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2003 DIGILAW 365 (PNJ)

Ram Parkash v. Dina Nath (Dead) Through L. Rs.

2003-02-28

HEMANT GUPTA

body2003
Judgment Hemant Gupta, J. 1. The plaintiff is aggrieved against the judgment and decree passed by the learned First Appellate Court dismissing his suit for the recover of Rs.7704/- which was decreed by the learned trial Court in the first instance. 2. The brief facts, out of which the present appeal arises, are that the parties were partners in leasehold rights in agricultural land measuring 469 Kanals 9 marlas situated in village Barsat. Partnership was dissolved on 4.8.1967. Accounts were settled and a sum of Rs.7400/- was found to be due to the plaintiff. As per the plaintiff, the defendant executed three pronotes in the sum of Rs.4000/-. Rs.2400/- and Rs.1000- on account of relinquishment by the plaintiff of his lease-hold rights in the land. However, the defendant paid a sum of Rs.1000/- relating to one pronote but the liability in respect of two pronotes was not discharged and therefore, the plaintiff filed suit for recovery of two pronotes of Rs.4000/- and Rs.2400/- along with interest thereon. 3. It may be mentioned here that the plaintiff has earlier filed a suit for declaration and injunction as a consequential relief on 9.4.1968 to the effect that the plaintiff is the sole lessee of the land in suit measuring 479 kanals 9 marlas on account of the failure of the defendant to pay the amount of pronotes in terms of the agreement executed between the parties on 4.8.1987 whereby it was stipulated that if the defendant pays a sum of Rs.7400/- to the plaintiff by 20.11.1967 then the plaintiff would cease to have interest in the lease of the suit land. However, such suit was withdrawn on 20.12.1968 and thereafter, the plaintiff filed the present suit for recovery. 4. The defendants, in the written statement, admit the execution of the pronotes as well as agreement between the parties dated 4.8.1967 and admit that a sum of Rs.7400/-was payable on 20.11.1967. Reply of the defendants in para No.1 and 1-A of the amended written statement is as under: "1 and 1A: With regard to para No.l and 1-A of the plaint it is submitted that the execution of the pronotes is admitted but no debt was raised by the defendant or paid by the plaintiff at all. Reply of the defendants in para No.1 and 1-A of the amended written statement is as under: "1 and 1A: With regard to para No.l and 1-A of the plaint it is submitted that the execution of the pronotes is admitted but no debt was raised by the defendant or paid by the plaintiff at all. There was an agreement between the parties to the suit regarding the agricultural land which took place on 4.8.1967 the day on which the pronotes were written whereby the defendant had to pay Rs.7400/-on 20.11.1967. In case of default of this amount for which pronotes were executed by the defendant in favour of the plaintiff the defendants lease rights where to be extinguished in the land and the plaintiff, was agreed to be the sole owner of lease rights. So nothing was to be paid separately to the plaintiff on the score of these pronotes. The matter regarding the lease rights of the parties is a separate one which they can enforce separately and therefore, the plaintiff is not at all entitled to demand any amount on the basis of pronotes as such. Moreover, on the basis of said agreement dated 4.8.1967, the plaintiff previously brought a suit for declaration and permanent injunction as a consequential relief to the effect that the plaintiff is the sole lessee in possession of the land measuring 469 kanals 9 marlas situated in village Barsat which suit was ultimately dismissed on 20.12.1968 by the then Sub Judge Panipat. Thus, the liabilities of the parties to the terms of the agreement are there and the plaintiff cannot legally separate the pronotes in question from the said agreement when both thedocuments formed one and the same transaction. In fact, the suit is legally barred and Is not maintainable, as such the suit does not lie at all. The agreement of 4.8.1967 is with the plaintiff and he should be ordered to produce it in the court." 5. The plaintiff controverted the averments made in the written statement by filing replication and alleged that since the defendant has not discharged liability in the pronote, therefore, the liability of the defendant to pay the amount of pronote in suit still subsists. The pronotes were executed by the defendant for valid consideration. 6. On the basis of these pleadings, the parties went to trial on the following issues: 1. The pronotes were executed by the defendant for valid consideration. 6. On the basis of these pleadings, the parties went to trial on the following issues: 1. Whether the disputed pronotes were executed by the defendant without any consideration? 