IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE THOTTATHIL B.RADHAKRISHNAN & THE HONOURABLE MR. JUSTICE S.S.SATHEESACHANDRAN THURSDAY, THE 24TH JUNE 2010 / 3RD ASHADHA 1932 AS.No. 227 of 1996() -------------------- OS.569/1993 of I ADDL.SUB COURT, KOZHIKODE .................... APPELLANT(S)/DEFENDANT: -------------- K.N.NADARAJAN,S/O.NARAYANA IYER, RESIDING AT KASABA AMSOM DESOM IN KOZHIKODE DISTRICT. BY ADV. SRI.T.KRISHNANUNNI RESPONDENT(S)/PLAINTIFF: --------------- S.LAKSHMI,W/O.K.N.VISWANADHAN, RESIDING IN CHERIYAKANNI KARUVAN KAVIL, NAGARAM AMSOM AND DESOM IN KOZHIKODE DISTRICT. ADV. SRI.V.V.SURENDRAN, SRI.P.A.HARISH THIS APPEAL SUIT HAVING BEEN FINALLY HEARD ON 16/06/2010, THE COURT ON 24/06/2010 DELIVERED THE FOLLOWING: ORDER IN C.M.P.NO.1498/1996 IN A.S.NO.227/1996 DISMISSED. 24.6.2010 SD/- THOTTATHIL B. RADHAKRISHNAN, JUDGE SD/- S.S.SATHEESACHANDRAN, JUDGE /TRUE COPY/ P.A TO JUDGE THOTTATHIL B. RADHAKRISHNAN & S.S.SATHEESACHANDRAN, JJ. ------------------------------- A.S.NO.227 OF 1996 & CR. OBJECTION NO.../96 ----------------------------------- Dated this the 24th day of June, 2010 J U D G M E N T S.S.SATHEESACHANDRAN, J. The appeal is by the defendant in O.S.No.569 of 1993 of the Sub Court, Kozhikode. The respondent/plaintiff filed the above suit for realisation of money, allegedly borrowed by the defendant under two cheques. Plaintiff had issued two cheques dated 2.3.1991 and 4.3.1991 for an amount of Rs.55,000/- each, a total sum of Rs.1,10,000/-, as loan to the defendant on his promise to repay the sum within one year with interest, was her case. After issuing a notice demanding the sum, and that being responded with a reply notice denying the loan transaction setting up a defence that the cheques were issued towards the amount due from her husband to the defendant, the suit was laid for recovery of money with 17.5% interest per annum and costs. A.S.227/96 2 The defendant in his written statement traversing the plaint allegations reiterated what had been stated in his reply notice that there was no loan transaction but only discharge of the sum due from the husband of the plaintiff in issuing of the cheques. Plaintiff's husband is the elder brother of the defendant, and the sum advanced by the defendant to purchase a property comprising a building in their names with that of their mother was not refunded even when that property was sold years later, and the cheques were issued towards the sum due when the defendant refused to sign a partition deed to effect division of the properties of their late mother as among the sharers, was the defence set up by the defendant to resist the suit claim. 2. The learned Sub Judge, on the materials produced negativing the defence canvassed by the defendant, decreed the suit in terms of the plaint, except to the modification of the interest claim, limiting it to 6% per annum on the principal sum till realisation. In the appeal of the defendant against that decree, the plaintiff has filed cross objections seeking A.S.227/96 3 modification of the decree by awarding interest as claimed i.e., 17.5% per annum. 3. We heard the counsel on both sides in extenso with respect to the correctness of the decree impugned in the appeal. The main thrust of attack pressed into service by the learned counsel for the appellant/defendant was that the burden proof was wrongly cast upon the defendant ignoring the presumption available under law that a cheque is normally issued towards the extinguishment of an existing debt and not to create a liability. There was no evidence other than that of the plaintiff to prove the loan transaction, which was disputed by the defendant, and the totality of the circumstances surrounding the issue of cheques as borne out by the materials, according to the learned counsel for the appellant, clearly substantiate the defence set up resisting the suit claim that such cheques had been issued towards the extinguishment of a debt as due from the husband of the plaintiff. A.S.227/96 4 4. Per contra, the learned counsel appearing for the respondent/plaintiff highlighting the close relationship between the parties and, further, pointing out that the plaintiff is a teacher, urged that the conclusion formed by the learned Sub Judge accepting the case of the plaintiff that the defendant had borrowed the amount covered by the cheques, does not warrant any interference in the proved facts and circumstances of the case as her claim had been established by the materials produced. The defence raised by the defendant that a sum of Rs.1,00,000/- was advanced by him at the time when a house was purchased in 1981 in his name and also that of his brother and mother is belied by his own evidence as