DELHIADVOCATE
..... Jealously Guarding Your Interest.....!
... If your are facing any legal problems you may seek our Free Legal Advice ...
... Hi! If you are a Lawyer, Advocate, Attorney, You may Associate with us...
Legal Notice for Cheque Dishonour, Check dishonor
Page-1 Page-2
138 N. I. Act Complaint and Money Recovery Suit Page1 Page2 Page3
Important Case laws on Cheque Dishonour (Check Dishonor)
K.P.O. Moideenkutty Hajee, Appellant V. Pappu Manjooran And Another, Respondents. 1996-(083)-AIR -3356 –SC
Para No. 5. Chapter VIII of the Negotiable Instruments Act, 1881 (for short the 'Act') provides special rules of evidence. Section 118 draws presumption as to the negotiable instruments. "Until the contrary is proved", under clause (a) presumption shall be made of consideration that every negotiable instrument was made or drawn for consideration, and that every such instrument when it has been accepted, endorsed, negotiated or transferred, was accepted, endorsed, negotiated or transferred for consideration. Para No. 6. This Court in Kundan Lal Rallaram v. Custodian, Evacuee Property (AIR 1961 SC 1316), speaking through K. Subba Rao, J. (as he then was) considering the scope of the presumption had laid down the law thus :"Section 118 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 burden of proof of failure of consideration on the maker of the note or the endorser, as the case may be. 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. 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 sale was effected for a particular consideration should produce the said account books. If such a relevant evidence is withheld by the plaintiff, Section 114, Evidence Act 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."
Para No. 7. In that case the appellant was doing business in radio and gramophones in Karachi in partnership with one Sarup Singh. He had transferred his shop to his friend Iqbal Hussain and the stock-in- trade for consideration to Abdul Satar Ahmedbhoy. In consideration thereof he received Rs 96-1-0 in cash and a promissory note endorsed in his favour for Rs 37,000 executed by another. On that basis he laid claim before the Custodian of Evacuee Properties. The Custodian General had held that from circumstantial evidence of not placing the relevant material, the presumption under Section 118(a) was rebutted and the appellant had not proved that consideration had been passed under that promissory note endorsed for consideration. This Court after elaborate consideration of all the case law for withholding material evidence by the appellant had held that the presumption raised under Section 118, in certain circumstances, stands rebutted. The burden of proof may be shifted by presumption of law or fact or presumption of law may be rebutted not only by direct or circumstantial evidence but also by presumption of law and fact. The question of irrebuttable presumption of law was not gone into. Accordingly rejection of the claim on the basis of the presumption under Section 118 was rebutted. Para No. 9. In G. Ramatulasamma v. K. Gowraiah ((1984) 2 An WR 333 : (1983) 2 Andh LT 114 (NRC)), the facts were that a promissory note was executed for a sum of Rs 3000. On its basis the suit was laid for its recovery with interest. The defence of the appellant was that he had executed a mortgage bond for a sum of Rs 10,000 in favour of the son-in-law of the plaintiff. For excess interest payable thereon at 25% per annum, the promissory note was executed. The excess rate was in violation of usurious rate of interest. The promissory note was not supported by legal consideration since the appellant was a small farmer, entitled to the benefit of the provisions in Small Farmers and Debtor's Relief Act 7 of 1977 under which the debt stood extinguished. On those facts, the question arose as to when the presumption stands rebutted ? It was held by the Andhra Pradesh High Court that the presumption is one of law. The Court, therefore, shall presume that the negotiable instrument was made for consideration. It throws burden of proof of failure of consideration on the maker of the promissory note. The burden initially rests on the plaintiff who has to prove that the promissory note was executed by the defendant. On its proof the rule of presumption under Section 118(a) helps him to shift the burden on the defendant. The burden of proof as a question of law rests, therefore, on the plaintiff but as soon as the execution is proved, Section 118 imposes a duty on the court to raise a presumption in his favour that the said instrument was made for consideration. That presumption shifts the burden of proof, namely, establishing a case that the promissory note is not supported by consideration to the defendant. The defendant may adduce direct or circumstantial evidences to prove that the promissory note was not supported by consideration. If he adduces acceptable evidence, the burden again shifts to the plaintiff. If the circumstances relied on by the defendant are so compelling, the burden is on the plaintiff to prove the contra. The statutory presumption, though is one of law, is also a question of fact to be proved in each case. The presumption raised under Section 118 is not in respect of the consideration mentioned in negotiable instruments, the presumption is in favour of there being a consideration for the negotiable instrument. Any consideration which is a valid consideration in law is valid and enforceable. If a particular consideration mentioned in the negotiable instrument is found to be false and some other consideration is set up, that is a factor which the court would take into