Delhi High Court
Kembiotic Laboratories & Ors. vs Rana Inderjit Singh on 29 August, 2016
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment Reserved On :August 23, 2016
Judgment Delivered On : August 29, 2016
+ RFA(OS) 2/2016
KEMBIOTIC LABOURATORIES & ORS .....Appellants
Represented by: Mr.N.S.Dalal, Advocate with
Mr.Amand Mudgal and
Mr.D.P.Singh, Advocates
versus
RANA INDERJIT SINGH .....Respondent
Represented by: Mr.V.K.Teng, Advocate
CORAM:
HON'BLE MR. JUSTICE PRADEEP NANDRAJOG
HON'BLE MS. JUSTICE PRATIBHA RANI
PRADEEP NANDRAJOG, J.
1. Rana Inderjit Singh, the respondent sued the appellant No.1 :
Kembiotic Laboratory and its three partners : appellants No.2 to 4 as
partners thereof on the plea that in the year 2001 appellants No.2 to 4
offered to him to collaborate with their business on 50% shareholding basis
and desired him to advance to them loan in sum of `53.5 lacs and
therefore in Hong Kong he gave US$ 1,13,829.78 to appellant No.2, who
promised that on returning to India he will complete the necessary
formalities regarding collaboration and till then the money received would
be treated as on loan with the partnership firm. As per him he received no
further communication from the partners of the firm and he came to India
in November, 2002 when, from the account of the partnership firm
maintained with State Bank of Bikaner & Jaipur Branch, Kirti Nagar and
State Bank of Mysore Branch Punjabi Bagh, 11 cheques totaling `53.5 lacs
were issued in his name, details whereof are as under:-
Sl.No. Cheque No. Date Amount Drawn on
1. 055916 20.12.2002 3,50,000/- State Bank of
Bikaner and Jaipur,
Kirti Nagar, New
Delhi.
2. 035841 25.01.2003 5,00,000/- State Bank of
Mysore, Punjabi
Bagh, New Delhi
3. 035842 25.02.2003 5,00,000/- -Do-
4. 035843 25.04.2003 5,00,000/- -Do-
5. 035844 25.05.2003 5,00,000/- -Do-
6. 035845 15.07.2003 5,00,000/- -Do-
7. 035846 25.08.2003 5,00,000/- -Do-
8. 035847 25.09.2003 5,00,000/- -Do-
9. 035848 25.11.2003 5,00,000/- -Do-
10. 035849 25.10.2003 5,00,000/- -Do-
11. 035850 25.01.2004 5,00,000/- -Do-
Total 53,50,000/-
2. As per Rana Inderjit Singh the cheques were obviously to return the
sum of `53.5 lacs received in the name of respondent No.1, which under
the circumstances had to be treated as a loan because the understanding
that defendants No.2 to 4 would collaborate with him in the business run
under the name and style of appellant No.1 with his share being 50% was
not given effect to. The cheques when presented for encashment were
returned dishonoured.
3. In the joint written statement filed by the appellants they denied any
amount received by appellant No.2 from Rana Inderjit Singh but admitted
that the cheques were issued. In para 6 of the preliminary objections it was
denied that there was any discussion for Rana Inderjit Singh to do business
with them on 50% shareholding basis. However, in paragraph 11 of the
preliminary submissions, explaining the circumstances under which the
cheques were issued it was pleaded that Rana Inderjit Singh offered to
invest `53.5 lacs in the business of the defendants and to give security for
the amount the defendants would receive from Rana Inderjit Singh the
cheques in question were issued. It was pleaded that Rana Inderjit Singh
never invested `53.5 lacs.
4. From the pleadings of the parties it is apparent that whereas Rana
Inderjit Singh pleaded having paid US$ 1,13,829.78 to appellant No.2 and
the cheques being issued when the agreement to collaborate did not go
through and as per the original oral agreement the money had to be treated
as a loan, the appellants pleaded that the cheques were issued as security
for Rana Inderjit Singh to invest `53.5 lacs but he did not do so.
