S. Manikumar, J.@mdashThe Second Appeal arises out of a reversing judgment on the suit for recovery on a Promissory Note. The plaintiff is the appellant in this appeal. According to him, for family and urgent expenses, the defendant borrowed a sum of Rs. 25,000/- on 21.09.2001 and promised to repay the same with interest at Rs. 1,000/- per month. Inspite of repeated demands and notice dated 06.11.2003, the principal with interest to the tune of Rs. 30,331/- remained unpaid and hence the suit. The defendant denied the execution of the Promissory Note and receipt of consideration. According to him, the defendant was engaged in chit transaction and that the plaintiff had taken a chit. He further submitted that a sum of Rs. 5,000/- was payable under the chit transaction which he was always ready and willing to pay. As he was unwell, he could not reply to the notice. Based on the above pleadings, the trial Court has framed three issues for consideration,
(i) as to whether the plaintiff is entitled for payment of the amount under the Promissory Note with interest?
(ii) as to whether the suit has been instituted in a forged Pro Note and therefore, to be dismissed or not?
(iii) what relief the parties are entitled to?
On behalf of the plaintiff, two witnesses have been examined. The plaintiff examined himself as PW1 and PW2, an attesting witness to the Promissory Note. Ex. A1 dated 21.09.2001, Suit Promissory Note, Ex. A2 dated 06.11.2003, notice and Ex. A3, dated 12.11.2003, postal acknowledgment have been marked. The defendant examined himself as DW1 and no document has been marked on the side of the defendant. PW1 reiterated his case. The attesting witness PW2 deposed that Ex. A1 Promissory Note was executed in his presence.
2. Per contra, though the defendant contended that Ex. A1 Suit Promissory Note was executed, for the amount due under the chit transaction, no oral or documentary evidence has been let in to prove his defence and therefore, the trial Court disbelieved the version of the defendant and granted a decree in favour of the plaintiff and directed payment of Rs. 30,332.25/- with interest @ 9% per annum, within a period of two months from the date of filing of the suit and thereafter, till the date of realisation at 6% per annum. Being aggrieved by the same, the defendant preferred an appeal in A.S. No. 63 of 2004, on the file of the learned Subordinate Judge, Dharmapuri, contending inter alia that the trial Court has failed to consider that the plaintiff has failed to prove that Ex. A1 Promissory Note was executed by the defendant and that the trial Court has also failed to consider that when the execution was denied, the defendant had not taken any steps for comparison of the signature in Ex. A1 Promissory Note with other admitted signatures and in such circumstances, ought to have held that the plaintiff has failed to prove his case and accordingly dismissed the suit. The defendant in his appeal has also submitted that when there was no comparison of the signature and therefore, the oral testimony of the plaintiff ought to have been given importance, particularly, when Ex. A1 Promissory Note did not contain the father''s name and the addresses of the scribe and the attesting witness. According to the defendant, the lower Court has failed to consider the abovesaid major defects and erroneously decreed the suit, when no other witness except PW2 - attester was examined. On the above submissions, the appellate Court framed two issues for consideration;
(i) whether the respondent in the first appeal is entitled to recover the loan amount with interest?
(ii) whether the judgment and decree of the trial Court have to be set aside.
3. Upon consideration of the material on record and rival submissions made by the parties, the lower appellate Court reversed the judgment and decree of the trial Court and accordingly, held that the plaintiff has failed to prove the suit Promissory Note and consequently dismissed the suit. Being aggrieved by the same, the plaintiff has filed the present second appeal and record of proceedings shows that the same has been admitted on the following substantial questions of law:-
(1) Whether the lower appellate Court is right in allowing the appeal, when execution of Ex. A1 had not been denied by the defendant.
(2) Whether the lower appellate Court ought not to have held that u/s 118 of the Negotiable Instruments Act and 114 of the Evidence Act, the legal presumption is in favour of passing of consideration on execution of the document being admitted.
(3) When the defendant had failed to prove the chit transaction, whether the lower appellate Court is justified in dismissing the suit for money based on surmises and non-examination of the scribe.
4. Assailing the correctness of the judgment and decree of the lower appellate Court, Mr. Raghavachari, Learned Counsel for the appellant submitted that when the defendant in his examination has admitted execution of Ex. A1 Suit Promissory Note, the observation of the lower appellate Court that an expert opinion ought to have been obtained to prove the signature of the defendant and in the absence of the above, adverse inference ought to have been drawn against the plaintiff, is irrational and without any basis. He also submitted that the admission of execution had not been denied, but it was the case of the defendant that the Suit Promissory Note has been executed only towards an amount due under a chit transaction and it was not the consideration for Ex. A1 Suit Promissory Note and in the absence of the defendant establishing chit transaction, the legal presumption u/s 118 of the Negotiable Instrument Act and Section 114 of the Evidence Act is attracted in favour of passing of consideration on the admission of the execution of the document and that therefore, the lower appellate Court has grossly erred in shifting the burden on the plaintiff to prove consideration.
5. Learned Counsel for the appellant further submitted that when the execution has been admitted, there is no necessity in law to examine the scribe of the document. He also submitted that the lower Court has failed to consider that PW2-attestor has clearly spoken about the passing of consideration and that in law, he is not under any obligation to identify the signature of the defendant, particularly, when there is no denial as regards its execution. In support of the contention that there is a statutory presumption drawn in favour of the plaintiff consequent to admission of execution of Ex. A1 Suit Promissory Note, reliance was placed on the decisions in Samikannu Naicker v. Sigamani reported in 2002 (2) CTC 140 = 2002-3-L.W. 692 and Ganapathy Thevar v. Shanmuga Thevar reported in 2008 (3) CTC 470.
