Kerala High Court
N.Raveendrananthan Nair vs Vijayakumar on 28 February, 2006
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE T.R.RAMACHANDRAN NAIR
&
THE HONOURABLE MR. JUSTICE K.ABRAHAM MATHEW
TUESDAY,THE 11TH DAY OF MARCH 2014/20TH PHALGUNA, 1935
RFA.No. 435 of 2008
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O.S.NO. 222/1999 OF SUB COURT, MAVELIKKARA, DATED 28-02-2006
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APPELLANTS/DEFENDANTS:
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1. N.RAVEENDRANANTHAN NAIR,
AGED ABOUT 73 YEARS, JYOTHINIVAS,
KARIYARA MURI, VILLAKUDI VILLAGE, PUNALOOR.
2. S.ASHA, AGED ABOUT 38 YEARS,
W/O. ANIL PRASAD, MAHALEKSHMI, CHARUMOODU,
NOW RESIDING AT JYOTHI NIVAS, KARIYARA MURI,
VILLAKUDI VILLAGE, PUNALOOR.
BY ADVS.SRI.G.P.SHINOD
SRI.RAM MOHAN.G.
SRI.MANU V.
RESPONDENT/PLAINTIFF:
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VIJAYAKUMAR, AGED 41 YEARS,
S/O. NARAYANAN, RESIDING AT KALLIRICKUM VILAYIL,
VEDERAPLAVU MURI, THAMARAKULAM VILLAGE.
BY ADVS. SRI.V.V.ASOKAN (SR.)
SRI.RINNY STEPHEN CHAMAPARAMPIL
SMT.ASHA ELIZABETH MATHEW
THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD
ON 04-02-2014, THE COURT ON 11-03-2014 DELIVERED THE FOLLOWING:
Msd.
T.R.RAMACHANDRAN NAIR &
K. ABRAHAM MATHEW, JJ.
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R.F.A.NO.435 OF 2008
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DATEDTHIS THE 11TH DAYOF MARCH, 2014
JUDGMENT
Ramachandran Nair, J.
This appeal is filed by the defendants in a suit for realisation of money on the basis of a promissory note.
2. According to the plaintiff, the son-in-law of appellant No.1, Mr. Anil Prasad as well as the plaintiff were personally known to each other for so many years. By using the said acquaintance, in February 1999 the appellants approached the plaintiff/respondent and demanded an amount of Rs.2 lakhs for discharging certain debts of said Shri Anil Prasad. The respondent/plaintiff arranged an amount of Rs.1,85,000/- and gave it to the defendants on 8.2.1999. On receipt of the amount, the appellants executed a promissory note in favour of the respondent in own handwriting of appellant No.2 agreeing to repay the amount on demand. The amount was not repaid inspite of demand. A notice was issued on 20.4.1999 through his lawyer and even though it was accepted, they did not send any reply or repay the amount. Accordingly, the suit was filed for realisation of the said amount RFA No.435/2008 -2- with interest totalling to Rs.2,10,428/-.
3. In the written statement filed by the defendants, it was contended that the first appellant is not the father-in-law, but the father of appellant No.2. True that Shri Anil Prasad is the husband of appellant No.2, but they denied the averment in the plaint that the plaintiff is personally known to them and stated that they have no acquaintance with the plaintiff. The plaintiff was having some transactions with Shri Anil Prasad and the plaintiff is a ration dealer and that he is having some money lending business also. Shri Anil Prasad and the plaintiff were neighbours and the plaintiff has given some money to some other strangers who are known to Shri Anil Prasad. Shri Anil Prasad was only a mediator for the transactions. He went abroad in 1998 for employment. The plaintiff, after some time, informed the defendants that he has to get some money for Shri Anil Prasad and he exerted pressure on the defendants. The matter was discussed with Shri Anil Prasad through telephone and it was told that there are some amounts due to the plaintiff and that amounts had to be given by some other strangers for which he is bound to pay back the amount. It was also told that the amount may come to Rs.75,000/- in total. The matter was discussed RFA No.435/2008 -3- at the office of an advocate at Mavelikkara where the plaintiff was having some acquaintance. The defendants were also called to that office and were asked to give some security for the amount. In this juncture the promissory note alleged in the plaint was executed in that office. When the plaintiff sent the legal notice, immediately the defendants contacted the plaintiff and it was told by the plaintiff that he will not initiate any legal proceedings on the basis of the notice issued, and hence no reply has been sent from the part of the defendants. It was contended that no payment on the basis of the promissory note was made by the plaintiff and no single rupee has been received by the defendants and hence consideration is lacking. They also denied the transaction said to have been made on 8.2.1999 as alleged in the plaint and there was no necessity for the defendants to take a loan from the plaintiff.
4. Evidence was adduced by both sides and the plaintiff examined himself as P.W.1 and Exts.A1 to A4 have been marked. The appellant No.1 was examined as D.W.1. The court below finally decreed the suit as prayed for, against which this appeal is filed.
5. Before us, learned counsel for the appellants, Shri G.P.Shinod RFA No.435/2008 -4- submitted that there was no transaction between the plaintiff and the defendants. This fact was admitted by the plaintiff in the cross examination. He plainly admitted that no amount was paid to the defendants on 8.2.1999 and there was no money transaction between them. In the light of the evidence adduced by the plaintiff himself, it can be seen that the promissory note lacks consideration.
