The Appeal vs ".........The Burden Upon The
2023 Latest Caselaw 3801 AP

       THE HON'BLE SRI JUSTICE T.MALLIKARJUNA RAO

                    APPEAL SUIT NO.401 OF 2012

JUDGMENT:

1. The Appeal, under Section 96 of the Code of the Civil Procedure, is

filed by the appellant/defendant challenging the decree and Judgment

dated 15.03.2012 in O.S.No.539 of 2008 passed by the learned IV

Additional Senior Civil Judge, Guntur (for short, 'trial court').

Respondent is the plaintiff in the said suit, who filed the suit in

O.S.No.539 of 2008 seeking recovery of Rs.6,86,666/- with interest and

costs from the defendant based on two promissory notes.

2. The parties will hereinafter be referred to as arrayed before the trial

Court.

3. The facts leading to the present Appeal, in a nutshell, are as under:

Plaintiff has been working as Manager in Sai Renuka Lodge,

Jinna Tower Center, Guntur, owned by Desu Veera Raghavamma

@ Lalitha and her sister Vuggirala Venkayamma @ Laxmi, who is

the wife of Pothuraju Venkateswarlu. The defendant was involved

in real estate business along with Venkateswarlu and used to

visit the lodge frequently. The plaintiff purchased 5 plots through

the defendant but due to differences that arose later, the plots

could not be conveyed to the plaintiff. As a result, the plaintiff

requested the defendant to return the amount received for the

plots. As the defendant had no ready money, he executed two

A.S.No.401 of 2012

promissory notes for Rs.2,00,000/- each on 05.05.2005, agreeing

to repay the same with interest @ 24% p.a. The defendant did not

pay the amount as promised and kept postponing the payment

citing ongoing disputes between the business partners. Plaintiff

waited for payment, but as three years approached and with no

settlement in sight, the plaintiff filed the suit.

4. In the written statement, the defendant contends that the suit is

filed in collusion with V.Srinivasa Rao to have wrongful gain. There was

no prior demand made before the suit was filed. He lacks wordly wise

knowledge, having only completed education upto SSC. He did real

estate business in the name of Renuka Real Estate along with Srinivasa

Rao and Pothuraju Venkateswarlu. Due to his close relationship with

them and their better education, he used to follow their instructions.

They convinced him that his signature was necessary for real estate

transactions and trusted them and signed on blank papers including

blank promissory notes. Later, differences arose with Srinivasarao and

the defendant stopped his business. When he asked for the papers

containing his signatures, Srinivasarao and Venkateswarlu informed

him that the papers had been torn into pieces and there was nothing to

worry about. On enquiry, the defendant learnt that they had been using

the signed papers to create forged documents and file suits in the name

of their nominees. Previously, the Srinivasarao had filed several suits in

various courts. The defendant filed his written statements and contested

those suits. Plaintiff never approached the defendant and never paid any

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amount to this defendant. As such, there is no basis for him to choose to

return any advance amount and offer to execute promissory notes does

not arise.

5. Based on the above pleadings, the trial Court framed the following

issues:

(1) Whether the plaintiff is entitled for the suit amount with interest thereon?

(2) To what relief?

6. During trial, on behalf of the plaintiff, P.Ws.1 to 4 were examined

and Exs.A1 to A.6 were marked. On behalf of the defendant, D.W.1 was

examined and Exs.B1 to B.3 were marked.

7. After completion of trial and hearing the arguments of both sides,

the trial Court decreed the suit with costs for Rs.6,86,666/-, and the

defendant shall pay the same together with interest @ 6% p.a., on

Rs.4,00,000/- from the date of suit till payment.

8. Sri Ghanta Sridhar, learned counsel for the appellant/defendant

contends that the suit promissory notes are concocted and pointed out

lack of correlation between the pleadings and the plaintiff's evidence.

Even if it is assumed that the appellant executed the suit promissory

notes, they are considered void as they were materially altered making

them fall under the purview of Sec.87 of Negotiable Instrument Act, 1991

(for short 'N.I. Act'). The plaintiff failed to provide evidence to establish

the passing of consideration to the defendant. There is no evidence

regarding the transaction of plots with the defendant. Discrepancies

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exist in the appellant's case regarding the signing of blank promissory

notes, which were given to his partners in the real estate business, who

are the driving force behind the litigation. The respondent/plaintiff is

suggested to be a mere name lender in the suit. Exs.B.1 to B.3

documents which apparently establish that the appellant's partners

carried out the real estate business and obtained the appellant's

signatures on several blank promissory notes on the same date. These

documents show similarities in terms of ink used and contain

deformities eking to those found in Exs.A.1 and A.2. The inconsistencies

in the testimonies of PWs.1 to 4 during cross-examination regarding the

execution of Exs.A.1 and A.2 promissory notes on the same date cast

doubts on the credibility of the plaintiff's claim. It is admitted that no

consideration was passed at the time of executing Exs.A.1 and A.2; there

was no demand notice calling upon the appellant to pay the amount. The

rulings cited by the trial Court in its judgment are said to be entirely

different from the facts of the present case.