2. Whether the disputed pronotes were executed under the circumstances referred in para No.1 and 1-A of the written statement? OPD 3. Whether the plaintiff is entitled for the recovery of any amount on account of interest due to any agreement? If so, at what rate, and to what extent?OPP 4. Whether the suit is legally barred as alleged in para No.l and 1-A; of the written statement? OPD 5. Whether the plaintiff is estopped as alleged? OPD 6. Whether the defendant is entitled to any special costs? OPD 7. Relief. The learned trial court granted decree for the recovery of the amount holding that the disputed pronotes were for consideration and the contention raised by the defendant in para No.l and 1-A of the written statement is not correct. However, in defendants appeal the First Appellate Court reversed the findings on issues No.1 and 2 and held that the pronotes were executed as collateral security and not executed in lieu of cash consideration and thus, dismissed the suit. Aggrieved against such findings the plaintiffs has filed the present appeal. With the assistance of the learned counsel for the parties. I have gone though the records of the case. The following substantial questions of law arise for consideration of this court; 1. Whether consideration under Section 118 of the Negotiable Instruments Act, means only the cash consideration and does not include the consideration of relinquishment of leasehold rights? 2. Whether the relinquishment of leasehold rights in terms of an agreement in pursuance of which pronotes were executed can form the basis for a decree of recovery on the basis of pronotes? 7. The parties admittedly entered into an agreement on 4.8.1967. where the plaintiff has agreed to relinquish his leasehold rights on payment of Rs.7400/- from the defendant on or before 20.11.1967. Since the defendant has not made payment at the time of execution of the agreement, therefore, he executed three pronotes in the sum of Rs.7400-. Thus, the relinquishment of leasehold rights were in lieu of consideration of Rs.7400- and for which sum the defendants executed three pronotes. Since the defendant has not made payment at the time of execution of the agreement, therefore, he executed three pronotes in the sum of Rs.7400-. Thus, the relinquishment of leasehold rights were in lieu of consideration of Rs.7400- and for which sum the defendants executed three pronotes. Since the consideration is not defined in the Negotiable Instruments Act, therefore, the consideration as contemplated under Chapter 11 of the Contract Act would be relevant. Section 10, 23 and 25 of the Contract Act read as follows: "10. What agreements are contracts.- All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Nothing therein contained shall affect any law in force in India and not hereby expressly repealed by which contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents. 23. What considerations and objects are lawful, and what not.- The consideration or object of an agreement is lawful, unless - it is "orbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent: or involves or implies injury to the person or property of another; or the court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an agreement is said to be unlawful. Even agreement of which the object or consideration is unlawful is void. 25. In each of these cases, the consideration or object of an agreement is said to be unlawful. Even agreement of which the object or consideration is unlawful is void. 25. Agreement without consideration void, unless if is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law.- An agreement made without consideration is void, unless - (1) it is expressed in writing and registered under the law for the time being in force for the registration of documents, and is made on account of natural love and affection between parties standing in a near relation to each other; or unless (2) it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do: or unless (3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits." 8. In Central Bank of India v. Tarseema Compress Wood Manufacturing Company and ors. A.I.R. 1997 Bombay 225. it has been held that the consideration can be either past, present or future. The Bombay High Court was dealing with recovery suit filed by a bank on the basis of cash credit account where the defendant was permitted to issue cheque up to the sanction limits. It was submitted that the promissory notes executed by the defendant are without consideration since no amount was paid on the date of execution of the pronote or thereafter. It was found that the promissory notes were executed for past consideration. 