6. The court below, after adverting to the evidence of P.W.1, was of the wrong view that the defendants undertook the liability of Shri Anil Prasad and therefore the promissory note is supported by consideration.
7. Learned counsel for the appellants further submitted that the presumption under Section 118(a) of the Negotiable Instruments Act does not apply to the quantum of consideration or the nature of the consideration. The presumption under Section 118(a) is a rebuttable one. There is no admission by the defendants in the written statement that Shri Anil Prasad has incurred any liability towards the plaintiff and that the defendants have undertaken any such liability. They have only narrated that to their knowledge there were some transactions by the plaintiff with strangers at some time past which was with the knowledge of Shri Anil Prasad. The RFA No.435/2008 -5- same cannot be termed as consideration for the promissory note. It is submitted that the plaintiff has not adduced any further evidence to show that the consideration described in the promissory note represents any amount due from Shri Anil Prasad to the plaintiff. No other person has been examined in the matter. It is therefore submitted that going by the settled principles, the presumption under Section 118(a) of the Negotiable Instruments Act will not come to the rescue of the plaintiff to get a decree, as the defendants can rely upon the evidence of P.W.1 and admission of the plaintiff himself as P.W.1 to show that the promissory note lacks consideration. In such cases merely because of the admission regarding execution of the promissory note, consideration cannot be presumed.
8. Learned Senior Counsel appearing for the respondent, Shri V.V. Asokan submitted that the defendants have not discharged their burden to prove that the promissory note is not supported by consideration. The legal position in this matter is clear from the various decisions of the Apex Court and this Court and going by the same, when execution of the promissory note is admitted, the entire burden is on the defendants to rebut the said presumption under Section 118(a) of the Negotiable Instruments Act. RFA No.435/2008 -6- Herein, the defendants have failed to rebut the presumption. It is submitted that the true principle being the same, merely because the plaintiff has admitted in the cross examination that no consideration has passed on the said date and there was no transaction between the plaintiff and the defendants, the burden has not shifted and hence the presumption under Section 118(a) is still in favour of the plaintiff. In that view of the matter, learned Senior Counsel submitted that the judgment and decree are sustainable.
9. The points which arise for consideration are: (a) Whether the promissory note is supported by consideration? and (b) Whether the plaintiff is entitled to succeed on the basis of the presumption as to consideration provided under Section 118(a) of the Negotiable Instruments Act, 1881 in spite of his admission as P.W.1 that no money was paid to the defendants on the date of execution of the promissory note?
10. We will now discuss the evidence available on record. In the chief affidavit filed by the plaintiff as P.W.1, in para 2 it is stated that the defendants together, on 8.2.1999 executed the promissory note for Rs.1,85,000/-. It was written in the handwriting of the second defendant. RFA No.435/2008 -7- Ext.A1 has been marked as the promissory note. In the cross examination, to a specific question he stated that there is no particular reason for not stating in the plaint the place at which the amount covered by Ext.A1 was given to the defendants. He further admitted that the promissory note was written in the office of the Advocate (name) in his presence and in the presence of other advocates and clerks and he was the lawyer of Shri Anil Prasad. The advocate clerk supplied the words incorporated in the promissory note. He was asked about the reason for not stating all these matters in the plaint and he answered that there is no specific reason for that. According to him, he came there as requested by the Advocate (name) and the defendants came there not as asked by him, but as requested by the said Advocate. He admitted that he is having a ration shop. According to him, he was having transactions with Shri Anil Prasad from 1991 and that Ext.A1 was drawn for the same and the defendants executed the promissory note after taking back the cheque and the promissory note issued by Shri Anil Prasad and agreeing to return the amount to be paid by Shri Anil Prasad, by them. The crucial admission made by him is that there was no money transaction between him and the defendants. He also admitted that it RFA No.435/2008 -8- is not correct to say that the defendants wanted an amount of Rs.2 lakhs from him and he paid an amount of Rs.1,85,000/- to the defendants on 8.2.1999. To a specific question he further answered that on 8.2.1999 the defendants have not received any amount from him based on Ext.A1. According to him, Ext.A1 was executed for the amount payable by Shri Anil Prasad but this aspect was not included in Ext.A1. He also stated that along with the Advocate (name) his clerk was also there and they have not been cited as witnesses.
11. D.W.1 gave chief affidavit in tune with the pleas in the written statement. According to him, Ext.A1 was executed in the office of the Advocate (name), but it was assured that no case will be filed. The defendants had been told through telephone by Shri Anil Prasad that the amount due to the plaintiff had to be paid by certain others and the maximum amount to be paid is below Rs.75,000/-. When Ext.A2 notice was received, the defendants went to the office of the said Advocate and on the assurance that the plaintiff will not proceed with the case, no reply was given. It was stated that even though a promissory note was executed on 8.2.1999, no amounts have been received by the defendants. Actually, RFA No.435/2008 -9- the promissory note was executed in the office of the counsel himself.
12. The trial court in the light of the decision of this Court in Alex Mathew v. Philip Philip (AIR 1973 Kerala 210 = 1973 KLT 545) was of the view that even though contrary to the averments in the plaint, P.W.1 stated during cross examination that he has not paid any amount to the defendants on the date of execution of Ext.A1 promissory note, it is clear that the defendants executed Ext.A1 promissory note in favour of the plaintiff, in lieu of the amount due to the plaintiff from Anil Prasad who is none other than the son-in-law of the first defendant and the husband of the second defendant. According to the trial court, even though the plaintiff is not able to prove the consideration stated in Ext.A1promissory note and the averments in the plaint, the admission of the defendants in the written statement would go to show that they undertook the liability of Shri Anil Prasad and for the repayment of the amount due from him to the plaintiff, executed Ext.A1 promissory note in favour of the plaintiff. The non furnishing of reply to the lawyer notice Ext.A2 was also taken as a circumstance against the defendants.
