Karnataka High Court
M Pundalik Rao S/O Mahalingappa vs M/S Vijayakumar Gadgi & Co on 29 June, 2017
Author: B.V.Nagarathna
Bench: B.V.Nagarathna
1
IN THE HIGH COURT OF KARNATAKA
KALABURAGI BENCH
DATED THIS THE 29TH DAY OF JUNE 2017
BEFORE
THE HON'BLE MRS. JUSTICE B.V.NAGARATHNA
REGULAR FIRST APPEAL No.1959 OF 2006
BETWEEN:
M.Pundalik Rao,
S/o Mahalingappa,
Age Major, Occ. Business,
R/o Bidar - 585 401.
...Appellant
(By Smt. Hema L.K, Advocate)
AND:
1. M/s Vijayakumar Gadgi & Co.,
General Merchant & Commission Agency Shop
Gandhi Gunj, Bidar
Represented by its Managing Partner
Sri Vijaykumar S/o Anneppa Patil
R/o Gandhi Gunj,
Bidar - 585 401.
2. Vijayakumar S/o Anneppa Patil
Age Major, Occ. Managing Partner of
M/s Vijaya Kumar Gadgi & Company
R/o Gandhi Gunj,
Bidar - 585 401.
3. Chandrashekhar S/o Anneppa Patil
Age Major,
President of CMC
R/o Near Railway Track
Jabshetty Complex,
2
Gandhi Gunj Road,
Bidar-585401.
4. Somashekar S/o Anneppa Patil,
Age major
R/o Near Railway Track
Jabshetty Complex,
Gandhi Gunj Road,
Bidar-585401.
5. Rajkumar S/o Anneppa Patil
Age major,
R/o Near Railway Track
Jabshetty Complex,
Gandhi Gunj Road,
Bidar-585401.
6. Chandramma W/o Anneppa patil
Age Major
R/o Near Railway Track
Jabshetty Complex,
Gandhi Gunj Road,
Bidar-585401.
...Respondents
(Service of Notice to all respondents is
held sufficient vide order dated 03.01.2011)
This Regular First Appeal is filed under Order 41 Rule 1
read with Section 96 of CPC against the judgment and decree
dated 28.06.2006 passed in O.S.No.91/2000 on the file of Addl.
Civil Judge (Sr.Dn.) Bidar, dismissing the suit for recovery of
money.
This appeal coming on for final hearing this day, Court
delivered the following:
JUDGMENT
This regular first appeal is filed by the plaintiff in O.S.No.91/2000, being aggrieved by the dismissal of suit 3 by judgment and decree dated 28.06.2006, by the court of Addl. Civil Judge (Sr.Dn.), at Bidar.
2. For the sake of convenience, the parties herein shall be referred to, in terms of their status before the trial court.
3. The appellant/plaintiff filed the suit seeking recovery of a sum of Rs.1,41,680/- together with interest and future interest at the rate of 18% per annum from the date of suit, till realization and for other equitable reliefs that he was entitled to be granted. According to the plaintiff, he is an Agent of Life Insurance Corporation of India, residing at Bidar. Defendant No.1 is a Partnership Firm and defendant No.2 is the Managing Partner of the firm. Defendant Nos.2 to 6 are also Partners of defendant No.1 firm. The firm is doing business of Commission Agency, at Gandhi Gunj, Bidar. The firm was in need of funds for development of business. Therefore, defendant No.2 in the capacity of Managing partner of defendant No.1 firm, approached the plaintiff for a hand loan for 4 expansion of the business of the firm. Plaintiff agreed to advance the loan and accordingly, he advanced a sum of Rs.92,000/- to defendant No.1 - firm. The Managing Partner agreed to repay the said loan as early as possible. According to the plaintiff, he approached the Managing Partner many times for repayment of Rs.92,000/- but the Managing Partner i.e., defendant No.2 went on making false promises and thereby postponing repayment. At last, he issued a cheque bearing No.351241, for a sum of Rs.92,000/-, dated 22.07.1997, in favour of plaintiff, which was drawn on Canara Bank, Bidar Branch. Plaintiff presented the said cheque in his bank on the same day but as there was insufficient funds in the account of defendant No.1 firm, the cheque was dishonored and the same was intimated to the plaintiff. Plaintiff got issued legal notice to defendant No.2 as per the provisions of the Negotiable Instruments Act, 1881, (hereinafter referred to as the 'Act' for the sake of brevity). But, in spite of service of notice, defendant No.2 failed to repay the loan amount. So, the plaintiff filed a complaint under Sections 138, 141 and 142 5 of the Negotiable Instruments Act, 1881, against defendant No.2, which was pending before the Chief Judicial Magistrate, Bidar. At the time of filing of suit, according to the plaintiff, defendant No.2 was Managing Partner of defendant No.1 firm, borrowed loan from the plaintiff for improvement of business of the firm. That the defendants are jointly and severally liable to pay the loan. That as the loan amount has not been repaid, defendants are liable to pay interest at the rate of 18% per annum from the date of dishonor of cheque. Thus, the plaintiff is entitled to Rs.92,000/- being the principal amount and Rs.49,680/- being the interest at the rate of 18% per annum from 22.07.1997, aggregating to Rs.1,41,680/- with interest at the rate of 18% per annum. That as the said amount has not been repaid by the defendants, plaintiff filed the suit, seeking recovery of said amount.