9. No representation is made on behalf of the respondent/plaintiff,

despite granting of adjournment. Hence, treated as heard.

10. Having regard to the pleadings in the suit, the findings recorded

by the Trial Court, the following points would arise for determination:

1) Whether the Trial Court justified in holding that the execution of Exs.A.1 and A.2-promissory notes on receipt of consideration amount by the defendant in favour of the plaintiff?

2) Whether the Judgment passed by the trial Court needs any interference?

A.S.No.401 of 2012

POINT NOs.1 & 2:

11. The trial Court Judgment appears to have based on the

assumption that the defendant admitted his signatures on the

promissory notes (Exs.A.1 and A.2) and failed to prove the non-existence

of consideration. The written statement shows that he disputed the

execution of the suit promissory notes i.e., Exs.A.1 and A.2. It is the

defence that the suit promissory notes may have been fabricated based

on the signatures obtained on a paper by PW.4 or forged altogether.

Therefore, based on the pleadings, it cannot be conclusively said that the

defendant admitted to the signatures on Exs.A.1 and A.2 promissory

notes. In light of the defendant's stand, the burden of proof lies on the

plaintiff to establish the execution of the suit promissory notes.

Furthermore, even if the defendant admitted to the signatures, it cannot

be construed as an admission of the execution of the documents.

12. The pleas taken in the plaint regarding the execution of suit

promissory notes extracted as follows:

"As per the plaint averments, the plaintiff came to know the defendant, and purchased 5 plots through the defendant in the business, he was doing with the two partners. Later, differences arose between them and those plots could not be conveyed to the plaintiff. So, on his request, the defendant chose to return the amount received atleast, but as he had no ready money, then he offered to execute a promissory note."

13. Coming to the evidence of plaintiff as PW.1, he stated in his chief

affidavit as follows:

I am working as Manager in Sri Renuka Lodge, near Jinna Tower, Guntur. I came into contact with the defendant who used to come there

A.S.No.401 of 2012

as he, V.Srinivasarao, the husband of one of the two owners of the lodge, as they were doing real estate business. As advised it would be a good investment as prices would soon escalate I purchased 5 plots through the defendant by giving him the sum of Rs.4,00,000/-. Differences arose between them and the deal failed. So, as he had no ready money, the defendant executed the two promissory notes dt.05.05.2005 in my favour promising to pay interest @ 24% p.a.

14. A plain reading of the plaint averments as well as the PW.1's

evidence in chief examination reveals that the plaintiff claims to have

purchased 5 plots by paying a consideration of Rs.4,00,000/-.

Subsequently, the disputes arose between the parties and due to lack of

immediate funds, the defendant executed two promissory notes i.e.,

Exs.A.1 and A.2. It is explicitly stated that the consideration was not

paid to the defendant under Exs.A.1 and A.2, however, it is clarified that

the consideration for the purchase of 5 plots was paid much before the

execution of the promissory notes. This indicates that the payment for

the plots was made separately from the promissory notes.

15. In Narayana Rao V. Venkatapayya1, the Division Bench of Madras

High Court considered the provisions of Section 118 of N.I Act and

Section 114 of Evidence Act in the matter of rebuttal of the presumption

under the former section and held that when evidence has been adduced

on both sides, the question of onus is a material or deciding factor only

in exceptional circumstances.

16. In K.P.O Moideenkutty Hajee V. Pappu Manjooran and another 2,

the Hon'ble Apex Court held that:

1 AIR 1937 Mad 182 2 AIR 1996 SC 3356

A.S.No.401 of 2012

...when the suit is based on pronote, and promissory note is proved to have been executed, section 118(a) raises the presumption, until the contrary is proved, that the promissory note was made for consideration. That initial presumption raised under section 118(a) becomes unavailable when the plaintiff himself pleads in the plaint different consideration........

17. In Bharat Barrel and Drum Manufacturing Company Vs Amin

Chand Payrelal3, the Hon'ble Apex Court was held thus :

".........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......."

