Madras High Court
N.S. Arumugam vs Trishul Traders on 19 December, 2005
Equivalent citations: [2006]132COMPCAS434(MAD), (2006)2MLJ41, 2007 (1) AJHAR (NOC) 146 (MAD.) = (2006) 2 MAD LJ 41
Author: K. Mohan Ram
Bench: P.D. Dinakaran, K. Mohan Ram
JUDGMENT K. Mohan Ram, J.
1. The unsuccessful plaintiff in O.S. No. 51 of 1985 on the file of the Sub-court, Mayiladuthurai is the appellant in the above appeal.
2. For convenient sake, the parties are referred to as per their ranking in the suit.
3. The plaintiffs case is as follows:
Defendants Nos. 2. and 3 borrowed a sum of Rs. 60,000 from the plaintiff on June 23,1982 for the benefit of their business and also for the first defendant firm and the third defendant as partner of the firm gave a post dated cheque dated August 21, 1982 drawn on United Commercial Bank, New Washermenpet Branch, in favour of the plaintiff for a sum of Rs. 60,000 towards the repayment of the said loan. When the cheque was presented for collection, the same was dishonoured and the defendants were informed about the dishonour of the cheque and the defendants promised to make arrangement for repayment of the loan ; but when they failed to do so, a registered notice dated May 26, 1985 was issued ; but the defendants failed to repay the amount hence the suit.
4. The suit was contested by the defendants. The second defendant filed a written statement, inter alia, contending that he is not a partner of the firm, that he issued a blank signed letter for the purpose of forwarding the post dated cheque with a specific instruction to use the same for the purpose of the joint tender at Madras Fertilizers Limited but the plaintiff has forged the same for his own purpose. He further contended that he had not received any consideration from the plaintiff and he had not written the contents of the letter dated June 23, 1982 and on these pleadings, he prayed for the dismissal of the suit.
5. The third defendant contested the suit by filing a separate written statement which was adopted by the first defendant by filing a memo. In the written statement, the third defendant took the following defence, viz., the defendant is residing at Madras and the cause of action arose at Madras and the court at Mayiladuthurai has no jurisdiction to entertain the suit. The mere issue of post dated cheque and the dishonour of cheque cannot constitute any legal obligation or liability for payment, unless it is supported by any material fact for incurrence of the liability by independent transaction to fix the liability. This defendant does not owe any money to the plaintiff. The post dated cheque issued was on a different context and dishonour was arranged by the third defendant on proper and justifiable grounds only. The specific case of the defendant is that he met the plaintiff at the precincts of the Madras Fertilizers Limited, Manali, Madras 600 068 and both of them decided on a joint bid on an understanding that when they become successful tenderer, the proceeds were to be shared by all the parties. As a safeguard for proportionate payments and also to pay for the cost of materials, if their joint tender happened to be accepted by the company offering the sale of scrap by the tender, a cheque was issued by the third defendant to be utilized for payment to the company. Being post dated cheque, a blank letter was also issued by the manager of the defendant's firm to indicate to the plaintiff that the cheque was only a post dated cheque and to incorporate thereon specific instructions to use the cheque only if the bid is accepted by the company. The joint tender of the plaintiff and the defendants was not accepted by the company and with the result the cheque became redundant for the purpose it was handed over to the plaintiff. But the plaintiff retained the cheque without returning the same in spite of repeated requests from the defendants. Suspecting the bona fides of the plaintiff, he advised his bankers to dishonour the cheque. The suit is not maintainable as no consideration passed from the plaintiff to the defendants under the dishonourned cheque. The defendant admitted the receipt of the legal notice from the plaintiff and as the defendant had already stopped payment, he ignored the notice and did not send any reply. The third defendant has specifically stated that a letter was sent by him to the plaintiff by normal post under certificate of posting pointing out their fraud and their persistence with their fraudulent claim. On these pleadings, he prayed for dismissal of the suit.
6. The trial court on the basis of the abovesaid pleadings framed the following issues, namely:
(i) Whether the cheque issued by the defendants and the hand letter are not supported by consideration ?
(ii) Whether the defendants had not obtained the loan from the plaintiff ?
(iii) Whether the defendants as pleaded by them are not liable to repay the loan amount to the plaintiff ?
(iv) Whether the court has got jurisdiction to try the suit ?
(v) To what relief the plaintiff is entitled to ?
