Telangana High Court
Kanuganti Ramu vs Samala Praveen Kumar on 12 August, 2024
Author: G.Radha Rani
Bench: G.Radha Rani
THE HONOURABLE DR.JUSTICE G.RADHA RANI
C.C.C.A.No.113 of 2019
JUDGMENT:
This appeal is filed by the appellant - defendant aggrieved by the judgment and decree passed in O.S.No.141 of 2012 dated 19.11.2018 by the XXVII Additional Chief Judge, City Civil Court, Secunderabad.
2. The respondent is the plaintiff.
3. The parties are hereinafter referred as plaintiff and defendant before the trial court.
4. The plaintiff filed the suit for recovery of an amount of Rs.10,00,000/- submitting that the plaintiff and defendant had acquaintance with each other. They were known to each other for a long time and out of the said acquaintance, the defendant approached the plaintiff and requested to advance a sum of Rs.10.00 lakhs to meet his compelling business requirements and promised to repay the same within a short period. Accordingly, the plaintiff considered his request and advanced the said sum of Rs.10.00 lakhs to the defendant on 25.08.2009. The said amount was paid by the plaintiff through cash. While receiving the said sum, the defendant executed a demand promissory note agreeing to repay the same with interest @ 2 % per month. The above 2 Dr.GRR, J ccca_113_2019 transaction was witnessed by two witnesses namely (1) Sri J.Veeresham and (2) Sri S.Bhoopal. After receiving the said sum, the defendant had not repaid either principal nor paid any monthly interest. The defendant did not keep up his word and did not discharge any part of the liability. The plaintiff approached the defendant and sought to repay the amount. But the defendant had not bothered to make the payment. Having left with no other alternative, the plaintiff filed the suit for recovery of amount.
4.1. The plaintiff further submitted that the defendant not only borrowed money from him, but also from others. He borrowed an amount of Rs.1.5 crores from Sri Raghu Alam Setty of Mahindra Hills, Hyderabad, an amount of Rs.3.00 crores from Sri Gopal Rao of BHEL, Hyderabad; an amount of Rs.2.00 crores from Sri K.Rajaiah of Nizamabad; an amount of Rs.1.20 crores from Sri K.Krishna of Tirumulgherry, Secunderabad; an amount of Rs.1.00 crores from Sri S.Srikanth of Tirumulgherry , an amount of Rs.1.00 crore from Bank of India. The defendant became highly indebted. The plaintiff came to know that the defendant was due huge amounts running to crores of rupees and he was not discharging his liability to anyone. All of his properties i.e. his house and landed property, which he owned were all mortgaged to banks. The business, which the defendant was carrying out was under huge loss and he was unable to pay amount to creditors. Recently, the plaintiff came to know that one of his properties, which was mortgaged to bank was sold without any permission from 3 Dr.GRR, J ccca_113_2019 bank, even while the charge existed, which would amount to cheating the bank. He further submitted that the defendant was highly indebted to many people and was trying to run away from the jurisdiction of the Court.
5. The defendant filed written statement denying the transaction. He contended that he never borrowed any amount from the plaintiff at any point of time much less on 25.08.2009. He contended that the plaintiff was not having capacity to advance such huge amount. The plaintiff forged and fabricated the promissory note and filed the suit. The alleged witnesses were set up persons. The plaintiff in collusion with witnesses filled and fabricated the promissory note. The plaintiff took advantage of the past loan transaction of Rs.1.00 lakh with one Samala Venu, who took totally four (04) signed blank promissory notes as a security. The same were repaid. Having blank promissory notes, the said Samala Venu (the plaintiff in O.S.No.140 of 2012) in collusion with the plaintiff in the present suit filled and filed the suit for an undue amount. 5.1. He further submitted that Samala Venu filed O.S.No.140 of 2012 for Rs.60,50,000/- and got filed other three (03) suits through his confidents. O.S.No.141 of 2012 was got filed by Samala Praveen Kumar for recovery of an amount of Rs.17,00,000/-. O.S.No.142 of 2012 was got filed by M/S.Kedia Overseas Limited for recovery of an amount of Rs.34,00,000/-. O.S.No.173 of 2012 was got filed by Samala Murali for recovery of an amount of 4 Dr.GRR, J ccca_113_2019 Rs.60,50,000/-. Samala Venu also filed a criminal case in C.C.No.456 of 2013 on the file of the learned XI Special Magistrate, Hyderabad. The same ended in acquittal and prayed to dismiss the suit.
