IMPORTANT POINT
The court established that a holder in due course can recover on a promissory note despite claims of prior discharge if the transfer was valid and supported by consideration.

JUDGMENT :

1. This Second Appeal has been filed by the Appellant/Appellant/Defendant against the Decree and Judgment dated 17.10.2006, in A.S.No.7 of 2003 on the file of VIII Additional District and Sessions Judge, (Fast Track Court), Vijayawada (for short, ‘the 1st Appellate Court’) confirming the decree and Judgment dated 20.01.2003, in O.S.No.16 of 1997 on the file of I Additional Senior Civil Judge, Vijayawada (for short, ‘the trial Court’).

2. The Respondent/Respondent is the Plaintiff, who filed the suit in O.S.No.16 of 1997 seeking recovery of Rs.50,600/- being the principal and interest from the Defendant based on the promissory note, dt.20.03.1994.

3. Referring to the parties as they are initially arrayed in the suit in O.S.No.16 of 1997 is expedient to mitigate any potential confusion and better comprehend the case.

4. The factual matrix, necessary and germane for adjudicating the contentious issues between the parties inter se, may be delineated as follows:

The defendant procured a sum of Rs.30,000/- from one Smt. K.Sarada, the spouse of Bapuji, on the 20.03.1994, executing a promissory note in favor of K. Sarada, thereby undertaking to recompense the borrowed amount along with interest accruing at a rate of 24% per annum. Notwithstanding repeated entreaties for repayment, the defendant has manifestly neglected to fulfill this obligation. Subsequent to these developments, K. Sarada’s health deteriorated, necessitating her to solicit financial assistance from the plaintiff to defray her medical expenses. In light of the outstanding sum owed to the plaintiff, and following the settlement of the residual balance stipulated in the promissory note, K. Sarada duly executed a transfer of the aforementioned promissory note to the plaintiff on the 24.02.1995, for valid consideration. Consequently, the plaintiff is entitled to recover the amount specified in the promissory note from the defendant. The transfer endorsement was inscribed on the reverse of the promissory note. Tragically, K. Sarada passed away on the 09.03.1995. In the ensuing period, the plaintiff made multiple demands upon the defendant for repayment. However, the defendant, for reasons undisclosed, has consistently deferred payment.

5. The Defendant filed written statement, refuting the plaint averments. He asserts that he borrowed Rs.30,000/- from K.Sarada, w/o Bapuji, on 20.03.1994 and categorically denies the execution of promissory note in her favour. He challenges the claims of neglect following notice, denying that Sarada incurred debts to the Plaintiff for medical expenses. The Defendants contends that the transfer endorsement on the promissory note, dated 24.02.1995, is a fabrication, orchestrated by the Plaintiff after Sarada’s death. Moreover, he claims to have disbursed Rs.30,000/- to K. Bapuji on 20.02.1995, for which a receipt was duly issued, responding to Bapuji’s urgent plea for funds for Sarada’s cancer treatment. The Defendant has consistently paid interest on this amount. In the wake of Sarada’s demise, he alleges that disputes emerged, prompting the Plaintiff to forge the transfer endorsement in a bid to lay a false claim. Thus, the Defendant asserts that the promissory note is fully discharged, relieving him of any financial obligation to the Plaintiff.

6. Based on the above pleadings, the trial Court has framed the following issues:

i. Whether the transfer endorsement dated 24.02.1995 alleged to have been executed by Kodali Sarada in favour of the Plaintiff is true, valid and it is for consideration?

ii. Whether the discharge pleaded by the Defendant in respect of the suit promissory note executed by the Defendant in favour of Kodali Sarada is true?

iii. Whether the receipt dated 20.02.1995 issued by Kodali Bapuji on behalf of his wife Sarada is true?

iv. Whether the Plaintiff is entitled to recover the suit amount from the Defendant?

v. To what relief?

7. During the trial, P.Ws.1 to 3 were examined and marked Exs.A.1 to A.5 on behalf of the Plaint