Regi ISAC vs Philomina Pious

P. Bhavadasan, J.—Plaintiff in O.S. 702 of 1992 before the Sub Court,Ernakulam is the Appellant.

According to the Plaintiff, the Defendant on 12.11.1990 borrowed a sum of Rs. 3,50,000/- on the basis of a demand promissory note executed on the said date marked as Ext.A1. Ext.A2 is the cash receipt for having received the said amount. It is alleged that subsequently a mortgage was also created by the Defendant by deposit of title deed. It is claimed that in January, 1991 the Defendant approached the Plaintiff and requested him to make arrangements to have the mortgage property sold and a power of attorney was given in his favour. On the basis of the said power of attorney, the Plaintiff is said to A.S.370/1996. 2 have entered into an agreement for sale on 4.4.1991 and received an amount by way of advance. With oblique motive the Defendant cancelled the power of attorney and laid a suit before the Sub Court, Ernakulam in respect of the property of which mortgage was created in favour of the Plaintiff. Inspite of repeated demands for repayment of money, Defendant did not repay the amount and therefore the suit was laid.

In the detailed written statement filed by the Defendant, she denied the execution of the promissory note and creation of mortgage as alleged in the plaint. She points out that the Plaintiff is a money lender. The husband of the Defendant was conducting a hotel in the plaint schedule property and he had to borrow a sum of Rs. 1,00,000/- for his business purpose. In relation to the said transaction, the husband of the Defendant handed over 14 signed blank cheques, blank signed white papers and blank signed stamp paper worth Rs. 50/-. Later on the title deed of the property was taken by the husband of the Defendant and handed over to the Plaintiff. She denied having A.S.370/1996.3 received any amount from the Plaintiff and pointed out that the blank papers over which signature was obtained were misused and the present suit was laid. The circumstances under which happened to be laid against the Plaintiff and his brother-in-law by the Defendant is narrated in detail in the written statement. That suit was decreed. It was as a counter blast to that suit that the present suit was instituted by the Plaintiff. Pointing out that there is no bonafides in the suit, she prayed for a dismissal of the suit.

The trial court raised necessary issues for consideration. The evidence consists of the testimony of P. Ws.1 and 2 and documents marked as Exts.A1 to A6 from the side of the Plaintiff. The Defendants had D. Ws. 1 to 3 examined. On a consideration of the evidence in the case, the court below came to the conclusion that though the execution of the promissory note has been proved, there was want of evidence to show that the alleged promissory note was supported by consideration and therefore the suit was dismissed. Hence this appeal.

Learned Counsel appearing for the Appellant pointed out that when the court below found that the promissory note was executed by the Defendant, then the presumption u/s 118 of the Negotiable Instruments Act follows and the court below was not justified in holding that the document was unsupported by consideration. It was pointed out that the Plaintiff had produced Exts. A1 to A4, which would clearly show that the demand promissory note was in fact executed by the Defendant and equitable mortgage was also created by her as security for the amount. These facts had been proved and had been accepted by the court below. Thereafter there was no justification in going into the question whether the promissory note was supported by consideration. According to the learned Counsel, when the execution is established, the presumption u/s 118 of the Negotiable Instruments Act is attracted and the burden is on the Defendant then to show that there was no consideration for the promissory note alleged to have been executed by the Defendant. In support of his contention, learned Counsel for the Appellant relied on the decision reported in Kumar Exports v. Sharma Carpets (2009(1) KLT 197). According to learned Counsel, the court below has erred in law in holding that there was no consideration for the transaction in question.

