Karnataka High Court
M Basavapunnaiah @ M B Punnaiah vs B Jagan Mohana Rao on 4 April, 2014
Author: A.V.Chandrashekara
Bench: A.V.Chandrashekara
1
IN THE HIGH COURT OF KARNATAKA
DHARWAD BENCH
DATED THIS THE 4 t h DAY OF APRIL, 2014
BEFORE
THE HON'BLE MR. JUSTICE A.V.CHANDRASHEKARA
REGULAR FIRST APPEAL No.862/2006 (MON)
BETWEEN:
M BASAVAPUNNAIAH
@ M B PUNNAIAH
S/O RATHAIAH
AGED ABOUT 56 YEARS,
OCC: EMPLOYEE,
R/AT PRAGATHINAGAR
GANGAVATHI
KOPPAL DISTRICT.
... APPELLANT
(BY SRI. AVINISH BANAKAR, FOR K VARA PRASAD,
ADVOCATE)
AND:
B JAGAN MOHANA RAO
S/O LATE B UMAMAHESHWAR RAO
AGED ABOUT 51 YEARS,
OCC: EMPLOYEE,
R/AT MURALI BASANNA CAMP,
SREERAMANAGAR VILLAGE,
GANGAVATHI, KOPPAL DISTRICT,
... RESPONDENT
(BY SRI. T BASAVANAGOUDA, ADVOCATE)
2
RFA FILED U/S 96 OF CPC AGAINST THE
JUDGMENT AND DECREE DT.7.4.2006 PASSED IN
O.S. NO. 59/2005, ON THE FILE OF THE CIVIL
JUDGE (SR.DN.) AT GANGAVATHI, DECREEING THE
SUIT FOR RECOVERY OF MONEY.
THIS APPEAL COMING ON FOR ARGUMENTS
THIS DAY, THE COURT DELIVERED THE
FOLLOWING:
JUDGMENT
Defendant of an original suit is before this Court by filing an appeal under Section 96 of CPC challenging the judgment and decree passed by the learned Senior Civil Judge, Gangavathi, Koppal District in O.S.No.59/2005. Respondent herein is the sole plaintiff in the said suit. Parties will be referred to as plaintiff and defendant as per their ranking given in the trial Court.
2. Suit filed for the recovery of a sum of Rs.1,36,330/- based on a promissory note stated to have been executed by the defendant on 10.01.2004 in favour of the plaintiff agreeing to repay 3 Rs.1,00,000/- with interest at 24% p.a. from the date of document till realisation, has been decreed as prayed for, directing the defendant to pay a sum of Rs.1,36,330/- with interest at 24% p.a. from the date of filing of suit till realisation along with costs. It is this judgment and decree dated 07.04.2006, which is called in question on various grounds as set out in the appeal memo filed under Section 96 of CPC.
3. The facts leading to the filing of the suit before the Court of Senior Civil Judge at Gangavathi are as follows:
Plaintiff and defendant are known to each other. Defendant is stated to have approached the plaintiff on 10.01.2004 for lending him a sum of Rs.1,00,000/-. Plaintiff is stated to have lent a sum of Rs.1,00,000/- to the defendant on 10.01.2004 and as a security, defendant is stated to have executed a promissory note on the same day in favour of the 4 plaintiff agreeing to repay the sum of Rs.1,00,000/- received by him as loan with interest at 24% p.a. thereon. In spite of several demands, defendant did not repay the loan and as such, plaintiff was constrained to file a suit for recovery of money claiming a sum of Rs.1,00,000/- towards principal and Rs.36,330/- as interest thereon at the rate of 24% p.a. from 10.01.2004 to 05.07.2005.
4. The defendant appeared before the Court and chose to file a detailed written statement. He has denied all the material averments inclusive of executing promissory note in favour of plaintiff, receipt of Rs.1,00,000/- as loan and agreement to pay back the same with interest at 24% p.a. He has called upon the plaintiff to strictly prove the contents of the plaint. According to him, the defendant is engaged in the business of money lending and therefore, suit is not maintainable. 5
5. According to the defendant, plaintiff is in the habit of obtaining two or three blank pro-notes with the signatures of the persons concerned and assuring the borrowers that the signed papers will be returned when the money would be repaid. Plaintiff is stated to be genius in creating documents by filling up blank pro-notes. According to the defendant, a sum of Rs.65,000/- only was received from the plaintiff by him in the year 2001 agreeing to repay the same with interest at 24% p.a. compounded quarterly. After availing the said loan, he is stated to have repaid the entire sum of Rs.1,35,000/- by selling his land. When the plaintiff learnt that defendant was getting about 5-6 lakh from sale of land, he demanded interest at 36% p.a. compounded quarterly. But defendant is stated to have settled the matter by paying the sum of Rs.1,35,000/- in the presence of Venkatesh and Govindappa of Gangavathi. When the defendant demanded the blank pro-note bearing his 6 signature to be returned to him, plaintiff went on postponing to return the same and even once told him that he had destroyed the same. With these pleadings, he had prayed for dismissal of the suit.
