Pattan Sardar Khan vs Pattan Rasool Khan and Another

This Judgment has been overruled by : Pattam Khader Khan Vs. Pattam Sardar Khan and Another, (1996) 5 AD 381 : (1996) 2 BC 275 : (1996) 6 JT 201 : (1996) 5 SCALE 63(1) : (1996) 5 SCALE 63 : (1996) 5 SCC 48 : (1996) 3 SCR 320 Supp

S.V. Maruthi, J

These two appeals arise out of the judgment and decree in OS No.33 of 1987 on the file of the learned Additional Subordinate Judge, Kakinada. Plaintiff is the appellant in AS No.721 of 1992 and the defendant is the appellant in AS No.1872 of 1991. The suit was filed for recovery of Rs.5,22,353-33 ps., which was due on two pronotes and for subsequent interest.

The plaint averments in brief are as follows : The parties are referred to as arrayed in the suit. The 2nd defendant is the father of defendants 3 and 4. The first defendant is the firm belonging to defendants 2 to 4 and the 2nd defendant is the managing partner of the 1st defendant-firm. The plaintiff introduced one Pynda Ramakumar, who agreed to advance monies on the understanding that the defendants will repay the amount and that the plaintiff executed pro-notes as sureties. The plaintiff is the son-in-law of the 2nd defendant. He executed certain pronotes, the consideration of which was received by the defendants. The defendants were sending monies by drafts or otherwise in the name of Narayana Murthy by opening the account in the Banks. After encashing the TTs. or Drafts Narayama Murthy was paying the amount to Pynda Ramkumar and at his convenience he is taking endorsements made and got signed by the plaintiff. The defendants failed to pay the balance amount due to Pynda Ramkumar. Therefore, he pressurised the plaintiff for the payment of the amounts due to him. Inspite of several demands they could not pay the amounts, therefore, they executed a pronote on 29-8-1986 after calculating the amounts due and payable by them. Accordingly the 2nd defendant executed pronote for a sum of Rs.4,72,000/-and for Rs.2,15,000/- on behalf of the 1st defendant-firm and on his behalf as the manager of the joint family agreeing to repay the amount with interest at Rs.2.50 ps. and Rs.1.50 ps., respectively per annum. Inspite of the repeated demands the defendants have not paid the amount and therefore a notice was issued on 3-10-1986 to which the defendants gave a reply with false allegations. Hence the suit.

The defendants filed a written statement denying the execution of pronotes. However, it is stated that no cash consideration was paid. Defendants 3 and 4 also filed a written statement stating that they have not singed the pronotes, Exs.A20 and A21. It was alleged that the pronotes are forged by the plaintiff with the assistance of his brother-in-law and his clerk and the recitals of the pronotes are false.

On the basis of the pleadings the trial Court framed the following issues:

"1. Whether the two suit pronotes dated 29-8-1986 and 29-8-1987 are true, valid and binding on the defendants?

Whether the plaintiff is entitled to recover the suit amount with subsequent interest and costs thereon?

Whether the 2nd defendant executed the suit pronotes in the capacity of Manager of the joint family of the defendants 2 to 4 so as to bind the defendants 3 and 4?

Whether the defendant No.2 executed pronotes as the Managing Partner of D1 firm so as to bind its partners 3 and 4?

To what relief?"

In support of his case the plaintiff examined PWs.1 to 3 - PW1 being the plaintiff himself, PWs.2 and 3 the scribe and attestor of the pronotes respectively. The defendants were examined as DWs.1 to 4. On behalf of the plaintiff Exs.A1 to A30 and Exs.X1 to X4 were marked. The defendants marked Exs.B1 to B17 on their behalf. On a consideration of the evidence adduced during the trial the learned First Additional Subordinate Judge dismissed the suit for the amount covered by Ex.A21 for Rs.4,72,000/- and decreed the suit covered by Ex.A20 for a sum of Rs.2,33,125/-with proportionate costs. The trial Court also granted interest at 18% per annum. Aggrieved by the dismissal of the suit covered by Ex.A21, the plaintiff filed the appeal in AS No.721 of 1992 and the defendants filed AS No. 1872 of 1991 against the decree granted by the trial Court.

At the first instance we dispose of the appeal filed by the plaintiff viz., AS No. 1872 of 1991. The main argument of the learned Counsel for the appellant is that the finding of the trial Court is that the defendants executed Ex.A21 for a sum of Rs.4,72,000/-. When once the execution of the pronote is found u/s 118 of the Negotiable Instruments Act (for short the ''Act'') a presumption arises that consideration passed under the pronote. The defendants have not denied passing of consideration either in the legal notice or in the written statement. The only pleading in the written statement is that no cash consideration was paid. However the recitals in the pronote categorically say that the amount was paid to the defendants. Therefore the trial Court ought to have decreed the suit.