Per contra, learned Senior Counsel appearing for the Respondent pointed out that the evidence adduced in the case is sufficient to show that the claim of the Plaintiff is untrue. Both sides have adduced evidence in the case. It is idle for the Plaintiff to contend that the burden is on the Defendant to dislodge the presumption. At any rate, it is pointed out that even if execution is proved, it is for the Plaintiff to show that the instrument was supported by consideration. Learned Counsel went on to point out that even according to the Plaintiff, he had accounts which would show that the amount had been paid to the Defendant. If that be so, the Plaintiff ought to have produced those accounts. His failure to do so enables the court to draw an adverse inference against him. He has withheld the best evidence and therefore the claim cannot be accepted. In support of his contention, learned Counsel relied on the decision reported in Kundan Lal v. Custodian, Evacuee Property (AIR 1961 SC 1316). Learned Counsel also pointed out that the presumption available u/s 118 is a rebutable presumption and it is not necessary that the Defendant should adduce evidence in that regard. The Defendant can show from the evidence adduced by the Plaintiff itself that the document is not supported by consideration. Learned Counsel brought to the notice of this Court various events, which will be dealt with later, that would indicate that the claim made by the Plaintiff is false. In support of his contention learned Counsel relied on the decisions reported in Bharat Barrel and Drum Manufacturing Company Vs. Amin Chand Payrelal, )and M.S. Narayana Menon @ Mani Vs. State of Kerala and Another, ).

While the Plaintiff would say that Ext.A1 promissory note was executed by the Defendant and she received Rs. 3,50,000/-, the Defendant would deny the same. It has come out in evidence that the Plaintiff also runs a firm, which deals with money lending business. Surprisingly enough, he says that the transaction in question is not with the firm. It is a personal transaction between the Plaintiff and the Defendant. One may at once notice that even though the Plaintiff has stated that he had got accounts for the transaction kept by him, he has not produced any of those documents to show that the Defendant had received a sum of Rs. 3,50,000/- as alleged by him.

Learned Counsel appearing for the Appellant, as already mentioned, relied on the decision reported onKumar Exports v. Sharma Carpets (2009(1) KLT 197) for the proposition that once the execution is proved, the presumption u/s 118 follows. In the said decision it has been held as follows:

The use of the phrase "until the contrary is proved" in Section 118 of the Act and use of the words "unless the contrary is proved" in Section 139 of the Act read with definitions of "may presume" and "shall presume" as given in Section 4 of the Evidence Act, makes it at once clear that presumptions to be raised under both the provisions are rebutable. When a presumption is rebutable , it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over. The accused in a trial u/s 138 of the Act has two options. He can either show that consideration and debt did not exist or that under the particular circumstances of the case the non-existence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed. To rebut the statutory presumptions an accused is not expected to prove his defence beyond reasonable doubt as is expected of the complainant in a criminal trial. The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. Once such rebuttal evidence is adduced and accepted by the court, having regard to all the circumstances of the case and the preponderance of probabilities, the evidential burden shifts back to the complainant and, thereafter, the presumptions under Ss.118 and 139 of the Act will not against come to the complainant''s rescue.

But as rightly pointed out by the learned Senior Counsel for the Respondents, presumption u/s 118 is a rebutable presumption. It is well settled that it is not necessary that the Defendant should adduce evidence to rebut the presumption and the Defendant can rely on the evidence of the Plaintiff himself to show that the document is not supported by consideration. As already mentioned and noticed, the definite case of the Plaintiff is that he has got accounts to show that the amount has been paid to the Defendant. One may recall here that the Plaintiff runs a firm engaging in money lending business, in which his close relatives are the other partners. The evidence of P.W.1 also shows that the amount was paid to the Defendant in his office. The evidence of P.W.1 shows that he has borrowed an amount of Rs. 3,50,000/- from three persons for paying to the Defendant. None of those witnesses are examined. He would also depose that at the time of handing over the money to the Defendant the Typist of the office, the Chief Accountant were also present apart from P.W.2. But strangely enough, none of those persons are also examined except P.W.2, who was a client of the firm. It has been brought out in the cross-examination of P.W.1 that the transaction involved in question is reflected in the accounts of the Plaintiff. If that be so, the best evidence would have been to produce all those accounts. The reluctance on the part of the Plaintiff to produce the accounts call for drawing an adverse inference against him. In the decision reported in Kundan Lal v. Custopdian, Evacuee Property (AIR 1961 SC 1316) it has been held as follows:

Section 118 lays down a special rule of evidence applicable to negotiable instruments. The presumption is one of law and thereunder a court shall presume, inter alia, that the negotiable instrument or the endorsement was made or endorsed for consideration. In effect it throws the burden of proof of failue of consideration on the maker of the note or the endorser, as the case may be. The phrase "burden of proof" has to meanings - One, the burden of proof as a matter of law and pleading and the other the burden of establishing a case, the former is fixed as a question of law on the basis of the pleadings and is unchanged during the entire trial, whereas the latter is not constant but shifts as soon as a party adduces sufficient evidence to raise a presumption in his favour. The evidence required to shift the burden need not necessarily be direct evidence, i.e., oral or documentary evidence or admissions made by opposite party; it may comprise circumstantial evidence of presumptions of law or fact. 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. 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 accounts 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.

