Mallavarapu Kasivisweswara Rao Vs. Thadikonda Ramulu Firm & Ors.
[2008] INSC 971 (16
May 2008)
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.5597 of 2001 MALLAVARAPU
KASIVISWESWARA RAO ..Appellant VERSUS THADIKONDA RAMULU FIRM and Ors.
..Respondents
TARUN CHATTERJEE,J.
1. This appeal is directed against
the final judgment and order dated 30th of July, 1999 passed by a Division
Bench of the High Court of Judicature of Andhra Pradesh at Hyderabad in AS No.
721/92 whereby the High Court had affirmed the judgment and decree dated 5th of
August, 1991 in OS No. 33/87 of the 1st Court of the Additional Subordinate
Judge, Kakinada, E.G.
District, Andhra Pradesh decreeing
the suit filed by the 1 appellant in part for a sum of Rs. 2,33,125/- with
interest @ 18% from the date of the suit till realization.
2. The facts leading to the filing
of this appeal as emerging from the case made out by the appellant in the
plaint are as under.
The appellant is the son-in-law of
respondent no.2. The respondent nos. 3 and 4 are the sons of respondent no. 2
while respondent no. 1 is the firm belonging to respondent nos. 2 to 4 whose
managing partner is respondent No.2. The appellant introduced one Pynda
Ramakumar to the respondents who agreed to advance monies to the respondents on
the understanding that the respondents would repay the amount while the
appellant would execute pronotes as surety. The appellant accordingly executed
certain pronotes whose consideration was received by the respondents. As regards
repayment, the respondents were sending monies by drafts or otherwise in the
name of one Narayan Murthy, who was the clerk of the appellant, by depositing
the same in his account. The appellant would withdraw such amount deposited in
the clerk's account by encashing the TTs or Drafts which was then paid to Pynda
Ramakumar who then got the endorsements signed by the appellant. This continued
for some time but when the respondents failed to repay the balance amount due
to Pynda Ramakumar, he pressurized the appellant for payment of the balance
amount due to him. The appellant made several 2 demands to the respondents for
payment of the amounts due to Pynda Ramakumar but when the respondents could
not pay the amounts, the respondent no. 2 as manager of the joint family and
also on behalf of the respondent No. 1 firm executed two pronotes for sums of
Rs. 2,15,000/- and Rs.
4,72,000/- being Ex.A-20 and
Ex.A-21 respectively and a Khararnama in favour of the appellant whereby the
respondent No. 1 agreed to repay amounts with interest at Rs. 2.50 ps. and Rs.
1.50 ps. respectively per annum. After execution of such pronotes, when,
despite several demands, the respondents did not pay the amounts, a notice
dated 3rd of October, 1986 was issued to them by the appellant stating that the
pronotes and khararnama were executed by respondent no. 1 in favour of the
appellant which may be discharged. The respondents vide letters dated 16th of
October, 1986 and 20th of October, 1986 replied to the notice wherein they did not
specifically deny the execution of the pronotes and the Khararnama but referred
to the allegations made in such notice as false and vague.
3. In the backdrop of the above
mentioned facts, in 1987, the appellant, therefore, filed O.S. No. 33/1987 in
the 1st Court of the Additional Subordinate Judge, Kakinada for recovery of the
amounts due under the pronotes of Rs. 4,72,000/- and Rs. 2,15,000/- with
interest and costs. The respondent No. 2 contested the suit by filing written
statement on his own behalf and also on behalf 3 of the respondent No. 1 firm
denying any execution of the pronotes in favour of the appellant and further
stating that the pronotes were forged by the appellant with the assistance of
his brother-in-law and the Clerk. It was further alleged that the appellant
bore a grudge against the respondents and was involved in many criminal cases
and since he was not looking after his wife and children properly, the
respondents had opened an account in the name of Narayanmurthy and were sending
monies regularly in that account for the maintenance of the appellants' family
and therefore, it was alleged that no money was ever borrowed from the said
Pynda Ramakumar, whom the respondent no.2 did not know, through the appellant
for the respondent No.
1 firm. It was also alleged by the
respondent no. 2 that the respondent no. 1 firm was not carrying on any
business and in fact, all its branches were closed and the respondent Nos. 2 to
4 were partitioned in the year 1980.