6. On the basis of the above pleadings, following issues came to be framed on 25.02.2005:
i. Whether plaintiff proves that the def endant borrowed a sum of Rs.1,00,000/- on 10.01.2004 and executed promissory note agreeing to pay interest at the rate of 24% p.a?
ii. Whether plaintiff f urther proves that he is entitled f or suit claim of Rs.1,36,330/- with future interest at the rate of 24% p.a.? iii. Whether def endant proves that the plaintiff has taken the signatures on blank promissory notes and created the suit pro- note?
iv. Whether def endant f urther proves that he received only an amount of Rs.65,000/- as 7 loan and he paid a total of Rs.1,35,000/- which includes interest?
v. What order?
7. Plaintiff is examined as PW1 and three
witnesses have been examined on his behalf.
Defendant is examined as DW1 and two witnesses have been examined on his behalf. 6 exhibits have been got marked on behalf of the plaintiff.
8. After hearing the arguments and perusing the records, the learned Senior Civil Judge had answered issued 1 and 2 in the affirmative and issues 2 and 3 in the negative. Consequently, suit is decreed as prayed for. This judgment and decree dated 07.04.2006 is called in question.
9. It is contended before this Court that the trial Court has erred in decreeing the suit, more particularly, when the document styled as 'promissory note' is not proved in accordance with 8 law. It is further contended that the trial Court has not framed a relevant issue in regard to the plaintiff being a money lender. It is contended that, no notice was got issued prior to the filing of the suit and therefore, suit is not maintainable. The trial Court is stated to have not properly assessed the oral and documentary evidence in right perspective. It is contended that the judgment and decree of the trial Court is opposed to law, facts and probabilities and hence it is prayed to allow the appeal in its entirety.
10. On hearing the arguments from the learned Counsel for the appellant and on perusing the records, this Court felt that an issue is required in regard to the plaintiff being a mone ylender. Framing of an issue in this regard is required as defendant has taken up a specific plea in the written statement that plaintiff is a regular money lender engaged in the business of money lending that too obtaining 9 blank papers with the signatures of borrowers. It is in this regard, an additional issue has been framed by this Court casting burden upon the defendant on 28.03.2014 and the same is as under:
"Whether def endan t proves that the plaintiff is a money lender and hence suit is not maintain able."
11. After formulation of this additional issue, arguments have been advanced by both the Counsel at length.
12. Learned Counsel for the respondent herein has vehemently argued that there are no series of transactions evidencing money lending by the plaintiff. It is argued that a stray admission from the mouth of witness Sri. Venkatesh Rao cannot be considered as an admission going to the very root of the plaintiff's case. He has relied upon the decision of this Court in Civil Revision Petition No.3043/2003 10 connected with 3044/2003 and 3045/2003 dated 19.03.2004 in the case of T. Veeranna and Smt. Katta Jayamma.
13. It is argued that in view of presumption available under Section 118(a) of Negotiable Instruments Act and in view of signature found on the pro-note being not denied by the defendant, the burden is upon the defendant to prove the non- passing of consideration.
14. After hearing the learned Counsel appearing for the parties and perusing the records, following points arise for consideration:
i. Whether plaintiff is moneylender within the purview of the Karnatak a Money Lenders Act?
II. Whether the trial Court is justif ied in coming to the conclusion that def endant had availed a loan of Rs.1,00,000/- f rom the plaintiff on 11 10.01.2004 by executing a promissory note marked as Ex.P1?
