2023 (7) TMI 709 - HC - Indian Laws

Validity of promissory notes - promissory notes are executed for a valid consideration or not - entitlement for suit amount with interest - HELD THAT - As far as the Negotiable Instruments Act is concerned, in view of the presumption available under Section 118 of Negotiable Instruments Act, every Negotiable Instrument Act is deemed to be drawn for consideration unless the contrary is proved - In the case on hand, the signatures found in the promissory notes are not disputed. However, the defendants raised a plea that promissory notes were not executed in favour of plaintiff but those promissory notes were handed over to Adeshwar Investments in respect of separate transaction. The said plea of the defendants is not acceptable to this Court. Therefore, it can be safely concluded that the plaintiff succeeded in proving execution of the promissory notes. Once, the plaintiff proves execution of promissory notes in his favour by preponderance of probabilities, he is entitled to press into service the statutory presumption under Section 118 of Negotiable Instruments Act. The place of execution and value of the promissory notes in words as well as in figures are written in different ink. However, merely because the name of the creditor and date of the instruments are filled up with a different ink, we cannot come to a definite conclusion that there is a material alteration in the suit promissory note vitiating is validity. First of all, the defendants have not made any specific plea with regard to the material alteration in his pleadings. Therefore, it is not open to them to make submission regarding material alteration without a plea. Further under Section 20 of Negotiable Instruments Act, a person who signs an inchoate document gives prima facie authority to the holder of the instruments to complete the same and make it as a complete Negotiable Instrument. Therefore, merely, because a different ink is used in respect of the name of the creditor and date of the instruments, we cannot come to a conclusion that the Negotiable Instrument is vitiated by material alteration in the absence of any plea or independent evidence in support of the same. A perusal of Section 269 SS of Income Tax would suggest that no person shall take or accept from any other person any loan or deposit otherwise than by the account payee cheque or account payee bank draft or by electronic mode when the amount of such loan or deposit is Rs. 20,000/- are more. Therefore, it prohibits a person who is taking or receiving the loan. Whether the prohibition is equally applicable to the lender of the amount is not very clear. In any event, in case of violation of Section 269 SS of Income Tax Act, the violator is liable to be proceeded against in accordance with law by the income tax authorities. Subject to such proceedings liable to be initiated by the tax authorities, the plaintiff is entitled to maintain a suit based on the Negotiable Instruments Act. By taking into consideration the above mentioned established facts and statutory presumptions, this Court comes to a conclusion that the plaintiff proved its case by preponderance of probabilities. The plaintiff is entitled to decree for recovery of money as prayed for. As far as the rate of interest is concerned, having regard to the fact that the suit transaction is a commercial one, this Court deems it appropriate to direct the defendants to pay the principal amount of Rs. 2,49,00,000/- with interest at the rate of 12% per annum from 19.06.2015 to date of actual realization of the amount - Issue decided in favor of plaintiff.

Summary

Issues Involved:
1. Validity of the suit promissory notes.
2. Entitlement of the plaintiff to the suit amount with interest.
3. Other reliefs to which parties are entitled.

Summary:

Issue 1: Validity of the Suit Promissory Notes
The plaintiff filed a suit seeking recovery of money based on nine promissory notes dated 19.06.2015. The plaintiff, a financial business company, alleged that the defendants borrowed Rs. 2,49,00,000/- with a promise to repay within 30 days and provided property documents as collateral. The defendants denied executing the promissory notes in favor of the plaintiff, claiming they were for a different transaction with Adeshwar Investment. However, the court found no acceptable explanation from the defendants on how the plaintiff obtained the original property documents of the 3rd defendant. The court concluded that the promissory notes were executed for valid consideration, invoking the presumption under Section 118 of the Negotiable Instruments Act, and dismissed the defendants' plea of material alteration due to different ink used.

Issue 2: Entitlement to the Suit Amount with Interest
The defendants argued that the cash payment of Rs. 2,49,00,000/- violated Section 269 SS of the Income Tax Act and an RBI circular. The court noted that Section 269 SS prohibits the receiver from accepting cash above Rs. 20,000/-, not the payer. The court also observed that any violation of this section would lead to tax authorities' action, not invalidation of the transaction. The plaintiff produced income tax returns reflecting the suit transaction, thereby proving the genuineness of the transaction. The court rejected the defendants' objection to the mode of proof of these returns, as they were marked without initial objection.

Issue 3: Other Reliefs
The court concluded that the plaintiff proved its case by preponderance of probabilities, supported by the production of original title documents, implied admission of signatures, reflection of the transaction in income tax returns, and statutory presumptions under the Negotiable Instruments Act. Consequently, the plaintiff was entitled to recover the principal amount with 12% interest per annum from 19.06.2015 until realization and the cost of the suit.

Conclusion:
1. The plaintiff is entitled to a decree for recovery of Rs. 2,49,00,000/- from the defendants.
2. The defendants are directed to pay interest at the rate of 12% per annum from 19.06.2015 to the date of realization.
3. The defendants are directed to pay the cost of the suit to the plaintiff.