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Andhra Pradesh High Court
Dasari Satyanarayana - Appellant
Versus
Alapati Sreeramulu - RESPONDENT
Decided On: 09-25-69

The presumption under Section 118(a) of the Negotiable Instruments Act is that every negotiable instrument is drawn for consideration. The burden of proving absence of consideration lies on the defendant.

Headnote:

NEGOTIABLE INSTRUMENTS ACT, 1881 - SECTION 118 - PRESUMPTION OF CONSIDERATION - REBUTTAL - BURDEN OF PROOF - VARIATION BETWEEN RECITAL AND EVIDENCE - EFFECT - TRUST DEED - OMISSION OF DEBT - EXPLANATION - FAILURE TO PRODUCE EVIDENCE - EFFECT.

Fact of the Case:

Plaintiff filed a suit for recovery of money alleged to be due under two promissory notes executed by the defendant. The defendant admitted execution but pleaded that they were not supported by consideration and were executed at a time when he was heavily involved in debts and at the advice of the plaintiff, who is his nephew, with a view to have the benefit thereof for himself in the event of his other creditors proceeding against him.

Finding of the Court:

The courts below dismissed the suit holding that the promissory notes were devoid of consideration. The High Court held that the courts below erred in not bearing in mind the statutory presumption under Section 118 of the Negotiable Instruments Act while examining the evidence and in disregarding certain admissions made by the defendant's own witnesses regarding the passing of consideration for the suit promissory notes.

Issues: 1. Whether the courts below erred in not bearing in mind the statutory presumption under Section 118 of the Negotiable Instruments Act while examining the evidence? 2. Whether the courts below erred in disregarding certain admissions made by the defendant's own witnesses regarding the passing of consideration for the suit promissory notes?

Ratio Decidendi: 1. The presumption under Section 118(a) of the Negotiable Instruments Act is that every negotiable instrument is drawn for consideration. The burden of proving absence of consideration lies on the defendant. 2. A mere variation between the recital contained in a negotiable instrument and the evidence adduced by the plaintiff regarding the manner in which the consideration passed does not rebut the presumption under Section 118(a) of the Negotiable Instruments Act. The defendant must prove that there was no consideration for the instrument. 3. The omission of a debt from a trust deed executed by the defendant to square up his liabilities does not, by itself, prove that the debt is not genuine. The defendant must provide an explanation for the omission.

Final Decision: The judgment and decree of the court below were set aside and the suit was remanded to the District Munsiff, Kovvur, for fresh disposal in accordance with law.

VENKATESWARA RAO, J.

( 1 ) THIS appeal is directed against a decision of the learned Subordinate judge, Eluru by which the judgment and decree in O. S. 517/63 on the rile of the District Mucsif, Kovvur, were confirmed, plaintiff is the appellant.

( 2 ) THE suit was filed for recovery of money alleged to be due under two promissory notes, Exs. A. 1 and A. 2 dated 7-4-1962 and 6-5-62, executed by the defendant in favour of the plaintiff for Rs. 1046/- and Rs. 2312/- respectively. Execution of these promissory notes is admitted by the defendant in his written statement but he pleaded that they are not supported by consideration and, were executed by him at a time when he was heavily involved in debts and at the advice of the plaintiff, who is no other than his own nephew, with a view to have the benefit thereof for himself in the event of his other creditors proceeding against him. On a consideration of the evidence adduced in the case, the trial Court felt satisfied that the promissory notes are devoid of consideration and accordingly dismissed the suit but without costs. This decision was Confirmed in appeal by the learned Subordinate Judge. Eluru. Hence this second appeal. Sri Bapiraju, the learned counsel for the appellant, contended that the decision under appeal is vitiated as the Courts below did not bear in mind the statutory presumption available to his client under section 118 of the Negotiable Instruments Act while examining the evidence adduced in the case and assessing its probative value and also because the learned Subordinate Judge disregarded certain admissions made by the defendant s own witnesses regarding the passing of consideration for the suit promissory notes while reaching the impugned conclusion. It is further urged that the Court below was very much influenced by the so-called variance between the recitals in the promissory notes and the evidence adduced on behalf of the plaintiff with regard to the manner in which the consideration passed when it ought not to have allowed this circumstance to influence its decision if the defendant failed to rebut the statutory presumption that the promissory notes are supported by consideration, Learned Counsel for the respondent, on the other hand, argued that the finding sought to be impeached being one of fact, cannot be questioned over again in this Second appeal.

( 3 ) THE recital in Ex, A-1 promissory note regarding consideration is This recital, if literally translated into English, will read "as follows "cash borrowed, being in need, on account of engine expenses etc," the other promissory note, Ex. A-2, recites that the defendant borrowed the sum of Rs. 2,312/- in cash for agricultural expenses.

( 4 ) THE defence, as already stated, is that the promissary notes were executed by the defendant at a time when he was heavily Involved in debts and at the advice of the plaintiff that whatever is realised thereunder by way of rateables or otherwise along with the other creditors would be available to the defendant and would thus enure to his benefit, Ex. A-1 was attested by two persons of whom D. W. 1 is one and the other attestor is now no more. While maintaining that no amount at all was paid by the plaintiff to the defendant in his presence under Ex. A-1, D. W. 1 stated that he actually questioned the defendant as to whether he received the consideration men" tioned in the promissory note before attesting it and that he attested it only when the latter wanted him to do so giving out that it is a family affair ard they would look into the matter. The defendant, who examined himself as D. W. 3, denied having received any consideration under Ex. A-1. As opposed to this, there is the evidence of the plaintiff, who swore as P. W. 2, that the consideration for Ex. A-1 was made up of the rent due to him from the defendant in respect of an engine which he hired out to the latter and some cash lent at the time of its execution. P. W. 3 tried to support this evidence though








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