2022 (4) TMI 1029 - HC - Indian Laws

Appellate court overturns judgment in promissory note case, finding lack of consideration. Defendants not liable.

The appellate court allowed the appeal, setting aside the trial court's judgment in favor of the plaintiff. It was held that the plaintiff failed to prove ... Dishonor of Promissory Notes - Suit for recovery of money, based on two promissory notes - rebuttal of presumption - HELD THAT:- Even at the time of filing the suit, it is stated by the respondent/plaintiff that the deceased Tiruppathi did not pay any amount towards interest or principal. Despite that there is no demand made by the respondent/plaintiff to the deceased Tiruppathi to repay the loans, during his life time. DW 3, who is the scribe of both the promissory notes has stated in his evidence that at the time when the loan amount of ₹ 10,00,000/- and ₹ 7,00,000/- were given on two different dates, the first appellant Muruganantham was also present. Though the scribe of the document/PW 3 could have a limited role to play, he has stated in his cross examination that during the life time of deceased Tiruppathi, demand to repay the loan amount was made after one year period from the date of the loans. It is understandable if the plaintiff' could tell the details about the demands for repayment. When the plaintiff was silent, the scribe of the promissory notes/PW 3 has stated that after one year from the date of promissory notes, demand for repayment was made and it was during the life time of Tiruppathi. The role of scribe has come to an end after drafting the promissory notes. He could not have any interest in getting the loan repaid. The above evidence of PW 3 would show that he has some interest in pursuing the repayments also. This conduct of PW 3 would show that he is an interested witness of the plaintiff. Unless the scribe is neutral, his evidence could not be reliable - Even if it is presumed in favour of the respondent/plaintiff that the appellants' father had affixed his signature in the promissory notes and executed the same by agreeing to the amount found therein, it is obligatory on the part of the plaintiff to prove that the promissory notes were supported by consideration, especially when the defendants deny the passing of the consideration. No doubt, by proving the execution of the promissory notes, the appellants/defendants have got the initial presumption in their favour. However, the said presumption is rebuttable one. It is needless to state once again that the rebuttal proof need not always be positive evidence from the appellants/defendants. Even the weakness and improbabilities exposed from the case of the plaintiff can also be considered as rebuttal proof. The evidence of DW 2 would show that at the time when the loan amount was given to the father of the appellants/defendants, the first appellant was at his College. The Principal Incharge of TELC Industrial Training Centre, Dindigul has spoken in his evidence about the said fact. During his examination, Admission Register and the Attendance Register were produced as Ex. X1 and Ex. X2 and they would show that at the relevant date, the first appellant/first defendant was attending the College from 9.00 a.m. to 5.30 p.m. When the facts are so, the first appellant could not have been present during alleged loan transaction, which was said to have happened in the morning 10.00 a.m to 11 a.m - the improbability exposed from the evidence would also serve as rebuttal proof in favour of the appellants/defendants, though they could not produce any other evidence from their side. Since the plaintiff failed to prove that the suit promissory notes are supported by consideration, points 1 & 2 are answered in favour of the appellants. The appeal is allowed. Issues Involved:1. Whether the deceased Tiruppathi had obtained loans of Rs. 10,00,000/- and Rs. 7,00,000/- from the plaintiff and executed promissory notes.2. Whether the plaintiff is entitled to the suit claim.3. Whether the defendants are liable to pay the suit amounts from the estate of the deceased Tiruppathi.4. Whether the defendants had rebutted the initial presumption under Section 118 of the Negotiable Instruments Act.5. Whether the judgment of the learned trial judge is fair and proper.Issue-wise Detailed Analysis:1. Whether the deceased Tiruppathi had obtained loans of Rs. 10,00,000/- and Rs. 7,00,000/- from the plaintiff and executed promissory notes:The plaintiff claimed that Tiruppathi took loans of Rs. 10,00,000/- on 17.02.2014 and Rs. 7,00,000/- on 01.05.2014, executing promissory notes for these amounts. The defendants contested this, alleging that the promissory notes were concocted and that their father had no need for such loans as he had already purchased a tractor before these dates. The trial court accepted the plaintiff's claim, but on appeal, it was noted that the plaintiff did not provide sufficient evidence to prove the passing of consideration for these promissory notes.2. Whether the plaintiff is entitled to the suit claim:The trial court had decreed the suit in favor of the plaintiff. However, the appellate court found that the plaintiff failed to prove the passing of consideration for the promissory notes. The improbability of the plaintiff lending a second large sum when no interest was paid on the first loan was highlighted. Additionally, the plaintiff did not produce income tax returns or bank statements to substantiate his financial capacity to lend such amounts.3. Whether the defendants are liable to pay the suit amounts from the estate of the deceased Tiruppathi:The appellate court concluded that the defendants were not liable to pay the suit amounts. The court observed that the plaintiff did not make any demand for repayment during Tiruppathi's lifetime, and there were inconsistencies in the evidence presented by the plaintiff's witnesses. The evidence suggested that the transactions were unlikely to have occurred as claimed by the plaintiff.4. Whether the defendants had rebutted the initial presumption under Section 118 of the Negotiable Instruments Act:The appellate court found that the defendants successfully rebutted the presumption under Section 118 of the Negotiable Instruments Act. The improbabilities and inconsistencies in the plaintiff's case, such as the lack of demand for repayment and the absence of financial records, served as rebuttal proof. The evidence presented by DW 2, showing that the first appellant was in college at the time of the alleged loan transaction, further supported the defendants' case.5. Whether the judgment of the learned trial judge is fair and proper:The appellate court determined that the trial judge's judgment was not fair and proper. The trial judge had relied on evidence beyond the pleadings and failed to consider the improbabilities in the plaintiff's case. The trial judge's observations about the deceased's alleged illicit relationships were also found to be unwarranted and unsupported by the pleadings.Conclusion:The appellate court allowed the appeal, setting aside the judgment of the learned Principal District Judge, Dindigul. The court concluded that the plaintiff failed to prove that the promissory notes were supported by consideration and that the defendants had successfully rebutted the initial presumption under Section 118 of the Negotiable Instruments Act. Consequently, the defendants were not liable to pay the suit amounts from the estate of the deceased Tiruppathi. No costs were awarded.