Appeals Nos 51 and 52 of 1962
Appeals from the judgment and order dated June 12 1959 of the Kerala High Court in AS Nos
538 and 539 of 1954
V A Seyid Muhammad for the appellants 
section T Desai and A G Pudissery for the respondent No 1 April 15 1964
The Judgment of the Court was delivered by GAJENDRAGADKAR C J
These two appeals arise from two suits Nos 5 of 1947 and 32 of 1951 and the main point which they raise for our decision is whether the two document executed by the appellants and two of the respondents are unenforceable as being opposed to public policy under sec tion 23 of the Indian Contract Act hereinafter called the Act
The trial Court has answered this question in the affirmative
while the High Court of Kerala has taken a contrary view
Poulo Varghese and Poulo Thommi who are the sons of Ouseph Poulo were carrying on trade in hill produce at Always and in the course of their business they had borrowed from the branch of the Catholic Union Bank Ltd at Always large amounts
In that connection they had pledged goods with the Bank as security for the loan and the same had been deposited in a godown the key of which remained with the Bank
It appears that on the 10th February 1947 747 the Officers of the Head Office of the Bank inspected the godown and it was discovered that there was considerable shortage of the goods pledged
Thereupon the Secretary of the Bank lodged a complaint with the Police that Ouseph Poulo and his two sons who had dealings with the Bank as well as Poulo Joseph another son of Ouseph Poulo had col luded with the local Agent of the Bank and had fraudulently removed a substantial part of the pledged articles form the godown
The complaint also alleged alternatively that if the goods had not been fraudulently removed then the security offered by Poulo Varghese and Poulo Thommi was grossly inadequate to cover the large amounts advanced to them and that was the result of cheating
The Police registered this case and investigations began
At that time the parties settled their differences and the two documents in question were executed
The criminal complaint was filed on the 13th Februaryand the First Information Report was made on the 16th February 1947
On the 22nd February a hypothecation bond Ext 26 was executed by Ouseph Poulo his wife his three sons and the wife of another son in favour of the Bank for Rs 30000 
This bound covered immovable properties belonging to the executants
On the 27th February 1947 another document was executed by the same parties in favour of the Bank for Rs 35000  this document was called Kollappirivu Karar Ext
On the came day a receipt was executed by Poulo Varghese and Poulo Thommi which showed that the goods in the godown were valued at Rs 10000 and were surrendered to the Bank in partial satisfaction of the debts due from them to the Bank
This was followed by a hire purchase agreement by which the car owned by Poulo Thommi was transferred to the Bank and the same was conveyed back to him on a hire purchase agreement  the value of this car was taken to be Rs 50001 
The total amount due from Poulo Varghese and Poulo Thommi to the Bank was Rs 80024 5 9
As a result of the transactions in which the parties entered Rs 10000 were made good by surrendering to the Bank the goods in the godown Rs 50001 by transferring the car Rs 30000 and Rs 35000 by the hypothecation deed and the Karar respectively that left a balance of Rs 24 5 9 which was paid in cash
After this transaction had thus been concluded on the 28th February the Secretary of the Bank made a statement before the police that the Bank s claim had been settled and that he and the Managing Director of the Bank was satisfied that no goods had been removed from the godown as alleged in the complaint and that in collusion with the Agent of the Bank the debtors Poulo Varghese and Poulo Thommi had 748 cheated the Bank by over valuing the goods pledged but that no further action was necessary to be taken in that behalf
In consequence the criminal proceedings were dropped
That in substance is the nature of the transactions the character of which falls to be determined in the present appeals
On the 15th December 1947 Ouseph Poulo the father his son Joseph Poulo s wife Aelia and Joseph s wife Thressia filed a suit in forma paliperis seeking cancellation of the two documents in question on the ground that they had been executed to stifle criminal prosecution and that they were also vitiated by undue influence coercion and threat
The first defendant to this suit was the Bank and defendants 2 and 3 were the two debtors Poulo Varghese and Poulo Thommi the sons of Ouseph Poulo
This was suit No 51947
While this suit was pending the Bank instituted suit No 32 of 1951 on the 26th February 1951 and claimed to recover the amount due on the Karar from all its executants
The persons who had filed suit No 51947 were defendants 1 2 5  6 in this suit and defendants 3  4 were the debtors Poulo Varghere and Poulo Thommi
These two sets of defen dants filed two separate written statements 
but the common plea raised by them was that the document on which the Bank s suit was based was unenforceable under section 23 of the Act
The trial Court substantially upheld this defence with the result that suit No 5  1947 was decreed and suit No 321951 was dismissed
The Bank took this matter before the High Court by preferring two appeals Nos 538  539 of 1954
