Karnataka High Court
Shri.M. Ratnavarma Padival vs Smt Rathnavarma Ajri on 24 August, 2023
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NC: 2023:KHC:30374
RSA No. 1793 of 2013
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 24TH DAY OF AUGUST, 2023
BEFORE
THE HON'BLE MR JUSTICE ANANT RAMANATH HEGDE
REGULAR SECOND APPEAL NO. 1793 OF 2013 (MON)
BETWEEN:
SHRI. M.RATNAVARMA PADIVAL
S/O LATE M.NEMIRAJ PADIVAL
AGED ABOUT 79 YEARS,
PROPRIETOR OF M/S. PADIVAL BROTHERS
305A, 3RD FLOOR, CRYSTAL ARC,
BALMATTA ROAD, MANGALORE-575001.
...APPELLANTS
(BY GANAPATI HEGDE SR. COUNSEL FOR SRI. RAYAPPA Y
HADAGALI)
AND:
1. SHRI. RATHNAVARMA AJRI
S/O NEMIRAJA HEGDE,
AGED ABOUT 78 YEARS,
Digitally
signed by
FIRST RESPONDENT PASSED AWAY ON
GIRIJA A
GIRIJA A BYAHATTI
BYAHATTI Date:
24.12.2014, R2 AND R3 ARE TREATED AS
2023.09.01
14:17:28 LRS. OF R1. VIDE ORDER DATED 16.06.2016.
+0530
2. SHRI. RAJ DEEPAK
S/O RATHNAVARMA AJRI,
AGED ABOUT 45 YEARS,
3. SMT. REKHA
D/O RATHNAVARMA AJRI,
AFED ABOUT 43 YEARS,
ALL ARE RESIDING AT KUDMAR HOUSE,
KUDMAR POST, PUTTUR TALUK,
D.K.DISTRICT-574202.
...RESPONDENTS
(BY SRI. NATARAJA BALLAL, ADVOCATE FOR R2 AND R3;
R2 AND R3 ARE TREATED AS LRS OF R1)
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NC: 2023:KHC:30374
RSA No. 1793 of 2013
THIS RSA IS FILED U/S.100 OF CPC PRAYING TO SET ASIDE
THE JUDGMENT DATED 29.07.2013 IN RA NO.26/2012, PASSED
BY THE LEARNED II ADDL. DISTRICT JUDGE, DAKSHINA
KANNADA, MANGALORE AND CONFIRM THE JUDGMENT AND
DECREE DATED 22.06.2011 IN OS.NO.114/1999, PASSED BY THE
HON'BLE III ADDL. SENIOR CIVIL JUDGE, DAKSHINA KANNADA,
MANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGEMENT ON 16.08.2023, COMING ON FOR PRONOUNCEMENT
OF JUDGMENT THIS DAY, THE COURT DELIVERED THE
FOLLOWING:
JUDGMENT
Two substantial questions of law that arise in this second appeal are;
(a) Whether the photostat copy (Xerox copy) compared with the original, admissible as secondary evidence, if other conditions required for the production of secondary evidence are met?
(b) Whether Section 11 of the Karnataka Money Lenders Act, 1961, mandates the production of money lender's licence, to maintain a suit to recover the money lent, by a money lender, if the amount lent is more than rupees three -3- NC: 2023:KHC:30374 RSA No. 1793 of 2013 thousand and lent through a negotiable instrument, other than the promissory note?
2. Ratnavarma Padival the plaintiff, claimed that on 19.03.1999, he lent, the defendant Dejamma Ajri, Rs.2 lakhs through a cheque, and the defendant's cheque dated 30.03.1999, issued towards repayment of the loan is dishonoured.
3. The defendant denied the alleged loan transaction.
Her defence is that the plaintiff misused the blank cheques issued by the defendant, in her long-standing business relationship with the plaintiff, as the defendant's husband refused to sell the shares of the Karnataka theatre, which the plaintiff insisted.
4. The suit filed to recover the alleged loan is decreed.
The trial court awarded interest @ 6% per annum on Rs.2,00,000.00 as against the claim of 18% p.a. -4- NC: 2023:KHC:30374 RSA No. 1793 of 2013
5. The defendant succeeded in the first appeal, consequently, the suit is dismissed on two grounds namely;
(a) The loan transaction is not proved,
(b) Suit is not maintainable, as the plaintiff did not produce the money lender's licence.