6. Basing on the said pleadings, the learned XXVII Additional Chief Judge, City Civil Court, Secunderabad framed the issues as follows:
(i) Whether the suit promissory note dated 25.08.2009 was true, valid and binding on the defendant?
(ii) Whether the suit promissory note was invalid due to material alterations?
(iii) Whether the suit claim was within the period of limitation?
(iv) Whether the plaintiff was entitled for recovery of an amount of Rs.17,00,000/- from the defendant?
(v) Whether the suit claim was within the jurisdiction of the Court?
(vi) To what relief?
7. The plaintiff examined himself as PW.1 and got examined one of the attestors of the promissory note as PW.2. The promissory note along with receipt dated 25.08.2009 was marked as Ex.A1. The defendant got examined himself as DW.1. No documents were marked on his behalf.
8. The plaintiff filed his evidence affidavit on the same lines as that of his plaint. PW.1 in his evidence affidavit stated that he was acquainted with the defendant since many years and had good association with him. The defendant 5 Dr.GRR, J ccca_113_2019 approached him as well as his family members in the year 2009 seeking loan to meet his compelling business requirements. The defendant was running business in the name and style of "Flycon Blocks Private Limited". But, it was a proprietary concern. Except the defendant and his wife Smt. K.Sheela, there were no other directors in the said company. The defendant not only requested him, but also his other family members. Believing and trusting the defendant, they lent the amount as requested by him. He advanced a sum of Rs.10.00 lakhs to the defendant on 25.08.2009. The defendant requested for payment of the amount in cash. He accepted the same and gave Rs.10.00 lakhs in cash. The defendant after receiving the said amount, executed a demand promissory note agreeing to repay the said amount with interest @ 2 % per month. The entire transaction of giving loan in cash and execution of promissory note by the defendant was witnessed by Sri J.Veeresham and Sri S.Bhoopal, who were also signatories to the promissory note.
9. In his cross-examination, he stated that he knew the defendant since 2005. The defendant was engaged in the business of light weight cement bricks. He was engaged in the business of HDPE pipes manufacturing. He stated that he knew Samala Venu from 2003 onwards and had long relationship with him. He had no business transactions with Samala Venu. One Samala Murali was the brother of Samala Venu. Samala Venu was a magician. He further stated that his business turnover was Rs.10.00 crore and he was also an Income Tax 6 Dr.GRR, J ccca_113_2019 assessee, but had not shown the suit transactions in his Income Tax returns. The said amount was his personal savings over a period of time and he gave the said amount at the office of the defendant, but admitted that he did not mention in his pleading about the same, but did not remember the exact date. He stated that Sri Veeresham was having a photostat centre and Sri Bhoopal was into real-estate business. He admitted that the promissory note was not scribed by the defendant and stated that he could not say as to who scribed the promissory note. He further stated that he could not give the date on which the amount was advanced. He stated that he was a resident of Tarnaka for the past 15 years and his business was at Nacharam.
10. The plaintiff also got examined one of the attestors by name Jangati Veeresham as PW.2. PW.2 filed his evidence affidavit stating that he knew the plaintiff through a common friend for the past 13 years and had good acquaintance with him. The defendant approached the plaintiff with a request of lending an amount of Rs.10.00 lakhs to meet his business requirements, for which the plaintiff agreed being the friend of the defendant and lent an amount of Rs.10.00 lakhs. The said transaction took place in the office of the defendant. The plaintiff handed over the amount of Rs.10.00 lakhs to the defendant and the defendant in turn executed a promissory note dated 25.08.2009 with respect to the said transaction. It was scribed by one of the office employees of the defendant and signed by the defendant before him on the same day. He had 7 Dr.GRR, J ccca_113_2019 seen the execution of the promissory note by the defendant and could identify the signature of the defendant on the said promissory note. He further submitted that he and Mr.S.Bhoopal were common friends of both the parties. They were physically present during the said transaction.