4. In response to the suit summons and court notices, defendant Nos.1, 2, 4 and 5 appeared through their counsel, defendant Nos.3 and 6 did not appear before 6 the court and were placed ex-parte. Defendant Nos.1 and 2 filed their written statement. In the written statement while denying the averments made in the plaint, defendants contended that the suit has been filed with a mala fide intention to extract money from the defendants, on the basis of a forged cheque. That the plaintiff has dragged them into litigation. The contents of plaint were expressly denied in verbatim and the defendants contended that they were not liable to pay any amount to the plaintiff, as they had not borrowed any amount from the plaintiff. They further contended that plaintiff was also working with one Subhash Patil, brother of defendant Nos.2 to 6, at Bidar. That Subhash Patil, between the years 1990 to 1997, was residing at Hyderabad, plaintiff used to visit the firm and supplied agricultural products and produce to the firm. He came in close acquaintance with the staff of firm particularly the Munim or Clerk, Bassayya Swamy. Bassayya Swamy, used to look after the financial affairs of the firm, used to keep the cheque book with signatures on blank cheques. Plaintiff used to receive 7 money from Bassayya Swamy, sometimes by cash and some times by cheque. That the relationship between plaintiff and Subhash Patil was strained. With a malafide intention, to harass defendant No.2, plaintiff taking undue advantage of his friendship with Bassayya Swamy, got the blank cheque from Bassayya Swamy, manipulated the cheque by inserting date as 22.07.1997, and claiming a false amount. That plaintiff has also dragged defendant Nos.1 and 2 in a criminal case. Plaintiff has never advanced Rs.92,000/- to defendant No.1 firm at any time nor has defendant No.2 issued the cheque to the plaintiff. That the suit is to be dismissed with costs. Therefore, defendants sought for dismissal of suit with compensatory costs of Rs.25,000/- to defendant No.2 and Rs.50,000/- in favour of defendant Nos.3 to 6.
5. On the basis of the rival pleadings, the trial court farmed the following issues for its consideration :-
1. Whether the plaintiff proves that, the defendant No.2 availed the loan of 8 Rs.92,000/- from him for the improvement of defendant No.1 business ?
2. Whether the plaintiff further proves that the defendant No.2 agreed for the interest at the rate of 18% per annum and further proves that, the plaintiff is entitled to claim the interest of Rs.49,680/- on the principle amount ?
3. Whether the plaintiff further proves that he is entitled to recover the suit amount of Rs.1,41,680/- from the defendants with future interest at the rate of 18% per annum ?
4. Whether the plaintiff has cause of action to file the suit ?
5. What order or decree ?
6. In support of his case, plaintiff examined himself as P.W.1, his brother-in-law, Vinodkumar was examined as P.W.2. Plaintiff produced three documents, which were marked as Exs.P.1 to P.3. Defendant No.1 was examined as D.W.1 and another witness was examined as 9 D.W.2. Defendants did not produce any documentary evidence. On the basis of the said evidence, the trial court answered all the issues in the negative and dismissed the suit, by judgment dated 28.06.2006. Being aggrieved by the dismissal of the suit, the plaintiff has preferred this regular first appeal.
7. I have heard learned counsel for the appellant.
Service of notice to respondents was held to be sufficient vide order dated 03.01.2011. I have perused the material on record as well as the original lower court records.