6. This second appeal by the plaintiff challenging the divergent findings was admitted on 16.07.2015 to answer the following substantial question of law:
"Whether the First Appellate Court is justified in holding that the statutory presumption under Section 118 and 139 of the Negotiable Instruments Act is rebuttable, and the defendants have rebutted the said presumption by tendering rebuttable evidence?
7. This case was heard on merits and reserved for judgment on 08.08.2013. Since this Court felt two more substantial questions of law, referred to in the beginning, are to be framed, the case was listed on -5- NC: 2023:KHC:30374 RSA No. 1793 of 2013 16.08.2023 to frame the substantial questions of law referred to above. Both sides were heard on additional substantial questions of law as well.
8. The appellant, before this Court filed an application under Order XLI Rule 27 of the Code of Civil Procedure, 1908, ('Code' for short) seeking permission to adduce secondary evidence (notarized Xerox copies) of the passbook and chequebook of his bank account to prove the suit transaction.
9. The respondents opposed the application on three grounds, namely, the documents sought to be produced are not secondary evidence, grounds are not made out to admit secondary evidence, and there is an inordinate delay in producing the documents.
10. This Court heard the application along with the merits of the appeal. This Court vide order dated 13.12.2022, overruled the objection on the ground of the delay in producing the documents, and allowed the production of additional documents. Objections as to its proof and -6- NC: 2023:KHC:30374 RSA No. 1793 of 2013 admissibility were kept open. The application was remitted to the trial Court to record evidence and to return the finding on the admissibility and proof of the secondary evidence.
11. The trial Court after recording the evidence held that the documents are inadmissible.
12. Learned Senior Counsel Sri. Ganapati Hegde for the appellant raised the following contentions:
(a) The trial Court erred in rejecting the secondary evidence, namely, the notarized Xerox copies of the passbook and the counter foil of the chequebook, despite meeting the requirements for admitting the secondary evidence.
(b) The defendant failed to rebut the presumption available under Sections 118 and 139 of the Negotiable Instruments Act, 1881 (hereinafter referred to as the 'N.I. Act', for brevity).-7-
NC: 2023:KHC:30374 RSA No. 1793 of 2013
(c) The defence in the written statement that the plaintiff managed to create entries in the defendant's bank accounts, itself would demonstrate that the money is transferred to the account of the defendant.
(d) The suit transaction is not a loan transaction as per the definition of 'loan' under Section 2(9)(h) of the Karnataka Money Lenders Act, 1961 (hereinafter referred to as 'Act, 1961', for brevity), Thus, Section 11 of the Act,1961 has no application and the suit is maintainable even without the money lender's licence.
(e) The First Appellate Court cannot reverse the finding of the trial Court merely because another view is also plausible.
In support of his contention, learned Senior Counsel has relied upon the following judgments:
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 i. SARJU PERSHAD RAMDEO SAHU VS. JWALESHWARI PRATAP NARAIN SINGH AND OTHERS [AIR 1951 SC 120] ii. MADHUSUDAN DAS VS. SMT.NARAYANI BAI, [(1983) 1 SCC 35] iii. SANTOSH HAZARI VS. PURUSHOTTAM TIWARI, [(2001) 3 SCC 179] iv. HITEN P. DALAL VS. BRATINDRANATH BANERJEE, [(2001) 6 SCC 16] v. RANGAPPA VS. SRI MOHAN [(2010) 11 SCC 441] vi. APS FOREX SERVICES P. LTD. VS. SHAKTI INTERNATIONAL FASHION LINKERS AND OTHERS [(2020) 12 SCC 724] vii. MANISHBHAI BHHARATBHAI SHAH VS. STATE OF GUJARAT AND OTHERS [(2008) 49 (1) GLR 392]
13. Learned counsel for the respondents Sri. Nataraja Ballal raised the following contentions:
(a) The additional documents sought to be produced are inadmissible in evidence as the necessary conditions for the admissibility of the secondary evidence are not met.
(b) The plaintiff's contentions that the original documents were misplaced and later the notarized copies of the documents are traced, -9- NC: 2023:KHC:30374 RSA No. 1793 of 2013 are unbelievable. The necessary details are not forthcoming in the application seeking production of additional documents as to when and where the original documents were misplaced or lost.
(c) The plaintiff in his cross-examination has admitted that the alleged transaction is a money lending transaction and he has maintained the records as required under the Act, 1961. Thus, the suit is not maintainable in view of the bar contained in Section 11 of the Act, 1961 as the plaintiff did not produce the money lender's licence.
