Thakkar Pardhan Purushottam vs Thakkar Shantilal Purushottam

Shah, C.J.—This is an appeal from a decree of the Civil Judge, Senior Division, Junagadh, dismissing the Appellant-Plaintiff''s suit on two cheques and two Khatas of the aggregate value of Rs. 5000/-. The Appellant-Plaintiff''s case is that the Respondent- Defendant gave to him on 2-6-1948 two post-dated cheques of Rs. 1500/- and Rs. 3500/- on the Central Bank of India bearing dates 3-8-1948 and 2-10-1948, and that in addition the Respondent passed two Khatas for the said sums in the Appellant''s favour on 6-6-1948 at Rajkot, whereupon the Appellant lent to the Respondent Rs. 5000/-. The defence of the Respondent was that the cheques and the Khatas were passed without consideration and he denied all liability for the same. One of the issues framed by the learned trial Judge was whether it was proved that Rs. 1500/- and Rs. 3500/- had not been advanced as consideration for the cheques and Khatas sued upon. The issue might have been framed better; all the same it did throw the onus on the Defendant to prove that the cheques as also the Khatas were without consideration.

The Defendant led evidence in support of his contention that the Plaintiff had promised to secure for him a loan of Rs. 5000/- and relying upon the Plaintiff''s word he gave the post-dated cheques without receiving any consideration whatever. The Defendant also led evidence to show that the Plaintiff'' was not in a financial position to advance Rs. 5000/-. The Plaintiff on his part led evidence by examining himself and other witnesses that he had Rs. 5000/- with him at the time of the transaction and that he did pay the sum to the Defendant. The learned Judge took all the evidence into consideration and held that the Defendant had succeeded in establishing that no consideration had been received by him for the cheques and the Khatas in the suit; and on that finding he dismissed the Plaintiff''s claim.

In appeal Mr. Mankad for the Appellant has laid stress on the presumption in Section 118, Negotiable Instruments Act and has urged that the onus lay all along on the Defendant to prove that the cheques were without consideration and that the learned Judge was not right in relying upon the financial condition of the Plaintiff in arriving at the decision that no consideration had passed for the cheques. He has also urged that the onus being on the Defendant, the question whether the Plaintiff proved that he had the necessary moneys to advance, and that he did advance the sum was immaterial and no importance need have been attached to it. In substance the contention is that the learned Judge''s approach to the question is not correct and that this incorrect, approach has vitiated his finding. This contention of Mr. Mankad is not correct as I will later show, but before doing so it is convenient to consider Section 118, Negotiable Instruments Act and its effect.

Now Section 118 raises a statutory presumption in favour of there being consideration for every negotiable instrument, and the burden is on the maker of the negotiable instrument to prove failure of consideration. This statutory presumption continues until it is rebutted and the only way in which it can be rebutted is by proving that the cheques in question were without consideration, and the onus to prove this fact is on the Defendant. The question as to this presumption u/s 118 and the rebuttal thereof has been considered in - Tarmahomed Haji Abdul Rehman Vs. Tyeb Ebrahim Bharamchari, . There the suit was brought on the strength of three hundis and the defence was that the hundis were without consideration. It appears that at the hearing the Plaintiff admitted that the consideration mentioned in the hundis was not correct and that the real consideration was something different from what was stated in the hundis. The contention put forward on the Defendant''s behalf was that as soon as it is shown that the consideration mentioned in the hundis was not the real consideration, the presumption u/s 118 is rebutted and it is for the Plaintiff to prove what the real consideration was. This contention was rejected, and dealing with the same and other relevant questions as to the onus and the discharge thereof, Chagla C.J. held that the statutory presumption u/s 118 that the negotiable instrument is for consideration continues until it is rebutted by proving the contrary, viz., that no consideration had passed for the same.

