Coercion is the practice of compelling a person or manipulating them to behave in an involuntary way (whether through action or inaction) by use of threats, intimidation or some other form of pressure or force. Coercion may involve the actual infliction of physical or psychological harm in order to enhance the credibility of a threat. The threat of further harm may then lead to the cooperation or obedience of the person being coerced.
The term is often associated with circumstances which involve the unethical use of threats or harm to achieve some objective. Coercion may also serve as a form of justification for a conclusion in a logical fallacy or non-logical argument. Coercion may also refer to more subtle means of influence such as sweet talking, begging, charming, and seduction.
Any person’s set of feasible choices is obtained from the combination of two elements: the initial endowment (the perceived initial state of the world, which the chosen actions are going to affect) and the transformation rules (which state how any chosen action will change the initial endowment, according to the person’s perception).
It follows that coercion could in principle take place by purposely manipulating either the transformation rules or the initial endowment (or both). In practice, however, the detailed choice reaction of a victim to a change in initial endowment is generally unpredictable. Hence effective coercion can only be carried out through manipulation of the transformation rules. This is done by the credible threat of some injury, conditional on the victim’s choice. Often, it involves the actual inflicting of injury in order to make the threat credible, but it is the threat of (further) injury which brings about the change in transformation rules.
Coercion does not remove entirely the victim’s ability to choose, nor does it necessarily affect his or her ranking of potential alternatives. As Roman jurists used to say, coactus volui, tamen volui (I willed under coercion, but still I willed). In the terminology of rational choice theory, coercion does not remove a person’s objective function, but only affects the constraints under which such function is maximised. Yet, the purpose of coercion is to substitute one’s aims to those of the victim. For this reason, many social philosophers have considered coercion as the polar opposite to freedom.
Various forms of coercion are distinguished: first on the basis of the kind of injury threatened, second according to its aims and scope, and finally according to its effects, from which its legal, social, and ethical implications mostly depend.
"Coercion" is the committing or threatening to commit, any act forbidden by the Indian Penal Code (45 of 1860), 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.
Explanation: It is immaterial whether the Indian Penal Code (45 of 1860) is or is not in force in the place where the coercion is employed.
A, on board an English ship on the high seas, causes B to enter into an agreement by an act amounting to criminal intimidation under the Indian Penal Code (45 of 1860).A afterwards sues B for breach of contract at Calcutta. A has employed coercion, although his act is not an offence by the law of England, and although section 506 of the Indian Penal Code (45 of 1860) was not in force at the time when or place where the act was done.
TECHNIQUE OF CAUSING COERCION:-
1. Committing or threating to commit any act forbidden by the indian penal code;or
2. Unlawfully detaining or threating to detain any property.
ACTS FORBIDDEN BY IPC:-
It is clear that as thus defined implies a committing or threatning to commit some act which is contrary to law.GABARDHAN DAS B. JAI KRISHNA DAS(1900)22 ALL 224The section has given rise to few decision .
· CHICHAM AMIRAJU VS. CHIKAM SESHAMMA. Similarly ,the privy council observed in askari mirza vs. Bibi jai kishori that cases brought under this particular branch of section 15 of the contract act must be of rare occurance .” a clear illustration would be consent obtained at the point of pistol, or by threating to cause hurt,or by intimidation or by threatening to burn a man’s house or slashing his valuable picture.THE SIBOEN AND THE SIBOTRE,RE,(1976)1 LLOYD,S REP 293
· An intiguing question in this connection was before the madras high court CHICHAM AMIRAJU VS. CHIKAM SESHAMMA.
· By threat of suicide ,a hindu induced his wife and son to execute a release in favoure of his brother in respect of certain properties which they claimed as their own. It was held by majority “that the threat of suicide amounted to coercion with in section 15 and the release deed was, therefore voidable. The differance of opinion realated to whether suicide is an act forbidden by the indian penal code. An attempt to commit suicide is punishable under the code ,but there is no pnishment provided for suicide . the majority consisting WALLIS CJ and SESHAGIRI J believed that the man who commits suicide goes unpunished,not becouse the act is not forbidden but ,becouse there is nobody left to be punished. OLDFIELD J dissented on the ground that unless an act is made punishable it cannot be said to be forbidden.