III. Whether plaintiff is entitled f or the suit claim and if so, with wh at rate of interest?
15. POINT NO.1: Burden is always upon the person who takes up a plea that a particular person is a moneylender. This Court in the case of M. N. Radhamma Vs. M. N. Venkatanarayanappa reported in ILR 1979 Kar. 2138 has held that, a person to be a lender, he or she must carry on business in money lending in the State. It is further held that, to refer an activity as business in money lending, there must be course of dealings carried on with profit motive. Thus, it must be established that the person has carried on the activity of money lending as a business with a profit motive. Explaining the words 'carries on the business of money lending' as found in Section 2(10) of the Karnataka Money Lenders Act, it is made clear that 12 mere stray instance of money lending cannot be taken as proof without establishment of the fact of carrying on business of money lending. In other words, money lending must be carried on as a profession.
16. Learned Counsel for the appellant has drawn the attention of this Court to the relevant portion of the deposition of Jagan Mohan - plaintiff examined as PW1. In page 3 of his oral evidence PW1 has admitted the suggestion that the attesting witness B. Venkatesh Rao has borrowed a sum of Rs.50,000/- from him. The said B. Venkatesh Rao is examined as PW4. In his cross-examination, B. Venkatesh Rao examined as PW4 has admitted that he has borrowed some amount from the plaintiff and that he has raised a hand loan of Rs.50,000/- from the plaintiff after filing of the suit. Nowhere it is suggested to either K.Lakshmi Narayana examined as 13 PW3 or K. Satyanarayana examined as PW2 that plaintiff is in the habit of lending money with a profit motive. It is true that one instance of lending mone y by the plaintiff to PW4 is made out. As held by this Court, one stray instance of lending amount cannot be considered as 'money lending' within the purview of Section 2(10) of the Karnataka Money Lenders Act. Suggestion put to PW1 that he had advanced a sum of Rs.50,000/- each to Venkatesh, Ramachandra Rao of Ayodhya, Ramjanaya has been specifically denied.
17. Though defendant examined as DW1 has deposed that he had availed loan from the plaintiff on several dates, he has not been able to give details of the dates on which he availed loan and the details of the amount availed as loan from the plaintiff.
18. Therefore, on reassessment of the entire evidence, it may be held that defendant has not been able to prove that plaintiff is a moneylender within 14 the purview of Section 2(10) of the Karnataka Money Lenders Act. Hence point No.1 is answered in the negative.
19. POINTS NO.2 & 3: Ex.P1 is the Promissory Note and it is in Te lugu Language. Ex.P2 is the Kannada Translation of Ex.P1. The contents of the same have not been denied by the learned Counsel appearing for the parties. What is mentioned in Ex.P2 is that, defendant had availed a sum of Rs.1,00,000/- as loan from the plaintiff on 10.01.2004 agreeing to repay with interest at 2% per month, on demand. It bears the signatures of Lakshmi Narayana and B. Venkatesh Rao as attestors and scribe Sri.K. Satyanarayana. The said K. Satyanarayana is examined as PW2. He has deposed about the pro-note executed by defendant on 10.01.2004 in favour of plaintiff and receipt of Rs.1,00,000/- as loan. It is his case that, he knows 15 plaintiff from more than 20 years and that he is residing in Shriram Nagar. It is his case that, he has written only one promissory note in favour of the plaintiff and that is Ex.P1. Though he has been cross-examined at length, nothing has been culled out from his mouth to discard his deposition. In fact he has withstood the rigor of the cross-examination. It appears that said K. Satyanarayana has no axe to grind against the defendant.
20. Lakshmi Narayan and Venkatesh Rao are attestors. Lakshmi Narayan also knows the plaintiff very well. He has deposed that plaintiff called him to his house when he advanced amount to the defendant. He has deposed that Ex.P1 was written by Satyanarayana. Suggestion put to him that he knew about defendant repaying the amount borrowed has been specifically denied. Nothing has been culled out from his mouth to discard his deposition. 16 Just because B. Venkatesh Rao examined as PW4 has availed a sum of Rs.50,000/- as loan from the plaintiff, he cannot be considered as interested witness.
21. Defendant is examined as DW1. He has reiterated the contents of the written statement. In his examination in chief, he has admitted that he knew plaintiff for the past 25 years and he has also admitted that there were no transactions other than the transactions in the year 2001. But he has deposed that he used to take amounts by executing a promissory note from 2001. It is his case that, he did not take back the promissory note from the plaintiff. What is deposed by him that, the document marked as Ex.P1 was signed by him in the year 2001 and that the same has been used to create a document as though it has come into being on 10.01.2004. Defendant is a literate man and puts 17 his signature in English. He has all wordily knowledge. Therefore, burden is upon him to prove that Ex.P1 is a concocted document and that it has been used as pro-note which has come into being on 10.01.2004.