(d) The contentions that the plaintiff used to obtain the signatures on the blank cheques from the defendant and misused it are fully established from the letters addressed by the plaintiff and accordingly, the presumption in favour of the
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 plaintiff under Sections 118 and 139 of the N.I. Act is rebutted by the defendant.
In support of his contentions, learned counsel for the respondents has relied upon the following judgments:
i. BHARAT BARREL & DRUM MANUFACTURING COMAPANY VS. AMIN CHAND PAYRELAL [(1999) 3 SCC 35] ii. RANGAPPA VS. SRI. MOHAN [(2010) 11 SCC 441] iii. REVEREND MOTHER MARYKUTTY VS. RENI C. KOTTARAM AND ANOTHER [(2013) 1 SC 327] iv. M. T. SIDDASHETTY AND ANOTHER VS. P. H. GOWDA AND ANOTHER [ILR 2010 KAR 3480] v. Y. YASHODA VS. K. SHOBHA RANI [(2007) 5 SCC 730] vi. P. HARI SHARMA VS. P. VAIKUNTA SHENOY AND COMPANY, BUNDER, MANGALORE, [2000 SCC ONLINE KAR 248].
vii. VENKATESULU VS. K. P. MANI NAYAR, [2000 SCC ONLINE KAR 829] viii. K. LAKSHMIPATHY VS. CHANNAIAH, [1996 SCC ONLINE KAR 304] ix. K. G. SRINIVAS AND ANOTHER VS. AKSHAYA FINANCIERS, CHICKABALLAPUR, [2011 SCC ONLINE KAR 4100]
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 x. AMITH R. JAIN VS. T. K. CHANDRASHEKAR, SINCE DEAD REP BY HIS LRS & OTHERS, [2021 SCC ONLINE KAR 15153] xi. P. VAIKUNTA SHENOY VS. HARI SHARMA, [(2007) 14 SCC 297]
14. This Court has considered the rival contentions and perused the materials placed and the citations.
15. This Court vide order dated 13.12.2022 had allowed the application for production of additional documents overruling the objections on the ground of delay, and the said order has attained finality. Thus, now the respondents cannot raise the ground of delay, in producing the additional evidence. However, the respondents can urge as to how the documents are inadmissible or not proved.
16. The trial Court has held that the plaintiff has not laid the necessary foundation for the production of secondary evidence, namely the attested copy of the passbook and the counter foil of the chequebook of her bank account. The trial Court is of the view that
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 the plea relating to the loss of originals is not established.
17. In addition, the trial Court also held that the materials placed before it are not enough to hold that the photostat copies sought to be produced are the copies made from the original.
18. Now the Court has to consider whether the additional documents sought to be produced are admissible as secondary evidence, and if so, they are proved.
19. Section 63 of the Indian Evidence Act deals with the secondary evidence and reads as under:
63. Secondary evidence. -- Secondary evidence means and includes --
(1) certified copies given under the Provisions hereinafter contained; (2) copies made from the original by mechanical processes which in themselves ensure the accuracy of the copy, and copies compared with such copies;
(3) copies made from or compared with the original;
(4) counterparts of documents as against the parties who did not execute
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 them;
(5) oral accounts of the contents of a document given by some person who has seen it.
20. Sections 63(2) and 63(3) of the Indian Evidence Act referred to above are relevant to this case. Section 63 (2) of the Indian Evidence Act recognizes two types of secondary evidence.
(a) Copies made from the original, by mechanical processes which in themselves ensure the accuracy of the copy, and
(b) Copies compared with such copies
21. If the document answers any one of the descriptions referred to above, then it is secondary evidence within the meaning of Section 63 (2) of the Indian Evidence Act. To fall in category (a) referred to above, it must be shown that the copy is made from the original, by a mechanical process, which ensures the accuracy by itself. Xerox copy, as is known in
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 common parlance, is a photostat copy, made from a mechanical process, which ensures the accuracy. To bring a photostat copy, within the ambit of the first part of secondary evidence, as provided in Section 63(2) of the Indian Evidence Act, one must establish that the copy is made from the original through a mechanical process which ensures the accuracy.
22. The second part of Section 63(2) also provides that copies compared with such copies are also secondary evidence. The expression 'such copies' found in Section 63(2) of the Indian Evidence Act refers to copies made from the original by a mechanical processes which by themselves ensure the accuracy. And if a copy made in any other mode, is compared with the copies made from the original by mechanical processes, which by themselves ensure the accuracy, then such copy made in any other mode also falls within the ambit of secondary evidence.