13. Now we will consider the question whether on the evidence RFA No.435/2008 -10- discussed above, the defendants have discharged their burden in rebutting the presumption in favour of the plaintiff under Section 118(a) of the Negotiable Instruments Act. The crucial argument raised by learned Senior Counsel for the respondent is that even if there is an admission by the plaintiff that no consideration was passed on 8.2.1999, the date of the alleged promissory note, still the presumption under Section 118(a) of the Negotiable Instruments Act is available and only when the contrary is proved by the defendants, it could be said as rebutted.
14. Shri G.P. Shinod, in his reply, submitted that the view taken by a Division Bench of this Court in the decision relied upon by the trial court in Alex Mathew (supra) has not been accepted by the subsequent decisions of various High Courts and by the Apex Court.
15. Therefore, we propose to consider the various principles discussed in the judgments referred to for consideration. First we will come to the decision relied upon by the trial court in Alex Mathew v. Philip (1973 KLT 545). The Division Bench, in para 4, was of the view that as far as the provision in question is concerned, some of the principles are well settled. These are: "The presumption that can be drawn under Section 118 RFA No.435/2008 -11-
(a) of the Act is only that every negotiable instrument was made or drawn for consideration and that every such instrument, when it has been accepted, endorsed, negotiated or transferred was accepted, endorsed, negotiated or transferred for consideration. The presumption does not indicate the nature of the consideration. The presumption under the section is not that the consideration stated in the instrument is the consideration for the document; but that merely that the instrument is supported by consideration." Reliance was placed therein on the decision of the Bombay High Court in Tarmahomed Haji Abdul Rehman v. Tyeb Ebrahim Bharamchari (AIR 1949 Bom. 257) and Kunhikalandar v.Abdul Khader (1971 KLT 620).
16. The further question considered in para 5 onwards is whether the failure of the plaintiff to prove the particular case relating to consideration would result in automatic rebuttal of the presumption under Section 118(a) of the Negotiable instruments Act. It was held that the decision of the Bombay High Court in Tarmahomed Haji Abdul Rehman's case (AIR 1949 Bom. 257) lays down the correct principle. Therein, the principle stated by the Bombay High Court is the following:
"It is one thing to say that the plaintiff has failed to prove a RFA No.435/2008 -12- particular consideration for the three hundis; it is an entirely different thing to say that it was proved that there was no consideration at all for the three hundis. The mere failure to prove consideration on the part of the plaintiff did not establish that the hundis were for accommodation as the defendant alleged, or that the defendant had succeeded in proving that there was do consideration at all for these hundis."
After referring to the decision of the Apex Court in Kundan Lal Rallaram v. Custodian Evacuee Property, Bombay (AIR 1961 SC 1316), it was held in Alex Mathew (supra) that "it would not be correct merely on the basis of the finding negativing the case of a plaintiff regarding consideration to hold that the presumption under Section 118(a) has been rebutted." In para 8 it was further held as follows:
"The fact, therefore, that a particular form of consideration pleaded by the plaintiff had not been proved will not negative the presumption under the section and will not enable the court to come to the conclusion that the instrument is not supported by any consideration at all. That presumption must still be there unless we are able to say, on the facts and circumstances and the evidence let in, either by the defendant who attempted to rebut the presumption, or by the admission made by the plaintiff or from other attendant RFA No.435/2008 -13- circumstances which may be referred to, that presumption had been rebutted and the rebuttal must be that the instrument is not supported by consideration at all."
In para 14, the evidence in the case was discussed and the Bench made the following crucial finding thereafter:
"The case as pleaded by the respondent as well as the appellant in regard to the circumstances in which the cheques came to be executed thus stood disproved."
Then, finally it has been held as follows:
"Whatever it be, the execution of the cheques arises the presumption of consideration and from that stems the liability of the second defendant."
Therefore, it was a case where the Division Bench, in spite of the finding that both sides have failed to prove their case by relying upon Section 118(a) of the Negotiable Instruments Act, found in favour of the plaintiff. Mainly, the Bench relied upon the very same view taken in Tarmahomed Haji Abdul Rehman's case (AIR 1949 Bom. 257).
