The presumption of consideration under Section 118 of the Negotiable Instruments Act is rebuttable; both parties must substantiate claims regarding the nature and existence of consideration for legal efficacy.

1 The defendant respondent is admitted to have executed a Promissory Note for a sum of Rs. 6,20,000/- on 11.10.1961 agreeing to pay the aforesaid amount to the plaintiff on demand. On his failure to repay the amount borrowed, the appellant served a legal notice calling upon the defendant respondent for making the payment of the amount borrowed. Neither the amount was paid nor the notice was replied with the result that the appellant plaintiff was forced to file a suit under Order XXXVII of the Code of Civil Procedure in the original side of the High Court of Calcutta on 10.8.1962. The respondent was granted leave to defend the suit by the learned trial Judge. In the written statement filed, the respondent alleged that the Promissory Note had not been executed for the value received as mentioned therein but was executed by way of collateral security. It was further submitted that in August 1961 the respondent had offered to import 10160 metric tones of steel drum sheets from the appellant which was accepted on 15.9.1961 with the condition that the goods should be shipped on or before 30.11.1961 before the expiry of the appellant's import licence. The Promissory Note was stated to have thus been executed under such circumstances which were, in fact, intended to be collateral security. Due to freezing of lakes the contract of import of steel drum sheets could not be performed, the same was cancelled with the appellant which absolved the defendant respondent from any liability arising out of and in relation to the document executed by him. The suit was dismissed by the learned trial Judge of the High Court holding that as evidence lied by the plaintiff and the defendant was not believable, the suit could not be decreed as according to the learned Judge the appellant had failed to prove its case for being entitled to the grant of the decree. Aggrieved by the judgment of the learned trial Judge, the appellant filed an appeal before the Division Bench of the High Court. In view of the important question of law involved being difficult to answer, the Division Bench referred the entire appeal to a larger Bench. By reason of the majority view, the appeal filed by the appellant plaintiff was dismissed vide the judgment impugned in this appeal. Not satisfied with the judgment of the Full Bench of the Calcutta High Court, the present appeal has been filed by the appellant.

2 On the pleadings of the parties the trial Judge of the High Court had framed the following issues:
1. was the promissory note dated October 11, 1961, executed by the defendant as collateral security in the circumstances and on the agreements mentioned in Para.6 and 7 of the Written Statement?
2. was there no consideration for the promissory note?
3. Did the consideration, if any, for the said promissory note fail?
4. To what relief, if any, is the plaintiff entitled?
To prove its case the defendant examined Shri Sat Pal Sharma, the Manager of its Bombay Office and Shri Jit Paul, a partner of the defendant firm. Shri Bhagwandas Kella, production Manager of the plaintiffs factory at Bombay, Shri Banwarilal Shroff, Secretary of the plaintiff company, Shri L.P. Goenka, a Director of the plaintiff-company, Shri Tebriwal, Calcutta Manager of the plaintiff company and Shri Shankar Lal Shroff appeared as witnesses on behalf of the plaintiff.

3 On appreciation of evidence led in the case and while dealing with issue No.1, the learned Trial Judge held "In the Circumstances, the conclusion is irresistible that the promissory note was not executed by way of a collateral security as alleged by the defendant." However, while dealing with issue No.2 the learned Judge referred to the evidence mainly of the plaintiff and concluded "I reject the plaintiff's case that a sum of Rs. 6,20,000/- was paid to Aminchand Pyarelal at Bombay by the plaintiff on 11th October, 1961 by way of loan or at all." He also held:
"The plaintiff's case as sought to be made out in the evidence of Goenka is that th