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23. Section 63(3) of the Indian Evidence Act referred to above, takes into account the copies made from the original and compared with the original. To fall within the ambit of Section 63(3) of the Indian Evidence Act, it is not necessary that the document must be made from a mechanical process. It can be any form of copy. The only requirement is, it must have been compared with the original. If this procedure is complied with, then it is secondary evidence within the meaning of Section 63(3) of the Indian Evidence Act.
24. The secondary evidence sought to be produced in this case are the photostat copies, attested by the Notary Public. The documents sought to be produced contains an endorsement, which reads as under:
'TRUE COPY' Certified that it is the true copy of the original document produced before me.
(Emphasis supplied) The endorsement referred to above prima facie indicates that the Notary Public, who attested the
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 photostat copy (Xerox copy) has compared the copy with the original. This endorsement was made on 16.05.2005.
25. In this case, the documents sought to be produced indeed answer the description of secondary evidence under the first category of Section 63(2) as well as Section 63(3) of the Indian Evidence Act.
26. The Notary Public, who has attested the document, is not examined. However, the statement is made at the bar that the Notary Public, who attested the passbook, is no more. This statement is not disputed.
27. It is also necessary to note that mere proof that the document is secondary evidence is not enough to admit the secondary evidence. The Court has to consider whether the grounds for admitting the secondary evidence in place of primary evidence are made out as required under Section 65 of the Indian Evidence Act.
28. The relevant portion of Section 65 of the Indian
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 Evidence Act, applicable to the case on hand reads as under:
65. Cases in which secondary evidence relating to documents may be given.--
Secondary evidence may be given of the existence, condition, or contents of a document in the following cases: --
(a) xxxxx;
(b) xxxxx;
(c) when the original has been destroyed or lost, or when the party offering evidence of its contents cannot, for any other reason not arising from his own default or neglect, produce it in reasonable time;
(d) xxxxx;
(e) xxxxx;
(f) xxxxx;
(g) xxxxx;
In cases (a), (c) and (d), any secondary evidence of the contents of the document is admissible.
xxxxxxxxxxxx
29. Section 65 (c) of the Indian Evidence Act, provides for two circumstances under which the secondary evidence can be admitted.
(a) When it is established that the original has been destroyed or lost,
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(b) When the party offering evidence of its contents cannot, for any other reason not arising from his own default or neglect, produce it in a reasonable time.
30. The first part applies in a situation when the original is destroyed or lost. The second part applies when the original is neither destroyed nor lost, and the party is not in a position to produce it in a reasonable time. However, in a situation where the party seeks to rely on the secondary evidence on the premise that he is not in a position to produce it in a reasonable time, he must also establish that the inability to produce primary evidence is not owing to his own default or neglect.
31. In this case, the appellant claims that the original is lost. Effort to produce the records from the bank to prove the transaction is not successful as the banker has issued an endorsement that the records are destroyed since they are old.
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32. Though it is urged that the application for the production of secondary evidence does not contain the details as to when, where, and how the documents are lost, there is a pleading that the original is lost and there is evidence to this effect. The defendant who cross-examined the plaintiff did not dispute the loss of the original. The suggestion in the cross- examination is that the documents sought to be produced are not copies made from the original.
33. There is yet another reason to admit the secondary evidence. Paragraph No. 6 of the written statement reads as under:
"It is very clear that the plaintiff deliberately made false representations to us and obtained our signatures and deceitfully got opened separate bank account in the name of the defendant, his wife and his son, as stated above and the plaintiff has been all the way operating his bank accounts with their knowledge or permission and he has created false records, as for e.g.(sic) false record in
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 their bank account showing that, they had obtained loan from the plaintiff,....."
(Emphasis supplied)
34. On perusal of the said stand in the written statement, it is evident that the defendant herself admits that the bank account of the defendant reflects the suit transaction between the plaintiff and the defendant as the defendant has asserted that the plaintiff was operating defendant's bank account to create an impression that the plaintiff has lent money to the defendant. In examination-in-chief the defendant states the same. In Ex.D-23 the complaint filed by the husband of the defendant, the same stand is taken.
35. Exhibit P-7, the copy of the passbook of plaintiff's bank account reveals that Rs.2 lakhs is transferred to the account of the defendant through cheque. Thus the contents of Ex.P-7, the secondary evidence are corroborated from the pleading and evidence of the defendant. It is not the case of the defendant that the
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 money transferred to her account is the money due to her by the plaintiff.
