IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD PRESENT : : HONOURABLE SRI JUSTICE B.SESHASAYANA REDDY AND HONOURABLE SRI JUSTICE P.DURGA PRASAD C.C.C.A.NO.219 OF 2002 Date:15.04.2011 Between:- T.Suraj. .. Appellant. A N D Mir Hamid Ali and others. .. Respondents. The Court made the following: JUDGMENT: (per the Hon’ble Sri Justice P.Durga Prasad) This is an appeal against the judgment and decree passed in O.S.No.128 of 1998 by the I Additional Chief Judge, City Civil Court, Secunderabad on 28.06.2002. The appellant herein is the plaintiff and he has filed the suit for recovery of Rs.8,36,700/- against the respondents herein. The brief averments of the plaint are that the 1st defendant is the landlord of the defendant Nos.2 and 3, for the premises bearing No.12-13-97 situated at Tarnaka, Uppal Road, Secunderabad. Defendant Nos.2 and 3 are having business relationship with the plaintiff and they brought the 1st defendant to the plaintiff for the had loan of Rs.5,00,000/- on 10.10.1995 to develop the property at Tarnaka, Secunderabad. At request of the defendant Nos.2 and 3, the plaintiff paid a sum of Rs.5,00,000/- on different dates with an understanding that the amount will be repaid with interest at 24% p.a. The plaintiff paid a sum of Rs.1,00,000/- on 10.10.1995, Rs.1,50,000/- on 11.11.1995, Rs.1,30,000/- on 01.01.1996 and Rs.1,20,000/- on 05.03.1996 and the 1st defendant has executed promissory notes for the said amounts in favour of the plaintiff. Defendant Nos.2 and 3 stood as sureties and executed security bonds. Thereafter the 1st defendant avoided to repay interest and principal amount to the plaintiff. Hence, the plaintiff got issued a legal notice on 15.04.1998 to all the defendants. The 1st defendant gave a reply with false allegations that he never executed any promissory notes in favour of the plaintiff. The 2nd defendant approached the plaintiff on 29.04.1998 and assured payment of the amount by 1st defendant within 30 days or else, he would pay the interest amount partly every month out of the rentals payable to the 1st defendant. The 2nd defendant has paid a sum of Rs.10,500/- on 01.05.1998 towards part of interest. The 2nd defendant came to the plaintiff on 01.11.1998 and expressed his inability to pay the agreed interest amount to the plaintiff since the rented premises has been affected in the road widening scheme. Hence, the plaintiff has filed the suit for recovery of Rs.5,00,000/- with interest at 24% per annum. The 1st defendant has filed the written statement denying the averments made in the plaint and according to him he is not the landlord of the premises bearing No.12-13-97, situated at Tarnaka, Secunderabad and the said property belongs to his wife and minor children. But he admitted that defendant Nos.2 and 3 are his tenants in respect of the said premises. He denied about his availing loan of Rs.1,00,000/- on 10.10.1995, Rs.1,50,000/- on 01.11.1995, Rs.1,30,000/- on 01.01.1996 and Rs.1,20,000/- on 05.03.1996 from the plaintiff. He also denied about the execution of the promissory notes in favour of the plaintiff. He also denied about the payment of interest by 2nd defendant to the plaintiff out of the rents payable by him. According to him, himself along with his nephew Khaja Faraz Hussain are partners in the firm known as “Hamid Feraaz Enterprises”. The said firm was floated by him and his nephew Khaja Faraz Hussain with the intention of developing the land belonging to his family. On 01.11.1994 the 1st defendant on behalf of his wife and minor children and the said Khaja Faraz entered into a rental agreement with the defendant Nos.2 and 3 in respect of the said premises on a monthly rent of Rs.2,100/-. The 1st defendant had obtained a loan of Rs.70,000/- on 24.04.1995 from the 2nd defendant for meeting the expenses of his daughter’s marriage. The said loan was interest free. The 1st defendant and his nephew had agreed that the defendant Nos.2 and 3 would not have to pay the rent in respect of the said shops till the amount of loan received by the 1st defendant was repaid. The 1st defendant has signed blank promissory notes at that time, which were kept with the 2nd defendant. On 25.12.1995, he has repaid the entire sum of Rs.70,000/- towards the loan availed by him from the 2nd defendant and thereupon the second defendant executed a receipt evidencing the receipt of amount. But he has not returned the original loan documents. He assured that return of the document within one week. Thereafter, he has availed a further sum of Rs.20,000/- as loan