Kumarasamy Mudaliar vs Kuttiappa Mudaliar

The defendant in O.S.No 315 of 1991 on the file of District Munsif Court, Polur has, preferred the second appeal aggrieved against the decree

and Judgment, of the Court of Subordinate Judge, Ami in A.S.No.72 of 1994 dated 24.9.1998 reversing the decree and, judgment of the trial

court dated 26,2.1992.

The case in brief is as follows:

The plaintiff filed a suit for recovery of Rs. 6800 . The plaintiff issued a cheque for Rs.5000 to the defendant on 22.4.1988 by way of loan and the

defendant agreed to repay the principal with interest at 12% per annum, in spite of repeated demands and also legal notice dated 1.4.1991, the

defendant has not paid the amount. The defendant, however, resisted the suit stating that he had not borrowed any money from the plaintiff. But the

plaintiff issued the cheque only by way of return of loan already received by the plaintiff. The plaintiff filed a criminal case before the court and

called upon the defendant to give evidence on his side and as he refused, the present suit has been filed only to harass him. There is no Agreement

to pay any interest and, as such, the suit is liable to be dismissed.

The trial court on the basis of the evidence and the documents, dismissed the suit and aggrieved against this, the plaintiff preferred A.S.No.72 of

1994 on the file of Sub Court, Ami and the appeal was allowed and the decree and judgment of the trial court were set aside and the suit was

decreed with costs. Aggrieved against this, the defendant has come forward with the present second appeal.

The appellant/defendant raised the following substantial questions of law.

1) whether the Lower Appellate Court is right in holding that. Exs. A1 and A2 would constitute proof of borrowing?

2) whether the lower appellate Court ought not to have appreciated that there is no, presumption in law that the payee of the cheque had received

the amount towards loan transaction ?

3) whether the learned Appellate Judge is not in error in holding that Exs.A1 and A.2 constitute a loan transaction and drawing presumption

therefore contrary to the principles laid down by well settled principles.?

4) whether the lower appellate court is right in holding that the non-issuance of reply of Ex.A3 is fatal to the proceedings should it not have

followed the judgment of the Madras High Court in 1955 MWN 485

5) whether the lower appellate court is not in error in directing payment of interest on presumption as regards the existence of the loan transaction

and should it not have seen that in the absence of proof of contract no interest could be awarded ?

The points that arise for consideration are

1) whether the plaintiff is entitled to the suit claim?

2) whether the defendant has not borrowed any money from the plaintiff ?

3) To what relief ?

Points: The plaintiff has come forward with a specific case that the defendant wanted a loan of Rs . 5000 and for which, the plaintiff issued the

cheque on 22.4.1988. Ex.A1 is the counterfoil and the signature of the defendant was taken on the back of the document and marked as Ex.A2.

Since the defendant has not repaid any amount towards either principal or interest, legal notice was sent under Ex.A3 and it was duly served on

4.4.1991 and Ex.A-1 is the served acknowledgment. Admittedly, the defendant neither sent any reply nor paid any amount. .

Learned counsel for the appellant / defendant contended that the plaintiff alone borrowed a sum of Rs.5000 from him and only for returning the

said amount, the cheque in question was issued in his favour and he had collected the amount through bank. There was no necessity for the

defendant to borrow any money since he was affluent and there was no agreement to pay any interest also. The plaintiff filed a criminal case and

for which, summons was sent to the defendant to give evidence as per Ex.B1 and as the defendant has not preferred to give, false evidence, the

present suit has been filed only to harass him. The defendant is not liable to pay any amount and as such, the suit has to be dismissed.

Learned counsel for the appellant further contended that the lower appellate court had failed in drawing presumption that the issue of cheque

would constitute a loan transaction and it should have seen that it is obligatory on the part of the plaintiff to establish the loan transaction. The

plaintiff admitted that he is in the habit of advancing amount by way of loan, only on execution of the promissory note and there is no reasonable

explanation offered why such a document was not taken. The plaintiff had also not filed any account book; ledger or cash book to prove the said

loan. The plaintiff is a professional money lender and would have entered his money transaction in the books of account and adverse inference can

be drawn because of non-production. Neither EX.A1 nor EX.A2 would constitute a loan transaction and no presumption under law can be

drawn. The presumption under sections 139 and 118 of Negotiable Instruments Act cannot be drawn. The non issuance of any reply to the notice

also is not fatal to his case.

D.W.1 admitted in the course of evidence that he received cheque from P.W.1 for a sum of Rs.5000 and his signature in the counterfoil under

Ex.A2; but D.W.1 would state that there was no necessity for him to borrow any money and P.W.1 alone had borrowed, money earlier and only

for discharging the said liability the cheque in question was issued by P.W.1 and hence, it cannot be construed as a loan and thereby called upon

the defendant to make any payment.

