Nasim Ali, J.This is an appeal against the decision of the Subordinate Judge of 24-Parganas, dated 21st September 1939, dismissing the appellants suit to enforce an equitable mortgage. The case of the plaintiff appellant as stated in the plaint is this: The plaintiff is a limited company incorporated and registered under the English Companies Act having its registered office in London. It is carrying on its business of insurance at its Calcutta office at No. 2, Fairlie Place in the town of Calcutta for a long time. The defendant was the cashier and accountant of the plaintiff company at its Calcutta office from 1st January 1929 to 8th January 1935. On 8th and 9th January 1935, while the accounts of the plaintiff company were being audited by its auditors Messrs. Price Waterhouse & Co., it was discovered that the defendant misappropriated large sums of money belonging to the plaintiff company in the course of his employment as cashier and accountant. The total amount misappropriated by him could not be ascertained at that time. The examination of the books of the plaintiff company and other papers so far as could be done up to that time disclosed that the amount misappropriated by him exceeded Rs. 50,000. On 10th January 1935, the defendant himself admitted his liability to the plaintiff company for Rs. 50,000 on account of such misappropriation. In order to make good the loss caused to the plaintiff company by his misappropriation to the extent of RS. 50,000 as admitted by him the defendant executed a promissory note for Rs. 50,000 in favour of the plaintiff company on 10th January 1935, and to secure repayment of the amount of the said promissory note deposited on the same day with Mr. Jackson the resident Secretary of the Calcutta office of the plaintiff company in the office of Messrs. Orr Dignam and Co., Solicitors of the plaintiff company at No. 30, Dalhousie Square in the town of Calcutta, the title deed of premises No. 110, Syed Ameer Ali Avenue, Calcutta, belonging to him. On further investigation, it was found that the liability of the defendant to the plaintiff company would come up to about Rs. 1,20,000. On 17th January 1935, a power of attorney was executed by the defendant in favour of Mr. Jackson to enable the plaintiff company to realise the monies secured by the mortgage out of Court. By this power of attorney, the defendant authorised Mr. Jackson to negotiate for the sale and to sell the mortgaged properties upon terms and conditions mentioned in the said power. On 4th February 1935, the plaintiff company realised Rs. 700 by sale of a dog belonging to the defendant and Rs. 1300 by sale of a motor car also belonging to the defendant of which Rs. 400 was realised on 25th February 1935 and Rs. 900 was realised on 2nd March 1935. Plaintiff is entitled to get interest u/s 80, Negotiable Instruments Act. The total amount due for principal and interest is therefore Rs. 56,637-11-6. On these allegations the plaintiff prayed for a mortgage decree in the usual form.

2. The defence of the defendant as disclosed in his written statement so far as it is relevant for the purposes of the present appeal is as follows: The defendant was no doubt the cashier and accountant of the plaintiff company from 1st January 1929 to 8th January 1935, but during this period he did not misappropriate any money belonging to the plaintiff company. On 10th January 1935, he did not admit any liability to the extent of Rs. 50,000 or any amount on account of misappropriation or on any other account whatsoever. He was compelled to execute a promissory note for Rs. 28,000 on 10th January 1935, and subsequently another promissory note for Rs. 50,000 on or about 18th January 1935, in favour of the plaintiff company after cancellation of the previous one for Rs. 28,000 without receiving any consideration therefor or for any liability for the said sum or any sum. The execution of this promissory note was due to the fraud, misrepresentation and coercion of Mr. Jackson, resident Secretary of the plaintiff company. He did not deposit the title deed of his property with intent to create an equitable mortgage and that no equitable mortgage was created by him. The title deed of his property was taken away by Mr. Jackson on a false representation. The power of attorney so executed by him in favour of Mr. Jackson was obtained from defendant by fraud, misrepresentation, undue influence and coercion of Mr. Jackson and upon a representation that criminal proceedings would otherwise be inevitable and that the said power of attorney would not be acted upon. The aforesaid documents were taken away on the distinct understanding and assurance given by Mr. Jackson that the same would be returned to the defendant as soon as such amount which might be found out as not properly accounted for was recovered from the auditors without making use of the said documents at any time at any place. At the time when Mr. Jackson took away the title deed he informed Mr. Jackson that he had already agreed to deposit the title deed with the builders of the house covered by the said title deed. The defendant did not give any valid power of attorney to Mr. Jackson. The dog and the motor car belonging to the defendant were taken from him under coercion and undue influence. The defendants liability was never found to be Rs. 1,20,000. There cannot be any defalcation in view of regular monthly and sometimes surprised auditing of the plaintiffs accounts by the auditors, Messrs. Price Waterhouse Peat & Co. If any defalcation ever took place such defalcation was never made by the defendant. He was not aware of the same. Mr. Jackson introduced the story of defalcation and for his own protection prevailed upon and induced and compelled the defendant to execute the promissory note in suit and power of attorney. In any case, the said documents were executed and the said title deed was wrongfully taken away by Mr. Jackson upon the express assurance that no liability would be created thereby. If any money was ever due on the mortgage in suit the same has been fully paid and discharged as the alleged loss to the plaintiff company was mainly due to the negligence of the auditors of the company and on or about 16th September 1935, the plaintiff company accepted from its auditors, Messrs. Price Waterhouse Peat & Co. a sum of 4500 in full and final settlement and discharge of all claims of every account whatever against the said auditors and in consideration of the receipt of the said sum of 4500 the plaintiff company has absolutely and finally discharged the said auditors and all other persons concerned from all further liability.

3. The trial Judge has dismissed the suit. He appears to have arrived at the following findings: In connation with the preparation of the accounts of Messrs. Duncan Brothers, agents of the plaintiff company, Mr. Jackson informed Messrs. Price Waterhouse, Peat & Co., the auditors of the plaintiff company to audit the accounts of the plaintiff company. The audit began on 8th January 1935. On the next day at 5 or 6 P. M., the amount that could be traced as defalcated was about Rs. 28,000. Thereupon the defendant got nervous and wrote a letter (EX. 4A) admitting misappropriation and incriminating himself. This letter was not written by him out of his own free will and volition. It was obtained by Mr. Jackson by undue influence holding out threat. Thereafter, on the same day, Mr. Jackson took away the title deed of defendants property (premises No. 110 Ameer Ali Avenue) from the office box of the defendant finding its lid open. At the time when he got possession of this title deed it was not delivered to him by the defendant in pursuance of any agreement to create an incumbrance on his property. When defendant came to office in the morning of the next day, i. e., 10th January 1935, Mr. Jackson took him to the office of Messrs. Orr Dignam and Co., the Solicitors of the plaintiff company. On their way the defendant wanted an assurance from Mr. Jackson that no criminal proceedings would be drawn up against him but Mr. Jackson did not give him any such assurance. In the afternoon of the same day the defendant executed the promissory note in suit (Ex. 1) in the office of Mr. S.B. Bose, an assistant of the plaintiffs solicitors and made over like an automaton to Mr. Jackson the title deed of his property which was handed over to him by Mr. Ghose. At the time when defendant executed the promissory note and handed over the title deed to Mr. Jackson, there was pressure of threat of criminal proceedings. His mind was not eased by Mr. Jacksons giving him an assurance that he would not be criminally prosecuted. Mr. Jackson was the defendants office master. He had a real authority over the defendant and was in a position to dominate the will of the defendant. He used such position in obtaining the pronote in suit, the title deed and the power of attorney (EX. 3). The builders of the house on the property covered by the title deed made over to Mr. Jackson had a lien over the house for the money due to them for the construction of the house. Defendant had no intention to create an equitable mortgage when he handed over the title deed of his property to Mr. Jackson. The defendant handed over his car and his dog to Mr. Jackson under compulsion and not out of his own free will. Money was taken by the defendant out of the companys till by manipulation of the marine, sweep and other accounts. This money did not exceed Rs. 60,000. This money first went to the defendants pocket and from there it went to Mr. Jackson for payment of illegal commission to agents of the plaintiff company for the benefit of the plaintiff company. The plaintiff company recovered Rs. 60,000 from its auditors on account of their negligence. The liability of the defendant in excess of this amount has not been proved. Plaintiff company is therefore not entitled to any relief in this suit. The promissory note in suit (Exhibit 1) is in these terms:

On demand I, Benoy Krishna Mitra of No. 12 Crouch Lane, Calcutta, promise to pay the London and Lancashire Insurance Company, Ltd. or order the sum of Rs. 50,000 only in repayment of the sums from time to time taken from the said Company in cash for my own use.

4. Signed at No. 32, Dalhousie Square, Calcutta, this 10th day of January 1935.

Benoy K. Mitra,

10-1-35.

5. The case of the defendant is that he did not take any money from the plaintiff company in cash for his own use. The case of the plaintiff company in the plaint is that the defendant took cash from time to time amounting to about Rs. 1,20,000 and misappropriated the same. In this Court the contention of the learned Counsel for the plaintiff is that on the evidence in this case it should be held that the defendant misappropriated at least Rs. 1,09,418-0-1. The learned Counsel for the defendant on the other hand contended that the defendant did not misappropriate any money at all. The trial Judge in his judgment has said:

The learned Advocate-General for India (Counsel for the plaintiff) takes Benoy (defendant) through the several items in the Marine Cash Book, fire Cash Book and Sweep Accounts and he (defendant) admits manipulation of these amounts to the tune of Rs. 1,09,400 by showing customers cheques paid as cash into the bank and proceeds of bearer cheque shown in sweep accounts.

6. It appears from Ex. 9 series that the total amount of customers cheques shown in the cash book paid as cash into the plaintiffs bank is Rs. 77,531-1-1. The plaintiff company has produced cheques of the value of Rupees 55,932-12-0 out of these cheques. They have not been, however, able to trace the remaining cheques, i. e., cheques of the value of Rs. 21,598-5-0. But the evidence of P. W. 7 and the defendant shows that out of these un-traced cheques, cheques of the value of Rs. 15,015-4.0 were shown in the cash book paid as cash into the bank. There cannot be any doubt, therefore, that in the cash book Rs. 70,948-0-1 have been shown as having been deposited into the bank of the company from the till of the company. It is clear from the evidence in this case and it was not seriously disputed by the learned Counsel for the defendant that this amount was never deposited in cash in the plaintiffs bank. The proceeds of bearer cheques amounting to Rs. 34,870-0-0 have been shown in the cash book as having been spent for the purchase of sweep tickets. Exhibits 6, 8 and the evidence of p. W. 10 clearly prove that this amount was not spent at all for the purchase of these tickets. It appears from the evidence of the defendant himself that there was cash shortage to the extent of Rs. 3600. The total amount of cash taken by the defendant from the till therefore, amounts to Rs. 1,09,418-0-1. The case of the defendant, however, is that this amount was not misappropriated by him but was paid to Mr. Jackson for payment to the agents of the company as illegal commission, i. e., commission at rates in excess of the rate sanctioned by the Tariff Rules of the Fire Insurance Association. The defendant did not make this case in his written statement. In his evidence, however he stated that Mr. Jackson wanted cash to pay illegal commission to the agents of the company, that towards the end of 1932 he asked him to discontinue ledgers and journals, to withdraw cash from the till of the company, to hide these withdrawals by manipulation of entries in the cash book in such a way that nobody would be able to detect them and that in accordance with these directions he manipulated the entries, took cash from the till of the company and paid them to Mr. Jackson.

7. It is true that the ledgers and journals were discontinued from 1933 but the other account books of the plaintiff clearly show that before and after the ledger and journal were discontinued, payments of illegal commission were duly entered in the account books of the company and that they were not hidden from the accounts. The contention of the learned Counsel for the defendant, however, is that over and above these payments there were other payments of illegal commission. The only evidence on which he relied in support of this contention is the pay which the plaintiff company paid to one Mr. Deva from 1935 to 1938. His argument is this: Before 1935, Mr. Deva used to get illegal commission at rates higher than what is mentioned in the account books. The payment at these higher rates were not entered in the account books. The amount of the commission which was being paid to Mr. Deva as commission before 1935 was converted into his pay from 1935 in order to hide these payments from the account books. There is no evidence in this case to show that Mr. Deva received before 1935 as commission anything in excess of what is entered in the account books. The learned Counsel for the defendant however, asks us to presume that the amount which was paid to Mr. Deva after 1935, as pay was paid to him as commission before 1935. I am unable however to make this presumption. There is also no evidence in this case to show that the amount which was paid to Mr. Deva from 1935 was not his pay but commission. The defendant in my opinion has failed to prove that any amount in excess of what is entered in the cash books was paid as illegal commission during the period in question. As all payments of illegal commission were duly entered in the account books before and after the alleged direction of Mr. Jackson to the defendant towards the end of 1932 there was no reason why Mr. Jackson would ask the defendant to get cash by manipulation of entries for payment to him of illegal commission or why defendant would pay any cash to him for payment of illegal commission. I therefore do not believe the evidence of the defendant that he paid anything in cash to Mr. Jackson during this period for payment of illegal commission to the agents of the company. My conclusion, therefore, is that the defendant misappropriated Rs. 1,09,480-0-1 in cash from the till of the company before he executed the promissory note in suit and that he was liable to pay this amount to the plaintiff company at the time when he executed this document. The defendant in his evidence said:

I do not remember if I signed another document beyond those signed between 9th and 18th January. Yes, I pulled myself up when I broke my nib while signing the first document (Ex. 4 A). The document that I was signing was not typed. I read the whole document. It was on the 9th. Then I tore up the letter that I signed and wrote a second letter. It was in Mr. Jacksons room . . . there was no threat when I wrote the Ex. 4A dated 9th January 1935. I know English fairly well. I am deposing in English. The word misappropriate is a homely word. I substituted the word misappropriated for the word "paid" according to Mr. Jacksons dictation as he said that the auditor would want that word. I realised that I was being made to use a damaging word.

It appears from the defendants evidence, therefore, that Ex. 4A was not obtained by threat. Mr. Jackson in his evidence said:

About mid-day of 9th January 1935, the auditor brought some cash books into my private office and pointed out certain entries to me. Defendant was sent for by me. He was questioned by the auditors in my presence regarding certain cash book entries. Defendant said that the entries would be explained if given sufficient time. But later in the afternoon of the same day after further questioning he admitted having taken away money during the year 1934 and even prior to that time. I asked him how much money he had taken and he replied it was about Rs. 18,000. The auditors continued their examination of the books and at about 5 oclock the amount which could then be traced was about Rs. 28,000. I asked Benoy Babu (defendant) if he could repay the money which he had taken; he said he could if he raised money on his house property at Park Circus. At about 6 oclock in the evening he wrote a letter, admitting having taken money during 1934 and even before that.

I have already found that the defendant misappropriated more than one lac of rupees. He knew what he has done. He also knew that he was liable to pay this amount to the plaintiff company. The statements in the letter in question are true. Mr. Jackson did not obtain an unfair advantage by taking this letter from him. I therefore find no reason to hold that the defendant did not write the letter Ex. 4A out of his own free will. It is an admitted fact in this case that Mr. Jackson got possession of the title deed of defendants property after Ex. 4A was written by the defendant. The evidence of the defendant is that Mr. Jackson took away this title deed from his office box finding its lid open. The evidence of Mr. Jackson is that he got the title deeds when they were handed over to the defendant by his motor car driver at the street door of his office. Mr. Francis, an assistant of Mr. Jackson was present when Mr. Jackson got the title deed. The trial Judge appears to have accepted the defendants version as Mr. Francis was not called to corroborate the evidence of Mr. Jackson. In view of the statements of the learned Counsel for the appellant company that the delivery of the title deed on the 9th was not in pursuance of any agreement to create an equitable mortgage the question how Mr. Jackson got possession of the title deed on the 9th is immaterial.

