Promissory note presumption and loan enforceability remain intact absent rebuttal evidence or specific denial.

A promissory note carries the statutory presumption of consideration under Section 118 of the Negotiable Instruments Act, 1881, and that presumption stands where the defendant offers no specific denial, evidence, or cross-examination to rebut execution or loan advance. Failure to produce income-tax returns or other proof of financial capacity, by itself, does not justify an adverse inference unless the court first seeks clarification through the Evidence Act and CPC procedures. A possible breach of Section 269SS of the Income-tax Act, 1961 does not make the loan unenforceable or defeat recovery. The note-holder's claim, therefore, remained proved on the materials discussed.

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Issues: (i) Whether the plaintiff proved due execution of the promissory note and passing of consideration. (ii) Whether the suit could be dismissed on the ground that the plaintiff failed to prove his financial wherewithal.

Issue (i): Whether the plaintiff proved due execution of the promissory note and passing of consideration.

Analysis: The defendant neither filed a written statement nor cross-examined the plaintiff. In the absence of a specific denial, the plaintiff's version regarding advancement of money and execution of the promissory note stood unchallenged. The promissory note being a negotiable instrument attracted the presumption under Section 118 of the Negotiable Instruments Act, 1881, and the defendant failed to rebut it. The defence taken in the reply notice was not supported by evidence, and the defendant did not enter the witness box. Non-examination of an attestor was not fatal when execution was not effectively disputed.

Conclusion: The plaintiff proved execution of the promissory note and consideration, and the finding against him on this issue was unsustainable.

Issue (ii): Whether the suit could be dismissed on the ground that the plaintiff failed to prove his financial wherewithal.

Analysis: The trial court drew an adverse inference from the absence of income-tax returns and from the plaintiff's alleged inability to advance the loan, but there was no proper foundation for such a finding. The court had not exercised its power of clarification under Section 165 of the Indian Evidence Act, 1872 or the procedure under Order 10 Rules 2 and 3 of the Code of Civil Procedure, 1908 before returning an adverse conclusion. Mere non-reflection of a transaction in income-tax returns does not establish that the transaction never occurred. The statutory breach, if any, under Section 269SS of the Income-tax Act, 1961 does not render the loan unenforceable or defeat recovery, and the presumption under Section 118 of the Negotiable Instruments Act, 1881 remained unrebutted.

Conclusion: The dismissal of the suit on the ground of want of means was incorrect and perverse.

Final Conclusion: The appellate court set aside the dismissal, decreed the money suit as prayed for, and upheld the plaintiff's entitlement to recover the decretal amount.

Ratio Decidendi: In the absence of a specific denial and rebuttal evidence, a promissory note carries the statutory presumption of consideration, and a loan transaction is not unenforceable merely because it allegedly violated the mode-of-payment requirements under the Income-tax Act.

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