· “when a criminal prosecution is instituted against a person and such person fearing the result of the prosecution enters into an agreement in favour of the complainant in consideration of his abondening the prosecution,it cant be held simply upon these facts that the consent of such person was caused by coercion.
· To the threatning a criminal prosecution is not perse an act forbidden by the indian penal code. Such an act could be one forbidden by the indian penal code if it amounted to a threat to a file a false charge.” This was pointed out by the privy council in ASKARI MIRZA VS. BIBI JAI KISHORI.(1912)16 IC 344
· A minor ,having borrowed on two martage deeds ,agreed to a compromise decree although the mortgages ere void. Subsequently he pleaded that the enterd in to the compromises becoise he was threatning with the prosecution for falsely mis representing his age and that his amounted to coercion . thier lordship observed : the law as contained in section 15 is much wider than anything to be found in the english authorities and in india it is not correct to say that a contract is vitiated merely by proof of a threat to bring a criminal charge. Of course, if the charge of cheating was a true one,there is an end to the plainteiff case,for a threat to bring such a charge would not be an act forbidden by the indian penal code.
· As the court below recoreded no finding as to the truth or falsity of the charge , the case was reffered back for re-trial. The plea was that the plaintiff was disopossessed of promises forcibly under threat that he would be arrested and detained under the maintenance of internal security act. The court said that such threat would fall with in the mis cheif of s. 15. KISHAN LAL KALRA VS. NDMC,AIR 2001 DEL 402
DETENTION OF PROPERTY:-
A illustration of the detentino of property is provided by a n early case. The plaintiff had pledgee insisted that an additonal 10pound interested was also owed. The plaintiff paid this to reddem his plate and then sued to recover it back. The court allowed it. He was in immediate need of his article and the defendant extracted from him an extra amount by refusing to deliver it.ASTLRYVS. REYNOLDS(1731)2STR915:93ER 939
Refusal by a government department to release the payment of a contractor unless he gave up his claim for extra rates amounted to coercion under the category of detention of property.
SUPERINTENDING ENFINEERING,IRRIGATION DEPTT. V PROGRESSIVE ENGG. CO.(1997)4 ANDH LD 489 DB
COMPARISON WITH THE ENGLISH LAW:-
The following comparison has been attempted by the madras high court. KARUPPAYEE AMMAL V. KARUPPIAH PILLAI,(1987)1 MAD LJ 138
“ what the indian law calls ,coercion is called in english law ‘duress or menace’.duress is said to consist in actual or threatened violence or imprisonment of the contracting party or his wife,parent or child ,by the other party or by anyone in s.15 is much wider and includes the unlaw ful detention of property also. Further,coercion may be committed by any person,not necessarily a party,or his party ,or his parent,wife or child. It may be directed against any person ,even immediate voilence and also unnerve a person of ordinary firmness of mind,thses requistes are not necessary in indian law.”
1. GOBERDHAN DAS VS. JAI KISHEN DAS(1900)22ALL224
The only grounds upon which the award was contested in the Court below and in
this Court are--(1) that by reason of coercion or undue influence exercised on the mind of the appellant there was no valid submission to arbitration; and (2) that there was no award in the sense of a judicial determination by the arbitrators of the matters submitted, but the arbitrators merely accepted a settlement of those matters by other
persons, and mechanically signed an award which was put before them for
There had been certaindealings between the appellant Gobardhan Das and one Gopal Das, the son ofthe plaintiff-respondent Jai Kishen Das. Gopal Das was a young man of twenty-two. The appellant was his cousin. It appears that the appellant got Gopal Das to execute a deed of sale of Gopal Das' share in certain ancestral property.
There were two deeds, one was taken in the name of Gobind Das, a relative of the appellant, and after that there was a further deed executed by Govind Das in the appellant's favour. On the 26th November 1896, a complaint was filed before a Magistrate by Gopal Das against Gobardhan Das, in which he charged the appellants with offences of criminal breach of trust and cheating under the Indian Penal Code in connection with the execution of the deeds, and on the following day, the 27th, the Court directed that the case should be sent to the police for investigation. While it was still under investigation the submission now in question was executed on the 4th December 1896. The submission is signed by Jai Kishen Das and the appellant Gobardhan Das. It recites a dispute between the executants; it states that "the parties are ready to have recourse to the Civil and Criminal Courts," and that therefore, at therequest of some of the relatives of the parties, in order to settle the matter, they appoint certain persons as arbitrators, and declare that they will accept whatever award the arbitrators may honestly make with respect to the dispute relating to the sale deeds.