18. However, it is well settled that the consideration for any contract

need not be contemporaneous to the document itself. Consideration can

be past, present and future. The same is valid in law as long as law does

not prohibit it. The presumption under section 118 of N.I Act may not

necessarily be as to the amounts specified in the promissory notes itself.

19. In light of the preceding discussion, the plaintiff said to have

paid consideration of Rs.4,00,000/- at the time of purchase of 5 plots

from the defendant. When the defendant expressed inability to pay the

consideration, he was asked to execute Exs.A.1 and A.2 promissory

notes. Thus, it is clear that the consideration was not paid under Exs.A.1

and A.2 at the time of those transactions. Contra to the said case

pleaded, the plaintiff as PW.1 stated in cross examination as follows:

3 (1999) 3 SCC 35

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"On the same day in the morning after paying the amount, the defendant executed the pronote and again in the evening, after my payment, he executed a pronote".

20. From the aforesaid PW.1's evidence, the consideration amount

was paid to the defendant on the day of Exs.A.1 and A.2 transactions

itself. It is not the plaintiff's case as pleaded in the plaint that as on the

date of Exs.A.1 and A.2 transactions, the said payment was made. The

plaint did not disclose the date on which the payment of Rs.4,00,000/-

was made in connection with the transaction relating to purchase of the

five plots. But the plaintiff adduced the evidence as if he lent

Rs.4,00,000/- to the defendant on the date of Exs.A.1 and A.2

transactions.

21. Coming to the evidence of PW.2 (A. Babu Reddy), he testified

that the defendant borrowed a sum of Rs.2,00,000/- from the plaintiff on

05.05.2005 in the morning and executed promissory note and he

attested the same. In the evening also, again the defendant borrowed

Rs.2,00,000/- from the plaintiff and executed promissory note and he

attested it. In the cross examination, PW.2 stated that he did not give

instructions to any person to draft his chief affidavit and he does not

know its contents. In view of the same, the trial Court has not considered

the PW.2's evidence rightly.

22. Coming to the evidence of PW.3 (V.Anantha Koteswararao) and

PW.4 (V.Srinivasarao), they supported the evidence of PW.1 by deposing

that the defendant borrowed of Rs.2,00,000/- on 05.05.2005 in the

morning and executed a promissory note. In the evening, the defendant

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again borrowed Rs.2,00,000/- from the plaintiff and executed another

promissory note. PW.3 is the one of the attestors to the promissory notes.

PW.4 is the scribe of both promissory notes. It is not the plaintiff's case

as set up in the plaint that he paid a consideration amount on the date

of suit transactions, but by ignoring the said plea, the plaintiff let in

evidence as if he paid the consideration amount on the date of Exs.A.1

and A.2 transactions.

23. To succeed in the case, this Court views that the plaintiff is

supposed to let in evidence to prove that he paid Rs.4,00,000/- at the

time of purchase of 5 plots. As such, atleast, the plaintiff must establish

on which date, he paid the amount and the location of the plots which he

intended to purchase.

24. The written statement shows the defendant has strongly refuted

the plaintiff's case with regard to his source of income. The PW.4's

evidence shows that PW.1 works as a Manager in Renuka Sai Lodge

situated at Jinna tower, Guntur, which belongs to them. The

remuneration paid to the plaintiff on a percentage basis, but he does not

know exactly what amount is being paid. He cannot say even at what

percentage, the remuneration is being paid to PW.1. The PW.4's evidence

does not conclusively determine the plaintiff's earnings. On the other

hand, though PW.4 gave evidence in support of the plaintiff's case, he

has not produced the documents to show the actual earnings of the

plaintiff at the relevant time of the suit transactions. PW.4's testimony

reveals that he scribed two promissory notes, based on which, his

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brother in law filed a suit against the defendant. PW.4 also admitted that

after exchange of notices between himself and the defendant, one has

nothing to do with the other. He does not remember how many suits

were filed by him against the defendant. PW.3, who is the son of PW.4's

elder brother, was a partner in the Renuka Real Estate business, but

later retired from the firm. He also admitted that he filed O.S.Nos.9 of

2007 and 10 of 2007 on the file of III Additional District Court, Guntur,

for specific performance of contract of agreement of sale, executed by 1st

defendant in respect of the landed property in favour of their firm. Ex.B.1

is the served copy of the plaint in O.S.No.9 of 2007 against the 1 st

defendant. He also admitted that in the said plaint, they averred that the

disputes between him and the defendant started in the year 2004 itself.

