Libertatem Magazine

“Without Prejudice Rule” Is Part of Public Policy: Karnataka High Court

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Facts of the Case

Plaintiff and Defendant were employees of the Reserve Bank of India. The defendant had started two chit groups of 100,000/- and one of 300,000/-. At the request of Defendant, Plaintiff had joined the three chit groups. Plaintiff accordingly had started paying the chit amount together either through cheque or cash. He had issued fourteen cheques and paid five instalments in cash to the defendant between 2000-2002. According to Plaintiff, he had paid a sum of 3,39,170/- to the defendant. The defendant had refused the existence of any such chit groups and refused to pay the said amount to the plaintiff. 

Arguments by the Plaintiff

The learned counsel of the Plaintiff submitted that the trial court had committed an error in dismissing the suit. Thereby, the plaintiff made an RGA contending that the defendant was running three chit groups and the Plaintiff being a member of the same had paid the Defendant through cheque or cash. The plaintiff provided evidence of paying a total sum of 2,49,200/- through fourteen cheques and the defendant had not explained in what matter he had repaid the Plaintiff. Plaintiff appealed that Defendant had to pay 3,39,170/-.

Arguments by the Defendant

The defendant argued that he had never started any chit groups as being an employee of RBI, it was illegal for him to run such chit groups. Further, in his written statement, the defendant had submitted that the plaintiff had made the said transactions in his account for Income Tax purposes. It was also submitted that the defendant withdrew various amounts from his account in cash to pay back the plaintiff. He had contended that the amount paid by the plaintiff to the defendant through cheques, was actually towards the repayment of the loan taken by the Plaintiff. Further, the learned counsel of the defendant argued that the plaintiff had completely failed to prove that the defendant was running chit groups. 

Court’s Observation

The Karnataka High Court had observed that the learned trial judge overlooked the cumulative effect of the pleadings, documents produced and the admissions made by the Plaintiff. The defendant had not produced any evidence of withdrawing various amounts to pay in cash to the Plaintiff. Additionally, the court had raised various questions regarding the matter and stated that the submissions by the learned counsel of the defendant were an exercise of “sophistry” and “hairsplitting” which the court would not encourage. 

Furthermore, the Court had discussed the issue of the “without prejudice rule” raised by Defendant by emphasizing various cases and observed that “prejudice” was a question of fact to each case and there could not be a general rule to what causes “prejudice”. As a result, after considering the submissions of both the Plaintiff and the Defendant the single-judge bench of the Karnataka High Court was of the view that Defendant was not entitled to the protection of “without prejudice rule”.

Court’s Judgement

The Court had allowed the appeal of the plaintiff and ordered that he was entitled to recover the remaining money from the defendant with an interest of 9% per annum from the date of the suit till the date of the payment. On failure to do so, the defendant would be held liable to pay an interest of 12% per annum. 

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