Recovery of an alleged loan was sought on two dishonoured cheques. The court held that issuance and execution were not established, so the presumption under Section 118 was unavailable. It dismissed the appeal and upheld dismissal of the money-recovery suit.
This page shows the compact analysis of this judgement. The full analysis — procedural history, issue-by-issue holdings with ratio and obiter, advocates, and paragraph-level evidence for every claim — is being added to the record in batches and will appear here when this judgement has been through it.
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MRS. JUSTICE MARY JOSEPH
MONDAY, THE 09TH DAY OF DECEMBER 2019 / 18TH AGRAHAYANA, 1941
RFA.No.514 OF 2004
AGAINST THE JUDGMENT IN OS NO.138/1998 DATED 24-06-2004 OF ADDITIONAL SUB COURT,KOLLAM
APPELLANT/PLAINTIFF:
VELUCHANDRAN, AKKARAVARATHU VEEDU, ALAMCODE, P.O. ATTINGAL, THIRUVANANTHAPURAM.
BY ADV. SMT.A.JANI
RESPONDENTS/DEFENDANTS:
1 VILASINI AMMA W/O.LATE VENUGOPALAN NAIR, CHERUKONATHU PUTHEN VEEDU, MARUKIL, OORUTTAMPALAM P.O. THIRUVANANTHAPURAM-695 507.
2 V.V. SWAPNA, D/O.VILASINI AMMA, OF DO. DO.
5 VIPIN, S/O.LATE P.VENUGOPALAN NAIR OF DO. DO.
R1 TO R5 BY ADV. SRI.V.N.GOPALAKRISHNAN NAIR R1 TO R5 BY ADV. SRI.G.SURARSHAN
THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 09.12.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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CR
MARY JOSEPH, J.
R.F.A.No.514 of 2004
Dated this the 9th day of December, 2019
JUDGMENT
O.S No.138/1998 seeking realisation of money by the
plaintiff from defendant was dismissed by the Additional Sub Court, Kollam by judgment dated 24.06.2004. Aggrieved thereby
the plaintiff is now before this Court in the appeal on hand challenging the judgment and decree. The 1st defendant died during the pendency of the suit and his legal heirs were brought on record as additional defendants 2 to 6. For the sake of convenience, the parties to the appeal are referred to hereinafter as the plaintiff and defendants.
defendant from the plaintiff on 02.05.1995. Cheques bearing Nos.968071 and 968072 each for Rs.1,00,000/- drawn on State Bank of Travancore, Ooruttampalam Branch were issued to the
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plaintiff towards repayment of the amount borrowed at the residence of plaintiff's brother at Mundakkal Village in Kollam District. Cheques were presented by the plaintiff before State Bank of India, Main Branch, Kollam for encashment through the son of his brother, who was also his authorised Power of Attorney, but returned bounced on 14/7/1995 for the reason “Account closed by the party with cheque leaves reported lost by him.” Despite demands made repeatedly, the defendant did not care to repay the amount. Demand made by registered lawyer notice dated 17.7.1995 was also not met with by payment and therefore, the suit was filed seeking realisation of money.
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Rs.2,00,000/- with interest was denied.
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learned counsel, in the context of the case cited as above, the contention of the defendants that presumption under Section 118 of the Act is not applicable in the case on hand is devoid of merits. It is urged that the versions of PW1 and PW2 ought to have been believed by the trial court to reach a finding on the liability of defendants to repay Rs.2,00,000/- to the plaintiff and to pass a judgment and decree in favour of the plaintiff.
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to her, the version of the defendant that two signed blank cheques were lost from his custody and those were misused by the plaintiff for the purpose of launching of the prosecution is highly improbable and the trial court is unjustified in placing reliance on it, to non suit the plaintiff.
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original defendant cannot take a stand deviating from the one of non-denial of affixture of signature taken, in the written statement filed by them. According to her, DW2 has categorically denied the signature in the cheques and that can only be taken as an afterthought of her, after noticing the dissimilarity in signatures affixed by the original defendant himself in the vakalath and the written statement filed lateron. According to her, the said stand of DW2 can only be considered as an attempt to establish that the signatures in Exts.A1 and A1(a) cheques were not authored by the original defendant but have been forged by someone.