It will be useful here to refer to the decision reported in Bharat Barrel and Drum Manufacturing Company Vs. Amin Chand Payrelal, ) wherein it was held as follows:

Once execution of the promissory note is admitted, the presumption u/s 11 would arise that it is supported by a consideration. Such a presumption is rebuttable. The Defendant can prove the non-existence of a consideration by raising a probable defence. If the Defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the Plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the Defendant of proving the non-existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the Plaintiff is entitled under law to rely upon all the evidence led in the case including that of the Plaintiff as well. In case, where the Defendant fails to discharge the initial onus of proof by showing the non-existence of the consideration, the Plaintiff would invariably be held entitled to the benefit of presumption arising u/s 118(a) in his favour. The court may not insist upon the Defendant to disprove the existence of consideration by leading direct evidence as the existence of negative evidence is neither possible not contemplated and even if led, is to be seen with a doubt. the bare denial of the passing of the consideration apparently does not appear to be any defence. Something which is probable has to be brought on record for getting the benefit of shifting the onus of proving to the Plaintiff. To disprove the presumption, the Defendant has to bring on record such facts and circumstances upon consideration of which the court may either believe that the consideration did not exist or its non-existence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that it did not exist.

In the decision reported in Joseph v. Gladis Sasi (2010(3) KLT 379) it was held as follows:

The presumption under Sections 118 and 139 of the Negotiable Instruments Act can be drawn only when the execution of the cheque is admitted or proved. The admission of signature in a blank cheque is not admission of execution of the cheque. The Respondent only admitted that she had issued Ext.P1 cheque for Rs. 1,50,000/- as can be seen in Ext.P1. her only case is that as the Appellant demanded a cheque security, she had given a signed blank cheque. That admission will never amount o an admission of execution of he cheque. To draw the presumption under Sections 118 and 139 of the Negotiable Instruments Act, Appellant has to establish that Respondent had drawn the cheque and issued to him.

In the decision reported in Mallavarapu Kasivisweswara Rao Vs. Thadikonda Ramulu Firm and Others, ) it has been held as follows:

Under Section 118(a) of the Negotiable Instruments Act, the court is obliged to presume, until contrary is proved, that promissory note was made for consideration. Initial burden in this regard lies on the Defendant to prove non-existence of consideration by bringing on record such facts and circumstances which would lead the court to believe non-existence of consideration either by direct evidence or by preponderance of probabilities showing that existence of consideration was improbable, doubtful or illegal. If the Defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the Plaintiff who would be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of negotiable instrument. If Defendant fails to discharge he initial onus of proof by showing the non-existence of the consideration, the Plaintiff would invariably be held entitled to the benefit of presumption arising u/s 118(a) in his favour.

In the decision reported in M.S. Narayana Menon @ Mani Vs. State of Kerala and Another, ) it has been held as follows:

Presumptions both under Sections 118(a) and 139 of the Negotiable Instruments Act are rebuttable in nature In terms of Section 4 of the Evidence Act whenever it is provided by the Act that the court shall presume a fact, it shall regard such fact as proved unless and until it is disproved. The words "proved" and "disproved" have been defined in Section 3 of the Evidence Act. Applying the said definitions of "proved" or "disproved" to the principle behind Section 118(a) of the Negotiable Instruments Act, the court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon. It is not necessary for the Defendant to disprove the existence of consideration by way of direct evidence. The standard of proof evidently is preponderance of probabilities. Inference of preponderance of probabilities can be drawn not only from the materials on record but also by reference to the circumstances upon which the accused relies. The accused need not disprove the prosecution case in its entirety. Moreover, the onus on an accused is not as heavy as that of the prosecution. it may be compared with that on a Defendant in a civil proceeding.

