Andhra Pradesh High Court - Amravati
Basava Veera Venkata Satyanarayana vs Kovvuri Somireddy on 10 September, 2024
1
APHC010146322009
IN THE HIGH COURT OF ANDHRA PRADESH
AT AMARAVATI [3369]
(Special Original Jurisdiction)
TUESDAY, THE TENTH DAY OF SEPTEMBER
TWO THOUSAND AND TWENTY FOUR
PRESENT
THE HONOURABLE SRI JUSTICE T MALLIKARJUNA RAO
APPEAL SUIT NO: 396/2009
Between:
Basava Veera Venkata Satyanarayana and Others ...APPELLANT(S)
AND
Kovvuri Somireddy ...RESPONDENT
Counsel for the Appellant(S):
1. SRINIVAS MALLAMPALLI
Counsel for the Respondent:
1. J SREENIVASA RAO
The Court made the following JUDGMENT:
1. The Appeal, under Section 96 of the Code of the Civil Procedure, 1908
(for short, 'C.P.C.'), is filed by the Appellants/Defendants 1 and 2 challenging
the decree and Judgment, dated 20.03.2009 in O.S.No.06 of 20
2002 passed
by the learned Senior Civil Judge, Tanuku, West Godavari District (for short,
'trial court').
2. The Appellants are the Defendants 1 and 2 in the said suit. Respondent
is the Plaintiff,, who filed the suit in O.S.No.6 of 2002 for recovery of
Rs.3,44,200/- being the principal and interest due o
onn a promissory note
dated 21.01.1999 executed by the Defendants
s in favour of the Plaintiff for
Rs.2,00,000/- payable with interest at 24% p.a.
3. Referring to the parties as arrayed in the suit is expedient to mitigate
potential confusion and better comprehend the case.
4. The factual matrix, necessary and germane for adjudicating the
contentious issues between the parties inter se, may be delineated as
follows:
The Defendants borrowed Rs.2,00,000/- from the Plaintiff on
21-01-1999 for the purpose of discharging the sundry debts and
constructing a house. On the same day, both Defendants
executed a promissory note agreeing to repay the amount
together with interest at 24% p.a., either to the Plaintiff or his
order, on demand.
Despite repeated demands made by the Plaintiff personally
and through intermediaries, the Defendants postponed the
payment on one pretext or the other and did not make any
payments. Consequently, the Plaintiff issued a registered notice
on 05.06.2000, which the Defendants received, yet they failed to
make any payment.
Since both the Defendants are employees, the interest is
claimed at the contract rate, and the Defendants are not entitled
for the benefits of any Debt Relief Act.
5. 1st Defendant filed a written statement, which was adopted by the 2nd
Defendant, they refuted the plaint averments and assert that the promissory
note is a rank forged one. They do not know the witnesses in the promissory
note. The scribe and attesters colluded with the Plaintiff and forged the
promissory note in order to have wrongful gain. The Plaintiff, who is a money
lender, had financial dealings with B.V.G.Nageswara Rao, the 1 st Defendant's
late brother. The Plaintiff did not agree to a settlement proposed by elders
regarding Nageswararao's debt, leading to a dispute with the 1st Defendant.
Defendants 1 and 2 are employees. The Plaintiff allegedly exploited this
situation to create a false promissory note and file a baseless suit. After
receiving the registered notice, the Defendants contacted the Plaintiff through
intermediaries, who admitted the mistake and assured them not to worry
about the notice. The Plaintiff lacks the capacity to lend Rs.2,00,000/-.
Defendants further assert that they built a house with a bank loan. Therefore,
the Plaintiff is not entitled to any interest or court costs.
6. Based on the above pleadings, the trial Court framed the following
issues:
(1) Whether the Plaintiff is entitled decree for Rs.3,44,000/- against the
Defendants as prayed for?
(2) Whether the suit promissory note is a rank forgery?
