Claim made by plaintiff for second loan held illegal.

1. The plaintiff in O.S.No. 1914 of 1986 on the file of I Additional District Munsif, Pondicherry is the appellant in the second appeal.

2. The plaintiff which is a partnership firm filed the suit for recovery of Rs. 10,000 with interest at 24% per annum from the respondents herein on the following averments:

The defendants borrowed a sum of Rs. 10,000 on 17.11.1984 from the plaintiff and executed a promissory note agreeing to repay the amount jointly and severally with interest at 24% per annum. Inspite of repeated demands, the defendants failed to pay the amount due under the promissory note. The plaintiff caused a lawyers notice to be issued on 8.8.1986 calling upon the defendants to repay the amount with interest. Though the defendants received the notice, they did not choose to repay or send any reply to the suit notice, necessitating the filing of the suit.

3. Thefirst defendant resisted the suit contending inter alia as follows: He received Rs. 10,000 by way of cheque from the plaintiff and he repaid the same with interest in three installments on different dates. He denied having borrowed Rs. 10,000 from the plaintiff along with other defendants, jointly and severally. When the plaintiff issued the cheque for Rs. 10,000 it obtained the signatures of the three defendants in blank promissory notes. Apparently, it had fabricated the suit promissory notes and filed the suit.

4. Defendants 2 and 3 adopted the written statement of the first defendant.

5. Thetrial Court framed the following issues:

"(1) Whether the defendants signatures were obtained on stamped blank papers and blank pronotes and used it as suit pronote after filling it up?

(2) Whether no cash was paid for the suit pronotes?

(3) Whether the defendants are not liable to pay any amount?

(4) To what relief the parties are entitled to?"

6. On the side of the plaintiff, the Managing Partner himself was examined as P.W.1 and Exs.A-1 to A-6 were marked. On the date of the defendants the first defendant was examined as D.W.1 and two other witnesses are examined as D.Ws.2 and 3.

7. Thetrial Court on the oral and the documentary evidence held that the defendants signatures were obtained on the stamp blank papers and blank pronotes and the suit pronote was one among them, that the plaintiff had not established that any consideration passed for the suit pronote, and that the defendants were not liable to pay any amount under the suit promissory note. So holding, the trial Court by judgment and decree, dated 21.7.1987 dismissed the suit.

8. The plaintiff filed appeal in A.S.No. 188 of 1990 before II Additional District Judge, Pondicherry. The learned District Judge by judgment and decree dated 16.10.1989 confirmed the decision of the trial Court and dismissed the appeal. Aggrieved, the present second appeal has been filed.

9. At the timeof admission the following substantial question of law was raised for decision:

Whether the lower appellate Court was right in holding that when once the respondents contended that they signed and delivered a blank or inchoate negotiable instrument, the burden is on the appellant to establish that the negotiable instrument was duly executed especially in view of the specific provisions of Section 20 of the Negotiable Instruments Act?

10. Mr. R. Subramanian, learned Counsel for the appellant submitted that under Section 20 of the Negotiable Instruments Act (hereinafter referred to as the Act) the presumption arises regarding the due execution of the promissory note, that in the instant case the defendants had admitted that they had signed and delivered to the plaintiff a paper duly stamped in accordance with law relating to the Act and thereby had given prima facie authority to holder to make or complete as the case may be upon it a negotiable instrument, then the presumption follows that the persons so signing shall be liable upon such instrument, in the capacity in which they signed the same, to any holder in du