A. Meharbhan and Ameerkhan vs K. Sultan Mohaideen

R.S. Ramanathan, J.—The unsuccessful Defendants are the Appellants herein in the Second Appeal.

The Respondent/Plaintiff filed a suit in O.S. No. 97 of 2005, for the recovery of Rs. 67,850/- on the basis of the promissory note dated

15.07.2002, executed by the Appellants/ Defendants for a sum of Rs. 50,000/- . The Respondent/Plaintiff has stated in the plaint that for the

purpose of their family necessities, the Appellants/Defendants borrowed a sum of Rs. 50,000/- and executed a promissory note dated

15.07.2002, in favour of the Respondent/Plaintiff. Thereafter, the Appellants/Defendants did not make any payment and therefore, after the

issuance of notice, the suit was filed for the recovery of the said amount.

The Appellants/Defendants filed a statement contending that the suit promissory note was a forged one and they have not received any amount

of Rs. 50,000/- , as alleged by the Respondent/Plaintiff on 15.07.2002 and they borrowed a sum of Rs. 70,000/- in the month of October, 1997

and executed a bond for the said amount and they have paid Rs. 10,000/- towards the principal amount and the balance amount of Rs. 60,000/-

was paid to the Respondent/Plaintiff in the presence of the Mediators and the Appellants/Defendants have paid interest at the rate of 24% p.a. and

Respondent/Plaintiff demanded the interest at the rate of 36% and therefore, to get the said interest, the suit promissory note was forged by the

Respondent/ Plaintiff.

The Respondent/Plaintiff filed a reply statement stating that on 15.08.1999, the Appellants/Defendants received a sum of Rs. 50,000/- and

executed the promissory note in a twenty rupees stamp paper and they have paid only interest and therefore, before the expiry of three years they

renewed the promissory note by executing the suit promissory note dated 15.07.2002 and the consideration for the suit promissory note was the

consideration paid on 15.08.1999, when the Appellants/ Defendants executed the promissory note dated 15.08.1999.

The Trial Court accepted the case of the Respondent/Plaintiff and decreed the suit. The Lower Appellate Court also confirmed the findings of

the Trial Court and dismissed the appeal. Against the same, this Second Appeal is filed.

The Second Appeal was not admitted initially and only notice was ordered to the Respondent and after the Respondent appeared, the Second

Appeal was heard on merits, after framing the following substantial question of law:

Whether the Courts below were right in arriving at a conclusion that the Defendants have not disproved the presumption u/s 118 of Negotiable

Instruments Act,1881, when the Plaintiff himself admitted that no money transaction had taken place as alleged in the suit pro-note in his reply

statement?

It is submitted by Mr. M. Suresh Kumar, the learned Counsel appearing for the Appellants that in the reply statement, the Respondent/Plaintiff

has clearly admitted that there was no consideration passed for the promissory note dated 15.07.2002 and therefore, the presumption u/s 118 of

Negotiable Instruments Act, 1881 ( hereinafter referred to as the said ''Act'') cannot be taken in respect of the suit promissory note and without

proving the passing of consideration, the Respondent/Plaintiff is not entitled to the relief prayed for.

The learned Counsel appearing for the Appellants further submitted that even in the reply statement, the Respondent/Plaintiff has admitted that

the consideration for the suit promissory note dated 15.07.2002, was the consideration paid on 15.08.1999 and therefore, the consideration as

stated in the promissory note dated 15.07.2002, was given a go by and different consideration has been stated in the reply statement and that was

also not proved and when the Plaintiff himself has admitted that no consideration was passed on 15.07.2002, the presumption u/s 118 of the said

Act cannot be taken and without appreciating the same, both the Courts below decreed the suit. In support of his contention, the learned Counsel

relied upon the judgments in the case of (Kalavally v. Parthasarathy reported in (2008) 5 C.T.C. 527 and in the case of G. Vasu Vs. Syed Yaseen

Sifuddin Quadri, .

On the other hand, Mr. Siva Thilagar, the learned Counsel appearing for the Respondent submitted that though the Appellants contended that

the suit promissory note was a forged one, no steps were taken to prove the same. Therefore, the Courts below held that the suit promissory note

was in fact executed by the Appellants and the concurrent findings of fact cannot be interfered with in the Second Appeal.

The learned Counsel appearing for the Respondent further submitted that though in the reply statement, the Respondent/Plaintiff has stated that

there was no consideration passed on 15.07.2002, for the suit promissory note but it has also been stated in the reply statement that the Appellants

executed the promissory note on 15.08.1999, and the suit promissory note was renewed for the earlier amount received under the promissory

note dated 15.08.1999, and that fact has been proved by marking the promissory note dated 15.08.1999 as Ex.A2. Therefore, the admission of

the Respondent/Plaintiff has to be taken as a whole and if taken as a whole, it has been proved that there was consideration for the promissory

note and considering all these aspects, the Courts below decreed the suit. The learned Counsel also relied upon the judgments in the case of

(Kundan Lal Rallaram v. Custodian Evacuee Property reported in AIR (1961) S.C. 1316) in the case of ( S. Perumal Cettiar v. T. Santhanam

AIR (1979) M.L.J 137) and in the case of Murugesan Vs. Subramania Gounder and Others, .

