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Patel Bettegowda Vs. Coorg and Mysore Coffee Co., Ltd. - Court Judgment

LegalCrystal Citation
SubjectCommercial;Banking
CourtKarnataka High Court
Decided On
Case NumberR.S.A. 602 of 1976
Judge
Reported inILR1985KAR273; 1985(1)KarLJ53
ActsNegotiable Instruments Act, 1881 - Sections 4, 13 and 118
AppellantPatel Bettegowda
RespondentCoorg and Mysore Coffee Co., Ltd.
Appellant AdvocateC. Shivappa, Adv.
Respondent AdvocateR. Narayan, Adv.
DispositionAppeal allowed
Excerpt:
.....make it non-negotiable in the absence of express terms prohibiting transfer.;suit was based on pronote executed by defendant. defendant pleaded that his son, an employee under plaintiff had misappropriated goods of plaintiff and pronote had to be executed by him under duress and threat of prosecution of his son, as collateral security and thus no consideration had passed. trial court dismissed the suit. plaintiff's first appeal was allowed applying section 118 of negotiable instruments act holding that consideration had passed which defendant failed to rebut. in second appeal contended that not being negotiable the document was not a negotiable instrument and on facts, burden to prove passing of consideration could not be placed on defendant.;there is no stipulation in ex p-l for..........it. a plaintiff, who says that he had sold certain goods to the defendant and that a promissory note was executed as consideration for the goods and that he is in possession of the relevant account books to show that he was in possession of the goods sold and that the sale was effected for a particular consideration, should produce the said account books, for he is in possession of the same and the defendant certainly cannot be expected to produce his documents. in those circumstances, if such a relevant evidence is withheld by the plaintiff, section 114 enables the court to draw a presumption to the effect that, if produced, the said accounts would be unfavourable to the plaintiff. this presumption, if raised by a court, can under certain circumstances rebut the presumption of law.....
Judgment:

Venkatesh, J.

1. This is defendant's second appeal. The Respondent plaintiff had filed against him the suit in O.S. 71/71 on the file of the Munsiff, Srirangapatna, for recovery of a sum of Rs.9974-43 and interest thereon with court costs. The suit was on the foot of a pronote dated 16-12-1968 said to have been executed by the defendant in favour of the plaintiff agreeing to pay on demand the aforesaid sum.

2. Resisting the suit claim the defendant inter alia contended that he had not executed the pronote in question and further denied his liability thereunder. His case was that his son was an employee under the plaintiff, used to work as a store keeper in one of its branch establishments; that alleging that he (defendant's son) had misappropriated some goods belonging to it and entrusted to him the plaintiff was threatening to prosecute him; that in view of that threat, under duress and being forced, he (the defendant) had executed a bond in favour of the plaintiff ; that it was only a collateral security and that he had not received any consideration under that document; and that in these circumstances he was not liable to pay any sums as claimed by the plaintiff and the suit be dismissed with costs.

3. The Munsiff formulated the following three issues on the basis of the aforesaid pleadings:

i) Whether the defendant has executed any pronote in favour of the plaintiff for consideration received ?

ii) Whether the defendant is liable to pay any amount to the plaintiff?

iii) What decree or order ?

4. Prior to the commencement of the evidence, filing an application under Order 12 Rule 3 C.P.C., the plaintiff called upon the defendant to admit or deny his signatures on three documents, namely, Ext. P. 1 dated 16-2-1968, Ext. P.2 a letter written by the defendant on that very day and addressed to the plaintiff company and Ext. P. 3 another letter dated 10-4-1968 said to have been written by the defendant to one Sri Kabeer, an Advocate. The order of the Munsiff recorded in the order sheet of the case on 3-8-1972 shows about the defendant, through his Counsel, having admitted his signatures on Ext. P. 1 and P. 2.

5. On behalf of the plaintiff a certain Mohamed Hussain who is said to have written Ext. P. 1 alone was examined. On his side the defendant examined himself and closed his case.

6. The Munsiff, for reasons stated by him in his Judgment, held that Ext. P. 1 was not a promissory note and that the plaintiff had not established that that document had been executed for any consideration. He therefore dismissed the suit with costs.

7. In the appeal preferred to him by the plaintiff against the Judgment and decree of the trial Court, the Civil Judge has held that Ext. P.1, the pronote was duly executed by the defendant in favour of the plaintiff; that under Section 118 of the Negotiable Instruments Act (the Act), in the circumstances of the case, it should be presumed to have been made for consideration; and that the defendant had failed to rebut this presumption; and that therefore the plaintiff was entitled to a decree as sought for. In this view he decreed the suit as prayed for.

