THE HON’BLE SRI JUSTICE B. CHANDRA KUMAR C.C.C.A..No.77 of 2003 Dated 23-09-2011 Between: Gandey Sravan Kumar and others. …Appellants. And: Pabba Nagamani and others. … Respondents. THE HON’BLE SRI JUSTICE B. CHANDRA KUMAR C.C.C.A..No.77 of 2003 JUDGMENT: This appeal is directed against the Judgment dated 26th November, 2002 passed in O.S.No.122 of 1998 on the file of the 1st Additional Chief Judge, City Civil Court, Secunderabad. Appellants herein are the defendants 1 to 3 and respondents 1 to 3 herein are the plaintiffs and 4th respondent herein is the 4th defendant before the Court below. The parties will herein after be referred to as arrayed before the Court below for the sake of convenience. The case of the plaintiffs in brief is as follows: Plaintiffs 1 and 2 joined two chits with the 3rd defendant. The 3rd defendant is a partnership firm and the 2nd defendant was a partner in it along with one G.Anantha Laxmi, the mother of the 1st defendant, who died on 4-3-1998. The 3rd defendant was a registered chit fund company. The plaintiffs were regularly paying the subscriptions since the date of inception of the said chits. They paid in all a sum of Rs.3,70,000/-. The last payment was made on 23-8- 1997. 3rd plaintiff who is the husband of the 2nd plaintiff had also given a sum of Rs.1,35,000/- by way of hand loan to the 1st defendant in the month of December, 1997. The 1st defendant executed three promissory notes and three receipts in favour of the plaintiffs. It is their further case that the 1st defendant, who was a bank employee informed the plaintiffs that he would be running the chit business in the names of his sister-in- law, the 2nd defendant and his mother one G.Anantha Laxmi. He alone was collecting the chit subscription amounts. While so, the defendants failed to pay the prize amount of the said chits even while the chit period was coming to close. The defendants 1 and 2 were giving some lame excuse even for non-payment of the hand loan of Rs.1,35,000/-. When the plaintiffs insisted them to pay the amounts, the partners of the 3rd defendant issued 14 post dated cheques. Out of those 14 cheques, 13 cheques were for a sum of Rs.25,000/- each and the last cheque was for a sum of Rs.50,000/-, all drawn on State Bank of India, Market Street Branch, Secunderabad in favour of the plaintiffs 1 and 2. The cheque for Rs.1,35,000/- drawn on Andhra Bank, Marredpaly, Secunderabad was signed by the 1st defendant. He handed it over to the 3rd plaintiff. The amount covered by those cheques represents the chit subscriptions and the loan amount given to the 1st defendant. It is their further case that when the plaintiffs wanted to present those cheques for encashment, the defendants 1 and 2 requested them not to present the same as they were not having funds. They also requested the plaintiffs not to take any action. However, they promised to pay the amount after reconstitution of the firm consequent to the death of G.Anantha Laxmi. Thereafter, the 1st defendant replaced the above cheques by issuing three cheques one each for Rs.one lakh and the fourth one for Rs.1,37,500/-, the aggregate amount being Rs.4,37,500/- . The plaintiffs at the request of the 1st defendant, accepted for replacement of those cheques towards part payment of the amount due. The 1st defendant in his letter dated 18.5.1998 assured the 3rd plaintiff that the replaced cheques would be definitely honoured. However, when those cheques were presented by the 3rd plaintiff, they were dishonoured. When the plaintiffs informed the same, the 1st defendant requested them not to take any action. In spite of lawyer’s notice and repeated demands, the 1st defendant evaded even to meet the third plaintiff. It is their further case that on 23.9.1998 the 1st defendant sent three bankers cheques for Rs.93,646/-, Rs.2,40,000/- and Rs.1,70,000/- all dated 24.7.1998 requesting the plaintiffs to retain those bankers cheques by way of security and requested them not to take any legal action. He also promised to clear the entire outstanding amount within two days. However, they did not comply. The plaintiffs came to know that there were several creditors demanding payment from the 1st defendant. The 1st defendant had already alienated his house property and was trying to dispose of the remaining properties so as to evade payments to the plaintiffs. They removed the name board of the 3rd defendant company. Defendants 1 to 3 filed a common written statement, while the 4th defendant remained ex parte, stating that the 1st plaintiff subscribed for two chits, and 2nd plaintiff also subscriobed for two chits, the value of each chit being Rs.100,000/- payable in 40 monthly installments of Rs.2500/- each. The chits were commenced in August, 1995 and were closed in November, 1998. The plaintiffs stopped paying the monthly subscriptions after the 32nd month and committed default in payment of the monthly subscriptions for the last 8 months. Thus, towards each chit, a sum of Rs.20,000/- was not paid. They were also liable to pay Rs.5,000/- under each of the chits towards the company commission. In all, a total sum of Rs.1,00,000/- i.e., Rs.25,000/- under each chit is liable to be deducted from