36. The learned counsel for the respondents in support of his contention has relied upon the judgment of this Court in the case of M. T. Siddashetty, supra, to contend that the Xerox copy is inadmissible in evidence. It is apparent from the said judgment, that, the copy produced in the said case did not conform to the description of the secondary evidence defined in Section 63 of the Indian Evidence Act. Moreover, it is also forthcoming that the original document is said to be with the lawyer of the party who intended to produce the secondary evidence. Thus, the Court in the said case has held that no case is made out for admitting the secondary evidence.
37. In the case of J. Yashoda, supra, the Hon'ble Apex Court has observed that the photostat copy produced before the High Court was not above suspicion. Said judgment does not say that the photostat copy is
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 inadmissible in all circumstances. In the case on hand, the contents of secondary evidence are corroborated.
38. DW2, who is examined on behalf of the defendant, was admittedly employed by the plaintiff for some time in his finance firm. In the cross- examination, he has admitted that the cheque referred to by the plaintiff is encashed by the defendant. The relevant portion of the evidence given by the DW2 in the cross- examination reads as under:
"zÁªÉAiÀÄ°è ºÉýzÀAvÀºÁ ZÉPÀÄÌ ¥Àw æ ªÁ¢AiÀÄgÀ SÁvÉUÉ dªÀiÁ DVzÉ. ¥Àwæ ªÁ¢ PÉÆlÖ ZÉPÀÄÌ CªÀiÁ£ÀåUÉÆArzÉ."
The English translation reads as under:
["The cheque referred to in the plaint is credited to the account of the defendants. The cheque issued by the defendant is dishonoured"]
39. Having considered all these aspects, this Court is of the view that the documents sought to be produced as additional evidence are secondary evidence, and
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 grounds are made out to admit the same and the contents of the secondary evidence are also proved.
40. It is also relevant to note that there is an initial presumption in favour of the plaintiff, under Section 118 and Section 139 of the Negotiable Instruments Act, 1881, as the cheque pertaining to defendant's bank account containing her signature is dishonoured.
(a) The relevant portion of Section 118 of the N.I. Act reads as under:
118. Presumptions as to negotiable instruments.-- Until the contrary is proved, the following presumptions shall be made:--
(a) of consideration:--that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration;
(b) as to date:--that every negotiable instrument bearing a date was made or drawn on such date;
(c)xxxxx;
(d)xxxxx;
(e)xxxxx;
(f)xxxxx;
(g)xxxxx:
xxxxx
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(b) Section 139 of the N.I. Act reads as under:
139. The presumption is in favor of the holder.--
It shall be presumed, unless the contrary is proved, that the holder of a cheque received the cheque of the nature referred to in section138 for the discharge, in whole or in part, of any debtor other liability
41. Section 118 of the N.I. Act, deals with presumption relating to the date of issuance of the cheque, and that it was accepted for consideration, among others. Under Section 139 of the N.I. Act, once the cheque issued in favour of a person is dishonoured, the presumption is that the cheque is issued for discharge of the legally enforceable debt. The presumption in favour of the payee is available both under Section 118 and 139 of the Negotiable Instrument Act, as long as it is not rebutted.
42. The burden is on the defendant to establish that either the consideration has not passed or if it has passed, the same is repaid. The defence is that the consideration has not passed. Whether the
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 presumption in favour of the payee is rebutted by the defendant is the question. Cumulative effect of the evidence and circumstances summarised below, leads to the conclusion that the presumption in favour of the plaintiff is not rebutted;
(a) The defendant has not replied to the demand notice issued by the plaintiff.
(b) Though the defendant has established the contention that the plaintiff used to request the defendant's husband to sign and send blank cheques and papers, the evidence is not there to hold that the plaintiff made such a request in and around 1999 and signed cheque was sent in and around 1999.
(c) There is no evidence to hold that the plaintiff demanded the cheque from the defendant and there is no evidence to hold that the defendant sent the blank cheque to the plaintiff. Though there is evidence to show that the plaintiff
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 requested the defendant's husband to send a demand promissory note signed by the defendant on its backside, said evidence is not enough to draw a conclusion that the defendant issued the blank signed cheque in favour of the plaintiff.