6. On the above pleadings and judgments stated supra, he submitted that the judgment and decree of the lower appellate Court are perverse and contrary to the fundamental principles of law and consequently, liable to be set aside and that the decree granted in the suit, has to be restored.
7. Per contra, defending the judgment of the lower appellate Court, Mr. V.R. Shanmuganathan, Learned Counsel for the respondent submitted that there is no fundamental error in the judgment and decree of the lower appellate Court, for the reason that though the plaintiff had inter alia contended that a sum of Rs. 24,000/- was lent on Ex. A1 Suit Promissory Note, he has failed to prove the same, and that therefore not entitled to seek for a judgment and decree. According to the Learned Counsel for the defendant, if there was any necessity to borrow the abovesaid sum for family or other expenses to dig up a well, there should have been proper averments in the plaint. Apparently, no averments have been made in the plaint, but an improvised version has been made by adducing oral testimony. He further submitted that had there been execution of Ex. A1 Suit Promissory Note, the plaintiff would be aware of the date of the execution, but during examination, he had categorically deposed that he was unaware of even the date. That apart, PW2 an alleged attester, was also not in a position to identify the signature of the defendant with other documents. No reasons have been offered in not examining the alleged scribe, on behalf of the plaintiff and that when the execution of Ex. A1 Suit Promissory Note had been denied, no steps have been taken by the plaintiff to get the opinion of an expert. He therefore submitted that considering the totality of the evidence on record, the lower appellate Court has rightly held that the plaintiff has failed to prove the genuineness of Ex. A1 Suit Promissory Note and accordingly dismissed the suit. He also submitted that the abovesaid finding cannot be said to be perverse, warranting interference, when the defendant has rebutted the presumption u/s 118 of the Negotiable Instruments Act. He prayed for dismissal of the Second Appeal. Heard the Learned Counsel for the parties and perused the materials available on record.
8. Before adverting to the rival contentions, this Court deems it fit to extract few provisions of the Negotiable Instruments Act and the Indian Evidence Act, for the purpose of adjudication of the dispute.
9. Sections 20 and 118 of the Negotiable Instruments Act read as follows:-
20. Inchoate stamped instruments:- Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in India, and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamp. The person so signing shall be liable under such instrument, in the capacity in which he signed the same, to any holder in due course for such amount:
Provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder.
118. Presumptions as to negotiable instruments of consideration: -- Until the contrary is proved, the following presumptions shall be made:-
(a) of consideration - 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;
(b) as to date - that every negotiable instrument bearing a date was made or drawn on such date;
(c) as to time of acceptance -- that every accepted bill of exchange was accepted within a reasonable time after its date and before its maturity;
(d) as to time of transfer - that every transfer of a negotiable instrument was made before its maturity.
(e) as to order of indorsements - that the indorsements appearing upon a negotiable instrument were made in the order in which they appear thereon;
(f) as to stamps - that a lost promissory note, bill of exchange or cheque was duly stamped;
(g) that holder is a holder in due course - that the holder of a negotiable instrument is a holder in due course:
Provided that, where the instrument has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him.
10. As per Section 3 of the Evidence Act, the words, ''Proved'' and ''disproved'', are defined as follows:
Proved:- A fact is said to be proved, when after considering the materials before it, the Court either believes it to exist, or considers its exists so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it exists.
Disproved:- A fact is said to be disproved when, after considering the materials before it, the Court either believes that it does not exist, or considers its non-existence so probable that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that it does not exist.
11. The words ''Not proved'' are also defined u/s 3 of the Evidence Act as follows:-
A fact is said not to be proved when it is neither proved nor disproved.
12. Thus, it could be seen that the words ''proved'' and ''disproved'' are closely connected with the theory of preponderance of probability, on the evidence.
13. Section 4 of the Evidence Act defines the words ''May presume'' and ''Shall presume'' as follows:-
(a) May presume: "Whenever it is provided by this Act, that the Court may presume a fact, it may either with regard to such fact as proved, unless and until it is disproved or may call for proof of it.
(b) Shall presume: "Whenever it is directed by this Act that the Court shall presume a fact, ii shall regard such fact as proved unless it is disproved.
14. Sections 101 to 104 and 114 of the Evidence Act, reads as follows:-
Section 101. Burdn of proof. -- Whoever desires any Court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exist.
Section 102. On whom burden of proof lies. -- The burden of proof in a suit or proceeding lies on that person who would fail if no evidence at all were given on either side.
Section 103. Burden of proof as to particular fact. -- The burden of proof as to any particular fact lies on that person who wishes the Court to believe in its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person.
Section 104. Burden of proving fact to be proved to make evidence admissible. -- The burden of proving any fact necessary to be proved in order to enable any person to give evidence of any other fact is on the person who wishes to give such evidence. Section 114. Court may presume existence of certain facts. -- 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.