Having regard to the submissions made by both the Counsel and the pleadings in this case, we will have to see whether the

Appellants/Defendants has rebutted the presumption as per Section 118 of the said Act.

It is argued by the Learned Counsel appearing for the Appellants that in the reply statement, the Respondent/Plaintiff has admitted that no

consideration was passed for the suit promissory note dated 15.07.2002 and therefore, even though, the execution of the promissory note is

proved, the presumption u/s 118 of the said Act has been rebutted by the admission of the Respondent/ Plaintiff and hence, it cannot be stated that

the Appellants/Defendants are liable to pay the amount. It is also not open to the Respondent/Plaintiff to give another version of passing of

consideration than the one stated in the promissory note.

Admittedly, in the suit promissory note, it has been stated that on 15.07.2002, a sum of Rs. 50,000/- was paid by the Respondent/Plaintiff to

the Appellants/Defendants. In the plaint as well as in the notice issued earlier, the Respondent/Plaintiff reiterated the same allegation that on

15.07.2002, a sum of Rs. 50,000/- was paid to the Appellants/Defendants and they executed the promissory note. Only in the reply statement, the

Respondent/Plaintiff has given a different version about the passing of consideration and admitted that on 15.07.2002, no consideration was

passed and that the suit promissory note was executed for the consideration paid on 15.08.1999, for which the Defendants executed a promissory

note and the suit promissory note was only a renewal promissory note. In such circumstances, can it be stated that the presumption u/s 118 of the

said Act has been rebutted by the Appellants. In the judgment in the case of Tarmahomed Haji Abdul Rehman Vs. Tyeb Ebrahim Bharamchari,

Chagla, this question has been answered as follows:

In (Tetamchand Haji Abdul v. Syed Ebrahim) Chagla, CJ., had occasion to consider this question. Said the Learned Chief Justice at page 257:

What has been urged before us is that as soon as it is shown that the consideration mentioned in the negotiable instrument is not the real

consideration, the presumption u/s 118 is rebutted and it is on the Plaintiff, who is suing on the negotiable instrument to prove what the real

consideration was. Looking to the plain language of the Section, it is impossible to accept that contention, because the presumption that is raised

u/s 118 is not in respect of the consideration mentioned in the negotiable instrument, the presumption in favour of there being a consideration for

the negotiable instrument, any consideration which is a valid consideration.

Later at page 259, the learned Chief Justice further observed as follows:

It is perfectly true that if a particular consideration is mentioned in a negotiable instrument and that consideration is found to be false and some

other consideration is set up, that is a factor which the Court would take into consideration, in deciding whether the Defendant has discharged the

burden case upon him by Section 118. But, it is a very different thing to say that merely because the consideration mentioned in the negotiable

instrument turns out to be false, therefore, the statutory presumption is rebutted, and burden is thrown upon the Plaintiff to prove the consideration.

Again at page 259, the Learned Chief Justice makes the following observation:

In order to determine whether the contrary is proved or not, as required by Section 118 the whole volume of evidence led before the Court must

be considered...but in considering the whole volume of evidence, the Court must always bear in mind the statutory presumption u/s 118 and also

the fact that the burden has got to be discharged by the Defendant.

This was followed in the judgment in the case of (Haribhavandas Parasuram and Company v. A.D. Thakur reported in (1963) AIR Mysore

107) and also in the judgment in the case of K.V.S. Iyer and Another Vs. The State of Kerala and Others,

In the judgment, in the case of ( Palaniappa Chettiar v. Rajagopalan reported in AIR (1928) Mad 773) the Division Bench of our High Court

on one occasion dealt with this question and it has been held that where the recital of the consideration in the pro note is admittedly false, the

burden of proving consideration is shifted on to the holder of the promissory note as against the maker of the note himself and much stronger,

therefore, would be the case when the consideration has to be proved against third parties.

Therefore, it is seen from the judgments referred to above that when the Plaintiff has stated that the consideration for the promissory note is not

as mentioned in the promissory note but some other consideration, the presumption u/s 118 of the said Act can be drawn, but much strong

evidence has to be adduced by the Respondent/Plaintiff to prove the passing of consideration. Further, in the judgment reported in A.I.R (1961)

S.C. 1316 (supra) the Hon''ble Supreme Court has dealt with Section 114(g) of the Evidence Act, regarding the presumption to be drawn and

held as follows:

Illustration (g) to that Section shows that the Court may presume that evidence which could be and is not produced would, if produced, be

unfavorable to the person who withholds it. A Plaintiff, who says that he had sold certain goods to the Defendant and that a promissory note was

executed as consideration for the goods and that he is in possession of the relevant account books to show that he was in possession of the goods

sold and that the sale was effected for a particular consideration should produce the said account books, for he is in possession of the same and

the Defendant certainly cannot be expected to produce his documents. In those circumstances, if such a relevant evidence is withheld by the

Plaintiff, Section 114 enables the Court to draw a presumption to the effect that, if produced, the said accounts would be unfavorable to the

Plaintiff. This presumption, if raised by a Court, can under certain circumstances rebut the presumption of law raised u/s 118 of the Negotiable

Instruments Act. Briefly stated, the burden of proof may be shifted by presumption of law or fact, and presumption of law or presumptions of fact

may be rebutted not only by direct or circumstantial evidence but also by presumptions of law or fact.

