IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. Regular Second Appeal No.854 of 1985 DATE OF DECISION : JANUARY 31, 2008 M/S IMPERIAL SAVING INDIA LIMITED ......... APPELLANT(S) VERSUS YUDHBIR SINGH .... RESPONDENT(S) CORAM : HON'BLE MR. JUSTICE AJAI LAMBA PRESENT: Mr. KS Cheema, Advocate, for the appellant. AJAI LAMBA, J. This Regular Second Appeal has been filed by the defendant against the judgment of reversal. The facts are that the respondent-plaintiff filed a suit for recovery of Rs.15,000/- on the ground that he joined the service with the appellant-defendant as Assistant Development Officer in June, 1980, and was promoted as Branch Manager, Tanda Urmur and Regional Manager. He worked as Director also from 16.7.1982 to 15.8.1982. In lieu of the services rendered and business conducted, the defendant was to pay salary and commission, against which the defendant issued a cheque dated 23.8.1982. When the cheque was presented in the Bank, it was dis- honoured. Finally, on refusal of the defendant to make the payment, the Regular Second Appeal No.854 of 1985 2 suit was instituted. The claim was resisted by the appellant-defendant on the ground that the salary, etc., had already been paid. The allegation made was that the respondent-plaintiff had embezzled a huge sum of money on account of which the services of the plaintiff were terminated on 30.8.1982. With regard to the cheque, the stand of the appellant- defendant was that the cheque in question dated 23.8.1982 was not issued for the payment of salary and commission to the plaintiff, but was issued for meeting the expenses of the company when the plaintiff was working as a Manager. The trial court, having considered the pleadings and evidence, dismissed the suit. The plaintiff filed the first appeal, whereupon the appeal has been allowed by the first appellate court and the suit has been decreed. Exact reference to paras 6 and 7 of the judgment is required, which read as under:- “6. I have heard the arguments of the learned counsel for the parties and gone through the record. In my opinion the whole of the approach of the trial court to the matter in issue is wrong. Admittedly the cheque in question was issued by the defendant company in favour of the plaintiff in his personal capacity. A cheque is a negotiable instrument and after the admission by the plaintiff there is a presumption in favour of its consideration. Under these circumstances, it was for the defendant to prove that the amount of the cheque had been paid or adjusted subsequent to its issue. The account books were with the defendant, but they were not produced. The defendant has also failed to show from the account books or other connected papers in vouchers etc. to show that the cheque in question was not issued to the plaintiff for his personal use, but in connection with the expenses of the company at Tanda Urmur. That account has been withheld Regular Second Appeal No.854 of 1985 3 and therefore, the presumption has to be drawn against the defendant from the non-production of the record and the non- examination of any evidence on the point. The result of all this obviously is that the plaintiff is entitled to the decree out- right on the basis of the cheque itself. 7. The learned Sub Judge seems to have tackled the problem upside down and come to the wrong conclusion that the plaintiff had failed to prove that the cheque was issued to him in his personal capacity. I do not find any justification for the approach of the learned Sub Judge. Keeping in view the fact that the cheque is a negotiable instrument falling under section 118 of the Negotiable Instrument Act, the onus lay upon the defendant to show that the plaintiff in his personal capacity, does not entitled to the amount. Having failed to discharge the onus, the defendant cannot be allowed to put the onus on the plaintiff and avoid the liability.” Learned counsel for the appellant has contended that under Section 118 of the Negotiable Instruments Act, 1881 (for short 'the Act'), although a presumption is required to be made that every negotiable instrument was made or drawn for consideration, until the Court after considering the matters before it, either believes that consideration does not exist or considers the non-existence of consideration so probable, that a prudent man ought, under the circumstances of the particular case, to act upon the supposition that consideration does not exist. The argument, therefore, is that the appellant has been able to rebut the presumption. In this regard, reference has been made to the sole testimony of PW-1 Malkiat Singh, general attorney, who appeared on behalf of the appellant, wherein, he has stated to the effect that when the plaintiff was posted at Tanda, he used to directly collect whole of the Commission and salary for himself and for the staff at Tanda, from the defendant-company. He used to draw his own salary by signing himself as Manager. No salary was sent through draft/cheque for the plaintiff. Similarly, he used to draw Regular Second Appeal No.854 of 1985 4 Commission in the same manner. In support of the proposition, learned counsel has relied on a Full Bench judgment (paras 24, 30 and 32)of Andhra Pradesh High Court in G. Vasu v. Syed Yaseen Sifuddin Quadri, AIR 1987 Andhra Pradesh 139 (Full Bench). For exact reference, relevant portions of paras 24, 30 and 32 are reproduced hereunder:- “24. ........ In our view, the above decision of the Supreme Court is clear authority for the proposition that once the defendant shows either by direct evidence or circumstantial evidence or by use of other presumptions of law or fact that the promissory note is not supported by consideration, in the manner stated in the promissory note or in the manner stated in the suit notice or in the pleadings, the evidential burden shifts to the plaintiff and the legal burden of the plaintiff is revived i.e. to prove that the promissory note is supported by consideration and at that stage, the presumption of law covered by S. 118 'disappears' and no longer subsists. This is because the presumption under S., 118 raised by the statute initially in favour of the plaintiff steps, as it were, into the witness box and acts as a substitute for the plaintiff's evidence. Once such rebuttal evidence is given by the defendant to the satisfaction of the Court, the Court acting on a preponderance of probabilities and not requiring an absolute proof of a negative i.e. absence of all conceivable forms of consideration, the effect of the presumption shifting the initial evidential burden