from the 2nd defendant, which was also duly repaid to him on 20.09.1997 under receipt executed by the 2nd defendant. But the 2nd defendant failed to return the original promissory notes, which had been executed by him towards security. Now, the 2nd defendant with the active collusion with the 3rd defendant got filed the suit by the plaintiff. Therefore, no amount whatsoever has been received by him from the plaintiff at any time. The promissory notes, which were executed by him for the loans, which were obtained by him from the 2nd defendant and which were duly discharged by him as evidenced by the receipts issued by the 2nd defendant have been brought into existence for the purpose of filing the suit. Therefore, the said promissory notes are not supported by consideration and no amount was received under them from the plaintiff. Hence, the suit is liable to be dismissed. Defendant Nos.2 and 3 even though appeared by engaging an advocate, did not choose to file written statements and consequently they came to be set exparte. The lower Court basing on the above pleadings framed the following issues: (1) Whether the suit pronotes are true, valid and binding on defendant No.1? (2) Whether the plaintiff is entitled to the decree as prayed for? (3) To what relief? To establish the claim of the plaintiff, he examined himself as P.W.1 and got marked Exs.A.1 to A.4. The 1st defendant, on the other hand, examined himself as D.W.1 and got marked Exs.B.1 to B.4. The lower Court by taking into consideration of the said oral and documentary evidence held that the plaintiff has miserably failed to prove that the 1st defendant has borrowed the amount or he has executed Exs.A.1 to A.4 on receipt of consideration and further held that two promissory notes dated 10.10.1995 and 11.11.1995 are barred by limitation, and thereby dismissed the suit. Aggrieved by the said judgment and decree, the present appeal is filed. Now, the point for consideration: Whether the appellant/plaintiff is entitled for the decree for the suit amount as prayed for? Learned counsel for the appellant has contended that the defendant has admitted in his evidence about his signatures on Exs.A.1 to A.4 promissory notes and having admitted about the execution of the said documents, the burden is on him to establish that no consideration was passed under Exs.A.1 to A.4, but the lower court has wrongly came to the conclusion that burden is on the plaintiff to prove consideration under the suit promissory notes and thereby committed error in dismissing the suit. Hence, the finding of the lower Court is liable to be set aside. Learned counsel for respondents, on the other hand, would submit that as the 1st defendant has denied about the execution of the promissory notes in favour of the plaintiff, burden lies on the appellant/plaintiff to prove execution as well as consideration of the suit pronote and that the respondent/1st defendant repaid the whatever amount borrowed from the 2nd defendant and the same has been evidenced by Exs.B.2 and B.3 receipts. He would further submit that the lower Court appreciated the evidence brought on record in right perspective and came to the conclusion that Exs.A.1 to A.4 promissory notes are not supported by consideration and that the said finding is not required to be interfered in this appeal. The trial Court also placed reliance on the judgment of this Court in “Tadikonda Ramulu firm v. Mallavarapu Kasivisweswara Rao” (2000 (3) ALD 493) in drawing the conclusion that presumption under Section 118 of the Negotiable Instruments Act is not available to the plaintiff in the given facts and circumstances of this case. According to the appellant/plaintiff, the 1st defendant approached him through defendants 2 and 3 for loan of Rs.5,00,000/- for developing his property and he has paid a sum of Rs.1,00,000/- on 10.10.1995, Rs.1,50,000/- on 11.11.1995, Rs.1,30,000/- on 01.01.1996 and Rs.1,20,000/- on 05.03.1996 and the 1st defendant executed promissory notes for the said amounts borrowed by him. The 1st defendant has denied about the execution of the promissory notes in favour of the plaintiff and he pleaded that he has borrowed the amount of Rs.70,000/- and Rs.20,000/- from the 2nd defendant and at that time the 2nd defendant has obtained the blank promissory notes as security for repayment of the said amount and he has repaid the said amounts under Exs.B.2 and B.3 receipts, but the 2nd defendant has not returned the blank promissory notes executed by him and the said promissory notes were pressed into