The presumption under the Section is not in respect of the consideration mentioned in the negotiable instrument, but the presumption is in favour of there being a consideration for the negotiable instrument, any consideration which is a valid consideration in law. No doubt if the consideration mentioned in the negotiable instrument is found to be false that is factor which the Court would take into account in deciding whether the Defendant had discharged the burden cast upon him by Section 118. But the mere fact that the consideration stated in the negotiable instrument turns out to be wrongly described does not rebut the presumption and the burden still continues on the Defendant to satisfy the Court that there was no consideration for the instrument. In order to determine whether that burden is discharged or not, the whole volume of evidence led before the Court including the admissions of the Plaintiff must be considered. But in so doing the Court must always bear in mind the statutory presumption and the fact that the burden of proof lies on the Defendant and that burden has to be discharged by the Defendant. Where the Plaintiff attempts to prove a particular consideration, the mere fact that he failed to prove such a consideration does not, in any way, relieve the Defendant from his obligation to establish the contrary of the presumption.

The learned Chief Justice also agreed that the proposition of law laid down in - Lal Girwar Lal Vs. Dau Dayal, , viz., that where the Court, after a careful consideration of the entire evidence, records a clear finding one way or the other, then that finding is based not on a mere presumption but on the evidence and has to be accepted. An earlier decision of the Allahabad High Court in - Kunwar Muhammad Shafi Khan Vs. Kunwar Muhammad Moazzam Ali Khan, , was considered in - ''Girwar Lal''s case, (B)'', and Sulaiman J. had uttered a warning as to show the decision in - ''Md. Shafi Khan''s case, (C)'', was to be understood. He observed:

We are not satisfied that it was meant to be laid down in that case that where the Plaintiff merely fails to prove that consideration passed and the Defendant also fails to prove that he did not get consideration, there is no presumption in favour of the Plaintiff.

The same view was taken in - L. Ram Nath and Another Vs. Lala Ram Chandra Mal, . This view was approved by the Bombay High Court in - ''Tarmahomed''s case (A)'' and Chagla C. J. summed up the position as follows:

The presumption u/s 118 is not rebutted till it is proved that there is no consideration for the negotiable instrument, and the mere fact that the Plaintiff fails to prove the particular consideration on which he relies is not sufficient to rebut that presumption and lead the Court to the conclusion that the contrary as required by Section 118 has been proved.

With respect I agree with this view. The onus being on the Respondent to prove that the cheques were without consideration, the fact that the Appellant is unable to prove that he did pay the sum mentioned in the cheques will not relieve the Defendant from the obligation to prove affirmatively that he did not receive any consideration for the cheques, and if the Defendant fails to prove it then the Plaintiff is entitled to succeed on the strength of the presumption u/s 118.

Applying this test to the facts here, the Defendant has, in our opinion, succeeded in proving that the two cheques were without consideration altogether. Now the Appellant was a broker, and he had, in the past, secured loans for the Respondent on the basis of commission on post-dated cheques. Shortly prior to the suit transaction, viz., on 9-5-1948, the Appellant had secured for the Respondent a loan of Rs. 5000/- on a post-dated cheque of 9-9-1948 from one Nanalal Dharamshi of Ahmedabadi for which he had charged Rs. 500/- as commission. It appears that Nanalal insisted on having a mortgage of the Respondent''s property. The Respondent was not willing to execute the mortgage, probably because the property was his father''s and not his own, but persuaded by the Appellant and hard pressed by his monetary circumstances, he had to yield and in the Khata (Ex. 49) which he passed in favour of Nanalal Dharamshi contemporaneously with the cheque, he stated that he agreed to execute the mortgage deed. But whether he did so voluntarily or otherwise is not of any material consequence. The Respondent''s plea is that he was in need of Rs. 5000/- in order to pay off Nanalal Dharamshi and that it was for that reason that he asked the Appellant to get a loan for him and for that purpose gave the two cheques and the Khatas in question.

