURT OBSERVATIONS :
It was conceded by the court that the Union of India was in a position which could
enable it to exert undue influence.
It was also observed that the Railways had lost the money before Nath became
chief cashier.
(a) Where he holds a real or apparent authority over the other party, or where he
stand in a fiduciary relation to the other; or
In Bank of China vs. Maria Chia Sook Lan, the respondent who had charged her
property for facilities given to her husband for his business contended that the bank
had procured the execution of the guarantee by her under undue influence.
She alleged that the bank acting through its servant had threatened her. The facts
that were relied upon were the statements made by the bank officer there (a)
pressing her in her husband’s absence to give a further guarantee of his account;
(b) threatening that if she did not give the guarantee, the bank would sell her shares
held as security for overdraft and (c) threatening that, if she did not give the
guarantee, the bank would make her husband bankrupt.
It was conceded for the guarantor that although the bank was entitled to make him
bankrupt, the threat to do so constituted undue influence.
The court took the view that, considering the facts relating to the guarantee,
Madam Chia had actually failed to establish undue influence.
JUDGEMENT:
The court ruled that taking the facts into account there was not enough evidence to
establish that undue influence had been used by the Union of India.
However, since the funds had been misappropriated by Pramanik before Nath
became chief cashier and signed the bond, thus Nath was not liable and the
forfeiture was not valid.
Solution:
However, this kind of liability is not found under Criminal Law, as is the
case here (misappropriation of funds), even though common in civil law.
Moreover, since Mr. Pramanik had misappropriated the sum before Mr.
Nath signed the bond, he cannot be made liable for it.
Thus, the forfeiture of the security deposit is not valid and is voidable.
Solution:
Section 16 of the Contracts Act 1950 states the general principle and the
emphasis where undue influence is deemed to exist and lays down some
rules for establishing on whom the burden of proof is in certain situations. It
states: “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.” There are certain essential elements
namely a relationship in which one party is dominant and the use of such
dominance upon another to obtain an unfair advantage . The presence of
undue influence in the formation of a contract can lead to its being flouted
by the other party who claims to have been influenced to agree to it.
In such cases person who is in some such position to dominate the will of
another, enters into contract with him, and the transaction appears, on the
face of it or on the evidence adduced, to be unconscionable, the burden of
proving that such contract was not induced by undue influence shall be upon
the person in a position to dominate the will of the other.
In the case, given the facts, there is not enough evidence that undue
influence has been exercised by the Union of India. (I have included a
similar case in this write-up.)
----------------------------------------------------------------------------------------------------