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TMI Blog2022 (1) TMI 1002X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the written statement that the suit promissory note is an outcome of the mediation in respect of settlement of accounts between M/s. Uma Sankar Syndicate, a partnership firm represented by the second respondent as Managing Partner and the trading concerns of Sri Kota Srinivasa Rao, who is the plaintiff in O.S. No. 195 of 2007 (concerned to S.A. No. 450 of 2011) and his family members or associates. It is also their case that in that mediation, when the outstanding was found approximately at Rs. 10.00 lakhs, at the instance of elders, viz. Sri Ch. Rama Krishna Rao, Chartered Accountant and Sri N. Lakshmana Rao, the appellant was made to execute five different promissory notes including the present suit promissory note. They further contended that other suits in O.S. No. 193 of 2007, 195 of 2007 and 197 of 2007 apart from O.S. No. 321 of 2007 were filed on the basis of these promissory notes. 4. Further contention of the appellant and second respondent is that all these trading concerns were carrying on business in purchasing cotton kappas from farmers, ginning them and selling seed and lint to others and on account of which there were transactions among all of them. They also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Sri Srinivasa Rao Kurapati, learned counsel for the first respondent addressed arguments in this second appeal. 12. This second appeal was admitted on the following substantial questions of law: "a. Whether the judgment and decree of the courts below is sustainable under law in decreeing the suit by drawing presumption Under Section 118 of Negotiable Instruments Act, notwithstanding that the appellants have successfully rebutted the presumption by discharging his initial burden with cogent and unimpeachable evidence? b. Whether the judgment and decree of the courts below are not contrary to law in decreeing the suit merely on the basis of alleged admissions and execution of the promissory note Ex.A1 notwithstanding of proving non existence of consideration by bringing on record the facts and circumstances showing that existence of consideration was improbable? c. Whether the courts below have not committed an error in law in decreeing the suit being oblivious of the onus of proof being heavily placed on the respondent in the light of the initial burden of proof in support of non-consideration having been discharged successfully by the appellant, the respondents in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legedly took part in the mediation and settlement, as per the defence of the appellant and second respondent. 19. Having regard to the nature of defence of the appellant and the second respondent, the burden is on them to establish that Ex.A1 suit promissory note is not supported by consideration and that it came to be executed by them in favour of the first respondent in the circumstances pleaded in the written statement. 20. P.W. 1 the first respondent deposed in terms of the suit transaction. P.W. 2 Sri Kota Srinivasa Rao corroborated testimony of P.W. 1. 21. There is evidence on record from the first respondent as P.W. 1 in proof of Ex.A1. She is entitled to rely on the admissions of the appellant as well as the second respondent as D.W. 1 and D.W. 3 not only of execution of Ex.A1 promissory note but also their contents. They clearly admitted the contents of this promissory note that reflected that both of them borrowed Rs. 2.00 lakhs in cash on 01.02.2004 from the first respondent. Ex.A1 was also scribed by the appellant while attested by D.W. 4 as the sole attestor. 22. Sri Pramod, learned counsel for the appellant contended that in the light of the defence of the appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion literally means "taking as true without examination or proof". 16. Section 4 of the Evidence Act inter alia defines the words "may presume" and "shall presume" as follows: "4. 'May presume'.--Whenever it is provided by this Act that the court may presume a fact, it may either regard such fact as proved, unless and until it is disproved, or may call for proof of it: 'Shall presume'.--Whenever it is directed by this Act that the court shall presume a fact, it shall regard such fact as proved, unless and until it is disproved: ***" In the former case, the court has an option to raise the presumption or not, but in the latter case, the court must necessarily raise the presumption. If in a case the court has an option to raise the presumption and raises the presumption, the distinction between the two categories of presumptions ceases and the fact is presumed, unless and until it is disproved. 25. Further, in para-13 of this ruling, it is stated: 13. In a significant departure from the general rule applicable to contracts, Section 118 of the Act provides certain presumptions to be raised. This section lays down some special rules of evidence relating to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs or it was based on noevidence or it was based on misreading of material documentary evidence or it was recorded against any provision of law and lastly, the decision is one which no Judge acting judicially could reasonably have reached. (See observation made by learned Judge, Vivian Bose, J., as his Lordship then was a Judge of the Nagpur High Court in Rajeshwar Vishwanath Mamidwar v. Dashrath Narayan Chilwelkar [Rajeshwar Vishwanath Mamidwar v. Dashrath Narayan Chilwelkar, AIR 1943 Nag 117] para 43.) 17. In our opinion, if any one or more grounds, as mentioned above, is made out in an appropriate case on the basis of the pleading and evidence, such ground will constitute substantial question of law within the meaning of Section 100 of the Code." 29. Another decision of Hon'ble Supreme Court relied on for the same purpose by Sri Pramod, learned counsel is HAFAZAT HUSSAIN v. ABDUL MAJEED @ SHEKH BALLAN & OTHERS (2001) 7 SCC 189. In para-8 of this ruling, the relevant observations are: 8. ................... No doubt, it has been repeatedly pointed out by this Court that concurrent findings recorded by the trial Judge as well as the Ist Appellate Judge on proper apprec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otiable Instruments Act reads: "Until the contrary is proved, the following presumptions shall be made: (a) that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration." 