Kerala High Court
C.T. Joseph vs I.V. Philip on 5 March, 2001
Equivalent citations: AIR2001KER300, AIR 2001 KERALA 300, (2001) 2 BANKCAS 498, (2001) 1 KER LJ 654, (2001) 2 CIVILCOURTC 224, (2001) 2 RECCRIR 508, (2001) 3 ICC 384, (2001) 3 ALLCRILR 20, (2002) 2 BANKCLR 826
JUDGMENT Sankarasubban, J.
1. Both these appeals are filed against the judgment and decree in O.S. No. 258 of 1985 on the file of the Subordinate Judge's Court, Kottayam. A.S. No. 180 of 1991 is the appeal filed by the plaintiff, while A.S. No. 105 of 1991 is the appeal filed by the fourth defendant. The suit was filed for realisation of Rs. 2,06,985/-. The case of the plaintiff is as follows :
2. First defendant is a Partnership Firm carrying on the business of dealers in rubber in Paika. Defendants 2 to 6 are its partners and they are close relatives. The plaintiff was having dealings with the first defendant --Firm for more than 10 years. On a final settlement of accounts arrived at between the plaintiff and the first defendant represented by its partner the fourth defendant on 19-8-1985 the amount due to the plaintiff from the first defendant -- Firm was settled at Rs. 2,06,985/-. The fourth defendant handed over to the plaintiff a cheque for the said amount drawn on Grindlays Bank, Wellington Island Branch, Cochin duly signed by the second defendant. When the cheque was presented on the request of the fourth defendant during the third week of October. 1985, it was dishonoured. The plaintiff approached the defendants on 15-10-1985 at their shop and informed them about the dishonour of the cheque. But the defendants did not care to settle the account. Hence, the suit was filed for return of the amount.
3. Defendants 1 to 3 filed a joint written statement. According to them, defendants 5 and 6 were not partners of the first defendant-Firm, as they had retired on 31-3-1985. There was absolutely no transaction or dealings between the plaintiff and the first defendant-Firm at any time. Hence there was no necessity or occasion to settle the accounts. No amount was due from the Firm to the plaintiff. The defendants came to know about the cheque only after institution of the suit and on verification from Court. The cheque is devoid of any consideration. The cheque was not issued to the plaintiff for any amount due from the first defendant-Firm. The first defendant-Firm is having its office and shop at Paika and the second defendant is the Managing Partner. He is residing at Nilamboor about 250 kms. away from Paika. The practice was that the second defendant would sign some blank cheque leaves affixing the seal of the Firm and leave station entrusting the same with the fourth defendant, who was also in charge of the shop along with the third defendant. The fourth defendant was allowed only to make use of the signed blank cheques for the transaction of the Firm, On enquiries, it was understood that one such cheque leaf was unauthorisedly handed over by the fourlh defendant to the plaintiff. In the counter foil, it was endorsed that the cheque was cancelled. Subsequent enquiries revealed that the plaintiff and the fourth defendant were moving closely. The defendants were not informed about the dishonour of the cheque by the plaintiff.
4. Fourth defendant filed a separate written statement. It is stated that there was no dealings with the plaintiff and the first defendant at any time. There was no occasion or necessity for settlement of account as alleged. The fourth defendant had never issued or handed over any cheque to the plaintiff for and on behalf of the first defendant-Firm. The fourth defendant has not requested the plaintiff for presentation of the cheque in October, 1985. The second defendant, the Managing Partner of the first defendant-Firm alone was authorised to operate the accounts of the first defendant-Firm. As he was permanently settled at Nilamboor, the practice was that the second defendant would sign some blank cheque leaves affixing the seal of the Firm and leave station entrusting the same with the fourth defendant. The plaintiff and the fourth defendant were close friends. The plaintiff used to lend money to others. Since the plaintiff was an employee of the State Bank of Travancore, he could not have any money lending business. Hence, he cannot lake any security from his debtors or take legal proceedings. So, his practice was to lend money only on the assurance of third parties, The plaintiff had given certain loans through the mediation of the fourth defendant. On such occasion for his confidence, the plaintiff used to get blank signed cheque leaves from the fourth defendant. These signed cheque leaves were not the cheques issued by the fourth defendant and are not supported by any consideration. In December, 1984, the plaintiff gave a loan of Rs. 10,000/-to one Thomas Joseph through the mediation of the fourth defendant. For the confidence of the plaintiff, the fourth defendant had handed over the plaintiff a blank cheque taken from the cheque book of the first defendant-Firm without having any writing except the signature of the second defendant. In order to wreck vengeance againsl the fourth respondent, that the plaintiff filed the suit.