The High Court has reversed the conclusion of the trial Court in regard to the character of the impugned transaction and in consequence suit No 51947 has been dismissed and suit No 321951 has been decreed
That is how the plain tiffs in suit No 5  1947 have come to this Court with a certificate issued by the High Court
During the course of this judgment
we will refer to the Bank as the Bank
the persons who brought suit No 51947 as the plaintiffs and the two debtors as defendants 2  3
Before dealing with the merits of the controversy between the parties it is necessary to state briefly the true legal position in regard to the agreements which are held to be unenforceable on the ground that the consideration for which they are made is opposed to public policy
It is well settled that agreements which are made for stifling prosecution are opposed to public policy and as such they cannot be enforced
The basis for this position is that the consideration which sup ports such agreements is itself opposed to public policy
In India
this doctrine is not applicable to compoundable offences nor to offences which are compoundable with the leave of the 749 court where the agreement in respect of such offences is entered into by the parties with the leave of the Court
With regard to non compoundable offences however the position is clear that no court of law can allow a private party to take the administration of law in its own hands and settle the question as to whether a particular offence has been committed or not for itself
It is obvious that if such a course is allowed to be adopted and agreements made between the parties based  solely on the consideration of stifling criminal prosecutions are sustained the basic purpose of criminal law would be defeated such agreements may enable the guilty persons to escape punishment and in some others they may conceivably impose an unconscionable burden on an innocent party under the coercive process of a threat of the criminal prosecution
In substance where an agreement of this kind is made it really means that the complainant chooses to decide the fate of the complaint which he has filed in a criminal court and that is clearly opposed to public policy
In dealing with such agreements it is however necessary to bear in mind the distinction between the motive which may operate in the mind of the complainant and the accused and which may indirectly be responsible for the agreement and the consideration for such an agreement
It is only where the agreement is supported by the prohibited consideration that it falls within the mischief of the principle that agreements which intend to stifle criminal prosecutions are invalid
The sequence of events no doubt has relevance in dealing with this question but from mere sequence it would not be safe to infer the existence of the prohibited consideration
If in order to put an end to criminal proceedings an agreement is made in the execution of which persons other than those who are charged in a criminal court join that may afford a piece of evidence that the agreement is supported by the consideration that the criminal proceedings should be terminated
If the nature of the liability imposed upon a debtor by a previous dealing is substantially altered with a view to terminate the criminal proceedings that itself may be another factor which the Court may take into account in deciding whether the agree ment is supported by the prohibited consideration
But in weighing the different relevant considerations in such a case courts must inevitably enquire did one party to the transaction make his promise in exchange or part exchange of promise of the other not to prosecute or continue prosecuting As Lord Atkin observed in Bhowanipur Banking Corporation Ltd vs Durgesh Nandini Desi1 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 1 1942ILR
I Cal
1 750 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
That however is not to say that if reparation is made as a consideration for a promise to give up criminal proceedings it would not amount to an abuse of the right of private prosecution and would not attract the provisions of section 23 of the Act
The main point to remember is that the party challenging the validity of the impugned transaction must show that it was based upon an agreement to stifle prosecution
If it is shown that there was an agreement between the parties that a certain consideration should proceed from the accused person to the complainant in return for the promise of the complainant to discontinue the criminal proceedings that clearly is a transaction which is opposed to public policy vide V Narasimha Raju vs V Gurumurthy Raju1 Maharaja Srish Chandra Nandy vs Supravat Chandra2 Sudhindra Kumar Ray Chaudhuri vs Ganesh Chandra Ganguli3 and Kamini Kumar Basu vs Birendra Nath Basu4
What then are the facts in this case on which the plaintiffs seek to challenge the correctness of the conclusion of the High Court that the impugned transactions are not invalid Dr Seyid Muhammed for the plaintiffs has urged that in dealing with the present dispute between the parties it is essential to remember that the complaint filed by the Bank against defendants 2  3 is found to be not a bonafide complaint and that according to him shows the true complexion of the impugned transactions
It is true that the trial Court has found that the complaint made by the Bank was not bonafide and the High Court has not in terms reversed that finding because the High Court disbelieved the direct evidence led by the plaintiffs and held that the agreement alleged by them was not proved