7. During trial, the plaintiff was not examined as a witness, but his manager one Pannerselvam was examined as P.W.I and exhibits A1 to A7 have been marked. On the side of the defendants, the second defendant was examined as D.W.I and one Saranaiya has been examined as D.W. 2 and exhibits Bl to B9 have been marked. On a consideration of the oral and documentary evidence adduced in the suit, the trial court has dismissed the suit. Aggrieved by that the plaintiff has filed the above appeal.
8. Mr. Muthukumaran learned counsel appeared for the appellant/plaintiff but no one appeared for the respondents/defendants. The trial court on a consideration of exhibits B3, B7 and B8 came to the conclusion that the first defendant, Thirusool Traders is the proprietary concern, but not a partnership concern as claimed by the plaintiff. The trial court has also held that the proprietary concern, Thirusool Traders has not been impleaded as the defendant and Radhashyam and Shantilal have not been impleaded in their individual capacity and therefore has held that the suit has not been properly framed. This observation of the trial court is not correct. Though the plaintiff claimed Thirusool Traders as a partnership firm it has been admitted by the third defendant in his written statement though not directly but indirectly in paragraph No. 5 of the written statement. In paragraph No. 5, it is stated as follows:
Being post dated cheque, a blank letter was also issued by the manager of the defendant's firm to indicate to the plaintiff.
9. Exhibit A1 cheque has been signed by the third defendant as proprietor of Thirusool Traders and the long cause title in the plaint shows that the Thirusool Traders is represented by M. Shantilal. Though, Mr. Shantilal is shown as representing Thirusool Traders as its partner, it will not affect the case. Thirusool Traders is represented by its proprietor Shantilal and actually no issue has been framed on the said question, but further the trial court has made certain observations which according to us are not correct.
10. The trial court by throwing the burden on the plaintiff to prove the passing of consideration under exhibit A1 cheque, relying on the non-examination of the plaintiff and considering exhibit B2, and the entry therein to the effect that at 2.42 p.m. on June 23, 1982, the third defendant participated in the tender at Madras Fertilizers Limited, Chennai came to the conclusion that defendants Nos. 2 and 3 would not have been present at 8.00 a.m. on June 23, 1982 at Myladuthurai and handed over exhibits A1 and A2. The trial court disbelieved the version of the plaintiff and held that the plaintiff has not proved his case.
11. The trial court believing the case of the defendants that exhibit A1 cheque was not issued by the third defendant for repayment of a sum of Rs. 60,000 said to have been borrowed by him and the cheque was not supported by consideration and the cheque and exhibit A2, letter were handed over on a different context, viz., in connection with the joint tender submitted by the plaintiff and the defendants in the auction conducted by the Madras Fertilizers Limited at Chennai. On the above said reasoning the trial court dismissed the suit.
12. We heard learned counsel for the appellant/plaintiff. The main thrust of the submission made by learned counsel is that exhibit Al, being a negotiable instrument, the plaintiff is entitled to the benefit of the legal presumption available under Section 118 of the Negotiable Instruments Act. Though the legal presumption is that exhibit A1 cheque is supported by consideration and the burden is on the defendants to prove that exhibit A1 cheque was not supported by consideration the trial court had wrongly thrown the burden on the plaintiff and thereby has committed an error of law. Further, he submitted that the defendants have not discharged the burden of proof that exhibit A1 cheque is not supported by consideration. Learned Counsel further submitted that the evidence adduced by the defendants is contrary to their pleadings in the written statement. Learned Counsel for the appellant by relying upon a judgment reported in Kundan Lal Rallaram v. Custodian, Evacuee Property AIR 1961 SC 1316, submits that Section 118 of the Negotiable Instruments Act laid down a special rule of evidence applicable to negotiable instruments and the presumption is one of law and thereunder a court shall presume, inter alia, that the negotiable instrument or the endorsement was made or endorsed for consideration and 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.
13. Learned Counsel by relying upon a judgment of this Court reported in Meenakshisundaram v. Rangasami [1996] 1 MLJ 297 submits that the trial court committed an error in not drawing a legal presumption available under Section 118 of the Negotiable Instruments Act, as the execution of exhibit A1 cheque has been admitted by the third defendant. Learned Counsel also points out that the oral evidence has not been properly considered.
