Ragnunath Prasad Sahu vs. Sarju Prasad Sahu, 1923

• Son Sarju Prasad as the defendant and His father Raghunath Prasad as plaintiff are part of the joint undivided family.
• Both father and son have a dispute over the property due to which the father filed a criminal suit against his own son.
• To defend himself defendant mortgaged his property for the sum of Rs. 10,000 @ 24% compound interest with the plaintiff but during eleven years the interest was increased by 11 times.
• Defendant contended that the plaintiff has taken advantage of his mental condition to increase the interest rate and therefore section 16 of the Indian Contract Act, 1872 should be applied here.

1. Whether the plaintiff would be protected under Section 16(3) of the ICA?
2. Whether the contract between the parties is induced by undue influence?

The lordship laid down clear views upon Sub-section 3 of Section 16 of the Indian Contract Act as amended. In order to determine that the person falls within the under sub-section 3 of Section 16, the lordship laid down three step process.

• In the first place, the relations between the parties to each other must be such that one is in a position to dominate the will of the other. 
• Once that position is confirmed, the second stage has been reached, viz., the issue whether the contract has been induced by undue influence.
• Upon the determination of this issue a third point emerges, which is that of the onus probandi. If the transactions appear as unconscionable then burden of proving that the contract was not induced by undue influence is to lie upon the person who was in a position to dominate the will of the other.

The lordship view that this order followed in sequence otherwise error will arise. For eg: 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? 

After taking Evidence in the case, the lordship held that the borrower failed to prove that lender was in a position to dominate his will under Section 16 of Indian Contract Act, 1872 which is first requirement to be proved. And the only relation between the parties was of lender and borrower. 

Hence the borrower got no relief.

In this Case the honorable Court Analysis that this case is one of the landmark cases of the Indian contract act, 1872. This case is one of the landmark cases when it comes to 'free consent' undue influence is one such instance where a consent is not said to be free and the party whose consent was so obtained has the option to avoid the contract hence in the case of undue influence the contract is voidable in nature in case of undue influence to prove undue influence the plaintiff has to prove that the relations between him and the defendant was such that the latter in the position to dominate the will of the former by reason of –

1. Real or apparent authority
2. Fiduciary relationship
3. Mental capacity is affected by reasons of age, illness or mental or bodily distress of the plaintiff.

Hence, it is necessary to prove undue influence under section (16) of Indian Contract Act, that  the party has to establish a relation between the parties in which the other person in the power to dominate a will.