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High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE S.S. SUBRAMANI
Kamala & Others
Versus
K.A. Kunjithapatham & Another
Second Appeal No.1287 of 1999
Decided On :Decided on : 14-09-1999
NEGOTIABLE INSTRUMENTS ACT - SECTION 79 - CIVIL PROCEDURE CODE - SECTION 34 - INTEREST - RATE OF INTEREST - DISCRETION OF COURT - COURT CAN EXERCISE DISCRETION TO AWARD INTEREST AT A RATE LOWER THAN THE CONTRACTUAL RATE EVEN IN SUITS BASED ON NEGOTIABLE INSTRUMENTS - COURT HAS TO CONSIDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND THE CONDUCT OF THE PARTIES.
Fact of the Case:
Plaintiff filed a suit for recovery of a sum of Rs. 1,97,033-34.p on the basis of promissory notes executed by deceased defendant. The defendant admitted execution of the promissory notes, but pleaded that they were not supported by consideration and that he was not benefited by the execution of those notes. The trial Court decreed the suit as prayed for. The decree of the trial Court had not allowed full costs to the plaintiff. Challenging the same, plaintiff filed cross-objection. As per judgment dated 12.10.1998, the lower Appellate Court dismissed the appeal with costs, and allowed the cross-objection with costs.
Finding of the Court:
The Court held that the plaintiff is entitled to a decree as prayed for. The Court further held that when deceased defendant himself has admitted execution of the promissory notes, the legal heirs cannot take a different stand. It also held that once the deceased defendant has admitted the execution, it is for him to prove that there was no passing of consideration. Defendants have failed to discharge that burden. It also held that plaintiff has taken assignment of Exs. A-1 to A-6 and he is, therefore, competent to file the suit.
Issues: 1. Whether the Courts below are correct in law in decreeing the suit filed by the respondent who claims to be an assignee for collection without there being any proof of the assignment? 2. Whether in law the respondent can maintain a suit in his capacity as the assignee for collection against the legal representatives of the deceased 1st defendant who is said to be the promisor? 3. Whether the Courts below are correct in law in not drawing an adverse inference against the plaintiff for not examining the assignors viz., the alleged promisees especially when the assignment is not admitted and stoutly denied by the appellant? 4. Whether, on the facts and circumstances of the case, the Courts below are correct in law in applying the presumption under Sec. 118 of the Negotiable Instruments Act when there is a total denial that the first defendant had borrowed money from the assignors of Exs. A-1 to A-6 and under Sec. 118 of the Negotiable Instruments Act there is no presumption that the amount was borrowed from the promisee stated in the promissory note? 5. Is it not necessary in law for the plaintiff to prove that the amount was lent by the promisee especially when the said fact is stoutly denied by the defendant that there was no borrowing from the promisees named in the promissory note Ex. A-1 to A-6? 6. Whether the Courts below are correct in law in totally eschewing from consideration the usurious nature of the rate of interest charged under Exs. A-1 to A-7? 7. Whether the judgment and decree of Courts below are sustainable in law especially when there is a total non-consideration of the principles enshrined in Sec. 34 of the Civil Procedure Code?
Ratio Decidendi: The Court held that the Court has to exercise its own discretion in awarding the rate of interest from the date of suit. It is admitted in the plaint itself that interest at the rate of 24% per annum has been paid by defendant till August, 1987. On the date of suit, the suit amount claimed is nearly Rs. 1,98,000/-. As on this date, the rate of interest calculated at 24% per annum from the date of plaint till date of the lower Appellate Court decree alone comes to nearly Rs. 2,25,000/-. The borrower is also no more. The claim of interest at 24% per annum is far in excess of the normal rate and it is also unfair. Under these circumstances, I feel that direction to the defendants to pay interest at 24% per annum will put them to great hardship. From the date of suit till date of recovery, plaintiff is entitled to interest at the rate of 6% p.a.