It is true that the trial Court found that the defendants have executed the pronotes. This finding is not challenged by the defendants by filing an appeal. Therefore this finding has become final. When once the execution of pronote is found a presumption arises as contended by the learned Counsel for the appellant that it is supported by consideration unless the executant of pronote denied consideration. Except in the reply notice Ex.A24 issued by the defendants, they have not stated that no consideration is passed. Therefore by virtue of the presumption u/s 118 of the, Act the plaintiff is entitled for a decree unless there is evidence to the contra. In other words if there is evidence inconsistent with the presumption u/s 118 of the Act the Court cannot pass a decree in favour of the plaintiff on the basis of the presumption. In this context it is necessary to refer to the evidence of the plaintiff in extenso. The plaintiff says that Rs.3,20,000/- was borrowed from Pynda Ramkumar and Rs.2,00,000/- at one time and Rs.1,20,0007- on one occasion and that Pynda Ramkumar issued a notice demanding repayment of the loan amount and that he discharged the debts except the amounts borrowed from Pynda Ramkumar. He also states that he verified in the books of account and on verification the amount due was established. He further states that on 29-8-1986 he did not give Rs.4,72,000/-under pronotes to the 2nd defendant and it is mentioned in Ex.A21 pronote that Rs.3,20,000/- was due towards the amount borrowed prior to the date of the pronote and Rs. 1,52,000/- was due towards interest and as the amount was not paid a pronote was executed for Rs.4,72,000/- and that he has not noted about Rs.3,20,000/- borrowed from him and given to the 2nd defendant either in the account books or Income Tax returns. Exs.A6 and A11 do not contain about Rs.3,20,000/-. He also states that defendants 3 and 4 and one Prasad came and took Rs.2,00,000/- from out of Rs.3,20,000/-. He sent Rs.1,20,000/- from out of Rs.3,20,000/- by TT through Corporation Bank in the name of N.S.N. Murthy. The amount was kept in the account of D1 firm. He admitted that he did not obtain any receipt for Rs.3 lakhs from D4 when they came along with one Prasad. He also admits that he did not obtain any document for the said sum of Rs.2 lakhs. He admits that his accounts did not indicate about the names of the persons in whose favour he executed pronote for the amount borrowed by him for Rs.3,20,000/- from Pynda Ramkumar. In the cross-examination he categorically admits that the 2nd defendant did not write to him any letter asking him to send Rs.2 lakhs, which is the part of the amount of Rs.3,20,000/- under Ex.A21 and that he has not noted in his accounts that he lent Rs.3,20,000/- and that he has not mentioned specifically either in the plaint or in the notice about giving Rs.2 lakhs to defendants 3 and 4 and Prasad and the clerk of D1''s firm. The accounts do not indicate any entry about the sending of Rs.1,20,000/- by TT through the Corporation Bank. From the evidence of PW1, plaintiff it is clear that there is no consistency, that he paid an amount of Rs.3,20,000/- to the defendant. It is no doubt true the recitals in the pronote, Ex.A21 show that "on your behalf you took loans of a total amount of Rs.3,20,000/-(three lakhs twenty thousand rupees) from outsiders in Kakinada and sent the same to us subject o the condition that we should discharge the same and that you should not have anything to do with the same". However, as pointed out in the earlier paragraphs on the basis of the recitals in the pronote a presumption arises. This presumption is subject to proof. If the plaintiff gives evidence inconsistent with the presumption no decree can be passed on the basis of the presumption arising u/s 118 of the Act. We have extracted the evidence of PW1 in extenso, which indicates that no amount was paid to the defendants under Ex.A2l. In view of the above the trial Court is right in dismissing the suit of the plaintiff under Ex.A21, pronote. We do not see any reason to disagree with the view expressed by the trial Court.

Therefore AS No.1872 of 1991 is dismissed. No costs.

Coming to the appeal filed by the defendants in AS No.721 of 1992 the finding of the trial Court is that the defendants have executed pronote, Ex.A20. This finding has become final and the defendants have not challenged the said finding. If the execution of the pronote is found then the next question is whether the pronote is supported by consideration. Unless these is evidence contrary to the presumption that arises u/s 118 of the Act; or that on perusal of the pronote a doubt arises as to passing of consideration or that the defendants deny the passing of consideration.

Let us now examine whether the recitals of pronote, Ex..A20 creates any doubt about passing of consideration to the defendants. The recitals in the pronote are as follows:

"As money required for our family necessity and as we were not willing to borrow locally I as Managing Partner of our firm M/s. Tadikonda Ramulu Firm and also in my individual capacity requested you to lend us money; where upon you borrowed a sum of Rs. two lakhs from outsiders in Kakinada by executing promissory notes, debited it to our account and lent it to us. Amounts were sent through TTs., to the SB A/c of your clerk Nookala Narayana Murthy garu in Kakinada Corporation Bank towards the interest payable each month under the said promissory notes at the rate of Rs.1.50 per cent per month and the interest amounts were got credited through him. Subsequently a sum of Rs.15,000/- has become payable by us towards interest upto now. We have executed and delivered this promissory note for the sum of Rs.2,15,000/- (in words two lakhs and fifteen thousand rupees) being the total of the said principal and interest. We shall, on demand, pay in Kakinada to you or your order the said amount together with interest thereon at Rs.1.50 per cent per month from now upto the date of payment, get an endorsement of discharge on this promissory note and take it. The consideration thereof has been received by us as mentioned above. This is the promissory note executed and delivered with our consent."