It might have taken a very different view of the submission and the award if the objection had been taken in either the Court below or in this Court that the submission was void as being in part for an unlawful consideration, or for an object opposed to public policy within the meaning of Section 23 of the Contract Act. It might very well have been contended that the submission had for its object the stifling of a prosecution for offences not compoundable under the provisions of the Code of Criminal Procedure, and if any such objection had been made, No such defence or issue has, however, been raised, and I do not think we should go out of our way to raise it for the appellant, when neither this Court nor the Court below has been asked to do so.
It was not the appellants' ease in the Court below, nor is it his case in this Court, that the agreement of submission to arbitration is void on the ground that the object or the consideration of the agreement is unlawful, that object or consideration being the stifling of a criminal prosecution. No issue was joined on that point in the Court below, and no plea has been urged in the memorandum of appeal to this Court to that effect. It is not necessary, therefore, to consider that question in this appeal. The only ground, upon which the validity of the submission was questioned was that of coercion, or undue influence.
It is clear that there was no coercion; and on the evidence it cannot be held that there was undue influence within the meaning of Section 16 of the Contract Act. On this point I agree with the observations of the learned Chief Justice and have nothing. As regards the award itself, the evidence shows that it embodies the result of a settlement come to by the parties to which both of them consented. They signed the award as indicating their acceptance of it, and it has not been proved that the appellant's consent to the settlement was procured by undue influence.
KISHAN LAL KALRA VS. NDMC, AIR 2001 DEL 402:-
The plaintiff was forced to sell his furniture etc. at Rs. 90,000/-. This was at the instance of the defendant who had threatened him with detention under MISA if plaintiff docs not do so. Therefore, the defendant would be liable for the loss caused to the plaintiff on this account. I agree with the counsel for the defendant that as jar as gratuity is concerned, the same is paid for the services rendered by the workmen.
This amount plaintiff was to pay to his workmen (even if the license were to continue, till the end of its usual term) on the expiry of term while dispensing with the services of the workmen. Therefore, payment made by me plaintiff to his workmen on account of gratuity cannot be attributed to the illegal dispossession of the plaintiff from the suit property. There cannot be a direct and concrete evidence of such a loss. The damages on account of loss of profit are in the nature of prospective, and therefore, necessarily contingent. It is now well established principle of law that the mere fact damages cannot be assessed with certainty does not relieve the wrongdoer of the necessity of paving damage.
License deed to the plaintiff was granted for five years from 1st June, 1968 by NDMC to run an open air restaurant in Connaught Circus, New Delhi, which was so started and run under the name and style of 'Ramble Open Air Restaurant'.
The lease rental was Rs.5,104.00 per month for the said land and Rs. 250.00 per month for the car parking area. During June, 1973 the lease got extended by NDMC for another five years (up to 31st May, 1978) at increased rental of Rs.6,380.00 per month for the land and Rs.312.50 per month for the car parking. During June, 1975 Emergency was proclaimed under Article 352 of the Constitution. While the lease was subsisting till June, 1978, the NDMC on 21st June, 1976 initiated proceedings for eviction under Section 4 of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971 (for short "PP Act"). On 26th June, 1976 the plaintiff made a representation in detail to the NDMC explaining his investment and praying that it should not be jeopardised.
On 24th July, 1976 the plaintiff filed a detailed reply before the Estate Officer to the show cause notice.
On 3rd August, 1976 in the proceedings before Estate Officer, NDMC sought time to reply the objection and the matter was adjourned to 22nd September, 1976 for evidence of NDMC. While these proceedings were pending and were at the stage of NDMC's evidence, on 7th August, 1976 the NDMC took the law into its own hands and sent a
demolition squad with police force to take forcible possession of the premises without due process of law, ignoring the fact that proceedings before the Estate Officer had already been initiated by the NDMC. After demolishing the structures and under threat of a blank warrant of arrest under MISA, possession was taken by the NDMC and the plaintiff was forcibly dispossessed.
