D. Sethuramalingeswara Rao vs Perla Pichaiah and others

Abdul Hadi, J.—The plaintiff died after the judgment in the suit and before filing this appeal. Of his legal representatives, his son has

preferred this appeal and his wife and daughters are respondents Nos. 2 to 7 in this appeal. The first respondent in this appeal is the defendant.

The deceased plaintiff was the indorse of two promissory notes (1) exhibit A-1, dated September 11, 1971, for Rs. 11,250 with interest at 12

per cent. per annum, executed by the defendant in favour of one G. Subramaniam, and (2) exhibit A-2 of the same date of Rs. 4,200 with interest

at 12 per cent. per annum, executed by the defendant in favour of one P. Lakshmiah. According to the plaintiff, both the promissory notes were

indorsed by the above said promisees, G. Subramaniam and Lakshmiah, respectively, in favour of the plaintiff at Madras on September 6, 1974.

The relevant endorsement are respectively marked as exhibits A-3 and A-4. The suit is for recovery of the sums due under the said promissory

notes. But the suit was dismissed by the trial court on the ground that (1) the plaintiff was not a holder in due course; (2) the promissory notes were

not supported by consideration; (3) the abovesaid alleged indorsements were not true; (4) in any case, the indorsements were not made at

Madras; and (5) the trial court at Madras has no jurisdiction to try the suit. The trial court also held that the defendant was entitled to the benefits

of the Debt Relief Act (4 of 1938).

If the trial court has no jurisdiction to try the suit, then it should not have gone into the merits of the case. Therefore, let me first of all consider

whether the finding of the court below that it has no jurisdiction to try the suit is correct. The defence in this regard is that the indorsements are not

true and even assuming they are true, they were not made at Madras. The further defence is, payment under the promissory notes has to be made

only at Gudalur in Andhra Pradesh and so the trial court at Madras has no jurisdiction to try the suit. Now, so far as this jurisdiction issue is

concerned, as per section 20, Civil Procedure Code, even if any part of the cause of action for the suit arose at Madras, that is, within the

jurisdiction of the trial court (City Civil Court, Madras) then the suit can be tried by the said court. So, if it is proved that the payment of the sums

due under the promissory notes has to be made at Madras, the suit could be filed in the trial court. Even if it is not so, if the abovesaid

indorsements were proved to have been made at Madras, then also, the suit could be entertained at by the trial court, Madras (vide Manepalli

Mangamma and Others Vs. Manepalli Sathiraju, ).

Now, regarding the place of payment, exhibit A-2 no doubt states that the payment should be made at Gudalur. But exhibit A-1 is silent about

it. Learned counsel for the appellant, in this connection brought to my notice sections 68 to 70 of the Negotiable Instruments Act. Sections 68 and

69 run as follows :

A promissory note, bill of exchange or cheque made, drawn or accepted payable at a specified place and not elsewhere must, in order to

charge any party thereto, be presented for payment at that place.

A promissory note or bill of exchange made, drawn or accepted payable at a specified place must, in order to charge the maker or drawer

thereof, be presented for payment at that place"".

So, section 68 covers the case where the promissory note, etc., is payable ""at a specified place and not elsewhere"", while section 69 covers the

case where it is payable ""at a specified place"". So, the present case, so far as exhibit A-2 is concerned is covered by section 69 and hence the

promissory note must be presented for payment at Gudalur in Andhra Pradesh and so, this part of cause of action arises not at Madras, but at

Gudalur, Andhra Pradesh.

The decision in V.C. Jayaram Mudaliar Vs. C.M. Sivaram, , cited by learned counsel for the appellant, holding that the term ""specified place"" in

section 69 must have been intended to refer not to a vast area in general terms like a large city as Madras, will have no application to the present

case since Gudalur cannot be termed as such a large city. So far as exhibit A-1 promissory note is concerned, section 70 of the Negotiable

Instruments Act would operate, which runs as follows :

A promissory note or bill of exchange not made payable as mentioned in sections 68 and 69, must be presented for payment at the place of

business (if any) or at the usual residence, of the maker, drawee or acceptor thereof, as the case may be"".

So, according to section 70, exhibit A-2 must be presented for payment at the place of business or at the usual residence of the defendant,

which is admittedly, Kavali, Andhra Pradesh. The plaint itself describes the defendant as residing at Kavali, Andhra Pradesh. So, relating to this

part of the cause of action, viz., payment of the sum due under the promissory notes, the plaintiff cannot bring the suit in the trial court at Madras.

Now, let me consider whether the other part of the cause of action, viz., the alleged indorsements would give the plaintiff the right to file the suit

in the trial court. Here, as earlier indicated, it has to be seen first of all, whether the indorsements alleged were true and if so, whether they were

made at Madras. The case of the defendant is that the indorsements were not true and were not for consideration and at any rate were not made at

Madras. The trial court no doubt finds that the contention of the defendant that the promisees simply signed in blank on the reverse of exhibits A-1

and A-2 and sent them to the plaintiff and that the same were later filled up by, or at the instance of the plaintiff as if indorsements were duly made

by the promisees in his favour, is not at all rendered improbable in this case. But, the trial court erred to note that u/s 16 of the Negotiable

Instruments Act, a mere signing by the promisee in the promissory note can be a proper indorsement, so, the indorsements in the present case are

true.

