Kanuganti Ramu vs Samala Praveen Kumar
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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

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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

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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

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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

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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

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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

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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

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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

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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

2004 (12) SCC 83

Laws (MAD) 2022 2 30

(2015) 219 DLT 294

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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.

(2011) 4 SCC 726

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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?

(2010) 1 SCC 83

AIR 1999 SC 1008

(2018) 6 ALD 516

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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

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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

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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

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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

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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.

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As a sequel, miscellaneous applications pending in this appeal, if any

shall stand closed.

_____________________ Dr. G. RADHA RANI, J

Date:12.08.2024 Nsk.