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2022 DIGILAW 12 (KER)

T. N. Omana v. A. K. Sini

2022-01-05

P.SOMARAJAN

body2022
JUDGMENT : P. SOMARAJAN, J. 1. A suit for recovery of money based on a dishonoured cheque for Rs. 17,50,000/- was dismissed by the trial court on the reason that the alleged cheque was issued about 2½ years after the alleged transaction that too without any liability for interest and that the oral evidence tendered by PWs. 1 to 3 cannot be relied on. It appears that the trial court has committed a grave mistake. The admission made in the written statement regarding issuance of a signed blank cheque by way of security to the plaintiff in connection with a money transaction was not properly considered or addressed by the trial court. It is a case wherein the defendant has admitted issuance of a cheque to the plaintiff by way of security in connection with a loan transaction. But according to the defendant, it was in connection with borrowal of an amount of Rs. 50,000/-, the abovesaid signed cheque was issued to the plaintiff. It would discharge the initial burden lies on the plaintiff to prove the due execution. It is true that a mere admission of signature found affixed as that of the executant may not itself prove the due execution of the document when it is brought under challenge. But in the instant case, the admission refers to the issuance of the cheque in a money transaction to the plaintiff. Necessarily, it must be understood that the cheque was drawn and issued to the plaintiff in connection with the money transaction, but at the same time, it is the version of the defendant that it was issued as a signed blank cheque by way of security at the time of borrowal of Rs. 50,000/-. When there is an admission regarding issuance of the cheque in connection with a money transaction either as security or in lieu of cash, the initial onus lies on the plaintiff to prove the due execution would stand discharged. The presumption available under Section 118 of the Negotiable Instruments Act including the one that the cheque is supported by consideration would come into play. But it is argued that there cannot be any presumption as to quantum of consideration even under Section 118 of the Negotiable Instruments Act, hence it will not relieve the plaintiff from proving the actual consideration covered by the cheque. But it is argued that there cannot be any presumption as to quantum of consideration even under Section 118 of the Negotiable Instruments Act, hence it will not relieve the plaintiff from proving the actual consideration covered by the cheque. Reliance was taken from a three Judge Bench decision of the Apex Court in The Official Receiver, Kanpur and Another vs. Abdul Shakoor and Others, AIR 1965 SC 920 in support of the said argument, wherein it was held that there cannot be any presumption as to the quantum of debt due by the insolvent at the date of insolvency, but the Insolvency Court has to ascertain whether a debt is due by the insolvent, whether the debt is provable in the insolvency and the quantum of the debt due at the material date. The Apex Court has not applied the presumption available under Section 118 of the Negotiable Instruments Act as against the consideration stated in the document or the actual amount due on the reason that no such presumption can be extended to a third person so as to defeat his claim in an insolvency proceedings. The principle behind it is that the presumption available under Section 118 of the Act would operate only against the drawer of the cheque or the person litigating under him and not against the creditor of the drawer of the cheque in an insolvency proceedings. Necessarily, a mere admission of execution of negotiable instrument, including a cheque by its drawer or maker, would not make Section 118 of the Act applicable and no presumption under that section can be drawn, when it is adverse to the interest of any of the creditor under him in an insolvency proceedings. To put it in short, in an insolvency proceedings, no presumption under Section 118 of the Negotiable Instruments Act can be drawn in a routine way as against a creditor of the insolvent, based on the admission by the insolvent, the drawer of the cheque, simply on the reason that there is no scope for such admission by him, as against the interest of other creditor/s. A right to admit a fact is resting on the person whose interest would stand affected by such admission. In an insolvency proceedings, after the submission of asset and liabilities of the person sought to be declared insolvent will not have any such right of admission as against the defeated creditors. Necessarily, in an insolvency proceedings, the validity or the due execution or the debt due under, is a matter to be agitated in relation to the other creditors. As such, the admission made by the executant or the drawer of the cheque or the maker of the promissory note who sought to be declared insolvent may not have much relevance as against the interest of other creditors. Hence, no presumption can be gathered as against the other creditors, unless they themselves admit its execution and consideration thereof. Necessarily, the legal position laid down by the Apex Court in the abovesaid decision must be understood pertaining to the insolvency proceedings and the limitation in the matter of presumption under Section 118 of the N.I. Act against a stranger or a third person. 2. As discussed earlier, the presumption that can be drawn under Section 118 of the Act should always be against the drawer of the cheque or maker of the promissory note and the persons litigating under them and rebuttable in nature. The wording used 'of consideration' under Section 118 of the Act, when it is permissible to draw presumption under that provision would stand initially for the amount made endorsed therein though it can be rebutted either by evidence or by preponderance of probability. There is no scope for drawing a presumption in part, though it is permissible to rebut the same either in part or in whole in consonance with Section 45 of the N.I. Act or otherwise. The application of presumption available under Section 118 of the Negotiable Instruments Act and under Section 114 of the Evidence Act was elaborately considered by a co-equal Bench of Apex Court in an earlier decision in Kundan Lal Rallaram vs. Custodian, Evacuee Property, Bombay, AIR 1961 SC 1316 and laid down the legal position that the presumption that can be drawn either under Section 114 of the Evidence Act or under Section 118 of the Negotiable Instruments Act is with respect to the existence of any fact, though it is rebuttable. What is laid down by the Apex Court in The Official Receiver's case (supra) in paragraph 15 would make the legal position crystal clear, which runs as follows: “The section is undoubtedly in terms general. But there is no reason to suppose that it was intended to apply to a proceeding which is not in the nature of a civil dispute between the parties to the negotiable instrument or their privies. The Negotiable Instruments Act is intended to codify the law merchant relating to dealings concerning negotiable instruments. The presumptions which are raised under Section 118 do undoubtedly set out special rules of evidence relating to negotiable instruments, but, in our opinion, the nature of the presumptions from their very nature operate in favour of or against the parties to the negotiable instrument or their privies and cannot generally apply to persons who do not claim under the parties to the instrument.” 