DW1 as he had given a conflicting version before the court, according to the counsel. When the house purchased in 1981 was disposed by a sale later, according to the counsel, it is unequivocally admitted by the defendant in his evidence that the deed registered thereof reflected the sharers accepting whatever amount due to them in the sale price. Further more, the defendant DW1, according to the counsel, had contended that he had paid Rs.1,75,000/- to the A.S.227/96 5 plaintiff's husband in 1981 contradicting his version in the written statement that the sum was Rs.1,00,000/-. No material whatsoever was produced by the defendant to show that his brother, husband of the plaintiff, had a pre-existing liability at the time of issue of two cheques by the plaintiff, and that being so, the conclusion formed by the learned Sub Judge that the amount covered by the cheques had been given to the defendant as a loan by the plaintiff deserve only to be confirmed, according to the counsel. 5. Plaintiff is the sister-in-law of the defendant as she having married his elder brother. Whatever be the relationship of the parties, so far as a transaction covered by a cheque, as rightly contended by the learned counsel for the appellant/defendant, the issue of a cheque is prima facie indicative that it is for extingtuishment of an existing debt and not to create a new liability unless shown otherwise. We notice that the court below has proceeded on the assumption that since the defendant had admitted the receipt of the cheques and A.S.227/96 6 encashment of the sum thereunder, the merit of the defence taken by him that the cheuqes were issued to discharge the liability of his brother, the plaintiff's husband, is the crucial and decisive question to be adjudicated in the case. In other wards, the denial of the borrowal of loan under the cheques setting up an alternate version that the cheques had been issued to discharge the existing liability from the plaintiff's husband cast upon the defendant the burden to prove such defence as he had admitted of the collection of cheques and encashing the sums thereunder, was the view taken by the court to appreciate the materials tendered by both sides in the case. We find that the whole approach taken by the court below to analyse the disputed questions involved was not at all proper and correct. Collection of a cheque and encashment of the same thereunder does not indicate a pre-existing borrowal, but, on the contrary, prima facie, it is indicative that the money under the cheque was due to him. True, it is open to the party, the drawer of the instrument, to plead and substantiate that the sum under the cheque had been issued as a loan, but, in that case, the burden is squarely A.S.227/96 7 upon that drawer and it does not shift to the drawee for the reason that he had set up a defence disputing the claim of the plaintiff. The burden of proof cast upon the plaintiff may not be rigorous where both sides let in evidence to substantiate their respective case and the court is called upon to adjudicate the disputed questions on the basis of the preponderance of probabilities, as borne out by the materials tendered. Still, when a claim is made on the basis of a cheque, and more so, the case of borrowal under the cheque is denied by the opposite party, an initial burden is cast upon the plaintiff to show that there was such a borrowal or advancement of a loan under the cheque since the issue of cheque is prima facie considered to be towards the discharge or extinguishment of a debt. 6. Has the plaintiff in the present case proved the loan transaction alleged in the case, it appears, did not gain much attention from the learned Sub Judge. We notice that Exts.A1 and A2 are photocopies of two cheques and the cheques had been issued on two different dates 2.3.1991 and 4.3.1991, each A.S.227/96 8 cheque for a sum of Rs.55,000/-. The plaintiff is a teacher and her husband, as per her evidence, employed in a post office. She did not plead or explain in evidence why photocopies of cheques were retained. Production of photocopies of the cheques would indicate that before issuing of the cheques, on both occasions, the plaintiff had taken care to take photocopies of the original cheques. What was the necessity to do so at that point of time and what prevented her from taking a contemporaneous document from the defendant evidencing the borrowal, if at all there was a loan transaction, necessarily, required an explanation, but none was offered. If there was a demand for Rs.1,10,000/- from the defendant, why the amount was paid under two cheques on two different dates also called for an explanation. No material leave alone any pass book was