out of the chit value of Rs.1,00,000/-. The 3rd plaintiff, however, obtained the promissory notes and receipts as one Rambabu was due certain amounts to the 3rd plaintiff. He made said Rambabu as one of the subscribers to two chits of Rs.1,00,000/- run by the 3rd defendant. The 3rd plaintiff wanted to coerce the said Rambabu so as to collect the money due to him. Even before the said Rambabu could become the successful bidder, he wanted to show that he had collected the chit amount from the third defendant,. For that purpose, the 3rd plaintiff obtained promissory notes from the 1st defendant representing the prize amount of two chits. However, later on said Rambabu collected the prize amount of his two chits and he issued undated cheques for a sum of Rs.80,000/- each representing the amount due towards future installments. However, the said Rambabu did not pay the subscriptions payable to the 3rd defendant to a tune of Rs.1,60,000/-. The 3rd plaintiff represented that he would collect the future monthly installments from the said Rambabu and that the 3rd defendant could deduct Rs.1,60,000/- from the amounts payable in respect of the four chits of the plaintiffs. The 3rd plaintiff demanded the 1st defendant to hand over the two cheques issued by Rambabu. When the 1st defendant asked for the receipts, the 3rd plaintiff declined, thus the two cheques of Rs.80,000/- each are still lying with the defendants. As the 3rd plaintiff agreed for adjustment of Rs.1,60,000/- from the amounts payable to the plaintiffs 1 and 2, the cheques were not presented for encashment and the subsequent subscriptions were also not demanded from the said Rambabu. Thus, the three promissory notes and the receipts were brought into existence without making any payments. They were not supported by consideration. There was no occasion for the third plaintiff to advance the amounts to the 1st defendant as the plaintiffs 1 and 2 themselves were entitled to collect the prize money. In fact the 1st defendant has nothing to do with the payment of the prize money. The plaintiffs 1 and 2 who committed default in payment of monthly subscriptions are not entitled to the entire amount paid by them. The cheque for Rs.1,35,000/- was of the year 1995 and as no amount was payable under the said cheque, the account was closed long back. The promissory notes and the receipts were also obtained undated. As one of the partners died, the cheques issued by the firm could not be presented for encashment and therefore, those 14 cheques were returned to the defendants and fresh cheques were returned to the defendants and fresh cheques were obtained from them in lieu of those earlier cheques. Further the 1st plaintiff collected Rs.40,000/- on 18-8-1997, Rs.40,000/- on 15.9.1997 and Rs.50,000/- on 5-11-1997 and acknowledged the same. Thus, the 1st plaintiff collected the total sum of Rs.1,30,000/-. A sum of Rs.1,60,000/- was due and payable to the defendants in respect of the two chits payable by the said Rambabu. Thus, the plaintiffs are not entitled for any amount towards chit fund transaction. The defendants did not receive any notice. Only an empty envelope was sent under the certificate of posting. The three bankers cheques have nothing to do with the suit claim. The three bankers cheques were issued by D.Srinivas and D.Shirish representing the sale consideration of a house belonging to the 1st defendant. Those cheques were not delivered to the 1st defendant. Three suits were filed for cancellation of those sale deeds and they are pending on the file of the 3rd Senior Civil Judge, City Civil Courts, Secunderabad. The 3rd plaintiff had collected the three cheques from Dandu Srinivas. A letter purported to have been issued by the 1st defendant was fabricated. The 3rd plaintiff and the said D.Srinivas together manipulated the said letter and instead of giving those cheques to the 1st defendant, they utilised the same for the purpose of this case. The defendants are not liable to pay the suit amount. Basing on the above pleadings, the Court below framed the following issues for trial: 1. Whether the promissory notes referred to in para 2 of the plaint are not supported by consideration? 2. Whether the plaintiffs are entitled to the money decree as prayed for? 3. Whether the plaintiffs are entitled to perpetual injunction against D.4 as prayed for? 4. To what relief? On behalf of the plaintiffs, P.W.1 was examined and Exs.A.1 to A.34 were marked. On behalf of the defendants, D.W.1 was examined and Exs.B.1 to B.4 were marked. On consideration of the oral and documentary evidence available on record, the Court below having observed that the defendants failed to show as to how there is the mis-joinder of causes of action or as to how the cause of action pleaded in the plaint has effected the merits of the case and that the suit promissory notes i.e.,Exs.A.2 to A.4 and the receipts Exs.A.11 to A.28 are supported by consideration, decreed the suit holding that the plaintiffs are entitled to the money decree as prayed for. The Court below further having observed that the plaintiffs sought for permanent injunction against the 4th defendant State Bank of India directing them not to encash