5. This section lays down a special rule of evidence applicable to negotiable instruments. The presumption is one of law and thereundera court shall presume, inter alia, that the negotiable instrument or the endorsement was made or endorsed for consideration. In effect it throws the burden of proof of failure of consideration on the maker of the note or the endorser, as the case may be. The question is, how the burden can be discharged? The rules of evidence pertaining to burden of proof are embodied in Chapter 7 of the Evidence Act. The phrase "burden of proof" has two meanings -- one the burden of proof as a matter of law and pleading and the other the burden of establishing a case; the former is fixed as a question of law on the basis of the pleadings and is unchanged during the entire trial, whereas the latter is not constant but shif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are raised in terms of the Evidence Act. Presumption drawn in respect of one fact may be an evidence even for the purpose of drawing presumption under another." 34. In para-30 of this ruling, it is further stated thus: "30. Applying the said definitions of "proved" or "disproved" to the principle behind Section 118(a) of the Act, the court shall presume a negotiable instrument to be for consideration unless and until after considering the matter before it, it either believes that the consideration does not exist or considers the non-existence of the consideration so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that the consideration does not exist. For rebutting such presumption, what is needed is to raise a probable defence. Even for the said purpose, the evidence adduced on behalf of the complainant could be relied upon." 35. BHARAT BARREL & DRUM MANUFACTURING COMPANY v. AMIN CHAND PAYRELAL (1999) 3 SCC 35 is also relied on by the learned counsel for the first respondent, which the learned appellate Judge also considered in this respect. The relevant observations in this ruling are in para-12: "12. ......... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... THAMBI 2013(8) Madras L J 220 and another ruling of Punjab and Haryana High Court in GOPI RAM v. KARNAIL SINGH 2015 Law Suit (P & H) 811. 37. The nature of defence of the appellant and second respondent coupled with the evidence adduced on behalf of the first respondent established the execution of Ex.A1 suit promissory note on 01.02.2004 with such recitals therein. D.W. 1 and D.W. 3 gave out their version at the trialin consonance with the contents of Ex.A1. Further, the testimony of P.W. 1, P.W. 2 and intrinsic worth of Ex.A1 are that the appellant and second respondent had received Rs. 2.00 lakhs in cash from the first respondent on 01.02.2004 and executed the same. 38. It is also elicited in the cross-examination of P.W. 2, viz. the first respondent that this transaction and other transactions relating to the suits referred to above took place on the same day at about same time at his house. The statement so elicited from P.W. 2, strengthen the contention of the first respondent than supporting the defence. Presence of D.W. 4 Sri Lakshmana Rao during this transaction is also established by these statements of P.W. 2. Significant to note his presence, who in fact is the sole a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned trial Judge, if the transaction was an outcome of the settlement of the accounts between M/s. Uma Shankar Syndicate and the concerns of P.W. 2, the account books should reflect the same. Ex.B10 ledger extract of M/s. Vijaya Krishna Cotton Traders, Ex.B25 ledger extract of M/s. Suseela Cotton Traders, and Ex.B27 ledger extract of M/s. Lakshmi Ganapathi Cotton Corporation did not mention this mediation efforts settling the claim of the concerns of the first respondent in the manner projected by the appellant and the second respondent. Cross- examination of D.W. 3 eliciting certain statements proved this fact. It is also the version of D.W. 3 that M/s. Uma Shankar Syndicate did not pay any amount directly to the plaintiff or M/s. Vijaya Lakshmi Cotton Mills. 45. The first appellate Court elaborately discussed the evidence placed by the appellant and the second respondent in this context with reference to testimony of D.W. 1 and D.W. 3. 46. Observations of both the Courts below are also to the effect that this alleged settlement is not evidenced by any document and that it was not reduced to writing. It is a right approach. If at all there were such transactions leading to the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to M/s. Vijaya Lakshmi Cotton Mills. Both the Courts below have considered this defence of partial discharge. However, Sri Pramod, learned counsel for the appellant contended that it is not an instance of partial discharge relating to Ex.A1 and other promissory notes and both the Courts misdirected themselves in construing likewise. 52. This contention has to be rejected for the reason that in the written statement a specific plea is raised in that context in relation to the amounts payable to P.W. 1. Learned appellate Judge specifically considered this aspect referring to Ex.B41, the ledger extract relating to the appellant for the years 2006 and 2007 reflecting 9 entries for Rs. 12,35,000/- on 16.01.2007 regarding payment to M/s. Vijaya Krishna Cotton Traders by the appellant in cash and through Demand drafts. Finding very nature of evidence brought out through these account extracts, learned appellate Judge also held that this plea of partial discharge of the appellant and the second respondent is totally inconsistent with the evidence adduced by them. Learned trial Judge also recorded appropriate reasons referring to Ex.A2, which is the account extract of M/s. Vijaya Lakshmi C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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