produced to show that when the cheque for Rs.55,000/- was issued on 2.3.1991, the plaintiff did not possess the entire sum of loan, allegedly, requested for. The loan was availed by the defendant, according to the plaintiff, to discharge his liabilities towards the purchase of a flat. Her own evidence as PW1 would A.S.227/96 9 indicate till the defendant purchased the flat in the middle of 1990, the families of plaintiff and defendant resided in the same house. They had, then, maintained separate kitchens in the same house, is borne out by her evidence. Maintaining two separate establishments in the same house was after the death of the mother of the defendant and her husband was also admitted. Her version that the parties still had cordial relationship can be taken only with the pinch of salt. If such cordial relationship continued after shifting of the defendant and his family to a flat, and, later, at the time when the cheques were issued, none would expect the plaintiff to retain photocopies of such cheques anticipating non-payment of the amount thereunder with the necessity to file a suit for realisation of the sum. It has also come out from evidence that a partition deed was entered into, and registered on 4.3.1991, by the defendant, his brother and their sisters in respect of the property left behind by their mother. Version of the defendant that he refused to be a party in the registration of the partition deed till the amount due from the plaintiff's husband, which is alleged to have been advanced by A.S.227/96 10 him much early in 1981 to purchase a house in their joint names with the mother, cannot be brushed aside as totally unworthy of any credence in the facts and circumstances presented and the materials produced. The first cheque was issued on 2.3.1991 for a sum of Rs.55,000/- and the second cheque as on 4.3.1991 for another sum of Rs.55,000/-, the date on which the partition deed was registered. The best person who could have explained the circumstances surrounding the partition deed, and more so, to refute and challenge the defence set up by the defendant was, undoubtedly, his brother, the husband of the plaintiff, but he was not examined. 7. The plaintiff had filed the suit one year after the encashment of the cheques, which were issued at a time when a partition deed was registered by the defendant with her husband and their sisters, that too on the basis of the photocopies of the cheques. With no contemporaneous record evidencing the loan transaction, and in the absence of cogent evidence proving the loan transaction alleged, her case cannot be accepted on its face A.S.227/96 11 value. It is difficult to accept the case of the plaintiff that the defendant borrowed the sum under the cheques as a loan. There is no presumption that the two cheques collected by the defendant were towards the loan from the plaintiff. When there was no such presumption under law, the burden was squarely on the plaintiff to prove that there was a loan transaction as alleged adducing necessary evidence. Other than the production of the photocopies of the two cheques, the rest of the documentary evidence tendered by the plaintiff was the notice and the reply notice. The evidence of the plaintiff as PW1 is hardly sufficient to prove the loan transaction, and it is found to be wanting in very many respects. The defence canvassed by the defendant that the cheques had been issued towards the sum due to him from the husband of the plaintiff, and more so when he refused to subscribe his signature in a partition deed, and its registration, which, admittedly, was carried out on the date of the issue of the second cheque, indicate that the defence raised was probable. The loan transaction pleaded by the plaintiff with respect to the cheques having note been proved in the case, even A.S.227/96 12 the merit of the defence set up by the defendant, as to whether it has been proved or not by cogent materials, does not have any importance, especially, where the presumption in relation to a transaction under a cheque indicated of discharge or extinguishment of a debt. In the given facts of the case, the court below was not justified in granting a decree in favour of the plaintiff. The decree and judgment of the court below are set aside, and the suit shall stand dismissed. Appeal is allowed and cross objection dismissed, directing both sides to suffer their respective costs. THOTTATHIL B. RADHAKRISHNAN JUDGE S.S.SATHEESACHANDRAN JUDGE prp THOTTATHIL B. RADHAKRISHNAN & S.S.SATHEESACHANDRAN, JJ. ------------------------------- A.S.NO.227 OF 1996 () & CROSS OBJECTION NO.... OF 1996 ----------------------------------- J U D G M E N T 24th day of June, 2010 A.S.227/96 14