5. At the trial Rana Inderjit Singh failed to establish that he gave US$
1,13,829.78 to appellant No.2. At the same time the appellants failed to
establish that the cheques were issued by way of security for an investment
yet to be made by Rana Inderjit Singh. Returning a verdict in favour Rana
Inderjit Singh the learned Single Judge has reasoned :-
"No doubt, plaintiff has not led any documentary evidence to
show that the amount of `53.50 lacs was paid by the plaintiff to
the defendant No.2 in Hong Kong, however, the fact that the
amount of `53.50 lacs was paid by the plaintiff to the defendant
No.2 becomes clear from two crucial aspects. The first crucial
facts is that undoubtedly original chequest of the suit amount
were given by the defendants to the plaintiff and the same were
in possession of the plaintiff. Section 114 illustration (i) of the
Indian Evidence Act, 1872 provides that when the original
instrument comes back into the hands of the issuer of the same,
then it is presumed that the obligation under the cheques would
be discharged, however, once the original instruments being
the cheques continue to remain with the obligee, viz the plaintiff
and in whose favour the cheques were issued, a presumption
arises that the amount was paid under the cheques by the
plaintiff to the defendant No.2 for defendant No.1 and the
obligation is not discharged by payment of amount due under
the cheques. This presumption has not been adequately
rebutted on behalf of the defendants inasmuch as, there is no
valid explanation how the original cheques continued to remain
with the plaintiff as onus to prove this was on the defendants as
per issue No.3 framed. In fact, this is the crucial second
fact/reason for holding that the plaintiff has proved that the
amount of `53.50 lacs was paid to the defendants, inasmuch as,
cheques were given in the year 2002 but till the due dates of the
cheques from December, 2002 to January, 2004, no letter or
any notice was ever written by the defendants to the plaintiff
that in this entire period and for this long period plaintiff is
illegally holding on to the subject cheques and the subject
cheques should be returned by the plaintiff to the defendants
because as per the defendants no amount was paid by the
plaintiff to the defendants and the cheques were thus allegedly
given only as security. The very fact that no communication
whatsoever was ever issued by the defendants to the plaintiff for
return of the cheques shows that the cheques were given for a
valuable consideration and which valuable consideration was
the amount of `53.50 lacs. Clearly therefore defendants have
failed to prove that the plaintiff retained the cheques with
himself although allegedly as per the defendants plaintiff did
not give any amount to the defendants under the subject
cheques which were given as security. Defendants have failed
to discharge the onus upon them of issue No.3 that the plaintiff
fraudulently withheld the cheques and as is the case of the
defendants as per the written statement.
In view of the above, issue Nos.2 and 3 are held in favour of the
plaintiff and against the defendants and therefore defendants
are held liable to pay the amount of `53.50 lacs."
6. The argument of the appellants was simple. The respondent made a
positive assertion of having paid US$ 1,13,829.78 to appellant No.2 in
Hong Kong and since as per him the consideration for the cheques was the
payment made, upon not proving having made the payment the benefit of
the presumption under Section 118 of the NI Act, 1881 would not be
available to the respondent. Conceding that the appellants also failed to
discharge the burden on them that the cheques were issued as security for a
payment yet to be received, the appellants argued that a negative fact could
not be proved by the appellants.
7. No serious attempt was made to question the reasoning by the
learned Single Judge, who has reasoned that the cheques were issued as per
the appellants in October, 2002; and the dates of the month of December,
2002, January, February, April, May, July, August, September, October
and November, 2003 and January, 2004 was a crucial aspect coupled with
the fact that till the year 2004 no letter was written by the appellants to
Rana Inderjit Singh that since he had not transmitted `53.5 lacs to appellant
No.1 the cheques which were issued as security should be treated as
cancelled.
8. Section 118 of the NI Act, 1881 raises a presumption that a cheque is
drawn for consideration. The opening words of the Section : 'Until the
contrary is proved' would obviously mean that the proof has to be that no
consideration was paid, meaning thereby, until it is proved that there was
no consideration the presumption under Section 118 operates. Thus,
notwithstanding the rejection of the case put forward by the holder of a
cheque, if the case put forward by the drawer also fails the question would
arise as to what happens to the presumption.
9. Let us take a practical view of the matter. A plaintiff sues on a
promissory note and pleads a cash consideration, which the plaintiff fails to
prove. The defendant, having admitted execution of the promissory note
pleads that it was without consideration and pleads that he gave the same to
the plaintiff because the plaintiff insisted that first the defendant should
give to him the promissory note and only then he would give the cash.