17. One of the decisions relied upon by the Division Bench to consider the plea under Section 118(a) of the Negotiable Instruments Act is RFA No.435/2008 -14- Kunhikalandar's case (1971 KLT 620) which was by a learned Single Judge of this Court. We will refer to the principles discussed in the said judgment also. Therein, in Ext. A1 promissory note the consideration mentioned is Rs.5,000/- as paid in cash. But in the plaint it was averred by the plaintiff that Rs.1,600/- was paid by way of cheque, Rs.1,900/- was paid in cash and later the sum of Rs.1,500/- was paid by cheques. The defendant denied the payment of consideration in cash on 19.9.1958, the date of execution of the promissory note. Both the courts went against the plaintiff on a finding that the evidence adduced by both parties are unreliable and unsatisfactory. The learned Single Judge also agreed with the same. In that context, the true principles under Section 118(a) of the Negotiable Instruments Act were examined. It was held in para 4 that "the words "for consideration" in this section are general in character." There is no presumption either that the instrument is supported by the consideration which is mentioned in the negotiable instrument or the consideration which is in the nature of what is mentioned therein." On the facts of the case, in para 5 it was held as follows:
"5 The presumption which arises under S.118 (a) is necessarily RFA No.435/2008 -15- limited to one regarding the existence of consideration, as I have already mentioned. Therefore, assuming that presumption would apply here the plaintiff cannot succeed in his plea that the sum of Rs. 5000/- which is mentioned in the document has been actually paid by him. No doubt, a recital in a document as to the quantum of consideration of the document may give rise to a presumption against the parties to that document, though such presumption is not by virtue of S.118 (a) of the Negotiable Instruments Act. It is for any party to the document who wants the court to hold otherwise to show that the recital is wrong and until it is so shown that will be evidence against the party concerned. Therefore, unless otherwise is shown plaintiff could have relied on the recital of receipt of consideration of Rs. 5000/-in Ex. Al to support his case. But that presumption will not be of any assistance to the plaintiff in this suit because even in the plaint he has admitted that a sum of Rs. 5000/-was not paid on the date of execution and whatever payment was made was itself not in ready cash. If so, whatever weight the recital could have is set at naught and the plaintiff has necessarily to prove the quantum of consideration. Though normally the question of burden of proof would be of academic interest only in a court of second appeal when the evidence adduced by both parties is before court, the presumption is called to aid when the evidence on either side is either unreliable or inconclusive. That is why I examined this case to see whether plaintiff could get the benefit of RFA No.435/2008 -16- any presumption in his favour. Since there is none available it follows that the decision of the courts below must stand. I hold that the plaintiff has not proved consideration to the extent of Rs. 1900/-."
The above view was taken in the light of the fact that the plaintiff admitted that the sum of Rs.5,000/- was not paid in cash on the date of execution of the promissory note. Therefore, it was held that the plaintiff had to prove the quantum of consideration. Significantly, it was also held that the plaintiff could not get the benefit of any presumption in his favour, in the light of the admission in the plaint.
18. T. Kutty Sankaran Nair v. Isappan Joseph (1990 (2) KLJ 491) is the decision of another learned Single Judge of this Court wherein the very same principle has been reiterated by relying upon Tarmahomed Haji Abdul Rehman's case (AIR 1949 Bom. 257), Kunhikalandar's case (1971 KLT 620) and Alex Mathew's case (1973 KLT 545). It was also held that the presumption can be rebutted by producing definite evidence that no consideration had passed or by relying on the facts and circumstances of the case as well as the flaws in the evidence of the plaintiff's side.
RFA No.435/2008 -17-
19. The next important decision is that of the Apex Court in K.P.O.Moideenkutty Hajee v. Pappu Manjooran and another {(1996) 8 SCC 586}. Therein it was held that when the plaintiff himself pleads in the plaint different considerations, the initial presumption raised under Section 118(a) of the Negotiable Instruments Act will become unavailable. We extract the following dictum laid down in para 11:
"11. It would thus be clear that when the suit is based on pronote, and promissory note is proved to have been executed, Section 118(a) raises the presumption, until the contrary is proved, that the promissory note was made for consideration. That initial presumption raised under Section 118(a) becomes unavailable when the plaintiff himself pleads in the plaint different considerations. If he pleads that the promissory note is supported by a consideration as recited in the negotiable instrument and the evidence adduced in support thereof, the burden is on the defendant to disapprove that the promissory note is not supported by consideration or different consideration other than one recited in the promissory note did pass. If that consideration is not valid in law nor enforceable in law, the Court would consider whether the suit pronote is supported by valid consideration or legally enforceable consideration. Take for instance, a pronote executed for a time- barred debt. It is still a valid consideration. The falsity of the plea of RFA No.435/2008 -18- the plaintiff also would be a factor to be considered by the Court. The burden of proof is of academic interest when the evidence was adduced by the parties. The Court is required to examine the evidence and consider whether the suit as pleaded in the plaint has been established and the suit requires to be decreed or dismissed." (emphasis supplied by us) The principle that emerges from the above is that the falsity of the plea of the plaintiff also would be a factor to be considered by the court and when evidence is adduced by both parties the burden of proof is of academic interest and the court will have to examine the evidence. In para 15 it was further held as follows:
"As held earlier, once the plaintiff pleads consideration different from the one found in negotiable instrument the statutory presumption does not arise. Under Section 118 (a) of the Act, until the contract is proved, presumption shall be made that every negotiable instrument was made for consideration. Once there is admission of the execution of the promissory or the same is proved to have been executed, the presumption under Section 118 (a) is raised that it is supported by consideration. That initial presumption will not be available to the plaintiff in this case."
Finally, on an assessment of evidence of both sides, it was held that the RFA No.435/2008 -19- promissory note was supported by legally enforceable consideration.
