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High Court Of Rajasthan
Judgename : K.N.Wanchoo,I.N.Modi,Jagat Narayan
HEERACHAND - Appellant
Versus
JEEVRAJ - Respondent
Second Appeal 84 Of 1953
Decided On : 03/28/1958
The presumption of consideration under Section 118 (a) of the Negotiable Instruments Act is a matter of principle and not a technical provision. It is applicable even in areas where the Act is not in force. The burden of proving absence of consideration lies heavily on the defendant and is not shifted merely because the plaintiff may have chosen to lead evidence in the first instance. In cases where the evidence of the defendant is untrustworthy and the plaintiff's evidence also inspires little belief, the court should consider the entire evidence and arrive at a positive conclusion on whether consideration has been disproved. If the court cannot arrive at such a conclusion, the presumption of consideration in favor of the plaintiff must be given due importance and the defendant must fail.
Fact of the Case:
Plaintiff brought a suit against the defendant on the basis of a hundi executed by the defendant in favor of the plaintiff. The defendant admitted to executing the hundi but claimed that he had done so by way of a loan to the plaintiff and that there was no consideration for the hundi. The plaintiff denied this and claimed that he had advanced a cash loan to the defendant for which the hundi was executed. Both parties led evidence in support of their respective claims.
Finding of the Court:
The trial court and the lower appellate court found that the defendant had failed to discharge the burden of proving absence of consideration and decreed the suit in favor of the plaintiff. The defendant appealed to the High Court.
Issues: 1. Whether the rule as to presumption of consideration embodied in section 118 of the Negotiable Instruments Act is a technical provision which can come into play only where the Negotiable Instruments Act is in force or it is a matter of principle based on general considerations as to negotiability of certain instruments, and effect should as a matter of law be given to it, irrespective of the consideration whether the negotiable Instruments Act as such may or may not have been in force at the time the instrument was executed or when a suit in relation thereto happens to be brought. 2. Assuming that the aforesaid presumption is a matter of principle and not a technical provision, will the presumption be of help to the plaintiff in that type of cases where the court comes to the finding that the evidence of the maker of the negotiable instrument as to failure of consideration is untrustworthy and also the evidence of the plaintiff fails to carry conviction in the sense that it fails to establish the consideration that is alleged or relied upon by him; or would it be correct in such cases to hold that both parties having led their entire evidence the matter then rests upon such evidence and not upon presumption at all. 3. Is it a correct proposition of law to say that ths presumption available under Section 118 stands rebutted merely because one kind of consideration has been mentioned in the negotiable instrument but another kind of consideration is admitted by the plaintiff to have passed from him or appears to have flowed from him and in such circumstances the burden to prove consideration is shifted to the plaintiff; or in such a case, the true rule of law still is that the burden continues to remain upon the defendant and it is for him to satisfy the court that no consideration had passed, and if he fails to discharge that burden, he should still fail.
Ratio Decidendi: The court held that the presumption of consideration under Section 118 (a) of the Negotiable Instruments Act is a matter of principle and not a technical provision. It is applicable even in areas where the Act is not in force. The burden of proving absence of consideration lies heavily on the defendant and is not shifted merely because the plaintiff may have chosen to lead evidence in the first instance. In cases where the evidence of the defendant is untrustworthy and the plaintiff's evidence also inspires little belief, the court should consider the entire evidence and arrive at a positive conclusion on whether consideration has been disproved. If the court cannot arrive at such a conclusion, the presumption of consideration in favor of the plaintiff must be given due importance and the defendant must fail.
Final Decision: The court dismissed the appeal but ordered parties to bear their own costs throughout.
K. N. Wanchoo, C. J.
( 1 ) THIS appeal has been referred to a Full Bench by a learned Single Judge as it involves important questions of law. The learned Judge has framed the questions also, but finally referred the whole appeal to the Full Bench.
( 2 ) THE facts leading to this second appeal may be briefly narrated to understand the point involved. A suit was brought by Himmatmal and another against Jeevraj and another on the basis of a hundi said to have been executed by Jeevraj in favour of Himmatmal on Migsar Sud 15 Samwat 1993 (equivalent to 1936 A. D. ). The date on which the suit was filed is 4-1-1943. The case of the plaintiffs was that Jeevraj owed Rs. 450 to them for which he had executed this hundi. But as the hundi was dishonoured, the present suit was brought for Rs. 450 as principal and Rs. 300 as interest.
( 3 ) THE suit was resisted by Jeevraj defendant. He admitted the execution of the hundi, but his case was that Himmatmal wanted a loan from him. Jeevraj had no ready mone. , He, therefore, gave this hundi to Himmatmal and that the hundi was-without consideration. He also disputed the allegation of the plaintiff that the hundi was executed in Dhamli. His case was that it was executed in Soda-was and that the court of Sojat had no jurisdiction.
( 4 ) FOUR issues were framed by the Munsif in this connection which are these:
1. Did the plaintiff ask for a loan from the-defendant and in consequence the defendant gave this hundi Ex. P. 1 to Himmatmal to enable him-to get the money? 2. Was the Hundi Ex. P. 1 executed at Dhamli and has the court jurisdiction to hear the suit? 3. Whether the hundi was dishonoured by Keshrimal Mishrimal to whom it was addressed. 4. Is the plaintiff entitled to any relief?
( 5 ) THE burden of proving the first issue was placed on the defendant. The defendant examined four witnesses in support of his case. The plaintiff examined six witnesses on his behalf. In his evidence the plaintiff definitely put forward the case that he had paid Rs. 450 in cash to Jeevraj when the hundi Ex. P. 1 was executed. The Munsif, on a review of the evidence on both sides, came to* the conclusion that the defendants case was proved and that no cash was paid by the plaintiff to the defendant when the hundi was executed. He therefore dismissed the suit.
( 6 ) THERE was an appeal by the plaintiff which was dismissed by the Civil Judge who held that the conclusion of the Munsif on the main issue was correct and that himmatmal had not paid anything in cash to Jeevraj and that the hundi had been executed in the circumstances mentioned by Jeevraj.
( 7 ) THEN came the present second appeal to this Court. The learned Single Judge was not prepared to agree with the findings of the courts below that the defendant had discharged the burden of proving issue No. 1, namely that the hundi had been executed in order that Himmatmal may get a loan from Jeevraj. The learned Single Judge also came to the conclusion that the findings of the courts below that the plaintiff had failed to establish the case that a cash loan had been advanced to defendant Jeevraj and that the hunch was executed in lieu thereof did not call for any interference.
( 8 ) IN this state of the finding, the learned Judge was of opinion that three important tions of law arose for considertion which mulated as below :
1. Whether the rule as to presumption of consideration embodied in section 118 of the Negotiable Instruments Act is a technical provision which can come into play only where the Negotiable Instruments Act is in force or it is a matter of principle based on general considerations as to negotiability of certain instruments, and effect should as a matter of law be given to it, irrespective of the consideration whether the negotiable Instruments Act as such may or may not have been in force at the time the instrument was executed or when a suit in relation thereto happens to be brought.
2. Assuming that the aforesaid presumption is a m
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