On 22nd September, 1976, the case before Estate Officer was adjourned to 19th October, 1976 and again to 4th December, 1976 at the instance of NDMC. NDMC absented on that date before Estate officer and the case was again adjourned to 13th December, 1976 for recording evidence.
On 13th December, 1976 Mr. P.R. Gupta, Head Assistant of NDMC appeared and stated the possession of the premises in question had been "recovered" from the plaintiff and NDMC did not want to pursue the matter further and the case was dismissed. In March, 1977 Proclamation of Emergency was revoked. The Plaintiff (after representations to the NDMC by letters dated 6th December, 1975 issued a statutory notice on 10th May, 1977 to NDMC under Section 49 of the Punjab Municipal Act, 1911 but to no effect. In July, 1979 the plaintiff filed the instant suit for recovery of damages of his wrongful dispossession and loss of profits for the balance period of the lease.
The defendant filed written statement in which it is admitted that proceedings were initiated against the plaintiff under the provisions of PP Act. It is also admitted that the defendant licensed this premises to one Smt. Kaushalya Pahwa after removing the plaintiff. However, the defense of the defendant is that the premises were voluntarily surrendered by the plaintiff, and therefore, suit was not maintainable.
When the license was for a particular period which had not expired, the defendant had no right to terminate the said license prematurely and in any case dispossess the plaintiff without due process of law. It was submitted that the defendant had itself initiated the proceedings under the provisions of PP Act and while those proceedings were pending, the plaintiff was dispossessed forcibly. This was clearly illegal and amounted to breach of contract.In the absence of any cross-examination of the witnesses and/or any in rebuttal produced by the defendant, the court has to believe the narration of facts as disclosed by the plaintiff. As per this testimony of the plaintiff, the plaintiff was forced to sign the possession note under threat. The threat was that he would be arrested and detained under MISA. As per the plaintiff he was shown a blank MISA warrant signed by the competent authority and he was told that his name had to be filled in to detain him. Under these compelling circumstances, he was forced to not only sign the possession note but also forced to part with his entire belonging s for a paltry sum of Rs. 90,000/-.
Since it cannot be measured with precision as to what profits the plaintiff would have earned had he continued to run the restaurant for remaining term of the license and the
figure given by the plaintiff for the period he actually did business could be the best indicator. This is what the plaintiff has done and based on this formula the plaintiff has been able to prove the likely loss of Rs.5 lacs. The plaintiff is accordingly held entitled to the amount of
Rs.5 lacs under this head. The total amount of damages calculated in the aforesaid manner would come to Rs. 9,11,525.12 paisa.
The learned counsel for the defendant did not dispute and rather conceded that the court had the power to grant interest on the aforesaid damages from the date of suit. The plaintiff would accordingly be entitled to interest at the rate of 12 per cent per annum w.e.f. the date of institution of this suit till decree. The plaintiff shall also be entitled to future interest at the rate of 12 per cent per annum on Rs.9,11,525.12 paisa till the payment thereof . In view of the aforesaid discussion, the suit of the plaintiff is decreed in the sum of Rs.9,11,525.12 paisa with cost as well as interest at the rate of 12 per cent per annum w.e.f. 7th August, 1979 i.e. the date when the plaint was filed till the decree and future interest at the rate of 12 per cent per annum. Decree sheet be drawn accordingly.
Salar Jung Sugar Mills Ltd. etc. Vs. State of Mysore and Ors.(1971 sc 0625):
The appellants are the India Sugars and Refineries Ltd. and the Salar Jung Mills Ltd. The India Sugars and Refineries Ltd. is situated at Hospet in Bellary District in Mysore and the Salar Jung Sugar Mills Ltd. Is situated at Munirabad in Raichur District in Mysore. In order to appreciate the rival contentions on the first ground as to whether there was a purchase or sale of sugarcane the relevant legislation has to be looked into and facts and circumstances have to be ascertained for finding out as to what the actual transaction was. The Central Government was empowered by Clause 3 of the Sugarcane Control Order, 1955 to fix the minimum price of sugarcane to be paid by purchasers of sugar. Sale or purchase of sugarcane at a price lower than the price fixed under Section 3 was prohibited.
The Central Government, however, could fix an additional price under certain circumstances and contingencies. Clause 4 of the Order of 1955 gave the Government power to prohibit or restrict or otherwise regulate export of sugarcane from any area for supply to different factories and also to direct that no jaggery or sugar shall be manufactured from sugarcane except under and in accordance with the conditions specified in a licence issued in that behalf.