The Appellant is a broker and in the past he had secured such loans for the Respondent on post-dated cheques from one Jadavji Raghavji and Mohanlal Jhinabhai, the former in December 1948 and the latter in July 1947. The loan of Rs. 5000/- from Nanalal Dharamshi was also secured by him on a post-dated cheque, all of which indicates that there was close relationship between the parties. The Appellant does not deny the Respondent''s statement that he required the suit sum of Rs. 5000/- for the purpose of repaying Nanalal Dharamshi and the evidence in the case too proves definitely that that was the purpose. Jeram Dharamshi, who entered into the transaction of the loan on behalf of his brother Nanalal, is a material witness on the point. As the mortgage document was not passed, he made a demand and wrote to the Appellant as the Appellant was the person through whom the loan was arranged, and some correspondence ensued between the two on the subject. The Appellant at first tried to put off Jeram but as Jeram insisted on the mortgage document and possession of the documents of title, he sent a rent note of the house purporting to be executed by the Respondent and also copies of the title deeds but not the mortgage document. Jeram was not satisfied with this. On his part the Respondent was not at all willing to execute the mortgage because he honestly felt that it was both wrong and not legal to do so as the property belonged to his father, and he was anxious to repay the loan. His evidence is that the Appellant promised to get the sum from his son-in-law at Bombay, and asked for the two cheques and the Khatas in order that he may raise the loan at Bombay, and this is borne out by Jeram who is quite an independent witness.

Jeram was pressing for the mortgage bond or else his sum, and the Appellant therefore ultimately decided to go to Bombay to get the moneys; at any rate, he pretended that he was going to Bombay for that purpose. He was at Ahmedabad and met Jeram on 15-7-1948. In the meantime the copies of the title deeds and the rent note had been received by Jeram, but he treated these as useless and told so to the Appellant. The Appellant then requested him not to insist on having the mortgage bond and not to put the Respondent to unnecessary expense, and said that the expiry of the time limit of the cheque was drawing near and the payment would be made. In fact he told Jeram that the Respondent had given to him two cheques of Rs. 5000/-, that he, the Appellant was going to Bombay to get the sum and that as soon as the money was raised the Respondent would pay off Nanalal. There is no reason why this definite evidence of Jeram should not be accepted. It proves beyond doubt that the two cheques in question had been given to the Appellant only for the purpose of raising a loan and that the Appellant had not given a pie to the Respondent as consideration for the cheques.

As ultimately the Respondent was unable to meet, his liabilities his maternal uncle Jethalal Devji intervened and took over the control of the Respondent''s shop at Rajkot and later sold it and out of the sale proceeds he paid off the creditors including Nanalal Dharamshi. Jeram had come to Rajkot in that connection and the payment was paid to him in the Appellant''s presence on 1-9-1949. In fact the Appellant was aware that Jethalal had sold the shop and was paying off the creditors and it is surprising that till Jeram was paid on 1-9-1949, he never gave an inkling that he had also moneys to recover from the Respondent on the strength of the cheques in suit. It was thereafter on the 19th of September that the Appellant for the first time made a demand of the sum. The first cheque viz., of Rs. 1500/- had become due on 3-8-1948, and it is difficult to see why the Appellant should have failed to demand that sum, particularly when he was aware that the Respondent''s shop had been sold and the creditors were being paid off.

The Respondent has kept regular books of accounts of his Rajkot shop and they contain a Khata of the Appellant, but it is significant that the suit sum does not find place in the said Khata. We find from the evidence that the Respondent is an honest straightforward businessman and we consider it improbable that he would have omitted to credit the Appellant with the sum if the sum had been actually received by him. The Appellant has no doubt produced accounts of his own showing a debit of the sum to the Respondent''s accounts (which?) are not at all regularly kept and they have no evidentiary value.