Dr Seyid Muhammed therefore contends that there is a finding recorded by the trial Court which has not been reversed in appeal and so we should deal with the main point in the light of this finding
If we had been satisfied that the complaint filed by the Bank was deliberately and dishonestly filed that no doubt would have assisted the plaintiffs to a very large extent but after carefully considering the material evidence on this point we are satisfied that the trial Court was in error in coming to the conclusion that the Bank had filed the complaint malafide
The complaint in terms made three material allegations
It alleged that though the goods pledged by defendants 2 and 3 were of a very low value they were 1  3 1939 ILR I Cal
2 AIR 1940 Cal
4 AIR 1930 PC 100
751 entered in the godown and in the relevant books as being worth a much larger amount
It also alleged that the goods though of a cheap quality were described as a very superior quality and it also said that substantial part of the goods pledged had been removed from the godowns for the purpose of causing loss to the Bank and for making unlawful profit
This complaint was filed against defendants 2 and 3 and plaintiffs 1 and 2 and another son Ouseph Poulo who is not a party to the present litigation
In regard to this last allegation of theft the complaint also averred that the key of the godown used to be with the agent of the Bank at Alwaye and the said agent had absconded
The complaint mentioned that the lorry in which the goods were removed bore the registration No 2923 and it belonged to the Qunani Motor Service
When the Secretary of the Bank gave evidence he stated that on an enquiry being made on the spot it was learnt that the goods had been removed in the particular lorry but later no evidence was forthcoming to support that report
He however adhered to the case of the Bank that the goods which were found in the godown were hopelessly inadequate to serve as a security for the advance made to defendants 2 and 3
The argument is that the allegation as to theft was dishonesty made by the Bank in its complaint in order to apply coercive pressure against defendants 2 and 3 and the members of their family
Prima facie this argument does appear to be attractive and if it had been sustained it might have helped the plaintiffs a good deal
There is however clear evidence on the record which negatives this contention
As we have already seen a receipt was passed in favour of the Bank surrendering the goods which were found in the godown to the Bank and these goods have been priced at Rs 10000 
It is common ground that the goods which were pledged with the Bank were intended to serve as a security for as much as Rs 80000 and odd and so there can be no doubt whatever that the goods found did not satisfy that requirement
The number of bags which were mentioned in the receipt its 534 that again does not represent the total bags of goods pledged with the Bank
So it is absolutely clear that the Bank realised on inspection of the godown that the security offered was wholly in adequate and it may well be that on the spot some people reported that the pledged goods had been removed
That is why the Bank stated all the material facts and alleged that either the substantial part of the goods which had been pledged had been removed or the goods which had been pledged were not at all enough to cover the amount advanced
In any case the agent of the Bank may have colluded with the debtors
Now in the view of the receipt passed by the debtors and the members of their family in favour of the Bank in which the value 752 of the goods found in the godown has been determined at Rs 10000  it would be unreasonable to suggest that the complaint made by the Bank was not bonafide
Besides in dealing with this dispute it is essential to remember that defendants 2 and 3 have not entered the wit ness box at all
They have left it to their father mother brothers and sister in law to fight this litigation
At every stage of the proceedings in both the suits we come across points of dispute on which defendants 2 and 3 alone could have given evidence
Did they pledge goods worth the amount advanced to them If yes did the Agent remove them or were the goods which were originally pledged not of enough value and by collusion with the Agent representation was made and accepted that they were valuable On all these matters it was necessary that defendants 2 and 3 should have taken the oath to support the case made by the plaintiffs when they challenged the validity of the transaction in question
The High Court has seriously commented on the fact that defendants 2 and 3 have deliberately avoided to face the witness box
In our opinion in the circumstances of this case this comment is fully justified
There is another piece of evidence which is equally material and which is in favour of the Bank and that evidence relater to the subsequent conduct of defendants 2 and 3
We have already noticed that a motor car belonging to one of the debtors was sold to the Bank for Rs 50001 and taken back on hire purchase agreement
Indeed this hire purchase agreement is a part of the transaction which settled the dispute between the parties
It appears that the debtors failed to pay the instalments under the hire purchase agreement and that led to a suit by the Bank