20. The next important decision is one by the Apex Court in Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal {(1999) 3 SCC 35}. Therein, the Apex Court considered the dictum laid down by a Full Bench of Rajasthan High Court in Heerachand v. Jeevraj (AIR 1959 Raj. 1) and by the Andhra Pradesh High Court in G. Vasu v. Syed Yaseen Sifuddin (AIR 1987 AP 139). Significantly, it was argued by the learned counsel for the appellant that the decision of this Court in Alex Mathew's case (1973 KLT 545) was not approved by the Apex Court in the above decision, whereas learned Senior Counsel for the respondent submitted that the principle laid down by the Apex Court is not in variance with the decision of the Division Bench in the said case. Therefore, we will examine the same. From paragraph 11 onwards detailed discussion has been made about the scope of Section 118(a) of the Act. The decision of the Full Bench of Andhra Pradesh High Court has been extracted in extenso. We extract the following portion in the said judgment in G. Vasu's case (supra):
"Having referred to the method and manner in which the RFA No.435/2008 -20- presumption under Section 118 is to be rebutted and as to how, it thereafter 'disappears' we shall also make reference to three principles which are relevant in the context. The first one is connected with the practical difficulties that beset the defendant for proving a negative, namely that no other conceivable consideration exists. We had occasion to refer to this aspect earlier. Negative evidence is always in some sort circumstantial or indirect, and the difficulty or proving a negative lies in discovering a fact or series of facts inconsistent with the fact which we seek to disprove (Gulson, Philosophy of Proof, 2nd Edition, p. 153 quoted in Cross on Evidence, 3rd Edition, page 78 Fn)."
In such situations, a lesser amount of proof than is usually required may avail. In fact, such evidence as renders the existence of the negative probable may shift the burden on to the other party (Jones, quoted in A Sarkar on Evidence, 12th Edition, p. 870). The second principle which is relevant in the context is the one stated in S. 106 of the Evidence Act. That section states that when any fact is especially within the knowledge of any person, the burden of proving that fact is upon him, it is very generally stated that, where the party who does not have the evidential burden, such as the plaintiff in this case, possesses positive and complete knowledge concerning the existence of fact which the party having the evidential burden, such as the defendant in this case, is called upon the negative or has peculiar knowledge or control of evidence as RFA No.435/2008 -21- such matters, the burden rests on him to produce the evidence, the negative averment being taken as true unless disapproved by the party having such knowledge or control. The difficulty or proving a negative only relieves the party having the evidential burden from the necessity of creating a positive conviction entirely by his own evidence so that, when he produces such evidence as it is in his power to produce, its probative effect is enhanced by the silence of the opponent (Corpus Juris, Vol. 31, Para 113). The third principle that has to be borne in mind is the one that when both parties have led evidence, the onus of proof loses all importance and becomes purely academic. Referring to this principles, the Supreme Court stated in Narayan v. Gopal, AIR 1960 SC 100 as follows :
"The burden of proof is of importance only where by reason of not discharging the burden which was put upon it, a party must eventually fail, where, however, parties have joined issue and have led evidence and the conflicting evidence can be weighed to determine which way the issue can be decided, the abstract question of burden of proof becomes academic."
We have referred to these three principles as they are important and have to be borne in mind by the Court while deciding whether the initial 'evidential burden' under S. 118 of the Negotiable Instruments Act has been discharged by the defendant and the presumption 'disappeared' and whether the burden has shifted and later whether the plaintiff has discharged the 'legal burden' after the same was RFA No.435/2008 -22- restored.
For the aforesaid reasons, we are of the view that where, in a suit on a promissory note, the case of the defendant as to the circumstances under which the promissory note was executed is not accepted, it is open to the defendant to prove that the case set up by the plaintiff on the basis of the recitals in the promissory note, or the case set up in suit notice or in the plaint is not true and rebut the presumption under S. 118 by showing a preponderance of probabilities in his favour and against the plaintiff. He need not lead evidence on all conceivable modes of consideration for establishing that the promissory note is not supported by any consideration whatsoever. The words 'until the contrary is proved' in S. 118 do not mean that the defendant must necessarily show that the document is not supported by any form of consideration but the defendant has the option to ask the Court to consider the non-existence of consideration so probable that a prudent man ought, under the circumstances of the case, to fact upon the supposition that consideration did not exist. Though the evidential burden is initially placed on the defendant by virtue of S. 118 it can be rebutted by the defendant by showing a preponderance of probabilities that such consideration as stated in the pronote, or in the suit notice or in the plaint does not exist and once the presumption is so rebutted, the said presumption 'disappears'. For the purpose of rebutting the initial evidential burden, the defendant can rely on direct evidence or RFA No.435/2008 -23- circumstantial evidence or on presumptions of law or fact. Once such convincing 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 plaintiff who has also the legal burden. Thereafter, the presumption under S. 118 does not again come to the plaintiff's rescue. Once both parties have adduced evidence, the Court has to consider the same and the burden of proof loses all its importance.
Before leaving the discussion on these aspects we would like to make it clear that merely because the plaintiff comes forward with a case different from the one mentioned in the promissory note it will not be correct to say that the presumption under S. 118 does not apply at all. In our view the presumption applies once the execution of the promissory note is accepted by the defendant but the circumstance that the plaintiff's case is at variance with the one contained in the promissory note or the notice can be relied upon by the defendant for the purpose of rebutting the presumption and shifting the evidential burden to the plaintiff who has also the legal burden. To the above extent, we agree with the view of the Bombay High Court in Taramahomed's case, AIR 1949 Bombay 257 (supra). Our dissent is only to the extent of the principle laid down in that case that even when the case of the plaintiff and that of the defendant is disbelieved still the suit is to be decreed on the basis of the presumption under S. 118 of the Negotiable Instruments Act." RFA No.435/2008 -24- It is clear from the said judgment of the Full Bench of Andhra Pradesh High Court that their Lordships disagreed with the view taken by the Bombay High Court in Tarmahomed's case (AIR 1949 Bom. 257) and that of this Court in Alex Mathew's case (1973 KLT 545). This is clear from the following paragraph:
"We, therefore, respectfully follow the decision of the Supreme Court in Kundanlal's case (AIR 1961 SC 1316) (supra) and dissent from the judgment of the Bombay High Court in Taramahomed v. Syed Ebrahim in so far as it held that even after the plaintiff's version and the defendant's version are disbelieved, still the presumption under S. 118 operates. We also dissent from the judgment of the Kerala High Court in Alex Mathew v. Philip Philip, AIR 1973 Ker 210......................."