Therefore, the presumption u/s 118 of the said Act, can be rebutted, if the Respondent/ Plaintiff fails to prove certain facts by producing the

documents, when he alleges that the consideration for the suit promissory note was not as per the consideration stated in the suit promissory note,

but otherwise. In this case, it has been stated by the Respondent/Plaintiff in the plaint as well as in the earlier notice that consideration for the suit

promissory note was passed on 15.07.2002, but in the reply statement, he has stated that no consideration was passed on 15.07.2002, and the

consideration was passed on 15.08.1999 and on that date, the Appellants/Defendants executed the promissory note and paid the interest therefore

and after three years, the suit promissory note was executed, as a renewal of the earlier promissory note. The Respondent/Plaintiff also marked the

promissory note dated 15.08.1999, executed by the Appellants/Defendants. Even though, the Respondent/Plaintiff has stated in the reply

statement that on 15.08.1999, the Appellants/Defendants borrowed a sum of Rs. 70,000/- and executed promissory note and the suit promissory

note is only the renewal of their promissory note, there was no denial by the Appellants/Defendants by filing any re-joiner statement denying the

execution of the promissory note dated 15.08.1999. Even during the cross examination of the Respondent/Plaintiff, no such suggestions was put to

P.W.1., about the promissory note dated 15.08.1999. Therefore, it is not the case of the Appellants/Defendants that they have not borrowed a

sum of Rs. 50,000/- under the promissory note dated 15.08.1999.

As stated supra, the Respondent/Plaintiff also marked the promissory note dated 15.08.1999 and there is no cross examination or suggestion

put to P.W.1., about the promissory note dated 15.08.1999, and therefore, the presumption u/s 118 of the Negotiable Instruments Act, can be

drawn in favour of the Respondent/ Plaintiff. As observed by the Hon''ble Supreme Court in the judgment reported in (1961) S.C. 1316 (supra),

the Court may presume that evidence which could be and is not produced would, if produced, be unfavorable to the person, who withholds it. In

this case, the Respondent/Plaintiff has not withheld the promissory note dated 15.08.1999 and the same has been marked in evidence and that was

also not denied by the Appellants/Defendants by putting suggestions to the Respondent/Plaintiff or in their evidence. Therefore, the

Respondent/Plaintiff has proved the passing of consideration by marking Ex.A2 and as per the judgment of the Bombay High Court reported in

(1949) Bom257 (supra) and as per the judgment of our High Court reported in AIR (1928) 773 ( supra) the Respondent/Plaintiff has discharged

the burden of proving the passing of consideration for the suit promissory note. In the judgment reported in (2008) 5. C.T.C. 527 ( supra) it has

been held that the drawer of cheque can rebut the presumption either by direct evidence or by bringing on record the preponderance of

probabilities by reference to circumstances and there is no necessity to produce direct evidence for non-payment of consideration.

In this case, no evidence has been adduced by the Appellants/Defendants to rebut the presumption. On the other hand, the Respondent/

Plaintiff has proved the passing of consideration by marking Ex.A2. In the judgment reported in G. Vasu Vs. Syed Yaseen Sifuddin Quadri, the

facts are different, as in that case, there was no pleading by the Plaintiff regarding the passing of consideration different from one stated in the suit

promissory note. Therefore, the High Court of Andra Pradesh has held that the presumption u/s 118 of the said Act cannot be drawn. But in this

case, necessary pleading was made in the reply statement and the Respondent/Plaintiff has also marked Ex.A2, viz., the promissory note dated

15.08.1999. Therefore, the principles laid down in the judgment reported in Tarmahomed Haji Abdul Rehman Vs. Tyeb Ebrahim Bharamchari,

can be applied to the facts of the present case.

Hence, I am of the opinion that the Appellants/Defendants having not rebutted the presumption u/s 118 of the said Act, and even though, a

different version is stated by the Respondent/Plaintiff regarding the passing of consideration in the reply statement and when the

Respondent/Plaintiff has proved the passing of consideration, the Substantial Question of Law is answered against the Appellants/Defendants.

Hence, the Second Appeal is dismissed, confirming the judgment and decree of the Courts below. No costs. Consequently, connected

Miscellaneous Petition is closed.