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Bishambhar Dayal (Deceased by L.Rs.) and ors. Vs. Vishwanath Agarwal - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAllahabad High Court
Decided On
Case NumberSecond Appeal No. 2176 of 1973
Judge
Reported inAIR1985All12
ActsNegotiable Instruments Act, 1881 - Sections 118; Evidence Act, 1872 - Sections 114; Contract Act, 1872 - Sections 25(3)
AppellantBishambhar Dayal (Deceased by L.Rs.) and ors.
RespondentVishwanath Agarwal
Appellant AdvocateS.P. Srivastava and ;G. Prakash, Advs.
Respondent AdvocateR.R. Agarwal and ;Bharatji Agarwal, Advs.
Excerpt:
.....due irrespective of his failure to establish that consideration passed in cash when the promissory note was executed. 8. the settled principle is that despite the failure of the plaintiff to establish that consideration passed in cash for the promissory note, he may get a decree on the basis of admission or evidence placed on record from the other side provided the same establishes that there was some other kind of consideration in lieu of which the promissory note could be executed. this does not fail on account merely of the consideration being shown to be not the same as indicated in the promissory note. the plaintiff failed to prove that there was a cash payment of rs. this view was endorsed by another division bench in girwar lal v. the burden of proving that there was no..........court that the promissory note dated sept. 18, 1965 relied for the plaintiff is not supported by cash consideration. there was no loan of rs. 11020/- advanced to the defendants or any of them on that date as claimed by the plaintiff. it was established however, that there was old debt outstanding against the defendants 1 and 3 and the promissory note was executed in lieu thereof. the old debt had become barred by limitation but section 25(3) of the contract act avails the plaintiff and he could therefore, maintain the suit on the basis thereof insofar as the defendants 1 and 3 are concerned. accordingly, the appeal was allowed in part. the suit was decreed for rs. 12,500/- against the defendants no. 1 and 3 only, it was dismissed against the defendant no. 2,5. aggrieved the defendants.....
Judgment:

B.D. Agrawal, J.

1. This appeal is directed against the judgment and decree of the Additional District Judge, Gorakhpur dated May 31, 1973.

2. The suit giving rise to this appeal was instituted on Sept. 17, 1968 by the respondent for the recovery of a sum of Rs. 12,500/- only with the allegations that on Sept. 18, 1965 the plaintiff advanced loan of Rs. 11020/- only to the defendants who agreed to repay the same with interest. On the same day the defendants 1 and 3 executed a promissory note and the accompanying receipt evidencing the loan in favour of the plaintiff. The defendant No 2 was also a member of the joint Hindu family but he could not sign the promissory note or the receipt. The amount accrued due is thus stated to be Rs. 12,500/- including interest. In defence, it was denied that the plaintiff had advanced loan of Rs. 11020/- on Sept. 18, 1965 as alleged by him or that the defendants agreed to pay interest on any such loan. The parties, it was averred, had been doing business in partnership. The defendants Nos. 1 and 3 were induced to execute a promissory note and receipt in favour of the plaintiff in connection with the accounts of the partnership. The defendant No. 2 was not a party to the transaction. On March 26, 1971 the defendants applied for amendment in the written statement which was allowed. Under the paras included in the written statement by virtue of this amendment it was pleaded that the partnership between the parties was dissolved on Sept. 20, 1959 since the plaintiff withdrew from the same. There was no accounting done when the partnership came to be dissolved. The accounts were with the plaintiff. It was given out by him that it would take time before the accounting could take place and according to him he was entitled to receive a sum of Rs. 15,000/- from the defendants. The defendants, it was added, were coerced in executing a promissory note and receipt for Rs. 1300/- dated Sept. 20, 1959 in favour of the plaintiff and further they paid a sum of Rs. 2000/- in cash to him on the same day. A sum of Rs. 4,500/- was further paid by them to the plaintiff in this connection by cheque on March 3, 1960.