Except for so stating the defence, we cannot think of any possible evidence
which the defendant could lead to establish that there was no consideration.
Surely the defendant is not expected to conceive all kinds of considerations
and then say that none were received. Therefore, the resolution of the
practical difficulty would have to be found in the Indian Evidence Act,
1872 and in particular Sections 101 to 104 thereof.
10. Section 3 deals with proved, disproved and not proved. 'Burden of
proof' is used in two senses. Firstly, with reference to the matter arising
out of the pleading, the burden casts; and secondly as to who has to first
prove a particular fact. The former is known as 'legal burden' and it never
shifts. The latter is the 'evidentiary burden' and it shifts from one side to
the other as was explained by the Supreme Court in the decision reported
as AIR 1961 SC 1316 Kundan Lal Vs. Custodian Evacuee Property. Legal
burden finds its reflection in Section 101 of the Evidence Act and the
evidentiary burden is reflected in Sections 102 of the Evidence Act.
Section 103 amplifies Section 101 regarding proof of a fact and Section
104 deals with the person who has to give evidence.
11. Presumptions may be of fact or of law. Presumptions of fact are
inferences logically drawn from one fact as to the existence of another fact.
The expression 'may presume' is defined as per Section 4 of the Evidence
Act to mean that a Court may presume a fact with regards such facts as are
proved unless and until it is disproved. Section 4 of the Evidence Act
would therefore guide that if a fact is to be presumed, the presumption
remains until the contrary is proved.
12. Now, what would be the evidence to conclude that 'the contrary is
proved' so that the presumption is rebutted.
13. Suffice it to state that the contrary would be proved by establishing
facts on a preponderance of probabilities and no more.
14. Pertaining to a negotiable instrument the defendant therefore would
have two options. The defendant can either show that consideration did not
exist or could show that under the particular circumstances of the case, the
non-existence of the consideration is so probable that a prudent person
ought to suppose that no consideration existed. In the judgment reported as
AIR 1959 Rajasthan 1 Heera Chand Vs. Jeevraj the Full Bench of the
Rajasthan High Court guided that in the assessment of a preponderance of
probability the entire circumstances of a particular case had to be
considered and the evidence of the parties could not be considered in
separate water tight compartments. In Kundan Lal's case, explaining the
methods by which a defendant could rebut the presumption raised by
Section 118 of the NI Act, 1881, the Supreme Court held that the evidence
required to shift the burden need not necessarily be direct evidence i.e. oral
or documentary evidence; it may comprise circumstantial evidence or
presumption of law or facts.
15. Now, in the instant case both parties have failed to establish the
respective fact asserted. The respondent failed to prove having paid US$
1,13,829.78 to appellant No.2 and the appellants failed to prove that the
cheques were issued as security for payment yet to be received. Therefore,
the learned Single Judge has rightly held that circumstances enwombing
the facts asserted would be relevant.
16. The appellants admit that the cheques were issued in October, 2002
but claimed that they were towards security for `53.5 lacs which the
respondent had offered to invest with them. As per the appellants the
respondent did not invest any money with them. The dates of the cheques
which are 11 in number span over one year commencing from December,
2002 and ending on January, 2004. The appellants have to explain as to
why they did not write any letter to the respondent informing that since he
promised investment had not been made the cheques which were offered as
security should be returned. This would be the normal conduct of any
person who had issued the cheques in the circumstances pleaded by the
appellants. The appellants have failed to render any satisfactory
explanation for not having so written to the respondent.
17. We conclude by holding that the respondent would be entitled to the
benefit of the presumption in his favour raised under Section 118 of the NI
Act, 1881 and since the presumption has not been rebutted,
notwithstanding the respondent having failed to prove consideration being
paid as claimed by him he would be entitled to the decree passed by the
learned Single Judge which we find is with interest @ 9% per annum
simple.
18. The appeal is dismissed without any order as to costs in the appeal.
(PRADEEP NANDRAJOG)
JUDGE
(PRATIBHA RANI)
JUDGE
AUGUST 29, 2016
mamta