8. Learned counsel for the plaintiff contended that the trial court was not right in dismissing the suit filed by the plaintiff, seeking recovery of a sum of Rs.1,41,680/- with future interest at the rate of 18% per annum from the date of suit, till realization. She contended that the suit was filed on the basis of the bill of exchange or a cheque dated 22.07.1997, which was issued by defendant No.2 for a sum of Rs.92,000/- drawn on Canara Bank, Bidar Branch. When such cheque was presented at the very 10 same bank by the plaintiff, it was returned dishonored. The plaintiff hence, issued a notice to the defendants, no reply was given to the said notice. In the circumstances, the plaintiff was constrained to file the suit.
9. Learned counsel contended that under Section 118(a) of the Act, a presumption with regard to the cheque would arise, the said section clearly states that when a cheque has been issued by any party then a presumption arises as to the said cheque or negotiable instrument was made or drawn for consideration. The trial court ought to have raised such a presumption in the instant case rather than, dismissing plaintiff's suit. She further drew my attention to the defence taken by the defendants in the suit to the effect that the plaintiff had mis utilized one of the signed cheque kept with the Munim or Clerk in the office of the firm and had filled the same and had presented it. She submitted that the Clerk ought to have been examined in order to rebut the presumption which ought to have been raised in this case. In the 11 absence of any rebuttable evidence, the trial court ought to have decreed the suit. Learned counsel contended that the parameters for filing a complaint under Section 138 of the Act are quite different from seeking recovery of the amount of loan advanced by the plaintiff to the defendants. Although, the criminal complaint filed against defendants has been rejected, nevertheless, the criminal appeal has been preferred by the plaintiff, which is pending adjudication before this court. The trial court hence, has not appreciated the case of plaintiff and has erroneously dismissed the suit.
10. In support of her submission, learned counsel for the appellant relied upon a decision of this court in the case of L.MOHAN VS. V.MOHAN NAIDU reported in 2004 (3) KCCR 1816, to contend that, when once the issue of cheque and the signature of party issuing the cheque is admitted, the court has to presume that the cheque has been issued for discharging the debt or liability, then the burden shifts on the accused to prove 12 that there was no liability or debt or the cheque was issued to a different person.
11. Having heard learned counsel for the appellant and on perusal of the material on record, at the outset it is to be noted that this first appeal arises out of a suit filed by the appellant, seeking recovery of a sum of Rs.1,41,680/- with future interest at the rate of 18% per annum. Having regard to the pleadings on record, the trial court raised as many as five issues. The first issue pertains to whether the plaintiff proves that defendant No.2 had availed loan of Rs.92,000/- from him for improvement of business of defendant No.1 firm. The second issue was as to whether the plaintiff further proves that interest at the rate of 18% per annum was leviable on the principle amount of Rs.92,000/-. Therefore, the case of plaintiff being that a sum of Rs.92,000/- was advanced by him to defendant No.2, for the purpose of improvement of the business of defendant No.1 firm, had to be first established. The initial burden being discharged would 13 entitle a presumption to be raised in favour of plaintiff under Section 118(a) of the Act, if a cheque was issued in the name of plaintiff by defendants.
12. In the instant case, while the plaintiff contended that a sum of Rs.92,000/- was lent to the defendants for the purpose of improvement of business of defendant No.1 firm, there was no evidence to prove the said transaction except the oral evidence of the plaintiff. The mere fact that cheque dated 22.07.1997 drawn by defendant No.2 at Canara Bank, Bidar Branch, was in possession of plaintiff, would not lead to raising of a presumption in favour of plaintiff. The said presumption could be raised only if the plaintiff proved Issue No.1. As already noted apart from the evidence of plaintiff, the other oral evidence let in by the plaintiff, in support of the transaction was that of P.W.2 is brother-in-law. He has expressly stated that he was not present when a sum of Rs.92,000/- was paid by the plaintiff to defendant No.2. Therefore, he is not a witness to the said transaction. The 14 said transaction is not evidenced by any other corroborative evidence or by any documents either by way of receipt or a pro-note or an entry in note book or a diary or a debit entry in a bank account. Therefore, when the trial court on appreciation of the evidence, has to come to a conclusion that the plaintiff had failed to prove that a sum of Rs.92,000/- had been lent by him to defendant No.2, for the purpose of improvement of defendant No.1 firm, then the trial court rightly did not raise a presumption in favour of plaintiff under Section 118 of the Act. Even if the bill of exchange or any other negotiable instrument is in the hand of a party and it is admittedly bearing the signature of drawer of cheque, nevertheless, it must be established by the plaintiff who is seeking recovery of money on the basis of the said negotiable instrument, that the said cheque was issued for a valid consideration i.e., there was a transaction, which had taken place between the plaintiff and the defendant and defendant owing a sum to the plaintiff had issued the said cheque. A debt is a valid consideration for which a cheque 15 could be issued. But in the instant case, on perusal of the evidence of plaintiff, it is noted that there is no proof of the fact that the plaintiff had ever paid or advanced a loan of Rs.92,000/- to defendant No.2 for the purpose of expansion of business of defendant No.1 firm. Therefore, when the plaintiff has failed to establish any loan transaction between himself and defendant No.2, then the next question would arise as to in what situation or in what circumstances, the plaintiff was in possession of cheque bearing the signature of a Managing Partner of defendant No.1 firm.