(d) The son of the defendant states that in April 1999 he closed her bank account. Her son in the evidence has stated that before closing the account he verified the bank account in 1999 itself. However, the bank statement is not produced, though he states that the amount is not credited to defendant's account. Since the plaintiff made a claim that the amount is paid through the cheque, and admittedly the cheque signed by the defendant is dishonoured, the burden is on the defendant to produce the statement of account. More importantly, defendant does not take a stand, that the
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 amount is not reflected in her account. On the other hand the defendant takes a stand that her bank account is manipulated in such a way, that it gives an impression that the plaintiff lent money to the defendant. The alleged manipulation of the defendant's bank account is not established. Thus the adverse inference has to be drawn against the defendant for not producing the bank statement.
(e) The evidence on record would indicate that the last request made by the plaintiff to the defendant's husband to send the signed cheque leaves, was made in the year 1993, and there is nothing on record to show that the defendant obliged the plaintiff by sending the blank cheques and there is nothing on record to show that the cheque marked at Ex.P-1, is the same cheque sent in 1993, if at all it was sent.
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(f) Though it is brought out in the evidence that from 1970 to 1999 there were series of transactions between the plaintiff and defendant based on mutual trust, nothing is brought out in the evidence to show that the plaintiff has betrayed the trust, earlier to the suit transaction.
(g) There is no serious dispute in the cross-
examination to the plaintiff on the authenticity the secondary evidence, except for saying that the copy is not made from the original. However, the documents would reveal that the document is compared with the original.
(h) The DW2 the witness examined on behalf of the defendant has stated in the cross-examination that the amount is credited to the account of the defendant. Since he was earlier working with the plaintiff it is quite probable that he must have had information in this regard.
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43. On going through the said documentary evidence including additional evidence placed before this court, there is no option but to hold that the suit transaction is proved. And the presumption in favour of the plaintiff available under Section 118 and 119 of N.I. Act is not rebutted.
44. The First Appellate Court while holding that the defendant has rebutted the presumption under Section 139 of the N.I.Act relied on the judgment of the Hon'ble Apex Court in the case of KRISHNA JANARDHAN BHAT VS DATTATRAYA G. HEGDE, 2008 (6) KAR.L.J. 538 (SC). The ratio laid down in the said case is overruled by the Hon'ble Apex Court in the case of RANGAPPA VS. MOHAN, (2010) 11 SCC 441.
45. Learned counsel for the respondents has also relied upon the judgment of this Court in the cases of D. P. Venkatesalu, supra. The said judgment is rendered in the context, where the rebuttal evidence was led to
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 rebut the presumption under Section 139 of the N.I. Act. The facts of this case do not attract the principles laid down in the said case as there is no acceptable rebuttal evidence.
46. Learned counsel for the respondents has also relied upon the judgment in the case of Amit R. Jain supra. In the said judgment, by analysing the evidence, the Court has concluded that the loan transaction is not established. In this case, through the additional evidence and other evidence already referred to above, the transaction is proved.
47. The First Appellate Court has proceeded on the assumption that the burden is on the plaintiff to establish the loan transaction. Since there is a presumption in favor of the plaintiff under Sections 118 and 139 of the N.I. Act, the burden is not on the plaintiff but it is on the defendant. Once there is a statutory presumption, in favour of a party, unless rebuttal evidence is led by the other party, and the
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 presumption is rebutted, the onus does not shift on the party in whose favour there is a presumption.
48. There is one more angle to the case. The defendant though has taken the stand that she used to invest the money in the plaintiff's finance and she used to send the signed blank cheques to the plaintiff, no explanation is forthcoming as to why the defendant, if she has invested the money with the plaintiff, should issue a blank cheque to the plaintiff. In fact, it should be other way round. If at all the defendant has invested the money with the plaintiff, then the plaintiff should have issued the cheque and the defendant should have insisted the cheque from the plaintiff.
49. Regarding money lending license. Before the first Appellate Court, the plaintiff/respondent before it cited the judgment of the Bombay High Court in the case of SITARAM LAXMINARAYAN RATHI VS. SITARAM KASHIRAM KOLI AND OTHERS, 1984 SCC ONLINE BOM 99, to urge that the production of a
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 money lender's license is not required in case the loan amount is transferred through a Negotiable Instrument, not being a promissory note. The First Appellate Court held that transfer of the loan itself is not established. Hence did not rely on the said judgment.