to the defendant 'disappears'.” “30. From the aforesaid authorities, we hold that once the defendant adduces evidence to the satisfaction of the Court that on a preponderance of probabilities there is no consideration in the manner pleaded in the plaint or suit notice or the plaintiff's evidence, the burden shifts to the plaintiff and the presumption 'disappears' and does not haunt the defendant any longer.” “32. For the aforesaid reasons, we are of the view that where, in a suit on a promissory note, the case of the defendant as to the circumstances under which the promissory note was executed is not accepted, it is open to the defendant to prove that the case set up by the plaintiff on the basis of the recitals in the promissory note, or the case set up in suit notice or in the plaint is not true and rebut the presumption under S. 118 by showing a preponderance of probabilities in Regular Second Appeal No.854 of 1985 5 his favour and against the plaintiff. ..........” It has been argued that PW-1, as noticed above, had admitted that the plaintiff used to collect whole of the commission and salary for himself and for the staff at Tanda, from the defendant-company for the purpose of disbursing it to all concerned entitled. He used to draw his own salary by signing himself as Manager. I have considered the statement of Malkiat Singh (PW-1), arguments addressed by the learned counsel as also the impact of the cited judgment. Section 118 of the Act reads as under:- “118. Presumptions as to negotiable instruments. - 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; (b) as to date - that every negotiable instrument bearing a date was made or drawn on such date; (c) as to time of acceptance - that every accepted bill of exchange was accepted within a reasonable time after its date its date and before its maturity; (d) as to time of transfer - that every transfer of a negotiable instrument was made before its maturity; (e) as to order of indorsements - that the endorsements appearing upon a negotiable instrument were made in the order in which they appear thereon; (f) as to stamps - that a lost promissory note, bill of exchange or cheque was duly stamped; (g) that holder is a holder in due course - that the holder of a negotiable instrument is a holder in due course; provided that, where the instrument has been obtained Regular Second Appeal No.854 of 1985 6 from its lawful owner, or form any person in lawful custody thereof, by means of an offence or fraud,or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving that the holder is a holder in due course lies upon him.” The issuance of cheque has been admitted by the appellant. It is further the admitted case that indeed the plaintiff was in service of the appellant and was paid salary as also commission. The portion of statement from the cross-examination of PW-1 shows that the plaintiff was enjoined with the duty of collecting the commission and salary for himself and for the entire staff of the company, for the purpose of disbursing it. Interestingly, the defendant is only relying on the statement of PW-1 to rebut the presumption. The case developed by the defendant to the effect that the plaintiff had embezzled some money of the company, therefore, the payment of the cheque was stopped, is not supported by any evidence or material. No evidence has been led to show that the plaintiff had indulged in embezzlement. Further, the appellant-defendant has not brought on record the books of accounts to establish that for the given period, the plaintiff had already taken his salary and commission and, therefore, he was not entitled to encash the cheque issued. No material has been produced to show that cheque was given for meeting the expenses of the company. Thus, on the stand taken by the defendant, no material has been produced on the record. The facts of the case when considered in the light of the presumption attracted under Section 118 of the Act, cannot be read dehors the sequence of facts. The cheque was issued on 23.8.1982 whereas the Regular Second Appeal No.854 of 1985 7 services of the plaintiff were terminated on 30.8.1982 i.e. after just about a week. The probability of settling the account of the plaintiff, therefore, cannot be ignored, particularly in the absence of there being any material to show embezzlement by the plaintiff. If the defendant was to develop a case to rebut the presumption that the plaintiff had indulged in embezzlement, some material ought to have been brought on record for the Court to consider. If the defendant was to develop a case to the effect that the plaintiff had already drawn the salary and commission by signing himself, some material ought to have been brought on the record to establish that the plaintiff had already taken his salary and commission and, therefore, the payment of the cheque had been stopped. It does not lie with the defendant to say that PW-1 in his cross-examination has not given statement in tune with the pleadings when the examination-in-chief of the witness is considered. In the examination-in-chief, it has been clearly stated by PW-1 that the plaintiff was given Commission out of the business conducted by the defendant- company and was also given salary. The appellant-defendant is required to maintain books of accounts, however, no material has been produced to substantiate the pleadings i.e. averments made in the written statement to the effect that “the defendant has paid all the salaries of the plaintiff so much so the plaintiff has embezzled a huge sum of money of the defendant company by defrauding the defendants of lakhs of rupees”. In view of the discussion made hereinabove and for lack of evidence produced by the defendant to substantiate the defence taken in Regular Second Appeal No.854 of 1985 8 the written statement, I do not find that the presumption attracted under Section 118 has been rebutted. In the facts and circumstances noticed above, the judgment in G. Vasu's case (supra) does not help the case of the appellant. The defendant has not been able to show to the satisfaction of the Court that the pleadings were not true so as to invite rebuttal of presumption under Section 118 of the Act by preponderance of probabilities in favour of the defendant and against the plaintiff. The reasoning adopted by the first appellate court while decreeing the suit, in paras 6 and 7 of the judgment, as reproduced above, cannot be faulted with. No substantial question of law arises for consideration. The appeal is, accordingly, dismissed. January 31, 2008 ( AJAI LAMBA ) Kang JUDGE