Madras High Court
R.Rajendran vs K.Kullappan on 10 February, 2025
Author: N. Sathish Kumar
Bench: N. Sathish Kumar
A.S.No.94 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 10-02-2025
CORAM
THE HONOURABLE MR JUSTICE N. SATHISH KUMAR
A.S.No. 94 of 2022
and
C.M.P.No.3412 of 2022
R.Rajendran
S/o. late C.Ramasamy,
Proprietor,
Sree Lakshmi Spinnerss,
A-101, Sun Shine Apartment 1st Floor,
College Nagar,
Peelamedu,
Coimbatore-641 004.
..... Appellant
-Versus-
K.Kullappan
S/o.Kurusamy,
51, Saraswathi Rice Mill Compound,
Ayyankovil Road,
Samalapuram,
Somanur, Tiruppur Dist.
..... Respondent
Appeal under Order 41, Rule 1 r/w 96 of the Code of Civil Procedure,
1908, praying to set aside the judgement and decree dated 01.12.2021 made in
O.S.No.34 of 2019 on the file of the learned Principal District Judge,Tiruppur,
Tiruppur District.
For Appellant : Mr.N.Manokaran
For Respondent : Mr.S.Arjun
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A.S.No.94 of 2022
JUDGEMENT
Challenging the judgement and decree dated 01.12.2021 made by the
learned Principal District Judge, Tiruppur District, in O.S.No.34 of 2019, the
defendant is before this Court with the present appeal suit. The suit was decreed
against the appellant herein directing him to pay to the plaintiff, a sum of
Rs.12,50,000/- with interest at the rate of 7.5% per annum from the date of
plaint till date of decree and thereafter at 6% per annum till date of repayment
in full and cost of Rs.67,764.50.
2. For the sake of convenience, the parties in this appeal suit will
hereinafter be referred to as per their array in the original suit.
3. The case of the plaintiff in O.S.No.34 of 2019 in brief is as follows:
(i) The defendant is known to the plaintiff. Knowing the plaintiff,
the defendant borrowed Rs. 9,00,000/- from him on 09.09.2014 by signing an
on-demand promissory note committing to repay the debt with interest at 24%
per annum.
(ii) Despite the plaintiff's repeated demands, the defendant did not
pay interest or repay the principal. Following repeated demands, the defendant
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issued a cheque bearing No.493307 dated 15.10.2016 in favour of the plaintiff
for Rs.12,50,000/- drawn on ICICI Bank Limited, Coimbatore to satisfy the
principal and interest payable to the plaintiff.
(iii) When the aforementioned cheque was presented for collection
on 16.10.2016 through the plaintiff's banker, Tamil Nadu Mercantile Bank,
Somanur Branch, Coimbatore, it was returned on 17.10.2016 due to the account
being closed.
(iv) Knowing that there were insufficient funds in his account to
honour the cheque, the defendant fraudulently issued the suit cheque and had it
returned in order to avoid paying the principal and interest. Thus, on
22.10.2016, the plaintiff sent a legal notice through his lawyer requiring the
defendant to repay the loan amount due within 15 days after the notice,
however the notice was returned on 25.10.2016 as intimation delivered. Despite
repeated demands, the defendant failed to repay the loan amount and accrued
interest. As a result, a suit was filed to retrieve the money.
4. The defendant stiffly resisted the suit inter alia contending that the
plaintiff worked as an Electrical Contractor for the defendant's mill, M/s.Sree
Lakshmi Spinnerss, in Kombakattupudur, Kadampadi, from 2004 to 2013, and
that it is the defendant who was responsible for resolving electrical issues in the
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mill whenever they arose. Except for the electrical contract, there was no
financial transaction between the plaintiff and himself, and there were money
transactions of no more than Rs.2000 to Rs.3000/-, depending on the electrical
work.
5. It is contended that he never borrowed any money from the plaintiff on
09.09.2014 and executed any promissory note thereof nor any cheque was
given towards discharge of any liability. The plaintiff was aware that the
defendant's mill was closed, and the defendant did not have the mill on the date
the cheque was alleged to have been issued. Yet would have clandestinely
stolen the cheque from the defendant's possession or would have obtained the
promissory note from someone else through Rajendran to make a false claim,
fully aware of the closure of the defendant's mill colluding with the said
Rajendran with a dishonest intention to cheat him (defendant). Hence, the
defendant prayed for dismissal of the suit.