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by the trial court. Plaintiff has marked in evidence the judgment in C.C.No.57 of 1996, a criminal prosecution relating to the issue on hand, launched under Section 142 of the Act as Ext.B1. Closing of the account before issuance of disputed cheques formed the basis for acquittal of the defendant as accused in Ext.B1 judgment in the criminal prosecution and that cannot form the basis to disprove the case of the plaintiff and cannot be relied on to non-suit the plaintiff. According to her, the trial court ought to have compared the admitted signatures of the defendant with the denied ones and the signatures found in the vakalath and written statement to discern that the defendant had a fraudulent intention to cheat the plaintiff and therefore, signatures have been affixed in the vakalath and written statement in a dissimilar manner. Raising contentions as above, the judgment and decree are sought to be set aside.
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According to her the judgment of the criminal court ought not to have been received by the trial court and relied on to take a view that the transaction alleged by the plaintiff is totally an unbelievable one. The learned counsel has relied on Kishan Singh (D) through L.Rs vs. Gurpal Singh & Ors. [2010 (6) SCC 516] to base the above argument. Raising arguments on contentions as above, the learned counsel has canvassed for reversal of the judgment under challenge.
12. All the above issues were answered by the trial court
against the plaintiff. In the context where, challenge on the findings of the trial court has been raised, it is incumbent upon this Court to have the entire evidence scrutinized thoroughly to see whether those have been arrived at, erroneously.
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from him to the defendant. Ext.A4(a) to A4(c) letters issued by defendant to him are testimonials even of the factum that the former for his debts owed to others was confined in jail for sometime.
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Mundakkal, Kollam District, is denied categorically by the original defendant, it is the burden of the plaintiff to establish the same by adducing cogent and reliable evidence.
“ 118. Presumptions as to negotiable instruments.
Until the contrary is proved, the following presumptions shall be made:-
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PROVIDED that, where the instrument has been obtained from its lawful owner, or from 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 .”
Instrument if was made or drawn and issued by one party to another, when accepted by the other, shall be presumed as drawn for consideration, as to date, time of acceptance, time of transfer, order of endorsements, stamp and as to holder in due course.
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Therefore it is discerned that only when the transaction of borrowal and issuance of cheque are established by the plaintiff with cogent evidence, then alone he can be said to have discharged his burden to establish execution of cheque. Only on successfully establishing the burden of execution of cheque, the presumption under Section 118 of the Act would aid him in the matter of proving that lending of Rs.2,00,000/- formed consideration for execution of the cheque. The words particularly in usage in Section 118 of the Act being, “presumption shall be made”, it is akin to “shall presume” envisaged under Section 4 of the Evidence Act. Therefore, when execution of cheques in dispute is established by the plaintiff, the court seized of the prosecution shall presume that cheques were supported by the consideration shown therein. In the case on hand Rs.2,00,000/being the total amount shown in two cheques, it is presumed as consideration for issuance of those and the presumption will favour the plaintiff, until the defendant succeeds in establishing that consideration is not Rs.2,00,000/-, but something else. In M/s.Kumar Exports supra the Apex Court has elaborately dealt with the ambit of presumptions liable to be drawn under Sections 118 and 139 of the Act, which is extracted hereunder:-
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“7. Feeling aggrieved, the respondent preferred Criminal Appeal No.946 SBA of 2004 in the High Court of Punjab and Haryana at Chandigarh. The learned Single Judge, who heard the appeal, was of the opinion that in terms of Section 139 of the Act there was a presumption that the cheques received by the respondent were for the discharge of a debt or liability incurred by the appellant that execution of cheques was admitted by the appellant and that the appellant did not place material to rebut such presumption as a result of which, he was liable to be convicted under Section 138 of the Act. The learned single Judge concluded that if the defence put forth by the appellant was true, he would have issued instructions to 'stop payment of the cheques' instead of allowing the cheques to be presented and dishonored. He was also of the view that the affidavit of complainant (appellant herein) that there was no transaction during 1994-95, was not a relevant circumstance. Accordingly, the learned Single Judge convicted the appellant under Section 138 of the Act and remitted the matter to the trial court for passing appropriate order of sentence, after hearing the appellant and the respondent. Feeling aggrieved, the appellant has approached this Court by way of filing the instant appeal.