14. In the light of the above submissions, we have gone through the entire pleadings, the oral and documentary evidence available on record, exhibit Al, is the dishonourned cheque and it has been admittedly signed by the third defendant and the third defendant has admitted that the same was handed over by him to the plaintiff. In their separate written statements filed by the second and third defendants, the signature in exhibit A2 letter is admitted as that of the second defendant. In the light of this admission, automatically the legal presumption available under Section 118 of the Negotiable Instruments Act should have been raised in favour of the plaintiff by the court below. Once the said legal presumption is raised, it throws the burden of proof of failure of consideration on the maker of the negotiable instrument. It will be useful to refer to a passage in the judgment in Kundan Lal Rallaram v. Custodian, Evacuee Property AIR 1961 SC 1316. In the said judgment, the apex court has laid down in paragraph No. 5 at page 1318 as follows:
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 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 meaningsone 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. To illustrate how this doctrine works in practice, we may take a suit on a promissory note. Under Section 101 of the Evidence Act, 'Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exists'. Therefore, the burden initially rests on the plaintiff who has to prove that the promissory note was executed by the defendant. As soon as the execution of the promissory note is proved, the rule of presumption laid down in Section 118 of the Negotiable Instruments Act helps him to shift the burden to the other side. The burden of proof as a question of law rests, therefore, on the plaintiff but as soon as the execution is proved, Section 118 of the Negotiable Instruments Act imposes a duty on the court to raise a presumption in his favour that the said instrument was made for consideration. This presumption shifts the burden of proof in the second sense, that is, the burden of establishing a case shifts to the defendant. The defendant may adduce direct evidence to prove that the promissory note was not supported by consideration, and, if he adduced acceptable evidence the burden again shifts to the plaintiff, and so on. The defendant may also rely upon circumstantial evidence and, if the circumstances so relied upon are compelling, the burden may likewise shift again to the plaintiff. He may also rely upon presumptions of fact, for instance those mentioned in Section 114 and other sections of the Evidence Act. Under Section 114 of the Evidence Act, 'The court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case'. Illustration (g) to that section shows that the court may presume that evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it. A plaintiff, who says that he had sold certain goods to the defendant and that a promissory note was executed as consideration for the goods and that he is in possession of the relevant account books to show that he was in possession of the goods sold and that the sale was effected for a particular consideration, should produce the said account books, for he is in possession of the same and the defendant certainly cannot be expected to produce his documents. In those circumstances, if such a relevant evidence is withheld by the plaintiff, Section 114 enables the court to draw a presumption to the effect that, if produced, the said accounts would be unfavourable to the plaintiff. This presumption, if raised by a court, can under certain circumstances rebut the presumption of law raised under Section 118 of the Negotiable Instruments Act. Briefly stated, the burden of proof may be shifted by presumptions of law or fact, and presumptions of law or presumptions of fact may be rebutted not only by direct or circumstantial evidence but also by presumptions of law or fact.
15. The above said passage clearly shows that the burden of proof as a question of law rests on the plaintiff, but since the execution is proved, Section 118 of the Negotiable Instruments Act imposes a duty on the court to raise a presumption in his favour that the said instrument was made for consideration and this presumption shifts the burden of proof in the second sense, that is, the burden of establishing a case shifts to the defendants. If we consider the present case in the light of the abovesaid principles, we have to hold that the trial court has wrongly thrown the burden of proof on the plaintiff without drawing the legal presumption in favour of the plaintiff when the defendants have admitted the execution of exhibit Al. Unless and until the defendant either by direct evidence or by circumstantial evidence acceptable to the court proves that the negotiable instrument was not supported by consideration, the burden on the defendants is not shifted. We have to see whether the defendants have adduced acceptable evidence and discharged their burden and shifted the burden to the plaintiff to prove his case.
16. The second defendant in paragraph No. 3 of his written statement has stated as follows:
The defendant had issued a blank signed letter for the purpose of forwarding the post dated cheque with specific instructions to use the same for the purposes of the joint tender at the Madras Fertilizers Limited. The plaintiff has forged the same for his own purposes.
17. In the written statement filed by the third defendant and adopted by the 17 first defendant in paragraph No. 5, it is stated as follows.
This defendant denies the allegations in Para. 3 of the plaint that he borrowed a sum of Rs. 60,000 from the plaintiff. The post dated cheque issued was on a different context and its dishonour was arranged by the third defendant on proper and justifiable grounds only.
