2011 (6) TMI 934 - HC - Indian Laws

Summary

Issues Involved:
1. Entitlement to benefits u/s 20 of the Negotiable Instruments Act.
2. Applicability of presumption u/s 118 of the Negotiable Instruments Act.

Summary:

Issue 1: Entitlement to benefits u/s 20 of the Negotiable Instruments Act

The appellants contended that the Lower Appellate Court failed to appreciate the provisions of section 20 of the Negotiable Instruments Act. They argued that even if the defendants signed blank promissory notes, the holder is empowered to fill inchoate instruments, making the plaintiffs entitled to sue on those promissory notes. The court noted that u/s 20, the holder of a blank promissory note has prima facie authority to complete it and the person signing such an instrument is liable to any holder in due course. However, this section applies only if the defendants prove they gave blank promissory notes, which they failed to do. Therefore, section 20 was not applicable as it was not proved that the plaintiffs filled their names in blank promissory notes.

Issue 2: Applicability of presumption u/s 118 of the Negotiable Instruments Act

The appellants argued that once the defendants admitted their signatures on the promissory notes, it amounts to execution, and the presumption u/s 118 of the Negotiable Instruments Act should be drawn, indicating the promissory notes were executed for consideration. The court held that the initial burden was on the defendants to prove they only signed blank promissory notes, which they failed to discharge. The court emphasized that execution, as per the Indian Stamp Act, means signed and signature. Therefore, even if the defendants signed blank promissory notes, it amounts to execution. The presumption u/s 118 that the promissory notes were executed for consideration stands, as the defendants did not provide sufficient evidence to rebut this presumption.

Conclusion:

The common judgment and decree of the Lower Appellate Court were set aside. The court decreed the suits in favor of the plaintiffs, answering both substantial questions of law in their favor. The presumption u/s 118 of the Negotiable Instruments Act enures to the benefit of the plaintiffs, and section 20 does not apply as the defendants failed to prove they gave blank promissory notes. The second appeals were allowed with no costs.