Madras High Court
Union Bank Of India vs S.Liakat Ali on 16 August, 2012
Equivalent citations: AIR 2012 MADRAS 255, (2013) 1 MAD LW 397, (2013) 1 NIJ 622, (2013) 1 BANKCAS 276
Author: S.Vimala
Bench: S.Vimala
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 16.08.2012
CORAM
THE HONOURABLE Mrs. JUSTICE. S.VIMALA
Second Appeal No.352 of 2000
Union Bank of India,
Ennore Branch,
Chennai 57
Rep. By its Branch Manager .... Appellant
Vs.
1. S.Liakat Ali
2. Askar Ali
3. P.S.I.Merchandisers,
Rep. By its Administrative Officer,
(R-2 & R-3 are given up) .... Respondents
Second Appeal filed under Section 100 of the Civil Procedure Code as against the decree and judgment, dated 27.08.1999 in A.S.No.8 of 1999 on the file of the Principal District Court, Chengalpattu, confirming the decree and judgment, dated 24.12.1997 in O.S.No.123 of 1991 on the file of the Sub Court, Thiruvallur.
For Appellant : Mr. R.Subramania Iyer
For Respondents : Mr. S.W.A.Hunainy, for R-1
R-2 & R-3, Given-up
- - -
J U D G M E N T
The appellant-Bank, which is not able to get a decree as against all the three defendants together but only as against the third defendant, has filed this appeal.
2. The following substantial question of law was formulated for consideration:-
1. Whether the framing of issues with reference to passing of consideration in respect of the promissory note, despite presumption available under Section 118 of the Negotiable Instruments Act is proper?
2. Whether fixing the liability as against the third defendant, exonerating the first and second defendants, is proper when the appellant has allegedly made payment to the third defendant on behalf of first defendant who is the debtor,for the repayment of which the second defendant was the guarantor ?
3. Whether the finding of court below on limitation is perverse?
3. The brief facts:-
The first defendant, who wanted to avail a loan under self-employment scheme executed the promissory note dated 15.03.1988 (Ex.A-1) in favour of the appellant and for which the second defendant stood as a guarantor by virtue of Ex.A-3-letter of guarantee. The third defendant was expected to deliver the lathe to the first defendant to which the appellant-Bank paid a sum of Rs.25,000/- allegedly on instructions from the first defendant.
4. The suit claimed was contested by the first and second defendants on the ground that, (a) suit promissory note is not supported by consideration and (b) the first defendant never instructed the appellant-Bank to make payment to the third defendant, who is the supplier of the lathe. It is the contention of the first defendant that the third defendant failed to deliver the goods i.e., the lathe to the first defendant and therefore, he is not liable to make any payment to the appellant-Bank.
5. Both the trial court as well as the appellate court incorrectly framed an important issue, which enabled the litigation to breath life for 21 years. The issue framed is this:-
Whether the suit promissory note is not supported by consideration?
6. Pleadings and issues are sine-qua-non in a civil litigation. Based upon pleadings, appropriate and proper issues have to be framed. Otherwise, focus of the litigation is bound to take a detour.
7. When the issues are properly and fairly framed it has got manifold advantage. (i) It is beneficial to the parties themselves to know exactly what are the matters left in dispute i.e., what is admitted and what is disputed. (ii) It helps the parties to know precisely what facts they must be prove at the trial. (iii) It helps the parties to find out whether the dispute revolves around the question of fact or question of law.
Order 14 of the code of civil procedure deal with issues Rule 1 (1) issues arise when a material proposition of fact or law is affirmed by the one party and denied by the other.
(2) Material propositions are those propositions of law or fact which a plaintiff must allege in order to show a right to sue or a defendant must allege in order to constitute his defence.
(3) Each material proposition affirmed by one party and denied by the other shall form the subject of a distinct issue.
(4) issues are of two kinds:
(a) issues of fact,
(b) issues of law.
(5) At the first hearing of the suit the Court shall, after reading the plaint and the written statements, if any, and 1 [after examination under rule 2 of Order X and after hearing the parties or their pleaders], ascertain upon what material propositions of fact or of law the parties are at variance, and shall thereupon proceed to frame and record the issues on which the right decision of the case appears to depend.
(6) Nothing in this rule requires the Court to frame and record issues where the defendant at the first hearing of the suit makes no defence.