50. Sri. Nataraja Ballal, would submit that since the plaintiff claims that the alleged transaction is carried out by the finance run and managed by the plaintiff, and in the cross-examination, the plaintiff has stated that he filed Form No.6 as required under the Act, 1961, the suit is not maintainable without the money lender's licence, in view of the mandate under Section 11 of the Act, 1961.
51. Learned Senior Counsel for the appellant, by referring to the definition of loan, in Section 2(9) of the Act, 1961, and the exclusion found in Section 2(9)(h) of the Act, 1961, urged that, if the amount lent through a cheque is more than rupees three thousand, the
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 transaction is not a 'loan' under the Act, 1961. He would also refer to the expression 'loan' found under Section 11 of the Act 1961 and would contend that the production of a money lender's license is necessary, only if, the transaction is a 'loan' within the meaning of the Act, 1961. In support of his contention, he has referred to the judgment of the Gujarat High Court in the case of Manishbhai, supra.
52. The expression 'Loan' is defined under Section 2(9) of the Act, 1961. The said definition, in its sub-clauses excludes a few transactions from the purview of 'loan' under the said Act. Section 2(9)(h) is one of such transactions. Section 2(9)(h), which is relevant in this case, reads as under:
Section 2. Definitions. --
(9) "Loan" means an advance at interest whether of money or in kind, and includes any transaction which the court finds in substance to amount to such an advance, but does not include-
(a) to (g) xxxx
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(h) an advance of not less than three thousand rupees made on the basis of negotiable instrument as defined in the Negotiable Instruments Act, 1881 (Central Act XXVI of 1881) other than on the basis of a promissory note."
53. Section 11 of Money Lenders Act, 1961 reads as under:
Section 11. Suits by money lenders not holding licence. -
(1) After the expiry of six months from the date on which this Act comes into force, no Court shall pass a decree in favour of a money-lender in any suit to which this Act applies, filed by a money-lender, unless the Court is satisfied that at the time when the loan or any part thereof to which the suit relates was advanced, and on the date such suit was filed, the money lender held a valid licence.
(2) xxxxxxxxxx (3) xxxxxxxxxx (4) xxxxxxxxxx (5) xxxxxxxxxx (Emphasis supplied)
54. On reading of Section 2(9)(h) of the Act, 1961, it is apparent that, if the amount is transferred through a cheque and if the amount transferred is more than rupees three thousand, then the transaction is not a 'loan' under the Act, 1961.
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55. Section 11 of the Act 1961 prohibits the Court from passing a decree in favour of the money lender in any suit to which this Act applies, unless the Court is satisfied that at the time when the loan or any part thereof to which the suit relates was advanced, the money lender held a valid licence.
56. The expression "suit to which this Act applies" is defined in Section 2(19) of the Act, 1961. The relevant portion of the Section 2(19) reads as under. 2(19). "Suit to which this Act applies" means any suit or proceeding-
(a) for the recovery of a loan made after the date on which this Act comes into force;
(b) xxxxx
(c) xxxxx (Emphasis supplied)
57. The expression 'loan' is defined in the Act, 1961. The word loan finds place in Section 11 of the Act, 1961 and the expression "suit to which this Act applies" also finds place in Section 11 of the Act,1961. The above said expression in Section 2(19)(a) of the Act,1961
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 also uses the word 'loan'. Since the word 'loan' is defined in the Act, 1961, it is logical that the word 'loan' appearing in Section 2(19)(a) and the word 'loan' appearing in Section 11 have to be construed and understood as defined under the Act, 1961 unless it leads to absurdity. No such absurdity is pointed out in assigning the same meaning to the word 'loan' as defined in Sections 2(9)(h) of the Act, 1961, while reading and interpreting the Section 11 of the Act, 1961.
58. No other provision is pointed out to hold that the word 'loan' defined in the Act, 1961 is applicable to some other provisions of the Act, 1961 other than Section
11.
59. This being the position, assigning the same meaning to the word 'loan' as defined in Section 2(9)(h) to the word loan appearing in Section 2(19)(a) and Section 11 of the Act,1961, this Court is of the view that Section 11 of the Act, 1961 applies to only those suits
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 to recover the 'loan' as defined under the Act,1961 and not for every suit by a money lender to recover 'money' which is not a 'loan' under the Act,1961. Under the scheme of the Act, 1961, every transaction lending money is not a 'loan' transaction. Some transactions are excepted from the definition of 'loan'. In Section 11 of the Act, 1961, has no application to those transactions which are excepted in Section 2(9)(h) of the Act, 1961.