the three cheques dated 24.7.1998 and as per the order in I.A.No.1577 of 1998 dated 2-11-1998, there was a Court direction for encashment of those bankers cheques and for keeping the amounts in the 4th defendant bank, held that the issue No.3 “whether the plaintiffs are entitled to perpetual injunction against D4 as prayed for” does not arise for consideration. Accordingly, the Court below decreed the suit with costs as prayed for allowing subsequent interest at12% p.a, from the date of the suit, till the date of realization. Aggrieved by the said judgment, the defendants 1 to 3 preferred the present appeal. Heard the learned counsel and perused the material available on record. The learned counsel for the appellants-defendants 1 to 3 argued that the trial Court erred in observing that Exs.A.2 to A.4 are supported by consideration and that the defendants have not rebutted the presumption under Section 118 of the Evidence Act. It is also further argued that the plaintiffs failed to produce books of account or statement of account from the business of the 1st plaintiff to show that he had advanced a loan to 1st defendant under Ex.A.2. It is further argued that the trial Court failed to consider the plea of D.W.1 that Ex.A.10 has been forged one and the same has been brought into existence in collusion with the vendor of the 1st defendant. It is also argued that the loan advanced by the 3rd plaintiff was on two different transactions and the trial Court ought to have dismissed it for separate transaction together and the judgment under revision is liable to be set aside by allowing this revision. The learned counsel for the respondents-plaintiffs argued that when the cheques have been issued a presumption has to be drawn under Section 118 of the Negotiable Instruments Act and burden lies on the defendants to prove that there is no passing of consideration which the defendants failed to prove. He has taken this Court through the entire evidence and also Exhibits and letters Ex.A.10. He further argued that the 1st defendant has sold his house and his vendee handed over the bankers cheques and that the defendants deposited the cheques with the plaintiffs promising to repay the amount due but subsequently, failed to pay the amount and thus, the bankers cheques came into possession of the plaintiffs and hence, the judgment under revision does not call for any interference by this Court. The only point that arises for consideration is: Whether the defendants have proved their case? As seen from the evidence, it is not in dispute that the plaintiffs 1 and 2 have joined as members of chits and that they have paid the chit subscription. It is also not in dispute that father of D.1, mother of D.1 and sister of D.1 and 2nd defendant are the partners of the 3rd defendant chit fund company. Plaintiff’s case is that P.W.1 gave a hand loan of Rs.1,35,000/- and the 1st defendant who in turn passed three promissory notes in Exs.A.2 to A.4 and execution of these promissory notes is not in dispute. The contention of the defendants that these promissory notes pertain to the transaction of one Rambabu is rightly negatived by the trial Court. Admittedly, total amount pertaining to the non-payment of future subscription by Rambabu is said to be of Rs.1,60,000/- but total of three promissory notes is Rs.1,35,000/- and therefore, it is clear that the amounts do not tally. Exs.A.6 to A.9 are the cheques issued by D.1. The contention of the plaintiffs that Exs.A.11 to A.28 are the receipts issued by the 1st defendant relating to the chit subscriptions is not in dispute. Exs.A.31 and 32 are the memos issued by the concerned bank showing the dishonour of cheques. Ex.A.5 is another letter. This letter is crucial. In this letter, D.1 informed the plaintiffs that he has not received funds except the funds from the sale proceeds of the house and therefore, the payments could not be arranged. The whole controversy is with regard Ex.A.10 which reveals that the 1st defendant has handed over three bankers cheques to the 1st plaintiff. It is alleged that Ex.A.10 is not genuine. Even if Ex.A.10 is not taken into consideration, the fact remains that three bankers cheques came into possession of the plaintiffs and the contents of Ex.A.5 probablises that it is D.1who had handed over Exs.A.6 to A.9 cheques to P.W.1. The 1st defendant’s case is that his vendor who had to issue the bankers cheque to him, had handed over those cheques to the 1st plaintiff. Therefore, he had filed a separate suit against the vendor. The burden lies on the defendants to prove that those cheques were handed over to the plaintiffs by his vendor, which they failed to prove. In view of the above, I do not see any merits in this appeal and accordingly, this appeal is liable to be dismissed and is accordingly dismissed. No costs. However, the decree stands modified as follows: The defendants shall pay interest at 12% p.a., from the date of the suit, till the date of decree and thereafter, at 6% p.a., from the date of the decree, till the date of realization. ____________________ B. CHANDRA KUMAR, J. Date: 23-09-2011 Dvs THE HON’BLE SRI JUSTICE B. CHANDRA KUMAR C.C.C.A..No.77 of 2003 Dated 23-09-2011