1958 (3) TMI 86 - HC - Indian Laws

Presumption of consideration upheld in appellate court decision. Burden on defendant to disprove consideration.

The court held that the presumption of consideration under Section 118(a) of the Negotiable Instruments Act is a principle essential for trade and ... - Issues Involved:1. Presumption of Consideration under Section 118 of the Negotiable Instruments Act.2. Applicability of Presumption in Absence of the Act.3. Burden of Proof in Cases of Disputed Consideration.4. Determination of Consideration in Light of Evidence.Issue-wise Detailed Analysis:1. Presumption of Consideration under Section 118 of the Negotiable Instruments Act:The primary issue was whether the presumption of consideration under Section 118 of the Negotiable Instruments Act is a technical provision or a principle based on general considerations of negotiability. The court noted that the presumption of consideration is not merely a technical provision but a principle aimed at facilitating trade and negotiability. This presumption is essential for the smooth functioning of commerce, as negotiable instruments pass from hand to hand, and it would be impractical to verify consideration for each transfer. The presumption is thus a matter of principle and should be applied even in areas where the Negotiable Instruments Act is not in force.2. Applicability of Presumption in Absence of the Act:The court examined whether the presumption under Section 118(a) should apply in regions where the Negotiable Instruments Act was not in force. It was determined that the principles underlying the Act could be applied as rules of equity, justice, and good conscience, even if the Act itself was not in force. The court cited previous cases where provisions of the Act were applied in areas where it was not formally in effect, reinforcing the idea that the principles, rather than the technical provisions, should guide the court's decisions.3. Burden of Proof in Cases of Disputed Consideration:The court discussed the burden of proof in cases where the consideration for a negotiable instrument is disputed. It was established that the burden lies heavily on the defendant to disprove the consideration. This burden does not shift merely because the plaintiff leads evidence first. The court must evaluate the entire evidence from both parties to determine whether the consideration has been disproved. If the defendant's evidence is untrustworthy and the plaintiff's evidence also fails to establish the consideration, the court must still consider whether the presumption of consideration has been effectively rebutted.4. Determination of Consideration in Light of Evidence:The court examined the evidence presented by both parties. The defendant's claim that the hundi was executed as a loan to the plaintiff was found to be untrustworthy. The plaintiff's evidence of cash payment was also not convincing. Despite this, the court held that the presumption of consideration should not be disregarded. The court emphasized that the defendant had the burden to disprove consideration, and in the absence of credible evidence from the defendant, the presumption in favor of the plaintiff stands.Conclusion:The court concluded that the presumption of consideration under Section 118(a) of the Negotiable Instruments Act is a principle based on general considerations of negotiability and should be applied even in areas where the Act is not in force. The burden of disproving consideration lies heavily on the defendant, and in this case, the defendant failed to discharge that burden. Therefore, the appeal was dismissed, and the suit was decreed in favor of the plaintiff for the principal amount with interest. The parties were ordered to bear their own costs throughout.