15. In
Section 118 lays down a special rule of evidence applicable to negotiable instruments. The presumption is one of law and thereunder a court shall presume, inter alia, that the negotiable 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 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 pleading and so unchanged during the entire trial whereas the latter is not constant but shifted as soon as a party adduces sufficient evidence to raise a presumption in his favour. The evidence required to shift the burden need not necessarily be directed evidence or admissions made by opposite party; it may comprise circumstantial evidence or presumptions of law or fact. 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 reflected for a particular consideration should produce the said account books. If such a relevant evidence is withheld by the plaintiff, S. 114, Evidence Act enables the Court to draw a presumption to the effect that, if produced, the said accounts would be unfavourable to the plaintiff. This presumption, if raised by a court, can under certain circumstances rebut the presumption of law raised u/s 118 of the Negotiable Instrument Act.
16. In Chidambaram v. P.T. Ponnusamy reported in 1995 (2) LW 719, a suit was instituted for recovery on promissory note. The defendant in his written statement, admitted that he had signed a blank pro-note for an earlier money transaction, 10 years ago and that the plaintiff had filled up the blank pro-note. Before the lower Court, the plaintiff had also contended that the promissory note contained the admitted signature of the defendant. However, he took out an application to summon the expert witness to compare the handwriting in the suit promissory note. Being aggrieved by the dismissal of the same, on the ground that the Court itself can compare the handwriting in the promissory note, a revision petition came to be filed. While confirming the dismissal of the interlocutory application, with reference to the provision u/s 20 of the Negotiable Instruments Act, this Court held that,
From a reading of the above section, it is clear that Section 20 of the Negotiable Instruments Act, is itself authority to the holder of inchoate stamped and signed instrument to fill up the blanks and to negotiate the instrument. The instrument may be wholly blank or incomplete in particular and in either case the holder has the authority to make or complete the instrument as a negotiable one.
17. In
11. It would thus be clear that when the suit is based on pronote, and Promissory note is proved to have been executed, section 118[a] raises the presumption, until the contrary is proved, that the promissory note was made for consideration. That initial presumption raised u/s 118[a] becomes unavailable when the plaintiff himself pleads in the plaint different considerations. If he pleads that the promissory note is supported by a consideration as recited in the negotiable instrument and the evidence adduced in support thereof, the burden is on the defendant to disapprove that the promissory note is not supported by consideration or different consideration other than one recited in the promissory note did pass. If that consideration is not valid in law nor enforceable in law, the court would consider whether the suit pronote is supported by valid consideration or legally enforceable consideration. Take for instance, a pronote executed for a time-barred debt. It is still a valid consideration. The falsity of the plea of the plaintiff also would be a factor to be considered by the court. The burden of proof is of academic interest when the evidence was adduced by the parties. The court is required to examine the evidence and consider whether the suit as pleaded in the plaint has been established and the suit requires to be decreed or dismissed.
18. In
The defendant having admitted in clear categorical terms both in the written statement and in the evidence that he only signed the promissory note Ex. A1, the suit must have been decreed by the Court below.
19. In
20. In
9. To appreciate the contentions raised by the counsel, it has be seen that the present suit is on a promissory note in which certain statutory presumptions arise in favour of the plaintiff.
Apart from the presumption which is raised u/s 114(C) of the Indian Evidence Act, Section 118 of the Negotiable Instruments Act, 1981 also raises certain statutory presumptions. u/s 118 of the Negotiable Instruments Act dealing with the presumption as to the Negotiable instruments Act, it is held that until the contrary was proved the presumption would arise in respect of the consideration, as to the date of the execution, as to the time of acceptance and transfer etc. Apart from Section 118, u/s 20 of the Negotiable Instruments Act, a further presumption is raised in respect of the negotiable instrument signed and delivered by a person either wholly blank or having written thereon, an incomplete negotiable instrument. In the present case, as could be seen from the observation of the learned District Munsif, D.W. 1, has also claimed that he signed on an incomplete and unfilled promissory note. Therefore, in the present case we are dealing with certain statutory presumptions which accrue in favour of the plaintiff.
10. In comparison to the presumption which would arise u/s 114 of the Indian Evidence Act, it is settled law that presumption arising u/s 118 of the Negotiable Instrument Act is statutory and mandatory in character. In
There is marked contrast between Section 118 of the Negotiable Instruments Act and Section 114 of the Indian Evidence Act. The statutory presumptions u/s 118 of the Negotiable Instruments Act is mandatory while the presumption u/s 114 of the Evidence Act is permissive depending upon the exercise of discretion of the Court.
Therefore, the present case, being a suit on a promissory note the defendant cannot be allowed to deprive the right of the plaintiff to avail the benefit of the statutory presumption by pleading a conflicting stand in contradiction with the stand taken in the original written statement.
21. In
The evidence led by the defendant in that regard was not accepted by any of the Judges dealing with the case as noticed herein earlier. In the absence of disproving the existence of the consideration, the onus of proof of the legal presumption in favour of the plaintiff could not be shifted.
22. In
On a reading of the evidence adduced in this case, I do not think that the defendants have adduced a prima facie case rebutting the presumption u/s 118 of the Negotiable Instruments Act. The only argument that was advanced before the Courts below seems to be that the defendant was in possession of sufficient funds and there was no necessity for him to execute the suit promissory notes. A submission was made that the interval between some of the promissory notes is only 20 days, and within such a short time, there was no necessity for the defendant to borrow huge amounts. I am unable to accept this contention of the legal representatives of deceased defendant, when he (i.e., the deceased defendant) himself had admitted the execution of the promissory notes. Merely because the interval between two promissory notes is only few days, that may not be sufficient to hold that the documents are not supported by consideration.