4. The respondent nos. 3 and 4 also
filed separate written statements contending, inter alia, that they had not
signed any pronotes and the scribe of the pronotes in question was the clerk of
the appellant and the Attester was his brother-in-law. They also contended that
they were not aware of the alleged borrowing by the respondent no.2 for the
respondent no. 1 firm from the 4 said Pynda Ramakumar or the appellant and in
fact, the pronotes in question did not show that the amounts so borrowed were
for the business of the respondent no.1 firm. It was further alleged in the
written statement filed by the respondent Nos. 3 and 4 that the pronotes were
fabricated on account of family disputes between the appellant and the
respondent No. 2 and that they had no necessity to borrow any amount from some
other person. Infact, Pynda Ramakumar was a friend and an associate of the
appellant. Even otherwise, the pronotes were not binding on them as no amounts
were borrowed for the benefit of the firm and they were not signatories to the
said pronotes. It was further the case of the respondent Nos. 3 and 4 that
there was no joint family because the properties of the respondents were
partitioned in the year 1980 and, therefore, the respondent no. 2 had no right
or authority to borrow debts for the firm on their behalf. Accordingly, all the
respondents prayed for dismissal of the suit filed by the appellant.
5. On the basis of the pleadings
of the parties, the following issues were framed by the trial court for
consideration: - a) Whether the two suit pronotes dated 29.08.86 and 29.08.1986
5 are true, valid and binding on the defendants? b) Whether the plaintiff is
entitled to recover the suit amount with subsequent interest and costs thereon?
c) Whether the 2nd defendant executed the suit pronotes in the capacity of
Manager of the joint family of the defendants 2 to 4 so as to bind the
defendants 3 and 4? d) Whether the defendant No. 2 executed pronotes as the
Managing Partner of D.1 firm so as to bind its partners 3 and 4? e) To what
relief?
6. As noted herein earlier, by the
judgment dated 5th of August, 1991, the 1st Court of the Additional Subordinate
Judge, Kakinada decreed the suit of the appellant in part for a sum of Rs.
2,33,125/- with proportionate costs and subsequent interest @ 18 % p.a. from the
date of suit till realization holding the same to be a commercial
transaction(Ex.A-20). As regards recovery of the amount due under the other
pronote Ex.A-21, the trial court held that the appellant was not 6 entitled to
recover the same because the said pronote was not supported by consideration
and accordingly, the rest of the claim of the appellant was dismissed with
proportionate costs. Feeling aggrieved by the said judgment of the trial court,
both the appellant and the respondents filed two appeals before the High Court
of Andhra Pradesh at Hyderabad being A.S. NO. 721/87 and 1872/92 respectively.
By the impugned judgment of the High Court dated 30th of July, 1999, both these
appeals were dismissed. The appellant has filed this special leave petition
before us against the aforesaid judgment of the High court passed in A.S. No.
721/87.
7. We have heard the learned
counsel for the parties and examined the judgment of the High Court as well as
the trial Court and other materials on record including the oral and
documentary evidence. The only question that needs to be decided in this appeal
is whether in the absence of any rebuttal by the respondents to the fact that
the promissory note was for consideration as required, which gave rise to the
presumption under Section 118 of the Negotiable Instruments Act, the courts
below were justified in holding that since the appellant had given evidence
inconsistent with such presumption, no decree could be passed on the basis of
such presumption.
7
8. The learned counsel for the
appellant contended before us that the trial court had found that the existence
of both the pronotes was proved by evidence and the materials on record. The
learned counsel for the appellant accordingly contended that although it was
never the defence of the respondents that the pronotes were not supported by
consideration, nevertheless, the trial court had held that since the appellant
had failed to prove that he had borrowed those amounts from Pynda Ramakumar and
lent the same to the respondent firm, the pronote Ex.A-21 could not be
believed. The learned counsel for the appellant, therefore, vehemently argued
that the conclusion reached by the trial court and the High Court to the effect
that since the evidence adduced by the appellant was inconsistent with the
presumption, in the absence of any evidence by the respondent to rebut the
presumption about the pronote, such conclusion was contrary to law. The learned
counsel for the appellant, while elaborating her argument further also contended
before us that once the execution of the pronote Ex.A-21 was proved, the
presumption under Section 118 of the Negotiable Instruments Act came into play
and after such presumption, the initial burden was on the respondents to prove
the non-existence of the consideration by adducing direct evidence or by
preponderance of probabilities showing that the existence of such consideration
was improbable, 8 doubtful or illegal and since they had failed to discharge
such initial burden, the appellant was entitled to the benefit of the
presumption that the pronote was for consideration. In this regard, the learned
counsel for the appellant strongly relied on a decision of this court in
Payrelal [(1993) 3 SCC 35].