3. The trial Court dismissed the suit on Sept. 11, 1972. The finding recorded was that the plaintiff did not advance Rs. 11020/- on Sept. 18, 1965 to the defendants and that the promissory note and the receipt in suit were not executed in the circumstances alleged by him. It was also held that the promissory note set up by the plaintiff was without consideration. The defendants did not constitute joint Hindu family and the defendant No. 2 did not derive any benefit under the transaction. The suit having been instituted on Sept. 17, 1968 was not barred by limitation.

4. Upon the matter being taken to appeal by the plaintiff the lower appellate Court confirmed the finding of the trial Court that the promissory note dated Sept. 18, 1965 relied for the plaintiff is not supported by cash consideration. There was no loan of Rs. 11020/- advanced to the defendants or any of them on that date as claimed by the plaintiff. It was established however, that there was old debt outstanding against the defendants 1 and 3 and the promissory note was executed in lieu thereof. The old debt had become barred by limitation but Section 25(3) of the Contract Act avails the plaintiff and he could therefore, maintain the suit on the basis thereof insofar as the defendants 1 and 3 are concerned. Accordingly, the appeal was allowed in part. The suit was decreed for Rs. 12,500/- against the defendants No. 1 and 3 only, it was dismissed against the defendant No. 2,

5. Aggrieved the defendants 1 and 3 have preferred this appeal. The defendant No. 1 appellant having died during the pendency of this appeal, his legal representatives have been substituted on the record.

6. Learned counsel for the appellant submitted that the suit was instituted with the averment that loan of Rs. 11020/- in cash was advanced by the plaintiff to the defendants 1 and 3 on Sept. 18, 1965 and that the promissory note and the receipt relied upon in the plaint were executed in lieu thereof. In the statement recorded under Order X, Rule 2 Civil P. C. on April 3, 1969 it was reiterated on behalf of the plaintiff that the amount in question was advanced in cash. This was reiterated by the plaintiff in his statement on oath also when he was examined before the trial Court on Aug. 8, 1972. The contention is that since both the Courts below have found that no such loan was advanced to any of the defendants, there existed no basis for the claim of the plaintiff having been decreed. It is argued that the plaintiff had to succeed on the strength of the case set up by him namely, that the amount in question was given in cash as a loan on 18th Sept. 1965 and in view of the failure to establish the same, there could be no presumption raised under Section 118 of the Negotiable Instruments Act in respect of the promissory note vide Ex.1/2. It was further argued that the lower appellate Court has erred in relying upon Section 25(3) of the Contract Act because, according to the learned counsel, there was no express promise to pay within the meaning of that provision.

7. Before entering into the merit of this contention of the appellant's learned counsel, it may be observed that in the written statement (as amended) the case taken was that there had been partnership among plaintiff and the defendants I and 3. The partnership was dissolved on Sept. 20, 1959. The accounting could not take place. On the representation made by the plaintiff to the effect that a sum of Rs. 15,000/- was due to him, the defendants 1 and 3 executed promissory note on Sept. 20, 1959 for the sum of Rs. 13,000/- after having paid Rs. 2000/- in cash and further that on March 3, 1960 they made payment of Rs. 4,500/- towards this transaction. According to the defendants, therefore, they had executed a promissory note on Sept. 20, 1959 which was for a sum of Rs. 13,000/- and on that also a sum of Rs. 4,500/- had been subsequently paid. The defendant No. 1 Bishambhar Dayal came to the witness box and was crossexamined at length on this score. In his deposition he stated that the accounting relating to the partnership firm took place in the year 1956. On the accounting being done a sum of Rs. 15,000/- was found due to the plaintiff. Out of this amount Rs. 2,000/- were paid by them in cash to the plaintiff and for the balance of Rs. 13,000/- he (the defendant No. 1) executed a promissory note. Subsequently Rs. 4,500/- were paid to the plaintiff by a cheque towards this transaction. In cross-examination the plaintiff also, it is worthy of note, stated that on Sept. 20, 1959 the promissory note for Rs. 13,000/- was executed in his favour and that Rs. 4,500/-were paid to him by cheque on March 3, 1960. He gave out that in connection with that promissory note dated Sept. 20, 1959 a sum of Rs. 11000/-was due to him on Sept. 18, 1965. On the strength of this evidence on both sides including the admission of the defendant No. 1 examined as a witness for the contesting defendants, it has been urged by the respondent's learned counsel that the respondent is entitled to decree for the amount admitted to be due irrespective of his failure to establish that consideration passed in cash when the promissory note was executed.

