Seth Gulabchand Vs. Seth Kudilal &
Ors  INSC 51 (22 February 1966)
22/02/1966 SIKRI, S.M.
GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N.
CITATION: 1966 AIR 1734 1966 SCR (3) 623
R 1987 SC 294 (46)
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.
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
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
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 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;
It was unnecessary to consider whether the
consideration for the agreement of February 1941 was unmoral or not. The caw of
bribery is covered otherwise by Section 23 of the Contract Act. [630 G]
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
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 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 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 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
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 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
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 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 our (1) I.L.R. 39 Cal. 245 . 16
(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
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.
(1) A.T.R. 1940 Patna 210 at 203.