9. These submissions of the
learned counsel for the appellant were contested by the learned counsel
appearing on behalf of the respondents. The learned counsel appearing on behalf
of the respondents have contended that the appellant is not entitled to the
benefit of presumption under Section 118 of the Negotiable Instruments Act and
that the impugned judgment of the High Court was passed after considering the
evidence in extenso to hold that the pronote Ex. A-21 was not supported by any
consideration. The learned counsel for the respondents further submitted that
the presumption under Section 118 is rebuttable and that the respondents had
all along denied the execution of the pronotes.
10. Having heard the learned
counsel for the parties, we are of the view that this appeal deserves to be
allowed for the reasons set out hereinafter.
9
11. Section 118 of the Negotiable
Instruments Act deals with presumptions as to negotiable instruments. One of
such presumptions appearing in Section 118(a), with which we would be concerned
in this appeal is reproduced as under:- "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."
12. Under Section 118(a) of the
Negotiable Instruments Act, the court is obliged to presume, until the contrary
is proved, that the promissory note was made for consideration. It is also a
settled position that the initial burden in this regard lies on the defendant to
prove the non-existence of consideration by bringing on record such facts and
circumstances which would lead the Court to believe the non-existence of the
consideration either by direct evidence or by preponderance of probabilities
showing that the existence of consideration was improbable, doubtful or
illegal. In this connection, reference may be made to a decision of this Court
in the case Chand Payrelal [supra]. In paragraph 12 of the said decision, this
court observed as under: - "Upon consideration of various judgments as
noted hereinabove, the position of law which emerges is that once execution of
10 the promissory note is admitted, the presumption under Section 118(a) would
arise that it is supported by a consideration. Such a presumption is rebuttable.
The defendant can prove the non-existence of a 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 disentitle 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 the 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 11 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......"
13.From the above decision of this
court, it is pellucid 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 is also discernible from 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.
14.Keeping the aforesaid in mind,
let us now see if the respondents in this case had discharged the initial
burden, which lay on them to prove that the pronote being Ex.A-21 was not
supported by consideration.
12
15. The learned counsel for the
appellant, as noted herein earlier, contended that the respondents had neither
taken the plea that there was no consideration for the pronote Ex.A-21, either
in the reply notice or in the written statement, nor had they adduced any
evidence to prove the non-existence of the consideration. The learned counsel
for the respondents, however, contended that the respondents had denied the
very execution of the pronotes and referred the same as forged both in the
reply notice as also in the written statement. We are unable to accept the
contentions of the learned counsel for the respondents. In the written
statements, the plea of the respondents was that on the face of the pronotes,
no cash was paid by the appellant and therefore, the respondents were not
liable to pay the amount because the pronotes were forged. It was a finding of
the trial court, which was affirmed by the High Court in the impugned judgment
that the pronotes were indeed executed by the respondents. It was also a
finding of the High Court that except in the reply notice issued by the
respondents, nowhere had they stated that the consideration had not passed. It
is also an admitted position that the findings of the two courts below was that
the execution of the pronotes having been proved, the presumption under Section
118(a) must come into play and the appellant must be entitled to a decree in
the absence of evidence to the contrary. Having said this, the High Court
proceeded to observe that if there was evidence inconsistent 13 with the
presumption under Section 118(a) of the Act, the court would not be in a
position to pass a decree in favour of the appellant on the basis of the
presumption and therefore, proceeded to examine the evidence of the appellant
in extenso. In view of the decision of this Court in Bharat Barrel [supra] and
also in view of the findings arrived at by the Courts below, we are of the view
that since the initial burden on the respondents to show that the pronote being
Ex.A-21 was not supported by any consideration was not discharged by them, the
High Court was not justified in not decreeing the suit of the appellant in
respect of the amount covered by the pro-note Ex.A-21. It is an admitted
position that the finding as to the execution of the pronotes had become final.
Also, we are of the view that the respondents had not discharged the initial
burden of proving the non-existence of consideration either by direct evidence
or by preponderance of probabilities.
The mere denial, if there be any,
by the respondents that no consideration had passed would not have been
sufficient and something probable had to be brought on record to prove the
non-existence of consideration. In this view of the matter, we are, therefore,
of the view that once the execution of the pronote has been proved, the
appellant would be entitled to the benefit of the presumption under Section
118(a) of the Negotiable Instruments Act because the respondents had failed to
discharge the initial burden and therefore, the High Court was in error in
appreciating the evidence of the 14 appellant to come to the conclusion that
since such evidence was inconsistent with the pronote being Ex.A-21, the
appellant could not be given the benefit of the presumption.
16. For the foregoing reasons, the
appeal is allowed and the judgments of the courts below are, therefore,
modified to the extent that the suit of the appellant must stand decreed in its
entirety. There will be no order as to costs.
...............................J.
[TARUN CHATTERJEE] New Delhi ;
.......................
........J.
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