From the recitals of the pronote, Ex.A20 it appears that the plaintiff borrowed the amount from the third parties by executing pronotes and he directed those third parties to credit the same to D2''s account. In other words the plaintiff borrowed the amount from the third parties and directed those third parties to pay the same to the defendants instead of paying it to him.

The recitals of the pronote do not create any doubt as to the passing of consideration. Even if the recitals in the pronote do not throw any doubt as to the passing of the consideration still if the defendants deny consideration the burden shifts to the plaintiff to establish that the pronote is supported by consideration under Ex.A20.

Let us refer to the pleadings. In the written statement the plea of the defendants is that on the face of the promissory note no cash was paid by the plaintiff and these defendants are not liable to pay the amounts. In other words the defendants case is that no cash was paid and not that no amount was credited through TTs., to the SB A/c. It is not their case that the plaintiff did not borrow the amount from the third parties by executing pronotes and that the said amount was not credited to the SB A/c by the third parties through TTs. There is no specific denial Stating that the plaintiff has not borrowed from the third parties by executing pronotes and that the amount thus borrowed was not credited to the account by TT by the third parties. Therefore, we are of the view that there is no plea that the pronote was not supported by consideration. In other words the defendants admitted that the pronote is supported by consideration. Further it is not the case of the plaintiff that cash was paid under the pronote, Ex.A20. It is true that neither in the plaint nor in the notice issued by the plaintiff there was any reference to the third parties from whom the plaintiff borrowed the amount except a reference to one Ramkumar. PW1, plaintiff, in his cross-examination states that Ex.A20 pronote was taken for Rs.2,15,000/- which includes the principal amount of Rs.2,00,000/- and interest and the same is mentioned in Ex.A20 pronote and that he borrowed Rs.2,00,000/- from Sri Ram Finance and Ashok Finance owned by one person and gave to D2 the same as in Ex.A20 stated. The interest was found due Rs.15,000/- on the date of pronote, that he mentioned in his Income Tax Return about the borrowing of Rs.2,00,000/- from these two firms, the amount borrowed from Ashok Finance was credited in the account of D1''s firm of the Guntur Branch. He also states that he has mentioned in his Income Tax Returns about his borrowing of Rs.2 lakhs from those two firms and he filed copies of the Income Tax Returns into Court. The evidence of PW1 was corroborated by PW2, the scribe of the pronote. Further no suggestion is made to PW1 that he has not borrowed the money from Sri Ramkumar and Ashok Finance and the same was not credited in the defendant''s accounts. Further under Ex.A4, which is an entry in the plaintiffs books an amount of Rs.2 lakhs has been debited through Guntur Corporation Bank to the defendant. The corresponding entry in Ex.A5 indicates that a sum of Rs.2 lakhs has been credited to the accounts of the defendants. Therefore the evidence of PW1 corroborated by the evidence of PW2 and Exs.A4 and A5 established that the pronote Ex.A20 is supported by consideration.

In view of the above it follows that there should be decree for Rs.2,15,000/-with interest. Coming to the evidence of DW1, his evidence is inconsistent, at one stage he says that he has not executed pronote and at another stage he admits having executed Ex.A20. Nowhere in the evidence he says that Ex.A20 is not supported by consideration. In his reply to the notice under Ex.A25, dated 16-12-1986 he says that the allegations made in the notice are evasive and vague and it is only in Ex.A24 he says that no consideration is paid, but it was given a go-bye in the written statement and in the written statement he says that no cash consideration was paid.

Coming to the judgment and decree of the trial Court, the learned trial Judge while granting decree for Rs.2,15,000/-under Ex.A20 relied upon Ex.B12 under which the defendants submitted his liability to pay an amount of Rs.1,83,800/-. To this amount they added Rs.25,000/- under Ex.A26 admittedly received by the defendants. On the basis of these two entries he had granted a decree for Rs.2,15,000/-. It is pointed out that Rs.1,83,000/- plus Rs.25,000/- comes to Rs.2,08,000/- and not Rs.2,15,000/-. Further the plaintiff has not filed the suit on the basis of the accounts and there is no counter claim by the defendants. Therefore the learned trial Judge committed an error in decreeing the suit on the basis of alleged admission made by the defendant in Ex.B12 and Ex.A26. As pointed out in the earlier paragraphs the suit is based on a pronote supported by oral and documentary evidence Exs.A4 and A5 and the decree ought to have been passed on the basis of Ex.A20 supported by Exs.A4 and A5.

For the reasons mentioned above, we dismiss the appeal and confirm the judgment and decree on grounds other than the grounds mentioned by the trial Court. Appeal thus dismissed however there will be no order as to costs.