2003 (8) TMI 579 - HC - Indian Laws

Summary

Issues Involved:
1. Realization of money based on dishonoured cheques.
2. Allegation of stolen cheques and validity of cheques.
3. Execution of cheques and presumption under the Negotiable Instruments Act.
4. Execution of settlement deeds and their validity in the context of defrauding creditors.

Detailed Analysis:

1. Realization of Money Based on Dishonoured Cheques:
The plaintiff instituted a suit for the realization of Rs. 2,65,000/- with interest based on two dishonoured cheques issued by the defendant. The cheques were returned with the endorsement "funds insufficient." The court decreed in favor of the plaintiff, allowing the realization of the amount with interest.

2. Allegation of Stolen Cheques and Validity of Cheques:
The defendant claimed that the cheques were stolen from her custody and were misused by the plaintiff. The court, however, did not find any independent evidence to support the defendant's claim of theft. The defendant admitted the signature on the cheques but alleged that the amounts and payee's names were not in her handwriting. The court held that the mere fact that the amounts and names were not in the drawer's handwriting does not invalidate the cheques.

3. Execution of Cheques and Presumption under the Negotiable Instruments Act:
The court referred to the presumption under Section 118 of the Negotiable Instruments Act, which states that every negotiable instrument is presumed to have been made for consideration until the contrary is proved. The court held that the burden was on the drawer to prove that the payee had no authority to fill in the date and amount. Since the defendant failed to provide independent evidence to discharge this burden, the presumption under Section 118 applied, and the cheques were considered validly issued.

4. Execution of Settlement Deeds and Their Validity in the Context of Defrauding Creditors:
The defendant executed settlement deeds in favor of her daughter and son-in-law after the issuance of the cheques. The court found that these deeds were executed to defraud the creditors and were therefore voidable at the option of the creditor. The court referred to precedents which held that transfers made with intent to defeat or delay creditors are voidable. Consequently, the court rejected the petition to drop the sale proceedings in execution of the decree and dismissed the appeal.

Conclusion:
The court upheld the trial court's decree allowing the plaintiff to realize Rs. 2,65,000/- with interest, albeit reducing the interest rate. The court rejected the defendant's claims of stolen cheques and found the settlement deeds executed by the defendant to be fraudulent and voidable. The appeal was dismissed, and the plaintiff was entitled to execute the decree.