6. Based on the aforesaid pleadings of the parties, the trial court had
framed the following issues for trial:
(1) Whether the defendant is liable to pay the
plaintiff a sum of Rs.12,50,000/- with interest as prayed
in the plaint? and
(2) To what other relief the plaintiff is entitled?
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7. During the trial, on the side of the plaintiff, the plaintiff, Kullappan,
examined himself as P.W.1, and in support of his case, one P.K. Rajendran was
examined as P.W.2, and Exs.A.1 to A.14 were marked, while on the side of the
defendant, the defendant, R. Rajendran, examined himself as D.W.1, and in
support of his defence, the defendant examined one Chenniappan as D.W.2, and
Exs.B.1 to B.8 were marked.
8. Upon considering the oral and documentary evidence adduced by the
parties, the learned District Judge decreed the suit against the defendant for
recovery of money due to the plaintiff payable on a promissory note, directing
the defendant to pay a sum of Rs. 12,50,000/- together with interest at the rate
of 7.5% per annum from the date of plaint till the date of decree and thereafter
at 6% per annum till the date of repayment in full and the cost of Rs. 67,764.50
paise. Challenging the above-mentioned money decree, the defendant is before
this court with the present appeal suit.
9. Heard Mr.N.Manokaran, the learned counsel for the appellant and
Mr.S.Arjun, the learned counsel for the respondent.
10. The learned counsel for the appellant would submit that the defendant
was only an Electrical Contractor for the defendant's mill – M/s.Sree Lakshmi
Spinnerss and that he was responsible for resolving electrical issues in the mill
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whenever they arose and he worked as such until 2013 and the mill was sold.
The plaintiff and one of his close associates, P.K.Rajendran (P.W.2) knew very
well that the defendant's mill was sold in 2013 itself. Therefore, the plaintiff
advancing the loan of huge sum to the tune of Rs.12.50 lakhs to the defendant
for running his business is highly improbable.
11. The learned counsel for the defendant would further submit that when
the defendant had already sold his spinning mill in the year 2013 itself and he
had sufficient funds in his bank account as evident from Ex.D.5 to Ex. D.7, no
need for him to borrow any amount from the plaintiff much less the suit
amount.
12. The learned counsel for the defendant would further add that though
the suit promissory note was stated to be executed on 09.09.2014, no legal
notice whatsoever was issued demanding return of money, and whereas the suit
cheque was projected as if the same was drawn by the defendant’s mill in
discharge of the principal sum and interest money due and payable under the
suit promissory note, when the defendant had closed his business and sold the
mill in 2013 itself.
13. Furthermore, the suit cheque was alleged to be drawn by the company
M/s.Sree Lakshmi Spinnerss — whereas the company had been closed in the
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year 2013 itself. It is therefore highly improbable to contend that the cheque
was drawn by the closed company for consideration. Only after the cross-
examination by the defendant, the plaintiff has filed Ex.A.10 and Ex.A.11 to
show as if the plaintiff had sufficient funds in his account to prove the passing
of consideration. Yet, Ex.A.10 and Ex.A.11 did not prove passing of
consideration, and it was not established by the plaintiff that Ex.A.10 and
Ex.A.11 accounts really relate to the plaintiff. Therefore, according to the
learned counsel, when the defendant has brought on record sufficient evidence
to draw an inference of probabilities to discharge the legal presumption, the
burden shifts to the plaintiff to prove the passing of consideration, but the same
has not been established. This aspect was not considered by the trial court.
14. Per contra, the learned counsel for the plaintiff would submit that the
plaintiff has, as P.W.1 sufficiently shown that the defendant executed the
promissory note and issued the suit cheque to satisfy the obligation owed under
the promissory note. P.W.2’s evidence would further strengthen the evidence of
P.W.1. That apart, though the business of the defendant was closed, there is no
evidence to show that his bank account had been closed. The defendant had, in
fact, been maintaining his account and therefore, it was only the defendant who
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issued the cheque (Ex.A.2) in discharge of his legal liability due under the
promissory note.
15. Thus, according to the learned counsel for the plaintiff, once the
execution of the promissory note and the issuance of the cheque have been
proved, the burden shifts on the defendant to disprove the passing of
consideration. Whereas the plaintiff has produced Ex.A.10 and Ex.A.11 to
show that he had sufficient means to advance such huge amount as loan. The
trial court has after thorough analysis of the available oral and documentary
evidence decreed the suit which does not require any interference at the hands
of this court.
