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TMI Blog2025 (3) TMI 253X X X X Extracts X X X X X X X X Extracts X X X X ..... undan Lal Rallara v. The Custodian, Evacuee Property Bombay [1961 (3) TMI 100 - SUPREME COURT], the Hon'ble Supreme Court has held that the presumption of law under Section 118 of the Negotiable Instruments Act could be rebutted, in certain circumstances, by a presumption of fact raised under Section 114 of the Evidence Act. Whether the execution of Ex.A.1-Promissory Note and Ex.A.2-Cheque have been proved to attract the legal presumption? - Whether the defendant has brought out circumstances to discharge such legal presumption? - HELD THAT:- Though it was stated by the plaintiff that Ex.A.1 Promissory Note was executed by the defendant on 09.09.2014 and Ex.A.2 Cheque dated 15.10.2016 was issued by the defendant in discharge of the legally owned debt under the promissory note, during cross examination, it was clearly admitted by the plaintiff that he was an Electrical Contractor for the defendant mill. P.W.2-P.K.Rajendran in his crossexamination stated that he was present at the time of borrowal of the suit loan by the defendant, but in the chief examination he never spoke about the execution of promissory note nor stated that Ex.A.1 was signed by the defendant in his presence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll these aspects of the matter and erred in decreeing the suit of the plaintiff by granting the relief of recovery of money against the defendant.
Conclusion - The plaintiff failed to establish the passing of consideration and the execution of the promissory note and cheque. The defendant successfully rebutted the presumption of consideration and execution under the Negotiable Instruments Act.
The appeal suit is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... e clandestinely stolen the cheque from the defendant's possession or would have obtained the promissory note from someone else through Rajendran to make a false claim, fully aware of the closure of the defendant's mill colluding with the said Rajendran with a dishonest intention to cheat him (defendant). Hence, the defendant prayed for dismissal of the suit. 6. Based on the aforesaid pleadings of the parties, the trial court had framed the following issues for trial : (1) Whether the defendant is liable to pay the plaintiff a sum of Rs.12,50,000/- with interest as prayed in the plaint? and (2) To what other relief the plaintiff is entitled? 7. During the trial, on the side of the plaintiff, the plaintiff, Kullappan, examined himself as P.W.1, and in support of his case, one P.K. Rajendran was examined as P.W.2, and Exs.A.1 to A.14 were marked, while on the side of the defendant, the defendant, R. Rajendran, examined himself as D.W.1, and in support of his defence, the defendant examined one Chenniappan as D.W.2, and Exs.B.1 to B.8 were marked. 8. Upon considering the oral and documentary evidence adduced by the parties, the learned District Judge decreed the suit aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count to prove the passing of consideration. Yet, Ex.A.10 and Ex.A.11 did not prove passing of consideration, and it was not established by the plaintiff that Ex.A.10 and Ex.A.11 accounts really relate to the plaintiff. Therefore, according to the learned counsel, when the defendant has brought on record sufficient evidence to draw an inference of probabilities to discharge the legal presumption, the burden shifts to the plaintiff to prove the passing of consideration, but the same has not been established. This aspect was not considered by the trial court. 14. Per contra, the learned counsel for the plaintiff would submit that the plaintiff has, as P.W.1 sufficiently shown that the defendant executed the promissory note and issued the suit cheque to satisfy the obligation owed under the promissory note. P.W.2's evidence would further strengthen the evidence of P.W.1. That apart, though the business of the defendant was closed, there is no evidence to show that his bank account had been closed. The defendant had, in fact, been maintaining his account and therefore, it was only the defendant who issued the cheque (Ex.A.2) in discharge of his legal liability due under the promissory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Instruments Act, 1881 until the contrary is proved, it shall be presumed that every negotiable instrument was made or drawn for consideration. This presumption can be rebutted by the opposing party by way of evidence that the instrument was not issued for consideration effectively disproving the initial presumption. In other words, it is obligatory on the part of the court to raise the initial presumption in every case where the factual basis for the raising of the presumption has been established. Such a presumption is rebuttable. The defendant can prove the non-existence of a consideration by raising a probable defence. 23. In Kundan Lal Rallara v. The Custodian, Evacuee Property Bombay [1961 SCC OnLine SC 10 : AIR 1961 SC 1316], the Hon'ble Supreme Court has held that the presumption of law under Section 118 of the Negotiable Instruments Act could be rebutted, in certain circumstances, by a presumption of fact raised under Section 114 of the Evidence Act. The relevant paragraph of the judgement reads as under: - "5. This section lays down a special rule of evidence applicable to negotiable instruments. The presumption is one of law and thereunder a court shall presume, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aintiff. He may also rely upon presumptions of fact, for instance those mentioned in Section 114 and other sections of the Evidence Act. Under Section 114 of the Evidence Act, "The court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case". Illustration (g) to that section shows that the court may presume that evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it. A plaintiff, who says that he had sold certain goods to the defendant and that a promissory note was executed as consideration for the goods and that he is in possession of the relevant account books to show that he was in possession of the goods sold and that the sale was effected for a particular consideration, should produce the said account books, for he is in possession of the same and the defendant certainly cannot be expected to produce his documents. In those circumstances, if such a relevant evidence is withheld by the plaintiff, Section 114 enables the court to draw a presum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he other individual properties. 27. It is relevant to note that when a person was already in dire need of money and incurred a huge liability and already sold the entire asset of the company, it is hard to believe that knowing all this, the plaintiff advanced Rs.9,00,000/- as a loan to the defendant to run his spinning mill business in the year 2014. Furthermore, Ex.A.2-cheque would go to show that the cheque was issued in the name of a closed mill. It was admitted by the plaintiff (P.W.1) himself that the defendant's mill was closed and sold as early as in 2013 itself. Knowing well that the defendant had already closed down his business and sold his mill, the plaintiff advancing the loan towards his business (as seen from the promissory note) is against the normal conduct of the human being. This fact forces this court to presume certain facts. Even if it is assumed for the sake of argument that the plaintiff had advanced such a huge amount as a loan to the defendant, when the defendant's mill was already closed and sold in 2013 itself, what made the plaintiff recite in the promissory note allegedly executed on 09.09.2014 that the defendant was still running his mill in 2014. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory note as if the mill was run by the defendant even in the year 2014 and getting a cheque in 2016 drawn by the company that was closed in the year 2013 is highly improbable. It goes against the normal prudence of an ordinary man. Therefore, in the absence of any convincing evidence to prove the passing of consideration, this court is of the view that the burden to establish the passing of consideration has not been discharged by the plaintiff. Though the signature in Ex.A.1 and Ex.A.2 was admitted by the defendant, the defendant has brought out probable circumstances to discharge the legal presumption, and therefore, the burden shifted to the plaintiff to establish the passing of consideration, which was not established by the plaintiff. 30. It is further to be noted that though the promissory note was said to be executed on 09.09.2014, a suit was not filed immediately for recovery of money due on the promissory. On the contrary, pursuant to the so-called cheque (Ex.A.2), which was returned dishonored for the reason "account closed," a notice was caused to the defendant, and thereafter, a private complaint under Section 200 of Cr.P.C. was filed against the defendant alleging an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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