Presumption of consideration under negotiable instrument law upheld where signatures were admitted and loan transaction was proved.

The Madras HC addressed challenges that a promissory note and related documents were forged, whether the loan and consideration were proved, and whether omission to show the transaction in income tax returns affected enforceability. The court found that the promissory note, voucher, cheque, notice and reply letter supported the plaintiff's case, that the defendant did not deny the signatures, and that the reply letter amounted to an admission of borrowing and an undertaking to repay. Once execution of the negotiable instrument was proved, the presumption of consideration under Section 118 of the Negotiable Instruments Act applied, and the defendant failed to rebut it. The court also held that non-reflection in income tax returns did not by itself defeat the claim.

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Issues: Whether the promissory note and allied documents were forged or fabricated, whether the plaintiff proved advancement of the loan and receipt of consideration, and whether the plaintiff's alleged omission to reflect the transaction in income tax returns negatived enforceability of the claim.

Analysis: The plaintiff produced the promissory note, voucher, cheque, notice and reply letter, and the 1st defendant did not deny the signatures on the promissory note and voucher. The reply letter written by the 1st defendant amounted to an admission of the borrowing and of the undertaking to repay. Once execution of the negotiable instrument was proved, the presumption under Section 118 of the Negotiable Instruments Act, 1881 operated in favour of consideration, and the defendant led no rebuttal evidence sufficient to displace it. The plaintiff also examined an attesting witness who supported execution and passing of consideration. The Court further held that non-reflection of the transaction in income tax returns did not, by itself, render the debt unenforceable or defeat the suit, and that the defendant could not rely on such an objection in the absence of a specific pleading and rebuttal proof.

Conclusion: The promissory note was held to be genuine, the plaintiff was held to have proved the loan transaction and receipt of consideration, and the decree in favour of the plaintiff was sustained.

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