K.Ramasamy vs G.Aruchamy

Aggrieved over the judgment and decree passed by the Trial Court granting preliminary decree dated 08.07.2009 and final decree dated

19.9.2011 in favour of the plaintiff, the defendant has preferred the instant appeals.

Since the issue involved in both the matters are one and the same, common judgment is being passed.

For the sake of convenience, the parties are referred to, as per their ranking before the trial Court.

The brief facts of the case of the plaintiff are as follows:

The defendant borrowed a sum of Rs.5,25,000/- from the plaintiff on 09.07.2006 and executed a promissory note agreeing to repay the same on

demand with interest at 18% p.a. On the same day, the defendant handed over an original title deed dated 20.01.1997 along with supportive

documents of the immovable properties with an intention to give security for the said loan and thereby created an equitable mortgage by depositing

of title deeds. Inspite of the demands made by the plaintiff, the defendant has not chosen to make any payment. Hence, the plaintiff issued a legal

notice dated 11.7.2007. Since the defendant issued false reply, the plaintiff filed the present suit.

The brief averments made in the written statement filed by the defendant are as follows:

(i) Denying the borrowal, execution of promissory note and deposit of original title deeds, it is the case of the defendant that he had money

transaction with one Subbaiya Gowder. At the time of lending money, the said Subbaiya Gowder had obtained the defendant''s signature in some

blank and unwritten promissory note, green ledger papers and other documents. Further, the defendant has also appointed the said Subbaiya

Gowder as his Power Agent to sell the suit property and also handed over the original sale deed bearing No.132 of 1997. As dispute arose

between the said Subbaiya Gowder and the defendant, Power deed was cancelled by the defendant and there were exchange of notices between

them for return of the sale deed and other documents.

(ii) When the matter stood thus, the said Subbaiya Gowder died. Hence, all the title deed and other documents, blank unfilled papers were not

taken back from the said Subbaiya Gowder. The son of the said Subbaiya Gowder, by name, Moorthy, set up one H.Ramalingam and issued legal

notice which is also replied by the defendant on 21.01.2001. As the son of the said Subbaiya Gowder not succeeded in the aforesaid attempt by

utilising the blank promissory note ad other documents, he has filed the present suit. Hence, it is the contention of the defendant that the plaintiff is

not a creditor. The plaintiff is a benami and a name lender of the said Moorthy. Hence, the defendant prayed for dismissal of the suit.

Based on the above pleadings, the trial Court has framed the following issues:

Whether the plaintiff is entitled to preliminary decree as prayed for?

To what relief?

On the side of the plaintiff, the plaintiff examined himself as PW1 and one Gunasekaran was examined as P.W.2 and Exs.A1 to A10 were

marked. On the side of the defendant, the defendant examined himself as D.W.1 and Exs. B1 to B15 marked.

On the basis of the oral and documentary evidence adduced by both sides, the learned trial Judge passed the preliminary decree dated

08.7.2009 as prayed for. Aggrieved over the same, A.S.No.983 of 2009 has been filed.

Appeal No.463 of 2012 has been filed as against the final decree dated 19.09.2011 passed by the trial Court, pursuant to the aforesaid

preliminary decree dated 09.07.2009, on the ground that the same has been passed by the trial Court, without taking into consideration the order

dated 09.7.2010 passed by this Court in Miscellaneous petitions.

The learned counsel for the appellant / defendant submitted that there is no privity of contract between the plaintiff and the defendant and the

defendant is a stranger to the plaintiff. It is submitted that the defendant originally had the transaction with one Subbaiya Gowder and executed

power of Attorney in favour of him. Thereafter, the said Power deed was cancelled. However, the original title deed handed over to the said

Subbaiya Gowder has not been returned. Meanwhile, the said Subbaiya Gowder died and his son, set up one Ramalingam and issued legal notice

on the basis of the unfilled promissory note, which was also suitably replied by the defendant. Thereafter the present plaintiff, who is a name lender

of the said Subbaiya Gowder''s son, has filed the present suit.

According to the learned counsel, no consideration has been passed and the plaintiff has also not established the consideration. The evidence

of P.W.1 and P.W.2 and the documents filed on the side of the defendant would clearly show that the transaction are not true and are not

supported by valid consideration. It is the further contention of the learned counsel that the final decree has been passed without taking into

consideration the modification order passed by this Court. Hence, the learned counsel prayed for allowing the appeals.