11. He in his cross-examination, admitted that he had not signed on the promissory note, but only signed on the receipt. He did not remember the date of execution of Ex.A1 promissory note. But the said transaction took place in the office, which was adjacent to RTO Office, Secunderabad. Nothing more was elicited in his cross-examination.
12. The defendant examined himself as DW.1 and filed his evidence affidavit on the same lines as that of his written statement. In his cross-examination, he admitted that he signed on Ex.A1. When he signed, it was blank. The plaintiff paid only Rs.1.00 lakh under Ex.A1 and he repaid the said amount. But, he had not the mentioned the same in his written statement about the repayment. The repayment of the amount was made in November, 2006 by way of cash. He stated that he had not addressed any letter to the plaintiff demanding to return the blank promissory note. When he was questioned about the financial capacity of the plaintiff, he stated that he did not know whether the plaintiff was financially sound to lend money and admitted that he mentioned in his written 8 Dr.GRR, J ccca_113_2019 statement that he promised to repay the amount along with interest @ 2 % per month. He also admitted that he had not filed his reply notice before the Court.
13. On considering the oral and documentary evidence on record, the trial court decreed the suit with costs against the defendant.
14. Aggrieved by the said judgment and decree passed by the XXVII Additional Chief Judge, City Civil Court, Secunderabad, the defendant preferred this appeal.
15. Learned counsel for the appellant filed his written submissions.
16. Heard the learned counsel for the respondent - plaintiff.
17. Learned counsel for the appellant in his written submissions contended that the suit was filed for unaccounted transactions, which was not reflected in the Income Tax returns of the plaintiff, as admitted by him. The respondent - plaintiff when questioned about the capacity to lend the amount of Rs.10.00 lakhs in cash to the appellant made a vague submission about being engaged in business without clearly specifying the nature of business and his annual income from the business. The trial court had not investigated the fact that when the amount was alleged to have been lent by cash, the respondent had not explained from where he got Rs.10.00 lakhs from. When the said transaction involved heavy amount, the same should have been reflected in the Income Tax 9 Dr.GRR, J ccca_113_2019 returns. The respondent being an Income Tax assessee, it was incumbent upon him to show the source of income, which admittedly was not shown. Therefore, it was appropriate to draw adverse inference against him. He further contended that the unaccounted transactions have to be considered as illegal transactions, as per the judgment of the Hon'ble Apex Court in G.Pankaja Lakshmi Amma v. Mathai Mathew 1. He further contended that the payment of huge sum of money by respondent in cash was impermissible in view of the bar under Section 269SS of the Income Tax, 1961 for transactions over and above the sum of Rs.50,000/-. The respondent by alleging to have extended a hand loan of huge amount of money had violated the said provision. Only with an intention to evade tax, the respondent had not shown the above huge money transaction in his Income Tax returns, which was unlawful and the same was hit by principles of Pari Delicto and relied upon the judgments of the High Court of Madras in Monicca Shantha Nelson and two others v. Rajalakshmi Venugopal 2 and of the High Court of Delhi in Vinod Popli v. Ragini Popli and Others 3. 17.1. He further contended that the promissory note executed by the respondent - plaintiff was tampered with and materially altered and filled with exorbitant amount to suit the whims and fancies of the respondent. At the time of signing promissory note, the same was blank. The respondent lent an amount 1 2004 (12) SCC 83 2 Laws (MAD) 2022 2 30 3 (2015) 219 DLT 294 10 Dr.GRR, J ccca_113_2019 of Rs.1.00 lakh and the same was repaid by the appellant - defendant and contended that as per Section 87 of the Negotiable Instruments Act (for short "NI Act"), 1881, the respondent - plaintiff was not entitled to enforce payment on account of material alteration. He also relied upon the judgment of the Hon'ble Apex Court in Tatipamula Nagaraju v. Pattem Padmavathi 4. He further contended that at the time of signing the promissory note, they were blank. The transaction was for an amount of Rs.1.00 lakh, but the respondent - plaintiff materially altered the