In this suit the debtors filed an elaborate written statement containing 21 paragraphs but we do not see any allegation that the hire purchase agreement was a part of a transaction which was invalid and as such the claim made by the Bank was not sustainable
In fact this suit was decreed in favour of the Bank
The conduct of defendants 2 and 3 in not raising a plea against the validity of the hire purchase agreement is not without significance
Similarly it appears that after the impugned transaction took place between the parties defendants 2 and 3 applied to the Bank for further advance on the 11th April 1947 and Mr Ramakrishna Nair who is the principal witness for the plaintiffs in the present litigation and who was the Legal Adviser of the Bank Supported the debtor s request for advance
This request was however turned down and it is obvious that the failure of the Bank to accommodate the debtors ultimately led to the present plea that the transactions in question are 753 invalid
Therefore we are satisfied that the subsequent conduct of defendants 2 and 3 clearly shows that they are not prepared to take the risk of facing cross examination and that is the reason that they have left it to their relatives to fight the present litigation
It is in the light of this background that we have to consi der the oral evidence in the case
The main witnesses on whose testimony Dr Seyid Muhammed has relied are Mr Nair PW I and Mr Pillai PW 3
Mr Nair is a practising lawyer and was at the relevant time the Municipal Chairman of Alwaye whereas Mr Pillai was a Municipal Councillor at that time
According to Mr Nair he took part in the execution of the relevant documents and advised the Bank
He stated that the documents were so executed for settling the criminal case
He also added that he told defendants 2 and 3 that if the mortgage deed and the agreement were got executed the criminal case could be dropped and his explanation was that he made that statement because the Managing Director and the Bank s Secretary Joseph had told him to that effect
It appears that for assisting the Bank in filing the criminal complaint this lawyer had claimed Rs 5001  but the Bank paid him only Rs 200 
That was one reason why he was dissatisfied
It also appears that he recommended to the Bank to give a loan to some persons including defendants 2 and 3 and his recommendation letters were ignored by the Bank
That war another reason why he was not feeling happy with the Bank
The High Court has taken the view that the statements made by this witness cannot be regarded as reliable or trustworthy and we are not prepared to hold that the view taken by the High Court is so erroneous that we should reverse it
In any case reading the evidence of this witness as a whole we would be reluctant to come to the conclusion that there was an agreement between the Bank and
defendants 2 and 3 at the relevant time which would attract the provisions of section 23 of the Act
Our reluctance is based on the somewhat unsatisfactory character of the evidence given by this witness as well as on the fact that defendants 2 and 3 who could have given evidence on this point have not stepped
into the witness box
The onus to prove the illegal character of the transactions was obviously on the plaintiffs and their failure to examine defendants 2 and 3 must largely contributed to the final decision on the issue
Mr Pillai who is the other witness on whose evidence the plaintiffs rely has been characterised by the High Court as untrustworthy but the infirmity in the evidence of this witness is that his evidence does not clearly or expressly lead to the conclusion that there was an agreement between the parties 754 that the document should be executed by the debtors in con sideration for the Bank withdrawing the criminal proceedings
The answers which he gave are somewhat vague and indefinite and it would be unsafe to make the said answers the basis of a definite finding against the Bank
The last witness on whose evidence Dr Seyid Muhammed has relied is plaintiff No 1 the father PW 7
His evidence is obviously interested and the fact that he has taken upon himself to speak to a transaction when defendants 2 and 3 who were directly concerned in the transaction did not come to give evidence considerably detracts from the value of his statements
Therefore having carefully considered the evidence in the light of criticism made by the High Court we are not prepared to accept Dr Seyid Muhammad s argument that he has made out a case for reversing the conclusion of the High Court
In this connection we ought to mention another point which is not irrelevant
The evidence given by the Secretary of the Bank Joseph shows that soon after the godown was inspected and before the complaint was filed defendants 2 and 3 offered to the Bank to make up for the deficiency in the value of the pledged goods
They appealed to the Bank that the discovery made by the bank on inspection of the godown should not be disclosed to anybody and that they would immediately furnish sufficient additional security
In order to carry out this promise they in fact delivered to the Bank certain documents of title in respect of the property which was ultimately mortgaged to the Bank but all the documents of title were not handed over and that is where the matter stood when the complaint war filed
Later the two impugned documents were executed and the complaint was withdrawn