The learned counsel for the respondent submitted that the signature in the promissory note has not been denied by the defendant. The learned

counsel further submitted that the original title deed has also been handed over to the plaintiff at the time of borrowing. Execution of promissory

note has been clearly proved by examining P.W.1 and P.W.2. Hence it is the contention of the learned counsel that once the execution of

promissory note has been proved, presumption under Section 118 of the Negotiable Instruments Act would squarely apply. Whereas the

defendant has not discharged his burden by rebutting the statutory presumption. Hence, the learned counsel prayed for dismissal of the appeals.

In the light of the above submission, now the points that arise for consideration in these appeals are:

Whether the suit promissory note dated 09.7.2006 has not been executed by the defendant?

Whether the plaintiff is a name lender of Subbaiya Gowder''s son Moorthy?

To what relief?

The suit has been laid for recovery of money on the basis of the suit promissory note 09.07.2006 said to have been executed by the defendant

for a sum of Rs.5,25,000/- agreeing to pay interest at 18% p.a. It is the case of the plaintiff that on the same date of execution of promissory note,

the defendant handed over title deeds with an intention to pay equitable mortgage. Whereas it is the contention of the defendant that originally he

had money transaction with the said Subbaiya Gowder for which he handed over title deed bearing document No.132 of 1997 and also signed

blank promissory note and other documents. Besides he has also executed power of Attorney in favour of him and though the said power deed

was subseequently cancelled,the documents could not be get back since the said Subbaiya Gowder died. Thereafter, the said Subbaiya Gowder''s

son set up one Ramalingam and issued legal notice which was also properly replied by the defendant. Subsequently, the plaintiff filed the present

suit.

P.W.1 in his evidence, has clearly spoken about the execution of the promissory note by the defendant after borrowal of a sum of

Rs.5,25,000/- as well as handing over of title deeds. P.W.2, one of the witness, has also spoken about the execution of the promissory note,

receipt of consideration and also handing over of title deeds with an intention to create equitable mortgage.

Though the specific defence has been taken by the defendant to the effect that he had handed over title deed bearing No.132 of 1997 to

Subbaiya Gowder alone and, after his death, his son has set up somebody and sent a legal notice and the same was also replied, in the entire

evidence of D.W.1 no circumstances, whatsoever brought on record to show that the plaintiff is the name lender of Subbaiya Gowder. In the

absence of any materials, the contention of the defendant cannot be countenanced in that regard. Whereas P.W.1 and P.W.2 clearly spoken about

the execution of Promissory note by the defendant.

It is well settled that initial burden always lies on the plaintiff to prove the execution of the promissory note. Once the execution of promissory

note has been proved in the manner known to law, the statutory presumption available under Section 118 of the Negotiable Instrument Act comes

into operation with regard to the consideration, time, place etc., Of course, such a statutory presumption is also rebut table one. To rebut such a

statutory presumption, one need not rely upon the direct evidence alone. Even the circumstances brought out in the cross examination itself is

sufficient to rebut the statutory presumption. Once the defendant is able to bring some circumstances on record to rebut the statutory presumption,

then the burden again shifts on the plaintiff to prove the factum of consideration. The burden of proof is not constant and it will shift on either side

whenever, better evidence is placed. But once the execution of the promissory note has been proved in the manner known to law, the burden

automatically shifts on the defendant to rebut the statutory presumption. As stated above, P.W.1 and P.W.2 in their evidence have clearly spoken

about the execution of promissory note as well as singing the same by the defendant. Therefore, now it is for the defendant to establish the fact that

there was no consideration at all.

In this regard, it is useful to refer the judgment of the Hon''ble Supreme Court in AIR 1961 SC 1316 (1) (KUNDAN LAL RALLARAM v.

CUSTODIAN EVACUEE PROPERTY), wherein the Hon''ble Supreme Court has held as follows:

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 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 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. Under Section 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

exist."" 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. 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 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 under Section 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. We are not concerned here with irrebuttable presumptions of law. .. .. .. ..