8. Challenging the Judgment and decree of the first appellate Court Sri C. Shivappa, Learned Counsel for the appellant , made the following submissions :

(i) that though Ext. P. 1 is dated 16-2-1968 the plaintiff had claimed in the suit (in the plaint, presented by him) a decree on a pronote dated 16-12-1968 and that in this state of the pleading the Court below had committed an error in granting a decree as prayed for;

(ii) that the stipulation in Ext. P.1 was not that the amount stipulated therein was payable either to bearer or to order but it being that the promisor would pay the said sum to the promisee and obtain return of the document, it was a non-negotiable one and was therefore not a promissory note, and, in the circumstances, the Court below has erred in granting a decree construing Ext. P. 1 as a promissory note and relying on Section 118 of the Act; and

(iii) and, that even otherwise, having regard to the facts and circumstances of the case, this was not a case in which the Court below relying on Section 118 of the Act could have thrown the burden on his client to prove want of consideration.

8(a) On the other hand Sri R, Narayan, Learned Counsel for the Respondent, supporting the Judgment and decree of the first Appellate Court, submitted that there was no merit in any of the submissions of the Counsel for the appellant and that the first appellate Court on a proper appraisal of the evidence on record had decreed the suit and therefore that decree is not liable to be interfered with. He also argued that having regard to the pleadings of the parties and the facts of the case, the Court below had rightly held that the burden of proving want of consideration under Ext. P.1 lay on the defendant and that he had failed to discharge the same.

9. The plaintiff-respondent, anticipating the aforesaid first submission made by the Learned Counsel for the appellant, has also filed an amendment application in this Court stating that byinadvertence or mistake it had been stated in the plaint that the pronote was dated 16-12-1968, whereas it should have been 16-2-1968 and the figure 'I' behind the figure '2' had been typed by mistake and therefore the plaintiff should be permitted to delete or remove the figure 'I' therein.

10. However, it is clear from the facts that the plaintiff had based his claim on Ext.P.1. had produced it along with the plaint and the defendant also has referred to that document in his written statement and evidence and it cannot, in the circumstances, be said that the defendant had been misled in his defence on account of this mistake in the plaint. There is no substance in the first submission made by the Counsel for the appellant, The plaintiff-Respondent ispermitted to make the accessory amendment in the plaint.

11. There is also no substance in the second submission made by the Counsel for the appellant. It is true that there is no stipulation in Ext. P.l for payment of the amount due under it to order and the promisor has undertaken to pay the same to the promisee and obtain return of the document from it. Neither the stipulation that the promisor would pay the money to the promisee nor the further stipulation that after thus paying the said sum he would obtain return of the said note, even if taken together, would not make this document a non-negotiable one.

12. For a document to be a promissory note within the meaning of Section 4 of the Negotiable Instruments Act, 1881 the same should conform to these requirements :

1. It must be its writing and signed by the maker.

2. It must contain an unconditional promise to pay a sum certain in money only, and nothing more.

3. It must be payable on demand or at a fixed or determinable future time.

4. It must, be payable to, or to the order of, a specified person or to the bearer.

The document In question satisfies all these requirements. Now, Section 13 of the Act provides that a Pronote, a Bill of Exchange or a cheque payable either to order or to bearer would be a negotiable instrument, if it does notcontain words prohibiting transfer or indicating an intention that it shall not be transferable (See Section 13(1), Explanation (1). In this connection the following observations of a Full Bench of Rajasthan High Court in Nanga-v.-Dhannalal may be noted :

' It is therefore, clear that even if a promissory note is payable to a particular person, it will be deemed to be payable to order and will be a negotiable instrument under the Negotiable Instruments Act unless expressly or by implication its transfer is prohibited. Therefore, looking to the definition of the promissory note in the Stamp Act as well as in the Negotiable instruments Act, it seems that a promissory note should in its popular sense as understood by men of business be negotiable. The only exception which the Stamp Act provides is that it need not be negotiable in cases where it falls within the wider definition as given in the Act. if it does not fall within the wider definition of the Stamp Act, then under the Negotiable Instruments Act, it need not be negotiable in those cases only when expressly or by implication it is not transferable. In all other cases a promissory note should stand the test of negotiability. There can be promissory notes which may not be negotiable but such notes can be only those which fall within the above mentioned exception. Barring these exceptions if they arc intended to be promissory notes they should be negotiable.'

Ext. P.1 does not in any express terms prohibit the transfer of the note ; nor is there anything therein to imply its non-negotiability.

13. The question now is whether Ext. P.I had been made for consideration. Under Section 43 of the Act 'a negotiable instrument made, drawn, accepted, endorsed, or transferred without consideration, or for a consideration which fails, creates no obligation of payment between the parties to me transaction.' in the instant case, thedefenddant's plea is that Ext. P.1 carriers no consideration at all and therefore he is not liable to pay any sum stipulated thereunder.

14. It is true that in the instant case there is material enough on record to show that the defendant had executed Ext. P.1. In his deposition the defendant admits of his Signature on Ext. P.1. though he qualifies that say by further stating that he had been forced to sign that document. I have referred to his plea in his written statement wherein he has stated that there was a threat of prosecution against his son on the allegation that his son had misappropriated some goods of the company and that therefore to save thesituation he had signed some papers as desired by the Plaintiff. Now, all these things taken together are sufficient to hold that the defendant had signed Ext. P.1 after it had been written.

