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TMI Blog2022 (9) TMI 993X X X X Extracts X X X X X X X X Extracts X X X X ..... d stand rebutted if the existence of consideration is so improbable that a prudent person would not accept the fact that there is consideration. The oral evidence of Suresh Prabhu is that the loan was given in three tranches on 28.11.2018 (Rs.40,00,000/-), 10.01.2019 (Rs.50,00,000/-) and 25.02.2019 (Rs.45,00,000/-). Across the two bank statements, the aggregate withdrawal in January 2019 is Rs.4,50,000/-. As against this, the claim is that a sum of Rs.50,00,000/- was loaned in cash in January 2019 - the only reasonable inference is that the existence of consideration for the promissory notes is highly improbable. In spite of permitting Suresh Prabhu to re-open the evidence so as to enable him to adduce additional evidence in the course of final arguments in the suit, Suresh Prabhu completely failed to establish the probability of consideration - decided in favour of Ramesh and against Suresh Prabhu. Whether Ramesh is the owner of the two business centres and handed over the same to Suresh Prabhu for maintenance? - whether Ramesh made any contributions to run the business centres? - HELD THAT:- The documentary and oral evidence placed on record establishes that Ramesh contri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffect, interest is claimed on an interest claim. Ordinarily, interest liability is specified at an agreed rate and not at a specified and quantified sum per month. In this case, however, the interest liability is quantified and expressed in a lump-sum per month. This lumpsum per month is at a rate that exceeds 36% per annum and the MoA does not provide for further interest. By considering these aspects, no further interest is granted on this claim. Whether Suresh Prabhu is entitled to receive payments under the Franchise Agreement? - HELD THAT:- There is no documentary evidence on record that royalty payments were demanded before the suit was filed. In the absence of any evidence that the agreements were acted upon by the parties, Suresh Prabhu is not entitled to this amount. Accordingly, Issue No.5 is decided against Suresh Prabhu and in favour of Ramesh. The evidence on record leads to the inference that the two parties were joint stakeholders in the C3 Fitness Science Centres at Vepery and Kilpauk. The evidence further discloses that substantial amounts were invested by Ramesh in such regard. However, Ramesh failed to prove that Suresh Prabhu agreed to purchase Ramesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of business in the name and style of C3 Fitness Science at the centres in Vepery and Kilpauk. 3. Suresh Prabhu stated the following. He established a fitness centre under the name and style of C3 Fitness Science. The said fitness centres functioned at New No.11/1, Ritherdon Road, Vepery, Chennai - 600 007 pursuant to Lease Deed dated 06.07.2017, and at No.17, Lakshmi Street, Kilpauk, Chennai - 600010 under Lease Agreement dated 30.09.2017. The necessary licenses were obtained in relation to the above mentioned fitness centres from the Greater Chennai Corporation, the Commissioner of Police and the Ministry of Micro, Small and Medium Enterprises. According to Suresh Prabhu, Ramesh runs a fitness centre in the name and style of M/s.UNIQUE ONE. In the year 2016, Ramesh approached Suresh Prabhu for a business loan of Rs.1,25,00,000/-. Suresh Prabhu advanced the above amount subject to the promise by Ramesh to repay the same with interest. According to Suresh Prabhu, Ramesh executed a promissory note in relation thereto and thereby agreed to repay the amount within one year or on demand. 4. Thereafter, in May 2017, it is stated that Ramesh approached Suresh Prabhu again for financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Ramesh to him. Likewise, it is stated that two notices dated 08.06.2020 were also issued by Ramesh to him with the same object and purpose. According to Suresh Prabhu, the claim made by Ramesh that a sum of Rs.2,70,00,000/- was payable by him to Ramesh by way of settlement and that, in the alternative, possession of the gyms at Vepery and Kilpauk should be handed over is against law and unsustainable. Suresh Prabhu stated that C.S.(Comm.Div)No.183 of 2020 was filed in the above facts and circumstances. 6. Ramesh stated as follows. He began his career in the fitness industry in the year 2002 and was appointed as a fitness trainer at various fitness centres. In July 2015, he started fitness centres under the name and style of M/s.UNIQUE ONE. Suresh Prabhu was a customer of the fitness centre called Fitness One between the year 2010 and March 2017. During that period, Suresh Prabhu was introduced to Ramesh in the year 2015. Thereafter, Suresh Prabhu along with one Ms.J.Poornima and Mr.S.Purushothaman advanced a sum of Rs.60,00,000/- to Ramesh for business development purposes. Ramesh agreed that he is required to repay the said sum within five years from 12.05.2017. Since he was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled in the said facts and circumstances. 9. Upon completion of pleadings, the following issues were framed in C.S.