23. In Mohammed Ali v. Abdul Sinab reported in 2001 (1) CTC 281=2001-2-L.W. 643, a suit was filed for recovery of money, based on a promissory note. The defendant denied the signature in the promissory note, but pleaded that he had signed a blank promissory note and gave it for balance chit amount and despite payment, the promissory note was not returned. Evidence was let in, proving the execution of the promissory note. While considering the nature of presumption and rebuttal thereof, with reference to Sections 101 and 103 of the Evidence Act and Section 118 of the Negotiable Instruments Act, a learned Single Judge of this Court, at Paragraphs 19, 20 and 22, held as follows:
19. From the reading of the above Section, it is clear that Section 20 of the Negotiable Instruments Act is itself authority to the holder of the signed instrument to fill up the blanks and to negotiate the instrument. Thus, once it is admitted that the defendant has signed in the promissory notes, his liability cannot be denied. These principles have been held in
20. In the light of the above decisions, it becomes obvious that once it is pleaded and proved that these promissory notes have been signed by the defendant on receiving the considerations, the presumption would arise and the same has to be rebutted by the defendant. Even this rebuttal could be given by direct evidence or by bringing on record the preponderance of probabilities also. In the instant case, the presumption has not been rebutted by the defendant even by the preponderance of probabilities. 22. In this situation, I am not inclined to hold that the presumption u/s 118 of the Negotiable Instruments Act had been rebutted.
The decisions in
24. In T.N. Boopathy v. T.A. Sattu reported in AIR 2002 Mad 177, the respondent therein has filed a suit on a promissory note, executed in favour of his mother After her death, the defendant contested the suit that he had never borrowed any money and executed any promissory note. He also contended that the promissory note was a forged one. The trial Court dismissed the suit. On appeal, the first appellate Court reversed the decree, which resulted in the second appeal to this Court. One of the substantial questions of law formulated by this Court for consideration, was whether the Court below was right in reversing the judgment of the trial Court, in throwing the burden of proof, on the appellant, when the respondent himself had not established that the signature in the suit document was that of the appellant. After comparing the signature of the defendant found in Ex. A1, Promissory note with the signature in the original deposition, the lower appellate Court has reversed the said finding, stating that the signature found in Ex. A1 -Promissory note was that of the appellant/ defendant. In the abovesaid circumstances, this Court, at Paragraph 10, held as follows:
10. A perusal of Ex. A1 promissory note would clearly indicate that there was only one attesting witness to the document and admittedly he was the father of the plaintiff and hence much weight cannot be given to the non-examination of the said attesting witness is true that the said document was not sent to the handwriting expert for the purpose of comparison of the signature in Ex. A1 document with the admitted signature of the defendant. The trial Court has stated the same as one of the main reasons for dismissing the suit. But on comparison of Ex. A1 document with the postal acknowledgement, the trial Court has come to the conclusion that the signature found in Ex. A1 document was not that of the defendant. The document in question was not sent to the handwriting expert for the purpose of comparison and the plaintiff has also not taken steps to do the same. But the suit cannot be dismissed on the said ground alone, is well settled that the Court can compare the disputed signature with the available admitted signature and arrive at a finding. As stated above, the trial Court gave a finding that the signature found in Ex. A1 promissory note was not that of the appellant/defendant, but the first appellate Court has reversed the said finding stating that the signature found in Ex. A1 was that of the appellant/defendant. Under the stated circumstances, the Court thought it fit to compare the disputed signature under Ex. A1 promissory note with the other available admitted signature of the appellant. When the signature found in Ex. A1 promissory note is compared with the signature of the defendant found in his original deposition as DW1, it would clearly reveal that the signature found in Ex. A1 promissory note was that of the appellant/defendant. Thus from the available evidence as discussed above is has to be found that the plaintiff/respondent has proved the execution of the promissory note by the appellant/defendant. Once the respondent/ plaintiff has discharged his burden of proving the same, then it is for the appellant/defendant to prove the non-existence of the consideration found under the promissory note. Once the execution of the promissory note is either admitted or proved, the presumption u/s 118-A of the Negotiable Instrument Act would arise that it is supported by consideration. It is true that such a presumption is rebuttable. The defendant could prove the failure of consideration. Under such a situation if the defendant discharges 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 would be obliged to prove it as a matter of fact, in the instant case the defendant has thoroughly failed to discharge the initial onus of proof by showing the non-existence of the consideration. The plaintiff must be given the benefit of presumption u/s 118(a) of the Negotiable Instruments Act in his favour. The mere denial of passing of the consideration apparently cannot constitute a valid defence in the instant case, it is not the defence put forth by the appellant that though he executed the document, it was not supported by consideration, but it was also bare denial of his signature and Ex. A1 promissory note was a forged one. From the evidence of PW2 and comparison of the disputed signature as stated above, it has to be found that the signature found in Ex. A1 document was that of the appellant/defendant is has to be pointed out that the appellant was unable to show that Ex. A1 promissory note was not supported by consideration. The court is of the view that it is a fit case where the presumption u/s 118 of the Negotiable instruments Act that when once the signature of the appellant is proved, the presumption that the promissory note was supported by consideration, has to be drawn. There is nothing to interfere in the judgment of the lower appellate Court, and the second appeal is liable to be dismissed.