5. On the basis of the above pleadings, the Court belowraised six issues. Exts. A1 to A18 were marked on the side of the plaintiff, while Exts. B1 to B29 were marked on the side of the defendants. Exts. XI and X2 were marked through witnesses and Ext. C1 is the Court Exhibit. On behalf of the plaintiff, the plaintiff was examined as PW 1 while on behalf of the defendants, the third defendant was examined as DW 1. The second defendant was examined as DW 2. The fourth defendant was examined as DW 3 and one Thomas Joseph was examined as DW 4.
6. On appreciation of the evidence, the Court below found that there was no acceptable evidence to prove that the plaintiff had dealings with the first defendant-Firm and that no amount was due to him from the Firm. It is also found that the cheque in question was not issued to the plaintiff for any debt due from the Firm. The trial Court did not believe the story set up by the fourth defendant that the cheque was issued as security for the loan given by the plaintiff to the fourth defendant. At the same time, the Court below took the view that since the fourth defendant had admitted that he had issued cheque to the plaintiff, a decree was given for the plaint amount against the fourth defendant. Thus, the suit was decreed against the fourth defendant and dismissed against the other defendants. The plaintiff has filed appeal against the dismissal of the suit against defendants 1 to 3 and 5 and 6, while the fourth defendant has filed appeal against the decree against him.
7. Counsel Sri. P. G. Rajagopal appeared for the plaintiff, Sri. T. R. Raman Pillai appeared for the fourth defendant, Sri. C. N. Ramachandran Nair appeared for second respondent and Sri. K. N. Narayana Pillai appeared for respondents 3, 5 and 6.
8. Sri. Rajagopalan appearing for the plaintiff submitted that the plaintiff has produced Ext. A3 to Ext. A14 which will show lhat the first defendant was purchasing rubber from the plaintiff. Further, according to him, Ext. A2 contains the handwriting of the fourth defendant and it is on that basis that the cheque was issued. He submitted that the issue of cheque is admitted. According to him, the cheque was filled up by the fourth defendant, There was authorisation from the second defendant to the fourth defendant to issue cheque on behalf of the Firm. Hence, he contended that when once it is proved that the cheque was executed on behalf of the Firm, there is a presumption that it was executed for valid consideration. According to him, the defendants have not discharged the burden and hence, the Court below was not correct in dismissing the suit against the defendants except the fourth defendant. He submitted that under Section 20 of the Negotiable Instruments Act, even if it is assumed that the cheque was not filled up by the fourth defendant, so long as the instrument has been signed by the second defendant, it gives prime facie authority to the holder thereof to make the instrument for any amount specified and hence, the defendants cannot question the validity of the cheque issued by the fourth defendant.