15. Section 18 of the Act, amongst other things, says that 'until the contrary is proved' it has to be presumed that every negotiable instrument made had been made forconsideration. The further question is, is this a case in which the Plaintiff in the suit can succeed by relying on thepresumption under Section 118 of the Act without adducing any further proof regarding the passing of consideration under the pronote in question.

16. As to the ambit and scope of Section 118 of the Act, the Supreme Court observes in Kundan Lal-Rallaram -v.-Custodian, A.I.R. 1961 S.C.l3l6 Evacuee Property as under :

'As soon as the execution of the promissory note is proved, the rule of presumption laid down in Section 118 of the Negotiable Instruments Act helps him to shift the burden to the other side. The burden of proof as a question of law rests, therefore, on the plaintiff; but as soon as the execution is proved, Section 118 of the Negotiable Instruments Act imposes a duty on the Court to raise a presumption in his favour that the said instrument was made for consideration. This presumption shifts the burden of proof in the second sense, that is, the burden of establishing a case shifts to the defendant. The defendant may adduce direct evidence to prove that the promissory note was not supported by consideration and, if he adduced acceptable evidence, the burden again shifts to the plaintiff and so on. The defendant may also rely upon circumstantial evidence and, if the circumstances sorealized upon are compelling, the burden may likewise thrift again to the plaintiff. He may also rely upon presumptions of 'fact, for instance those mentioned in Section 114 and other Sections, of the Evidence Act. Under Section 114 of the Evidence Act the Court may presume the existence of any fact which it thinks likely to have happened, regard being had to the common course of natural events, human conduct and public and private business, in their relation to the facts of the particular case.' Illustration (g) to that Section shows that the Court may presume that evidence which could be and is not produced would, if produced, be unfavourable to the person who withholds it. A plaintiff, who says that he had sold certain goods to the defendant and that a promissory note was executed as consideration for the goods and that he is in possession of the relevant account books to show that he was in possession of the goods sold and that the sale was effected for a particular consideration, should produce the said account books, for he is in possession of the same and the defendant certainly cannot be expected to produce his documents. In those circumstances, if such a relevant evidence is withheld by the plaintiff, Section 114 enables the Court to draw a presumption to the effect that, if produced, the said accounts would be unfavourable to the plaintiff. This presumption, if raised by a Court, can under certain circumstances rebut the presumption of law raised under Section 118 of the Negotiable Instruments Act. Briefly stated, the burden of proof may be shifted by presumptions of law or fact, and presumptions of law or presumptions of fact may be rebutted not only by direct or circumstantial evidence but also by presumptions of law or fact. We are not concerned here with irrefutable presumptions of law.'

In this connection reference also may be made to the Division Bench decision of this Court in Sharada Bai -v.- Syed Absul Hai 1971 (2) Mys. L.J. 407.

17. The consideration stipulated in Ext.P.l is Rs. 9974-43 and the said sum, as the recital of the document shows, represented the value of the goods of the companymisappropriated by the son of the executants (the promisor). On that very day, according to the plaintiff, the defendant had also given to it (the plaintiff) another letter Ext. P. 2. The averments made in Ext. P. 2 to some extent support the plea of the defendant that he had executed Ext. P. 1 under the threat that his son would be prosecuted. In Ext. P. 2 it is stated that at his (the defendant) instance his son had secured employment in the plaintiff concern; that his son had misappropriated some goods of the company; that undertaking to pay the value of the aforesaid goods he had executed the pronote in question and that therefore no further action may betaken against his son.

18. It is not clear what goods the defendant's son had misappropriated and as to whether there was any proper audit. When the defendant pleads that under duress and to avoid his son being prosecuted he had executed this document but not for consideration, and when the circumstances prima facie indicate that it might have been so, the plaintiff should have placed some more material on record in support of his claim that the sum stipulated in the promissory note in fact represented the value of the goods misappropriated by the defendant's son and that the defendant undertaking to pay the said sum had executed the pronote in question. The plaintiff has not discharged the burden thus shifted on to it in this case. The only witness who has been examined on behalf of the plaintiff is one Mohamed Hussain, said to be the scribe of Ext. P. 1. As to the execution of Ext. P. 1 what he says is that the plaintiff-company was about to file a complaint against the defendant's son and that at that time the defendant had executed the suit pronote Ext. P. 1 in favour of the plaintiff-company. This is all what he says. He does not say a word about the consideration etc. The plaintiff is a company and it must have had records or documents showing the entrustment, if any, of the goods to the defendant's son and the connected particulars. The plaintiff has not produced any suchdocument. Nor has it examined any witness to speak about these facts.

19. In the circumstances of the case, I am of the view that the first Appellate Court has erred, relying on Section 118 of the Act, in holding that Ext. P. 1 had been executed for consideration. As already stated, the defendant has been able to discharge the burden that initially lay upon him in proof of his case that Ext. P. 1 carried no consideration. And the plaintiff, on whom the burden had shifted to prove that the said document had been made for consideration, has failed to discharge its burden.

20. In the circumstances of the case, the plaintiff has to fail and accordingly this appeal is allowed, The judgment and decree of the first Appellate Court is hereby set aside and the plaintiff's suit is dismissed for reasons stated above.


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