claim amount in the promissory note upon fairly admitting the signature on the promissory note. The Court ought not to have come to the conclusion that the amount was payable by the appellant. No liability would lie upon the appellant to pay the amount in pursuance of a tampered promissory note, for which no consideration was ever passed from the respondent to the appellant. He further submitted that he deposited the entire amount in the EP proceedings filed to execute the decree to prevent distress sale through court auction. But the said money was deposited without prejudice to his rights pending appeal. He also raised objections for withdrawal of the amount by the Decree Holder, since appeal was pending and prayed to order for restitution of the amount, which was withdrawn from the Court by the respondent - plaintiff in case of allowing the appeal. 4 (2011) 4 SCC 726 11 Dr.GRR, J ccca_113_2019
18. Learned counsel for the respondent - plaintiff on the other hand contended that as per Section 118 of the NI Act, when the defendant admitted execution of the promissory note, the presumption under Section 118(a) of the NI Act would arise that it was supported by consideration. The defendant failed to prove non-existence of consideration by raising any probable defence. The trial court on considering all the aspects passed the judgment and relied upon the judgments of the Hon'ble Apex Court in M/s. Grasim Industries Limited and another v. Agarwal 5 , Bharat Barrel and Drum Manufacturing Company v. Amin Chand Pyarelal 6 and of this Court in Siram Srirama Murthy v. Meka Suryanarayanamma 7.
19. Now, the points for consideration in this appeal are:
(i) Whether the plaintiff proved that the suit promissory note dated 25.08.2009 was true, valid and binding on the defendant and that he is entitled to recover the said amount from the defendant?
(ii) Whether the judgment of the trial court is in accordance with law or liable to be set aside?
(iii) To what result?5
(2010) 1 SCC 83 6 AIR 1999 SC 1008 7 (2018) 6 ALD 516 12 Dr.GRR, J ccca_113_2019 P O I N T No.1:
Whether the plaintiff proved that the suit promissory note dated 25.08.2009 was true, valid and binding on the defendant and that he is entitled to recover the said amount from the defendant?
20. On a perusal of the pleadings and evidence of the witnesses, the defendant had admitted his signature on the promissory note, but only contended that it was blank. He contended that he had taken only an amount of Rs.1.00 lakh with 2 % interest per month from the plaintiff, the respondent - plaintiff also received three other blank promissory notes by lending Rs.1.00 lakh on each promissory note and materially altered the promissiory notes.
21. When the defendant was admitting the execution of the promissory note, the presumption under Section 118(a) of the NI Act should be drawn that the promissory note is supported by consideration.
22. The Hon'ble Apex Court in Bharat Barrel and Drum Manufacturing Company v. Amin Chand Pyarelal (cited supra), held that:
"12. Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by consideration. Such a presumption is rebuttable. The defendant can prove the non-existence of consideration by raising a probable defence. If 13 Dr.GRR, J ccca_113_2019 the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would dis-entitle him to the grant of relief on the basis of the negotiable instrument. The burden upon the defendant of proving the non-existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non-existence of the consideration, the plaintiff would invariably be held entitled to the benefit of presumption arising under Section 118(a) in his favor. The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence as existence of negative evidence is neither possible nor contemplated and even if led is to be seen with a doubt. The bare denial of the passing of the consideration apparently does not appear to be any defence. Something which is probable has to be brought on record for getting the benefit of shifting the onus of proof on to the plaintiff. To disprove the presumption the defendant has to bring on record such facts and circumstances, upon consideration of which the 14 Dr.GRR, J ccca_113_2019 court may either believe that the consideration did not exist or its non-existence was so probable that a prudent man would, under the circumstances of the case, shall act upon the plea that it did not exist. We find ourselves in the close proximity of the view expressed by the Full Benches of the Rajasthan High Court and Andhra Pradesh High Court in this regard."