He issued a registered notice on 15.11.2004. He also admitted that one of

his partners, Pothuraju Venkateswara Rao filed a suit in O.S.No.10 of

2007 on the file of III Additional District Court, Guntur against the

defendants herein and others. Considering the emerging disputes

between PW.4 and the defendant in the year 2004, it becomes unlikely

that PW.1, who works in PW.4's lodge, lent Rs.4,00,000/- to the

defendant in the year 2005. The discrepancies in the time line and

PW.4's involvement as a scribe in the suit transactions further

undermine the plaintiff's case. It is also difficult to believe the scribing of

the Exs.A.1 and A.2 promissory notes by PW.4 in 2005.

25. The evidence provided by PW.3, who is closely related to PW.4 is

inconsistent with the testimony of PWs.1 and 4. PW.3 stated that he

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witnessed the three transactions on the same day, with two promissory

notes (Exs.A.1 and A.2) executed in the morning and another transaction

covered by a different promissory note in between 4.00 pm to 5.00 pm.

The said evidence of PW.3 is quite contrary to the evidence of PWs.1 and

4. It is not the plaintiff's case that three transactions were held on the

same day. As already observed, according to the evidence of PW.1, PW.2

and PW.4, Ex.A.1 transaction was held in the morning hours, whereas,

Ex.A.2 transaction was held in the evening hours. The PW.3's evidence

shows that he is having cordial relations with his paternal uncle i.e.,

PW.4.

26. PW.1 deposed that he did not get the contents of Exs.A.1 and A.2

read over; there is no recital in Exs.A.1 and A.2 that he advanced the

funds in purchasing the plots; prior to advancing the funds to the

defendant, he did not even enquire about whether the defendant is

having any right or interest in the plots or not and he did not obtain any

link documents or any documents pertaining to the property which he

intended to purchase from the defendant; he did not see or verify any

plan pertaining to the said plot; they did not even fix up the rate of the

plot or the number of the plot that are agreed to be given to him towards

advance paid by him. Except his oral testimony, there is no written proof

to show that the defendant offered to give plots in token of his advancing

the funds to him.

27. The aforesaid PW.1's evidence shows that without making any

enquiries about the plots, he intended to purchase plots from the

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defendant; by paying advance of Rs.4,00,000/-. It is surprising to note

that the plaintiff did not make enquiries as to whether the defendant got

right or interest in the plots or not. The PW.1's evidence that he did not

get the contents of Exs.A.1 and A.2 read over as if he is no way

concerned with the Exs.A.1 and A.2 transactions. It is not the plaintiff's

case as pleaded in the plaint and in his chief affidavit that the

consideration amount was paid to the defendant on the date of Exs.A.1

and A.2 transactions. In the said facts of the case, it is highly difficult to

believe the evidence of PWs.1, 3 and 4 regarding passing of consideration

to the defendant at the time of Exs.A.1 and A.2 transactions. According

to the plaintiff's case, he did not enter into the sale agreement with the

defendant to purchase the property. The PW.3's evidence shows that

procedure in general, if any person wants to purchase any property, he

will enter into agreement by paying advance. The plaintiff has not let in

any evidence as to why the normal procedure of obtaining agreement is

deviated in this case. It is the defendant's specific case that he proposed

to do real estate business and believing the words of PW.4, he joined as a

partner in the business and PW.4 and other partners represented that

his signatures are required on blank papers and he signed on blank

papers including blank promissory notes and subsequently, on account

of differences, the defendant stopped doing business with them. When he

requested the return of pronotes and papers, they informed him that the

papers were already torn into pieces and he need not worry about it.

A.S.No.401 of 2012

28. The evidence shows that PW.4 filed suits in O.S.No.108 of 2007,

O.S.No.109 of 2007, O.S.No.442 of 2007, O.S.No.443 of 2007 and

O.S.No.389 of 2007. PW.4 relied on Ex.B.2 certified copy of pronote dated

05.05.2005 marked in O.S.No.108 of 2007 and Ex.B.3 certified copy of

pronote dated 05.05.2005 marked in O.S.No.109 of 2007. PW.4 stated in

cross examination that Exs.B.2 and B.3 pronotes filed in O.S.No.539 of

2008 do not contain his writings at the interest column. He also admitted

that the words two lakhs in Telugu were written in the interest column in

Exs.A.1 and A.2; he also admitted that the suit promissory notes in

O.S.Nos.108 of 2007 and 109 of 2007, the words two lakhs were

mentioned in the interest column.