8. The counsel for the defendant contended that the trial Judge was wrong in holding that the promissory note in suit was executed by the defendant on 10th January 1935. (After discussing evidence his Lordship proceeded:) It is clear from the evidence of this witness that though the stamp for another promissory note was purchased no promissory note was taken from the defendant on 18th January apparently for the reason that the value of the defendants property could not exceed the amount secured by Ex. 1. There is no mention of the execution of any promissory note on 18th January in the day book of P.W. 2. The trial Judge has found that Ex. 1 was executed by the defendant on 10th January 1935. I see no reason to hold otherwise. I accordingly hold that Ex. 1 was executed by the defendant on 10th January 1935, and not on the 18th as alleged by him.

9. It is an admitted fact in this case that in the afternoon of 10th January 1935, the promissory note in suit was executed and the title deeds of the defendants property were handed over to Mr. Jackson in the office of P.W. 2. (After discussing evidence his Lordship proceeded:) The case of the defendant in the written statement that the promissory note in suit was obtained by fraud and misrepresentation was not pressed by the learned Counsel for the defendant in this Court. His contentions, however, are: (1) that the defendant executed the promissory note in suit and deposited the title deed of his property with Mr. Jackson as there was a threat by Mr. Jackson of criminal proceedings and that Mr. Jackson being his office master was in a position to dominate the will of the defendant and that he used this position in securing the promissory note in suit and the like deeds of his property, (2) that both Mr. Jackson and the defendant understood that the defendant was making his promise to pay Rs. 50,000 to the plaintiff company in exchange or part exchange for the promise of Mr. Jackson not to prosecute the defendant for a criminal misappropriation. (3) that although the defendant handed over the title deed of the property to Mr. Jackson on 10th January in the office of the plaintiffs solicitors he did so not with the intention of creating any charge over his property.

10. In other words, the contention of the learned Counsel for the defendant is that the transaction in question was vitiated by coercion and undue influence and that it was hit by Section 23, Contract Act It may be stated here that in the written statement of the defendant or at the time of the hearing before the trial Judge it was not the case of the defendant that the consideration or part of the consideration for the transaction in question was the stifling of the prosecution of the defendant for criminal misappropriation. In Flower v. Sadler (1882) 10 Q. B. D. 572, Lord Coleridge C. J. said:

Creditors may use strong expressions and even threat and it was held in Ward. v. Lloyd (1843) 7 Scott N.E. 499 that strong language is not conclusive evidence of an agreement to compound a felony or to stifle a prosecution.

11. In the same case Brett L. J. observed:

The proposition of law laid down in Ward. v. Lloyd (1843) 7 Scott N.E. 499 is that if a debt really exists the right to sue for it must be upheld even although there may have been a threat by the creditor of criminal proceedings.

12. In the same case Cotton L. J. said:

A threat to prosecute is not of itself illegal and the doctrine contended for does not apply, where a just and bona fide debt actually exists, where there is a good consideration for giving a security and where the transaction between the parties involves a civil liability as well as, possibly, a criminal act .... A threat to prosecute does not necessarily vitiate al subsequent agreement by the debtor to give security for a debt which he justly owes to his creditor.

13. In Neate v. Harding (41) 28 A. I. E. 1941 P. C. 95:1. L. E. (1942) 1 Cal. 1 Lord Atkin said:

Proof that there has actually been a crime committed is obviously unnecessary. But it is also of course necessary that each party should understand that the one is making his promise in exchange or part exchange for the promise of the other not to prosecute or continue prosecuting. In all criminal cases reparation, where possible, is the duty of the offender, and is to be encouraged. It would be a public mischief if on reparation being promised by the offender or his friends or relatives mercy shown by the injured party should be used as a pretext for avoiding the reparation promised. On the other hand, to insist on reparation as a consideration for a promise to abandon criminal proceedings is a serious abuse of the right of private prosecution. The citizen who proposes to vindicate the criminal law must do so wholeheartedly in the interests of justice, and must not seek his own advantage. It only remains to say that such agreements are from their very nature seldom set out on paper. Like many other contracts, they have to be inferred from the conduct of the parties after a survey of the whole circumstances.

14. I have already found that on 9th January the defendant admitted that he had misappropriated money belonging to the plaintiff company. I have also found that the defendant misappropriated about Rs. 1,09,000 before he executed the promissory note in suit and deposited the title deed. In the morning of 10th January 1935, the defendant wanted an assurance from Mr. Jackson that he would not be criminally prosecuted. Mr. Jackson, however, refused to give any assurance. It is, therefore, clear that at the time when he-executed the promissory note in suit and deposited the title deed he knew that he was liable for the money which he had misappropriated. There was naturally an apprehension in his mind that he might be criminally prosecuted.

15. The defendant in his evidence said that in the morning of the 10th Mr. Jackson threatened the defendant that he would be handed over to the police if he did not execute the promissory note and that he put his one hand on the telephone. This story, however, was not suggested to Mr. Jackson in cross-examination. On the other hand, Mr. Jackson denied the suggestion of the defendant that he threatened him with criminal prosecution. The evidence of P. W. 2 clearly shows that when the defendant handed over the title deed to Mr. Jackson he knew that the title deed was being made over to create a charge over his property. What was the conduct of the defendant after 10th January He admittedly executed the power of attorney in favour of Mr. Jackson on 17th January. This power was executed after the defendant was dismissed from service and after he had consulted his lawyers. The defendants story that if he would not have executed the power of attorney he was threatened that he would be sent to jail was not suggested to Mr. Jackson in his cross-examination. After this alleged threat he consulted his solicitors Mr. G. C. De, who is also his relation and then he agreed to sign the power of attorney. Prom this power of attorney it is clear that on 10th January 1935, he had mortgaged his property to the plaintiff company, Ex. 4J. The letter written by Mr. J. K. Sarkar, the solicitor of the defendant also shows that a valid mortgage was created by the defendant in favour of the plaintiff company on 10th January. This letter was written admittedly under instructions from the defendant. On the authority of the letters Exs. 4G and 4L the dog and the car of the defendant were sold by the plaintiff company and the sale proceeds were credited towards part satisfaction of the mortgage debt. There is no reliable evidence to prove that the defendant made over his dog and car under compulsion. If really Mr. Jackson had threatened the defendant with criminal proceedings before he executed the promissory note in suit and the deposit of title deeds there was no reason why the defendant did not repudiate the mortgage after he was dismissed and had opportunities to consult lawyers. The conduct of the defendant after 10th January 1935, supports the evidence of Mr. Jackson that he did not threaten him with criminal prosecution before he executed the promissory note in suit and deposited the title deeds.

16. It may be that at the time when he executed the promissory note in suit and deposited the title deeds he was under an apprehension that he might be criminally prosecuted; but from this it does not follow that this apprehension in his mind was caused by any threat on the part of Mr. Jackson. The defendant has failed to prove that the consideration or part of the consideration for the promissory note was Mr. Jacksons promise not to prosecute the defendant in criminal Courts. The trial Judge has found that Mr. Jackson obtained the promissory note in suit and the title deeds of the property which were handed over to him by the defendant because Mr. Jackson being his office master was dominating the will of the defendant at that time. If that was so, why is it that after 10th January 1935 the defendant or his solicitors never mentioned this in the letters written after 10th January 1935, but on the other hand admitted the mortgage effected on 10th January 1935. Further, Mr. Jackson did not take any undue advantage of his position as the office master of the defendant on the 10th inasmuch as the defendant had misappropriated money amounting to more than a lac and the defendant simply agreed to pay Rs. 50,000 in repayment of the sums taken by him from the plaintiff company. The evidence of Mr. Jackson and Mr. Lang (p. w. 7) is that on the 10th defendant was penitent and executed the promissory note in suit and handed over the title deed. In view of the facts and circumstances I believe the evidence of Mr. Jackson and disbelieve the evidence of the defendant. The evidence in this case in my opinion is not sufficient to prove that the transaction in question was vitiated by any undue influence. I hold from the evidence of Mr. Jackson and P. W. 2 that at the time when the defendant deposited the title deed of his property with Mr. Jackson on 10th January he did so with the intention of mortgaging this property to secure the payment of the money which he promised to the plaintiff company by the promissory note in suit. A valid mortgage of Rs. 50,000 over the property of the defendant was therefore created by him in favour of the plaintiff company on 10th January 1935.

17. The case of the defendant is that even if there was any liability of the defendant on the promissory note in suit that liability was discharged u/s 41, Contract Act, by the payment of Rs. 60,000 to the plaintiff company by their auditors. The material evidence on these points is the correspondence between 2nd May 1935, and 16th September 1935 (Ex. 4U to Ex. 4z8) and Ex. 4z9 (the receipt granted by the General Manager of the plaintiff company in England to the auditors of the plaintiff company). It is not disputed by the learned Counsel for the defendant that before 11th September 1935, there was no intention on the part of the plaintiff company to release the defendant from his liability. His contention however, is that the company decided to release the defendant also from his liability in order to close the matter once for all so that the mismanagement of the affairs of the plaintiff company and the negligence of the auditors might not be exposed by litigation in Courts. In support of this contention the learned Counsel invited our attention to the following passages of Mr. Just (P. W. 9), an assistant of the auditors:

When a matter is settled with anybody it is to their advantage and it is advantageous to the auditors that questions of negligence should not be debated in Courts of law. Hence when a large amount has been paid we expect that there should be no more publicity.

This witness, however, said that he had nothing to do with the negotiations of the office in England of his firm with the plaintiff company. What he said therefore was a mere matter of opinion. The receipt (Ex. 4 (z) 9) is in these terms:

18. The London and Lancashire Insurance Company Limited.

7, Chancery Lane,

London, W. C. 2.

We hereby acknowledge to have received the sum of four thousand and five hundred pounds paid to us by Messrs. Price, Waterhouse, & Co. of 3 Fredericks Place, Old Jewry, London, E. C. 2, on behalf of Messrs. Price Waterhouse Peat and Co., of Clive Buildings, Calcutta, which sum we accept in full and final settlement, satisfaction and discharge of all claims of every kind whatsoever against the said Messrs. Price Waterhouse, Peat & Co., as Auditors of our Branch Office at Calcutta and we hereby absolutely and finally discharge the said Messrs. Price, Waterhouse Peat & Co., and all other persons concerned from all further liability.

Dated this 16th day of September 1935.

(Sd.) Charles Hendry

General Manager.

19. The contention of the learned Counsel for the defendant is that the words "all other persons concerned" include the defendant. "The general words of a release are limited always to that thing or those things which were specially in the contemplation of the parties at the time when the release was given." (See Norton on Deeds, 2nd Edn. p. 209).

20. The draft of Ex. 4 (z) 9 was sent to the general manager of the plaintiff company by the auditors along with a letter Ex. 4 (z) 5, written by them to the general manager of the plaintiff company. This letter clearly indicates that the auditors agreed to pay 4500 (Rs. 60,000) in discharge of any liability they (the auditors) may have incurred. The auditors clearly, therefore, wanted release from their liability to the plaintiff company and this liability apparently was on account of their negligence in the performance of their duties as auditors. The correspondence previous to this letter clearly indicates that the plaintiff company demanded 4500 as compensation for the loss which they had suffered on account of the negligence of the auditors. In assessing this damage they excluded the money which they expected to recover from the property of the defendant. The words "all other persons concerned" in Ex. 4 (z) 9 therefore must mean "all other persons against whom there was or might have been a liability for negligence." The defendants original liability was for defalcation. His liability to pay Rs. 50,000 was contractual and not a liability for tort. He was not in any way liable for the negligence of the auditors. Section 41, Contract Act, therefore, has no application, to the facts of the present case and Ex. 4 (z) 9 did not discharge the defendant from his liability under the promissory note in suit. The learned Counsel for the defendant contended that the defendant and the auditors were joint tort-feasors and as the auditors were discharged by the company from their liability of the joint tort by Ex. 4 (z) 9, this release operated also as release of the defendant from his liability. The question as to whether the defendant and the auditors were joint tort-feasors or not is not a pure question of law inasmuch as persons cannot be said to be joint tort-feasors unless they have acted in concert to commit a tort. It was not stated in the written statement that the defendant and the auditors acted in concert while the money was being misappropriated by the defendant. The learned Counsel for the defendant, however, contended that even if such a case was not pleaded the way in which the defendant misappropriated the money clearly raises the inference that the defendant could not have misappropriated the money unless the auditors were acting in concert with him.

21. I am unable to accept this contention. The evidence in this case no doubt shows that the auditors were negligent in the performance of their duties. The written statement of the defendant negatives the suggestion that the auditors acted in concert with him. If the defendant had raised this defence it would have been open to the plaintiff to give evidence to show that the auditors did not act in concert with the defendant while the defendant was misappropriating monies belonging to the plaintiff company. The evidence in this case does not justify me to hold that the defendant and the auditors acted in concert. My conclusion, therefore, is that the defendant has not been discharged from his liability created by promissory note in suit and by the deposit of the title deeds of his property.

22. The result is that this appeal is allowed. The judgment and decree of the trial Judge dismissing the suit of the appellants are set aside. A preliminary mortgage decree for Rs. 78,210-1-71 (Rupees seventy-eight thousand two hundred and ten, anna one and pies seven and half) with costs in this Court as well as in the trial Court is made in favour of the plaintiff company against the defendant. The defendant is directed to pay the decretal amount within six months from this date. In default of such payment, the plaintiff company will be entitled to apply for a final decree for sale of the mortgage property or a sufficient part thereof for the satisfaction of the decretal amount. If the proceeds of the sale be insufficient to pay the decretal amount, the plaintiff company will have the liberty to apply for a personal decree for the balance of the decretal amount. The cross-objections are not pressed. They are accordingly dismissed without cost.

Pal, J.

23. This appeal is by the plaintiff in a suit for enforcement of an equitable mortgage. The plaintiff is the London and Lancashire Insurance Co., Ltd. incorporated and registered under English Companies Act, having its registered office situate in London and carrying on business in Calcutta. The defendant is one Benoy Krishna Mitra who was the Cashier and Accountant of the plaintiff company at its Calcutta office from 1st January 1929 to 8th January 1935. He was dismissed on 13th January 1935.

24. The mortgage in question is dated 10th January 1935, and the case of the plaintiff is that it was created by the defendant in favour of the plaintiff on that date by deposit of title deeds to secure repayment of Rs. 50,000 promised by the defendant by way of reparation for the loss caused by him to the plaintiff by misappropriation by himself of the money belonging to the plaintiff. The plaintiff for its claim relies on the following material facts, all stated in its plaint:

1. Misappropriation by the defendant from time to time in course of his employment as Cashier and Accountant from 1929 to 8th January 1935 and discovery of the misappropriation by the auditor on 8th and 9th January 1935;

2. Admission of the liability by the defendant and his readiness to make good the loss suffered by the plaintiff company;

3. Reparation made by the offender defendant; (a) by giving a promissory note for Rs. 50,000 on 10th January 1935; (b) by depositing the title deed of his property to secure payment of the amount of the promissory note; (c) by giving facilities to the plaintiff company for part realisation of the amount, (i) by handing over his dog and motor car and empowering the company to sell the same and appropriate the sale proceeds, (ii) by giving the company power of attorney to sell the mortgaged property and to appropriate the sale proceeds.

26. The defendant denies the facts in items 1 and 2 set out above. As regards item 3 he does not deny the factum of execution of the documents and of the deposit of title deed. In order to avoid the legal consequences of these acts, however, he pleads practically all the vitiating factors available under the Contract Act. The particulars of the vitiating elements given by him are the following:

1. That there was no examination of the plaintiffs accounts and no discovery of any defalcation on 8th and 9th January 1935;

2. That as a matter of fact there was no defalcation by the defendant: Mr. Jackson, the resident Secretary of the plaintiff company, introduced a story of defalcation;

3. That Mr. Jackson for his own protection prevailed upon and induced and compelled the defendant to execute the promissory note and power of attorney.