(3) To what relief?
6. During the trial, on behalf of the Plaintiff, PWs.1 and 2 were examined
and marked Exs.A1 to A4. On behalf of the Defendants, DWs.1 and 2 were
examined, and no documents were marked.
7. After completion of the trial and hearing the arguments of both sides,
the trial Court decreed the suit with costs for Rs.3,44,200/- with subsequent
interest @ 24% per annum from the date of suit till the date of realization
and at 6% per annum thereafter till the date of realization on Rs.2,00,000/-.
8. I have heard Sri Srinivas Mallampalli, learned counsel for the
Appellants/Defendants 1 and 2 at length. I have gone through the Judgment
and findings recorded by the trial Court while decreeing the suit. I have also
re-appreciated all the evidence on record, including the deposition of
witnesses examined by both sides.
9. None appeared on behalf of Respondent/Plaintiff. This Court ordered
notice to the Respondent/Plaintiff to the address provided in the plaint and
the appeal, but the notices were returned with an endorsement 'insufficient
address'.
10. In light of the absence of representation from the Respondent/Plaintiff,
this Court has proceeded based on the arguments presented by the learned
counsel for the Appellants. Learned counsel for Appellants/Defendants
asserts that, although they raised objections in the written statement
regarding the interest rate claimed by the Plaintiff, the trial Court without
framing appropriate issue, also awarded interest at 24% per annum from the
date of suit till the date of decree.
11. With regard to the pleadings in the suit, the findings recorded by the
Trial Court and in light of the rival contentions and submissions made on
either side before this Court, the following points would arise for
determination:
1) Is the Trial Court justified in holding that the Defendants
executed Ex.A.1 suit promissory note by receiving the
consideration amount?
2) Is the trial Court justified in granting interest at 24% per
annum from the date of suit till the date of decree?
3) Does the trial Court judgment need any interference?
POINT NO.1:
12. In light of the plea raised, the burden rests on the Plaintiff to establish
the suit claim. To discharge the burden, the Plaintiff testified as PW1 and
also examined the scribe of the promissory note as PW2. In rebuttal, the 2 nd
Defendant testified as DW1, and the Defendants also examined DW2 to
substantiate their claim of dispute settlement as outlined in the written
statement. The Plaintiff relied on documents marked as Exs.A.1 to A.4.
Ex.A1 is the promissory note executed by the Defendants in favour of the
Plaintiff dated 21.01.1999. The Plaintiff relied on Ex.A.2, to demonstrate that
a legal notice was sent to the Defendants before initiating the suit.
Additionally, Exs.A.3 and A.4, which are postal acknowledgments, were
provided to confirm that the notice was duly served on the Defendants.
While the Defendants did not challenge the receipt of the legal notice, they
contended that, following its receipt, they approached the Plaintiff through
intermediaries. They alleged that the Plaintiff acknowledged an error
regarding the notice and requested them to disregard it. Notably, there is no
written acknowledgment or endorsement from the Plaintiff to support this
claim. Consequently, this Court finds that the Defendants' explanation for
their failure to respond to the legal notice is unsubstantiated and lacks merit.
13. The Plaintiff as PW.1 testified about the suit transaction, which was
further supported by the PW.2's testimony. The Trial Court's judgment
indicates that the Defendants are employees. During cross-examination,
PW1 was questioned about the genuineness of suit transaction, but no
evidence was presented to discredit his testimony regarding the transaction.
Although the Plaintiff was questioned about his financial capacity, the
Defendants did not raise any contention concerning the Plaintiff's financial
capacity in their written statement.
14. On the other hand, the Defendants contended that the Plaintiff is a
money lender, as such, this Court views that the evidence elicited in the
PW.1's cross examination regarding his financial capacity to be of limited
significance. PW.1 testified that his wife holds 9 acres of wet land and that
he later acquired 7 acres of land. Nevertheless, he did not produce
documentation to verify a total holding of 25 acres of land. Given that the
Defendants did not challenge the Plaintiff's financial capacity in their written
statement, the Plaintiff was not required to address this issue. Moreover, the
Defendants have presented inconsistent contentions regarding the Plaintiff's
financial status, which further undermining their claims.