29. The plaintiff referred on Exs.B.2 and B.3 transactions to show

that in all the transactions, the same mistake occurred, so that, it

probablizes the defendant's case that the suit promissory notes were

created. This Court is not supposed to go into the correctness of the

contentions regarding other suits. However, the plaintiff's case as

pleaded in the plaint regarding the passing of consideration in

connection with the plots transaction is not established. Furthermore,

the evidence is adduced as if the consideration was passed as on the date

of Exs.A.1 and A.2 transactions. As already observed, the plaintiff must

establish the passing of consideration to the defendant in connection

with the purchase of the plots and the defendant failed to repay the

amount, he executed Exs.A.1 and A.2 promissory notes. This Court has

no hesitation to hold that the evidence adduced is quite contra to the

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pleadings. The evidence adduced without support of the pleadings cannot

be accepted. Though the plaintiff has adduced evidence to show his

financial capacity to lend the amount, but he failed to establish that he

paid the amount to the defendant at the time of purchase of the plots.

30. The standard of proof evidentially is principles of preponderance

of probability. Inference of preponderance of probability can be drawn

not only from the materials on record, but also by references to the

circumstances upon which reliance is placed. As already observed, by the

time of alleged execution of promissory notes Exs.A.1 and A.2,

admittedly, PW.1 had disputes with PW.4. It rules out the possibility of

loan transactions covered Exs.A.1 and A.2 transactions in the presence

of PW.4. PW.3 is closely related to PW.4. PW.1 is working in the lodge of

PW.4. In such a case, it is somewhat difficult to believe lending of money

by PW.1, who is working in the lodge of PW.4, to the defendant, when

there were disputes between PW.4 and the defendant.

31. Based on the evidence presented by both parties, several

inconsistencies and contradictions are apparent. The plaintiff's claim

that he paid the consideration amount of Rs.4,00,000/- to the defendant

on the date of the Exs.A.1 and A.2 transactions is not supported by any

concrete evidence. The plaintiff did not make any enquiries about the

plots he intended to purchase from the defendant and did not enter into

a sale agreement or obtain any link documents related to the property,

which raises doubts about the genuineness of the transaction. The

defendant was successful in showing the improbability of consideration.

A.S.No.401 of 2012

As the defendant is successful in rebutting the presumption of

consideration, then the evidential burden goes back to the plaintiff.

32. Additionally, PW.1's lack of knowledge about the specific details

of the transaction, the properties involved, and the absence of any

written proof or link documents related to the property cast doubt on the

plaintiff's claim. PW.1's statement that he did not verify any plan or fix

the rate or number of the plot to be given to him also weakens the

plaintiff's case.

33. The defendant has successfully discharged the initial evidential

burden by providing plausible evidence that raises doubt about the

genuineness of the promissory notes and passing of consideration. As a

result, the presumption under section 118 of N.I Act disappears and

becomes functus officio and the evidential burden shifts to the plaintiff

who has also the legal burden arising out of the pleadings to prove the

consideration. After careful consideration of the entire evidence, I am of

the view that the plaintiff has not discharged the legal burden, as such,

he cannot once again rely on the presumption of sec.118 of N.I Act. As

already observed, the plaintiff's own evidence contradicts the case

pleaded in the plaint. The plaintiff has not been able to establish that he

paid advance amount of Rs.4,00,000/- to purchase the plots from the

defendant and as a result, the plaintiff has failed to discharge the legal

burden of proving the consideration. The evidence adduced by the

plaintiff regarding the payment of consideration at the time of the

execution of Exs.A.1 and A.2 promissory notes cannot be accepted.

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34. The findings and conclusions recorded by the trial court are not

based on proper appreciation of the evidence on record. The Trial Court

Judgment is erroneous and cannot be sustained, and is liable to be set

aside, and the Appeal deserves to be allowed with costs.

35. As a result,

(a) The Appeal is allowed, with costs.

(b) The Judgment and Decree passed by the Trial Court in

O.S.No.539 of 2008, dt.15.03.2012, is set aside.

(c) The suit in O.S.No.539 of 2008 is dismissed with costs.

36. Miscellaneous petitions pending, if any, in this Appeal shall stand

closed.

_________________________________ JUSTICE T. MALLIKARJUNA RAO

Date: 04.08.2023 SAK

A.S.No.401 of 2012

THE HON'BLE SRI JUSTICE T.MALLIKARJUNA RAO

APPEAL SUIT NO.401 OF 2012

Date: 04.08.2023

SAK