1999 (2) TMI 716 - HC - Indian Laws

Summary

Issues Involved
1. Validity and enforceability of the promissory note.
2. Alleged collusion between bank officials and the supplier.
3. Burden of proof regarding the consideration for the promissory note.
4. Applicability of statutory presumptions under the Negotiable Instruments Act and Evidence Act.
5. Procedural aspects under Order 8(A) of the Civil Procedure Code.

Detailed Analysis

1. Validity and Enforceability of the Promissory Note
The suit was filed by the plaintiff/Indian Bank for a sum of Rs. 3,795 based on a promissory note executed by the defendant on 13.4.1970. The defendant acknowledged his liability under the promissory note but later contended that he did not receive any pumpset and that his signatures were obtained by force. The trial court held that the promissory note was proved and decreed the suit. The appellate court found that no amount was paid to the defendant under the promissory note but held the defendant liable as there was evidence that the pumpset had been supplied to him.

2. Alleged Collusion Between Bank Officials and the Supplier
The defendant contended that the bank officials and the supplier, P.A. Manickam, colluded and that no pumpset was supplied to him. The appellate court commented on the nature of the hypothecation deed, noting that it did not disclose the particulars of the pumpset and that there appeared to be collusion between the bank officials and the supplier.

3. Burden of Proof Regarding the Consideration for the Promissory Note
The defendant argued that no consideration was paid to him on the execution of the promissory note. The appellate court found that no payment had been made to the defendant and that there was collusion between the bank and the supplier. The court cited several precedents, including Palaniappa Chettiar v. Rajagopala Pandarathar, which held that the burden of proving consideration shifts to the holder of the promissory note when the recital of consideration is incorrect.

4. Applicability of Statutory Presumptions Under the Negotiable Instruments Act and Evidence Act
The plaintiff argued that the presumption under Section 114 of the Evidence Act and Section 118 of the Negotiable Instruments Act should be applied. However, the court noted that these presumptions are rebuttable. The court cited various judgments, including Kundan Lal v. Custodian, Evacuee Property, which held that the presumption can be rebutted by circumstantial evidence or adverse inference from the non-production of relevant documents. The court found that the plaintiff failed to produce evidence of payment to the supplier and inspection notes, thereby rebutting the presumption of consideration.

5. Procedural Aspects Under Order 8(A) of the Civil Procedure Code
The defendant invoked Order 8(A) of the Civil Procedure Code to implead P.A. Manickam as a third party. However, Manickam did not file any written statement and remained ex parte in the appellate court. The court found no necessity to address the liability of the third party, as the plaintiff failed to establish their claim against the first defendant.

Conclusion
The court concluded that the plaintiff/Indian Bank did not successfully establish their claim against the first defendant under the promissory note. The statutory presumption under Section 118 of the Negotiable Instruments Act was effectively rebutted. The court set aside the judgments and decrees of the lower courts and dismissed the suit with no costs.