21. The Apex Court thereafter considered the dictum laid down in earlier decision in Kundan Lal Rallaram's case (AIR 1961 SC 1316) and the subsequent decision in K.P.O. Moideenkutty Hajee's case {(1996) 8 SCC 586}. Finally, in para 12 the legal position has been explained thus:
"12. Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the RFA No.435/2008 -25- promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by consideration. Such a presumption is rebuttable. The defendant can prove the non- existence of 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 dis-entitle 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 his favour. The Court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence as 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 RFA No.435/2008 -26- 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, shall act upon the plea that it did not exist. We find ourselves in the close proximity of the view expressed by the Full Benches of the Rajasthan High Court and Andhra Pradesh High Court in this regard."
22. It will show that the views of the Full Benches of Rajasthan High Court and Andhra Pradesh High Court have been approved. The above dictum will show that the defendant can prove non existence of a consideration by raising probable defence and if the defendant is proved to have discharged the initial burden, the onus will shift to the plaintiff and on his failure to prove the non existence of a consideration, he will be disentitled to get relief. It was also held that the defendant can discharge the burden of proving the non existence of consideration either by direct evidence or by bringing on record the preponderance of probabilities by reference to circumstances upon which he relies. Therefore, it can be seen RFA No.435/2008 -27- that it will be a shifting of the onus of proof in such cases and the entire evidence will have to be considered. On the facts of the said case, in para 14 it was held that the defendant has not been successful in discharging the initial burden.
23. The principles stated as above in the said decision, came up for consideration in Mallavarapu Kasiviseswara Rao v. Thadikonda Ramulu Firm and others {(2008) 7 SCC 655}. It was held in para 17 that "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 the negotiable instrument." It was further held in the above decision that "if 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 his favour." In para 22 it was also held that "the mere denial, if there be any, by the respondents that no consideration had passed would not have been sufficient and RFA No.435/2008 -28- something probable had to be brought on record to prove the non-existence of consideration." The above decision also show that when the initial onus of proof of the defendant is discharged, the onus will shift to the plaintiff.
24. Shri V.V. Asokan, learned Senior Counsel for the respondent relied upon the following decisions also: Heerachand v. Jeevraj and another (AIR 1959 Raj. 1), Marimuthu Kounder v. Radhakrishnan (1990 (1) KLT 634) and M.V. Raman v. C.K. Venugopalan (ILR 1992 (1) Ker. 198).
25. In Marimuthu Kounder's case (1990 (1) KLT 634) and M.V. Raman's case (ILR 1992 (1) Ker. 198), on the facts of the cases, it was found that the defendants have not discharged their burden. It was held that the presumption under Section 118(a) of the Act is a rebuttable presumption. As already noted, the decision of the Full Bench of Rajasthan High Court in Heerachand's case (AIR 1959 Raj. 1) has been approved by the Apex Court in Bharat Barrel and Drum Manufacturing Company's case (supra). Therein, the Full Bench did not fully agree with the view taken in Tarmahomed's case (AIR 1949 Bombay 257), which in turn was accepted by a Division Bench of this Court in Alex Mathew's case RFA No.435/2008 -29- (1973 KLT 545). After referring to Tarmahomed's case (AIR 1949 Bombay 257), the Full Bench of Rajasthan High Court (speaking through K.N. Wanchoo C.J.) (majority view) held in para 16, as follows:
"I feel, however, that the interpretation given in that case goes to the extreme of the extent of the presumption. I am not prepared to hold that the principle behind S.118(a) is of that extreme nature..............The principle can only be as mentioned by Byles on Bills that consideration is presumed until the contrary appears or at least appears probable. To put it in the language of Indian enactments I would say that the principle behind S.118(a) is that consideration shall be presumed in the case of a negotiable instrument."
In para 18 of the above decision, after referring to Section 4 of the Evidence Act, it was held that "to my mind, the principle behind the presumption of consideration under S.118(a) is of the second kind, namely that the Court shall presume a negotiable instrument to be for consideration and shall regard the consideration as proved unless and until it is disproved." After referring to the definition of the word "disproved" in the Evidence Act, in para 19 it has been held as follows:
"19. Applying this definition to the principle behind the RFA No.435/2008 -30- presumption in S.118(a) the principle comes to this. The Court shall presume a negotiable instrument to be for consideration unless and until after considering, the matters before it, it either believes that 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. I would, therefore, say that the principle as explained by me above behind S.118(a) was in force in the former State of Marwar even when the Act was not in force before 1949."