9. On behalf of defendants 1, 3 and 5 and 6, it was contended that the slips, Exts. A3 to A15 produced by the plaintiff do not disclose any transaction with the first defendant. According to them, these slips cannot be relied on because they have not been properly proved. Learned counsel submitted that the plaintiffs case cannot be believed, because he has not produced any other document to show that the plaintiff had dealings with the defendants. The defendants gave evidence to show that they did not have any dealings with the plaintiff. So far as the issue of Ext. XI cheque is concerned, it is contended that it was not in the course of the business. It was issued in the name of the plaintiff only because at that time, the plaintiff was employed at Ernakulam. Defendants 5 and 6 further contended that they were not partners of the Firm at the relevant time. On behalf of the fourth defendant, it was contended that the plaintiff had never any transaction with the first defendant Firm. It was contended on behalf of the fourth defendant that the Court below was not correct in granting decree against the fourth defendant. Learned counsel for the fourth defendant highlighted the fact that when once the case set up by the plaintiff is knocked down, the plaintiff cannot get a decree on the basis of a different case. According to him, the relief claimed in the plaint was to get recovery of the amount mentioned in the plaint which was given to the Firm and it was stated that as partners of the Firm, the defendants were liable. Further, when once it is proved that the cheque was not issued for any consideration, the Court below was not correct in holding that the fourth defendant had received consideration for the cheque. Hence, he submitted that the decree against the fourth defendant should be set aside.
10. After hearing both sides, the following points arise for consideration: (1) Whether the plaintiff had any dealings with the first defendant-Firm? If so, whether any amount was due from the first defendant to the plaintiff? (2) In so far as Ext. A1 cheque has been signed by the Managing Partner and issued by the fourth defendant, are the defendants estopped from contending that the cheque was unauthorisedly filled up by the plaintiff? (3) Was the Court below correct in decreeing the suit against the fourth defendant after finding earlier that the case set up by the plaintiff was not proved?
11. The first question to be considered is whether the plaintiff had transactions with regard to the sale of rubber with the first defendant-Firm. The plaintiff has not produced any account books or any other documents kept in the course of business to show that he was supplying rubber to the first defendant-Firm. His evidence consists of only Exts. A3 to A1 5. We went through Exts. A3 to A15. We are of the view that from this, it cannot be presumed that the plaintiff had transactions with the first defendant-Firm. These slips do not bear the seal of the Firm nor the signature of any person, who is liable. The plaintiff would say that the handwriting is that of the fourth defendant. But the fourth defendant has denied it.
12. In this context, we wish to say that the first defendant-Firm is a dealer in rubber and that it has got the duty to file returns to the Rubber Board regarding the purchase of rubber. Further, it has produced Ext. B24 purchase bill book to show that it used to issue purchase bills for the purchase of rubber. It is having accounts with the Banks and only the second defendant has the right to operate the accounts. It has also to pay sales tax. In these circumstances, it is very difficult for us to accept the argument of the plaintiff that the plaintiff used to supply rubber to the first defendant-Firm. Even though he has stated that previously he had sold rubber, he has not produced evidence to show about such dealings and payment for sale. The only evidence given is that the amount has been received by the plaintiff by Ext. XI and that the cheque is dated 2-8-1976. On the basis of this cheque, the plaintiff contends that this was the amount paid to him by the first defendant-Firm. Ext. XI is a cash cheque for Rs. 3,500/- issued by the first defendant-Firm. The cheque is of the Bank of Baroda, Wellington Island, Cochin. It is seen that this was collected by the State Bank of Travancore. According to the plaintiff, the cheque was given to him and it was collected by him. Ext. X2 shows that there is a credit in the name of the plaintiff for Rs. 3,500/- on 10-8-1976. The answer of the plaintiff is that he was at that time employed at Ernakulam. Hence, the defendants Wanted to cash the cheque through him as otherwise, they will have to send it back by post. In fact, the defendants have produced Ext. B4. On 2-8-1976, it is seen that they have received Rs. 3,500/-through the Bank of Baroda. Thus it appears to us that the case set up by the defendants is true and that the plaintiff cannot take the advantage of Ext. XI.