4. That the said documents were executed and the title deed was deposited upon the express terms that no liability of the defendant was created thereby but that they were taken on the distinct understanding and assurance given by Mr. Jackson that the same would be returned to the defendant as soon as the amount which might be found out as not properly accounted for was recovered from the auditors;

5. That the power of attorney was obtained also upon a representation that criminal proceedings would otherwise be inevitable and with an assurance that the said power of attorney would not be acted upon.

26. These are the particulars of the fraud, misrepresentation, coercion and undue influence pleaded by the defendant in his written statement. If the rules of pleading have any meaning, the case should have been confined to these particulars. Rule 7 of o. 6, Civil P. C., expressly enjoins that "No pleading shall, except by way of amendment, raise any new ground of claim or contain any allegation of fact inconsistent with the previous pleadings of the party pleading the same." If a further and better statement of the nature of the claim or defence, or further or better particulars of any matter stated in any pleading be required these may in all cases be ordered by the Court under B. 5 of the Order. In this case no steps under this provision were taken. Nothing happened either under Order 10 or Order 14, further to add to these particulars and issues were settled by the Court on the pleading as analysed above. Issues 2 to 6, 9 and 10 are the relevant ones for the purposes of this appeal and they ran as follows:

2. Was there any defalcation as alleged; if so to what amount and is the defendant liable for any part thereof

3. Were the promissory note for Rs. 50,000 and the power of attorney executed by the defendant owing to fraud, misrepresentation or coercion or are the same otherwise invalid

4. Was any equitable mortgage by deposit of title deed ever validly made

5. Was there any consideration for the promissory note and/or equitable mortgage and power of attorney

6. Were the said promissory note, equitable mortgage and power of attorney made solely for the purpose mentioned in the written statement and did the same create any liability on the defendant

9. Has the liability of the defendant under the promissory note and mortgage been fully satisfied by the plaintiff company having received 4500 from the auditor as alleged by the defendant

10. Is the plaintiff company entitled to get a mortgage decree in respect of the property in suit

27. At the hearing of the suit on these issues the defendant made a new case. He admitted that there were defalcations in all appearance and that in all appearance these were made by him. But he alleged that for the procuration of the plaintiff companys business it was always necessary to pay commission to the agents. There was an association of companies doing similar business, and, by the rule of this association the maximum rate of such commission was fixed. By the rule of the association any commission paid in excess of the maximum rate thus fixed would be illicit. But such illicit payment was considered necessary for the better procuration of the business. Mr. Jackson decided to continue the practice of making this illicit payment but at the same time to hide such payment from the association. In order to enable Mr. Jackson to do this it was arranged to take out money from the funds of the company by the manipulation of its account and pay the same to Mr. Jackson. The defendant only carried out the order of his superior and gave effect to this scheme and paid to Mr. Jackson all the money apparently defalcated by him.

28. The learned Subordinate Judge who tried the case seems to have taken these new allegations as covering issue No. 6 already framed by him on the pleadings of the parties which did not even hint at this new story. He, however, took the new story to be, in short, the substantial defence. It may be noticed here that though no express issue was raised on the point, one material defence of the defendant was that the alleged deposit of title deed was made when the promissory note was only for Rs. 28,000 and that that note was changed on a subsequent date to one for Rs. 50,000. So even the apparent act of deposit of title deed had no reference to this substituted promissory note and as. the present suit is on this substituted promissory note only the suit must fail at least so far as it seeks to enforce the equitable mortgage. The learned Subordi-note Judge after hearing the evidence ultimately dismissed the plaintiffs suit on the following findings:

1. The defendants case in the written statement that the promissory note, equitable mortgage, and power of attorney were executed by him with a view to protect Mr. Jackson who held out promises and inducements to the defendant cannot be accepted (p. 136).

2. The mere fact of receipt of Rs. 60,000 by the plaintiff from the auditor would not have ipso facto released the defendant, if he were otherwise found liable (p. 138).

3. But the promissory note for Rs. 50,000 and the power of attorney were executed by the defendant owing to the undue influence of Mr. Jackson (p. 130).

4. There was no consideration for the pro-note of Rs. 50,000 (Issue 5).

5. No valid equitable mortgage by deposit of title deed was made (p. 130).

6. For the reasons given above the promissory note and the alleged equitable mortgage created no liability of the defendant (p. 136).

29. The plaintiff company has preferred this appeal from this decree of the learned Subordinate Judge. Mr. Bose appearing in support of the appeal impeaches each one of the findings 3 to 6 of the learned Subordinate Judge enumerated above and contends.

1. That the evidence in the case establishes beyond doubt that the defendant made defalcations and embezzled to the extent of at least Rs. 94,000;

2. That the plaintiff company had a right to sue for money had and received on waiving the tort at the date of the transaction in question in the suit;

3. That the defendant gave the promissory note and the collateral security on the plaintiffs not pursuing the remedy for money had and received and consequently the transaction was supported by consideration;

4. That the transaction was not under any undue influence of Mr. Jackson or anybody else;

5. (a) That the story that the defalcation was at the instance of Mr. Jackson and the defalcated amount was paid back to him is false and is an after thought; (b) that even assuming the whole story, the liability of the defendant to the plaintiff remains unaffected, Mr. Jackson being, according to the story given by the defendant himself, only a joint tort-feasor with him.

30. Mr. Noad appearing for the respondent contends:

1. That even according to the plaintiffs case the title deed was deposited on 10th January to secure the loan of the promissory note executed on that date; consequently if it be established that the present promissory note was not executed on 10th January, the claim for enforcement of the equitable mortgage must fail;

2. That the present promissory note was executed on 18th January; the promissory note of the 10th was for Rs. 28,000 and that was cancelled on the 18th;

3. That the extent of defalcation has not been established by evidence;

(a) that the case of the defendant that the defalcation and the manipulation of the accounts were at the instance of Mr. Jackson has been established and that it has not been established that anything was received or retained by the defendant for his own use or benefit;

4. That consequently the very foundation of the plaintiffs claim for money had and received was gone, and the transaction was without consideration;

5. That the transaction was procured by undue influence and consequently voidable;

6. That the transaction was void, its object and consideration being to stifle prosecution to compound non-compoundable offence;

7. That the liability, if any, of the defendant under the promissory note and the equitable mortgage became discharged;

(a) by reason of the plaintiffs accepting performance from the auditors who paid Rs. 60,000 in full satisfaction of all claims arising from the incidents;

(b) by reason of the plaintiffs giving express discharge by Ex. 4 (z) 9 to all the persons concerned in respect of all their liabilities arising from the incident.

31. I shall first of all take up the question whether the promissory note in suit is the note executed on 10th January 1935, as alleged by the plaintiff or whether it was executed on the 18th but antedated as on the 10th as alleged by the defendant. (After discussing evidence his Lordship proceeded:) The evidence on the record satisfactorily establishes that there was only one promissory note executed by the defendant, that the same was for Rs. 50,000 and was executed on 10th January 1935, and that the promissory note in suit is that promissory note. The story of there having been a promissory note for Rs. 28,000 on 10th January 1935, is not acceptable. The case of the plaintiff company is based on contract. After stating in para. 3 of the plaint how the misappropriation by the defendant was detected, the plaintiff says in para. 4 of its plaint:

In order to make good the loss caused to the plaintiff company by his misappropriation as aforesaid to the extent of Rs. 50,000 as admitted by him the defendant executed a promissory note for Rupees 50,000 in favour of the plaintiff company on 10th January 1935, and to secure payment of the amount of the said promissory note deposited on the said date with Mr. Harold Lyons Jackson, the resident secretary of the Calcutta Office of the plaintiff company in the office of Messrs. Orr Dignam & Co., solicitors .... the title deeds of his property. . . .

32. The relief claimed is a decree on the equitable mortgage. In view of the respective cases of the parties the questions for our consideration in this appeal are:

1. Whether the agreement was for a consideration;

2. Whether the consideration was lawful; whether the consideration was an agreement not to prosecute for the criminal offence;

3. Whether the agreement was with unlawful object with the object of stifling criminal prosecution;

4. Whether the consent of the defendant was free; whether it was caused by coercion or undue influence;

5. Whether liability was discharged.

33. The learned Subordinate Judge arrived at the conclusion that there was no consideration for the pro note of Rs. 50,000. It is difficult to follow the reasoning of the learned Subordinate Judge. The learned Judge seems to have been of opinion that as the plaintiff company subsequently realised Rs. 60,000 from the auditors, the damage caused to it by the defalcation of the defendant got reduced by this amount. This is quite an irrelevant matter for the purpose of determining the question whether or not there was consideration for the agreement made on 10th January 1935. The payment by the auditors was made in September 1935, long after the defendants agreement. We shall see later that this payment by the auditors did not in any way affect the liability of the defendant. At any rate, this subsequent payment cannot affect the question whether or not there was consideration for the agreement made on an earlier date. Strictly speaking, the consideration for the agreement was not the defalcation. Consideration is defined in the Contract Act thus:

When at the desire of the promisor, the promisee or any other person has done or abstained from doing, does or abstains from doing, promises to do or to abstain from doing something, such act, or abstinence or promise is called a consideration for the promise.

The plaintiffs case is that the defendant embezzled its money. This was a tortious act for which the defendant became liable to pay damages (unliquidated) to the plaintiff. Prom the nature of the tortious act, the plaintiff was entitled to waive the tort and seek relief for money had and received: This would entitle the plaintiff to realize from the defendant the entire amount defalcated by him. These were the respective rights and liabilities of the parties at the date of the agreement. The consideration for the defendants promise contained in the promissory note was the plaintiffs promise to abstain from suing the defendant for money had and received. The agreement will be for consideration if there was this right of the plaintiff on 10th January 1935. When the learned Subordinate Judge comments upon Mr. Jacksons not coming forward to say how much he paid as illegal commission, he forgets that this case was not to be found in the pleading of the defendant. He made this new case only after the plaintiff closed its case. Mr. Jackson was examined in this case. But the defendant did not even suggest that any portion of the defalcated money was paid to him by the defendant. It is difficult to see why the learned Judge says that the payment of illegal commission was hidden. Mr. Lang in his evidence did not say that it was hidden. Mr. Lang said:

I recollect one occasion in which additional commission was paid; that was not or should not have been hidden in our account in any way as London was aware of and had agreed to the payment.

34. As we shall see later, the discontinuance of the ledger and journal was not at all any irregularity and was not responsible for the manipulation of the accounts by the defendant. The manipulation was absolutely the design of the defendant and nobody else had anything to do with it. The criticism by the learned Subordinate Judge that in finding the defalcation the auditors did not see whether subsequently the defalcated amounts were duly credited in the accounts of the plaintiff is wholly unjustifiable. The learned Subordinate Judge refers to two instances, in which the cheques drawn by Eagle Star for Rs. 1066-14-0 and 1464-8-0 helped the defalcations. According to the learned Subordinate Judge these were paid back by the defendant later on. We have been shown the relevant entries. What happened is that Eagle Star was credited with the amounts of these cheques later on its ledger accounts. There was no credit in the plaintiffs cash book and it is difficult to see how mere entry in the ledger brought back the money to the plaintiff company. In the plaint it was stated that up to 9th January it was discovered in course of the examination of the plaintiffs accounts by its auditors: (1) That the defendant from time to time had misappropriated large sums of money belonging to the plaintiff company in course of his employment as cashier and accountant. (2) That though the actual total amount so misappropriated by the defendant could not be ascertained at that time, the examination of the books of the plaintiff company and other papers so far as could be done upto that time disclosed that such amount would exceed Rs. 50,000. (3) That on 10th January the defendant himself admitted his liability to the plaintiff company for Rs. 50,000 on account of misappropriation. (4) That subsequently on further investigation it was found that the liability of the defendant to the plaintiff company would come up to about Rs. 1,20,000. In his written statement the defendant denied that there was any defalcation at all. His case was: (l) That he never misappropriated any money. (2) That he did not admit any liability on 10th January or on any day. (3) That no liability on his part to plaintiff company ever existed. (4) That no liability to the extent of Rs. 1,20,000 or to any sum was found. (5) That the story of defalcation was introduced by Mr. Jackson. In para. 6 of his written statement the defendant even denied the case of the plaintiff that there was examination of accounts on the 8th and 9th and that in course of this examination any defalcations were detected. Consequently, issue NO. 2 was raised which ran as follows:

Was there any defalcation as alleged; if so to what amount and is the defendant liable for any part thereof

Strictly speaking, the last portion of this issue does not arise in this case as this is not a case either for damages for the tortious act of misappropriation etc., or for "money had and received." At the hearing, in order to establish defalcation by the defendant and the amount of such defalcation, the plaintiff relied on: (1) Auditors report, (EX. 13). (2) The various account books of the plaintiff, (Ex. 9 series). (3) Cheques issued by the plaintiff on various banks, (Ex. 5 series). (4) Counterfoils of such cheques, (Ex. 10 series). (5) Defendants banking accounts, (Ex. 7). (6) Certified copy of the entries in the register of the National Bank, Ltd., about numbers and amounts of notes paid to the plaintiff company by that -Bank, (Ex. 6 series). (7) Certified copy of the entries in the defendants account with P. & 0. Banking Corporation, Ltd., (Ex. 8). (8) Certified copy of entries in the register of P. & 0. Banking Corporation, Ltd., showing the numbers and amounts of notes received from the defendant, (Ex. 8). (9) Evidence of P. Ws. 9 and 11 (Auditors). (10) Evidence of admission by the defendant (P. Ws. 1, 2, 7).

35. The method of defalcation adopted by the defendant, as disclosed by this evidence, can be classified under three heads:

(1) The plaintiff company issued a bearer cheque for self. The cheque was cashed but (a) the cash received did not find entry in the cash book of the company. The cheese itself was shown on the debit side as if it were not issued for self but to somebody else for the purchase of sweep tickets; or (b) the cash received was entered in the cash book of the company, but was immediately shown on the debit side as expenditure for the purchase of sweep tickets, though as a matter of fact no such expenditure was made. The defendant has admitted that these entries showing expenditure for sweep tickets are all false. We shall see his explanations later. This method covers Rs. 34,870.

(2) Some customers of the plaintiff company made payments by cheques. The cash book of the plaintiff company did not credit the payers at all. The cheque was sent to the plaintiffs bank account, but in the cash book it was entered as cash sent to bank. The bank balance was maintained by the cheques sent. Cash was taken out by the defendant from the till. This method covers Rs. 55,932-12-1.

(3) The defendant took money directly from the cash-in-hand without any manipulation of accounts: According to defendants own admission this would be Rs. 3600.

36. He says:

... In the Marine Book p. 95, the amount was drawn out in X mas week Rs. 1200, Rs. 1200 and Rs. 1200 in order to be paid to Mr. Jaokson. This money was not actually in the till, although the book shows they were, because of the fact that the trouble started and I did not adjust this amount by putting the customers cheques into the Companys Bank and writing off the amount in the column for the petty cash; just to show how the accounts were to be kept.

37. For the items covered by the first of the methods stated above the plaintiff succeeded in tracing the very currency notes paid by its bank in cashing its self-cheques, to the defendants accounts. For the items covered by the second method the plaintiff traced out the cheques and established that the balances from time to time in its account with the bank were accounted for by these cheques and that the alleged cash-transfers remained wholly unaccounted for by these balances. This explains why the defendant ultimately, when he came to the witness-box after the plaintiff closed its case, changed his defence in this respect altogether, admitted all these manipulations in the accounts and carne forward with the story that he took money in this manner but did so as directed by his office master Mr. Jackson and paid back every farthing to Mr. Jackson who on his part required this money for the purpose of making illicit payment of commission to the agents. This new story is best given in the language of the defendant himself. He was allowed to state in his deposition almost at the very commencement of his examination-in-chief thus:

I know what illicit commissions are: This is a commission paid to an agent and which is not permitted by the rules of the association of companies. This is done to do more business; what is not in the tariff is called illegal commission.

