2024 (10) TMI 498 - HC - Indian Laws

Decree for payment of money granted by the trial Court - suit for recovery of amount allegedly due under a promissory note - rebuttal of presumption - Whether the trial Court was justified in invoking the presumption without adverting to the conflicts and contradictions in the evidence of PW1 and PW2 as well as between the proof affidavits filed in chief examination and the cross examination of the plaintiff as PW1? HELD THAT - Section 118 of the Negotiable Instruments Act, 1881, enacts the presumption as to consideration once the execution of the promissory note is admitted, but the said presumption is rebuttable. In T. MOHAN KUMAR VERSUS R. ASOK KUMAR 2023 (12) TMI 1358 - MADRAS HIGH COURT , this Court after referring to the judgments in Bharat Barrel Drum Manufacturing Company's case 1999 (2) TMI 627 - SUPREME COURT and Hiralal vs. Badkulal 1953 (3) TMI 36 - SUPREME COURT , wherein, the Supreme Court had held that the defendant may also rely upon circumstantial evidence and if the circumstances so relied upon are compelling, the burden may likewise shift again to the plaintiff, had held that direct evidence of absence of consideration is not the only mode of proving absence of consideration. Surrounding circumstances and probabilities can also be relied upon by the Court to non suit the plaintiff on the ground of absence of consideration. A holistic reading of the evidence of PW1 and PW2 impels us to believe the version of the defendant. Once it is found that the version in defence is more probable, it is necessary to look for something more than the mere oral evidence of PW1 to establish the passing of consideration. Unfortunately for the plaintiff, the evidence of PW2 is also not very helpful. His evidence contradicts the evidence of the plaintiff. Therefore, it is clear that the plaintiff has not established passing of consideration and the presumption under Section 118 stood rebutted by the prevailing circumstances. The findings of the trial Court which do not reflect the impact of the evidence on record, are not sustained. The Appeal Suit stands allowed with costs.

Summary

Issues Involved:

1. Whether the defendant borrowed Rs.20,00,000/- from the plaintiff.
2. Validity of the promissory notes executed by the defendant.
3. Entitlement of the plaintiff to interest at 24% per annum.
4. Entitlement of the plaintiff to the decree as claimed in the suit.
5. Additional reliefs entitled to the parties.

Issue-wise Detailed Analysis:

1. Whether the defendant borrowed Rs.20,00,000/- from the plaintiff:

The plaintiff alleged that the defendant borrowed Rs.20,00,000/- over two years for business development, secured by a promissory note dated 25.12.2017. The defendant denied borrowing such an amount, asserting he had no necessity to borrow as he was a cab driver. He claimed the transaction was a collusion between the plaintiff and his brother, Govindaraj. The trial court initially found the promissory note supported by consideration, relying on the presumption under Section 118 of the Negotiable Instruments Act, 1881, due to the defendant's admission of his signature on the note.

2. Validity of the promissory notes executed by the defendant:

The defendant contested the validity of the promissory notes, claiming they were signed in blank and not supported by consideration. He argued that the plaintiff failed to prove the existence of consideration. The appellate court scrutinized the evidence, noting contradictions in the testimonies of PW1 (the plaintiff) and PW2 (the attestor of the promissory note). The court highlighted the lack of documentary evidence to support the plaintiff's claim of lending Rs.20,00,000/-, thereby casting doubt on the validity of the promissory notes.

3. Entitlement of the plaintiff to interest at 24% per annum:

The plaintiff claimed interest at 24% per annum on the principal amount from 25.12.2017. The trial court initially upheld this claim based on the presumption of consideration under Section 118. However, the appellate court found the presumption rebutted by the defendant's evidence and the inconsistencies in the plaintiff's case, ultimately negating the entitlement to such interest.

4. Entitlement of the plaintiff to the decree as claimed in the suit:

The trial court granted the decree for the plaintiff based on the statutory presumption of consideration. However, the appellate court overturned this decision, emphasizing the defendant's successful rebuttal of the presumption through circumstantial evidence and inconsistencies in the plaintiff's narrative. The appellate court concluded that the plaintiff failed to establish the passing of consideration, thus dismissing the suit.

5. Additional reliefs entitled to the parties:

The appellate court did not find any additional reliefs warranted for either party, given the dismissal of the suit. The appeal was allowed with costs, and the trial court's decree was set aside.

Conclusion:

The appellate court found that the trial court erred in mechanically applying the presumption under Section 118 without adequately considering the conflicts and contradictions in the evidence. The appellate court determined that the defendant had successfully rebutted the presumption of consideration, leading to the dismissal of the plaintiff's suit for recovery of the alleged loan amount.