Then the question is whether the indorsements made on September 6, 1974, were made at Madras. On the said question, no doubt the trial

court has held that in view of the difference in the evidence given by PW-1 (plaintiff) and PW-2 (who typed exhibits A-3 and A-4) on the one

hand and PW-3, the attestor of exhibits A-3 and A-4 on the other hand, the indorsements were not actually made at Madras on September 6,

1974. But the trial court failed to note that despite the said difference, both deposed that the indorsements took place only at Madras. Further,

even though DW-1, the defendant deposed that on September 6, 1974, the promisees did not go to Madras, he did not say so in exhibit B-1

dated September 7, 1974, the lawyer notice sent by him to the plaintiff. He only stated in exhibit B-1 that the plaintiff colluded with the other

persons and his relatives and was trying to drag the defendant to a court of law at Madras unnecessarily with a view to trouble the defendant. If

really the promisees were not at Madras at all on September 6, 1974, but were at Kavali on that date, as deposed by him, he would have stated

so in exhibit B-1 itself. So, the version of the defendant as DW-1 in this regard cannot be believed. Further, even to PW-2 there was no

suggestion that indorsements were not made at Madras at all. Therefore, I hold that the indorsements were made at Madras and the trial court has

jurisdiction to try the suit.

Then, coming to the merits of the case, there is no difficulty in holding that exhibits A-1 and A-2 promissory notes were executed by the

defendant for consideration, in view of the following admissions of the defendant as DW-1 :

I have borrowed monies from them under promissory notes or handloans apart from exhibits A-1 and A-2. There is no enmity between me and

these promisees. We are on good terms with each other even today .... exhibits A-1 and A-2 are in my handwriting ..... There is the signature of

Singaiah as an attesting witness for exhibits A-1 and A-2. Singaiah''s family and my family are close for three generations ..... There is no enmity

between me and Singaiah ..... In exhibit A-9, I have mentioned that I owe Rs. 22,000 to Subramaniam and Rs. 4,200 to Lakshmiah. In exhibit A-

15, also I have mentioned above Subramaniam also. But, I cannot say whether Rs. 22,250 refers to Subramaniam''s debt due from me.

Then coming to the question whether the indorsements in question were for consideration and whether the plaintiff was a bona fide holder in

due course, I find that no doubt PW-1, the plaintiff has deposed that on payment of consideration, the indorsements, exhibits A-3 and A-4 were

made. There is also the presumption u/s 118(a) of the Negotiable Instruments Act that the negotiable instrument was indorsed for consideration.

But, I think in the present case, it has to be concluded that the said presumption has been rebutted in view of the fact that despite several demands

made at several stages by the defendant, the plaintiff did not produce the account books of the promisees for the period around September 6,

1974, the date of indorsements and the plaintiff has also not examined the promisees. Therefore, adverse inference has to be drawn against the

plaintiff in this regard. In paragraph 5 of the written statement dated August 4, 1976, itself the defendant demanded the production of the accounts

of the promisees for the relevant period. Even earlier, in November, 1974, itself at the time of the application for leave to defend also such a

demand was made. The plaintiff, as PW-1 also admitted thus :

The defendant had called upon me in his leave to defend application to produce the account books even in November, 1974.

PW-1 also admits that ""since suggestions were put that no amount was advanced by the promisees during trial of the suit"" he asked the

promisees to produce the account books. Even in exhibit B-3 notice dated August 29, 1977, long before the trial in January, 1978, the said

account books were asked to be produced. DW 1 also admitted thus : ""I received exhibit B-3 on September 6, 1977"". But, they were not

produced at all. Even exhibits A-16 and A-18 the account books which were produced only on January 20, 1978, did not relate to the period

around the indorsement date September 6, 1974, but relate only to the period 1971-72.

Learned counsel for the respondent cited the decision in Kundan Lal Rallaram v. Custodian, Evacuee Property, AIR 1961 SC 1316. There it

has been held as follows :

Section 118 lays down a special rule of evidence applicable to negotiable instruments, and the court as per section 118 shall presume, inter alia,

that the negotiable instrument or endorsement was made for consideration. In effect section 118 throws the burden of proving failure of

consideration on the maker or the endorser of the note as the case may be. The evidence required to shift this burden need not necessarily be

direct evidence, that is, oral or documentary evidence or admissions made by the opposite party; it may comprise circumstantial evidence and

presumption of law or fact. The plaintiff therein says that he has sold certain goods to the defendant, that the promissory note was executed as

consideration for the goods, 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. Then he should produce the said account book. If such a relevant evidence is withheld by the

plaintiff, section 114, Evidence Act enables the court to draw a presumption to the effect that, if produced, the said account books would be

unfavourable 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.

In view of this decision of the Supreme Court, I think there is force in the argument of learned counsel for the respondent that the presumption

u/s 118(a) has been rebutted by the defendant. Therefore, I hold that the abovesaid indorsements in question were not for consideration. Even

exhibit A-7 account book of the plaintiff, though mentions that the plaintiff paid the consideration to the promisees for exhibits A-3 and A-4 on

September 6, 1974, does not mention about the payment of court fee for the suit, which comes to about Rs. 1,500 which is not a small sum.

Further mere entries in the plaintiff''s own account book exhibit A-7 by themselves would not prove passing of consideration for the indorsements

in question. The Supreme Court has held in Chandradhar Goswami and Others Vs. The Gauhati Bank Ltd., as follows (at page 111 of 37 Comp

Cas) :

..... no person can be charged with liability merely on the basis of entries in book of account, even where such books of account are kept in the

regular course of business. There has to be further evidence to prove payments of the money which may appear in the books of account in order

that a person may be charged with liability thereunder, except where the person to be charged accepts the correctness of the books of account

and does not challenge them"".

For all these reasons, I hold that the plaintiff is not a bona fide holder as defined in section 9 of the Negotiable Instruments Act, under which,

only an indorsee for consideration can be a holder in due course.

In the result, the appeal is dismissed. But, in the circumstances of the case, there will be no order as to costs.