In Mr. Bewleys time quite a lot of illegal commission was paid. This was entered in the companys ledgers as expenses. I can point out instances if any of the books of Mr. Bewleys time be produced here. He never disguised these payments.

When Mr. Jackson succeeded Mr. Bewley, the practice changed. The association changed their rules as they found most of the companies were not observing the rules and they made strict rules and required deposit of Rs. 2000 and further made provisions for cancellation of licenses. When Mr. Jackson failed to secure business in following the rules of the association he toured in the mofussil and came back and told me that all the companies were following the old practices of paying extra commission or illicit commission and that he would follow that old practice and I was asked to hide the fact in our account and keep the accounts in such a way that nobody else would find that. I told him that it would be difficult to hide this from the auditors. Mr. Jackson asked me why the thing could not be concealed from the auditors I told him that such adjustment must pass through the ledger and journals and that those two books could not be discontinued without the auditors permission. Then Mr. Jackson sent for Mr. Younie who had a long consultation together as a result of which I was called by Mr. Younie in Mr. Jacksons Chamber when I was told to discontinue those two books, viz., ledgers and journals. This happened in the end of 1932. There was an end of those two books; Mr. Jackson had to do this because otherwise the business would suffer and he would be taken to be incompetent and somebody else would come in his place. This illicit commission could be paid for in cash only and not otherwise. Thus I used to give Mr. Jackson cash which was settled with the parties, i. e., agents. First this was done with a paltry sum as an experiment. When the auditors knew that I cant say whether they deliberately overlooked the accounts. When our London office confirmed our accounts as correct, then more money was taken out for this illicit commission. From Marine account chiefly this amount was drawn. Fire business was the main business of the company and there are hard rules for this business and people wanting to check accounts will check the Fire accounts and not Marine accounts. Hence large sums of money that was drawn for payment of the illegal commission was from Marine accounts.

38. The modus operandi was given by the defendant thus:

These cheques are for those purposes. Mr. Jackson would ask for some money and I used to write out the cheques in favour of ourselves or bearer. The cross was cancelled thereafter. This used to go to Mr. Henderson who used to operate on the Marine bank and he would sign the cheque in both places. I would then give it to the collecting Sarkar of the company in due course and be would fetch the money from the bank and hand over to me and when Mr. Jackson would ask for the same again and I would hand the same on to him to be locked up in his personal safe in his office and some times the money used to be kept with me to accumulate to a large sum which he used to take from me when he used to go out touring in the mofussils. I had only a tin box as cash box in the office and when a large sum accumulated there I found it unsafe to keep in the box and told Mr. Jackson who then said that I should then keep those sums of money in my own account and thus I used to send the money to the P. & O. Banking Corporation which is housed in the same building...."

39. The salient points in this story relevant for the purposes of this suit are: (1) Jacksons decision to pay illicit commission after its prior discontinuance; (2) the defendants having been taken into confidence by Jackson for this purpose;--his being asked to procure money for the purpose by manipulating the accounts so as to hide such payments from the auditors; (3) discontinuance of ledger and journal necessitated for the purpose of such manipulation and defendants proposal to Jackson to obtain consent of the auditors for such discontinuance; (4) conference between Jackson and Younie; Younie sends for the defendant and directs him to discontinue the ledger and journal; (5) Jacksons direction to the defendant to keep the money in his own banking account; (6) payments to Jackson by the defendant.

40. It may be noticed here that Jackson was examined in this case and he was examined on 27th and 28th February 1939. This case was not put to him by the defendant then. It was introduced for the first time only on 24th August 1939 after the close of the plaintiffs case when the defendant himself came to depose in the case. None of the points set out above was put either to Jackson or to Younie. The basis of the whole story seems to have been supplied by two admitted facts, viz. (1) payment of illicit commission; (2) discontinuance of consolidated ledger and journal since 1933. It may further be added that no evidence as to the maximum rate fixed by the association was given by the defendant in this case and the defendant himself also did not give the rate though Mr. Jackson had already given the maximum rate as 25 per cent.

41. There may be some reason for saying that pleadings in this country are not to be strictly construed. At the same time there is no reason why the parties should be allowed to ignore altogether the rules of pleading which have been laid down by the statute. There is no reason why in spite of all these rules a pleading should be allowed to degenerate into no pleading at all. The rule is that all necessary particulars must be embodied in the pleadings. According to the rules of pleading as given in the Code of Civil Procedure, the pleadings not only need be concise, they must also be precise. A party is entitled to be told every particular which will enable him to properly prepare his case for the trial, so that he may not be taken by surprise. The whole object of pleadings is to bring the parties to an issue and the importance of the rule is to prevent the issue being enlarged, which would prevent either party from knowing, when the case comes for trial, what is the real fact to be discussed and decided. The defendant was shown every relevant item in the account books regarding the customers cheques and the self cheques and seeing them he said:

These sweep account payments are all in the Marine Book -- some are in the bank column and some in the cash column. The money all came to me and then went to Mr. Jackson for payment of illegal commission... in any ease the principle is that the money came to me first.

Similarly the proceeds of customers cheques which are treated as cash proceeds came to me in the first instance; everything was thereafter paid to Mr. Jackson. My banking account does not show any payment to Mr. Jackson . . . . .

42. In another place he explained the second method of defalcation adopted by him thus:

...On 16th June 1932 the amount Rs. 1587 on the right hand side was cash. I took it from the till of the company; on the same date this amount was shown as payment to the bank. It is not cash which went to the bank; the cheque went to the bank. The cash went out of the till. It may be that in the first instance it went to my pocket (i. e., I might have held it for two days or two months when Mr. Jackson went to tour in muffasil). The amount transferred to bank, is not proper entry; the proper entry should have been "Union Insurance Society of Canton" and credited accordingly. This improper entry was made to adjust the payments made to Mr. Jackson. An honest accountant would have done if directed by his boss else he will lose his job. I was entirely in the hands of Mr. Jackson as a puppet; so long as the auditors did not object I did not see anything wrong there.

The money that went to Mr. Jacksons pocket is not coming again. Then this cheque for Rs. 1587 was used to inflate the account in the bank and deflate the amount in the till. Thus the company did not get a single piece but the money went to Mr. Jacksons pocket. Thus the company lost the benefit conferred by this cheque and no amount of adjustments will improve this position; this is the position otherwise the money paid would be shown as outstanding if this was not done.

By that adjustment the liability of the Canton Insurance was reduced; yet the company got no benefit; the liability of the company (plaintiff) was reduced to other companies although the plaintiff company did not pay; false items of expenditure had to be noted to show the position to the head office; because Mr. Jackson wanted cash and he wanted to hide this, that is why this was done and to hoodwink the rival companies too. I all along appreciated that I was servant of the company and not of Mr. Jackson but I know him to be the big official of the company in India. It struck me these were not proper entries and I left the matter to the auditors and report to the head office; I had not thought of it as I know no fraud was being practised....

43. We have been taken through the several items in the plaintiffs account book and we have no doubt in our mind that the amount stated above (viz., Rs. 94,402-12-1) was defalcated by the defendant from the plaintiffs money. The defendant admitted that in his deposition and in our opinion this admission is fully supported by the evidence on the plaintiffs side. The only explanation given by the defendant is that all these amounts were paid by him to Mr. Jackson. Excepting his own statement he could not adduce any evidence in support of his story of payment back to Mr. Jackson. Mr. Jackson was examined in this case and the only questions put to him on this point were whether illicit commission was paid and whether he instructed the defendant to cover up such payments. Jackson said:

...It is very easy way of securing business allowing commissions larger than are allowed by fire Insurances association. Many companies do that. I do not do that now. My company did that in one or two isolated cases during the long period of years. It has been by no means the general policy with my company to pay illicit rebates. I have no idea how companies show illicit rebates in their books. Where an illicit rebate was given the agency account concerned should show the true position. No instructions were ever given by me to try and cover up the payment of an illicit nature.

44. This witness said that 25 per cent, was the legitimate commission paid to the agents, but that in some cases commission up to 30 per cent, was paid. It has been pointed out to us that the accounts all along showed these payments in their true amounts and rates. So these illicit payments were not concealed from the accounts. Mr. Jackson was asked whether or not the sum which was the subject of defalcation was drawn for the purpose of paying illicit rebate, and in reply he denied it. Mr. Jackson was not asked as to whether he himself was paid anything by the defendant out of the apparently defalcated amounts. The whole story about this payment is a subsequent development. Even the defendant in his deposition spoke about Rs. 40,000 paid to Jackson for this purpose. He told the Court that he had his account book showing payment to Jackson, This account book was not produced by him. In course of his deposition he wanted to say that probably that account book has gone to the plaintiff. He however did not even call upon the plaintiff to produce it. This is wholly an unreliable story. As a part of this story the defendant introduced the story of dropping the ledger and journal in 1933. That these two account books were as a matter of fact discontinued from 1933 is correct. But these were only some unnecessary duplicates. The plaintiff company keeps detailed ledgers for the different branches of its business. The ledger dropped was only a consolidated one. It is difficult to see how the dropping of this consolidated ledger facilitated the concealment of the manipulation from the auditors. We have seen the detailed ledgers and in our opinion discontinuance of the consolidated ledger could not be a design to hoodwink the auditors. The payment of illicit commission and the discontinuance of the ledger and journal are the two facts. The defendant in despair got hold of these truths to found a false story of design for defalcation by Mr. Jackson. The story is wholly unworthy of credit and we discard it in toto. In our opinion, the plaintiff has succeeded in establishing defalcation by the defendant to the extent of Rs. 94,402-12-1 during the period of his employment as cashier and accountant prior to the date of the promissory note and equitable mortgage.

45. It is the defendants case that the London Office prohibited the payment of illicit commission. The learned Subordinate Judge himself found that the defaclation resulted in the loss to the plaintiff company; it did not benefit by the false entries and its money went in some shape or other from the pocket of the defendant to the pocket of Mr. Jackson and thence to the pocket of the agents. Even if it were so, it would be wrongful on the part of the defendant to defalcate the amount and falsify the accounts although he might have done it with the connivance of Mr. Jackson or at his bidding. The defendant seems to have introduced this story in the hope that if the event happened in the way it would not constitute any tort on his part. But it is difficult to see why. Is it because the plaintiff is taken to have consented, or at least, assented to the risk of the possible harm Volenti non periculum injuries The plaintiff company never assented to the risk and it is admitted by the defendant that the alleged arrangement for illicit payments was against the express directions by the company. Mr. Jackson was at the worst only a joint offender. The act was at best a joint act done in pursuance of a concerted purpose of the two, but all the same it was a tort feasance. The defendant can neither take shelter under the principle respondent superior--let the principal answer. Even if he was merely an agent of Mr. Jackson and committed the tortious act under the direction or with the assent of him, each would be liable at the suit of the party injured. No authority of his principal would justify the wrongful act. The next question is if the consideration was lawful, if any invalidity attached to the contract in its substance or purpose--if the contract was invalid, being contrary to public policy in its substance or purpose--in any part of its consideration or object. The commonest remedy for a tort is an action for unliquidated damages. Embezzlement is a crime as also a tort and so far as the tortious liability involved in it is concerned, the remedy of the injured is an action for unliquidated damages. Embezzlement may also create a relation within the confines of what may be said to be quasi contract. A person who obtains a benefit from a tort committed by him at the expense of another is under a duty to compensate the other for the value of the benefit thus received. Actions can be based on such unjust enrichment. To require the wrongdoer to pay the value of what he has improperly received is ordinarily demanded by justice. In any case when embezzlement takes place, the injured party may waive the tort and seek his remedy in an action based on quasi contract for "money had and received": Neate v. Merionethahire (1851) 20 L. 3. Ex. 250 No party is bound to sue in tort, where by converting the action into one of quasi contract he does not prejudice the tort-feasor. In the present case, therefore, at the time when the promissory note attended with the deposit of title deed by way of collateral security was obtained, the rights of the plaintiff company stood thus: (1) To prosecute the defendant criminally. (2) (a) To claim from him the payment of damages (unliquidated) for the tort or (b) To waive the tort and claim from him the repayment of the debt "for money had and received". For the criminal act of the defendant the plaintiff company not only had the right to prosecute but it was also its duty to do so. As Bowen, L. J. pointed out in Jones v. Merionethshire Permanent Benefit Building Society (1892) 1 Ch. D. 173 at p. 183, this duty to prosecute was a social and not a legal duty. The offences committed by the acts alleged were those under Sections 408 and 477A, Penal Code. These were not compoundable offences and the one u/s 408, Penal Code, was also cognizable. The plaintiff company might pro-secute the delinquent, but was not made legally bound either to do so or to lodge information of the offence anywhere. No doubt embezzlement is a crime committed against the public as well as against the individual. In deciding what steps should be taken to punish such an offence, the person who has to deal with it must, if he is to discharge his moral duty conscientiously, consider the public as well as himself. So far as the injured himself is concerned, "reparation" is fairly an important consideration, and considering the fact that the plaintiff company is doing the insurance business I cannot say that in the facts and circumstances of this case it failed to bring a fair and honest mind to the consideration as to whether to prosecute the delinquent or not, if, and when, it decided to abstain from prosecution, itself having obtained adequate reparation.

46. Though the plaintiffs claim in tort would have been unliquidated damages, and thus in private settlement might have been open to bargaining, in view of the nature of the tort in the present case, its waiver would give rise to a definite debt and the Court would be in a position to see whether or not there had been any undue bargaining. In this case the amount promised and secured was much less than the amount "had and received" by the defendant. The possible considerations for the promissory note and the collateral security might be (1) the promisees undertaking not to prosecute the defendant (promisor) criminally, (2) the promisees undertaking not to sue the defendant in damages or for "money had and received" for the tort.

47. The first will be an illegal consideration the offence being non-compoundable and its compromise being opposed to public policy. The second will be perfectly legal. Causes vitiating a contract in its substance or purpose are given in Section 23 read with Section 10, Contract Act. Section 10 requires that in order to be a contract, an agreement must be for a lawful consideration and with a lawful object. Section 23 lays down that the consideration or object of an agreement will be lawful unless (1) it is forbidden by law or (2) is of such a nature that, if permitted, it would defeat the provisions of any law; or (3) is fraudulent; or (4) involves or implies injury to the persons or property of another, or (5) the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful.

48. Section 345, Criminal P. C., after laying down in its Sub-sections (1), (2) and (3) which of fences may be compounded, enacts in its Sub-section (7) that "no offence shall be compounded except as provided by this section." The other relevant sections are Sections 247, 248 and 259, Criminal P. C. Section 43, Penal Code, defines the word "illegal" as applicable to everything which is an offence or which as prohibited by law, or which furnishes ground for civil action. According to this definition, compounding an offence other than those made compoundable by Section 345, Criminal P. C., will be illegal as such compounding is a thing prohibited by Section 345 (7), Criminal P. C. Section 120A, Penal Code, would render an agreement to compound such an offence a criminal conspiracy if in pursuance thereof some act is done. The section says:

49. When two or more persons agree to do ... an illegal act... such an agreement is designated a criminal conspiracy," provided that no agreement except an agreement to commit an offence shall amount to a criminal conspiracy unless some act besides the agreement is done by one or more parties to such agreement in pursuance thereof. Section 120B (2) of the Code provides for the punishment of such a conspiracy. In my opinion an agreement to compound a non-compoundable offence is thus forbidden by law in India, and when such an agreement will constitute the consideration for or be the object of an agreement the latter will fail to develop into a contract. In this view it is not necessary for us to have recourse to the more elastic provision of the statute as to its being opposed to public policy in order to see whether or not such a contract will be void. There the statutory provision is so general as to amount to no more than a mere direction to the Court to find out the rule of law itself. The difficulty of a Judge when he is to find a footing on such a slippery ground has been indicated by Lord Atkin in Fender v. St. John Mild May<(1938) 1938 A.C. 1 But so far as an agreement to stifle prosecution is concerned, it has hitherto been declared to be opposed to such public policy by the highest authorities. Only side by side with the recognized public policy, another vital interest has gained recognition, viz., the interest of the injured in the procurement of reparation. The authorities could not possibly ignore this interest. The law which governs life must be brought into and kept in touch with life. Experience in this field perhaps has not yet been sufficient for the purpose of formulation of the resultant tendency. We shall have occasion to refer to some of the authorities later on.