23. Except his self serving testimony, the defendant had not adduced any other evidence to prove that consideration was not passed under Ex.A1. The plaintiff had adduced evidence by examining himself and one of the attestors of the promissory note and by filing the promissory note marked as Ex.A1 and the receipt signed by the defendant to show that consideration was passed under the promissory note. But the defendant failed to show that no consideration was passed under Ex.A1 and that he received only an amount of Rs.1.00 lakh under Ex.A1. As seen from his cross-examination, he stated that he repaid the amount of Rs.1.00 lakh taken from the plaintiff in November, 2006 by way of cash but admitted that he had not mentioned the same in his written statement nor addressed any letter to the plaintiff demanding to return the blank promissory note after repayment of the amount. The said admissions made by the defendant would show that he failed to rebut the legal presumption under Section 118(a) of the NI Act to show that no consideration was passed under the promissory note.
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24. This Court in Siram Srirama Murthy v. Meka Suryanarayanamma (cited supra), upon consideration of the judgment of the Hon'ble Apex Court in Bharat Barrel and Drum Manufacturing Company's case, held that:
"20. Hence, in view of admission of execution of the Ex.A1 promissory note, the burden is on the defendant to prove his case. Besides himself, the defendant examined DWs.2 to 4 to show that the said Mohana Rao was in the habit of lending money, but did not speak of non-passing of consideration. On the other hand, it is the case of the defendant that he was borrowing amounts from Mohana Rao and the suit promissory note was executed for a much higher amount than the amount borrowed by him. That borrowing of higher amount was also not proved by the defendant in the instant case by producing any documentary evidence. In view of the same, the judgment and decree passed by the trial Court cannot be set aside and accordingly it is affirmed. Consequently, the Appeal Suit is dismissed with costs. The miscellaneous petitions, if any, pending in this appeal shall stand closed."
25. The Hon'ble Apex court in M/s. Grasim Industries Limited and another v. Agarwal (cited supra), also held that:
"5. In our opinion, when a person signs a document, there is a presumption, unless there is proof of force or fraud, that he has read the document properly and understood it and only 16 Dr.GRR, J ccca_113_2019 then he has affixed his signatures thereon, otherwise no signature on a document can ever be accepted. In particular, businessmen, being careful people (since their money is involved) would have ordinarily read and understood a document before signing it. Hence the presumption would be even stronger in their case. There is no allegation of force or fraud in this case. Hence it is difficult to accept the contention of the respondent while admitting that the document Ex.D-8 bears his signatures that it was signed under some mistake. We cannot agree with the view of the High Court on this question. On this ground alone, we allow this appeal, set aside the impugned judgment of the High Court and remand the matter to the High Court for expeditious disposal in accordance with law."
26. In the present case also, the appellant - defendant was a businessman and his contention that he signed on a blank document, could not be accepted. If the amount was repaid by him, he ought to have issued a notice seeking for the return of the promissory note executed by him.
27. With regard to the contention of the appellant - defendant that the respondent - plaintiff was not having financial capacity to lend the amount, he admitted in his cross-examination that he did not know whether the plaintiff was financially sound to lend money. The appellant - defendant had not stated that the plaintiff was not financially sound, but only stated that he was not aware of 17 Dr.GRR, J ccca_113_2019 the financial capability of the plaintiff. The contention of the appellant about the respondent - plaintiff failed to file his Income Tax returns to show that he lent the said amount was in-consequential, as it was for the Income Tax Department to initiate proceedings against the respondent - plaintiff, if the said transaction was not reflected in the Income Tax returns. But, the appellant - defendant could not take advantage of it. The facts and circumstances of the cases relied by the learned counsel for the appellant - defendant are distinguishable from the facts of this case. As such, the same cannot be relied upon. As such, this Court considers that the suit promissory note dated 25.08.2009 is true, valid and binding on the defendant and the plaintiff is entitled to recover the amount of Rs.17,00,000/- from the defendant. P O I N T No.2:
28. This Court considers that there is no illegality in the judgment of the trial court to set aside the same.
P O I N T No.3:
29. In the result, the CCCA is dismissed with costs confirming the judgment of the trial court dated 19.11.2018 passed in O.S.No.141 of 2012 by the XXVII Additional Chief Judge, City Civil Court, Secunderabad in decreeing the suit.18
Dr.GRR, J ccca_113_2019 As a sequel, miscellaneous applications pending in this appeal, if any shall stand closed.
_____________________ Dr. G. RADHA RANI, J Date:12.08.2024 Nsk.