Final Decision: The Second Appeal is partly allowed by reducing the rate of interest from 24% p.a. to 6% p.a. simple interest from the date of suit till date of recovery. Parties are directed to suffer their own costs in the Second Appeal.
Additional defendants 2 and 4 to 7 who are legal heirs of deceased defendant in O.S. No. 699 of 1990, on the file of Subordinate Judges Court at Tiruchirappalli are the appellants. Third defendant who is also a legal heir has been impleaded as second respondent in this Appeal.
2. Plaintiff filed the suit for recovery of a sum of Rs. 1,97,033-34.p on the basis of promissory notes Exs. A-1 to A-7 executed by deceased defendant. The allegation in the plaint is that as per Ex. A-1 dated 7.2.1986, the deceased defendant executed a promissory note in favour of one Mangayarkarasi for a sum of Rs. 35,000/-, as per ExA-2 dated 5.3.1986, he executed another promissory note in favour of one Rajeshwari for Rs. 20,000/-; as per Ex. A-3 dated 25.7.1986, he borrowed a sum of Rs. 20,000/- from one Tara; and, as per Exs. A-4, A-5 and A-6, he had borrowed Rs. 20,000/-Rs. 5,000/- and Rs. 15,000/- respectively by executing promissory notes in favour of one Eswari on 10.8.1986, 13.8.1986 ana 3.9.1986. Defendant borrowed a further sum of Rs. 10,000/- on 5.10.1986 by executing a promissory note Ex. A-7 in favour of plaintiff. It is said that as per Exs. A-8 to A-14, defendant himself has made endorsements of payment in the various promissory notes. It is further said that the plaintiff is now the holder of Exs. A-1 to A-6, and the persons in whose name the promissory notes were executed, assigned the same for collection as evidenced by Exs. A-15 to A-20. It is further said that the defendant has paid interest upto the end of August 1987, Defendant had further agreed to pay interest at 18% per annum on each and every promissory note. Since there was default in payment of interest, a demand notice was issued on 1.8.1990 asking the defendant to settle the transactions, and the notice was served on the defendant on 6.8.1990. In that notice, the date of assignment was wrongly given as 29.7.1986. So, the further notice was sent to the defendant intimating the correct date of assignment. That notice was also served on the defendant on 6.8.1990. But the defendant did not send any reply. The suit was, therefore, laid for recovery of a sum of Rs. 1,97,033-34.p. with future interest at the rate of 24% per annum, and costs.
3. Defendant who died pending suit, filed a written statement. According to him, even though the promissory notes stand in the name of various persons, he knows only the plaintiff. He admitted that he executed the promissory notes. According to him, these promissory notes are not supported by any consideration. According to him, he was employed in Southern Railway, and retired in 1984. At that time, he got large sums of money by way of gratuity, provident fund, etc. Plaintiff introduced to the defendant one Santhanam as his loyal friend and advised him to do money lending business along with Santhanam. Plaintiff also used to advance money to Santhanam on fabulous rate of interest at 86% per annum. Plaintiff also used to get promissory notes from defendant through the said Santhanam for the amount advanced to Santhanam to the tune of Rs. 2 lakhs. On this ground of understanding alone, all the promissory notes have been executed and they have come into existence. It is said, that plaintiff has been receiving Rs. 6,000/- per mensem by way of interest from Santhanam for the amounts advanced to him till November 1987. Thereafter, Santhanam stopped payment of interest and filed I.P. 51 of 1987, on the file of Sub Court, Trichirappalli, and absconded ever since that date. Plaintiff was also unable to trace the said Santhanam, and has filed the suit with a view to blackmail the defendant to recover the amount. According to defendant, he was not at all benefited from out of the suit borrowings, and in fact he did not receive any amount from plaintiff. There was also (no?) (sic.) necessity to borrow such huge amount, and the actual borrower was Santhanam. It is also said in the written statement that plaintiff had assured the defendant that h
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