The statutory presumption under Section 118 of the Negotiable Instruments Act, 1881, remains unrebutted if execution is proved by cogent evidence, and the non-reflection of a personal loan in income tax returns does not inherently discredit the transaction.

VIRINDER AGGARWAL, J.

1. The present Regular Second Appeal (hereinafter referred to as the “RSA”) has been preferred by the appellant-defendant assailing the judgment and decree dated 04.05.2001 passed by the learned First Appellate Court, whereby the appeal instituted by the respondent-plaintiff against the judgment and decree dated 14.12.1998 of the learned Trial Court, dismissing the suit, came to be allowed.

2. Chronology of events of the matter is that the respondent- ₹ plaintiff instituted a suit for recovery of 2,06,400/- on the basis of a pronote and receipt dated 17.09.1994. It was pleaded that the appellant- ₹ defendant had borrowed a sum of 1,20,000/- on the said date at an agreed rate of interest of 2% per month and executed the pronote and receipt in favour of the plaintiff, undertaking to repay the amount along with interest on demand. Despite repeated demands and service of legal notice dated 08.08.1997, the defendant failed to discharge the liability, thereby necessitating the institution of the suit.

3. The suit was contested by the appellant-defendant, who denied the execution of the pronote and receipt for consideration and pleaded that no amount was ever advanced by the plaintiff. It was further contended that the plaintiff was an unlicensed money lender. On merits, the defendant asserted that he had never borrowed any amount and that no consideration passed under the alleged instrument. It was pleaded that Ashok Kumar, a marginal witness to the pronote and receipt, was a member of a money collection scheme allegedly run by the plaintiff, and being the highest bidder, was entitled to receive the collected amount. The plaintiff is stated to have demanded security from Ashok Kumar, whereupon, to facilitate such security, the defendant appended his signatures on blank proforma pronote and receipt. It was further asserted that Ashok Kumar had repaid the amount, save for a minor dispute regarding one or two instalments. The defendant, being a Punjab State Government employee, pleaded that he could not legally engage in such financial transactions. It was also averred that the other witness and the scribe were not present at the time the signatures were obtained.

4. The respondent-plaintiff filed a replication, controverting the assertions made in the written statement and reiterating the averments contained in the plaint. Upon a comprehensive consideration of the pleadings and rival submissions, the learned Trial Court proceeded to frame the following issues for adjudication, so as to effectively determine the matters in controversy between the parties:-

i) Whether the defendant received a sum of Rs.1,20,000/- vide pronote dated: 17-9-1994? OPP

ii) Whether the plaintiff is entitled to interest, if so, at what amount? OPP

iii) Whether the plaintiff has no cause of action or locus standi to file this suit? OPD

iv) Whether the plaintiff is a money lender and does not possess the money lending licence, if so, its effect? OPD

v) Relief.

5. Upon the framing of issues, both parties were afforded full and adequate opportunity to adduce evidence in support of their respective claims and defences and to address arguments. Upon conclusion of the trial, the learned Trial Court dismissed the suit. Aggrieved thereby, the res