8. We heard the learned counsel for the parties at length and considered the record of the case.
9. In order to determine the question whether offence punishable under Section 138 of the Act is made out against the appellant, it will be necessary to examine the scope and ambit of presumptions to be raised as envisaged by the provisions of Sections 118 and 139 of the Act. In a suit to enforce a simple contract, the plaintiff has to aver in his pleading that it was made for good consideration and must substantiate it by evidence. But to this rule, the negotiable instruments are an exception. In a significant departure from the general rule applicable to contracts, Section 118 of the Act provides certain presumptions to be raised. This Section lays down some special rules of evidence relating to presumptions. The reason for these presumptions is that, negotiable instrument passes from hand to hand on endorsement and it would make trading very difficult and negotiability of the instrument impossible, unless certain presumptions are made. The presumption, therefore, is a matter of principle to facilitate negotiability as well as trade. Section 118 of the Act provides presumptions to be raised until the contrary is proved (i) as to consideration, (ii) as to date of instrument, (iii) as to time of acceptance, (iv) as to time of transfer, (v) as to order of endorsements, (vi) as to appropriate stamp and (vii) as to holder being a holder in due course. Section 139 of the Act provides that it shall be presumed, unless the contrary is proved, that the holder of a cheque
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received the cheque of the nature referred to in Section 138 for the discharge, in whole or in part, of any debt or other liability. Presumptions are devices by use of which the courts are enabled and entitled to pronounce on an issue notwithstanding that there is no evidence or insufficient evidence. Under the Indian Evidence Act all presumptions must come under one or the other class of the three classes mentioned in the Act, namely, (1) “may presume” (rebuttable), (2) “shall presume” (rebuttable) and (3) “conclusive presumptions” (irrebuttable). The term 'presumption' is used to designate an inference, affirmative or dis affirmative of the existence a fact, conveniently called the “presumed fact” drawn by a judicial tribunal, by a process of probable reasoning from some matter of fact, either judicially noticed or admitted or established by legal evidence to the satisfaction of the tribunal. Presumption literally means “taking as true without examination or proof”. Section 4 of the Evidence Act inter-alia defined the words 'may presume' and 'shall presume as follows:-
“(a) 'may presume'- whenever it is provided by this Act that the Court may presume a fact, it may either regard such fact as proved, unless and until it is disproved. Or may call for proof of it.”
(b) 'shall presume'- Whenever it is directed by this Act that the Court shall presume a fact, it shall regard such fact as proved, unless and until it is disproved”.
In the former case the Court has an option to raise the presumption or not, but in the latter case, the Court must necessarily raise the presumption. If in a case the Court has an option to raise the presumption and raises the presumption, the distinction between the two categories of presumptions ceases and the fact is presumed, unless and until it is disproved.
10. Section 118 of the Act inter alia directs that it shall be presumed, until the contrary is proved, that every negotiable instrument was made or drawn for consideration. Section 139 of the Act stipulates that unless the contrary is proved, it shall be presumed, that the holder of the cheque received the cheque, for the discharge of, whole or part of any debt or liability. Applying the definition of the word 'proved' in Section 3 of the Evidence Act to the provisions of Sections 118 and 139 of the Act, it becomes evident that in a trial under Section 138 of the Act a presumption will have to be made that every negotiable instrument was made or drawn for consideration and that it was executed for discharge of debt or liability once the execution of negotiable instrument is either proved or admitted. As soon as the complainant discharges the burden to prove that the instrument, say a note, was executed by the accused, the rules of presumptions under Sections 118 and 139 of the Act help him shift the burden on the accused. The presumptions will live, exist and survive and shall end only when the contrary
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is proved by the accused, that is, the cheque was not issued for consideration and in discharge of any debt or liability. A presumption is not in itself evidence, but only makes a prima facie case for a party for whose benefit it exists.