8. The settled principle is that despite the failure of the plaintiff to establish that consideration passed in cash for the promissory note, he may get a decree on the basis of admission or evidence placed on record from the other side provided the same establishes that there was some other kind of consideration in lieu of which the promissory note could be executed. The presumption under Section 118 of the Negotiable Instruments Act is that the promissory note was made for consideration; this does not fail on account merely of the consideration being shown to be not the same as indicated in the promissory note. In L. Ram Nath etc. v. L. Ramchandra Mal : AIR1935All154 the plaintiff sued on a promissory note and a receipt on which he claimed that Rs. 2,000/- had been lent to the defendants. The defendants on the other hand admitted the execution of the promissory note and the receipt but they denied that there was a loan of Rs. 2,000/-in cash. The plaintiff failed to prove that there was a cash payment of Rs. 2000A. The defendants also did not prove the allegations made by them. The view taken by the Division Bench was that the execution of the promissory note having been admitted by the defendants and the passing of the consideration denied, the plaintiff could still avail himself of the presumption under Section 118(a) Negotiable Instruments Act even though the evidence produced by both the parties had not been believed by the Courts. This view was endorsed by another Division Bench in Girwar Lal v. Dau Dayal : AIR1935All509 of which Sutaiman C. J. was a member. It was held that where a Court has after a consideration of the entire evidence recorded finding one way or the other then the finding becomes acceptable irrespective of the question of presumption.

9. The question arose in Manyam Janakalakshmi v. Manyam M. Rao : AIR1973AP103 , Chinnappa Reddy J. (as he then was) speaking for the Division Bench in that case laid down the law as under (at pp. 110-111) : --

'But the law does not require that a negotiable instrument should recite the consideration for which it is made or drawn. The law does not also require the person suing on the instrument to allege the consideration for which it was made or drawn. Irrespective of any recital in the instrument or any allegation in the plaint regarding consideration, the law presumes that the instrument was made or drawn for consideration. The presumption is that there was consideration and not that there was any particular consideration, that which might be recited in the instrument or that which might be alleged in the plaint. The presumption arises as soon as the execution of the instrument is proved and the presumption continues until 'the contrary is proved', that is until it is proved that there was no consideration. It must be proved that there was no consideration at all for the instrument. Mere proof that the particular consideration recited or alleged did not exist may not suffice, though such proof must naturally be a circumstance to be considered in deciding whether there was no consideration at all. Therefore, a plaintiff who, quite unnecessarily, adduces evidence to prove a certain consideration but is unable to prove that consideration, need not necessarily lose his action for that reason. The burden of proving that there was no consideration is on the defendant and the burden has to be discharged irrespective of the failure of the plaintiff to prove a particular consideration which he sets out to prove. The failure of the plaintiff to prove a particular consideration may itself probabilise the defendant's version and lead to the conclusion that there was no consideration at all; on the other hand, it may not where the failure of the plaintiff to prove a particular consideration does not tend to probabilise and lead to the acceptance of the defendants' version, as in a case where the defendant's version is found to be false. The presumption under Section 118 still operates and the plaintiff is entitled to get a decree.'