26. In para 20, after referring to the decision of the Bombay High Court in Tarmahomed's case (AIR 1949 Bombay 257), it was held that "the court cannot deal with the evidence in two water-tight compartments." The following extract from para 20 is significant:
"If, on the other hand, it comes to the conclusion that the consideration has not been disproved, the defendant would fail and the plaintiff would get a decree on the negotiable instrument. Whether the consideration has been disproved or not in a particular case has to be decided by the Court after considering all the matters before it and then deciding whether it believes that the consideration does not exist or considers its non-existence so probable that a prudent man ought, under the circumstances of the RFA No.435/2008 -31- particular case, to act upon the supposition that it does not exist.
That seems to be the only way in which the Court has to arrive at the conclusion whether the presumption of consideration, which it is bound to make in favour of the plaintiff in a case based on a negotiable instrument, has been displaced and the consideration has been disproved. The question, as put, seems to presume that the Court is not prepared to take the third step after it has taken two steps, namely that it has come to the conclusion that the evidence of the maker of the negotiable instrument as to failure of consideration is untrustworthy and also to the conclusion that the evidence of the plaintiff fails to establish the consideration that is alleged or relied upon by him.
I am of opinion that in such a case the Court must take the third step also namely whether on a consideration of all the matters before it, it is of opinion that consideration has been disproved and there is no question of the Court not taking this third step and decreeing the suit after taking only these two steps on the basis of the presumption of consideration. It must, as the Evidence Act stands and as the words "shall presume" and "disprove" are defined in it, take this final step. I would, therefore, say in answer to the second question that the correct position in a case of this kind is that where both parties have led their entire evidence, the matter certainly rests on such evidence.
It would, however not be correct to say that it does not rest RFA No.435/2008 -32- upon presumption at all, for the Curt cannot forget the presumption. It will always remember the presumption and judge the evidence in the light of the presumption, that is, it must come to the conclusion that the consideration has been disproved. In order to arrive at that conclusion, it will have to consider all the matters before it and then decide whether it believes that consideration does not exist or considers its non-existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition hat it does not exist."
(emphasis supplied by us)
27. One of the decisions of the Apex Court which has been considered in all the decisions, is Kundan Lal Rallaram's case (AIR 1961 SC 1316). We will refer to the said decision, since various principles have been discussed and laid down succinctly therein. In the said decision, the Apex Court has analysed the question how the burden can be discharged? In that context, in para 5 after referring to Section 118 of the Negotiable Instruments Act, it has been noted down thus:
"5. This section 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 RFA No.435/2008 -33- instrument or the endorsement was made or endorsed for consideration. In effect it throws the burden of proof of failure of consideration on the maker of the note or the endorser, as the case may be. The question is, how the burden can be discharged? The rules of evidence pertaining to burden of proof are embodied in Chapter VII of the Evidence Act. The phrase "burden of proof" has two meaning - 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 or presumptions of law or fact."
Thus, the defendant can rely upon the admission made by the opposite party also as well as circumstantial evidence or presumptions of law or fact.
28. In fact, the Apex Court has further examined the presumption under Section 118 of the Negotiable Instruments Act along with Sections 138 and 139 of the Act, in Kumar Exports v. Sharma Carpets {(2009) 2 SCC 513} wherein also these principles have been reiterated. We extract RFA No.435/2008 -34- para 19 of the said judgment which makes the legal position clear:
" 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 rebuttable. When a presumption is rebuttable, 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."
29. In a recent decision of the Apex Court in Vijay v. Laxman and another {(2013) 3 SCC 86} also the standard of proof required for rebutting the presumption under Sections 118 and 139 of the Negotiable Instruments Act was considered and it was held as follows, in para 20:
"The standard of proof required for rebutting the presumption under Sections 118 and 139 of the NI Act is not as high as that required of the prosecution and is rebuttable on the preponderance of probabilities..........The courts can take into consideration the circumstances appearing in the evidence to determine whether the presumption should be held to be sufficiently rebutted." RFA No.435/2008 -35-
30. We will also refer to another decision of a Division Bench of this Court in Venkiteswara Iyer v. Appukutty Muthan (1986 KLT S.N. Page 25, C. No.45) which has also elaborately considered as to how it can be said that the burden of proof can be discharged and the context in which the presumption under the section has to be drawn. It is significant to note that the Bench has emphatically held that "But if the evidence discloses lack of consideration plaintiff's suit cannot be decreed merely on the basis of the presumption arising from the fact that the execution of the note has been duly proved. In a case where lack of consideration has been brought out from the testimony of the plaintiff or from the totality of evidence court cannot brush aside that evidence on the ground that the note which has been proved to have been duly executed is presumed to be supported by consideration...............But in a case where evidence adduced is found highly inconsistent or unreliable such a presumption cannot be availed of by the plaintiff to obtain a decree." The said view is contrary to the view taken in Alex Mathew's case (1973 KLT 545). In the light of the decisions of the Apex Court which we have discussed already, the view taken in Alex Mathew's case (supra) that even if the evidence of the defendant as well as RFA No.435/2008 -36- the plaintiff is unreliable, presumption has to be drawn in favour of the plaintiff, cannot therefore be supported.