Materials from which issues may be framed is provided under rule 3 The Court may frame the issues from all or any of the following materials :-
(a) allegations made on oath by the parties, or by any persons present on their behalf, or made by the pleaders of such parties;
(b) allegations made in the pleadings or in answers to interrogatories delivered in the suit;
(c) the contents of documents by either party.
Power to amend and strike out issues has been provided under rule 5 and power to take evidence or to call for records has been provide under rule 4 Rule 5 Power to amend and strike out issues (1) The Court may at any time before passing a decree amend the issues or frame additional issues on such terms as it thinks fit, and all such amendments or additional issues as may be necessary for determining the matters in controversy between the parties shall be so made or framed, (2) The Court may also, at any time before passing a decree, strike out any issues that appear to it to be wrongly framed or introduced.]] Rule 4 . Court may examine witnesses or documents before framing issues.
Where the Court is of opinion that the issues cannot be correctly framed without the examination of some person not before the Court or without the inspection of some document not produced in the suit, it 1[may adjourn the framing of the issues to a day not later than seven days], and may (subject to any law for the time being in force) compel the attendance of any person or the production of any document by the person in whose possession or power it is by summons or other process.
When such expensive and expansive power has been conferred, with regard to framing of issues at various stages, still the courts below have not bestowed the attention in framing proper issues.
8. So far as this case is concerned, the first defendant has admitted the execution of the promissory note. Once the execution is admitted, there is a presumption under Section 118 of the Negotiable Instruments Act, that every negotiable instrument was made or drawn for consideration until the contrary is proved. Section 118 of the Negotiable Instruments Act is reproduced for convenient reference:-
"118. Presumptions as to negotiable instruments of consideration 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) as to time of acceptance- that every accepted bill of exchange was accepted within a reasonable time after its date its date and before its maturity;
(d) as to time of transfer.- that every transfer of a negotiable instrument was made before its maturity;
(e) as to order of endorsements - that the endorsements appearing upon a negotiable instrument were made in the order in which they appear thereon;
(f) as to stamps-that a lost promissory note, bill of exchange or cheque was duly stamped;
(g) ......
9. If the courts have taken note of the presumption then the issue ought to have been framed like this:-
Execution of the promissory note having been an admitted fact ,In view of the presumption available under Section 118 of the Negotiable Instruments Act,as the passing of consideration is presumed, whether the defendant has rebutted the presumption or disproved the contrary ?
10. The nature of issue framed will also throw light on the burden of proof also. Even considering this case as an example, as per the issue which ought to have been framed the burden of proof will be on the part of the defendant to show that the promissory note is not supported by consideration. According to the issue framed by the trial court, it is for the plaintiff to prove the passing of consideration, which according to law is a presumed fact and a fact which need not be proved, as the execution is admitted. But as per the legal position the burden is on the defendant to prove that presumption regarding passing of consideration is wrong or incorrect. The Courts below, having lost the focus, has misdirected itself, resulting in miscarriage of justice.
10.1. The learned counsel for the first respondent has relied upon the following decisions:-
(i) 2006 (3) CTC 730 (M.S.Narayana Menon @ Mani v. State of Kerala and another). This decision speaks about requirement of probable defence to be raised by the party against whom the presumption lies.
(ii) 2008 (5) CTC 527 (Kalavally v. Parthasarathy). This decision is about the presumption regarding existence of legally recoverable debt and not about the presumption regarding passing of consideration as such.
(iii) (2011) 1 Crimes 70 (M.P.) (Chanchal Mistri vs. Asha Bhati). This decision highlights the mode of proving the non-existing of consideration.
All the above three decisions do not advance the cause of the first respondent in any way.
11. The findings of the lower court are, (i) Ex.A-1-promissory note did not authorize the appellant to make the payment to the third defendant; (ii) no authority has been conferred upon the Bank to make payment directly to the third defendant; (iii) the appellant ought to have handed over the pay order for payment of Rs.25,000/- to the first defendant and not to the third defendant directly or at least the payment ought to have been made through the first defendant to the third defendant; (iv) the acknowledgement for receipt of money under Ex.A-4 did not say that it is received on behalf of the first defendant, though it is admitted that it was for the supply of lathe.