50. In the case before us, it is not even the case of the defendant that he agreed to give the promissory note in view of any undertaking given by Jackson either expressly or by implication that there would be no criminal prosecution of the defendant. In my opinion the consideration for the transaction in the present case was the promisees undertaking not to sue the defendant in damages or for money had and received and it was perfectly lawful consideration. The object of the agreement was not the stifling of the prosecution. No infirmity therefore attached to this contract, in its substance and purpose. The next question for our consideration is whether there was anything wrong in the method of the procurement of the contract. The validity or otherwise of the contract in question in the present suit shall have to be determined with reference to the provisions of the Indian Contract Act. Sections 10 to 16 and 19A contain the relevant provisions for the present purpose. Section 10, Contract Act, lays down:

All agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.

51. Section 11 lays down who are competent to contract:

Every person is competent to contract who is of the age of majority according to the law to which he is subject and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.

52. Section 12 defines what is sound mind for the purpose of contracting:

A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.

53. Section 13 defines consent:

Two or more persons are said to consent when they agree upon the same thing in the same sense.

54. Section 14 lays down that

consent is said to be free when it is not caused by (1) coercion as defined in Section 15, or (2) undue influence, as defined in Section 16, or (3) fraud, as defined in Section 17, or (4) misrepresentation, as defined in Section 18, or (5) mistake subject to the provisions of Ss. 20, 21 and 22. Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake.

55. Section 15:

Coercion is the committing, or threatening to commit, any act forbidden by the Indian Penal Code, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.

56. Section 16:

(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 the 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 provisions of Section 111, Evidence Act, 1872.

57. Section 19A:

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 Court may seem just."

Duress can be either physical or moral: the former makes a man submit like a machine, and excludes all meeting of the minds because the license of him who uses duress is absolutely dominant; the latter can be exerted by depriving the victim of the use of his mind and free will, thus rendering him incapable of giving a valid consent. The fear caused by the duress must be real--non metus vani hominis,--and must be such as would induce a reasonable man to enter the contract. But when the law is given in a statute, we are to see whether the case comes within its provisions, no matter whether the application of these provisions would or would not disfavour the abuse of moral influence or encourage moral cowardice. As has been stated above, the defendant in his written statement pleaded almost all the vitiating causes for the avoidance of the contract. He alleged fraud, misrepresentation and coercion. In connection with the promissory note and the deposit of the title deed what he did not plead is undue influence and the agreement to stifle criminal prosecution. In connexion with the execution of the power of attorney on 17th January he pleaded undue influence and some threat coming from Mr. Jackson. According to him

the power of attorney was obtained from him by fraud, misrepresentation, undue influence, and coercion by the said Mr. H. L. Jackson and upon a representation that criminal proceedings would otherwise be inevitable.

58. The particulars of misrepresentation perhaps are given when he says in his written statement:

The documents aforesaid were taken away on the distinct understanding and assurance given by Mr. Jackson of the plaintiff company that the same would be returned to this defendant as soon as such amount which might be found out as not properly accounted for be recovered from the auditors any time at any place.

59. No issue as to undue influence or agreement to stifle criminal prosecution could be raised on this pleading and none was raised unless the wide words "otherwise invalid" in issue 3 would cover these cases also. Mr. Jackson in his deposition denied the allegations made in the written statement. He said:

This is the promissory note. Defendant signed it voluntarily. It is marked Ex. 1 on the side of plaintiff. I did not exercise any undue influence or coercion on him to obtain it. This is the title deed which was handed over to me by defendant. There was no fraud or undue influence or coercion practised on him then.

60. In his cross-examination he said:

It is not a fact that I told defendant that he would not beheld responsible for anything found due or missing by the auditors. I did not threaten the defendant that if he did not take the responsibility he would be criminally prosecuted. I asked him whether he had any property. I told him that I wanted the title deeds from him as security. It is not a fact that on the first occasion that his house property was mentioned I was told that the deed I wanted was to be deposited by him with Mackintosh Burn & Co. I did not certainly tell defendant that if he took the responsibility nothing would be pay, able by him on his pronote or mortgage....

61. The whole case of the defendant as made at the hearing is thus given by him in his deposition:

...In the same evening (i. e. 8th January 1935) Mr. Jackson came to my house after the office was closed and explained to me that the auditors were wanting details. I told him it is for him to do that as he was paying the illicit commission himself and he said he kept no details since the auditors raised no question like that before. He further told me that he did that without the Head Offices knowledge to get more business. I was assured that if I took the responsibility of this rebating he would be behind my back but if he said that he did it, nobody could save him; on the contrary I could be saved by him. At last on Mr. Jackson s prayer and begging I agreed to undertake to account for the amounts that could not be accounted for. Next day i. e. on the 9th at 11 I was sent for and I went to Mr. Jackson when Mr. Just was there. Jackson asked Mr. Just what the amount was. He said Rs. 27,000 odd, then Mr. Jackson handed me his pen and I wrote down what he dictated as I agreed the previous night. This is that (Ex. 4A). I took exception to the words "misappropriation etc." but Mr. Jackson said " Dont worry." The figure of Rs. 27,920-4-1 was the figure supplied by Mr. Just from his notes. In the evening at about 6-30 P.M. when, I was looking up the cash (9th) when the lid of my cash box was open, Mr. Jackson came and said that some security was wanted by the auditors who, otherwise would report the matters to the Head Office. I said I had no security, when he said if I have any life Policy. I said none. Then he chanced to look into the box where the title deeds of my house remained which I were to hand over to Messrs. Mackintosh Burn & Co. contractors. This remained in the office because my solicitors sent it down to my office and I was addressed in my office address. He took that deed i. e. he picked it up and said that he would show it to the auditors whether it would do for the time being and thus saying he went away; Mr. Jackson locked the title deeds in his office. When I was coming home Mr. Francis and Mr. Jackson came out of the room and we got down the lift and he (Mr. Jackson) jumped into his car and I went to my own car.

On the 10th at about 11 or 12 (midday) I was again sent for and when I went Mr. Jackson said I should execute a promissory note for Rs. 28,000. I declined and he said else he would ring up the police and have me taken to the custody. His one hand was on the telephone. He further told me that if I did that I would be given a big lift in my office and I was assured that I might one day take his chair. I was not afraid of the criminal case because I knew I was honest and that I would come out successfully but I was afraid of harassment and thought of the reputation of the family and hence I agreed to execute a pronote for Rs. 28,000. Sometime afterwards on the same day I was taken by Mr. Jackson to the office of Messrs. Orr Dignam and Co. and he went to the office of Mr. S. B. Bose and I waited outside; sometime after that I was called in and Mr. Jackson handed me a typed pronote for Rs. 28,000 which I signed. Then Mr. Bose who was looking for something handed Mr. Jackson a paper which, on looking at the top I found to be my title deed. This Ex. 1 is not the pronote which I signed on that date. It was a typed pronote. I had no idea what an equitable mortgage was. A gentleman who is Mr. Mallik was standing there. I was asked to go over to my office and I did that leaving Mr. Jackson there. I used to go to the office after 10th and I drew up the accounts at the request of Mr. Jackson. Then about the power of attorney this happened. I was sent for, went to Mr. Jackson who told me that some contractors saw him and claimed money. I asked him how they came to know. He handed me the Statesman and showed to me the notice of caution and something like that. I got surprised and said "why did you do it; you told me that nobody would know and you have done me this damage.

To Court:--I then thought that my pronote might be used in a different way and I told him that I would consult my solicitors. Mr. Jackson said "you wont do anything of the sort, if you do, you will go to jail" and thus saying he placed his hand on the phone again, then he became soft and asked me to go with him to the solicitors and make Rs. 50,000 for Rs. 28,000 in the pronote as I had creditors. I consulted Mr. G. O. De a relation of ours and I took him to Mr. Jackson. Then I agreed to sign the power of attorney.

Later on, in course of cross-examination he says:

I did appreciate that Mr. Jackson was making me liable on 9th January 1935. Mr. Jackson wanted to make the Head Office know that Mr. Mitter was doing these illegal payments with his consent. That is all. Mr. Jackson had no permission to do illegal payment. Under the belief what Mr. Jackson told me I wrote the letter dated 9th January 1935. There was no threat when I wrote the Ex. (4A) dated 9th January 1935. I know English fairly well. I am deposing in English. The word "misappropriate" is a homely word. I substituted the word misappropriated for the word paid according to Mr. Jacksons dictation as he said that the auditors would want that word. I realised that I was being made to use a damaging word. The second line was written by me i.e. I was made to write that. I cant say whether the auditors knew that defalcation was going on from before. I know that the letter written by me could be used in some way. I was assured that I would not lose my job and that I would occupy Mr. Jacksons chair. I believe that. Mr. Jackson could do anything he liked. I still think that I am quite fit to be the accountant.

62. The salient points in the case made by the defendant in his deposition are: (1) By 8th January 1935 defalcation was discovered; (2) On the 8th evening Jackson went to the defendants house, (a) the defendant told Jackson that it was for Jackson to explain the defalcation; (b) Jackson pleaded inability to do so as he kept no details; (c) the defendant "agreed to undertake to account for the amounts that could not be accounted for" on Jacksons prayer and begging. None of these things in item 2 were put to Jackson when the latter was examined. The story was given out for the first time when the defendant came into the witness-box. (3) On the 10th, on the defendants declining to execute the promissory note for Rs. 28,000 Jackson said else he would ring up the Police and have the defendant taken to the custody. Jacksons one hand was on the telephone: This story too was never put to Jackson when the latter was in the witness-box. (4) After the execution of the promissory note on the 10th, on a subsequent date when the defendant wanted to consult solicitors, Jackson said "you wont do anything of the sort, if you do, you will go to jail," and thus saying he placed his hand on the phone again. This too was never put to Jackson, According to the defendant himself in spite of this he could consult his relation Mr. G. C. De, a solicitor, before executing the power of attorney. It is the defendants own case that between 13th January and 1st March he had occasion to consult competent lawyers like Mr. G. C. Dey, solicitor, Mr. Pannalal Mitter, solicitor, Mr. J. K. Barkar, solicitor, and Mr. M. N. Banerjee, a pleader. The defendant was dismissed from his office on 13th January 1935. So after that he could not have been under any illusion as to his future prospect in that office. Jackson ceased to be his office master since then. Yet we find him electing to proceed on the footing that the pro-note, the deposit of this title deed and the power of attorney were all valid transactions. He never repudiated them, and the only in. fluence that might have still worked on his mind after the 13th January would be his own fear of criminal prosecution. It is not an easy task to find out the state of mind of another at any given time. But he himself says he was not afraid of criminal prosecution.

63. The learned Subordinate Judge came to the conclusion that the promissory note and the power of attorney were executed by the defendant under the undue influence of Mr. Jackson. His conclusion in this respect was based on the following findings made by him:

(a) The very letter which Benoy wrote on 9th January 1935 (Ex. 4A) and which the plaintiff proves, proves the defence that there was pressure of threat of criminal proceedings against the defendant; (page 129). (b) Mr. Jackson who was defendants office master, held a real authority over Benoy and was in a position to dominate the will of Benoy and he used such position in obtaining the documents, i. e., the pro-note, the Ex. 4A, power of attorney and others, (page 130). (c) Free consent as denned in Section 14, Contract Act, being wanting, these documents can be said to have been obtained by undue influence u/s 16 of the Act, and the documents being obtained at a time when Benoy was mentally distressed, the transaction is hit by Section 19A of the Act, (p. 130). (d) The plaintiff should have proved that Mr. Jackson was not in a position to dominate the will of Benoy in the matter of execution of the pro-note and other documents as the onus shifted the moment Mr. Jackson is found to have exercised undue influence and used his real position over Benoy and got the documents from him, (pp. 138-139). (e) It should have further been shown by the plaintiff that Benoy had independent advice but except in the matter of execution of power of attorney it is not shown that Benoy who was simply obeying his master had such advice when he executed the pro-note and made over the title deed to Mr. Jackson either in the office of the solicitor Mr. Bose or in the street when his motor driver is said to have produced the document which Mr. Jackson wanted to lock up in his safe custody, (page 139).

64. Referring to "the letter dated 9th January 1985 (Ex. 4A) in which Benoy stated to Mr. Jackson that he undertakes to account for Rs. 27,920-4-1 which he misappropriated during 1934," the learned Subordinate Judge observed:

I fail to understand why so damaging a letter incriminating himself would be written by Benoy out of his own free will and volition on the very day of the discovery of deficit unless he was prevailed upon to do so by Mr. Jackson, especially when he was so intelligent and so clever, according to the plaintiff as to manipulate the several accounts in such a way as to defeat the keen eyes of the highly efficient staff of the Chartered Accountant.

He seems to think that such an intelligent man cannot "turn penitent and therefore a saint." But it is not even Benoys case that his letter was obtained from him by any pressure of threat. According to him, on the discovery of the defalcation by the auditors, Jackson himself came to Benoys house and "at last on Mr. Jacksons prayer and begging" he agreed to undertake to account for the amounts that could not be accounted for. Next day, i. e., on the 9th at 11 he was sent for and he went to Mr. Jackson when Mr. Just was there. Jackson asked Mr. Just what the amount was. He said Rs. 27,000 odd; then Mr. Jackson handed him his pen and he wrote down what he dictated as he had agreed the previous night. This is that Ex. 4A. He took exception to the words misappropriation, etc., but Mr. Jackson said "Dont worry." The figure Rs. 27,920-4-1 was the figure supplied by Mr. Just from his notes."

65. Benoy is certainly not a saint. Yet he may not be so depraved as to be incapable of being penitent. Perhaps he is not a habitual criminal, though he was guilty of a serious crime. The very consciousness of such guilt along with the nervous strain of avoiding detection may naturally lead to a confession upon being detected. The process may be one of a suddenly relaxed inhibition. The confession on the part of the defendant in this case on the 9th and 10th is not at all an improbable event. Benoys father was a trusted servant of the plaintiff company, served the company honestly during almost the whole of his active life and before his retirement succeeded in placing his own son in the same responsible and trusted position. Benoy was thus placed in a position which a man of his education would hardly expect at his age. By the indiscretion of his youth, he created severe demands on his purse and ultimately could not keep the trust inviolate. He could not bat have been conscious of the depth of his fall and if anything of humanity were left in him I dont see why he would not confess what he had done, at least, when further concealment was futile. If "any electric atmosphere" came into being by the event of disclosure, Benoy did not necessarily lose the freedom of will though he might have lost his will to conceal.

66. The learned Judge next referred to the statements of Mr. Jackson where he said that on 10th January 1935, Benoy said that he would do anything he wanted him to do and that he would take a pronote for a lac of rupees if the defendants house was worth a lac. The learned Subordinate Judge thinks that

this conclusively proves that Mr. Jackson who was defendants office master held a real authority over Benoy and he was in a position to dominate the will of Benoy and he used such position in obtaining the documents.