18. Now we have to consider whether the defendants have by acceptable 18 evidence established the above said specific defence. The second defendant has not been examined in the case, but the third defendant has been examined as D.W. 1, In his evidence, D.W. 1 has stated that he came to know the plaintiff on June 23,1982 through one Veerappan Chettiar and he was introduced to the plaintiff in connection with an auction which was to take place on June 23, 1982 at Madras Fertilizers Limited, Chennai. He has stated that there was an arrangement in which, he and the plaintiff were to participate in the auction. The auction was held on June 23, 1982. The arrangement was that if the tender is confirmed in favour of the third defendant the plaintiff would be paid a particular percentage of money. D.W.I has admitted his signature in exhibit A1 and also admitted that he gave exhibit A1 cheque to the plaintiff on June 23, 1982. As agreed (since the tender was not confirmed in favour of the third defendant) and promised by the plaintiff, D.W.I requested the plaintiff to return exhibit A1 cheque. D.W.I has specifically stated that when he asked him to return the cheque, the plaintiff told him that since the cheque is at Mayiladuthurai, he will go there immediately and bring it back and return the same to D.W.I. Company Cases But the plaintiff did not return that. This evidence of D.W.I is contrary to the averments in his written statement. The specific plea of the third defendant in the written statement is that they decided to go for a joint bid and when they become successful tenderers, the proceeds were to be shared by them and as a safeguard for proportionate payments and also to pay for the cost of materials if their joint tender happen to be accepted, offering the sale of scrap by the tender, a cheque was issued by the third defendant to be utilized for payment to the company. This defence has not been spoken to by D.W.I in his evidence. As noticed above, what D.W.I has stated is that if the plaintiff helps D.W.I to get the tender in the name of D.W.I, a particular percentage of money will be paid to the plaintiff and that was the arrangement between them. This evidence of D.W.I is contrary to the pleadings in the written statement, which speaks about the joint tender. Nowhere in the written statement it is stated that any commission is to be paid to the plaintiff, if he helps the third defendant to get the tender confirmed in his name. Hence, we feel that D.W.I's evidence is not credible and reliable. It is the specific case of the third defendant in his evidence that the auction was held on June 23,1982 and exhibit A1 cheque was given by him to the plaintiff on June 23, 1982 at the premises of Madras Fertilizers Limited at Chennai and the tender was not confirmed in favour of the third defendant and hence he requested the plaintiff to return exhibit A1 cheque. If that is true, then the third defendant would have got back the cheque immediately from the plaintiff and the plaintiff could not have given any excuse for not returning the cheque. D.W.I has stated that when he requested the plaintiff to return the cheque, the plaintiff told him that the cheque is at Mayiladuthurai which could not be true because, admittedly the cheque was issued by the third defendant to the plaintiff at Madras on June 23,1982 and the tender was opened on June 23,1982 itself and the tender was not confirmed in favour of the third defendant and immediately he asked for the return of the cheque and in such circumstances, it is quite unbelievable that when the cheque itself was with the plaintiff, he could have said that the cheque is at Mayiladuthurai. For this reason also, we are unable to accept the evidence of D.W.I.
19. It is the case of D.W.I, that only after signing in exhibit B2, one can participate in the auction. The plaintiff participated in the auction in some other name and the plaintiffs signature is not in exhibit B2 and the plaintiff participated in auction in the name of Raghavan. But Raghavan's signature is also not there in exhibit B2. This evidence of D.W.I in his cross-examination will show that the plaintiff did not participate in the auction and if he had participated in the auction, on behalf of Raghavan, at least Raghavan's signature should be there in exhibit B2, which is also not there. Hence this version of D.W.I is not trust-worthy and liable to be rejected. D.W.I in his cross examination has stated as follows:
* * * * * *
20. But this is not the case pleaded by him in the written statement. As pointed out above, D.W.I has stated that if the tender is confirmed in his name particular percentage was agreed to be paid to the plaintiff. But now in the cross-examination, he has stated that whether the tender is confirmed in the name of the plaintiff or in the name of the third defendant, the beneficiary will be the third defendant and the plaintiff will be paid Rs. 60,000. But in the written statement, it is stated that as a safeguard for proportionate payments and also to pay for the cost of materials, if their joint tender happen to be accepted by the company offering the sale of scrap by the tender, a cheque was issued by the third defendant to be utilized for payment to the company. The said pleading has been given a go-bye and a new plea has been introduced in his evidence by D.W.I. For this reason also, we are unable to believe D.W.I.
