The central legal point established in the judgment is the application of the presumption under Section 118 of the NI Act, 1881, and the burden of proof under the Indian Evidence Act in cases involving negotiable instruments.

Pradeep Nandrajog, J.

1. Rana Inderjit Singh, the respondent sued the appellant No.1 : Kembiotic Laboratory and its three partners : appellants No.2 to 4 as partners thereof on the plea that in the year 2001 appellants No.2 to 4 offered to him to collaborate with their business on 50% shareholding basis and desired him to advance to them loan in sum of Rs.53.5 lacs and therefore in Hong Kong he gave US$ 1,13,829.78 to appellant No.2, who promised that on returning to India he will complete the necessary formalities regarding collaboration and till then the money received would be treated as on loan with the partnership firm. As per him he received no further communication from the partners of the firm and he came to India in November, 2002 when, from the account of the partnership firm maintained with State Bank of Bikaner & Jaipur Branch, Kirti Nagar and State Bank of Mysore Branch Punjabi Bagh, 11 cheques totaling Rs.53.5 lacs were issued in his name, details whereof are as under:-

2. As per Rana Inderjit Singh the cheques were obviously to return the sum of Rs.53.5 lacs received in the name of respondent No.1, which under the circumstances had to be treated as a loan because the understanding that defendants No.2 to 4 would collaborate with him in the business run under the name and style of appellant No.1 with his share being 50% was not given effect to. The cheques when presented for encashment were returned dishonoured.

3. In the joint written statement filed by the appellants they denied any amount received by appellant No.2 from Rana Inderjit Singh but admitted that the cheques were issued. In para 6 of the preliminary objections it was denied that there was any discussion for Rana Inderjit Singh to do business with them on 50% shareholding basis. However, in paragraph 11 of the preliminary submissions, explaining the circumstances under which the cheques were issued it was pleaded that Rana Inderjit Singh offered to invest Rs.53.5 lacs in the business of the defendants and to give security for the amount the defendants would receive from Rana Inderjit Singh the cheques in question were issued. It was pleaded that Rana Inderjit Singh never invested Rs.53.5 lacs.

4. From the pleadings of the parties it is apparent that whereas Rana Inderjit Singh pleaded having paid US$ 1,13,829.78 to appellant No.2 and the cheques being issued when the agreement to collaborate did not go through and as per the original oral agreement the money had to be treated as a loan, the appellants pleaded that the cheques were issued as security for Rana Inderjit Singh to invest Rs.53.5 lacs but he did not do so.

5. At the trial Rana Inderjit Singh failed to establish that he gave US$ 1,13,829.78 to appellant No.2. At the same time the appellants failed to establish that the cheques were issued by way of security for an investment yet to be made by Rana Inderjit Singh. Returning a verdict in favour Rana Inderjit Singh the learned Single Judge has reasoned :-

“No doubt, plaintiff has not led any documentary evidence to show that the amount of Rs.53.50 lacs was paid by the plaintiff to the defendant No.2 in Hong Kong, however, the fact that the amount of Rs.53.50 lacs was paid by the plaintiff to the de