67. It is not the case of the defendant that Mr. Jackson as office master of him had any such hold over him to dominate his will. On the other hand, according to Benoy himself, Mr. Jackson came to Benoy to pray and beg and if Benoy agreed to do anything which Mr. Jackson would ask him to do it was by such begging and prayer. The learned Judge took the very letter (Ex. 4A) to indicate that there was pressure of threat of criminal proceeding. Here again this is not even the case of the defendant. He never suggested that there was any such threat at any time earlier than the demand for a promissory note for the defalcated amount. We need not stop here, to consider whether a person can be said to be deprived of the soundness of his mind within the meaning of Section 12, Contract Act, when his mind is overwhelmed with fear of criminal prosecution and he is prepared to do anything to save himself from such prosecution. All that we need say in this case is that it is not the case of the defendant that at the time when he made the contract he was not capable of understanding it and forming a rational judgment as to its effect upon his interests. He did appreciate that Mr. Jackson was making him liable. He had the effective use of his reason. He knew what he was doing and what , would be its effect on his interests: but his case is that he was compelled to do so. He did not lose the soundness of his mind, he willed; though according to his case determination of his will was forced by coercion or undue influence.

68. The question for our consideration therefore is whether the consent was free. Consent is free when the activity of man by which it is effective works without obstacles to impede its exercise. The obstacles are named in Section 14, Contract Act. As has been pointed out above, the defendant in his written statement alleged all the vitiating causes contemplated by Section 14, Contract Act. Before us, however, the learned Counsel appearing for him relied on coercion and undue influence only. In our opinion, nothing has been alleged, in this case which will entitle any Court to say that the consent here was caused by coercion as defined in Section 15. The only allegation is that Mr. Jackson threatened that he would inform the police or would prosecute the defendant. By such threats Mr. Jackson neither committed nor threatened to commit any act forbidden by the Penal Code. The allegation of the defendant is that the document of title was taken and detained by Jackson unlawfully. It is, however, not his case that by reason o such detention he was obliged to give his consent to the transaction in question. Coercion under the Contract Act can be pleaded only where the end arrived at was achieved by the use of something in the nature of unlawful force, or the threat of unlawful force, against the person or mind of the other contracting party. Undue influence may, however, exist where a promise is extracted by a threat to prosecute certain person unless the promise is given. It is not necessary that there should be any direct threat. It may be enough if the undertaking is given owing to a desire to prevent a prosecution, and that desire is known to those to whom the undertaking is given. In order to see whether or not the consent was caused by "undue influence" it will be necessary to see: (i) Whether any relations subsisted between Jackson and the defendant; (2) whether the relations were such that Jackson was in a position to dominate the will of the defendant. In the facts and circumstances of this case the contract in question is neither unfair nor unconscionable and the case does not come within Section 16 (3), Contract Act. Even assuming, therefore, that Jackson was in a position to dominate the will of the defendant, the onus is still upon the defendant to establish that his consent to the contract was caused by undue influence.

69. The relations subsisting between Jackson and the defendant on 10th January 1985 were as follows: (1) Jackson was the office master of the defendant: (2) Jackson was in possession of materials which would entitle him to prosecute the defendant for noneompound-able and cognizable offences. The evidence of the defendant himself is that he was not afraid of criminal prosecution. 4t any rate it is not his case that because of Jacksons being in possession of the incriminating materials he did whatever Jackson desired him to do. Undue influence usually arises in contracts made between relatives or persons in a fiduciary position. But even as between strangers between whom. there exists no fiduciary relation certain forms of coercion, oppression or compulsion may amount to undue influence invalidating a contract. The question is: "How is the line to be drawn between those forms of coercion or persuasion which are permissible and those which the law recognises as unlawful and as a ground of contractual invalidity" In Kaufman v. Gerson (1904) 1 K. B. 591 it is suggested that the line should be drawn by reference to general considerations of public policy, the question in each case being: Is the coercion or persuasion by which this contract was procured of such a nature that the enforcement of a contract so obtained would be contrary to public policy Just as a contract may be invalid because it is contrary to public policy in its substance or its purpose, so it may be invalid because it is contrary to public policy in respect of the coercive method of its procurement. This is perhaps the true underlying principle and this general principle has been reduced so far as possible to the form of specific rules in respect of divers methods of coercion and undue influence. The requirements of public policy have been similarly made specific in respect of illegal and nugatory contracts. Where the instrument of coercion is the doing or threatening of wilfully illegal act of any description, it retains the name of coercion in the Indian Statute. But even though the instrument of coercion is not thus in itself illegal as in the case of a threat of prosecution, it may amount to undue influence and the enforcement of a contract so procured may nevertheless be held, in appropriate cases, to be contrary to public policy.

70. On a careful consideration of the evidence in the present case it appears to us (1) that on the discovery of the defalcation the defendant really became penitent and confessed the guilt; (2) that Jackson might have used some threats and might have threatened to inform the police unless Benoy agreed to make proper reparation; (3) (a) that as a matter of fact there was no talk about the compounding of the offence; (b) that Jackson did not suggest anything expressly or by implication which might entitle Benoy to expect that if he made the reparation there would be no criminal prosecution;. (c) that Benoy too did not behave in such a way as to lead Jackson to believe or even to suspect that Benoy was agreeing to make reparation on the expectation that thus the criminal prosecution would be prevented; (4) (a) that the transaction in question did neither prevent the possibility of prosecution nor render the possibility of a prosecution remoter than what it was at the date of the transaction; (b) that the evidence of the offence remained intact and was not in the least affected by the transaction; (5) that the criminal prosecution was not resorted to on a different consideration; the decision might have been influenced by the fact that the defendant had made reparation to his utmost ability; but the decision was not the consideration or the object of the agreement given by the defendant.

71. In view of the above findings, the contract in suit cannot be said to have been vitiated in any way either in respect of the method of its procurement or in its substance or purpose and any reference to the decisions in cases with different sets of facts will perhaps be somewhat out of place. In fairness, however, to the learned advocates who relied on them I propose to examine those cases and to see what relevant guidance can be derived therefrom. I shall, first of all, take the case in (1843) 6 Man. & G. 785.2 In that case the plaintiff was a coal merchant in Denbighshire and had an establishment at Newton of which the defendant was in charge as his clerk. The defendants duty as such clerk was to collect and receive money on the plaintiffs account, and remit to him, together with monthly accounts. In December 1841, the plaintiff having ascertained that the defendant had received upwards of 900 more than he had accounted for, sent for him and told him that "unless he went to his (plaintiffs) attorneys and gave satisfactory security, he would prosecute him for unlawfully making use of his money", thereby meaning, "for unlawfully embezzling or appropriating to his own use moneys he had received as his clerk." The defendant thereupon went to the plaintiffs solicitors, and executed a warrant of attorney authorising them to appear for him and confess a judgment for 1800, with a defeasance to secure 900. On the next day judgment was entered upon the warrant of attorney and execution issued on the following day. Two months later, the effects of the defendant were sold, and the proceeds paid over by the Sheriff to the plaintiff. Two months later a fiat in bankruptcy issued against the defendant under which he was duly adjudged a bankrupt. The act of bankruptcy, upon which the adjudication proceeded, was the giving the warrant of attorney in question.

72. On the petition of the creditors assignee in bankruptcy a rule was issued calling upon the plaintiff to show cause why the warrant of attorney executed in the case, and all proceedings thereon, should not be set aside, on the ground that it was given upon an illegal consideration, namely, a corrupt agreement to compromise a felony. It was found in the case that the security in question was obtained from the defendant by threat of criminal prosecution followed by an abstaining from prosecution. There was evidence in this case, and this evidence was believed, that when the plaintiff first discovered the defalcation, he threatened to prosecute the defendant for unlawfully making use of his money unless he would go to see the plaintiffs attorneys and give satisfactory security, and that the defendant afterwards went to the plaintiffs attorney and gave the security in question, and no prosecution followed. But these facts were not considered sufficient to lead to the inference that a compact to stifle prosecution was made. Tindal C. J., Coltman, Erskine and Maule JJ., in forceful terms laid it down that, where there is a debt actually due, the mere use of threat of this kind, though followed by an abstaining from prosecution, will not vitiate the transaction. Tindal C. J., observed:

It must be borne in mind that this is not the case of security given to induce fan uninterested party to withhold a charge of a criminal nature; there is a just debt due from the defendant to the plaintiff. The plaintiff may have held out threats of prosecution in order to induce defendant to give the warrant of attorney; but there is the positive denial on the part of the plaintiff that he made any such agreement as that suggested.

73. The plaintiff in this case denied that he made any agreement not to prosecute and his denial was accepted by the learned Judges. Coltman J. said:

It is true that threats were used by the plaintiff, which may have influenced the defendant. It is possible that he may have hoped that, i he gave the security, he would not be prosecuted. In the absence, however, of an agreement, express or necessarily implied, to that effect, there is no ground for setting the warrant of attorney aside. Such an agreement is not to be inferred from hasty expressions used by a man when seeking to obtain security for a just debt.

74. Maule, J. observed:

The plaintiff demanded, what he had a perfect right to demand, viz., money due to him; and the defendant did what he was bound to do, namely, give a security for money which he was bound to pay. In substance the transaction was fair and honest and there is no necessity to impute to the plaintiff the making a corrupt agreement which he has expressly denied. Any expectation that the defendant may have entertained, that, if he gave the required security, he might escape prosecution, will not of itself vitiate the transaction."

75. Erskine J. said:

Circumstances ought to be shown clearly leading to the inference that such a compact was in fact made.

By such a compact the learned Judge was referring to the alleged compact to stifle criminal prosecution. In this case the learned Judges were not satisfied that the charge of embezzlement against the defendant was made out. But their decision did not turn on this fact. Coltman J, said:

I do not conceive it material to consider whether or not the defendant was actually guilty of embezzlement; for if there was reasonable ground to suspect that he was, although the circumstances might not be such as insure a conviction, and the warrant of attorney was given to induce the plaintiff not to prosecute, the consideration would, in my opinion, be illegal.

76. Tindal C. J. proceeded to decide the case on the assumption that the defendant was guilty of embezzlement. Erskine J. considered that the question whether the defendant was actually guilty of embezzlement was an important one:

for if he was really guilty, and the plaintiff knew it, but abstained from prosecuting him, that would afford some foundation for inferring that the plaintiff agreed not to prosecute if the required security were given.

77. Next we may take up the case in Williams v. Bayley (1866) 1 H. L. 200 In this case the appellants were bankers and the respondent carried on the business of a coal master. One of the sons of the respondent, William, had also been in business as a dealer in coal and coke. The respondent had for years kept an account at the bank of the appellants and often had a considerable balance to his credit. His son William had often been a purchaser of coal from his father, and in that way, many transactions on promissory notes had also passed by William into the appellants bank and had, of late, often borne the endorsement of the respondent. On one or two occasions these notes had been dishonoured and the appellants had given formal notice to the respondent of the fact. On 6th January 1863, an event of that kind occurred with respect to a note for 247. The respondent, who seemed to have believed it to relate to a note he had indorsed, mentioned the matter to his son who promised to provide for it. On the day following the notice, it was provided for by William. William, however, had, without his fathers knowledge, sent to the bank many notes apparently indorsed by his father, but these indorsements were forged by himself. The amount of these notes at last reached a considerable sum. Suspicion having been excited, application, was urgently made by the appellants (bank) to the respondent for a settlement and this application produced the discovery that William (the son) had, in many instances, forged the indorsements of his father. The respondent with another son of his had an interview with the manager of the bank when the manager of the bank stated that Williams liabilities were serious, but if he would act properly, and his friends would back him, all would be right. At this interview, the respondent distinctly denied that he had ever given his son authority to make these indorsements, and, on being informed that the amount was 6000 said that he was an old man, and could not be expected to beggar himself, but was willing to do anything to assist in reason. The manager said that the appellants (bank) did not wish to exercise any pressure upon him. Thereafter there was a meeting of all the parties at the bank of the appellants and after some discus. sion, the respondent agreed to pay to the appellants the sum of 7203-14-6 and further agreed to deposit with them the several title deeds of his Colliery by way of equitable mortgage, for securing payment to them of the said sum of 7203-14-6. Two days later the respondent deposited the title deeds and signed the formal agreement. Three days after that the respondents solicitor wrote a letter complaining of the agreement which had been entered into against his advice, declaring it to have been obtained under undue influences improperly exercised. Later on the appellants brought an action in the Court of Queens Bench to recover the amount claimed by them on the agreement. The respondent filed his bill in the Court of Chancery praying for a declaration that the agreements were invalid. Stuart V. C. made a decree in favour of the respondent. On appeal the Lord Chancellor (Lord Cranworth) came to the following findings:

(1) The appellants strongly suspected, indeed they must be said to have known, that the signatures (on indorsements) were forgeries; (2) If the signatures were forgeries, the bankers were in this position, that they had the means of prosecuting the son; (3) (a) The appellants must have known that all the parties to the negotiations understood that this was a case, not of life or death, but of transportation for life; (b) The father was acting in this matter under the notion that if he did not interfere to save his son, the latter would be liable to be prosecuted and, probably, would be prosecuted for forgery and so be transported for life; (4) The case in point of fact was this: Here are several forged notes. The bankers in the presence of the father and of the person who forged them, both being persons of apparent respectability in the Courts, carrying on business as tradesmen, and the father having the presence and the assistance of his solicitor, the bankers say to him what amounts to this: Give us security to the amount of these notes and they shall all be delivered up to you; or do not give us security, and then we tell you we do not mean to compound a felony; in other words, we mean to prosecute. That is the fair inference from what passed; (5) The plain interpretation of what passed is: We have the means of prosecuting, and so transporting your son. Do you choose to come to his help and take on yourself the amount of his debt, the amount of these forgeries If you do we will not prosecute; if you do not, we will.

Thus an agreement to stifle prosecution was found in this case and the agreements in question in the suit were held invalid. Lord Cranworth in the course of his address observed:

I very much agree with the argument of Sir Hugh Cairns that it is not pressure in the sense in which a Court of equity sets aside transactions on account of pressure, if the pressure is merely this: If you do not do such and such an act I shall reserve all my legal rights, whether against yourself, or against your son." If it had only been if you do not take on yourself the debt of your son, we must sue you for it, I cannot think that that amounts to pressure, when the parties are at arms length, and particularly when, as in this case, the party supposed to be influenced by pressure had the assistance of his solicitor.... But if what really takes place is this: If you do not assist your son, by taking on yourself the payment of these bills and notes on which there are signatures which are said, at least, to be forgeries, you must not be surprised at any course we shall take, meaning to insinuate if not to say, we shall hold in our hands the means of criminally prosecuting him for forgery.

78. An analysis of the judgment of Lord Chelmsford will show that his Lordship arrived at the following conclusions:

(1) The object of the arrangement between the parties was to save William Bailey from a prosecution for forgery; (2) The negotiations between the parties proceeded upon the footing of forgery having been committed by William Bailey, and of his being liable to a criminal prosecution; (3) The bankers both personally and by means of their agents availed themselves of the fears of the father for the safety of his son, to press the arrangements upon him; (4) (a) Probably nothing could be used against the bankers to prevent their insisting on the liability of the father; (b) but the defence did not raise the question of any civil liability on the part of the father; (5) The case comes within the principles on which a Court of equity proceeds in setting aside an agreement where there is inequality between the parties, and one of them takes unfair advantage of the situation of the other, and uses undue influence to force an agreement from him.

Lord Westbury pointed out that there were two aspects of the case: (i) (a) Was the plaintiff a free and voluntary agent (b) Did he give the security in question under undue pressure exerted by the defendants This aspect refers to the plaintiff alone (2) Was the transaction taken independently of the question of pressure, an illegal one, as being contrary to the settled rules and principles of law This question regards the case with reference to the defendants alone. Regarding the first question, his Lordship enquired: (1) What was the basis of the negotiations between the appellant and the respondent that led to the giving the security in question (2) What was the motive or inducement, that was brought to bear on the respondent in order to. induce him to give the security As regards the basis his Lordship observed that there was a constat of all parties that the forgeries had been committed, and that William Bayley, therefore, stood in the liability of a felon. As regards the motive his Lordship observed: (a) It is perfectly clear that they did not pretend that the father was liable; (b) The only motive to induce him to adopt the debt, was the hope that by so doing he would relieve his son from the in evitable consequences of his crime. The father was not a free and voluntary agent. The security given for the debt of the son by the father under such circumstances was not the security of a man who acted with that freedom and power of deliberation that must undoubtedly be considered as necessary to validate a transaction of such a description. His Lordship then proceeded to consider the second aspect of the case, namely, whether the transaction was illegal independently of pressure. His Lordship observed:

It is a law dictated by the soundest consideration of policy and morality, that you shall not make a trade of a felony. It you are aware that a crime has been committed, you shall not convert that crime into a source of profit or benefit to yourself.

