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CMA Foundation · Fundamentals of Business Laws and Business Communication · Capacity of Parties, Free Consent

Anil borrowed Rs. 1,00,000 from Sethi, a money-lender, who by undue influence made him sign a bond for Rs. 2,00,000 with heavy interest. Anil has received the Rs. 1,00,000. If the court sets the bond aside, which outcome is consistent with Section 19A?

The court may set the bond aside and order Anil to repay the Rs. 1,00,000 with such interest as it considers just. Section 19A lets the court impose just terms where the party avoiding the contract has received a benefit, rather than forcing the unfair bond or allowing a free windfall.

  1. AThe bond is set aside absolutely, and Anil keeps the Rs. 1,00,000 without repayment
  2. BThe bond is enforced for the full Rs. 2,00,000 since Anil received a benefit
  3. CThe bond is set aside, and Anil may be ordered to repay the Rs. 1,00,000 with such interest as the court thinks justCorrect
  4. DThe bond is automatically void and the court has no power to impose terms

Explanation

Section 19A allows a court to set aside the contract absolutely or, if the party entitled to avoid it has received a benefit, on terms the court finds just. The money-lender illustration has the borrower repay the principal with such interest as seems just. Letting Anil keep the money would ignore the benefit received.

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