(Comm.Div)No.183 of 2020: (i) Whether the defendant was the owner of the two business centers and it was handed over to the plaintiff only to maintain the same? (ii) Whether the defendant had made any contributions to run the business centers along with the plaintiff? (iii) Whether the plaintiff has established through any materials that there was a contractual obligation on the part of the defendant to make the payments to the plaintiff? (iv)Whether the plaintiff is entitled to recover the profit share as per the memorandum of agreement dated 12.05.2017? (v) Whether the plaintiff is entitled to recover money from the defendant as per the terms and conditions of the Franchise Agreement dated 13.12.2017? (vi) Whether the plaintiff is entitled to recover money for the amounts borrowed by the defendant under various promissory notes executed by the defendant ? (vii) To any other reliefs the parties are entitled to? 10. The following issues were framed in C.S.(Comm.Div)No.68 of 2021: (i) Whether the plaintiff has substant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o November 2017. He also stated that Ramesh issued cheque dated 15.07.2020 for Rs.30,00,000/-, cheque dated 15.08.2020 for Rs.35,00,000/-, cheque dated 15.09.2020 for Rs.35,00,000/- and cheque dated 15.10.2020 for Rs.35,00,000/- towards repayment of the loan. By referring to the statements of account from the Indian Overseas Bank in relation to Saving Bank Account No.273802000000333 and Current Account No.273802000009333 at Indian Overseas Bank, he contended that the said bank statements, which were exhibited as Exs.P54 and P55, evidence the financial capability of Suresh Prabhu to provide the loan to Ramesh. 13. Learned counsel for Ramesh refuted the above contentions. His first submission was that Suresh Prabhu extended a loan of Rs.40,00,000/- to Ramesh under the MoA. Apart from the said loan, he submitted that no further loans were given by Suresh Prabhu to Ramesh. His next submission was that Ramesh had entered into a franchise agreement with Fitness One and that the said agreement prevented Ramesh from running any other fitness centre. Therefore, Ramesh entered into an arrangement with Suresh Prabhu, whereby Suresh Prabhu would function as the ostensible owner and face of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , questions 19 to 22, 27,28,35 and 75, he stated that there is no evidence whatsoever that Suresh Prabhu agreed to pay a sum of Rs.2,55,00,000/- to Ramesh. 16. By way of a short response, learned counsel for Ramesh submitted that the story that a loan was extended is completely improbable. There was no demand for repayment of the alleged loan. As regards equipment purchase, he submitted that the email I.D. and phone number provided in the relevant document is that of Ramesh. Issue No.6 in C.S.(Comm.Div)No.183 of 2020 17. Issue No. 6 relates to whether Suresh Prabhu is entitled to recover the sum of Rs.1.4 crores allegedly borrowed by Ramesh under various promissory notes allegedly executed by Ramesh. At the outset, it should be noticed that Ramesh admits the signature on the promissory notes (question and answer 75 during his cross-examination) but states that the promissory notes were misused and are not supported by consideration. Under Section 118 of the NI Act, there is a non-discretionary (shall presume) statutory presumption, inter alia, with regard to both the date of execution and the consideration stipulated in a promissory note. Section 118 of the NI Act is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration. Such a presumption is rebuttable. The defendant can prove the non-existence of consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would dis-entitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non-existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non-existence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under Section 118(a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loan was given in cash, at a minimum, there should be communications by way of letters, emails or even whatsapp messages relating to the request for or provision of the loan. Admittedly, no such communication is on record. Although the loan was allegedly given between end 2018 and early 2019, the first communication that refers to the loan is the email dated 18.04.2020 from Suresh Prabhu to Ramesh in response to Ramesh's email of 17.04.2020 alleging that Suresh Prabhu had not provided proper accounts to Ramesh as regards the fitness centres in which he had invested 50%. This is admitted in response to question 29 in crossexamination. The said question and answer are set out below: Q29:I put it to you that the Ramesh did not borrow any money from you that is why you did not demand the amount from Ramesh from 2017 until Ramesh had demanded the amount from you on 08.06.2020. What do you say? A: I sent Email on 18.04.2020 asking money to Ramesh and the details were given in the said Email regarding the payment due from Ramesh. 21. Turning to the savings bank account statement for the period from 01.10.2018 to 28.02.2019, this statement discloses debits from the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he complete absence of communication between the parties during the period November 2018 to end February 2019, when such loans were allegedly provided by Suresh Prabhu to Ramesh. According to Suresh Prabhu, the loans were not repaid by Ramesh and that this necessitated the filing of this case. Once again, normal human behavior would be to call upon the defaulter to repay the amounts. Except for the email of 18.04.2020 in response to the email of 17.04.2020 from Ramesh, any communication by which Suresh Prabhu called upon Ramesh to repay the amounts is conspicuous by its absence. In light of the evidence on record, the only reasonable inference is that the existence of consideration for the promissory notes is highly improbable. In spite of permitting Suresh Prabhu to re-open the evidence so as to enable him to adduce additional evidence in the course of final arguments in the suit, Suresh Prabhu completely failed to establish the probability of consideration. Therefore, Issue No.6 is decided in favour of Ramesh and against Suresh Prabhu. Issue Nos.1 2 in C.S.