The Mysore Sugarcane Order, 1955 determined the crushing capacity of the appellant Salar Jung Sugar Mills Ltd. to be 1000 tons per day and the quantity of sugarcane required by the factory during the crushing season to be 1,50,000 tons. The Order further stated that the factory was to secure the quantity of sugarcane from the area specified in Schedule I and the quantity of sugarcane to be supplied by each grower was fixed at 95 per cent of the sugarcane grown by the grower. 1966 'factory' means any premises including the precincts thereof in any part of which sugar is manufactured by vacuum pan process, 'price' means the price or the minimum price fixed by the Central Government from time to time delivered at thegate of the factory or sugarcane purchasing center and 'reserved area' means any area where sugarcane is grown and reserved for a factory in terms of the Order. Clause 3 of the 1966 Sugarcane Control Order dealt with minimum price of sugarcane fixed by the Central Government having regard to (a) cost of production of sugarcane, (b) the return to the grower from alternative crops on the general trend of prices of agricultural commodities, (c) availability of sugar to the consumer at a fair price, (d) the price at which sugar produced from sugarcane is sold by producers of sugar, and (e) the recovery of sugar from sugarcane. Purchase and sale of sugarcane at a price lower than that fixed was prohibited.
At all relevant times sugarcane was declared to be an essential commodity. The various orders were made for regulating the supply of sugarcane to the factories having regard to the crushing capacity of the factory, the availability of sugarcane in the area and the need for production of sugarcane. This co-ordination between production and distribution of sugarcane on the one hand and production and distribution of sugar on the other hung together as complementary to each other in regard to the requirements of basic ingredient. The carving out of areas for production and distribution of sugarcane is necessary to preserve continuity of supply and to prevent shortage and defective distribution.
The regulation of supply of sugarcane by fixing the minimum price is an application of the principle of utilitarianism which receives the approbation and goodwill of both the grower and the factory so that then grower is assured of an economic competitive return and the factory is also assured of not being scared by soaring and fluctuating price to thwart and impede production and manufacture of sugar.
Counsel for the appellants extracted the famous dictum of Sir Henry Maine and submitted that the orders in the present case were retrograde step and the clock was put back by reversing the historical evolution from status to contract. What was emphasized by counsel for the appellants was as follows : The various Orders had the effect of bringing into existence the status of delivery by the growers and acceptance by the factory of sugarcane as a result of the statutory orders and there was no area of bargain. There was no element of will. There was no aspect of assent. The entire transaction was nothing but a regimentation of pattern of automatic supply and acceptance.
It was also said on behalf of the appellants that tax on purchase of sugarcane could not be collected by the appellants as tax. The High Court relying on the decision in Tata Iron & Steel Company v. State of Bihar  S.C.R. 1355 said that the mere circumstance that the appellant could not collect from the purchasers of the sugar the amount the factories had paid as purchase tax on sugarcane would not alter the nature or quality of tax. This Court in the case of Tata Iron and Steel Company said 'This is further made clear by the fact that the registered dealer need not, if he so pleases or chooses, collect the tax from the purchase and sometimes by reason of competition with other registered dealers he may find it profitable to sell his goods and to retain his old customers even at the sacrifice of the sales tax. This also makes it clear that the sales tax need not be passed on to the purchasers and this fact does not alter the real nature of the tax which, by the express provisions of the law, is cast upon the seller'. It therefore follows that the appellants cannot impeach the imposition or levy of sale tax on the ground that the appellants could not collect from the purchasers of sugar the purchase tax paid by the appellants on purchase of sugarcane.
Another contention was raised on behalf of the appellants that the authorities had not taken into account the varying rates of tax on purchase of sugarcane levied by different States while computing the cost of production of sugar in different States and fixing different selling prices of sugar. The High Court rightly did not entertain this contention because there were no materials to support the contention. For these reasons, the appeals fail and are dismissed with costs. There will be one set of hearing fees.
U.P. Co-operative Cane Unions Federations
Vs. West U.P. Sugar Mills Association and Ors. etc.