13. The explanation offered by the defendants in the suit is that there was a practice in the firm of Managing Partner signing blank cheques and leaving them with the Munim or Clerk, which were to be utilized for the purpose of business. That plaintiff being acquainted with the staff of firm, had managed to lay his hands on one of the cheques i.e., Ex.P.1, filled in details and presented the said cheque. That the said cheque was not issued by defendant No.2 to 16 the plaintiff for the purpose of repayment of any loan, which had been advanced by plaintiff to defendants as according to the latter no loan had been advanced to them. Therefore, the initial burden was on the plaintiff to prove that there was indeed a loan transaction that had taken place between the plaintiff and the defendants and that a sum of Rs.92,000/- had been advanced by the plaintiff to defendant No.2 for the purpose of expansion of business of defendant No.1 firm and it was for discharge of the said loan, that the cheque had been issued. In the absence of there being any proof of the fact that there was any such loan transaction between the parties, the mere fact that the plaintiff was in possession of the cheque, which had been signed by defendant No.2 and pertaining to defendant No.1 firm, would not give rise to a presumption in favour of plaintiff.
14. On perusal of oral evidence of plaintiff who deposed as P.W.1, it is elicited in the cross-examination that although defendants were taking loan from him 17 whenever they were in need of money, P.W.1 is unable to say for how many times in a year he gave loan to the defendants. Further, no document was produced pertaining to the earlier transactions. It is difficult to believe that the plaintiff, who was working as LIC Agent for about twenty years and was selling agricultural produce to defendant No.1 firm would be contacted by the defendants for the purpose of availing loan. In further cross-examination, plaintiff has stated that on 27.05.1996, defendant No.2 asked him for a loan but he does not remember the date and the day when defendant No.2 went to his house for seeking a loan. He has also admitted that apart from Ex.P.1 cheque, he has no document to show that he had paid a sum of Rs.92,000/- to the defendants. Neither was any receipt taken from the defendant No.2 at the time of payment of amount. He has also admitted that Subhash Patil, brother of defendant No.2 was having a transport business at Bidar and Hyderabad. That P.W.1 and two others were looking after the business at Bidar and at that time he was residing in the house of Subhash Patil. He has 18 denied the suggestion that there was a quarrel between him and Subhash Patil, in respect of transport business and rent amounts. He has stated that on 21.07.1997, PW- 1 asked defendant No.2 for repayment of the loan and on the next day defendant No.2 issued cheque and that the cheque was already written in his name. That he has not issued any receipt in favour of defendant No.2 in respect of receipt of the cheque.
15. PW-2 is the brother-in-law of plaintiff PW-1. He has expressly denied in his cross-examination that any transaction took place between the plaintiff and defendant No.1 in his presence. He has also denied the fact that he was not present when a sum of Rs.92,000/- was allegedly advanced by plaintiff to defendant No.1. He has stated that he does not know for what reason defendant No.1 took Rs.92,000/- from the plaintiff neither does he know on what date plaintiff advanced the said amount. That plaintiff has not shown any document to him in respect of payment of Rs.92,000/- to the defendants. That he and 19 one Suresh were present along with plaintiff when plaintiff went to defendant for seeking repayment of the loan. He is unable to recall the date on which he met the defendants along with plaintiff in July, 1997 seeking repayment of the loan. That the plaintiff has not executed any document while receiving the cheque.
