THE HON’BLE SRI JUSTICE K.C. BHANU APPEAL SUIT No.1958 OF 1993 JUDGMENT: This Appeal Suit, under Section 96 of the Code of Civil Procedure, 1908, is directed against the judgment, dated 13.07.1993, in Original Suit No.97 of 1980, on the file of the Sub-ordinate Judge, Chirala, whereunder and whereby, the suit filed for recovery of the debt due under a pronote was decreed. 2. For better appreciation of facts, the parties hereinafter are referred to as they are arrayed in the trial Court. 3. The brief facts that are necessary for disposal of the present appeal may be stated as follows: Plaintiff filed the suit stating that defendant No.1 borrowed Rs.15,000/- on 31.03.1977 and Rs.20,000/- on 30.04.1977, from defendant No.2, who is the transferor of the plaintiff, for the purpose of purchasing a house from one Tiruveedhula Suryanarayana, and for the entire amount of Rs.35,000/-, defendant No.1 executed a Promissory Note in favour of defendant No.2 on 22.09.1977 undertaking to repay the said amount with interest at 6% per annum. Defendant No.2 transferred the suit pronote in the favour of plaintiff on 10.09.1980 and endorsed it on the back of the pronote. Thus, the plaintiff is a bona fide holder in due course, of the suit pronote. In spite of repeated demands, defendant No.1 failed to discharge the debt. When a notice was issued, he gave a reply notice with false allegations stating that the suit debt was a book adjustment and he did not receive money as shown in the pronote. Hence, the suit. 4. Defendant No.1 filed a written statement admitting the execution of the suit pronote, but pleaded discharge. It is submitted that Kakaraparthy Venkateswarlu is the father of Kakaraparthy Nageswara Rao, Kakaraparthy Venkata Maharaju and defendant No.1. They had no ancestral property, but were living jointly. Kakaraparthy Venkateswarlu, defendant No.1 and one Kotha Krishna Rao started Sri Venkata Ramana Silk Palace in the year 1966 and did business up to 31.07.1977. Defendant No.1 and his two brothers started another firm under the name and style of Sri Sivarama Silk Palace and did business up to 31.07.1977. Defendant No.1 alone started another firm Sri Kamakshi Silks. As disputes arose between the partners, the matter was referred to one Ankamma, an Arbitrator. In the meanwhile, the house belonging to Thiruveedhula Suryanarayana came up for sale and the partners wanted to purchase the same for Rs.1,00,000/- jointly. They paid an advance of Rs.20,000/- in installments drawn from the funds of Sri Sivarama Silk Palace. By 31.03.1977, it was decided that the sale deed should be taken in the name of defendant No.1. Therefore, the account of Thiruveedhula Suryanarayana was closed by crediting Rs.20,000/- to his account and debiting the same from the individual account of defendant No.1 and there was a book adjustment in this respect, as if defendant No.1 borrowed Rs.15,000/- each from the individual accounts of Kakaraparthy Venkata Nageswara Rao and Venkata Maharaju and the same were credited to the account of defendant No.1, so as to make the book adjustment. After crediting of Rs.20,000/-, the remaining of Rs.10,000/- was utilized for the purpose of stamp papers for the sale deed. Rs.20,000/- each from the individual accounts of Kakaraparthy Venkateswarlu, venkata Nageswara Rao, Venkata Maharaj and Venkata Raghavulu were debited as borrowed by defendant No.1 for the purpose of the house and the same amounts were credited in the individual accounts of defendant No.1 and paid to the vendor towards the balance of consideration. Since the sale was for the benefit of all the partners, the book adjustment was made in the manner stated above as if defendant No.1 borrowed these amounts for the purpose of the house. Pratipati Ankamma, the Arbitrator, decided that the firms Venkata Ramana Silk Palace and Sivarama Silk palace should be taken over by other partners and the firm Kamakshi Silks should be taken over by defendant No.1, and that defendant No.1 should relinquish his share in the first two firms and other partners should relinquish their shares in the other firm. The profits that stood in the account of this defendant in the first two firms were carried over and credited to Kamakshi silks. Not only the accounts of defendant No.1, but the money due under the khatas of defendant No.1’s wife and sons were also carried over and credited to Kamakshi Silks to pay the money due to the shares of the other partners. Therefore, this defendant had to pay other partners Rs.16,987- 26 ps. To this effect an agreement dated 10.08.1977 was entered into between the partners. A copy of the agreement was given to each of the partners. Subsequently the other partners insisted that defendant No.1 should execute pronotes with regard to the amount shown in their individual accounts debited to defendant No.1 for the purchase of the house, which was decided to become the sole and exclusive property of this defendant. According to the advice of the mediators, defendant No.1 executed the suit pronote and other pronotes. Again disputes arose and the matter was referred to one Pulakam Raghava Reddy, Gurram Brahmanandam and Ankamma the elders. All the pronotes were also entrusted