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1996(5) Supreme 113
SUPREME COURT OF INDIA
K. Ramaswamy, B.L. Hansaria and G.B. Pattanaik, JJ.
K.P.O. Moideenkutty Hajee -Appellant
versus
Pappu Manjooran & Anr. -Respondents
Civil Appeal No. 3651 of 1996
(Arising out of SLP (C) No. 9943/91)
Decided on 6-2-1996
Held : That when the suit is based on pronote, and promissory note is proved to have been executed, Section 118(a) raises the presumption, until the contrary is proved, that the promissory note was made for consideration. That initial presumption raised under Section 118(a) becomes unavailable when the plaintiff himself pleads in the plaint different considerations. If he pleads that the promissory note is supported by a consideration as recited in the negotiable instrument and the evidence adduced in support thereof, the burden is on the defendant to disapprove that the promissory note is not supported by consideration or different consideration other than one recited in the promissory note did pass. If that consideration is not valid in law nor enforceable in law, the court would consider whether the suit pronote is supported by valid consideration or legally enforceable consideration. Take for instance, a pronote executed for a time-barred debt. It is still a valid consideration. The falsity of the plea of the plaintiff also would be a factor to be considered by the court. The burden of proof is of academic interest when the evidence was adduced by the parties. The court is required to examine the evidence and consider whether the suit as pleaded in the plaint has been established and the suit requires to be decreed or dismissed. (Para 6)
(ii) Negotiable Instruments Act, 1881-Section 118-Presumption as to negotiable instruments-Promissory Note-Suit for recovery based on-Promissory Note is proved to have been executed-Plea of defendant that he had executed Promissory Note to show that agreement of sale of land would be proceeded with-Agreement got cancelled - Plaintiff pleading consideration different from one found in Promissory Note-Documentary evidence to prove that defendant executed Promissory Note when they were put in possession of additional area uncovered by agreement-Valid consideration-Decree granted by courts below not warranting interference.
Held : In this case, the plea of the appellant is that he had executed Ex. A-1, promissory note to show to the principal of the first respondent, the power of attorney/agent under which the respondent had entered into the agreement, that Ex. B1 would be proceeded with and on the faith thereof, they intended to proceed to perform their part of the contract under Ex. B1. Later, the respondent got Ex. B1 cancelled and consequently, Ex. B1 contract became unenforceable and that, therefore, Ex. A1 is not supported by consideration and so the respondents cannot recover the amount. (Para 7)
Once the plaintiff pleads consideration different from the one found in negotiable instrument, the statutory presumptions does not arise. Under Section 118(a) of the Act, until the contrary is proved, presumption shall be made that every negotiable instrument was made for consideration. Once there is admission of the execution of the promissory or the same is proved to have been executed, the presumption under Section 118(a) is raised that it is supported by consideration. That initial presumption will not be available to the plaintiff in this case. He, however, not only relied on Ex. A1 but also the exuberance of documents that came into existence, viz., Ex. B1 agreement, correspondence, conduct of the parties and the endorsement on the agreement. Those documents do show that though cash consideration was recited under Ex. A1, in fact, the consideration was for the transfer of the land, namely, to the extent of 3 acres 44 cents and the building thereon in R.S.8/1A2 and that Ex. A1 is supported by valid consideration. (Para 9)
Since the respondents had delivered possession of 3 acres 44 cents of land and the building to the appellant which is in addition to the lands covered under Ex. B1, the possession of land having been passed into the hands of the appellant and since in consideration thereof he had executed Ex. A1 Promissory Note, it is supported by legally enforceable consideration. (Para 10)
ORDER
Impleadment allowed.
Leave granted.
2. We have heard the counsel on both sides. The appellant-defendant is assailing the concurrent findings of the High Court in A.S. No. 372/83, dated 12.6.1990 and the Civil Court in O.S. No. 67/81, dated 12.10.1981 that though Promissory Note, Ex. A1, dated October 28, 1978 executed for a sum of Rs. 1.5 lakhs recites case consideration, since the consideration, as pleaded in the plaint, namely, an additional land of 3 acre and 44 cents bearing survey No.8/1A2 and a building, was delivered, in addition to 10 acres of land delivered under agreement of sale dated July 21, 1978, Ex.B1, the consideration for Ex.A1 has been proved; and the suit for recovery of the amount on the basis of Ex.A1 is valid in law.
3. The facts in support thereof are that the first respondent as a general power of attorney had entered into an agreement of sale, Ex.B1, to sell 35 acres of land for a total consideration of Rs. 10 lakhs. In furtherance thereof, on paying Rs. 4 lakhs as part consideration, 10 acres of land was put in possession of the appellant. On the appellant requiring additional land and as he did not have case with him, had executed Promissory Note, Ex.A1, for a sum of Rs. 1.50 lakhs and in furtherance thereof possession of three acres and forty four cents of land and building was given to the appellant. It is not necessary for us to proceed further in this matter relating to Ex.B1 for the reason that Ex.B1 has fallen through and the contract has not been completed.
4. Chapter VIII of the Negotiable Instruments Act, 1881 (for short the Act") provides special rules of evidence. Section 118 draws presumption as to the negotiable instruments. "Until the contrary is proved", under clause (a) presumption shall be made of consideration that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration.
5. This Court in Kundan Lal Rallaram v. Custodian, Evacuee Property, Bombay1, speaking through K. Subba Rao, J. [as he then was] considering the scope of the presumption had laid down the law thus :
"Section 118 lays down a special rule of evidence applicable to negotiable instruments. The presumption is one of law and thereunder a court shall presume, inter alia, that the negotiable instrument or the endorsement was made or endorsed for consideration. In effect it throws the burden of proof of failure of consideration on the maker of the note or the endorser, as the case may be. The phrase "burden of proof" has two meanings - One, the burden of proof as a matter of law and pleading and the other the burden of establishing a case; the former is fixed as a question of law on the basis of the pleadings and is unchanged during the entire trial whereas the latter is not constant but shifted as soon as a party adduces sufficient evidence to raise a presumption in his favour. The evidence required to shift the burden need not necessarily be directed evidence or admissions made by opposite party; it may comprise circumstantial evidence or presumptions of law or fact. 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 reflected for a particular consideration should produce the said account books. If such a relevant evidence is withheld by the plaintiff, Section 114, Evidence Act 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 Instrument Act."
In that case the appellant was doing business in radio and gramophones i
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