16. In the light of the above submissions, the points that arise for
consideration in this appeal suit are:-
(1) Whether the suit promissory note (Ex.A.1) was
supported by consideration? And if so, did the defendant
issue the suit cheque to discharge a lawfully owed debt
payable under the suit promissory note?
(2) Whether the plaintiff has proved the execution of
Ex.A.1 - Promissory Note and issuance of Ex.A.2- Cheque?
(3) Whether the defendant has discharged the legal
presumption attached to Ex.A.1 and Ex.A.2?
Point Nos.1 to 3:
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17. The suit was filed for recovery of money due under the promissory
note.
18. It is the case of the plaintiff that the defendant had borrowed a sum of
Rs.9,00,000/- from him and executed Ex.A.1 Promissory Note on 09.09.2014
agreeing to repay same with interest @ 24% per annum. However, the
defendant had not repaid the loan amount and upon repeated requests, the
defendant issued Ex.A.2 cheque bearing No.493307 dated 15.10.2016 in favour
of the plaintiff for Rs.12,50,000/- drawn on ICICI Bank Limited, Coimbatore to
satisfy the principal and interest payable to the plaintiff. On presentation of the
abovesaid cheque, it was returned dishonoured for the reason “account closed”.
Hence the suit.
19. On the contrary, the defendant contended that there was no privity of
contract between himself and the plaintiff. For the defendant mill, the plaintiff
was merely an electrical contractor.
20. The defendant claimed that following the closure of his business and
the sale of the mill, the suit promissory note and the suit cheque were misused.
21. The defendant went on to contend that the plaintiff was only a name
lender, and he was set up by one P.K. Rajendran, with whom the defendant had
some transaction during his business.
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22. It is needless to state that as per Section 118(a) of the Negotiable
Instruments Act, 1881 until the contrary is proved, it shall be presumed that
every negotiable instrument was made or drawn for consideration. This
presumption can be rebutted by the opposing party by way of evidence that the
instrument was not issued for consideration effectively disproving the initial
presumption. In other words, it is obligatory on the part of the court to raise the
initial presumption in every case where the factual basis for the raising of the
presumption has been established. Such a presumption is rebuttable. The
defendant can prove the non-existence of a consideration by raising a probable
defence.
23. In Kundan Lal Rallara v. The Custodian, Evacuee Property
Bombay [1961 SCC OnLine SC 10 : AIR 1961 SC 1316], the Hon'ble Supreme
Court has held that the presumption of law under Section 118 of the Negotiable
Instruments Act could be rebutted, in certain circumstances, by a presumption
of fact raised under Section 114 of the Evidence Act. The relevant paragraph of
the judgement reads as under: -
“5. This section lays down a special rule of evidence applicable to
negotiable instruments. The presumption is one of law and thereunder a
court shall presume, inter alia, that the negotiable instrument or the
endorsement was made or endorsed for consideration. In effect it throws the
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burden of proof of failure of consideration on the maker of the note or the
endorser, as the case may be. The question is, how the burden can be
discharged? The rules of evidence pertaining to burden of proof are
embodied in Chapter 7 of the Evidence Act. The phrase “burden of proof”
has two meanings — one the burden of proof as a matter of law and pleading
and the other the burden of establishing a case; the former is fixed as a
question of law on the basis of the pleadings and is unchanged during the
entire trial, whereas the latter is not constant but shifts as soon as a party
adduces sufficient evidence to raise a presumption in his favour. The
evidence required to shift the burden need not necessarily be direct evidence
i.e., oral or documentary evidence or admissions made by opposite party; it
may comprise circumstantial evidence or presumptions of law or fact. To
illustrate how this doctrine works in practice, we may take a suit on a
promissory note. Under Section 101 of the Evidence Act, “Whoever desires
any court to give judgment as to any legal right or liability dependent on the
existence of facts which he asserts, must prove that those facts exist”.