The controversy raised in these appeals by special leave and Transfer Petitions basically relates to the competence of the State Government to fix the State Advised Price for purchase of sugarcane by an occupier of a sugar factory over and above the minimum price fixed by the Central Government. The validity of the procedure adopted for ensuring the payment of the aforesaid price to a sugarcane grower is also under challenge.
The Sugarcane grower or the sugarcane growers' co-operative society and the occupiers of sugar factories have to compulsorily enter into an agreement in accordance with UP Sugarcane (Supply and Purchase) Order, 1954 (hereinafter referred to as 1954 Order) and the State Government can issue directions for recording of State Advised Price in the agreements which have to be executed for supply of sugarcane. Shri Dwivedi has also urged that parchas are issued to the sugarcane growers and in exercise of the power conferred by 1953 Act, the State Government can direct that the State Advised Price be recorded in the parchas which are issued to sugarcane growers.
Learned counsel has also submitted that the Central Government does not take into consideration the various bye- products like molasses, bagasse and press mud which are produced during the course of production of sugar and the sugar mills make considerable amount of money from the sale of aforesaid bye-products especially since molasses has been decontrolled after 1991. The State Government, having regard to the local conditions and also the amount earned by the sugar factories from the aforesaid bye-products, fixes the price of the sugarcane which is more realistic. Learned counsel has further submitted that there is no repugnancy between the minimum price fixed by the Central Government and the State Advised Price fixed by the State Government and the view to the contrary taken by the High Court is clearly erroneous in law.
The provisions referred to above have been made for the benefit of the sugar factory so that it is assured of and gets a continuous supply of freshly harvested sugarcane in quantity according to its crushing capacity and for the whole duration of the crushing season. No doubt the cane grower also gets some advantage in the sense that purchase of his yield is assured but at the same time many limitations and restrictions are imposed upon him. In view of the aforesaid statutory provisions, the position of a cane grower becomes entirely different from that of a farmer producing any other kind of agricultural crop where there are absolutely no restrictions upon him. He is at absolute liberty to harvest his crop at his convenience without being dictated by a third party, to sell it to anyone whomsoever he likes and whenever he wants. It is in this scenario, which is not the creation of the cane grower but of the statutory provisions operating in the field, that we have to examine the question whether the State has any authority or power to fix the price of the sugarcane supplied to a producer of sugar (sugar factory).
Dai-ichi Karkaria Private Ltd., Bombay
Vs. Oil & Natural Gas Commission Bombay and another AIR1992Bom 249
The plaintiff is a company incorporated under the provisions of the Companies Act, 1954 carrying on business, inter alia, of manufacture of speciality chemicals. The 1st defendant is a statutory Corporation constituted under the provisions of the Oil and Natural Gas Commission Act, 1959. The 2nd defendant is a nationalised Bank.
On 4th May 1984, the defendant No. 2 furnished a Bank Guarantee in favour of the defendant No. 1 at the instance of the plaintiff in a sum of Rs. 1,50,00,000/-, a copy whereof is annexed as Exhibit `T' to the plaint in this suit. The said bank guarantee recites that the defendant No. 1 purchaser had placed a supply order dated 12th December 1983 with the plaintiff for supply of Four Point Depressant/Flow Improver, Daitro-lity-MNF-1206, hereinafter referred to as "the said goods". It was recited in the said bank guarantee that the plaintiff had requested the defendant No. 1 to give an ad hoc payment up to an amount not exceeding Rs. 1,50,00,000/-in that behalf.
Prior to the execution of the said Bank guarantee, it was contemplated by the parties, rightly or wrongly, that the Government of India might perhaps be persuaded to refund the amount of Customs duty paid by the plaintiff on the raw material used by the plaintiff in manufacture of goods to be supplied to defendant No. 1 under the said order. In this context, it was recited in the said order that the defendant No. 1 had agreed to make ad hoc payment to the plaintiff not exceeding Rs. 1,50,00,000/-, provided the plaintiff undertook to refund the said amount to defendant No. 1 within 10 days from the date of receipt of "refund of the customs duty on the imported raw material" from the concerend authorities or within six months from the date of the guarantee, whichever was earlier, and the plaintiff agreed to furnish to defendant No. 1 a bank guarantee for a sum of Rs. 1,50,00,000/- in that behalf.