9. In Kundan Lal Rallaram v. Custodian, Evacuee Property. Bombay A.I.R. 1961 Supreme Court 1316. the Honble Supreme Court while considering the presumption under Section 118 of the Negotiable Instruments Act has held that withholding of material evidence would be a legal evidence on the basis of which the presumption raised under Section 118 can be rebutted. It was a case where the plaintiff alleged that the defendant has executed pronote. in the sum of Rs. 37000/- which was payable in exchange of the properties. It was a case where the plaintiff alleged that the defendant has executed pronote. in the sum of Rs. 37000/- which was payable in exchange of the properties. The promissory note was executed as a consideration for the goods. The relevant para reads as under: A plaintiff, who says that he had sold certain goods to the defendant and that a promissory note was executed as consideration for the goods and that he is in possession of the relevant account books to show that he was in possession of the goods sold and that the sale was effected for a particular consideration, should produce the said account books, for he is in possession of the same and the defendant certainly cannot be expected to produce his documents. In those circumstances, if such a relevant evidence is withheld by the plaintiff. Section 114 enables the Court to draw a presumption to the effect that, if produced, the said accounts would be unfavourable to the plaintiff. This presumption, if raised by a court, can under certain circumstances rebut the presumption of law raised under Section 118 of the Negotiable Instruments Act. Briefly stated, the burden of proof may be shifted by presumptions of law or fact, and presumptions of law or presumptions of fact may be rebutted not only by direct or circumstantial evidence but also by presumptions of law or fact. We are not concerned here with irrebutable presumption of law." 10. In K.P.O. Moideenkutty Hajee v. Pappu Manjooran and another. A.I.R. 1966 Supreme Court 3365 the Supreme Court was considering the case arising out of a pronote reciting cash consideration but the consideration proved was transfer of land under an agreement of sale. It was held by Honble Supreme Court as under: "Section 118 imposes a duty on the Court to raise a presumption in his favour that the said instrument was made for consideration. That presumption shifts the burden of proof, namely, establishing a case that the promissory note is not supported by consideration to the defendant. The defendant may adduce direct or circumstantial evidence to prove that the promissory note was not supported by consideration. If he adduces acceptable evidence, the burden again shifts to the plaintiff. If the circumstances relied on by the defendant are so compelling, the burden is on the plaintiff to prove the contra. The defendant may adduce direct or circumstantial evidence to prove that the promissory note was not supported by consideration. If he adduces acceptable evidence, the burden again shifts to the plaintiff. If the circumstances relied on by the defendant are so compelling, the burden is on the plaintiff to prove the contra. The statutory presumption, though is one of law is also a question of fact to be proved in each case. The presumption raised under Section 118 is not in respect of the consideration mentioned in negotiable instruments, the presumption is in favour of there being a consideration for the negotiable instrument. Any consideration which is a valid consideration in law is valid and enforceable. If a particular consideration mentioned in the negotiable instrument is found to be false and some other consideration is set up that is a factor which the court would take into consideration in deciding whether the defendant has discharged the burden cast on him by Section 118. The Court is required to consider the entire evidence laid before the Court." 11. However, in the present case, the plaintiff has pleaded the basis of execution or pronotes i.e. an agreement dated 4.8.1967 whereby he has relinquished leasehold rights in the agricultural land. The execution of agreement is admitted and so is the execution of the pronotes. Therefore, the pronotes have been executed for consideration and thus, the findings recorded by the learned First Appellate Court dismissing the suit is clearly erroneous and not sustainable. 12. The plaintiff has relinquished his share in the leasehold rights in the agricultural land measuring 469 kanals 9 marlas vide agreement dated 4.8.1967. Three pronotes were executed on the same day in lieu of the consideration which the defendant agreed to pay on or before 20.11.1967. Although the agreement contemplated that the plaintiff shall be the sole owner of the leasehold rights if the defendant fails to pay the amount agreed vide agreement dated 4.8.1967. The plaintiff has not enforced the said agreement. He has an independent causes of action to enforce his claim for the amount of pronotes. The withdrawal of suit by the plaintiff for declaration filed on the basis or agreement dated 4.8.1967 will not preclude the plaintiff to sue for the amount of pronotes. The plaintiff has not enforced the said agreement. He has an independent causes of action to enforce his claim for the amount of pronotes. The withdrawal of suit by the plaintiff for declaration filed on the basis or agreement dated 4.8.1967 will not preclude the plaintiff to sue for the amount of pronotes. The pronotes executed by the defendant were for consideration and thus, the plaintiff is entitled to decree for the recovery of the amount.In view of the above, the present appeal is allowed. The judgment and decree passed by the learned First Appellate Court is set aside and that of the trial Court is restored with costs throughout.