25. In Samikannu Naicker v. Sigamani reported in 2002 (2) CTC 140 = 2002-3-L.W. 692, the negotiable instrument was inchoate. The defendant resisted the suit, contending inter alia that no consideration was received and that he had signed only blank stamp papers. It was also his contention that nothing was written on the promissory note. The Trial Court, after considering the evidence let in, came to the conclusion that the suit promissory note was fabricated and accordingly, dismissed the suit. The plaintiffs appeal failed. Substantial questions of law framed in the second appeal, are as follows:
i. When the respondent had categorically admitted his signature in Ex. A1 promissory note, whether the courts below are correct in law in shifting the burden of proving Ex. A1 promissory note on to the appellant?
ii. Whether the courts below are correct in non-suiting the case of the appellant inspite of clear and categorical admission by the respondent that he has signed in Ex. A1 promissory note?
iii. When the burden cast upon the appellant had been shifted to the respondent by virtue of his admitting the signature in Ex. A1 promissory note, whether the courts below are correct in law in relying upon nugatory contentions of the respondent and thereby deciding in his favour?
iv. Whether the presumption u/s 118 of the Negotiable Instruments Act can be drawn up in the present case?
26. In the above reported case, though it was the case of the plaintiff therein that the defendant borrowed the amount, under the suit promissory note, the defendant while admitting his signature, denied the rest of the writing in the suit promissory note. According to him, he had signed only in the blank promissory note and that the contents in the suit promissory note were not filled up and it was fabricated. At Paragraphs 12 and 13, this Court held as follows:
12. Let us assume what has been stated by the defendant is true. What would be the legal consequences that would flow from the admission made by the defendant that the signature in the suit promissory note is, his signature, but the rest were filled up by some body else. In this connection only, the learned advocate for the plaintiff relied upon Section 20 of the Negotiable Instruments Act, which reads as follows
Inchoate stamped instruments: Where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instruments then in force in the States, and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamp. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same to any holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder.
13. The said section empowers the person, who is the holder of an inchoate stamped and signed instrument, to fill up the blanks and to negotiate the instrument. The instrument may be wholly blank or incomplete in particular and in either case the holder has the authority to make or complete the instrument as a negotiable one. In our case, the plaintiff is the holder in due course. "Holder in due course" is defined u/s 9 of the Negotiable Instruments Act as follows:-
Holder in due course means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or endorsee thereof, payable to, or to the order of, a payee, before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.
27. After considering various decisions and Sections 20 and 118 of the Negotiable Instruments Act and relevant provisions of the Evidence Act, dealing with burden of proof, this Court held that both the Courts below have committed an error in not considering the abovesaid legal provisions and accordingly, set aside the judgments. At Paragrah 22, this Court further held as follows:
22. In our case, the defendant admitted the signature in the suit promissory note and what he would state is that the rest of the contents in the suit promissory note were not there at the time when he signed in the stamped paper and the writings were subsequently filled up. We have already seen Section 20 of the Negotiable Instruments Act, which empowers the ''holder in due course'' to fill up the blanks and to negotiate the instrument. As such, the promissory note given by the defendant is admitted and the burden shifts upon the defendant that the writings in the promissory note were subsequently filled up and he has not borrowed the amount under the promissory note, which the defendant has not proved in this case. Presumptions with regard to the negotiable instruments as stated u/s 118 of the Negotiable Instruments Act are also in favour of the plaintiff. As the defendant is not able to prove the contrary versions with regard to consideration, as to date.............as to stamps and also that holder is a holder in due course and in the said circumstances, the presumptions have got to be drawn in favour of the plaintiff and therefore, on that score also the defendant has to fail.
28. In K. Mani v. Elumalai reported in 2002 (3) CTC 598=2002-3-L.W. 845, the defendant admitted his signature, but pleaded that blank promissory notes were filled up later. He also denied borrowing any money from the plaintiff and contended that the signature on the promissory note, related to chit transaction. During the course of arguments, it was also submitted that there were some material alterations in the promissory notes. While considering the above defence and the judgments in
29. In
7. The Supreme Court in
30. In
31. In N.S. Arumugam v. Trishul Traders & Others, reported in 2006 (2) LW 167, the plaintiffs submitted that defendants 2 and 3 therein borrowed money for the benefit of their business and that a post-dated cheque was given towards repayment. When the cheque was presented, it was dishonoured. Despite notice, the defendant did not make the payment and hence, the suit. One of the defences taken by the second defendant therein was that, he was not a partner of the firm and that he issued a blank signed letter, for the purpose of forwarding the post dated cheque, with a specific instruction to use the same, for the purpose of a joint tender, at Madras Fertilizers Limited, but the plaintiff has forged the same, for his own purpose. It was also contended that no consideration was received. The trial Court dismissed the suit. The Division Bench, after considering the judgment in
11. Learned Counsel by relying upon a judgment of this Court reported in (1996) 1 MLJ 297 (Meenakshisundaram v. Rangasami) submits that the trial court committed an error in not drawing a legal presumption available u/s 118 of the Negotiable Instruments Act, as the execution of exhibit A1 cheque has been admitted by the third defendant. Learned Counsel also points out that the oral evidence has not been properly considered.