13. Then the next question is with regard to Exts. A1 and A2. Ext. A1 is the cheque dated 19-8-1985. The amount stated is Rs. 2,06,985/-. It bears the signature of the second defendant, who is the Managing Partner. Ext. A-2 is the slip produced by the plaintiff to show that this amount of Rs. 2,06,985/- includes Rs. 2,05,520/- as principal and interest of Rs. 1465/-. According to him. the cheque was given by the fourth defendant on the basis of the balance recorded on 19-8-1985. Ext. A2 suffers with the same infirmity as the other slips. It is too much to believe that a Firm like the first defendant would have dealings with two lakhs rupees without proper papers. The ledgers produced by them do not contain such transaction. So far as the issue of the cheque is also concerned, the cheque bears the date, 19-8-1985 and the number of the cheque is 062306. The defendants have produced Ext. B2 cheque book. The counterfoil is marked as Ext. B2(a). Ext. A1 cheque itself shows as cancelled. Previous leaf, viz., 062305 is seen to have been issued on 27-10-1984. The next cheque is cheque No. 062307, which was issued on 5-2-1985. We find a number of other cheque leaves, which have been issued before Ext. A1 excepting cheque leaf No. 062314, which was issued on 16-10-1985 for Rs. 1,35,000/-, Ext. B2 cheque book contains many leaves unfilled. Cheque leaves Nos. 062315 to 062325, i.e., nearly 10 cheques, we find, have been signed by the second defendant without writing the date or amount. Thus, the case set up by the second defendant appears to be true that he used to give signed blank cheques entrusted to the fourth defendant for payment on behalf of the Firm. Evidence adduced either by the fourth defendant or by the plaintiff regarding the filling up of the cheques cannot be believed. The only thing that emerged from the evidence is that the cheque leaf was handed over to the plaintiff by the fourth defendant. The question that arises is whether the cheque was given for any consideration and whether the defendants have established that signed cheque was given to the plaintiff. According to us, in so far as we have found that there has been no business relationship proved, ft is difficult to assume that the amount which the cheque bears is the amount due by the Firm to the plaintiff. The business transactions do not reveal any connection with the plaintiff and defendants. Hence, the basis of the plaintiffs case that the cheque was issued for the balance payment to the plaintiff on account of the transaction of sale of rubber falls on the ground and hence, according to us, the cheque would have been issued for the amount due to the plaintiff in the transaction of rubber as the transaction was not proved.
14. Learned counsel for the plaintiff then argued that even the case of the fourth defendant is that he had entrusted cheque duly signed by the fourth (defendant) and the fourth defendant was authorised to issue the cheque on behalf of the Firm. He relied on Section 20 of the Negotiable Instruments Act and contended that on the basis of that the defendants are estopped from denying their liability under the cheque. So far as Section 20 of the Negotiable Instruments Act is concerned, according to us, it does not apply because Section 20 applies only with regard to inchoate negotiable instruments. So far as the cheques are concerned, they don't require any stamp under the Stamp Act in force.
15. The Lahore High Court in Dower v. Sohan Lal, AIR 1937 Lahore 816 have held that insofar as the cheque do not require to be stamped. Section 20 of the Negotiable Instruments Act is not applicable. Learned counsel for the plaintiff then submitted that even if the principles under Section 20 of the Negotiable Instruments Act do not apply, the general principles of law of estoppel will apply. Learned counsel also cited some decisions to show that the general principles of law of estoppel will apply. But according to us, for the application of such principles, it is highly necessary that the cheque was issued and filled up as authorised. We scanned oral and documentary evidence in this case. The plaintiff has miserably failed to prove that the cheque was issued on behalf of the Firm. Learned counsel then submitted that since the fourth defendant was the representative and the agent of the Firm and the cheque was issued by him, the Firm is liable for the acts of its agent. It is true that the Firm is liable for the acts of its agent. But here, there is nothing to tack on the acts done by the fourth defendant with the Firm. It is not proved that it was done in the course of business. According to the fourth defendant, he never authorised the plaintiff to fill up the cheque. On the other hand, he gave the cheque leaf only as a security for loan, which was given by the plaintiff to the fourth defendant. Thus, we cannot accept the argument of the plaintiff that the defendants are stopped from denying the liability under Ext. Al. The presumption under Section 118 arises only if the execution of the document is proved as true. Here, the execution of the document is not proved excepting the admission that the signature in the cheque is the signature of the second defendant. That does not mean that the cheque was executed by him.