60. The object of the Act, 1961, is to regulate the money lending business and to prevent exploitation of borrowers. Thus, money lent under the promissory note which may be a cash transaction is well within the definition of 'loan' and to recover such loan the production of money lender's licence is a must. However, the money lent in excess of rupees three thousand, through a negotiable instrument, other than promissory note, is not a 'loan' as defined in the Act, 1961. The logic appears to be that the money lent
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 through cheque will reach the payee as it involves a banking transaction which by very nature ensures some credibility because of the involvement of a banker. Thus, the rigor of Section 11 cannot be made applicable to such transaction which is not a 'loan' transaction under the Act, 1961.
61. When so construed, though the transaction between the plaintiff and the defendant is a loan transaction, in a common parlance, it is not a 'loan' transaction within the meaning of Sections 2(9)(h), 2(19)(a) read with Section 11 of the Act, 1961, as the amount is lent through cheque and the amount lent is in excess of rupees three thousand. Thus, the suit is maintainable though the money lender's licence is not produced.
62. In Manishbhai supra, though the Bombay High Court has held that the even cheque issued by the defendant towards repayment of loan, takes away the transaction from the ambit of loan defined under
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 Sections 2(9)(f) and 10 of the Bombay Money Lenders Act, this Court is not agreeing with the said view. However, for the reasons stated supra, if the amount lent is more than rupees three thousand and payment is through a negotiable instrument other than the promissory note, then such a transaction is not coming under the purview of Section 11 of the Act, 1961. Thus, non-production of a money lender's licence is not fatal to the case of the plaintiff, since the transaction is through a cheque and the amount lent is in excess of rupees three thousand.
63. Learned counsel for the respondents has referred to the judgment of this Court in the case of P. Hari Sharma, K. Lakshmipathy and K. G. Srinivas and Another (supra) to substantiate his contention that production of money lender's licence is mandatory in a suit by the money lender to recover the loan. This Court is of the view that in the aforementioned cases, the Court has not laid down any law interpreting
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 Sections 2(9)(h) and 2(19)(a) of the Act, 1961, with reference to payment made through cheque in excess of rupees three thousand.
64. The judgment of the Hon'ble Apex Court in the case of P Vaikunta Shenoy supra, is also not applicable to the facts of this case as in the said case, the Hon'ble Apex Court was considering the question whether production of money lending licence is mandatory when the person suing was not a money lender under Section 2(2) of Karnataka Money Lenders Act, 1961. Hence, the said judgment has no application to the facts of this case.
65. As far as the judgments cited by the learned counsel for the respondents in the case of Bharat Barrel supra, the said judgment is relating to the discharge of the burden and shifting of the onus under Section 118 of the N.I. Act. In this case, this Court is of the view that the burden cast on the defendant is not discharged and the plaintiff has proved the transaction
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 by producing the secondary evidence. The case of Reverend Mother Marrykutti supra, also deals with the discharge of burden under Sections 118 and 139 of the N.I. Act. Said case was decided in an entirely different set of facts where the burden was discharged by the accused.
66. The First Appellate Court did not have the benefit of analyzing the secondary evidence which is produced before this Court. Assuming that the view of the First Appellate Court is also one of the plausible views, this Court is of the opinion that the finding given by the trial Court which had the benefit of observing the demeanor of the parties could not have been set aside merely because one more view is also plausible. The view taken by the trial Court is now strengthened by the additional evidence placed before this Court.
67. For the reasons assigned above, substantial questions of law are answered in favour of the appellant.
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68. It is also relevant to note that the additional documents which are produced before this Court were notarized in the year 2005. The appellant produced the said documents in this second appeal. Had it been produced before the trial Court or the First Appellate Court at least, probably this appeal could have been avoided. Hence, the appellant has to bear his cost of this appeal.
69. Hence the following:
ORDER i. The impugned judgment and decree dated 29.07.2013 passed in RA No.26/2012, on the file of the II Addl. District Judge, Dakshina Kannada, Mangaluru, are set aside.
ii. Consequently, the judgment and decree dated 22.06.2011 passed in O.S.No.114/1999, on the file of III Addl. Senior Civil Judge, Dakshina Kannada, Mangaluru, are restored.
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NC: 2023:KHC:30374 RSA No. 1793 of 2013 iii. Appellant is entitled to the cost of the suit. iv. Appeal is allowed, however, the cost of the appeal is made easy.
Sd/-
JUDGE gab CT-PA List No.: 19 Sl No.: 1