to them for final adjustment. As per their advice, defendant No.1 agreed to retire from Kamakshi Silks and make it over to the other partners. This defendant was found indebted to other partners for a sum of Rs.1,18,000/- represented by the four pronotes excluding the pronote executed in favour of his mother. It was also held that defendant No.1 was entitled to all the stock in trade in Kamakshi Silks. In discharge of the debt of Rs.1,24,987-26 ps. this defendant gave up the entire stock in trade and furniture of Kamakshi Silks to other partners. All the partners signed in an agreement dated 14.12.1977 in the presence of mediators. All the pronotes including the suit pronote were with Raghava Reddy. Since, defendant No.1’s father fell ill and he was treated in Guntur, defendant No.1 could not obtain the pronote from Raghava Reddy. Later on the said Raghava Reddy died. Defendant No.1 never thought that the brothers would enforce the pronotes. The suit pronote debt was already discharged as stated supra. The plaintiff in this suit is the father-in-law of the transferor Nageswara Rao and the transfer endorsement is devoid of consideration and he is not a bona fide transferee. The transfer endorsement is a nominal one. Hence, the suit may be dismissed with costs. 5. During the pendency of the suit defendant No.1 died. Defendant Nos.3 to 6 are his legal representatives. Defendant No.2 is the transferor of the plaintiff. Defendant No.2 has not filed any written statement. The legal representatives of the deceased, defendant No.1, filed a memo adopting the written statement already filed by defendant No.1. 6. On the basis of the above pleadings the following issues were settled for trial: “1) Whether the suit pronote is executed under circumstances mentioned in para 7 of written statement? 2) Whether the plaintiff is holder in due course? 3) Whether the discharge pleaded in para 8 of the written statement is true and valid? 4) To what relief?” 7. During trial, PW.1 was examined and Exs.A1 to A3 were got marked on behalf of the plaintiff. On behalf of the defendants, DWs.1 to 5 were examined and Exs.B1 to B8 were got marked. 8. The trial Court accepting the evidence of plaintiff decreed the suit holding that the plaintiff is holder in due course of the suit promissory note and defendant No.1 failed to prove the plea of discharge that in pursuance of the settlement, the entire amount covered under Ex.A1 has been adjusted and in pursuance of holder in due course Ex.B2 was executed and accordingly, decreed the suit. Challenging the same, the appeal is filed by defendant Nos.4 to 6, who are the legal representatives of defendant No.1. 9. Learned counsel for the appellants contended that the suit Promissory Note is not supported by consideration, but it is executed in the circumstances stated in the written statement by defendant No.1; that defendant No.1 along with his brothers used to do the business and at the time of settlement of accounts in the business, it was agreed that the suit amount has to be adjusted and that there was no need for payment of any amount; that the initial burden is on respondent No.1/plaintiff to establish that the suit Promissory Note is supported by consideration; that defendant No.1 discharged the burden placed on him stating that amount in suit Promissory Note was adjusted, while settling the accounts in terms of Ex.B2; that the trial Court ought to have dismissed the suit and hence, he prays to set aside the impugned judgment. 10. None appears for the respondents. 11. There cannot be any dispute that in a suit based on Promissory Note, initial burden is on the plaintiff to prove that the Promissory Note is executed by defendant No.1 and supported by consideration. The evidence of PW.1 would go to show that defendant No.1 borrowed sum of Rs.35,000/- from respondent No.2 and executed Ex.A1 in his favour, and that respondent No.2, later on, by receiving Rs.35,000/- from respondent No.1 on 10.09.1980, transferred the Promissory Note in his favour under transfer endorsement. The statement of PW.1 that defendant No.1 borrowed Rs.35,000/- from respondent No.2 and executed Promissory Note has not been specifically denied or disputed in the cross-examination. Once a fact has been stated by a witness and the same has not been denied and disputed in the cross-examination, it must be admitted that such a fact is admitted. Even defendant No.1 did not deny the execution of A1. Therefore, from the evidence of PW.1 it is clear that Ex.A1 was executed by defendant No.1 having received Rs.35,000/- from respondent No.2, and respondent No.1 is the holder in due course. Respondent No.2 received an amount of Rs.35,000/- from respondent No.1 on 10.09.1980 and transferred the Promissory Note in favour of respondent No.1. Even that transfer endorsement has not been specifically denied or disputed in the cross-examination. Once the initial burden on respondent No.1 is discharged, the burden shifts to defendant No.1 under Section 118 (a) of the Negotiable Instruments Act, 1881, which reads as follows: “Until the contrary is proved, the following presumptions shall be made:- (a) of consideration – that every negotiable instrument was made or drawn for consideration, and that every such instrument, when it has been accepted, indorsed, negotiated or transferred, was accepted, indorsed, negotiated or transferred for consideration.” Of course, it is a rebuttable presumption. The presumption can be discharged by the defendant by adducing necessary evidence or by eliciting in the cross-examination of the plaintiff witnesses. 