16. In Marimuthu Rounder v. Radhakrishnan, 1990 (1) Ker LT 634 : (AIR 1991 Ker 39) this Court observed as follows at Page 41; of AIR:
"What is required is the proof of execution of an instrument. The argument that only in case the execution is admitted, the presumption is attracted is without force. When it is said that execution is admitted, it only means that the party who has got the duty or obligation to prove the execution is freed from that obligation and duty because, the contesting party has admitted the execution. If such an admission is not there, certainly the effect of that admission can be obtained by the plaintiff if he proves the execution, and in both cases where execution is admitted or proved, a presumption is raised in favour of the consideration having passed. If there is an admission by the defendant, certainly there is no burden on the plaintiff to prove the execution of the promissory note. But, if the plaintiff discharges his burden in regard to the execution of the promissory note then the plaintiff is in the same position where the defendant has admitted the execution of the promissory note and the effect and result is that the burden to prove lack of consideration is then with the defendant."
Learned counsel for the plaintiff relied on the decision of the Supreme Court in Bharat Barrel and Drum v. Amin Chand Payrelal, (1999) 3 SCC 35 : (AIR 1999 SC 1008), There, the Supreme Court observed as follows : "Once execution of the promissory note is admitted, the presumption under Section 118(a) 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 under Section 118 (a) in this 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 nor 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. Learned counsel, as a matter of fact, stressed importance on the following sentence in the judgment: "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 that case, it was further held that 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 under Section 118(a). According to us, the above decision does not apply to the facts of the present case. First of all here, the execution is not proved. Hence, we are of the view that the question of probabilities does not arise in this case and hence, it is a case where the plaintiff failed to discharge his onus.
17. The next question is whether on the basis of the facts, the Court was justified in granting a decree against the fourth defendant. In the judgment, the Court below has stated as follows : "The fourth defendant has no case that Ext. A1 cheque was stolen by the plaintiff from his custody. Therefore if the explanation of the 4th defendant that he had entrusted the blank cheque leal to the plaintiff is disproved, then it is to be held that the 4th defendant had issued the cheque to the plaintiff. If that is the conclusion to be arrived at from the evidence it is clear that the liability under the cheque cannot be that of the 1st defendant firm as the 1st defendant firm had no dealings in rubber with the plaintiff. I have already found that the explanation offered by the 4th defendant as to how the plaintiff got possession of Ext. A1 cheque is unbelievable. Therefore as a natural corollary to that finding it is to be held that 4th defendant had issued Ext. A1 cheque. It is quite clear that he is not deposing the truth before the Court and is setting up a false case in order to avoid the liability". In this context, we would like to refer to the plaint in the case. In paragraph 4 of the plaint, it is stated that a final settlement of accounts was arrived at between the plaintiff and the first defendant, represented by its fourth partner and the amount due to the plaintiff from the first defendant Firm on 198-1985 was settled at Rs. 2,06,985/-. On the same day, the fourth defendant handed over to the plaintiff a cheque for the said amount drawn on Grindleys Bank, Wellington Island Branch, Cochin duly signed by the second defendant. The prayer is to allow the plaintiff to realise the amount from the defendant as per the accounts given in the plaint. The plaintiff further states in the plaint that the amount stated in the plaint is the amount due to him as per the dealings.
18. As already stated, the plaintiff was not able to establish his case. The cheque issued is not a cheque issued by the fourth defendant. It is a cheque of the Firm. It is true that the fourth defendant was not able to prove his case that the cheque was given as security for the loan granted to the fourth defendant. That does not mean that the plaintiffis to be given a decree. The plaintiff has not come with clean hands to the Court. He has not told the true story before Court. The only cause of action stated is business transaction with the plaintiff. Hence, according to us, the decree granted against the fourth defendant is wrong.
In the above view of the matter. A.S. No. 105 of 1991 is allowed, A.S. No. 180 of 1991 is dismissed. Parties are to bear their respective costs.