2022 (5) TMI 1110 - HC - Indian Laws

Dishonor of cheque - legal presumptions arising before dismissing the suit by reversing the well considered reasonings of the trial Court - scope of Section 118 of the Negotiable Instruments Act - suit promissory notes under Section 20 of the Negotiable Instruments Act - holder is authorized to fill up the blanks and to negotiate the instrument for a certain amount or not? - defendant has categorically admitted the execution and issuance of Ex.A1 to Ex.A3 in his written statement and in evidence before the Court - HELD THAT - On perusal of the evidence of PW1 and PW2 and the written statement filed by the defendant and the oral evidence of PW1, it is found that the execution and issuance of the pro-notes, viz., Ex.A1 to Ex.A3 are not in dispute. In fact, the defendant has categorically admitted the same in the written statement as well as in his evidence. However, the first Appellate Court has committed an error in giving findings as to the execution. Once the signature found in the suit documents have been admitted, there is no need or necessity for the plaintiff to give explanation for not obtaining the thump impression in the suit promissory note. There is no such law to get the thump impression in the suit promissory note. There is no such law to get the thump impression also in the promissory note, particularly, when the execution and issuance of Ex.A1 to Ex.A3 were not in dispute. When there was no dispute as to the execution of Ex.A1 to Ex.A3, the first Appellate Court ought not to have compared the suit documents by naked eye, as if, the defendant has denied execution and therefore, based upon the above evidence both in oral and documentary pleaded and evidence of the plaintiff side, it is found that in terms of Section 4 of the Indian Evidence Act, whenever it is provided by the Act that the Court shall presume a fact, it shall record such fact as proved unless and until it is disproved. Applying the said definitions of proved or disproved under Section 5 of the Indian Evidence Act to the principle behind Section 118 (a) of the Negotiable Instruments Act, the Court shall presume that Ex.A1 to Ex.A3 were supported by consideration. Presumption under Section 118 of the Negotiable Instruments Act is one of law, and thereunder, the Court below shall presume inter alia that the promissory notes were made for consideration. Once statutory presumption is raised, onus of proving absence of consideration is on the executant and hence, it is found that the lower Appellate Court has miserably failed to consider the pleading and evidence in the proper prospective and has wrongly thrown the burden of proof on the plaintiff with gross ignorance of legal presumption. The defendant had admitted the execution of Ex.A1 to Ex.A3. There is no mandatory provision under the Negotiable Instruments Act that both the signature and thump impression has to be obtained for a pro-note and the lower Appellate Judge has totally misguided and misused the provision of the Negotiable Instruments Act, regarding burden of proof and not even followed basic rudimentary of Section 20 of the Negotiable Instruments Act. This Court comes to the conclusion that the evidence of DW3 is too inform to discharge onus of proof as stated, the statutory provision under Section 118 of the Negotiable Instruments Act. The approach adopted by the lower Appellate Court is condemnable. The finding rendered by the lower Appellate Court that suit pro-note is not valid in the absence of thumb impression is sustainable in law, more so, when the defendant has not disputed the signature and hence, all the Substantial Questions of Law are answered in affirmative in favour of the appellant/plaintiff against the defendant/respondent - Appeal allowed.

Summary

Issues involved:
1. Interpretation of Section 118 of the Negotiable Instruments Act and legal presumptions under it.
2. Rejection of plaintiff's right to fill up the promissory notes under Section 20 of the Negotiable Instruments Act.
3. Dismissal of the suit based on a comparison by naked eye despite admission of execution by the defendant.

Issue 1: Interpretation of Section 118 of the Negotiable Instruments Act and legal presumptions under it:
The plaintiff filed a suit for recovery of money borrowed by the defendant, supported by promissory notes. The trial court decreed the suit based on statutory presumptions under Section 118 of the Act and the authority of the holder to fill up promissory notes under Section 20. However, the first Appellate Court erred in not considering these legal presumptions and wrongly dismissed the suit without proper analysis of the evidence and burden of proof as per the Indian Evidence Act.

Issue 2: Rejection of plaintiff's right to fill up the promissory notes under Section 20 of the Negotiable Instruments Act:
The lower Appellate Court failed to acknowledge the plaintiff's right to fill up the promissory notes under Section 20 of the Act, which authorizes the holder to fill up blanks and negotiate the instrument for a certain amount. Despite the defendant's admission of execution and issuance of the promissory notes, the lower court wrongly raised suspicion due to the absence of a thumb impression, ignoring the legal provisions and burden of proof.

Issue 3: Dismissal of the suit based on a comparison by naked eye despite admission of execution by the defendant:
The defendant admitted the execution of the promissory notes in the written statement and evidence. The lower Appellate Court erred in comparing the documents by naked eye and dismissing the suit based on minor discrepancies in signatures. The court failed to consider the statutory presumption under Section 118 and wrongly shifted the burden of proof to the plaintiff, disregarding the legal principles and evidence presented.

The High Court, upon hearing both parties, found that the lower Appellate Court's judgment was flawed. The Court emphasized that the defendant's admission of execution and issuance of the promissory notes should have been given due weight. The lower court's failure to apply legal presumptions correctly and misinterpretation of burden of proof led to an erroneous dismissal of the suit. The High Court highlighted the mandatory presumption under Section 118 of the Negotiable Instruments Act and clarified that the burden of proof lies with the executant to rebut the statutory presumption of consideration.

In conclusion, the High Court allowed the second appeal, setting aside the lower Appellate Court's judgment and restoring the trial court's decree. The Court reinstated the order of attachment before judgment, emphasizing the importance of legal presumptions and burden of proof in cases involving negotiable instruments. The judgment highlighted the necessity of adhering to statutory provisions and principles of law in determining the validity of promissory notes and upholding the rights of the parties involved.