21. While the second defendant in his written statement has categorically 21 admitted that the signature in exhibit A2 letter is his signature, D.W.I in his evidence though admitted at the first instance that exhibit A2 contains the second defendant's signature (Radhashyam), immediately he retracted the same and said that the signature in exhibit A2 is not that of the second defendant, Radhashyam but his name alone is there. This evidence of D.W.I, shows that he will go to any extent to lie. If really the arrangement spoken to by D.W.I between him and the plaintiff was true and ultimately the bid was not confirmed in favour of the plaintiff, when the plaintiff was admittedly present with him at Madras Fertilizers Limited at Chennai on June 23,1982 he would have immediately got back exhibits A1 and A2. Further, the third defendant would not have kept quiet without issuing a legal notice demanding the return of exhibits A1 and A2 from the plaintiff. All these factors persuades us to disbelieve D.W.I. The defendants have relied upon exhibit B6, letter said to have been written by the plaintiff. In his evidence D.W. 1 has categorically stated that the cover in which the exhibit B6 letter was received was destroyed by him. He has also stated that he does not know whether exhibit B6 contains the signature of the plaintiff. It is the specific case of the plaintiff that exhibit B6 is not written by him and does not contain his signature and P.W.I has deposed like that in his evidence. Having specifically stated in his cross-examination that he had destroyed the cover in which exhibit B6 letter was received by him, in the re-examination he produced a cover stating that it was the cover in which the letter was received by him. This aspect also compels us to hold that D.W.I is not a trust-worthy person. When it has been specifically denied that exhibit B6 was not written by the plaintiff and it does not contain the signature of the plaintiff, we have to hold that there is no proof to show that exhibit B6 contains the signature of the plaintiff or it was written by him.
22. The defendants have examined one Saranaiya as D.W. 2. He has stated in his evidence that if tender is confirmed in favour of the defendants, it was agreed that Shantilal should pay the commission to the plaintiff. This is contrary to the stand taken by the defendants in their written statement. D.W. 2 has stated in his cross-examination that there was no auction at the Madras Fertilizers Limited on June 23, 1982, but there was only tender. This particular answer of D.W. 2 will disprove the whole case of the defendants.
23. The above discussion of ours will show that the defendants have not proved their case pleaded by them in their written statement and they have not discharged the burden of proving that exhibit A1 was not supported by consideration. All the above said facts have not at all been considered by the trial court, when the defendants have not discharged their burden the legal presumption under Section 118 stands unrebutted and on that ground itself, the trial court should have held that exhibit A1 is supported by consideration. But the trial court has wrongly thrown the burden on the plaintiff to show that exhibit A1 is supported by consideration.
24. The trial court has relied upon trivial circumstances and minor contradictions to disbelieve the case of the plaintiff. The trial court has not at all considered the oral and documentary evidence adduced by the defendants in the light of the pleadings in the written statement. The trial court has heavily relied upon the non-examination of the plaintiff to disbelieve his case. The inability of P.W.I to mention the car number in which the second and third defendants came to Mayavaram has been relied upon by the trial court to disbelieve P.W.I. When the burden has not been discharged by the defendants, non-examination of the plaintiff will not have any effect. The trial court has stated that if really the second and third defendants has handed over exhibits A1 and A2 to the plaintiff at 8.00 a.m. on June 23,1982 at Mayiladuthurai, they could not have gone to Madras Fertilizers at Chennai at 2.00 p.m. The trial court has relied upon exhibit B2 and has stated that the third defendant was present at Madras Fertilizers Limited at 2.42 p.m. on June 23, 1982. It could not be said with absolute certainty that one cannot reach Madras from Mayavaram within 63A hours. On these minor aspects, the trial court has wrongly disbelieved the case of the plaintiff.
25. The trial court while considering exhibit B6, has rightly rejected exhibit 25 B9, cover. The trial court has not properly considered exhibit B6 as pointed out by us alone. D.W.I has stated that he does not know whether exhibit B 6 contains the signature of the plaintiff. The plaintiff has categorically denied that he had not written exhibit B6 and it does not contain his signature. There is no other evidence to show that exhibit B6 was written by the plaintiff and it contains the signature of the plaintiff. The fact that D.W.I in his chief examination having stated that he had destroyed the cover in which exhibit B6 letter was received by him has gone back and stated in his re-examination that exhibit B9 is the cover, will show that he is not speaking the truth. Considering these aspects the trial court ought to have rejected exhibit B6, whereas the trial court erred in holding that exhibit B6 was written by the plaintiff. Therefore, there is absolutely no evidence to hold that one Raghavan was an agent to the plaintiff and he participated in the tender and it was not the case as pleaded by the defendants in the written statement.
26. For all these reasons stated above, we hold that the trial court has totally 26 misconstrued the oral and documentary evidence available on record and has not properly considered the scope of the legal presumption available under Section 118 of the Negotiable Instruments Act and we are unable to accept the reasoning of the trial court for dismissing the suit. We hereby set aside the judgment of the trial court and decree the suit as prayed for with costs.