16. According to DW-1, the relationship between the plaintiff and Subhash Patil, brother of DW-1 was strained due to business transactions. DW-1 tried to intervene in the matter to settle the dispute. Plaintiff developed a hostile attitude towards DW-1 and in order to take revenge against DW-1, he took undue advantage of his close acquaintance with Basayya Swamy, one of the staff of the defendant - firm, managed to secure a blank cheque, manipulated the same and has dragged the defendants to court by filing a false suit and also by filing a criminal complaint. That the plaintiff had never advanced a sum of Rs.92,000/- to the firm nor was any cheque issued on 22.07.1997 in the name of the plaintiff. In the 20 cross-examination, DW-1 has admitted that plaintiff used to bring food grains to the shop for sale. He has also admitted his signature on Ex.P-1 the cheque. That he used to sign on blank cheques i.e. two to three cheques at a time and give the same to the manager, Basayya Swamy. That the manager used to deal with money transactions, whenever there was need for money for the business, by taking permission from the defendants especially for large amounts. DW-1 has denied that he was taking loans from others for the business purpose. He expressly denied that a sum of Rs.92,000/- was borrowed from the plaintiff for the purpose of the business. That he came to know about Ex.P-1, when he received Court summons in the instant suit. Thereafter, he enquired from his manager, Basayya Swamy about Ex.P-1 and dismissed him from service. That he did not inform about Ex.P-1, to the bank as he was not aware that Ex.P-1, was issued to the plaintiff. That at the time of deposition, he was President of Gandhi Gunj Co-operative Bank, Bidar, and his 21 brother Chandrashekar Patil Gadgi, was the Councilor and now the President of Bidar Town Municipality.
17. DW-2 is one of the employees of defendant No.1 firm. He has stated in his examination-in-chief that he and Basayya Swamy were earlier working as Munims in the firm looking after the financial affairs of the firm including receipts and payments. That Basayya Swamy was always having blank cheques signed by Vijay Kumar, i.e. defendant No.2 in his custody for the purpose of business. Defendant No.2 never borrowed any money for the business purpose nor was he directly involved in payment of cheques to the parties. That the plaintiff is an agriculturist who was supplying agricultural produce to the firm. He has never given any amount for the firm for business purpose. There was no need for defendant No.1 - firm to borrow any money from the plaintiff or any other person. That plaintiff had filed a false suit and a criminal case against the defendants by misusing a blank cheque taken from custody of Basayya Swamy, as he had friendly 22 relationship with Basayya Swamy. That defendant No.2 had never given any such cheque to the plaintiff nor borrowed any amount from the plaintiff. In his cross- examination, he has stated that Basayya Swamy, had left the job in the firm. That plaintiff and Basayya Swamy, are friends for fifteen years. He has denied that defendants were in need of money and therefore took loan from plaintiff for business. That Basayya Swamy, had not given the cheque to the plaintiff on the instructions of the defendants.
18. In the circumstances, the trial court held issue No.1 in the negative and consequently issue Nos.2 to 4 also were held in the negative. On re-appreciation of oral evidence on record, in the light of submissions made by learned counsel for the appellant, I am of the view that the trial court was justified in answering issue No.1 in the negative and thereby not raising any presumption under Section 118 of the Act in favour of the plaintiff. Such a presumption would have arisen only when the plaintiff had 23 established that there was a loan transaction between the plaintiff and the defendants for which Ex.P-1 cheque had been issued by defendants. The mere fact that Ex.P-1 was in possession of the plaintiff would not lead to a presumption that there was any such loan transaction. It is only when the loan transaction is established by the plaintiff, then on the basis of Ex.P-1 being in possession of the plaintiff, could lead to the raising of presumption under Section 118(a) of the Act.
19. The decisions cited by learned counsel for the appellant would also not apply as in that case the court has held that the presumption must be raised under Section 118 of the Act to the effect that when once such cheque is issued, which is for discharging of a debt or liability then, the burden of proof would shift on the accused to prove that there was no liability or debt or that the cheque was issued to a different person. Such an approach would not apply in the instant case. Before such a presumption could be raised, it must be established that 24 there was a transaction in respect of which the cheque had been issued. It is only when a transaction in the form of a loan, as in the instant case, is established by the plaintiff, then the presumption with regard to the possession of the cheque by the plaintiff bearing the signature of defendant No.2 would arise in favour of the plaintiff. But in the absence of establishing any transaction by which there could have been passing of consideration from the plaintiff to the defendant, merely because the plaintiff was in possession of cheque, it cannot be presumed that the cheque was issued to discharge a valid debt or liability.
20. Therefore, in my view, the trial court was justified in dismissing the suit. There is no merit in the appeal. Appeal is hence, dismissed.
Sd/-
JUDGE sn/swk