15. The testimonies of PWs.1 and 2 indicate that the Defendants borrowed
money for the purpose of constructing a house and discharging of sundry
debts. The Defendants themselves admitted in their written statement that
they have built a house. However, the evidence does not reflect any
explanation from the Defendants regarding their own source of income to
construct house. Although the Defendants have taken plea of forgery, they
failed to take the necessary steps to have the disputed document examined
by an expert. The Trial Court also observed this lack of action. Given these
circumstances, this Court agrees with the Trial Court's finding that, based on
the testimonies of PWs.1 and 2, and considering the absence of legal notice,
the Plaintiff's claims cannot be found false. Consequently, the presumption
outlined under section 118 of the Negotiable Instruments Act, 1881 naturally
applies.
16. In G. Venkata Rama Subbaiah Vs. D. Rasool Naik1, the composite
High Court of Andhra Pradesh held thus :
"Once the execution of the promissory note is admitted or
proved, then it is presumed to be supported by consideration
unless contrary is proved. The burden is on the Defendant to
rebut the same by adducing convincing evidence. Unless the
Defendant rebuts the presumption by adducing convincing
rebuttal evidence, the evidential burden would not shift back to
the Plaintiff who has legal burden only after adducing such
convincing rebuttal evidence, it can be held that thereafter the
presumption under Section 118 does not come to the rescue of
the Plaintiff."
17. In Bonalaraju V. S. Sarupula Srinivas2, the composite High Court of
Andhra Pradesh held that:
"once execution is proved the presumption under Section 118
of N.I. Act that it is supported by consideration automatically
applies and the contention that the Plaintiff is not only to
establish the execution but also establish passing on the
consideration is rejected".
18. In Abbisetti Krishnamoorthy V. Singasani Raghuramaiah (died)
per L.R.s3, the composite High Court of Andhra Pradesh held that:
2003 (4) ALT 414
2006 (2) ALD 202
2011(5) ALT 143
"Section 118 of the N.I Act shows that the presumption
attached to passage of consideration (as is the subject matter
of this Appeal) just like other presumption also is clearly
rebuttable and it is for the Defendant to satisfy the Court that in
a given case, the presumption cannot be drawn".
19. In light of well-settled legal principles, the burden lies on Defendants to
prove the non-existence of consideration by bringing on record such facts and
circumstances, which would lead the Court to believe the non-existence of the
consideration. Suppose Defendants discharge the onus of proof showing that
the existence of consideration was improbable or doubtful and that executing
the promissory note would shift the onus to Plaintiff. Then, he will be obliged
to prove the existence of the consideration.
20. Defendants failed to show any valid reasons or circumstance to cast
doubt on the testimonies of PWs.1 and 2 regarding the execution of the
promissory note by Defendants and the passing of consideration. The
testimonies of P.Ws.1 and 2 are consistent regarding the execution of the
Defendants' promissory note. Though PWs.1 and 2 were subjected to lengthy
cross-examination, nothing was elicited to discredit their evidence regarding
the execution of the promissory note by Defendants and passing of
consideration. The Plaintiff and his witness i.e., PW.2, has no reason to
fabricate the suit promissory note. PW.2 has no conceivable incentive to
falsely testify against the Defendants' interest, and it is implausible that he
would support the Plaintiff's case without a basis in truth. The Defendants
have not asserted any enmity between themselves and witness i.e., PW.2,
that would prompt the witness to provide false testimony against them.
However, even the rebuttal could be given by direct evidence or by proving
the preponderance of probabilities on record. In the present case, the
Defendants have not rebutted the presumption, even by the preponderance of
probabilities.