10. Reliance was placed on the view taken by the Bombay High Court in Tarmahomed v. Tyeb Ebrahim, AIR 1949 Bom 257 wherein it was observed that the statutory presumption under Section 118 continues until it is established that the instrument was without consideration. The presumption raised is not in respect of the consideration mentioned in the negotiable instrument, the presumption is in favour of there being a consideration for the negotiable instrument, any consideration which is valid consideration in law. The Patna High Court has also taken similar view as will appear from the decision reported in Satya Narain Singh v. Janardan Kanth : AIR1980Pat277 ; Barhamdeo Singh v. Kari Singh AIR 1936 Pat 498; the Full Bench decision of the Rajasthan High Court in Heera Chand v. Jeevraj was also referred to in this connection. It is clear thus that merely due to the inability of the plaintiff-respondent in the instant case to prove that cash consideration passed when the promissory note dated 18th Sept. 1965 was executed does not suffice to dismiss the suit in view of the evidence for the defendants showing beyond doubt that a sum of Rs. 8500/- was in any case outstanding against defendants Nos. 1 and 3 arising out of the transaction dated Sept. 20, 1959 since out of the sum of Rs. 13000/- for which pronote was executed on Sept. 20, 1959 there was payment of Rs. 2,000/- on, that day and Rs. 4,500/- were paid later on 3rd March, 1960 by cheque.

11. The next argument of the appellant's learned counsel as mentioned above was that the promissory note for Rs. 13,000/- having been executed by the defendants on Sept. 20, 1959, the promissory note relied upon by the plaintiff-respondent which was made on 18th Sept., 1965 was barred by limitation and hence it should be taken as without consideration. The argument advanced is that to avail of Section 25(3) Contract Act there has to be offer and acceptance which, it was submitted, does not exist herein. Emphasis was laid over again on contending that the plaintiff admitted that consideration in cash in the form of loan did not pass on Sept. 18, 1965. In my view the argument is fallacious. The promissory note dated 18th Sept., 1965 incorporates the promise to pay expressly made by the concerned defendants. In other words this is the culmination of the understanding reached between the parties the defendants offering to execute the promissory note and the plaintiff accepting the same. The conduct of the parties is itself material for this purpose. The contents of the promissory note in question bear out that this constitutes express promise to pay and is apprised to the plaintiff-respondent concerned. It is not required under the law that the promissory note mentions that this was in lieu of a time barred debt or even that the defendants should have been conscious that the debt had become barred by limitation. I am supported in this view by the decisions reported in K.K. Rm Muthayee Achi : AIR1951Mad903 , and Kasturchand Jiwaji v. Manekchand Devchand AIR 1943 Bom 447. The appellant's counsel made reference to Lalam Sambayya v. Pattan : AIR1963AP337 which however, does not assist him. In that case reliance was sought to be put on a statement made by a witness in the Court admitting a time barred debt. It was held that this does not constitute promise to pay within the meaning of Section 25(3) of the Contract Act. In Sriram Arjundas v. G.G. in Council : AIR1952Cal443 likewise there was a letter from the Railways stating that a pay order for certain amount had been sent to the plaintiff in full satisfaction of his claim. This could not evidently be said to contain a promise sufficient to satisfy the requirement of Section 25(3) since there was no contract, it was held, to pay within the meaning of this section. In Ganesh v. Mallu Mal Girdar Das : AIR1931All375 also cited for the appellant there was not even 'account stated' as properly understood. All that the document recited in so far as relevant was 'Interest at the rate of 8%'. It was held that to bring the case within the meaning of Section 25(3) it was necessary to show that there was express promise to pay as a mere acknowledgment of liability even if it implied a promise would not be sufficient for this purpose. These decisions being distinct on facts do not assist the appellant. In the instant case there being the express promise to pay a time barred debt as evident by the promissory note dated 18th Sept., 1965 executed by the defendants 1 and 3 the plaintiff-respondent is entitled to recover the sum of Rs. 8,500/- only as analysed above.

12. From the discussion in the foregoing para the plaintiff-respondent is entitled to a decree for Rs. 8,500/- only. There is no evidence that there was provision for payment of interest when the defendants-appellants executed the promissory note for Rs. 13,000/- on Sept. 20, 1959. The conduct of the plaintiff-respondent has not been such as to entitle him to interest in equity. As against the respondent No. 2 who was impleaded pro forma, the appeal has already been dismissed on April 22, 1980.

13. The appeal is, therefore, allowed in part only. The suit shall stand decreed against the defendants-appellants for the recovery of Rs. 8,500/- only. In the circumstances the costs shall be borne by the parties throughout.


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