It is necessary to state that in the written statement, such a plea has not been taken by D.W.1 that he had already advanced any money to

P.W.1 and only for discharging the same, the cheque in question was issued. Further more, when the loan was given and other particulars were

also not given by D.W.1 either in the written statement or in the course of evidence. Even assuming that there was any loan transaction between the

parties earlier, if P.W.1 had issued the cheque without any further material, then there :nay be some force in the contention of the defendant. There

is absolutely no necessity for D.W.1 to affix his signature in the counterfoil under Ex.A2. When a cheque is normally give it would be encashed

only after putting, into the account and therefore, it will find a place in the account of the defendant also. The very fact that D.W.1 had affixed his

signature in the counterfoil Ex.A2, would go a long way to show that what is now stated by him could not be true, and only because P.W.1 had

advanced money by means of cheque, the signature of DW1 had been taken. There is also one more circumstance to come to the conclusion that

the loan might have been given by P.W.1 to D.W.1, because the legal notice was issued under Ex.A3 and the defendant having received the same

did not thought it fit to send any reply. It is also not the case of D.W.1 that after the receipt of the notice he contacted P.W.1. If the statement of

D.W.1 is true, naturally D.W.1 would have sent a reply pointing out the circumstances under which P.W.1 issued the cheque. The absence of any

reply for Ex.A3 shows the present explanation put forward by D.W.1 could not be true.

Section 13 of the Negotiable Instruments Act relates to the'' definition of ""Negotiable instruments"" which means a promissory note, bill of

exchange, or cheque payable either to order or to bearer. Section 118 of the Act relates to presumption as to negotiable instruments of

consideration, Until the contrary is proved, the following presumptions shall be made relating to the consideration, date, time of acceptance, time of

transfer, order of endorsements, stamps and also that holder is a holder in due course. So far as this case is concerned, when D.W.1 admitted that

he had received the cheque from P.W.1 for a sum of Rs.5000, the presumption u/s 118 can be drawn and as such, the burden is only upon D.W.

1 to rebut the same. Except the interested testimony of D.W.1, there is no other evidence to rebut the presumption. Moreover, persual of the

cheque book clearly indicates that on the date of Ex.A.1 itself, P.W.1 had issued number of cheques not only to D.W.1 but also to other, persons

to establish that P.W.1 was in the habit of advancing money to various persons. No doubt, P.W.1 stated that whenever cash is not available, he

used to give a cheque and subsequently will get the promissory note from the concerned persons; but, however, in the case, it was not taken. It has

been admitted by P.W.1 in the course of evidence that both of them are friends. Further more, the signature of D.W.1 has been taken in Ex.A2

itself and simply because the subsequent promissory note was taken, it will lead to any conclusion that it it not a loan transaction.

Learned counsel for the appellant relied on the decision in Ayyaswami, M and another . v. S.P.Ganesan, 1994 (2) L.W 376 for the

proposition that ""the appellant had already filed an application under Order 41, Rule 27, C.P.C. before the lower appellate court for adducing

additional evidence, but the appellate court before passing any order on the application, had disposed of the appeal itself. It is a well settled

position of law that an application filed in the appeal for permission to adduce additional evidence has to be Considered along with the main appeal

and not separately"". There is no dispute about this principle. Reliance is also placed upon the another decision in Devaraja In Re, 1955 M.W.N

435 relating to the issue of non-reply to the notice and it has no application to the case on hand.

It is seen from the judgment of the lower appellate court that the defendant already preferred a second appeal as S.A.No.406 or 1994 in

respect of the very same subject matter and it was later remanded. Now, after disposal by the lower appellate court, again the matter has come up

in this second appeal. Now P.W.1 stated that there was an agreement orally to pay 12% interest per annum, but no document has been filed to

substantiate the same. Admittedly, no reply was also given for the legal notice. Considering the fact that no document has been filed to show that

the defendant agreed to pay interest at 12% per annum, I am of the view that the plaintiff is not entitled to claim interest at the said rate and at best,

the plaintiff can claim interest only from the date of filing the suit and not earlier to that the lower appellate court set aside the decree and judgment

of the trial court and thereafter decreed the suit as prayed for with costs. In the absence of any document, wherein D.W.1 admitted to pay interest,

I am of the view that P.W.1 is not entitled to claim interest for the said amount earlier to the issue of notice namely, 1.4.1991. Hence, the points

are answered accordingly.

For the reasons stated above, the second appeal is allowed in part, only with reference to the interest that plaintiff can claim interest, only from

1.4.1991, at the rate of 12% per annum till decree, and thereafter at 6% per annum till realisation. In other respects the second appeal fails and is

dismissed. No Costs.