SANGAPPA BASAPPA v. CHIDANANDA BASAWANTRAYA — 1980 DIGILAW 151 (KAR)

( 1 ) THIS second appeal is by the defendant in O. S. No. 88 of 1989 on the file of the Miunsiff Muddebihal. ( 2 ) THE material facts leading to this secoud appeal are these: the plaintiff Chidanandappa Basr wantray a Aski brought the suit O. S. 38 of 1969 against. the defendant sangappa Basappa Gogi for the recovery of a sum of Rs. 2,052 with future interest and costs on a handloan advanced by the plaintiff to the defendant - the consideration amount being paid by issuing cheques in favour of the defendant, drawn on the Karnataka bank Ltd. , Talikot, in which the plaintiff had his account. The plaintiff of 1881 ). Cheque Cashed-Presum- issued four cheques Exts. P. 1 to P. 4, out of which three cheques Exs. P. 1 to P. 3 were issued in the name of the defendant and Ex. P. 4 was issued in the name of one Veerabhadrappa malatwad, who was the clerk of the defendant and that amount was also received by the defendant towards the loan. Since the defendant failed to return the amount, the plaintiff filed the above suit for necessary reliefs. ( 3 ) THE defendant resisted the suit denying any loan. It was the case of the defendant that the plaintiff sold certain lands belonging to him (Plaintiff) through the assistance and intervention of the defendant and deposited the sale price in the Karnataka Bank Ltd, talikot. The plaintiff was carrying on money lending business with the amount deposited by him in the Bank. The plaintiff always used to sit in the shop of the defendant and sometimes carrying on his money lending business by issuing cheques to his borrowers. As the plaintiff was not conversant with the writing of cheques, he used to get them written by the defendant and give those cheques to his borrowers. Sometimes, the plaintiff used to ask the defendant to write the cheque in his (defendant's) name and request him to get the cash for him (plaintiff ). Thus, it was the case of the defendant that the suit cheques Ext. P. 1 to P. 3 were written by the defendant at the instance of the plaintiff in his (defendant's) name and paid the amount to the plaintiff immediately after encashing them. Thus, it was the case of the defendant that the suit cheques Ext. P. 1 to P. 3 were written by the defendant at the instance of the plaintiff in his (defendant's) name and paid the amount to the plaintiff immediately after encashing them. He denied having received the amount covered under the cheque Ex-P. 4 issued in the name of his clerk. On these grounds, he sought for the dismissal of the suit. ( 4 ) ON the above pleadings, the trial court raised the following issues: 1. Whether the plaintiff had advanced loans to the defendant on 14-8-68 rs. 500, on 22-8-68 Rs. 1,000 on 26-8-68 rs. 200 and on 27-8-68 Rs. 100 through cheques drawn on the Karnataka bank, Talikot Branch. 2. Whether the claim of the plaintiff is true and due; from the defendant. 3. Whether the plaintiff is entitled to interest? If so, at what rate? 4. To what reliefs are the parties entitled? ( 5 ) THE learned Munsiff recorded his findings on issue Nos. 1 to 3 in the negative and on the basis of his findings on those issues, dismissed the suit as per his judgment and decree dated 14-9-1971. ( 6 ) THE plaintiff being aggrieve,d by the said decree, took up the matter in appeal to the court of the Civil Judge, bijapur, in R. A. No. 19211971. The appeal finally came up for hearing before the Addl. Civil Judge, Bijapur. The learned Addl. Civil Judge formulated four points for consideration which were as under: 1. Whether the defendant proved that the amounts of the suit cheques though encashed by himself and by his gumasta Virabhadrappa were in fact paid to the plaintiff? 2. Whether plaintiff is entitled to recover the amounts of the four cheques from the defendant? 3. Is he entitled to claim any interest? 4. Whether the findings of the trial court are proper and sustainable? the learned Addl. Civil Judge recorded his findings under point no, 1 in the negative and under point No. 2 in the affirmative. Under point, No. 3 he held that the plaintiff was entitled to claim interest from the date of the suit. 4. Whether the findings of the trial court are proper and sustainable? the learned Addl. Civil Judge recorded his findings under point no, 1 in the negative and under point No. 2 in the affirmative. Under point, No. 3 he held that the plaintiff was entitled to claim interest from the date of the suit. As regards point No, 4, he held that the findings of the trial court were not proper and sustainable and accordingly he allowed the appeal, set aside the judgment and decree of the trial court and decreed the suit as per his judgment and decree dated 26-3-1974. Hence this second appeal by the defendant. ( 7 ) THE short point for decision in this second appeal will be whether the lower-appellate court was right, in the circumstances of the case and the evidence on record, in reversing the trial court's findings and decreeing the suit. ( 8 ) THAT the plaintiff issued the four suit-cheques three in the name of the defendant Exs. P. 1 to P. 3 and one in the name of his clerk Veerabhadrappa, ex-P. 4, the particulars of which were as under: (1) Ex-P. 1 cheque dated 22-8-1968 for Rs. 1000, (2) Ex. P-2 cheque dated 27-8-1968 for Rs. 100, (3) ex-P-3 cheque dated 14-8-1968 for Rs. 500, and (4) Ex. P-4 cheque dated 26-8-1968 for Rs. 200, is not in dispute. It is also not in dispute that all the four cheques were written by the defendant and that the first three cheques Exs. P. 1 to P. 3 were encashed by the defendant himself and the last one Ex. P-4 by his clerk. According to the plaintiff, all the four cheques were given to the defendent as hand-loan, whereas the case of the defendant was that he wrote the cheques Exs. P. 1 to 3 in his name at the instance of the plaintiff and on his request, encashed those cheques and returned the amount to the plaintiff soon after they were encashed. As regards Ex. P. 4, the defendant denied the receipt of either the cheque or the amount thereunder. He denied the case of the plaintiff regarding any loan in toto. ( 9 ) THE trial court, on, issue No, 1, which is the most relevant issue in the case, has held that the plaintiff has failed to prove that the suit cheques Exs. P. 4, the defendant denied the receipt of either the cheque or the amount thereunder. He denied the case of the plaintiff regarding any loan in toto. ( 9 ) THE trial