12. In the light of the above submissions, we have gone through the entire pleadings, the oral and documentary evidence available on record, exhibit Al, is the dishonourned cheque and it has been admittedly signed by the third defendant and the third defendant has admitted that the same was handed over by him to the plaintiff. In their separate written statements filed by the second and third defendants, the signature in exhibit A2 letter is admitted as that of the second defendant. In the light of this admission, automatically the legal presumption available u/s 118 of the Negotiable Instruments Act should have been raised in favour of the plaintiff by the court below. Once the said legal presumption is raised, it throws the burden of proof of failure of consideration on the maker of the negotiable instrument. It will be useful to refer to a passage in the judgment in
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, 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 VII 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 shifts as soon as a party adduces sufficient evidence to raise a presumption in his favour. The evidence required to shift the burden need not necessarily be direct evidence, i.e., oral or documentary evidence or admissions made by opposite party; it may comprise circumstantial evidence or presumptions of law or fact. To illustrate how this doctrine works in practice, we may take a suit on a promissory note. u/s 101 of the Evidence Act, ''Whoever desires any court to give judgment as to any legal right or liability dependent on the existence of facts which he asserts, must prove that those facts exists''. Therefore, the burden initially rests on the plaintiff who has to prove that the promissory note was executed by the defendant. As soon as the execution of the promissory note is proved, the rule of presumption laid down in Section 118 of the Negotiable Instruments Act helps him to shift the burden to the other side. The burden of proof as a question of law rests, therefore, on the plaintiff but as soon as the execution is proved, Section 118 of the Negotiable Instruments Act imposes a duty on the court to raise a presumption in his favour that the said instrument was made for consideration. This presumption shifts the burden of proof in the second sense, that is, the burden of establishing a case shifts to the defendant. The defendant may adduce direct evidence to prove that the promissory note was not supported by consideration, and, if he adduced acceptable evidence the burden again shifts to the plaintiff, and so on. 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. He may also rely upon presumptions of fact, for instance those mentioned in Section 114 and other sections of the Evidence Act. u/s 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 presumption to the effect that, if produced, the said accounts would be unfavourable to the plaintiff. This presumption, if raised by a court, can under certain circumstances rebut the presumption of law raised u/s 118 of the Negotiable Instruments Act. Briefly stated, the burden of proof may be shifted by presumptions of law or fact, and presumptions of law or presumptions of fact may be rebutted not only by direct or circumstantial evidence but also by presumptions of law or fact.
The above said passage clearly shows that the burden of proof as a question of law rests on the plaintiff, but since the execution is proved, Section 118 of the Negotiable Instruments Act imposes a duty on the court to raise a presumption in his favour that the said instrument was made for consideration and this presumption shifts the burden of proof in the second sense, that is, the burden of establishing a case shifts to the defendants. If we consider the present case in the light of the abovesaid principles, we have to hold that the trial court has wrongly thrown the burden of proof on the plaintiff without drawing the legal presumption in favour of the plaintiff when the defendants have admitted the execution of exhibit A1. Unless and until the defendant either by direct evidence or by circumstantial evidence acceptable to the court proves that the negotiable instrument was not supported by consideration, the burden on the defendants is not shifted. We have to see whether the defendants have adduced acceptable evidence and discharged their burden and shifted the burden to the plaintiff to prove his case.
32. Upon considering the evidence and pleadings, at Paragraph 17, the Division Bench further held as follows:
23. The above discussion of ours will show that the defendants have not proved their case pleaded by them in their written statement and they have not discharged the burden of proving that exhibit Al was not supported by consideration. All the above said facts have not at all been considered by the trial court, when the defendants have not discharged their burden the legal presumption u/s 118 stands unrebutted and on that ground itself, the trial court should have held that exhibit A1 is supported by consideration. But the trial court has wrongly thrown the burden on the plaintiff to show that exhibit A1 is supported by consideration.
33. In
11. As rightly pointed out by the courts below, the presumption u/s 20 of the Negotiable Instruments Act is in favour of the respondent. The appellant herein has admitted the execution of the suit pronote, Ex. A2. His signature, Ex. A1 is also admitted by him. Section 20 of the Negotiable Instruments Act contemplates that where one person signs and delivers to another a paper stamped in accordance with the law relating to negotiable instrument then in force in (India) and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamp. The person so signing shall be liable upon such instrument, in the capacity in which he signed the same, to any holder in due course for such amount: provided that no person other than a holder in due course shall recover from the person delivering the instrument anything in excess of the amount intended by him to be paid thereunder.
12. The executant admitting signature but asserting that he did not sign note in the condition in which it is filled, the burden of proof is on the executant. When we look into the evidence let in by the appellant herein, he has not proved it.
34. In Ramasamy v. Kamalammal reported in 2007 (5) MLJ 1005, the case of the defendant in the above appeal was that he borrowed a lessor amount, under the suit promissory and that the plaintiff filled up a higher sum, but used his signature in the blank paper and therefore, the promissory note had been created, for the purpose of institution of the suit. While dismissing the appeal, this Court held that once the defendant has admitted the signature, the onus of proving against its contents shifts to the defendant, as per the rules under the Negotiable Instruments Act.
35. In K. Sivakami v. S. Krishnan reported in 2008 (6) CTC 271, a suit has been filed for recovery of money on the basis of a promissory note. The defendant admitted execution of the promissory note, but denied passing of consideration. Both the lower Courts decreed the suit and appeal respectively. The defence was that the suit promissory note was executed, as a security for the loan borrowed by the defendant''s husband, from Mangalam Finance Chit Corporation at Palani and that there was no consideration on the promissory note. Both the Courts below observed that though the defendant had contended that the suit promissory note was not executed as a security, the defendant had not sent any notice, calling upon the plaintiff to return the promissory note. Applying the decision in
36. In a recent decision in
20. In the written statements, the plea of the respondents was that on the face of the pronotes, no cash was paid by the appellant and therefore, the respondents were not liable to pay the amount because the pronotes were forged. It was a finding of the trial court, which was affirmed by the High Court in the impugned judgment that the pronotes were indeed executed by the respondents. It was also a finding of the High Court that except in the reply notice issued by the respondents, nowhere had they stated that the consideration had not passed. It is also an admitted position that the findings of the two courts below was that the execution of the pronotes having been proved, the presumption u/s 118(a) must come into play and the appellant must be entitled to a decree in the absence of evidence to the contrary. Having said this, the High Court proceeded to observe that if there was evidence inconsistent with the presumption u/s 118(a) of the Act, the court would not be in a position to pass a decree in favour of the appellant on the basis of the presumption and therefore, proceeded to examine the evidence of the appellant in extenso.