12. All these findings are contended to be correct and it is supported by learned counsel appearing for the first respondent. It is contended that if the payment by the Bank to the third defendant had been done with the permission of the first defendant then the third defendant would not have been able to cheat the first defendant by non supply of the lathe. But this contention is refuted by the learned counsel for the appellant by pointing out the evidence of D.W.1 wherein D.W.1 has stated that as per the guidance / instructions given by the Bank he met the third defendant, obtained quotation from him and handed over it to the Bank. Therefore it is clear that payment to the third defendant by the appellant Bank would not have been made without the consent and knowledge of the first defendant.
13. Learned counsel for the appellant also pointed out that when Exs.A-6 and A-8 notices were issued to the first and third defendants, both of them did not think it proper to send any reply. Under Ex.A-8 notice it is mentioned that the conduct of the first and third defendants would amount to criminal breach of trust and cheating. Despite this kind of serious allegations the first defendant has not chosen to reply that there was no element of cheating involved and that the omission was only on the part of the third defendant to supply the lathe. When such is the conduct of the first defendant, it is not open to him to contend that he was cheated by the third defendant. The Courts have given findings, without considering those circumstances and without taking into account the settled practice, the scheme under which payment is made by the Bank and also without looking into the documents under Ex.A-1-promissory note and Ex.A-2-hypothecation agreement. It is pointed out that whenever loan is sanctioned for any special scheme the mode of payment takes care to see that the purpose for which loan is granted must be achieved and it should not get defeated. Only in order to eliminate the chance of the money sanctioned being misused, the scheme stipulates that payment by the Banker must be made to the supplier of the machine directly. The execution of the promissory note by the first defendant, towards the supply of lathe, is itself an authority for the Banker to make the payment directly to the supplier. Moreover, execution of Ex.A-2-hypothecation agreement will lend support to Ex.A-1-promissory note which in turn is an implied authority to the Banker to make payment to the third defendant, who is the supplier of lathe. Therefore, having failed to supply the lathe the third defendant is liable. The money by the Banker having been paid to the third defendant only at the instance of the first and second defendants are also liable to make the payment jointly and severely. The lower court did not take note of the omission to deny the liability by D1 and D2 when the appellant issued notice. If lathe is not supplied by D3 it is for D1 to proceed against the D3.The lower court omitted to consider the fact that pay order was given only according to the quotation obtained by D1 from D3. The bank dealing with public money should not be allowed to suffer for the omission and negligence on the part of the defendants. Therefore the finding of the trial court and the first appellate court that the first and second defendants are not liable towards the loan transaction is set-aside and they are also liable.
14. In the courts below a defence has been taken that the suit is barred by limitation. The lower appellate court has considered the circumstances under which the acknowledgement of liability has been made under Ex.A-12 and doubting the same has observed that even assuming Ex.A-12 to be an acknowledgement, still the suit is liable to be dismissed as against the first and second defendants as the promissory note itself is not supported by consideration, and thus bringing the case to back to square one. The fact remains that amount paid towards acknowledgement of liability has been given credit to in the account of the first defendant. The assumption that it ought to have been obtained at the time of execution of Ex.A-1-promissory note itself is unwarranted in the absence of any evidence for the same. This finding is a perverse finding. Therefore, this Court hold that the finding of the lower appellate court that the suit is barred by limitation has to be set-aside and it is set-aside accordingly. The concurrent findings of both the courts below, which were arrived at by ignoring the presumption under Section 118 of the Negotiable Instruments Act, are patently erroneous and illegal and are set-aside. The defendants are jointly and severally liable to pay the amount to the appellant.
15. In the result, the second appeal is allowed and the substantial questions of law formulated are answered in favour of the appellant holding that the suit promissory note is supported by consideration and that the suit is not barred by limitation. Having regard to the long pendency of the case, the rate of interest is reduced from 12% to 6%, which is payable from the date of plaint till the date of realisation. No costs.
16.08.2012 Index : Yes/No Internet: Yes/No srk To
1. The Principal District Court, Chengalpattu
2. The Sub Court, Thiruvallur S.VIMALA, J., srk Pre-Delivery Judgment in S.A.No.352 of 2000 16.08.2012 Pre-Delivery Judgment in Second Appeal No.352 of 2000 To The Hon'ble Mrs. Justice S.Vimala Most Respectfully submitted:
S.Ramkumar P.A. to the Hon'ble Judges