The point on which Mr Desai for the Bank has relied is that the evidence of the Secretary shows that an agreement to furnish additional security had been reached between defendants 2 and 3 on the one hand and the Bank on the other even before the complaint was filed and so it would be unreasonable to suggest merely from the sequence of subsequent events that the impugned documents were executed with the object and for the consideration of stifling the criminal prosecution
Mr Desai argues and we think rightly that where the validity of an agreement is impeached on the ground that it is opposed to public policy under section 23 of the Act the party setting up the plea must be called upon to prove that plea by clear and satisfactory evidence
Reliance on a mere sequence of events may tend to obliterate the real difference between the motive for the agreement and the consideration for it
Did the parties offer to give security and execute the documents in consideration for the withdrawal of the criminal complaint by the Bank that is the question which has to be decided in the present appeals 755 and in proving their case the plaintiffs are expected to lead satisfactory evidence and in our opinion the High Court is on the whole right when it came to the conclusion that the evidence led by the plaintiffs is far from satisfactory
Therefore we are satisfied that the view taken by the High Court is right and cannot be reversed
The result is the appeals fail and are dismissed with costs one set of hearing fees
The appellants have been allowed to file their appeals in forma pauperis and so we direct that they should pay court fees which they would have had to pay if they had not been allowed to appeal as paupers
Appeals dismissed


Summary:
Two of the defendants in the two suits out of which the present appeals arose borrowed a sum of Rs 80024 4 9 from the respondent Bank in course of their business by pledging their goods
The Bank discovered that there was shortage in the goods deposited and through its Secretary lodged a com plaint with the police that the said defendants their father and brother had in collusion with the local agent of the Bank fraudulently removed part of the goods or in the alternative had made a grossly inadequate deposit to cheat the Bank
The Police registered the case and started investigation
The parties thereafter settled their differences by a transaction which consisted among others of a hypothecation bond for Rs 30000covering immovable property and a Karar for Rs 35000  which were executed in favour of the Bank by the parent of the said defendants by the said defendants themselves and their brother and his wife
On the Secretary of the Bank stating to the Police that the Bank s claim had been settled and any further action would be unnecessary the criminal proceeding was dropped
Thereafter the said relatives of the two defendants who had executed the hypothecation bond and the Karar brought a suit for the cancellation of the said documents on the ground that they had been executed to stifle the criminal prosecution and were as such unenforceable under section 23 of the Indian Contract Act
The Bank sued for recovery of the amount due on the Karar which was resisted on the same ground that the document was unenforceable under section 23 of the Contract Act
The said defendant debtors did not examine themselves
They did not raise the plea of unenforceability in respect of a hire purchase agreement which formed a part of the transaction in question and on which the Bank brought a suit against them and got a decree
After the said settlement these defendants applied for further loan from the Bank
There was evidence to show that an agreement to furnish additional security had been reached between the said defendants and the Bank even before the complaint was filed
The trial Court held that both the documents fell within the mischief of section 23 of the Contract Act and decreed the first suit and dismissed the second
The High Court on appeal took the contrary view and reversed the decision of the trial Court accordingly
The plaintiffs in the first suit appealed to this Court
Held It was well settled that agreements made with the sole purpose of stifling prosecution were opposed to public policy since the consideration which supported such agreements was itself against public policy and could not therefore be 746 enforced
In India however this doctrine was not applicable either to compoundable offences or to offences which could be compounded with the leave of the Court
The onus was strictly on the party that impugned the trans action to prove that it was based on an agreement to stifle the prosecution
It must be able to show that on a certain consideration proceeding from it the complainant in return promised to discontinue the criminal proceeding and then alone the transaction would be one against public policy
V Narasimha Raju vs V Gurumurthy Raju 1963 3 SCR 687 Maharaja Srish Chandra Nandy vs Sapravat Chandra AIR  Sudhindra Kumar Ray Chaudhuri vs Ganesh Chandra Ganguli 1939 IL R I Cal
241 and Kamini Kumar Basu vs Birendra Nath Basu AIR 1930 PC 100 referred to
Bhowanipur Banking Corporation Ltd vs Duresh Nandini
Dasi Cal 1 considered
But in judging a particular agreement distinction must be made between the motive for the agreement and the considera tion for it and subsequent events should not be allowed to confuse the issue
It was clear in the present case that the plaintiffs had failed to discharge the onus that lay on them and the decision of the High Court was therefore correct