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ANDHRA PRADESH HIGH COURT AT AMARAVATI
Subba Reddy Satti, J.
N. Venkata Subbaiah – Appellant
Versus
V. Vinod Kumar – Respondent
Appeal Suit No. 172 of 2006
Decided On : 08-04-2022
NEGOTIABLE INSTRUMENTS ACT, 1881 - SECTION 20 - PROMISSORY NOTE - VALIDITY - INCOMPLETE INSTRUMENT - HOLDER'S AUTHORITY TO COMPLETE - PRESUMPTION OF CONSIDERATION - REBUTTAL - BURDEN OF PROOF.
Fact of the Case:
Plaintiff filed a suit for recovery of an amount of Rs.5,96,333/- basing on five promissory notes along with interest. Defendant contended that the promissory notes were executed as security deposit for doing stock business and though the promissory notes were drafted by him, date of execution and the name of promisee were kept blank as they were executed only for the sake of security.
Finding of the Court:
The court held that the defendant failed to establish that the promissory notes were executed by him towards security for doing business with the firm and thus, failed to discharge onus of proof lying on him.
Issues: 1. Whether consideration is not passed under the suit promissory notes? 2. Whether non-scribing of promisee's name on Exs a-1 to a-5 invalidate the same? 3. Whether judgment of trial Court is to be interfered with?
Ratio Decidendi: 1. Section 20 of the Negotiable Instruments Act, 1881 gives prima facie authority to the holder of a stamped paper to make or complete a negotiable instrument for any amount specified therein and not exceeding the amount covered by the stamp. 2. The presumption under Section 118(a) of the Negotiable Instruments Act, 1881 that a promissory note is supported by consideration is rebuttable. The defendant can prove the non-existence of consideration by raising a probable defence. 3. The burden of proving the non-existence of consideration lies on the defendant. The defendant has to bring on record such facts and circumstances, upon consideration of which the court may either believe that the consideration did not exist or its non-existence was so probable that a prudent man would, under the circumstances of the case, shall act upon the plea that it did not exist.
Final Decision: The appeal was dismissed.
JUDGMENT
Subba Reddy Satti, J. - The appeal is filed by the defendant aggrieved by the decree and judgment, dated 30.12.2005 passed in O.S.No. 66 of 2002 on the file of learned Senior Civil Judge, Proddatur.
2. For the sake of convenience and brevity, the parties shall be referred to as they are arrayed in suit O.S.No.66 of 2002.
3. The plaintiff filed suit O.S.No. 66 of 2002 on the file of learned Senior Civil Judge, Proddatur against the defendant for recovery of an amount of Rs.5,96,333/- basing on five promissory notes along with interest.
4. The case of the plaintiff, in brief, is:
The defendant borrowed an amount of Rs.1,00,000/- each on five occasions i.e. on 05.08.2001, 12.08.2001, 26.08.2001, 09.09.2001 and 23.09.2001 from the plaintiff agreeing to repay the same with interest at 24% per annum and executed five promissory notes in favour of the plaintiff; that defendant failed to repay the debt amount inspite of repeated requests made by the plaintiff and through mediators and hence filed the suit.
5. The defendant filed written statement rebutting the plaint averments and contended inter alia that the defendant joined as client in a sub-brokers business of Steel City Securities Ltd., Visakhapatnam, being run by the plaintiff and V. ashok Kumar Reddy (D.W.2) under the name and style M/s. Vijayalakshmi Investments and the defendant did crores of business with the said firm in the year, 1999-2000 due to which the firm benefited lakhs of rupees as brokerage. Subsequently due to crash in share market, the defendant stopped share business. During the course of stock business done by him with the said firm, the defendant executed promissory notes as security deposit for doing stock business and though the promissory notes were drafted by him, date of execution and the name of promisee were kept blank as they were executed only for the sake of security.
6. It is further contended that the witnesses in the promissory notes are close associates of the firm and fraud was committed in the business by incorporating unnecessary entries in his account due to which disputes arose between the defendant and the firm. Therefore, the firm failed to deliver shares certificates worth of Rs.4,00,000/- to the defendant and when the same was demanded, the suit promissory notes were created in the name of the plaintiff only to harass the defendant. Both the plaintiff and the defendant are income tax assessees and every money transaction exceeding Rs.20,000/- shall be either through cheque or demand draft, which was not done and prayed the Court to dismiss the suit.
7. During the course of trial, plaintiff examined himself as PW1 besides examining the respective attesters of promissory notes as P.W.2 to P.W.4. Exs. a1 to a5 were marked. On behalf of the defendant, the defendant himself is examined as DW1 and he got examined one of the partners of the firm as DW2.
Exs.B1 to B4 were marked on behalf of the defendant.
8. The trial Court, on consideration of the oral and documentary evidence, decreed the suit with costs for Rs.5,96,330/- with future interest at 6% per annum on Rs.5,00,000/- from the date of plaint till the date of realization. Trial Court came to conclusion that defendant failed to establish that Exs.a1 to a5, promissory notes were executed by him towards security for doing business with the firm and thus, failed to discharge onus of proof lying on him. aggrieved by the same, the defendant is before this Court by way of this appeal.
9. Heard Sri V. Nageswar Rao, learned counsel for the appellant/defendant and Sri L.J. Veera Reddy, learned counsel for the respondent/plaintiff.
10. Learned counsel for the defendant would contend that the Trial Court failed to appreciate that the date of execution and name of promisee were kept blank since the promissory notes were executed as security deposit for doing share business with the plaintiff and no consideration was passed. He would further submit that the trial Court ought to have rejected the evide
The presumption of consideration under Section 118 of the Negotiable Instruments Act, 1881, can be rebutted by evidence that the defendant had no capacity to lend the amount and that the promissory n....
The main legal point established in the judgment is the presumption of consideration under Section 118 of the Negotiable Instruments Act and the burden of proof on the defendant to rebut this presump....
The presumption of consideration under Section 118(a) of the Negotiable Instruments Act applies when the execution of a promissory note is admitted, shifting the burden to the defendant to prove non-....
The presumption of consideration under Section 118 of the Negotiable Instruments Act applies once execution of the promissory note is established, placing the burden on the Defendant to rebut this pr....
The plaintiff's failure to disprove the defense taken by the defendant and the finding of the suit promissory note as not true and valid influenced the court's decision.
The presumption of consideration under Section 118 of the Act is a statutory presumption and unless it is rebutted, it has to be presumed that consideration has passed.
Plaintiff must establish passing of consideration for promissory notes, and failure to do so shifts evidential burden to plaintiff
The mere admission of a signature on a Promissory Note does not invoke the presumption under Section 118 of the Negotiable Instruments Act without proof of execution and passing of consideration.
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