Though the defendant has filed judgments in 2011 4 SCC 726 (TATIPAMULA NAGA RAJU V. PATTEM PADMAVATHI); 2001 2 CTC

268 (JANAKIRAMAN CHETTIAR V. NARASIMHAN); and (2011) 3 MWN (Civil) 611 (RANGANAYAKI V. KASINATHA

PADAYACHI), the said judgments are not applicable to the facts of the present case. In the said judgments, in fact, the party concerned was able

to show some circumstances about the legal statutory presumption. Whereas in this case, nothing was brought on record to rebut the presumption.

In this case, Exs.A2 to A4, title deeds have been filed by the plaintiff. Though the defendant has filed Power of Attorney as well as cancellation

of such power deed in order to show that the same was executed only in favour of Subbaiya Gowder, the same itself is not sufficient to rebut the

legal presumption attached to promissory note, which has been otherwise proved in the manner known to law. Ex.B6 was filed to show that one

H.Ramalingam has issued notice in the year 2000 claiming deposit of title deed bearing No.132 of 1997, which has also been replied by the

defendant under Ex.B7, wherein he has stated that he has executed blank promissory note in favour of Subbiah Gowder as well as his daughter

Jayarani and the same should have been misplaced. Whereas now it is the contention of the defendant that these documents have been given only

to Subbiah Gowder. In earlier reply notice in the year 2001 a contrary stand has been taken by the defendant. If really these documents were with

Ramalingam, since he has not filed any suit, nothing prevented the defendant to take some action through court of law. But he has kept quiet. All

these facts would clearly show that the contention of the defendant cannot be true at all.

That apart, when the cross examination of D.W.1 is carefully read, he did not bring any circumstances to show that he never executed

promissory note and handed to the documents with an intention to create equitable mortgage for the loan availed by him. Further, the documents

filed on the side of the defendant, when carefully analysed, particularly, the reply notice issued by one Rajkumar, advocate, it is the specific stand

of the defendant that he has handed over the document bearing No.132 of 1997 alone to the Subbaiya Gowder. But in the said reply, he has not

stated about other documents. Whereas the plaintiff has clearly established the fact that apart from document No.132 of 1997, one mortgage deed

and receipt with regard to the immovable properties were also handed over by the defendant to the plaintiff. Therefore, the contention of the

defendant that these documents were originally handed over to the Subbaiya Gowder is found to be false.

In any event, the defendant has not brought out any circumstances to rebut the legal presumption attached to Ex.A1 promissory note under

Section 118 of the Negotiable Instrument Act. Though the publication of the year 2005 was filed under Ex.B11 to show that with regard to the

document No.132/1997, the defendant has issued publication to the effect that the above document was with Subbiah Gowder, the above,

publication also silent about the other documents, which are now filed by the plaintiff. In any event, mere issuing publication in the year 2005 itself

cannot be a ground to hold that these documents have been still with Subbiah Gowder. Unless and until the nexus between the Subbiah Gowder

family and the plaintiff has been established, the defendant cannot succeed in rebutting legal presumption. Hence, this Court does not find any

infirmity in passing the preliminary decree by the trial Court.

Though the trial Court has awarded interest at 18% p.a., taking into consideration the reduction of interest in the banks, I am inclined to modify

the interest at 6% on the suit amount, i.e. Rs.6,37,263.00 from the date of the suit till the date of realisation. In other aspects, the judgment and

decree of the trial Court dated 08.07.2009, is confirmed.

With the above modification, A.S.No.983 of 2009 is disposed of. No costs.

Insofar As.No.463 of 2012 is concerned, the same has been filed challenging the fair and final decree passed by the trial Court in I.A.No.389

of 2011. The learned trial Court, after taking into consideration the fact that the conditional order passed by this Court has not been complied with

by the defendant, had passed the final decree.

Admittedly, this Court has passed a conditional order directing the defendant to deposit a sum of Rs.2,50,000/- within a period of six weeks.

However, the defendant has not complied with the said conditional order. However, he has sought extension of time. Though this Court has

granted further time to deposit the amount, the defendant has not chosen to comply the same. In any event, since the main appeal, i.e. As.No.983

of 2009 has been disposed of, this Court is not inclined to interfere with the final decree.

Accordingly, A.S.No.463 of 2012 is dismissed. No costs. Connected MP is closed.