A reading of the above decisions will indicate that once the execution is either admitted or proved, the presumption u/s 118 follows. Then the burden shifts to the Defendant to show that the document is not supported by consideration. At the risk of repetition, one may notice that it may not be necessary for the Defendant to adduce evidence to show that the document is not supported by consideration. He can rely on the evidence of the Plaintiff himself to show that the document is not supported by consideration. Once that burden is discharged by the Defendant, the onus of proof shifts to the Plaintiff.

The evidence on record shows that, according to the Plaintiff, the Defendant had created an equitable mortgage in respect of the suit property in order to secure the amount said to have been given by the Plaintiff to the Defendant. The evidence also discloses that later the Plaintiff had managed to get a power of attorney from the Defendant for sale of the property. It is interesting to note that the Plaintiff then entered into an agreement for sale of the property for a paltry sum of Rs. 50,000/- with his brother-in-law. Coming to know about the said fact, it seems that the Defendant had instituted a suit for cancellation of the document after cancelling the power of attorney and that suit was decreed. Though the Plaintiff carried the matter in appeal as A.S. 184 of 1996, he did not succeed. The result was that the transaction was found to be invalid and the document in favour of the brother in law was set aside. The Defendant had sought to produce a copy of the judgment in A.S. 184 of 1996 before this Court dismissing the appeal filed by the Plaintiff. It is seen that the present suit was instituted almost immediately after the suit was instituted for the cancellation of the deed said to have been executed in favour of the brother in law of the Plaintiff. It is important to notice that for reasons best known to the Plaintiff, he did not issue a notice before instituting the suit.

It is in this background, one has to appreciate the contention put forward by the Defendant. According to the Defendant her husband borrowed a sum of Rs. One Lakh from the Plaintiff and later on the husband of the Defendant deposited the document of title with the Plaintiff.

The evidence shows that the power of attorney in favour of the Plaintiff was executed by the Defendant on 11.1.1991. The agreement for sale between the Plaintiff and his brother in law was executed on 4.4.1991. Notice of cancellation of the power of attorney was issued on 4.7.1992 and the suit was laid by the Defendant immediately thereafter. The suit was decreed on 16.2.1995. As already stated, an appeal was preferred by the Plaintiff, which was dismissed by this Court True, the judgment in the said suit may not be an evidence as such in the present case. But it is a relevant piece of document atleast to establish that there was such a proceedings between the parties and that had gone against the Plaintiff.

It is no doubt true that since the court below had found that the promissory note was infact executed by the Plaintiff, presumption u/s 118 follows. One has to remember that the Defendant admits her signature in the document. But her definite case is that she has not received the sum of Rs. 3,50,000/- as alleged by the Plaintiff. The failure on the part of the Plaintiff to produce the accounts which would show that the amount has been paid by him, the fact that non-examination of the members of the staff in the firm, who according to him has witnessed the payment of the amount, the institution of O.S. 605 of 1992 against the Plaintiff and non-production of account infact allows the Defendant to rely on the presumption available u/s 114 of the Indian Evidence Act to hold against the Plaintiff. The above items of evidence and the presumption available u/s 114 of the Evidence Act shifts the onus of proof to the Plaintiff to show that he had infact paid the amount to the Defendant.

It is rather difficult to believe that if as a matter of fact the amount was paid in the office of the firm, the transaction would not have been with the firm itself. As already noticed, there is no evidence at all to show that the Plaintiff had borrowed the amount as claimed by him from three persons to pay to the Defendant. It is also difficult to believe that the Plaintiff would have entered into an independent transaction with the Defendant in the office of the firm itself. It is here that the explanation offered by the Defendant for the documents in the possession of the Plaintiff became relevant. It is also significant to notice that infact Ext.A4 dated 15.10.1990, the letter of deposit of title deeds issued by the Plaintiff to the Defendant, itself creates the mortgage and it ought to have been registered. However, this aspect has not been been projected in the court below. Whatever that be, from the above discussion it follows that the Plaintiff has miserably failed to establish that the so-called promissory note is supported by consideration. Preponderance of probability on the basis of the evidence adduced by the Defendant would point to the fact that the so-called promissory note is not supported by consideration.

The court below was therefore perfectly justified in non-suiting the Plaintiff. No interference is called for with the judgment and decree of the court below.

This appeal is without merits and it is accordingly dismissed with costs in this Court as well as in the court below.