31. While applying the principles already discussed, in this case, we will have to find out whether the plaintiff and defendants have respectively discharged their onus of proof. The question is whether it is an extreme case where the defendant has not discharged his burden at all. The law is settled, going by the principles stated in the above decisions, that the defendants can rely upon the circumstances proved as well as the admissions of the plaintiff. Herein, the admission of the plaintiff as P.W.1 will go to show that the consideration shown in the promissory note has not passed on the date of its execution and there was no transaction between the plaintiff and defendants. The plaintiff did not adduce any other evidence to show that it is for the liability incurred by Shri Anil Prasad that the promissory note was executed. The place where the promissory note has been executed, has not been stated in the plaint or in the chief affidavit, but in the cross examination he stated that it was executed in the office of the Advocate and in his presence and also in the presence of the clerk and other lawyers. The circumstances under which the promissory note has been executed, have not RFA No.435/2008 -37- been proved by any other independent evidence by the plaintiff. It is also well settled that the presumption under Section 118(a) of the Act will not be available to prove the quantum of consideration or the nature of the consideration. What is available is only that the promissory note is supported by consideration and that is rebuttable. The plaintiff will have to prove by necessary evidence, the passing of consideration. Herein, lack of consideration has brought out from the testimony of the plaintiff.
32. In the light of the decision of the Apex Court in K.P.O. Moideenkutty Hajee's case {(1996) 8 SCC 586} and of this Court in Kunhikalandar's case (1971 KLT 620), it can be seen that the initial presumption under Section 118(a) becomes unavailable when the plaintiff, by way of pleadings, admits in the plaint different considerations. When evidence is adduced by both parties, the burden of proof is of academic interest. The defendant can rebut the presumption under Section 118(a) by showing the preponderance of possibilities in his favour to the effect that the consideration as stated in the promissory note or in the plaint does not exist. He can rely on direct evidence or circumstantial evidence or on presumptions of law or fact. If convincing rebuttal evidence is adduced, the RFA No.435/2008 -38- presumption under Section 118 does not again come to the plaintiff's rescue. Once both parties have adduced evidence, the Court has to consider the same and the burden of proof loses all its importance.
33. The Andhra Pradesh High Court in G. Vasu's case (AIR 1987 AP
139) was of the view that the circumstance that the plaintiff's case is at variance with the one contained in the promissory note or the notice can be relied upon by the defendant for the purpose of rebutting the presumption and shifting the evidential burden to the plaintiff. The view taken in Tarmahomed's case (AIR 1949 Bom. 257) that the suit will have to be decreed on the basis of the presumption under Section 118(a) even when the case of the plaintiff and that of the defendant disbelieved, was not accepted. The said view of the Andhra Pradesh High Curt which is also the same view by the Full Bench of Rajasthan High Court in Heerachand's case (supra) was accepted by the Apex Court in Bharat Barrel & Drum Manufacturing Company's case {(1999) 3 SCC 35}. Therefore, the admissions of the plaintiff in evidence could also be relied upon by the defendants on the facts of this case.
34. The view taken in Alex Mathew's case (1973 KLT 545) that RFA No.435/2008 -39- even if there is failure on the part of both sides to adduce evidence, again the presumption under Section 118(a) of the Act will come into play as has not been accepted by the Full Bench of Andhra Pradesh High Court in G. Vasu's case (AIR 1987 AP 139) and the view taken in Heerachand's case (AIR 1959 Raj. 1) by majority, as we have already discussed, will not also help the plaintiff herein. Both these decisions were approved by the Apex Court in Bharat Barrel & Drum Manufacturing Co.'s case {(1999) 3 SCC 35}. Therefore, it cannot be said that the view taken in Alex Mathew's case (1973 KLT 545) to that extent survives.
35. The court below has relied upon the said judgment to find in favour of the plaintiff. According to us, the view taken in Kunhikalandar's case (1971 KLT 620) will be apposite as far as the facts of this case is concerned. This Court did not accept the plea of the plaintiff that presumption under Section 118(a) of the Act will come to his help. The following significant observations in para 8 of the judgment are relevant here: "It is for any party to the document who wants the court to hold otherwise to show that the recital is wrong and until it is so shown that will be evidence against the party concerned."
RFA No.435/2008 -40-
36. We have perused the evidence of D.W.1 and the pleas in the written statement. There is no admission by the defendants in the written statement that so much amount is due from Shri Anil Prasad to the plaintiff. In para 4, the only averment is the following:
"The matter was discussed with Anil Prasad through telephone and it is told that there are some amounts due to the plaintiff and that amounts have to be given by some other strangers for which he is bound to pay back the amount. Further it is told that the amount may come to Rs.75,000/- in total."
Thus, there is no admission regarding liability to the tune of Rs.1,85,000/- which is the consideration shown in the promissory note. Therefore, the court below went wrong in finding that there is a clear admission by the defendants about the liability of Shri Anil Prasad which is sufficient to decree the suit.
37. When the entire evidence adduced by both sides will have to be assessed and as the defendant is entitled to rely upon the admissions of the plaintiff also, in the absence of any further evidence on the part of the plaintiff to prove consideration, the presumption under Section 118(a) of the Act cannot be called as an aid by the plaintiff. Merely because Ext.A2 RFA No.435/2008 -41- notice was not replied by the defendants, it cannot improve the case of the plaintiff, in view of the clear admission made by him in cross examination itself. When lack of consideration for the promissory note, viz. that the consideration of Rs.1,85,000/- has passed on the date of execution of Ext.A1 is evident, in the absence of further evidence to support consideration, the plaintiff cannot succeed. The preponderance of probabilities will definitely help the defendants in this case.
For all these reasons, we allow the appeal and the decree and judgment of the court below are set aside and the suit is dismissed. The parties will suffer their respective costs in the appeal.
(T.R.RAMACHANDRAN NAIR, JUDGE) (K. ABRAHAM MATHEW, JUDGE) kav/