service by the defendant Nos.2 and 3 through plaintiff for filing the suit. Thus, from the above pleadings, it is evident that the 1st defendant had admitted about the execution of the promissory notes but pleaded that the said promissory notes are not executed by him in favour of the plaintiff, but he had given blank promissory notes as security for the amount borrowed from defendant Nos.2 and 3. The lower Court by relying upon a decision rendered in “TADIKONDA RAMULU FIRM v. MALLAVARAPU KASIVISWESWARA RAO”[1] held that the suit cannot be decreed on the basis of presumption under Section 118 of the Negotiable Instruments Act if the evidence of the plaintiff discloses that no consideration has been paid. Against the said judgment of this court, the respondents therein has preferred the Civil Appeal NO.5597 of 2001 before the Supreme Court and the judgment rendered in “MALLAVARAPU KASIVISWESWARA RAO v. THADIKONDA RAMULU FIRM AND OTHERS”[2] came to be set aside. The Apex Court set aside the judgment on which the defendants placed reliance and held that once the execution of the promissory note has been proved, the appellant would be entitled to the benefit of the presumption under Section 118 (a) of the Negotiable Instruments Act because the respondents had failed to discharge the initial burden and, therefore, the Order of the High Court in not decreeing the suit of the appellant in respect of the amount covered by the said promissory note was not proper. It is also observed by the Apex Court that under Section 118 (a) of the Negotiable Instruments Act, the Court is obliged to presume, until the contrary is proved, that the promissory note was made for consideration. It is also a settled position that the initial burden in this regard lies on the defendant to prove the non-existence of consideration by brining on record such facts and circumstances which would lead the Court to believe the non-existence of the consideration either by direct evidence or by preponderance of probabilities showing that the existence of consideration was improbable, doubtful or illegal. In the present case as observed above, the 1st defendant has admitted about the execution of the blank promissory notes, but he pleaded that the said promissory notes were executed as security for the amount borrowed from the 2nd defendant. The 1st defendant as D.W.1 in his evidence has admitted that Exs.A.1 to A.4 contains his signatures and he has admitted that he did not issue any notice demanding to return the promissory notes from 2nd defendant. However he denied about the receipt of Rs.5,00,000/- on different dates. Therefore, the 1st defendant having admitted the execution of Exs.A.1 to A.4 promissory notes, the burden lies on him to establish that the said promissory notes Exs.A.1 to A.4 were not supported by consideration. In that regard D.W.1, in his chief-examination, has stated that he has no acquaintance with the plaintiff. He never borrowed any amount from him. Defendants 2 and 3 are his tenants. They are running a hotel under the name and style of “Gold Coin” in that premises. In the month of April, 1995, he borrowed altogether Rs.90,000/- on two occasions from 2nd defendant for the expenses of the marriage of his daughter and executed four blank promissory notes. He discharged the said debt. But the 2nd defendant did not return those blank promissory notes. 2nd defendant issued Exs.B.2 and B.3 receipts for the amounts repaid by him. In his cross-examination, he has stated that he handed over the promissory notes to 2nd defendant. But he did not remember as to how many places he signed in the promissory notes and handed over to 2nd defendant and he did not remember as to how may promissory notes he signed when he borrowed Rs.70,000/- from 2nd defendant on first occasion and Rs.20,000/- on 2nd occasion. He denied of the suggestion in cross-examination that himself and 2nd defendant colluded and created Exs.B.2 and B.3. He admitted that he alone signed in Exs.A.1 to A.4 and none signed as attestors. Exs.A.1 to A.4 and Ex.B.4 were not signed on the same day and that he signed on Exs.A.1 to A.4 on the date of receipt of Rs.20,000/- from the 2nd defendant. The plaintiff as P.W.1 has stated, in his chief- examination, about the borrowing of the amount by 1st defendant and execution of the promissory notes Exs.A.1 to A.4. In the cross-examination he denied the suggestion that the did not borrow any amount from him and did not execute any promissory note in his favour. He showed his ignorance as to who scribed Exs.A.1 