consideration in deciding whether the defendant has discharged the burden cast on him by Section 118. The court is required to consider the entire evidence laid before the court. Very often important admissions elicited by counsel for the defendant in the cross-examination of the plaintiff certainly can be availed of by the defendant. The court, therefore, must always bear in mind the statutory presumption under Section 118(a) and also the fact that the burden of proof lies on the defendant and to see whether the burden has been discharged or not. How the burden can be discharged or whether it has been discharged is a matter of appreciation of evidence. The failure of the plaintiff to prove a particular consideration may itself probabilise the defendant's version and lead to the conclusion that there was no consideration at all; on the other hand, it may not have any consideration. The expression "until the contrary is proved", in Section 118 of the Act must also be read in an expanded sense, having regard to the definition of the word 'disapproved' and of the expression "shall presume" in Sections 3 and 4 of the Evidence Act, 1872. It was, therefore, held that the courts below proceeded merely on the presumption under Section 118(a) without considering the true legal import vitiating the approach of the courts as an error of law. Accordingly, the suit was remitted to the trial court to give opportunity to the parties to adduce evidence afresh and decide the case on the merits in the light of the law thus laid down. Para No. 10. In Y.M. Prasad v. Sanathnagar Wire Products ((1987) 2 Andh LT 947) facts were that the plaintiff, partnership firm had two promissory notes Exs. A-5 and A-6 for a sum of Rs 30,000 and Rs 20,000 respectively from the appellant-defendant. Two cheques A-7 and A-8 were executed by second defendant as collateral security. Before expiry of Exs. A-5 and A-6, a renewal, the promissory note Ex. A-9 was executed on the basis of which the suit was filed. The defence was that no amount was borrowed. It was pleaded that the appellant-first defendant's business was being looked after by the husband of the second defendant who had lent a sum of Rs 50,000 to the first defendant and he executed a promissory note in his favour. A suit filed by him for recovery of that amount was already decreed. The husband of the second defendant was lending money without licence. He got signatures on blank papers from the appellant-first defendant for the purpose of income tax and other transactions. Therefore, he did not execute Ex. A-9, promissory note, nor receive any consideration thereunder. He also denied that Ex. A-9 was renewal of Exs. A-5 and A-6, promissory notes nor were they supported by consideration. After considering the case law and the evidence it was held by the High Court that the appellant had proved that Exs. A-5 and A-6, promissory notes were not supported by consideration. It was held that the expression "until the contrary is proved" under Section 118 of the Act does not mean that the defendant must necessarily show that the document is not supported by any form of consideration but the defendant has the option to ask the court to consider the non-existence so probable that a prudent man ought, in the circumstances of the case, to act upon the supposition that the consideration did not exist. Though the evidential burden is initially placed upon the defendant by virtue of Section 118, it can be rebutted by the defendant by showing the preponderance of probabilities that such consideration, as stated in the pronote or in the suit notice or in the plaint, does not exist and once the presumption is so rebutted the said presumption disappears. The burden is on the plaintiff to prove that the pronote is supported by past consideration as recited in the pronote. It was also further observed that when the Act was made the presumption was drawn when the moral values were high in the society. With the passage of time when moral standard eclipsed to its ebb, and moneylending has become a profession and means to an end, several subterfuges are being adopted to exploit the indigent people due to economic necessity. The statutory presumption under Section 118(a) requires a re-look consistent with Article 39-A which guarantees as a fundamental right equal justice read with Articles 14 and 21 which provide procedural fairness. A statutory presumption requires re-examination. Para No. 11. It would thus be clear that 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 considerations. If he pleads that the promissory note is supported by a consideration as recited in the negotiable instrument and the evidence adduced in support thereof, the burden is on the defendant to disprove that the promissory note is not supported by consideration or different consideration other than one recited in the promissory note did pass. If that consideration is not valid in law nor enforceable in law, the court would consider whether the suit pronote is supported by valid consideration or legally enforceable consideration. Take for instance, a pronote executed for a time-barred debt. It is still a valid consideration. The falsity of the plea of the plaintiff also would be a factor to be considered by the court. The burden of proof is of academic interest when the evidence was adduced by the parties. The court is required to examine the evidence and consider whether the suit as pleaded in the plaint has been established and the suit requires to be decreed or dismissed.Credit Card, Cheque Dishonour Case Law
Designed and Maintained by DELHIADVOCATE. © 1999 - 2010 DELHIADVOCATE
Last Updated: 18 July 2010