(Comm.Div)No.183 of 2020 23. Issue No.1 relates to whether Ramesh is the owner of the two business centres and han ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to the purchase of equipments for the fitness centres. The said documents were exhibited as Exs.P30 to P43. In addition, Ramesh relied upon vouchers relating to expenses incurred for the fitness centres and these documents were exhibited as Exs.P45 to P61. On perusal of the installation reports that were exhibited as Exs.P30 and P31, it is noticeable that the name of the customer is indicated as C3 Fitness Science at Vepery. The name of the contact person is mentioned as Mr.Ramesh and his mobile number and email address is specified. Significantly, Ramesh has signed these installation reports as the customer. The invoices, however, bear the name of C3 Fitness Science and the name of Suresh Babu (probably an inadvertent error instead of Suresh Prabhu) is mentioned therein. With regard to expenditure incurred towards the interiors of the fitness centres, Ramesh relied upon the estimate for a sum of Rs.68,67,490/-. This document was exhibited as Ex.P45. The only cross examination with regard to the payment of the sum of Rs.1,12,00,000/- is by way of suggestions. These suggestions were recorded as questions 84 to 86. All the suggestions were denied by Ramesh by stating, for inst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard to an agreement for payment of the above mentioned amount by Suresh Prabhu to Ramesh. In the absence of documentary evidence, the oral evidence merits careful consideration. Ramesh made the above assertion in the proof affidavit at paragraph 20. Ramesh also asserted at paragraph 22 of the proof affidavit that Suresh Prabhu issued four cheques for an aggregate sum of Rs.20,00,000/- towards part payment of the settlement amount of Rs.2,55,00,000/-. It was further stated that one cheque for Rs.5,00,000/- was cleared but that the next cheque was returned with the endorsement ''payment stopped by the drawer''. In course of cross examination, the following questions were put to Ramesh and both the questions and answers are set out below: ''Q27: To show that in February, 2020 there was a negotiation in which Suresh Prabhu agreed to pay Rs.2,55,00,000/- as full and final settlement on or before 30.06.2020 is there any documentary proof? A: There is no written documentary proof but it was only an oral commitment. Q28: Is there any written document to show that the four cheques each for Rs.5 Lakhs were given towards the profit share of Rs.20 Lakh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om December, 2017 Suresh Prabhu started to adjust the said amount from the profit share due to be paid to me from Vepery and Kilpauk centres till I settled the entire amount. 29. While Ramesh contends that Suresh Prabhu adjusted this amount from and out of the revenues of the fitness centres, in the absence of evidence, the said contention cannot be accepted. Suresh Prabhu claimed interest at 18% per annum on the claim of Rs.39,59,550 from the date of plaint until realisation. In effect, interest is claimed on an interest claim. Ordinarily, interest liability is specified at an agreed rate and not at a specified and quantified sum per month. In this case, however, the interest liability is quantified and expressed in a lump-sum per month. This lumpsum per month is at a rate that exceeds 36% per annum and the MoA does not provide for further interest. By considering these aspects, no further interest is granted on this claim. Therefore, Issue Nos.3 and 4 are decided in favour of Suresh Prabhu and against Ramesh. Issue No.5 in C.S.(Comm.Div)No.183 of 2020 30. Issue No.5 relates to whether Suresh Prabhu is entitled to receive payments under the Franchise Agreement. Whil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the evidence on record leads to the inference that the two parties were joint stakeholders in the C3 Fitness Science Centres at Vepery and Kilpauk. The evidence further discloses that substantial amounts were invested by Ramesh in such regard. However, Ramesh failed to prove that Suresh Prabhu agreed to purchase Ramesh's stake in the business for a sum of Rs.2,55,00,000/-. Consequently, both Ramesh and Suresh Prabhu are entitled to jointly manage the two centres. Suresh Prabhu contended that Ramesh is admittedly not in possession and that he is entitled to injunctive relief as the party in possession. However, the injunctive relief claimed by Ramesh extends to non-interference in the operation of the business. Even as regards access for such purpose, as the co-stakeholder, Ramesh is entitled to use the premises and Suresh Prabhu cannot deny or impede access to the C3 Fitness Science Centres at Vepery and Kilpauk. Consequently, neither party is entitled to an injunction restraining the other from interfering with possession or the business. 33. In the result, C.S.(Comm.Div)No.183 of 2020 is partly decreed as regards prayer (a) in paragraph 28 to the extent of the principal cl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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