Therefore, the burden initially rests on the plaintiff who has to prove that the
promissory note was executed by the defendant. As soon as the execution of
the promissory note is proved, the rule of presumption laid down in Section
118 of the Negotiable Instruments Act helps him to shift the burden to the
other side. The burden of proof as a question of law rests, therefore, on the
plaintiff; but as soon as the execution is proved, Section 118 of the
Negotiable Instruments Act imposes a duty on the court to raise a
presumption in his favour that the said instrument was made for
consideration. This presumption shifts the burden of proof in the second
sense, that is, the burden of establishing a case shifts to the defendant. The
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defendant may adduce direct evidence to prove that the promissory note was
not supported by consideration, and, if he adduced acceptable evidence, the
burden again shifts to the plaintiff, and so on. The defendant may also rely
upon circumstantial evidence and, if the circumstances so relied upon are
compelling, the burden may likewise shift again to the plaintiff. He may also
rely upon presumptions of fact, for instance those mentioned in Section 114
and other sections of the Evidence Act. Under Section 114 of the Evidence
Act, “The court may presume the existence of any fact which it thinks likely
to have happened, regard being had to the common course of natural events,
human conduct and public and private business, in their relation to the facts
of the particular case”. Illustration (g) to that section shows that the court
may presume that evidence which could be and is not produced would, if
produced, be unfavourable to the person who withholds it. A plaintiff, who
says that he had sold certain goods to the defendant and that a promissory
note was executed as consideration for the goods and that he is in possession
of the relevant account books to show that he was in possession of the goods
sold and that the sale was effected for a particular consideration, should
produce the said account books, for he is in possession of the same and the
defendant certainly cannot be expected to produce his documents. In those
circumstances, if such a relevant evidence is withheld by the plaintiff,
Section 114 enables the court to draw a presumption to the effect that, if
produced, the said accounts would be unfavourable to the plaintiff. This
presumption, if raised by a court, can under certain circumstances rebut the
presumption of law raised under Section 118 of the Negotiable Instruments
Act. Briefly stated, the burden of proof may be shifted by presumptions of
law or fact, and presumptions of law or presumptions of fact may be
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rebutted not only by direct or circumstantial evidence but also by
presumptions of law or fact. We are not concerned here with irrebuttable
presumptions of law.” [Emphasis supplied]
24. In the light of the above legal position, now, it has to be seen whether
the execution of Ex.A.1-Promissory Note and Ex.A.2-Cheque have been proved
to attract the legal presumption? And whether the defendant has brought out
circumstances to discharge such legal presumption?
25. The fact that the plaintiff was working as an Electrical Contractor in
the defendant mill is not disputed by the plaintiff. Though it was stated by the
plaintiff that Ex.A.1 Promissory Note was executed by the defendant on
09.09.2014 and Ex.A.2 Cheque dated 15.10.2016 was issued by the defendant
in discharge of the legally owned debt under the promissory note, during cross
examination, it was clearly admitted by the plaintiff that he was an Electrical
Contractor for the defendant mill. P.W.2-P.K.Rajendran in his cross-
examination stated that he was present at the time of borrowal of the suit loan
by the defendant, but in the chief examination he never spoke about the
execution of promissory note nor stated that Ex.A.1 was signed by the
defendant in his presence. P.W.2’s evidence had proceeded as if he had signed
as a witness on the promissory note.
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26. Be that as it may, when the evidence of P.W.1 is carefully perused, it
shows that an electrical fitter only introduced him to the defendant. He has also
admitted that the so-called consideration passed on Ex.A.1 was not shown in his
income tax account of the year 2014. The plaintiff (P.W.1) himself admitted
that the defendant mill was closed in the year 2013 itself. The plaintiff (P.W.1)
categorically admitted in his cross-examination that the defendant had sold his
property to clear off his liabilities. Knowing all of this, he (plaintiff) had
advanced money to the defendant on the promise given by the defendant that he
would repay the loan amount after selling the other individual properties.
27. It is relevant to note that when a person was already in dire need of
money and incurred a huge liability and already sold the entire asset of the
company, it is hard to believe that knowing all this, the plaintiff advanced
Rs.9,00,000/- as a loan to the defendant to run his spinning mill business in the
year 2014. Furthermore, Ex.A.2-cheque would go to show that the cheque was
issued in the name of a closed mill. It was admitted by the plaintiff (P.W.1)
himself that the defendant’s mill was closed and sold as early as in 2013 itself.
Knowing well that the defendant had already closed down his business and sold
his mill, the plaintiff advancing the loan towards his business (as seen from the
promissory note) is against the normal conduct of the human being. This fact
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forces this court to presume certain facts. Even if it is assumed for the sake of
argument that the plaintiff had advanced such a huge amount as a loan to the
defendant, when the defendant’s mill was already closed and sold in 2013 itself,
what made the plaintiff recite in the promissory note allegedly executed on
09.09.2014 that the defendant was still running his mill in 2014. This fact could
only probabilize the theory that the promissory note and the cheque had been
fabricated subsequently after the defendant’s business had been closed and sold
to suit the convenience of the plaintiff at the instance of P.W.2. This probability
is sufficient to discharge the legal presumption available to Ex.A.1 Promissory
Note and Ex.A.2 Cheque.