It is impossible, therefore, if you look at this matter wholly independently of the question of pressure, and confine your attention to the act of the bankers alone, not to come to the conclusion that a great delictum was committed when the transaction is viewed simply with reference to the course which they took.

79. In order to see what inference of fact as to the existence of an agreement not to prosecute is to be drawn his Lordship took into consideration the following facts: 1. The promisee was aware that the bills were forgeries; 2. He obtained an additional advantage and benefit by trading with these bills; 3. He was aware that by this trading he would either prevent the possibility of a prosecution or render the possibility of a prosecution so remote, that it could hardly be expected to succeed. His Lordship then observed:

If a man does an act which is attended necessarily with an inevitable consequence, he must be taken in law to have foreseen the consequence, and in point of fact, to have deliberately intended that it should be the result of his action.

80. Lord Westbury concluded by observing:

I regard this as a transaction which must necessarily, for purposes of public utility, be stamped with invalidity, because it is one which undoubtedly, in the first place, is a departure from what ought to be the principles of fair dealing between man and man, and it is also one which, if such transactions existed to any considerable extent, would be found productive of great injury and mischief to the community.

His Lordship then said that he did not mean to cast any imputation on the character of these gentlemen. He observed:

I am only dealing with abstract principles of law. They might perhaps fairly have thought that they were doing the best for the family of Mr. William Bayley or of his father. ... I have used those words as necessary to vindicate the policy and justice of the rule of law.

81. Mr. Bose in support of the appeal strongly relied on (1882) 10 Q. B. D. 572.1 In this case one Maynard had been employed to collect rents on behalf of the plaintiffs; he failed to account for a large sum, and the plaintiffs threatened to prosecute him for embezzlement. Maynard afterwards indorsed to the plaintiffs these bills of exchange drawn by him upon and accepted by the defendant. The consideration for the defendants acceptance was the sale to him by Maynard of a share in a patent. The defence was that the consideration for the transfer of the bills of exchange to the plaintiffs was the compromise of criminal proceedings and consequently the indorsements were not lawful, and the plaintiffs were not the lawful indorsees of the bills. Denman J., held that the question involved was really one of fact and came to the conclusion that the defendant had not established that the bills were given or indorsed upon an agreement to stifle a prosecution or by reason of a threat of prosecution. On appeal to the Court of appeal this judgment was affirmed. Lord Coleridge C. J. observed:

Upon the facts of the case there is no foundation for this argument; there was no agreement to stifle a prosecution for felony. The evidence fails to disclose even a veatige of an agreement of that kind; the form and the subject of the transaction was different. The plaintiff used threats to Maynard, but they did not come to an agreement with him not to prosecute him. A creditor may use strong expressions and even threats; and it was held in (1843) 7 Scott N. B. 4992 that strong language is not conclusive evidence of an agreement to compound a felony or to stifle a prosecution. Both the facts and the law fail to support the case for the defendant.

82. Brett L. J.:

Denman J. has found that there was no agreement to stifle a prosecution, and I think that there was no agreement of that kind in point of fact. . . . even although there had been a threat to prosecute Maynard which induced him to indorse the bills, the present action would be maintainable, because a debt was actually due from Maynard and there is nothing illegal in a creditor endeavouring to obtain payment of his debt.

83. Cotton L. J. observed:

It seems to me that there is a distinction between getting a security for a debt from the debtor himself and getting it from a third person who is under no obligation to the creditor. A threat to prosecute is not of itself illegal; and the doctrine contended for does not apply where a just and bona fide debt actually exists, where there is a good consideration for giving a security, and where the transaction between the parties involves a civil liability as well as possibly, a criminal act. In my opinion a threat to prosecute does not necessarily vitiate a subsequent agreement by the debtor to give security for a debt, which he justly owes to his creditor.

84. We may next take up the case in (1892) 1 ch. D. 173.5 In this case, the Secretary of a building society, one Mr. Cadwaladr who had made default in accounting for money paid to him and was threatened by the society with a prosecution for embezzlement, applied for assistance to the plaintiffs (Mr. Ellas Jones and his mother, Mrs. Jones) who were his relatives, and they gave a written undertaking to the society to make good the greater part of the debt due from the Secretary, the expressed consideration being the forbearance of the society to sue the Secretary for the amount for which the plaintiff made themselves responsible, and in pursuance of that undertaking they gave two promissory notes and some title deeds by way of collateral security to the society. The plaintiffs in giving the undertaking were actuated by the desire to prevent the prosecution, and that was known to the directors of the society, but no promise was made that there should be no prosecution. The society brought an action on the promissory note in the Queens Bench Division, and the plaintiffs brought an action in the Chancery Division to set aside the promissory notes and the collateral securities on the ground that they were made for an illegal consideration. The Queens Bench action was transferred to the Chancery Division and the two actions were tried together.

85. It was held that it was an implied term of the agreement that there should be no prosecution; that the agreement was therefore founded on an illegal consideration, and void; and that the society could not recover on the promissory notes or enforce the securities. Vaughan Williams J., who heard the case, arrived at the following conclusion: (1) that Cadwaladr did embezzle funds entrusted to him by his employers; (2) that the directors knew of this embezzlement; (3) that the directors did threaten to prosecute Cadwaladr; (4) that these threats which were uttered to Cadwaladr were communicated to Cadwaladrs son; (5) that the directors had no communication whatsoever with the plaintiffs (Mr. Elias Jones and Mrs. Jones); (6) that at the only interview which seems to have taken place between the directors and Mr. Elias Jones (a) there was nothing said by the directors on the subject of the prosecution of Cadwaladr and (b) there was no promise in words by the directors that they would not prosecute Cadwaladr. (7) That Cadwaladr, fearing prosecution, applied to his relations and mentioned to them the fact that if he did not get this money the directors intended to prosecute him; 8. that, the plaintiffs (Mr. Elias Jones and Mrs. Jones) knew that there was every prospect of prosecution of Cadwaladr if he did not provide the money. On appeal none of these findings of fact except one was questioned by the appellant. The only finding questioned on appeal was the item 8 above, namely that the directors did threaten to prosecute Cadwaladr. The Court of appeal, however, affirmed this finding, and took the facts as correctly found by Vaughan Williams J. in all respects. Upon the basis of the above findings, the Court of appeal proceeded to consider what the true result ought to be. Lindley L. J. observed that the law, as to what the giver of the promissory note must shew in order to protect himself from paying the notes which he had given, was very correctly stated by Lord Ellen-borough Wallace v. Hardacre (1807) 1 Camp. 45 at p. 46 where his Lordship said:

It was common enough, upon discovering that bank notes or bills of exchange had been forged, to send them back to the person from whom they had been received, and to get others that were valid in their stead. But it would be too much to say, that the consideration for these last was corrupt and illegal, and that they could not be rendered available in the hands of those whose object in getting possession of them was merely to exchange securities that were forged for others without this vice. If any bargaining could be shewn here to stifle a prosecution for a criminal act, the action certainly could not be maintained; but otherwise, the mere substitution would not invalidate the plaintiffs right to recover against the acceptor of this bill.

86. After quoting the above passage from the judgment of Lord Ellenborough, Lindley L. J. observed that the decisions were all uniform that in order to amount to a defence on the ground of illegality there must be an agreement not to prosecute, an agreement to stifle a prosecution. His Lordship, therefore, said that the substantial question for consideration was whether, under the facts found, the learned Judge was warranted in coming to the conclusion that there was an agreement not to prosecute. According to his Lordship upon the findings it was impossible to avoid coming to the conclusions, (1) that these promissory notes and other securities were given by the relatives in the expectation that Cadwaladr would not be prosecuted; (2) that they were given for the express purpose of preventing a prosecution of Cadwaladr, (3) that that purpose was perfectly well-known to the directors, (4) that the whole negotiation proceeded upon that basis. His Lordship thought he could not avoid coming to the conclusion (l) that there was an implied term or condition that they should not prosecute and (2) that they accepted these notes (a) knowing of such term or condition, and (b) without dissenting or intimating in any way whatever that they took the notes upon any other condition or upon any other terms. The case in Ward. v. Lloyd (1843) 7 Scott N.E. 499 was referred to with approval by Lindley L. J. Bowen L. J. classified the cases under two heads: (l) the cases where there is the suggestion of an agreement to stifle a prosecution; (2) the cases where there has been that which amounts to pressure or undue influence within the meaning attached to these terms by a Court of equity. With regard to the first class his Lordship observed:

The duty to prosecute, or not to prosecute, is a social and not a legal duty, which depends on the circumstances of each case. It cannot be said that it is a moral duty to prosecute in all cases. The matter depends on considerations, which vary according to each case. But the person who has to act is bound morally to be influenced by no direct motive. He is morally bound to bring a fair and honest mind to the consideration and to exercise his decision from a sense of duty to himself and others.

87. His Lordship then observed that the law requires that the exercise of this moral duty should not be made a matter of private bargain. It may be made a matter of private bargain in two ways: (1) if forbearance to prosecute is promised on condition of the receipt of a particular sum of money or a particular security, (2) if the forbearance is given in consideration of money or security actually received. His Lordship then pointed out that the difficulty in practice arises when reparation has been made by the offender. His Lordship observed:

It is not possible to deny embezzlement, like false pretences, is a crime committed against the public as well as against the individual, and, in deciding what steps should be taken to punish it, the person who has to deal with the case must, if he is to discharge his moral duty, conscientiously consider the public as well as himself. But still the subject of reparation does seem to me to be one which may fairly be taken into the consideration of the case. First of all, reparation is a duty which the offender owes quite independently of his fear of prosecution or otherwise, and it would be absurd to my mind to lay down as an impossible counsel of perfection that the relative of an offender and his friends are not justified, nay, even are not bound, in certain instances, to assist him to make reparation to those whom he has injured. It is impossible, therefore, to say that reparation is a thing which ought not to be made, as it is also impossible to say it is a matter which is not likely to affect the mind, and, to a certain extent, reasonably to affect the mind, of a person who has been wronged.

88. The law certainly is not anxious to discourage reparation. But if reparation takes the form of a bargain, then, the bargain is one which the Court will look upon with suspicion and will not enforce. Bowen L. J. then found that there was an implied promise not to prosecute and the consideration of the notes was the corrupt bargain to stifle the prosecution. Pry L. J. also found the same .implied agreement to stifle prosecution. This case was followed by the Judicial Committee Kamini Kumar v. Birendra Nath (37) 17 A.I.E. 1930 P. C. 100 as also in Neate v. Harding (41) 28 A. I. E. 1941 P. C. 95 where their Lordships of the Judicial Committee observed:

... it is of course necessary that each party should understand that the one is making his promise in exchange or part exchange for the promise of the other not to prosecute or continue prosecuting. In all criminal cases reparation where possible is the duty of the offender, and is to be encouraged. It would be a public mischief if on reparation being made or promised by the offender or his friends or relatives mercy shown by the injured party should be used as a pretext for avoiding the reparation promised. On the other hand to insist on reparation as a consideration for a promise to abandon criminal proceedings is a serious abuse of the right of private prosecution. The citizen who proposes to vindicate the criminal law must do so wholeheartedly in the interests of justice and must not seek his own advantages.

89. An analysis of all these cases will show:

1. (a) that the defence that the consent was caused by threat of prosecution should be kept distinct from the other defence that the promise was given because it was agreed that there would be no criminal prosecution, the first relates to the method of procurement of the contract; the second relates to the substance or purpose of the contract:

(b) (i) consent caused by threat will, at the worst, mean consent caused by coercion or undue influence -- the contract will only be voidable, (ii) consent given because of the agreement not to prosecute will render the resulting contract void;

2. that in order to amount to a defence on the ground of illegality attached to the substance or purpose of the contract there must be an agreement not to prosecute--an agreement to stifle prosecution;

3. that such an agreement may either be express or implied; but from its very nature such an agreement is seldom set out on paper;

4. that whether or not there was such an agreement is always a question of fact to be determined by the Court;

5. (a) that when the agreement set up is an implied one to be inferred from the circumstances, such circumstances ought to be shewn leading to the irresistible inference that such a contract was in fact made; (b) that in weighing the circumstances in cases where the act involves both a criminal offence and a tortious liability it should be remembered, (i) that, the injured is entitled to a reparation; (ii) that reparation is a duty which the offender owes quite independently of his fear of prosecution; (iii) that reparation may legitimately and reasonably affect the mind of the person wronged; (iv) that law encourages reparation; law certainly is not anxious to discourage reparation; (v) that where there is a debt actually due, the creditor may legitimately make use of threats of prosecution in order to induce the offender to give security for the deb

90. As has been pointed out above, the question whether or not there was an agreement to stifle prosecution in any particular case, will always be a question of fact. Remembering that such an agreement will seldom be set out on paper and perhaps will more often than not be only an implied one, the Court will always have a difficult task in arriving at a decision on the point. The difficulty is further enhanced by the recognition accorded to two conflicting interests, viz: (1) the individual interest of the injured and (2) the interest of society. No hard and fast rule can be conceived of in this respect and perhaps it is not yet possible to lay down any canon of valuing these conflicting and overlapping interests. Experience in this field has not yet been sufficient so as to be formulated into a rule of law.

91. In the case before us: (1) No such agreement was alleged in the written statement; (2) it is by no means clear that any prosecution for embezzlement was ever seriously contemplated; (3) the evidence given by the defendant, even if fully accepted, does not at all establish any such agreement; (a) it is not even the case of the defendant (i) that he gave the promissory note and the other security in the expectation that he would not be prosecuted, (ii) that his expectation was known to Mr. Jackson; (b) his case rather is that he was not at all afraid of criminal prosecution; (4) the evidence given by the plaintiff establishes the fact that the defendant really became penitent and there is nothing before us which would prevent us from holding that at least for the time being the defendant felt that reparation was a duty which he owed to the plaintiff company (the benefactor of the defendants family) and that he owed that duty quite independently of his fear of prosecution. Mr. Bose appearing in support of the appeal contends that assuming that the contract at its inception was procured by undue influence, it was only a voidable one u/s 19A, Contract Act. Consequently as in the case of agreements procured by misrepresentation, this only gave the defendant a right of choice or election. Such a right, when once exercised, is exhausted; whence it follows that, if by notice expressly given, or implied by conduct, the promisor elects to affirm, he can never afterwards claim to avoid; and that, if he has once elected to avoid, he can never afterwards be allowed to affirm in his own interests. There is no locus pcenitentic@ in either case. Mr. Bose relies on Halsbury, Laws of England, Vol. 23, Section 140. There is no quarrel with this proposition of law. But

if his right to relief is no more than a right to choose, on the other hand, it is no less he is not bound to choose one course rather than the other, nor is he bound to make any choice at all within a particular period of time, though he delays doing so at his own risk and peril;" (Halsbury Vol. 23).