12. Defendant No.1 admitted that he utilized Rs.15,000/- from the account of respondent No.2 to purchase house and that on 30.04.1977, he utilized Rs.20,000/- from the account of respondent No.2. It is also admitted that respondent No.2 transferred the Promissory Note in favour of respondent No.1 for collection only. But, his contention is that while they were carrying on business, they purchased house from Thiruveedhula Suryanarayana for benefit of all the partners and that as agreed by all the partners, the sale deed was obtained in the name of defendant No.1 and at that time, a sum of Rs.15,000/- each was debited from the individual accounts of Kakaraparthy Venkata Nageswara Rao and Venkata Maharaju and accordingly, a sum of Rs.30,000/- was credited to the account of DW.1. Out of Rs.30,000/-, Rs.20,000/- was paid to the vendor and Rs.10,000/- was utilized for the purpose of stamp papers and registration charges for the sale deed. The remaining balance was debited from the individual accounts of Kakaraparthy Venkateswarlu, Venkata Nageswara Rao, Venkata Maharaj and Venkata Raghavulu, each Rs.20,000/- and the same was credited to the account of DW.1. All the above referred transactions are also book adjustments. The other partners have obtained Promissory Note for the debit entries made in their individual accounts for the money paid towards sale transaction. Subsequent to the execution of Ex.B1, mis- understandings arose and the matter was referred to the Arbitrator. The Arbitrator asked defendant No.1 to give the entire stock in trade of Kamakshi Silks to other partners. Accordingly, he handed over the Kamakshi Skills to other partners. Therefore, in pursuance of the agreement, Ex.B2 was executed and in pursuance of the terms of Ex.B2 – Agreement, there is no need for defendant No.1 to pay or discharge the debt due under Ex.A1. 13. If really, the case of DW.2 is to be accepted that both the parties did business and the firm was dissolved and on 14.12.1997, an agreement was executed by all of them and he attested Ex.B2, then there would be an endorsement on the back of Ex.A1 with regard to discharge. According to DW.3, all the debts were settled between the parties before the elders as per terms of Ex.B2, and thereby, he need not pay any amount on the suit Promissory Note. If the evidence of DWs.1 to 3 is to be accepted as correct that in pursuance of Ex.B2 the disputes were settled including Ex.A1 - pronote, certainly defendant No.1 need not pay the amount covered by Ex.A1 to respondent No.1. There is no recital in Ex.B2 to the effect that in pursuance of the settlement between the parties, defendant No.1 need not pay the amount covered under Ex.A1 – Promissory Note. It is not in dispute that Ex.B2 was executed subsequent to Ex.A1. In the absence of any recital in Ex.B2, oral testimony of DWs.1 to 3 cannot be accepted to show that the suit amount stood adjusted in the business transaction and defendant No.1 need not pay any amount. DW.4 brought the ledger account of defendant No.1, but he has no personal knowledge about the same. Even otherwise, Exs.B4 to B7 do not reveal about the adjustment of the suit Promissory Note, duly discharging defendant No.1 from paying the amount. 14. DW.5 is the father-in-law of respondent No.1. He stated that defendant No.1 borrowed an amount of Rs.15,000/- on 13.03.1977 and Rs.20,000/- on 30.04.1977. He categorically stated that the parties settled the dispute relating to the business only, but not in respect of the suit Promissory Note. His evidence would also clearly go to show that defendant No.1 borrowed the amount and that the adjustment of the business transactions as recited in Ex.B2 relates to business only, but not with reference to the money borrowed by defendant No.1 under the suit Promissory Note. The burden placed on defendant No.1 to show that the suit Promissory Note amount has to be adjusted in pursuance of Ex.B2 – agreement, has not been discharged beyond preponderance of probability. Therefore, in the absence of any evidence and in view of the fact that the burden placed on defendant No.1 has not been discharged, the trial Court rightly decreed the suit. The impugned judgment needs no interference. The appeal is devoid of merit and is liable to be dismissed. 15. Accordingly, the Appeal Suit is dismissed. There shall be no order as to costs. _______________ K.C. BHANU, J November 23, 2010 MD IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD TUESDAY, THE TWENTY THIRD DAY OF NOVEMBER TWO THOUSAND AND TEN PRESENT THE HON'BLE SRI JUSTICE K.C. BHANU APPEAL SUIT No.1958 OF 1993 Between: Kakaraparthi Parvathi and others .....APPELLANTS AND Valicharla Rama Mohan Rao and others ....RESPONDENTS The Court made the following: THE HON’BLE SRI JUSTICE K.C. BHANU APPEAL SUIT No.1958 OF 1993 November 23, 2010