The Respondent''s case further is that the Appellant was in a difficult financial condition himself and had no means to advance a big sum as Rs. 5000/- even if he had meant to do so. The Appellant has given evidence in this case and in determining the question at issue we must take into account certain of his admissions. He had no regular business of his own excepting that he was doing some stray brokerage and in 1946, on his own admission, he was making about Rs. 50/- to Rs. 60/- per month. That again was not every month and some of the months were blank. He had a large family to support and the said income was hardly sufficient to support the family. According to him, in 1947 his income was Rs. 2000/- to Rs. 2500/ but, excepting for his statement there is no evidence to prove the fact. He is unable to say what particular transactions he had entered into in 1947 on which he earned brokerage and the same is true for 1948. There are also no accounts to support his statement. He was in an indebted state and he had asked for instalments of Rs. 5/- to Rs. 10/- per month in a suit filed against him in 1946 by one Odhavji Govindji of Kodinar. A decree for Rs. 666/-, was passed against him in that suit and the same is still outstanding. His monetary condition was thus far from satisfactory and he was not in a position to give a loan of such a large sum to the Respondent.

It is true that the onus is not on the Appellant to prove the payment, but since he has led affirmative evidence in support of the payment, it is necessary to examine that evidence. Now admittedly the payment had not been made on 2-6-1948, viz., the day on which the cheques had been given by the Respondent. That is his own case in the plaint and in the course of the evidence, though in his notice dated 19-9-1948, he had alleged that the consideration was paid on 2nd June, the date of the cheques. The fact of the non-payment of the consideration on the date of the cheques therefore is a factor to weaken the presumption of consideration. According to him he had brought the moneys with him when he came to Rajkot on 6th June, on which date the two Khatas were given, that he had stopped with his ''Vevai'', but had kept the moneys all along in his own pocket and had not talked to his ''Vevai'' about it. The sum is comprised of three items, the first of which is of Rs. 1800/- out of which Rs. 1200/- represented a loan which he took from one Bai Kastur On 1-6-1948. Kastur is a widow and the Appellant lives in her house as a tenant and is looking after her affairs since 7 or 8 years, and their relations are riot merely formal. The sum is no doubt debited to the Appellant in Kastur''s accounts, but that is done by the Appellant himself and is again in a ''Betha Khata'' which can be written out at any time. According to the Appellant he received Rs. 600/- from Mocni Harilal Manji on 6th June, it being a repayment of a loan which had been made to Harilal from Kastur''s moneys. Harilal is in a chronic indebted state and he used to borrow moneys very often from the Appellant and is a man under his obligation. According to him he had given Rs. 700/- to the Appellant on 6th June, which is inconsistent with the Appellant''s own version. The payment is not supported by any reliable accounts and the debit entry of Rs. 600/- in the ''Betha Khata'' of the Appellant in Kastur''s account is equally valueless. Significantly enough the account is squared up by an alleged payment of Rs. 1800/- on 9th August.

The next item is of Rs. 1500/- said to have been received from one Jethalal Devraj a cousin of the Appellant. The story is that Jethalal wanted to purchase a house at Junagadh and had with that view given this sum to the Appellant on 22nd May and this sum was lying with the Appellant. This item too is sought to be supported by entries in the ''Betha Khata'' book of Jethalal and is alleged to have been repaid on 8-8-1948. However no evidentiary value can be attached to the entries in the ''Betha Khata'' and there is no doubt that this Khata as also Kastur''s Khata are mere manipulations. It is difficult to see that the Appellant who was constantly hard pressed for money could make a cash payment of Rs. 3300/- odd on 8 and 9-8-1948. According to the Appellant he made up the balance from a sum of Rs. 2200/- lying in cash with him, but this fact has not been borne out by any evidence.

There is thus ample material to support the Respondent''s contention that the Appellant had not the means to advance the amount in suit and it corroborates the positive evidence of Jeram Dharamshi and of the other circumstances referred to in paragraph above. The Respondent has thus proved to the contrary and has rebutted the presumption arising u/s 118, Negotiable Instruments Act. The lower Court''s finding that the cheques and the Khatas in question were not for consideration is thus correct. The appeal therefore fails and is dismissed with costs.

Baxi, J.

I agree.