Presumption of consideration in negotiable instruments survives even without the Act and must be weighed against whole evidence.

A negotiable instrument carries a presumption of consideration under section 118(a), and the majority treated that presumption as a substantive rule of equity, justice and good conscience capable of application even where the Act was not then in force. The court also held that the presumption does not vanish when both sides lead evidence; it must be weighed with the whole record, and the party denying consideration must disprove it. On the facts, the defendant failed to rebut the presumption sufficiently, so the appeal failed. The dissent viewed the burden of proof as decisive where neither version was convincing and would have partly allowed the appeal.

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Issues: (i) whether the presumption of consideration embodied in section 118(a) of the Negotiable Instruments Act is a rule of principle capable of application even where the Act was not in force; (ii) how that presumption operates where both parties have led evidence and neither version is wholly satisfactory.

Issue (i): whether the presumption of consideration embodied in section 118(a) of the Negotiable Instruments Act is a rule of principle capable of application even where the Act was not in force

Analysis: The majority held that the presumption of consideration is founded on the negotiable character of the instrument and is not a mere technical or procedural rule. The principle is meant to support negotiability and trade, and may therefore be applied as a rule of equity, justice and good conscience even in a territory where the Act was not then in force. The instrument is to be presumed to have been made for consideration unless the contrary is disproved.

Conclusion: The issue was answered in the affirmative and in favour of the assessee-like claimant on the legal principle, namely that the presumption applies even without the Act in force.

Issue (ii): how that presumption operates where both parties have led evidence and neither version is wholly satisfactory

Analysis: The majority held that the court must consider the entire evidence and determine whether the consideration has been disproved within the meaning of the Evidence Act. The presumption does not disappear merely because both sides have adduced evidence; it remains relevant and must be weighed with the evidence. On the facts, the defendant's explanation was found untrue, but the plaintiff's version of cash consideration also failed to inspire confidence. Even so, the defendant had not discharged the burden of disproving consideration, and the presumption was not rebutted to the extent necessary to defeat the suit.

Conclusion: The issue was answered against the appellant and in favour of the respondent, and the appeal was dismissed.

Final Conclusion: The majority upheld the applicability of the presumption of consideration as a substantive legal principle and, on the facts, held that the defendant had not displaced it sufficiently to succeed in appeal.

Ratio Decidendi: A negotiable instrument carries an obligatory presumption of consideration as a matter of principle, and where the presumption is not disproved on the whole evidence, the party denying consideration fails.

Dissenting Opinion: Modi, J. held that the presumption is a strong principle, but in a case where both sides fail to establish a convincing version, the burden of proof remains decisive. On his view, the appeal should have been partly allowed and a decree granted against both defendants.

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