3. The nature of presumption that can be drawn came up for consideration before the Privy Council in Murugesam Pillai vs. Gnana Sambandha Pandara Sannadhi, AIR 1917 PC 6 , wherein it was observed that: “A practice has grown up in Indian procedure of those in possession of important documents or information lying by, trusting to the abstract doctrine of the onus of proof, and failing, accordingly to furnish to the Courts the best material for its decision. With regard to third parties this may be right enough - they have no responsibility for the conduct of the suit: but with regard to the parties to the suit it is in their Lordships' opinion, as inversion of sound practice for those desiring to rely upon a certain state of facts to withhold from the Court the written evidence in their possession which would throw light upon the proposition.” 4. It was reaffirmed and settled in Rameshwar Singh vs. Bajit Lal, AIR 1929 PC 95 . The Apex Court in Hiralal vs. Badkulal, AIR 1953 SC 225 had given confirmation to the abovesaid legal position by endorsing the very same view. The interaction between the provisions of general law - Section 114 of the Evidence Act and the special enactment - Negotiable Instruments Act under Section 118 was considered by the Division Bench of the High Court of Madras in Narayana Rao vs. Venkatapayya, ILR (1937) Mad. 299 : AIR 1937 Mad. The interaction between the provisions of general law - Section 114 of the Evidence Act and the special enactment - Negotiable Instruments Act under Section 118 was considered by the Division Bench of the High Court of Madras in Narayana Rao vs. Venkatapayya, ILR (1937) Mad. 299 : AIR 1937 Mad. 182 which was taken note of by the Apex Court in Kundan Lal Rallaram vs. Custodian, Evacuee Property, Bombay, AIR 1961 SC 1316 . What is considered, discussed and laid down is only pertaining to the presumption that can be drawn under Section 118 of the Negotiable Instruments Act and Section 114 of the Evidence Act, which can be rebutted by proving the contrary. Necessarily, it must be understood that it is upon the person, who disputes the consideration thereof to prove the contrary either by cogent evidence or even by preponderance of probabilities. The question whether presumption would operate as against the quantum of consideration never came up for consideration either before the Privy Council or the Apex Court while dealing with the question of presumption available under Section 118 of the Negotiable Instruments Act presumably for the reason that there is no scope for any such legal proposition especially when it is rebuttable in whole or in part in consonance with Section 45 of the N.I. Act. Hence, the legal position settled by a three Judge Bench of the Apex Court in The Official Receiver, Kanpur and Another vs. Abdul Shakoor and Others, AIR 1965 SC 920 is standing on a different footing and would be applicable as against a creditor or a stranger either in an insolvency proceedings or any other proceedings akin to that and shall not be interpreted so as to make it applicable between the drawer and drawee of a cheque. 5. It was laid down in a subsequent decision by the Apex Court in Bharat Barrel and Drum Manufacturing Co. vs. Amin Chand Payrelal, AIR 1999 SC 1008 that once execution of the promissory note is admitted, the presumption under Section 118(a) of the Act would arise that it is supported by consideration. The defendant can prove the nonexistence of consideration by raising a probable defence. vs. Amin Chand Payrelal, AIR 1999 SC 1008 that once execution of the promissory note is admitted, the presumption under Section 118(a) of the Act would arise that it is supported by consideration. The defendant can prove the nonexistence of consideration by raising a probable defence. When the defendant failed to discharge the initial onus of proof by showing the non-existence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under Section 118(a) of the Act. To disprove the presumption, the defendant has to bring on record such facts and circumstances and upon consideration of which, the court may either believe that the consideration did not exist or its nonexistence was so probable that a prudent man would, under the circumstances of the case, act upon the plea that it did not exist. 6. Except the interested testimony of the defendant, no independent or satisfactory evidence was adduced though there is a case of discharge pleaded by the defendant. It is the version of the defendant that the money transaction comes to only Rs. 50,000/- and it was discharged properly, for which also no satisfactory evidence was adduced except the interested version of the defendant as DW-1. 7. PW-2 is the person who filled up the cheque. The reasons advanced by the trial court in paragraphs 40 to 45 of the judgment cannot be sustained. Instead of adjudging whether the cheque was drawn in the handwriting of PW-2, the trial court went on extraneous matters as to what actually prompted the drawer of the cheque not to fill up the same. Further the rejection of oral evidence of PW-3 on a flimsy ground that she is smart enough to recollect the colour of car in which the defendant and her husband came cannot be sustained. The amount covered by the cheque comes to Rs. 17,50,000/- for which no satisfactory evidence was adduced by the plaintiff regarding its source. The fact that the suit was filed without claiming interest to the amount covered by the cheque is a crucial factor to be taken into consideration for the purpose of rebutting the presumption and when there is no satisfactory explanation as to how the plaintiff has raised such a huge amount, it would go against the presumption that can be drawn under Section 118 of the Negotiable Instruments Act. The version given by her that it is out of her retirement benefits requires further consideration and for that purpose, permission can be granted to the parties to adduce further evidence. 8. The appeal is allowed in part by setting aside the decree and judgment of the trial court. The matter is remanded back to the trial court for the consideration of the abovesaid issue pertaining to the source of amount covered by the cheque and the question of rebuttal of presumption, for which the parties shall appear before the trial court on 25.01.2022. There will be a further direction to dispose of the matter within a time schedule of three months from the date of appearance of parties.