92. Moreover, the right of choice accrues to the influenced promisor on the cessation of the influence. If the undue influence in the present case was due to Jacksons being in possession of the materials which would have enabled him to prosecute the defendant at any time he chose, and, if this fear of prosecution dominated the mind of Benoy, then we cannot say that the dominating cause ceased when Ex. 4(J) was written, or when the so-called ratifications were made. Coming to the other part of the transaction, viz., the deposit of the title deed with the intention of creating the mortgage, the defendants case in the written statement, besides being based on the vitiating causes affecting the pronote, and therefore the whole transaction, was that of denial of the factum of deposit. His case further was that the same was taken by the said Mr. Jackson on a false representation. At the hearing the defendant said:

I was taken by Mr. Jackson to the Office of Messrs. Orr Diguam & Co., and he went to the office of Mr. S. B. Bose and I waited outside; sometime after that I was called in and Mr. Jackson handed me a typed pronote for Rs. 28,000 which I signed. Then Mr. Bose who was looking for something handed Mr. Jackson a paper which, on looking at the top, I found to be my title deed. This Ex. 1 is not the pronote which J signed on that date. It was a typed pronote. I had no idea what an equitable mortgage was. Nor did I mean to create any such mortgage . . . .

93. As to how the title deed went to Mr. Jackson he said:

...In the evening at about 6-30 P. M., when I was locking up the cash (9th) when the lid of my cash box was open, Mr. Jackson came and said that some security was wanted by the auditors who, otherwise would report the matters to the Head Office. I said I had no security, when he said if I have any life policy. I said none. Then he chanced to look into the box where the title deeds of my house remained which I were to hand over to Messrs. Mackintosh Burn & Co. contractors. This remained in the office because my solicitors sent it down to my office and I was addressed in my office address. He took that deed, i. e., he picked it up and said that he would show it to the auditors whether it would do for the time being and thus saying he went away; Mr. Jackson locked the title deeds in his office....

94. In the course of his cross-examination he said:

I did not tell Mr. Sree Bhusan Bose that the statement was all wrong. I made no protest to sign this in his presence. The deposit of the title deed was on the same date. Nor did I know of my mortgage transaction. I know that according to the agreement with Messrs. Mackintosh Burn & Co., I had to deposit the title deeds but never did I know that that would mean mortgage. It might be that for their satisfaction about my title this had to be done. On 16th January I was told by Mr. Jackson that other creditors of mine approached him, before I got summons from Mackintosh Burn & Co. I have no idea that an equitable mortgage had been executed. On 16th January 1935 I appreciated that. I had no idea on the 16th whether it was a mortgage or not....

His solicitor Mr. J. K. Sarkar wrote a letter (Ex. 4J) on 25th February 1935 to the plaintiff company which clearly indicates that the deposit was made to create mortgage, The defendant referring to this letter says:

Mr. J. K. Sarkar was my solicitor. The letters written were according to my instructions. I told him all the facts that I am not responsible for any defalcation and that I created no mortgage and that the deposit, was not made by me with a view to create any equitable mortgage. Mr. J. K. Sarkar may be in Calcutta.

The evidence on the plaintiffs side is given by P. Ws. 1, 2 and 8 in support of this mortgage. The entry in the Solicitors Day Book (Ex. 12) is also proved to corroborate their evidence. P. W. 1 Jackson said:

... The promissory note was handed over to me and Mr. Bose handed the title deeds to Benoy Babu to hand (over) to me officially to create an equitable mortgage on the property. A further document was banded over to me by Mr. B. Bose which I understand to be a memorandum of the deposit and further note was handed over to me which was a draft of the notification to be advertised in the newspaper. This is the promissory note. Defendant signed it voluntarily. It is marked Ex. 1 on the side of the plaintiff. I did not exercise any undue influence or coercion on him to obtain it. This is the title deed which was handed over to me by defendant. There was no fraud or undue influence or coercion practised on him then. This is the original letter of 9th January 1935 written by defendant. This is the original memorandum of deposit. It was signed by Mr. S. B. Bose and Mr. P. () C. Mallik in my presence on 10th January 1935. It was typewritten. It is marked Ex. 2.

P. W. 2 Sribhusan said:

Benoy Babu was brought in my room by Mr. Jackson. When I asked him (Benoy) about the matter he said that he had defalcated and was prepared to pay up the amount if time was given and he was willing to execute such document by way of security and deposit his title deeds. The amount for which title deeds would be deposited was also discussed and Mr. Jackson said that Benoy Babu had agreed to charge his property for Rs. 50,000 as that would be the value of his property. As I had an appointment then I told Mr. Jackson to leave the document with me and come later in the day. Mr. Jackson came at about 4 Oclock in the same afternoon. I told him that I considered the matter and inspected the document of title and in my view Benoy Babu should execute a pro-note for Rs. 50,000 and make a formal deposit of the title deeds of his property No. 110, Syed Ameer AH Avenue, with Mr. Jackson by way of equitable mortgage. I asked Benoy Babu whether he had created any incumbrance over the property. He said he had not done so. Benoy Babu then wrote out a pronote for Rs. 50,000 the wordings of which I dictated and I handed to him his title deed to enable him to make a formal deposit of the same with Mr. Jackson. At this time I phoned from my room to another Assistant in our office so that he could be present at the time of the deposit. That gentleman came and Benoy Babu deposited the title deed i. e. he handed the document of title to Mr. Jackson and also made over the pronote to him. Then Benoy Babu went outside my room.

P. W. 8, the other solicitor, supported this statement: The learned Subordinate Judge arrived at the conclusion that "No valid equitable mortgage by deposit of title deed, was made". His conclusion was based on the following findings: (a) There was no agreement to deposit the title deed before it was given to Mr. Jackson; (b) Mr. Jackson practically managed to get the title deed from Benoy after the same was handed by the motor car driver to the defendant; (c) It is clear, if we give full value to the evidence of Mr. Jackson, that his getting possession of this title deed was not juridical possession for it was not handed to him by Benoy in pursuance of an agreement; (d) This title deed found its place from Mr. Jackson into the drawer of Mr. S. M. Bose, and Benoy who was on that fateful day apprehensive of criminal proceedings and whose mind was not eased by Mr. Jackson giving him an assurance, was handed over the deed by Mr. Bose and he by way of automaton made over the deed to Mr. Jackson; (e) Mr. Jackson who was defendants office master held a real authority over Benoy and was in a position to dominate the will of Benoy and he used such position in obtaining the documents, i. e., the pronote, the Ex. 4A, power of attorney and others, (p. 130); (f) The plaintiff should have proved that Mr. Jackson was not in a position to dominate the will of Benoy in the matter of execution of the pronote and other documents as the onus shifted, the moment Mr. Jackson is found to have exercised undue influence and used his real position over Benoy and got the documents from him; it should have further been shown by the plaintiff that Benoy had independent advice but except in the matter of execution of power of attorney it is not shown that Benoy who was simply obeying his master had such advice when he executed the pronote and made over the title to Mr. Jackson either in the office of the solicitor, Mr. Bose or in the street when his motor driver is said to have produced the document which Mr. Jackson wanted to lock up in his safe custody (p. 189); (g) The handing of the title deed in the office of Messrs. Orr Dignam & Co. was not a valid and legal deposit: (p. 180).

95. I have already set out the evidence on the point and, in my opinion, the case of the defendant that he did not understand the transaction at all cannot be believed. The solicitors evidence clearly establishes the fact that the deposit of the title deed was made by the defendant and was made with the intention of creating security for the debt of the promissory note. This evidence finds ample support from the contents of Ex. 4, written by the defendants solicitor subsequent to the date of the transaction. As regards the vitiating causes we have already discussed them in connection with the procurement of the promissory note and in our opinion there was none to vitiate this transaction. We are therefore of opinion that the promissory note and the equitable mortgage were perfectly valid and did create liability of the defendant. There remains then the case of the defendant that the liability, if any, was discharged by the subsequent event that happened in the case, viz., by the arrangement arrived at with the auditors.

96. The case of the defendant on this point may be arranged under the following heads: (1) That the promissory note and the deposit of the title deed created, at best, only a liability destructible on the happening of an event, (viz., recovery from the auditors of the amount which might be found out as not properly accounted for); the amount has been recovered from the auditors and consequently the liability of the defendant ceased to exist thereafter; (2) That the promissory note and the deposit of title deed were taken with the understanding which amounted to an undertaking given on the part of the plaintiff company that any money recovered from the auditors would be taken as acceptance by the plaintiff of the performance of the promise involved in these transactions; consequently by accepting the payment from the auditors the plaintiff accepted performance of the promise and the promise became unenforceable in law by the plaintiff against the defendant u/s 41, Contract Act; (3) That apart from any such understanding and assurance given by the plaintiff company its acceptance of payment from the auditors amounted to an acceptance of the performance of the defendants promise within the meaning of Section 41, Contract Act, and consequently the promise became unenforceable thereafter; (4) That on a proper construction of Ex. 4 (z) .9 whereby the plaintiff discharged "all other persons concerned from all further liability," the liability of the defendant under the promissory note and the deposit of the title deed was also discharged. The defendant in his written statement, para. 8, made the case that the documents were taken from him on the distinct understanding and assurance given by Mr. Jackson of the plain, tiff company that the same would be returned to the defendant without making use of the said documents at any time at any place as soon as such amount as might be found out as not properly accounted for was recovered from auditors. Jackson denied the story of this alleged understanding and assurance. He said in his examination-in-chief:

It in not a fact that I gave him an assurance that his title deeds would be returned to him as soon as the amount found out as not properly accounted for would be recovered from the auditors. I had no idea then that the amount would be recoverable and could be recovered from the auditors. There was no understanding between defendant and me that no liability would arise against him by deposit of his title deeds with me.

97. In his cross-examination Jackson was not asked anything about the story of this understanding or assurance. He was cross-examined only on the point whether or not he told the defendant that the latter would not be held responsible for anything found due or missing by the auditors. Jackson denied that he said any such thing. The learned Subordinate Judge did not accept this part of the case of the defendant. We are also unable to accept it. The first two points raised by Mr. Noad on behalf of the respondent therefore do not at all arise. As regards the third point, Mr. Noad for the respondent contends: (1) That the promise in the promissory note given by the defendant (EX. 1) is to repay the money defalcated by the defendant subject to a maximum of Rs. 50,000; the auditors paid Rs. 60,000 in full payment of the money defalcated by the defendant, and the plaintiff company accepted that payment; consequently this amounted to acceptance of performance of the promise (given by the defendant) from the auditors within the meaning of Section 41, Contract Act; or (2) That the promise, in the promissory note (Ex. 1) is to repay the money had and received: liability for money had and received" is a liability in quasi contract; the principle underlying the provisions contained in Section 63, Contract Act, applies to such a case also; the promisee company settled the liability of the defendant at Rs. 50,000 and took the promissory note; the amount of the money had and received is then settled to be Rs. 50,000 and the promise is to repay the money had and received and thus settled; the auditors themselves were not liable to quasi contract for money had and received; but what the auditors offered to pay was the money had and received by the defendant because this became possible by their negligence; it was therefore an offer to perform what the defendant had promised; this offer was accepted by the plaintiff and the plaintiff by accepting payment from the auditors accepted performance of the defendants promise from the auditors within the meaning of Section 41, Contract Act. Promise is defined in the Contract Act, thus:

2 (a). When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.

(b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted: A proposal, when accepted, becomes a promise.

The promise in the promissory note (EX. 1) is not to repay money had and received .or to indemnify the injured plaintiff for the loss sustained by it by the tortious act but to pay Rs. 50,000.

98. The motive for this promise or its object may be the repayment of money had and received or the indemnification for the tortious act. These might have been the basis of the promise, and abstinence on the part of the promisee (the plaintiff company) from seeking relief for money bad and received or for the tort might have been the consideration for the promise. But the promise is only to pay Rs. 50,000. What the auditors offered to do and ultimately did would appear from the correspondence between the auditors firm and the plaintiff company evidenced by Ex. 4 (a), 4 (b), 4 (y), 4 (z), 4 (z) 1. 4 (z) 3, 4 (z) 4, 4 (z) 5, 4 (z) 6, 4 (z) 7 and 4 (z) 9. The correspondence will clearly indicate that the plaintiff company demanded complete indemnification for the losses sustained by the defalcation and the auditors agreed to indemnify it partially. In estimating the loss the possibilities of recovery from the present defendant on the strength of the transaction in question in the present suit were taken into account. No doubt the valuation put on the defendants promise to repay was very small. But at the same time it is clear from the entire negotiations that the settlement between the plaintiff company and the auditors was arrived at keeping in view the possible performance of his promise by the defendant. The auditors therefore, never offered to perform defendants promise and the plaintiff company never agreed to accept performance of the defendants promise from the auditors. Both counted upon its performance by the defendant himself.

Coming now to the last point urged by Mr. Noad, EX. 4 (z) 9 runs as follows:

We hereby acknowledge to have received the sum of four thousand and five hundred pounds paid to us by Messrs. Price Waterhouse & Co., of 3, Fredrieks Place, Old Jewry, London, E. C. 2, on behalf of Messrs. Price Waterhouse Peat & Co. of Clive Buildings, Calcutta, which sum we accept in full and final settlement, satisfaction, and discharge of all claims of every kind whatsoever against the said Messrs. Price Waterhouse Peat & Co. as Auditors of our Branch Office at Calcutta and we hereby absolutely and finally discharge the said Messrs. Price Waterhouse Peat & Co., and all other persons concerned from all further liability.

99. Mr. Noad contends that the words "all other persons concerned" mean and refer to all the persons concerned in the incident of defalcation and therefore include the defendant as well, and that the words "all further liability" mean and refer to all the liabilities arising from or based on the defalcation in question and therefore include the liability arising from the promissory note as well. The plain reading of the document indicates that the words "all other persons concerned" mean and refer to persons other than Messrs. Price Waterhouse Peat & Co., and concerned in the claim against the said Messrs. Price Waterhouse Peat & Co., Mr. Noad contends that there cannot be any other person concerned in that claim and so, if we take this view, the words become meaningless surplusage. In my opinion the claim against Messrs. Price Waterhouse Peat & Co. being in respect of their negligence, and the actual negligence being of their agents, (the actual auditors who from time to time carried on the audit as agents of the firm of Messrs. Price Waterhouse Peat & Co.) these persons were also concerned in this claim, and it may be Messrs. Price Waterhouse & Co. of London, as the principal firm of which the negligent firm of Messrs. Price Waterhouse Peat & Co. of Calcutta was only a branch, were also concerned in the claim. The words referred to them and were intended to secure discharge for them as well.

100. If there is any doubt as to the manner in which the language used in this document is related to the existing fact, a reference to the entire correspondence, or at any rate only to the covering letter Ex. 4 (z) 5, will clearly show that the liability of the present defendant under the promissory note was not within the terms of the discharging agreement, and only the liability of the auditors arising from their negligence in auditing was in the contemplation of the parties. We are certainly entitled to arrive at the true meaning and effect of the transaction in the light of all the surrounding circumstances and, in our opinion, the true meaning and effect of the discharge is to discharge only the auditors and persons concerned with the liability arising from the negligence in the auditing of the plaintiffs accounts. Negligence of the auditors constituted a distinct injury, distinct from the injury involved in the defalcation committed by the defendant. Mr. Noad contends that if the story of the plaintiff as to the method of defalcation and manipulation of the accounts be "accepted, then1 gross negligence on the part of the auditors shall be the inevitable inference, and the negligence thus found will indeed be so gross that from it the inevitable inference will follow that the auditors wilfully connived at the defalcation and conspired with the defendants; consequently the auditor would be joint tort-feasors with the defendant and their discharge from all liability without any reservation would discharge the defendant also. No case of concert between the auditors and the defendant was made by either party in this case. The defendants evidence negatives such a case. The negligence of the auditors, however gross, as established in this ease, does not, in our opinion, necessarily lead to the inference of any such conspiracy. In my judgment, the promissory note and the equitable mortgage were for lawful consideration with lawful object and were not procured by any coercion or undue influence. The liability thereunder was not discharged by any subsequent event.

101. In the result, I agree that this appeal should be allowed and I fully agree with my learned brother in the order proposed by him.