to A.4 among the defendants. He also denied the suggestion that Exs.A.1 to A.4 are not supported by consideration. He denied the suggestion that defendant Nos.2 and 3 fabricated the suit promissory notes when the 1st defendant initiated eviction proceedings against them. Therefore, nothing was suggested to P.W.1 to disbelieve his evidence with regard to the 1st defendant borrowing amount from him and executing Exs.A.1 to A.4 in his favour. With regard to the plea taken by the 1st defendant that he has borrowed Rs.70,000/- and Rs.20,000/- from 2nd defendant and executed four blank promissory notes and handover the same to 2nd defendant as security and subsequently, he repaid the amount to 2nd defendant, but 2nd defendant failed to return back the blank promissory notes. He examined himself as D.W.1 and marked Exs.B.1 to B.4 Exs.B.2 and B.3 are the receipts said to have been executed by M.A.Saleem about the receipt of Rs.70,000/- and Rs.20,000/- from 1st defendant and both the receipts are containing the signatures of the witnesses. But the said receipt does not disclose about the handing over of blank promissory notes by 1st defendant to 2nd defendant or 2nd defendant agreeing to return the same to 1st defendant. Moreover, the said receipts are attested by two witnesses. But the said attestors are not examined to substantiate the plea advanced by the 1st defendant. Therefore, the 1st defendant failed to discharge the burden, that the suit promissory notes Exs.A.1 to A.4 were not supported by consideration. Therefore, the plaintiff is entitled for presumption under Section 118 (a) of Negotiable Instruments Act in his favour. The lower Court erred in recording a finding that the suit promissory notes are not supported by consideration. The evidence of P.W.1 clearly establishes the borrowing of the amount by 1st defendant from plaintiff and executing Exs.A.1 to A.4 in his favour. The next contention of the appellant’s counsel is that the finding of the lower Court that the promissory notes dated 10.10.1995 and 11.11.1995 are barred by limitation is not correct as the 2nd defendant has paid an amount of Rs.10,500/- towards part payment of interest on behalf of the 1st defendant, as such the said promissory notes are within the period of limitation and he further pleaded that the limitation starts from the date of demand for payment of the said amount. Even though the plaintiff has pleaded about Rs.10,500/- towards part payment of interest by 2nd defendant on behalf of 1st defendant, no evidence was produced in that regard and P.W.1 also not spoken about the same. Therefore, the plaintiff has failed to establish about the part payment made under the said two promissory notes. The contention of the appellant’s counsel that the limitation starts from the date of demand cannot be accepted as once the promissory note was executed, the limitation of three years starts from the date of execution itself as per Article 35 of schedule of the Limitation Act, 1963. Therefore, as rightly observed by the lower Court the promissory notes dated 10.10.1995 and 11.11.1995 are barred by limitation. Thus, the plaintiff is only entitled for decree for amount due under the two promissory notes dated 01.01.1996 and 05.03.1996, for Rs.1,30,000/- and Rs.1,20,000/- respectively. In the plaint, the plaintiff has claimed the amount of Rs.1,30,000/- with interest at 24% p.a. from 01.01.1996 to 11.11.1998 amounting to Rs.88,400/-. Thus, total amount due under the promissory note dated 01.01.1996 is Rs.2,18,400/-. With regard to other promissory note dated.05.03.1996, the plaintiff claimed interest at 24% p.a. from the date of execution till 11.11.1998 amounting to Rs.36,800/-. Thus, the total amount due under the promissory note dated. 05.03.1996 is Rs.1,56,800/-. Thus, the plaintiff is entitled for decree for total amount of Rs.3,75,200/-. Hence, the appellant/plaintiff is entitled for decree for a sum of Rs.3,75,200/- with interest at 12% p.a. from the date of filing of the suit till the date of realization. In the result, the appeal is allowed in part with proportionate costs and consequently, O.S.No.128 of 1998 is decreed in part for a sum of Rs.3,75,200/- with proportionate costs and with interest at 12% p.a from the date of filing of the suit till realization against the 1st defendant. The suit against defendants 2 and 3 is dismissed without costs. _____________________________ B.SESHASAYANA REDDY, J _____________________ P.DURGA PRASAD,J 15th April, 2011 KSP [1] 2000 (3) ALD 493 [2] AIR 2008 Supreme Court 2898