22. Though he has made an averment to that effect, nothing is placed on record to effectively substantiate the same. Defendant has not denied the signature found on Ex.P1 as P1A. Defendant, being educated and having wordily knowledge and having not denied his signature found on Ex.P1, the inference is that Ex.P1 has been proved. The moment, the due execution of a negotiable instrument is proved, the burden is always upon the person to show that no consideration is passed under the same. Exs.P1 and P2 - the translated copy of Ex.P1 specifically indicate the receipt of Rs.1,00,000/- as loan from the plaintiff on 18 10.01.2004 and being executed by the defendant in the presence of two witnesses, scribe of which was K. Satyanarayana. Suffice to state that evidence placed on record is sufficient to come to the conclusion about the due execution of promissory note, a negotiable instrument.
23. Presumption is also available under Section 118(a) of the Negotiable Instruments Act. Further the presumption available under Section 118(a) is that negotiable instruments is always drawn for consideration and Section 118(b) speaks about the presumption regarding the date. There is a presumption under Section 118(b) that every negotiable instrument bearing the date was made or drawn on such date. Plaintiff is the holder in due course of this negotiable instrument as per Section 118(g) of Negotiable Instruments Act. Therefore, receipt of Rs.1,00,000/- on 10.01.2004 is proved and 19 similarly, receipt of the same under Ex.P1 is also proved.
24. There is a reference about payment of interest at 2% per month and annual interest would be 24%. The trial Court has granted interest at 24% p.a. as agreed between the parties in Ex.P1. Therefore, it is argued by the learned Counsel for the respondent that rate of interest granted by the trial Court cannot be meddled with by this Appellate Court and therefore, judgment and decree of the trial Court will have to be upheld in its entirety.
25. The law governing the rate of interest is the Interest Act, 1978. The word 'Court' as per Section 2(a) of the Interest Act includes a Tribunal and Arbitrator. Section 2(b) of the Interest Act deals about the current rate of interest. It means the highest of the maximum, rates at which interest may be paid to different classes of deposits by different 20 classes of Scheduled banks in accordance with the directions given or issued to banking companies by the Reserve Bank of India under the Banking Regulation Act, 1949.
26. Admittedly, plaintiff and defendant are known to each other for more than 25 years being employees in a sugar facotry. Therefore, the transaction cannot be considered as a loan transaction. Though plaintiff has been able to prove that defendant has availed financial assistance to an extent of Rs.1,00,000/- from him. Defendant is only an employee of Gangavathi Sugars Limited and is not a businessman. Similarly, plaintiff is also an employee of a sugar mill and therefore, he is also not a businessman. Though there is an agreement for payment of interest at 24% p.a., the same cannot be pressed into service to award same rate of interest from the date of suit till realisation. Nothing is 21 placed on record as to what was the rate of interest prevalent during the year 2004 in regard to various kinds of deposits awarded by Scheduled banks. In the absence of material to that effect and in view of friendship of plaintiff and defendant, and this transaction being the only money transaction, awarding lesser rate of interest would meet the ends of justice in the present case.
27. Even otherwise, proviso to Section 34 of CPC provides that, where the liability in relation to the sum so adjudged has arisen out of a commercial transaction, the rate of such further interest may exceed six per cent, per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalized banks in relation to commercial transaction. Civil Court has discretion insofar as awarding interest during the pendency of 22 the litigation and till the decreetal amount is recovered under Section 34 of CPC. Taking all these into consideration, interest @ 10% p.a. would meet the ends of justice in the present case. It is held that defendant has received a sum of Rs.1,00,000/- as loan from the plaintiff and he is liable to pay the interest of 10% p.a. on Rs.1,00,000/- from the date of filing of suit till realization. As no interest can be awarded on interest, no interest is to be charged on Rs.36,330/- being the interest calculated at 24% p.a. from 10.01.2004 till 15.07.2005, the date of filing the suit. Accordingly, appeal will have to be allowed in part.
ORDER Appeal filed under Section 96 of CPC is allowed in part. Judgment and decree passed in O.S.No.59. which was pending on the file of the Senior Civil Judge, Gangavathi stands modified. The defendant 23 shall pay a sum of Rs.1,36,333/- with interest at 10% p.a. on Rs.1,00,000/- (Rupees One Lakh Only) from the date of filing of suit till realisation along with proportionate costs throughout. Judgement and decree of the trial Court stands modified accordingly.
Sd/-
JUDGE gab/-