court, on, issue No, 1, which is the most relevant issue in the case, has held that the plaintiff has failed to prove that the suit cheques Exs. P. 1 to P. 4 were loaned to the defendant. ( 10 ) THE first appellate court appeared to have proceeded on the basis that a payment by cheque would be primafacie evidence of a loan and therefore, it is for the person to contend otherwise to establish the same. That this is so, is clear from the observations made by the learned Addl. Civil Judge in his judgment which reads as follows: "certainly these four cheques were negotiable instruments and the presumption that they were drawn for due consideration is applicable to them. It is therefore, the burden upon the defendant to prove that the amounts of these cheques were not received by him as loans but were in t'act paid to the plaintiff himself. " he proceeded further to observe that "the learned Munsiff misdirected himself and felt that the burden of proving that he advanced loan to the defendant under the suit cheques lay heavily on the plaintiff himself. " ( 11 ) IT is obvious from the above observtion made by the learned Addl. Civil judge in his judgment that the learned addl. Civil Judge proceeded on the assumption that a paid cheque is by itself evidence of a loan by the drawer to the payee. It seems to me that the learned addl. Civil Judge was erroneous in his view as to the true scope of the evidentiary value of a cheque. The correct legal position as to the evidentiary" value of a cheque is found in a passage in the book "the Negotiable Instruments Act" by Bhashyam and Adiga 13th Edn. at page 108 runs thus: "prima facie all payments by cheques are to extinguish an existing debt, not to create a new one. The correct legal position as to the evidentiary" value of a cheque is found in a passage in the book "the Negotiable Instruments Act" by Bhashyam and Adiga 13th Edn. at page 108 runs thus: "prima facie all payments by cheques are to extinguish an existing debt, not to create a new one. Hence a cheque presented and paid is of itself no evidence of money lent or advanced by the banker to the customer, on the other hand, it is prima facie evidence of the repayment of money previously lodged by the customer in the banker's hands, except, perhaps, when the cheque was paid without funds or when the payment itself creates an overdraft. "nor again a paid cheque is in itself an evidence of a loan by the drawer to the payee: yet it may be shown by other evidence that a cheque was in fad loaned to him. A cheque once drawn but not presented is not evidence of money previously lent to the drawer by the payee. " (Note: emphasis supplied ). From the above quoted passage, it would be clear that a cheque drawn, presented and paid is by itself no evidence of money lent or advaced by the drawer to the payee. It may be a prima facie evidence to extinguish an existing debt, but however, not to create a new one. However, it is open to the drawer to show by other evidence that the cheque was, in fact, loaned to the payee. A mere issue of a cheque in favour of the payee, by itself will not be evidence of a loan even if the cheque is encashed by the payee. That it was loaned to the payee must be proved by the drawer by other evidence, if not, it would lead to dangerous and disastrous consequences. To emphasize this view by illustration, suppose an employer issues a, cheque in the name of his employee or a master issues a cheque in the name of his servant and asks the latter to encash the cheque and bring the cash to him from the Bank and if the latter does so, it would be hazardous to hold that the cheque issued in the name of the employee or the servant as evidence of loan to them and place the burden upon them to prove otherwise. On the other hand, in such a situation, if the employer or the master brings an action against his employee or the servant to recover the money encashed by them under the cheque by way of loan, it is for the employer or the master to prove by other evidence that the cheque issued in their name was really loaned to them. That being the position in law, it seems to me that the burden is upon the person who sets up a case of loan based on the issuance of a cheque to establish by other evidence that it was a loan to the payee. ( 12 ) APPLYING the above legal principle as to the evidentiary value of a cheque to the facts of the case on hand, it appears to me that the trial court had proceeded on the correct basis and raised issue No. 1 placing the burden upon the plaintiff to prove that the four suit cheques were loaned to the defendant. It discussed the evidence, both oral and documentary, produced by the parties and recorded its finding that the plaintiff had failed to prove that the four suit cheques Exs. P. 1 to P. 4 were loaned to him. That finding of the trial court is fully supported by the evidence on record. In that view of the matter, it seems to me that the lower-appellate court was not right in criticising the trial court that it misdirected itself by placing burden of proof on the plaintiff to prove that the suit transaction was a loan transaction. ( 13 ) THE first appellate court has committed an error and illegality in scrutinising the evidence in the case on the assumption that the suit cheques were prima facie evidence of loan and the burden was upon the defendant to prove that the amounts covered under those cheques were not received by him as loan but were in fact paid to the plaintiff soon after the cheques were encashed. This was how the first appellate court has fallen into an error in appreciating the whole evidence adduced in the case and reached a wrong conclusion in deciding the case in favour of the plaintiff. The evidence adduced in the case, in my opinion, would not justify or support the conclusion reached by the lower-appellate court. This was how the first appellate court has fallen into an error in appreciating the whole evidence adduced in the case and reached a wrong conclusion in deciding the case in favour of the plaintiff. The evidence adduced in the case, in my opinion, would not justify or support the conclusion reached by the lower-appellate court. On the other hand, they fully support the conclusion reached by the court of first instance. ( 14 ) IN the result, for the reasons stated above, the appeal is allowed with costs. The judgment and decree of the lower- appellate court are set aside and that of the trial court restored. --- *** --- .