Promissory note presumption under Section 118 rebutted due to contradictory evidence and witness conflicts

The HC reversed the trial court's decree for money recovery under a promissory note. While Section 118 of the Negotiable Instruments Act creates a presumption of consideration once execution is admitted, this presumption is rebuttable. The court found that contradictions between PW1 and PW2's evidence, conflicts between proof affidavits and cross-examination testimony, and surrounding circumstances successfully rebutted the presumption. The defendant's version was deemed more probable than the plaintiff's oral evidence alone. The trial court erred by invoking the presumption without considering these evidentiary conflicts and contradictions. The appeal was allowed with costs.

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Issues Involved:

1. Whether the defendant borrowed Rs.20,00,000/- from the plaintiff.
2. Validity of the promissory notes executed by the defendant.
3. Entitlement of the plaintiff to interest at 24% per annum.
4. Entitlement of the plaintiff to the decree as claimed in the suit.
5. Additional reliefs entitled to the parties.

Issue-wise Detailed Analysis:

1. Whether the defendant borrowed Rs.20,00,000/- from the plaintiff:

The plaintiff alleged that the defendant borrowed Rs.20,00,000/- over two years for business development, secured by a promissory note dated 25.12.2017. The defendant denied borrowing such an amount, asserting he had no necessity to borrow as he was a cab driver. He claimed the transaction was a collusion between the plaintiff and his brother, Govindaraj. The trial court initially found the promissory note supported by consideration, relying on the presumption under Section 118 of the Negotiable Instruments Act, 1881, due to the defendant's admission of his signature on the note.

2. Validity of the promissory notes executed by the defendant:

The defendant contested the validity of the promissory notes, claiming they were signed in blank and not supported by consideration. He argued that the plaintiff failed to prove the existence of consideration. The appellate court scrutinized the evidence, noting contradictions in the testimonies of PW1 (the plaintiff) and PW2 (the attestor of the promissory note). The court highlighted the lack of documentary evidence to support the plaintiff's claim of lending Rs.20,00,000/-, thereby casting doubt on the validity of the promissory notes.

3. Entitlement of the plaintiff to interest at 24% per annum:

The plaintiff claimed interest at 24% per annum on the principal amount from 25.12.2017. The trial court initially upheld this claim based on the presumption of consideration under Section 118. However, the appellate court found the presumption rebutted by the defendant's evidence and the inconsistencies in the plaintiff's case, ultimately negating the entitlement to such interest.

4. Entitlement of the plaintiff to the decree as claimed in the suit:

The trial court granted the decree for the plaintiff based on the statutory presumption of consideration. However, the appellate court overturned this decision, emphasizing the defendant's successful rebuttal of the presumption through circumstantial evidence and inconsistencies in the plaintiff's narrative. The appellate court concluded that the plaintiff failed to establish the passing of consideration, thus dismissing the suit.

5. Additional reliefs entitled to the parties:

The appellate court did not find any additional reliefs warranted for either party, given the dismissal of the suit. The appeal was allowed with costs, and the trial court's decree was set aside.

Conclusion:

The appellate court found that the trial court erred in mechanically applying the presumption under Section 118 without adequately considering the conflicts and contradictions in the evidence. The appellate court determined that the defendant had successfully rebutted the presumption of consideration, leading to the dismissal of the plaintiff's suit for recovery of the alleged loan amount.

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