21. On studied scrutiny, it is seen that the Defendants have not produced
any evidence to discharge the onus on them. The defence taken by the
Defendants is not substantiated. The presumption under section 118 of the
Negotiable Instruments Act 1881 is a statutory one, and unless it is rebutted, it
has to be presumed that consideration has passed.
22. After careful consideration, the trial Court adequately appreciated the
evidence. There is no reason for this Court to arrive at a different conclusion
than the one reached by the trial Court. I hold the findings arrived at by the
trial Court are correct, and no justifiable reasons have been shown by the
Appellants/Defendants for arriving at different conclusions. I agree with the
conclusion reached by the trial Court.
23. Accordingly, Point No.1 is answered in favour of the Plaintiff by holding
that the Trial Court is justified in holding that Defendants executed the suit
promissory note and is supported by consideration.
POINT NO.2:
24. The Defendants have taken a plea questioning the rate of interest, but
the trial Court without assigning any reasons awarded the interest at an
annual rate of 24% from the date of suit till the date of decree. Based on the
testimonies of PWs.1 and 2, it is clear that the Defendants borrowed the
money for the construction of a house. Consequently, this Court determines
that the loan was not intended for commercial purposes.
25. As indicated in the Trial Court's Judgment, interest was awarded at a
rate of 24% per annum, accruing from the date of the suit until the date of the
decree. Section 34 of the C.P.C., deals with the power of the Court to grant
interest. The section does not confer any power on the Court to grant interest
for the period prior to the filing of the suit. The grant of interest for that period
is to be governed by the terms of the contract between the parties.
26. The main part of sub-section (1) of Section 34 C.P.C. states that
interest is to be awarded at a reasonable rate during the period the suit was
pending in Court. For the period subsequent to the passing of the decree,
interest is to be awarded @ 6% per annum, and future interest at a higher rate
can be awarded if the proviso is attracted. The only question is the reasonable
interest rate for the period the suit was pending in the Court.
27. The rate at which interest can be awarded is at the Court's discretion,
which, of course, should be reasonable. The discretion shall be exercised
fairly, judiciously, and for reasons, not in an arbitrary or fanciful manner.
28. In ascertaining the interest rate, the Courts of Law can take judicial
notice of inflation and the fall in bank lending rate of interest. This Court views
that the trial Court should have considered the steep fall in the Bank Lending
interest rate from the date of suit till the date of decree. This Court views that if
the interest rate awarded from the date of suit until the date of decree is
deemed excessive, the Appellate Court has the authority to intervene. As
such, this Court is inclined to reduce the interest rate from 24% to 12% per
annum from the date of the suit till the date of decree.
29. In light of the above facts and circumstances, this Court views that the
trial Court was not justified in awarding interest at 24% per annum from the
date of the suit until the date of the decree. The Plaintiff is entitled to interest
at a revised interest rate of 12% per annum. The findings arrived at by the trial
Court on the appreciation of evidence in this case, therefore, correct does not
call for interference, except with regard to the rate of interest as indicated
above. Accordingly, the point is answered.
POINT NO.3:
30. In the result, the Appeal is hereby partly allowed by modifying the
decree and Judgment dated 20.03.2009 in O.S.No.6 of 2002 passed by the
learned Senior Civil Judge, Tanuku, concerning the interest rate. The interest
rate is revised from 24% to a simple rate of 12% per annum on the principal
amount from the date of the suit until the date of the decree. The rest of the
Judgment holds good. Both parties shall bear their costs in the Appeal.
Miscellaneous petitions pending, if any, in this Appeal, shall stand
closed.
_____________________________
JUSTICE T. MALLIKARJUNA RAO
Date: 10.09.2024
GRL / SAK
THE HON'BLE SRI JUSTICE T.MALLIKARJUNA RAO
APPEAL SUIT NO. 396 OF 2009
Date: 10.09.2024
GRL