21. In view of the decision of this Court in Bharat Barrel and Drum Manufacturing Company v. Amin Chand Payrelal reported in 1999 (1) SCC 35 and also in view of the findings arrived at by the Courts below, we are of the view that since the initial burden on the respondents to show that the pronote being Ex. A-21 was not supported by any consideration was not discharged by them, the High Court was not justified in not decreeing the suit of the appellant in respect of the amount Page 2563 covered by the pro-note Ex. A-21.
22. It is an admitted position that the finding as to the execution of the pronotes had become final. Also, we are of the view that the respondents had not discharged the initial burden of proving the non-existence of consideration either by direct evidence or by preponderance of probabilities. The mere denial, if there be any, by the respondents that no consideration had passed would not have been sufficient and something probable had to be brought on record to prove the non-existence of consideration. In this view of the matter, we are, therefore, of the view that once the execution of the pronote has been proved, the appellant would be entitled to the benefit of the presumption u/s 118(a) of the Negotiable Instruments Act because the respondents had failed to discharge the initial burden and therefore, the High Court was in error in appreciating the evidence of the appellant to come to the conclusion that since such evidence was inconsistent with the pronote being Ex. A-21, the appellant could not be given the benefit of the presumption.
37. In Ganapathy Thevar v. Shanmuga Thevar reported in 2008 (3) CTC 470, the plaintiff filed a suit for recovery of money under the promissory note. The defendant not only admitted his signature, but also contended that he had filled up the amount column in his own handwriting, in respect of a chit transaction and that no amount was borrowed. Both the trial as well as appellate Courts dismissed the suit and appeal respectively. Plea of chit transaction was not proved. Applying Sections 20 and 118 of the Negotiable Instruments Act, this Court, at Paragraphs 18, held that,
Section 20 of the Negotiable Instruments Act, would clearly demonstrate that once, the promiser signs the promissory note format, it becomes inchoate document and thereupon, the promise may fill it up and filed a suit. Section 118 of the Act would also come into operation in this case, as the defendant clearly admitted that he received a sum of Rs. 3,600/- (Rupees three thousand and six hundred only) and in consideration of it, he specified the amount at the top of Ex. A.1 and signed beneath the period version."
38. Section 118 of the Negotiable Instruments Act, in contra distinction to the general presumption u/s 114 of the Evidence Act, starts with the specific words "until the contrary is proved", the following presumtion shall be made (a) of consideration, (b) as to date, (c) as to time of acceptance, (d) as to time of transfer, (e) as to order of indorsements, (f) as to stamps and (g) that holder is a holder in due course. Proviso to Section 118, states that, where the instrument has been obtained from its lawful owner, or from any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him.
39. Applying the meaning of the word, ''proved'', in Section 3 of the Evidence Act, to Section 118 of the Negotiable Instruments Act, it would read thus, "a presumtion shall be made that every negotiable instrument was made or drawn for consideration until the Court after considering the mattes before it, either believes that consideration does not exist or considers the non-existence of consideration so probable, that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that consideration does not exist." The burden of proof being statutory and the evidence required to shift the burden need not necessarily be direct evidence, i.e., oral or documentary evidence or admissions made by the opposite party; but it may comprise circumstantial evidence or presumption of law or fact.
40. From the above judgments, the following points are culled out:
(i) Section 118 of the Negotiable Instrument Act lays down a special rule of evidence applicable to negotiable instruments.
(ii) The presumption u/s 118 of the Negotiable Instruments Act, is one of law and thereunder a court shall presume, inter alia that the negotiable instrument or the endorsement was made or endorsed for consideration.
(iii) 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.
(iv) The burden of proof can be discharged in two means, viz., (1) The burden of proof as a matter of law and pleading; and (2) 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 shifts as soon as a party adduces sufficient evidence to raise a presumption in his favour. The evidence required to shift the burden need not necessarily be direct evidence, i.e., oral or documentary evidence or admissions made by opposite party; it may comprise circumstantial evidence or presumptions of law or fact.
(v) when the suit is based on pronote, and that Promissory note is proved to have been executed, section 118 [a] raises a presumption, until the contrary is proved, that the promissory note was made for consideration. That initial presumption raised u/s 118 [a] becomes unavailable, when the plaintiff himself pleads in the plaint different considerations. If he pleads that the promissory note is supported by a consideration as recited in the negotiable instrument and that the evidence adduced in support thereof, the burden is on the defendant to disapprove that the promissory note is not supported by consideration or different consideration other than one recited in the promissory note. If that consideration is not valid in law nor enforceable in law, the court would consider whether the suit pronote is supported by a valid consideration or legally enforceable consideration. The falsity of the plea of the plaintiff also would be a factor to be considered by the court.
(vi) Apart from the presumption which is raised u/s 114(C) of the Indian Evidence Act, Section 118 of the Negotiable Instruments Act, 1981 also raises certain statutory presumptions.