28. Now, the burden shifts to the plaintiff to establish the fact that
consideration was passed on to the defendant under Ex.A.1 promissory note.
The plaintiff has placed much reliance on Ex.A.10-Statement of Account from
Axis Bank for the period between 01.08.2024 and 31.08.2024 and Ex.A.11-
Statement of Account from Canara Bank for the period between 01.09.2014 to
26.09.2015 relating to Roja Textiles. According to him, from 01.08.2014 to
30.08.2014, he has sufficient funds in the account.
29. It is relevant to note that the plaintiff as P.W.1 has categorically
admitted in his cross-examination that the amount advanced to the defendant
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did not reflect in his income tax statement. On the contrary, Ex.A.10 and
Ex.A.11 Statement of Accounts have been brought into evidence only after the
cross-examination of the plaintiff (P.W.1) was over. When Ex.A.10 and
Ex.A.11 are perused, this court found that they relate to Roja Textiles. Of
course, the accounts indicate that some amounts were available in the account
maintained by Roja Textiles. To show whether the plaintiff was running Roja
Textiles or not, no material whatsoever was produced by the plaintiff. Even if it
is assumed that the plaintiff was running that company, merely showing the
income in the account of Roja Textiles would not by itself prove that the
plaintiff had sufficient means at the relevant point in time, i.e., on the date of
the Ex.A.1 promissory note dated 09.09.2014. Ex.A.10 and Ex.A.11 do not
show any entry to prove that the amount had been withdrawn from his bank
account to pay the consideration under the promissory note. Therefore, merely
showing that some amount is lying in the bank account, by producing a bank
statement, it cannot be said that the burden of establishing passing of
consideration has been discharged. When the plaintiff was working as an
electrical contractor in the defendant's mill and he was aware of the fact that the
defendant's mill had been closed and was sold in the year 2013, still by reciting
in the promissory note as if the mill was run by the defendant even in the year
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2014 and getting a cheque in 2016 drawn by the company that was closed in the
year 2013 is highly improbable. It goes against the normal prudence of an
ordinary man. Therefore, in the absence of any convincing evidence to prove
the passing of consideration, this court is of the view that the burden to
establish the passing of consideration has not been discharged by the plaintiff.
Though the signature in Ex.A.1 and Ex.A.2 was admitted by the defendant, the
defendant has brought out probable circumstances to discharge the legal
presumption, and therefore, the burden shifted to the plaintiff to establish the
passing of consideration, which was not established by the plaintiff.
30. It is further to be noted that though the promissory note was said to
be executed on 09.09.2014, a suit was not filed immediately for recovery of
money due on the promissory. On the contrary, pursuant to the so-called cheque
(Ex.A.2), which was returned dishonored for the reason “account closed,” a
notice was caused to the defendant, and thereafter, a private complaint under
Section 200 of Cr.P.C. was filed against the defendant alleging an offence
under Section 138 of the Negotiable Instruments Act, 1881, before the
jurisdictional magistrate. Except for the issuance of a legal notice after the
cheque was returned dishonoured, there was no attempt whatsoever made by
the plaintiff to recover the money, and the suit was filed only in 2019. This
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conduct of the plaintiff in keeping quiet and not choosing to send any legal
notice to enforce the alleged legal liability in respect of the promissory note
dated 09.09.2014 also cannot be ignored altogether. The trial court has
completely lost sight of all these aspects of the matter and erred in decreeing the
suit of the plaintiff by granting the relief of recovery of money against the
defendant.
31. In the light of the above discussion, the point Nos.1 to 3 are answered
in favour of the defendant and against the plaintiff. Thus, the decree and
judgement of the trial court are liable to be set aside and the suit deserves to be
dismissed.
In the result, the appeal suit is allowed. The Judgement and decree
dated 01.12.2021 passed by the learned Principal District Judge, Tiruppur,
Tiruppur District in O.S.No.34 of 2019 are set aside and the suit in O.S.No.34
of 2019 on the file of the learned Principal District Judge, Tiruppur, is
dismissed. However, considering the facts and circumstances of the case, there
shall be no order as to the costs. Consequently, connected CMP is closed.
Index : yes / no 10-02-2025
Neutral Citation : yes / no
kmk
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To
1.The Principal District Judge, Tiruppur, Tiruppur District.
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N.SATHISH KUMAR.J.,
kmk
10..02..2025
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