Back
Andhra Pradesh High Court
RAMANUJULU NAIDU, T. L. N. REDDY,JAGANNADHA RAO
G. Vasu - Appellant
Versus
Syed Yaseen Sifuddin Quadri - Respondent
Decided On : 12/08/1986
NEGOTIABLE INSTRUMENTS ACT, 1881 - SECTION 118 - PRESUMPTION OF CONSIDERATION - REBUTTAL - BURDEN OF PROOF - SHIFTING OF BURDEN - "UNTIL THE CONTRARY IS PROVED" - MEANING AND SCOPE - PREPONDERANCE OF PROBABILITIES - CIRCUMSTANCES OF THE CASE - REBUTTAL EVIDENCE - DISAPPEARANCE OF PRESUMPTION - LEGAL BURDEN ON PLAINTIFF - EVIDENCE ACT, 1872 - SECTIONS 3, 4, 101 TO 104, 114.
Fact of the Case:
In a suit on a promissory note, the plaintiff pleaded that the defendant borrowed certain sums of money under two promissory notes. The defendant denied borrowing the money and claimed that the plaintiff was a pauper and had no means to lend the amounts. The trial court rejected both the plaintiff's and defendant's cases and held that the promissory notes were nominally executed. On appeal, the plaintiff contended that the presumption under Section 118 of the Negotiable Instruments Act, 1881, operated in his favor, even if both parties' versions were not true.
Finding of the Court:
The Full Bench of the Andhra Pradesh High Court held that the presumption under Section 118 of the Negotiable Instruments Act, 1881, is rebuttable and can be disproved by the defendant by showing a preponderance of probabilities that the promissory note is not supported by any consideration. The Court interpreted the words "until the contrary is proved" in Section 118 to mean that the defendant need not prove with absolute certainty that no consideration existed, but can rely on the circumstances of the case and establish the non-existence of consideration by a preponderance of probabilities.
Issues: 1. Whether the presumption of consideration under Section 118 of the Negotiable Instruments Act, 1881, is irrebuttable or can be rebutted by the defendant? 2. What is the meaning and scope of the words "until the contrary is proved" in Section 118 of the Negotiable Instruments Act, 1881? 3. Can the defendant rely on a preponderance of probabilities to rebut the presumption of consideration under Section 118 of the Negotiable Instruments Act, 1881? 4. What is the effect of the defendant successfully rebutting the presumption of consideration under Section 118 of the Negotiable Instruments Act, 1881? 5. Does the presumption under Section 118 of the Negotiable Instruments Act, 1881, reappear after the defendant rebuts it and the plaintiff fails to discharge the legal burden of proving consideration?
Ratio Decidendi: 1. The presumption of consideration under Section 118 of the Negotiable Instruments Act, 1881, is rebuttable by the defendant. 2. The words "until the contrary is proved" in Section 118 of the Negotiable Instruments Act, 1881, mean that the defendant need not prove with absolute certainty that no consideration existed, but can rely on the circumstances of the case and establish the non-existence of consideration by a preponderance of probabilities. 3. Yes, the defendant can rely on a preponderance of probabilities to rebut the presumption of consideration under Section 118 of the Negotiable Instruments Act, 1881. 4. If the defendant successfully rebuts the presumption of consideration under Section 118 of the Negotiable Instruments Act, 1881, the evidential burden shifts back to the plaintiff, who also has the legal burden of proving consideration. 5. No, the presumption under Section 118 of the Negotiable Instruments Act, 1881, does not reappear after the defendant rebuts it and the plaintiff fails to discharge the legal burden of proving consideration.
Final Decision: The appeal was allowed, and the suit was dismissed.
JAGANNADHA RAO, J. :- This reference to a Full Bench has been made on the ground that there is a conflict between Division Bench judgements, viz., M. Janaka Lakshmi v. Madhava Rao, AIR 1973 Andh Pra 103 rendered by Chinnappa Reddi, J. (as he then was) and A.D.V. Reddy, J. on the one hand and Maddam Lingaiah v. Hasan CCCA Nos. 95 and 96 of 1969 dt. 22-9-1972 rendered by M. Krishna Rao J. and M. Ramchandra Raju J. and Ponna Satyavathi v. Pamu Surya Rao L. P. A. 158 of 1977 dt. 26-12-1978 rendered by Kuppuswami J. (as he then was) and P.A. Choudary J. on the other hand. The point arises in the context of the presumption under S.118 of the Negotiable Instruments Act, 1881. In Janaka Lakshmi's case (AIR 1973 Andh Pra 143) (supra) the Court disbelieved the defendant's plea as to the circumstances under which the promissory note was executed without consideration and the Court also disbelieved the plaintiff's story; but, even so, the Court held that even if the versions of both sides were not true, still the presumption under S.118 would operate and the suit was liable to be decreed. For that reason, the Court relied upon a judgement of the Bombay High Court in Tar Mahamed v. Tyed Embrahim, AIR 1949 Bom 257. On the other hand in Maddam Lingaiah's case (supra) another Division Bench of this Court expressly dissented from the Bombay judgement and stated that they were doing so in view of the ruling of the Supreme Court in Kundanlal v. Custodian Evacuee Property, AIR 1961 SC 1316 and also referred to two earlier decisions of the Madras High Court in Narasamma v. Veeraju, AIR 1935 Mad 769 and Narayana Rao v. Venkatappayya, AIR 1937 Mad 182. In the Second unreported judgement in Ponna Satyavathi's case (supra) though the Bombay case was referred to it was not expressly dissented from. That is how the matter has come to the Full Bench. We have to decide which of the conflicting views is to be followed.
2. In the present case, the plaintiff pleaded that the defendant borrowed a sum of Rs. 10,000 under one promissory note dt. 1-8-1972 (Ex. A-1) and another sum of Rs. 5,000/- (Ex. A-3) on the same day under another promissory note. The plaintiff claimed likewise in the suit notice, Ex. A-5, dt. 10-10-1973 claiming the above sums and another sum of Rs. 1,500/- said to have been borrowed earlier. The defence was that no amounts were borrowed as stated above but that the plaintiff was a pauper and had no means to lend the amounts. It was further contended that the plaintiff and defendant were close friends having joint business, that the defendant was the financial investor and plaintiff was paid monthly remuneration, that the plaintiff's parents did not approve of the job and therefore the plaintiff represented to his parents that his monies were invested with the defendant and that therefore the plaintiff obtained these promissory notes from the defendant. These notes were not supported by any consideration. The same story was stated in the reply notice. Ex. A-6 dt. 14-11-1973. The defendant produced his witnesses in the first instance.
After D.W. 1 (defendant's) cross-examination was over, the plaintiff recalled him and suggested a case of the suit pronotes being renewals of earlier notes, which was denied. Thereafter the plaintiff admitted in his evidence as P.W. 3 that Exs. A-1 and A-3 were not supported by cash consideration but were renewals for Exs. A-9 dt. 1-1-1970 (Rs. 10,000) and Ex. A7 dt. 26-3-1969 (for Rs. 5000/-). The trial Court rejected the plaintiff's case of cash consideration for Exs. A-1 and A-3 and also rejected the defendant's plea and Ex. A-1 and A-3 were nominally executed. But, it accepted the plaintiffs evidence that Exs. A9 and A-7 notes were renewals of Exs. A-1 and A-3 respectively (sic). In this appeal, we have come to the conclusion that the plaintiff having admitted that no cash was paid under Exs. A-1 and A-3 and the case regarding renewals not having been set up by the plaintiff either in the suit notice
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