(vii) Apart from Section 118, u/s 20 of the Negotiable Instruments Act, a further presumption is raised in respect of the negotiable instrument signed and delivered by a person either wholly blank or having written thereon, an incomplete negotiable instrument.
(viii) Section 114 of the Evidence Act is a general provision, but Section 118 of the Negotiable Instruments Act enacted a Special Rule of evidence which would operate between the parties to the instrument.
(ix) Section 20 of the Negotiable Instruments Act, is itself an authority to the holder of inchoate stamped and signed instrument to fill up the blanks and to negotiate the instrument.
(x) Once the plaintiff has pleaded and proved the execution of the promissory note, the presumption would be in his favour and that the same has to be rebutted by the defendant by direct evidence or by bringing on record the preponderance of probabilities also.
(xi) the burden initially rests on the plaintiff who has to prove that the promissory note was executed by the defendant. As soon as the execution of the promissory note is proved, the rule of presumption laid down in Section 118 of the Negotiable Instruments Act helps him to shift the burden to the other side. The burden of proof as a question of law rests, therefore, on the plaintiff but as soon as the execution is proved, Section 118 of the Negotiable Instruments Act imposes a duty on the court to raise a presumption in his favour that the said instrument was made for consideration. This presumption shifts the burden of proof in the second sense, that is, the burden of establishing a case, shifts to the defendant.
(xii) The defendant may adduce direct evidence to prove that the promissory note was not supported by consideration, and, if he adduces acceptable evidence, the burden again shifts to the plaintiff, and so on.
(xiii) 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. He may also rely upon presumptions of fact, for instance those mentioned in Section 114 and other sections of the Evidence Act.
41. Reverting back to the case on hand, it is the case of the plaintiff that on 21.09.2001, the defendant, for his family and other expenses, borrowed a sum of Rs. 25,000/- from him, as loan and agreed to repay the same, with interest at the rate of 1% per annum. Despite demands, the amount was not paid. Hence, the plaintiff issued a notice under Ex. A2, dated 06.11.2003 to the defendant. Per contra, the defendant though denied the execution of the promissory note, contended that he was liable to pay only a sum of Rs. 5,000/- under a chit transaction.
42. The defendant in his evidence, at one stage, has admitted the execution of Ex. A1-Pro-note and later on denied the same. The relevant portion of the deposition is extracted hereunder:
43. From the perusal of the testimony of the defendant, it is evident that though the defendant had admitted his signature in the suit promissory note, he has denied the receipt of consideration. Further, comparison of the signatures found in Ex. A1 - Pro-note and Ex. A3, postal acknowledgement, dated 12.11.2003, shows that, there is similarity of the signatures of the defendant.
44. PW. 2, Attesting Witness, has also deposed that the defendant had executed Ex. A1 -Promissory Note and that he has also denied the specific suggestion, posed that the signature contained in Ex. A1 - Promissory Note, was not that of the defendant. In the abovesaid circumstances, on the basis of the evidence recorded before the lower Court and in the light of the principles laid down by the Supreme Court in various decisions, this Court is of the view that the plaintiff has proved execution of Ex. A1-Promissory Note and that there was also an admission on the part of the defendant. Merely because, the plaintiff, in his examination, was not in a position to state the date of execution of Ex. A1, suit promissory note, it cannot be contended that Ex. A1 was not all executed. Further, non-examination of the scribe is not fatal to the case of the plaintiff, when the defendant himself has admitted execution. Unless and until the defendant, either by direct evidence or by circumstantial evidence, acceptable to the court proves that the negotiable instrument was not supported by any consideration, the burden on the defendant is not shifted.
45. In the case on hand, the plea of the defendant that there was a chit transaction, in which, the defendant had to pay a sum of Rs. 5,000/- and that having regard to the same, the plaintiff has instituted the suit, on the promissory note, without there being any consideration, has not been proved by the defendant. The rebuttal evidence, let in by the defendant, is not sufficient to dislodge the statutory presumption raised in favour of the plaintiff u/s 118 of the Negotiable Instruments Act. Inasmuch as the defendant has admitted in his evidence, execution of Ex. A1, Promissory note, his liability cannot be denied, unless there is strong evidence, let in by him, to shift the burden on the plaintiff.
46. In the light of the above, this Court is of the view that there are no compelling circumstances or evidence let in by the defendant, to shift the burden on the plaintiff to prove consideration. The observation of the lower Court that the plaintiff ought to have taken steps to send the document for an expert opinion, is erroneous, for the reason that the Court itself is empowered to compare the signature from documents available on record.
47. Per contra, if the defendant had seriously disputed his signature in the suit promissory note, he could have taken steps for an expert opinion, if required. The defendant has not adduced any acceptable evidence to discharge his burden. Considering the principles of law laid down in the abovesaid judgments, this Court is of the view that the lower appellate Court has failed to consider the fundamental principles of law, in adjudicating the issues properly, in view of the statutory presumption u/s 118 of the Negotiable Instruments Act and erred in misdirecting the plaintiff to discharge the burden of proof of payment of consideration. In view of the above, the substantial questions of law framed, are answered in favour of the appellant. Accordingly, the judgment and decree of the lower appellate Court in A.S. No. 63 of 2004, dated 19.04.2005, is set aside and the second appeal is allowed, confirming the judgment and decree of the trial Court made in O.S. No. 43 of 2004, dated 08.09.2004. No costs.