It was recited in the said bank guarantee that defendant No. 2 irrevocably and unconditionally guaranteed as a prime obliger to repay the amount which may be received by the plaintiff as ad hoc payments, the maximum liability being to the extent of Rs. 1,50,00,000/-. The defendant No. 2 agreed to pay the said amount without any demur merely on a demand from defendant No. I staling that the plaintiff had failed to repay the said amount Rs. 1,50,00,000/- or part thereof or that the amount claimed was for any loss or damage caused, to be suffered or would be caused or suffered due to nonpayment to the defendant No. I of the amounts so received. It was also recited in the said bank guarantee that any such demand made on the bank by defendant No. 1 shall be conclusive. It is not necessary to state anything more about the contents of the said bank guarantee at this stage. It is the case of the defendant No. 1 that relying upon the said bank guarantee furnished by the 2nd defendant, the defendant No. 1 paid three different sums of Rs.25 lacs. Rs. 95 lacs and Rs. 28 lacs, aggregating to Rs. 1,48,00,000/-, to the plaintiff on 26th May 1984 and 6th July 1984 respectively, as a loan to be returned by the plaintiff to defendant No. 1 in the manner set out in the bank guarantee. By its letter dated 16th December 1989, the defendant No. I invoked the said bank guarantee and called upon the 2nd defendant to pay the said amount. The defendant No. 1 addressed several letters also to defendant No. 2 invoking said bank guarantee. The said bank guarantee has been extended by the plaintiff from time to time and is operative up to 28th February 1991.
On 27th December 1989., the plaintiff filed the present suit for a declaration that the impugned demand made by defendant No. 1 on the 2nd defendant to make payment under the said bank guarantee was fraudulent, void, illegal and of no effect whatsoever. The plaintiff has sought a permanent injunction against defendant No. 1 from enforcing the said bank guarantee against defendant No. 2 from making any payment on the said bank guarantee.
It was held that the plaintiff has made out a strong prima facie case establishing at this stage that the 1st defendant had procured the consent of the plaintiff to the stipulation in the bank guarantee for its invocation irrespective of non-receipt of the amount of refund of Customs duty as a result of economic duress and fraud committed by it on the plaintiff and the special equities of the situation also warrant grant of an injunction in favour of the plaintiff as sought for.
I must, however, state that the plaintiff has not made out an equally strong prima facie case on the second question i.e. whether the plaintiff has approbated or affirmed the varied transaction by renewal of the bank guarantee after the economic duress has ceased to operate on the mind of the plaintiff. On this aspect as to whether the plaintiff's conduct after release of Rs. 1,48,00,000/- by defendant No. 1 to the plaintiff is consistent with the 1st defendant's case of approbation of the transaction or with the plaintiff's case that the said extensions of the bank guarantee were also obtained by the 1st defendant as a result of duress exercised would, in any event, require recording of oral evidence at the trial. At this stage, both the sides appear to have an equally arguable case on this aspect and it cannot be said that the plaintiff has a strong case and the 1st defendant has a weaker case. I am of the opinion that the plaintiff shall suffer an irreparable loss unless the plaintiff is protected by grant of an interim injunction. I am recording this prima facie conclusion for completion of record, although this aspect is not much relevant in bank guarantee cases.
The picture is less simple for psychological specific coercion, owing to the general difficulty in finding clear evidence for it. In most systems psychological coercion is treated as a criminal offence when it is aimed at extortion, as is typical of blackmail. It is also punished when it leads to undue influence, defined as a master-slave relationship.
Finally, economic coercion is generally unlawful under most systems of anti-trust legislation, where it can amount to either a criminal offence – as under the Sherman Act of the US – or an administrative offence liable to a mere fine – as under EU legislation on the abuse of a dominant position. It is important however to remember that trade unions and other groups of organised workers are mostly exempted from this general principle for acts of economic coercion (like strikes) against their employer. Legal methods themselves may employ coercion, such as when a lawsuit is threatened if a person does not comply with the wishes of the plaintiff. Specific coercion may be used as a legal defence in criminal cases for acts committed under threat of injury. Similarly, one may claim the legal nullity of a contract signed under duress.
In both cases, however, the question arises of whether a "reasonable person" would have perceived a threat, and reacted in the same way. Moreover, under most modern legal systems disciplinary coercion cannot be claimed as an exculpating circumstance for war crimes committed under unlawful order.