11. The use of the phrase “until the contrary is proved” in Section 118 of the Act and use of the words “unless the contrary is proved” in Section 139 of the Act read with definitions of “may presume” and “shall presume” as given in Section 4 of the Evidence Act, makes it at once clear that presumptions to be raised under both the provisions are rebuttable. When a presumption is rebuttable, it only points out that the party on whom lies the duty of going forward with evidence, on the fact presumed and when that party has produced evidence fairly and reasonably tending to show that the real fact is not as presumed, the purpose of the presumption is over. The accused in a trial under Section 138 of the Act has two options. He can either show that consideration and debt did not exist or that under the particular circumstances of the case the non-existence of consideration and debt is so probable that a prudent man ought to suppose that no consideration and debt existed. To rebut the statutory presumptions an accused is not expected to prove his defence beyond reasonable doubt as is expected of the complainant in a criminal trial. The accused may adduce direct evidence to prove that the note in question was not supported by consideration and that there was no debt or liability to be discharged by him. However, the court need not insist in every case that the accused should disprove the non-existence of consideration and debt by leading direct evidence because the existence of negative evidence is neither possible nor contemplated. At the same time, it is clear that bare denial of the passing of the consideration and existence of debt, apparently would not serve the purpose of the accused. Something which is probable has to be brought on record for getting the burden of proof shifted to the complainant. To disprove the presumptions, the accused should bring on record such facts and circumstances, upon consideration of which, the court may either believe that the consideration and debt did not exist or their non-existence was so probable that a prudent man would under the circumstances of the case, act upon the plea that they did not exist. Apart from adducing direct evidence to prove that the note in question was not supported by consideration or that he had not incurred any debt or liability, the accused may also rely upon circumstantial evidence and if the circumstances so relied upon are compelling, the burden may likewise shift again on to the complainant. The accused may also rely upon presumptions of fact, for instance, those mentioned in Section 114 of the Evidence Act to rebut the presumptions arising under Sections 118 and 139 of the Act.
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The accused has also an option to prove the non-existence of consideration and debt or liability either by letting in evidence or in some clear and exceptional cases, from the case set out by the complainant, that is, the averments in the complaint, the case set out in the statutory notice and evidence adduced by the complainant during the trial. Once such rebuttal evidence is adduced and accepted by the court, having regard to all the circumstances of the case and the preponderance of probabilities, the evidential burden shifts back to the complainant and, thereafter, the presumptions under Sections 118 and 139 of the Act will not again come to the complainant's rescue.”
21. It is clear from the foregoing discussions and extracts
from the judgment above that the argument of the learned counsel for the plaintiff is devoid of merits. When the execution of the cheque is satisfactorily established by the plaintiff, then alone presumption on consideration will come to aid the plaintiff and the presumption would be available till evidence is adduced by the defendant to establish on the contrary.
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produce the same after having been undertaken to produce it, adverse inference either that he does not hold a passport or that the relevant entries to establish his availability locally on 2.5.1995 are not there, is liable to be drawn.
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Mundakkal, Kollam on 02.05.1995 and on the day itself Exts.A1 and A1(a) were handed over to him. The plaintiff did not attempt to examine Mr.Sasi, who caused to lent Rs.75,000/- to him. Lending money after borrowing from someone is quite unheard of imprudence also.
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discharge the debt. Therefore, the defendant has succeeded in causing to view the case put forth by the plaintiff with suspicion or in other words, as something improbable to happen.
which is extracted hereunder:
“Thus, in view of the above, the law on the issue stands crystalized to the effect that the findings of fact recorded by the Civil Court do not have any bearing so far as the criminal case is concerned and vice-versa. Standard of proof is different in civil and criminal cases. In civil cases it is preponderance of probabilities while in criminal cases it is proof beyond reasonable doubt. There is neither any statutory nor any legal principle that findings recorded by the court either in civil or criminal proceedings shall be binding between the same parties while dealing with the same subject matter and both the cases have to be decided on the basis of the evidence adduced therein. However, there may be cases where the provisions of Sections 41 to 43 of the Indian Evidence Act, 1872, dealing with the relevance of previous Judgments in subsequent cases may be taken into consideration.”
27. It is pertinent to note on a perusal of the judgment
under challenge that the trial court has not placed reliance on
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Ext.B1 while arriving at a finding against the plaintiff. In that context, the argument of the learned counsel for the appellant on the above line is untenable and therefore discarded. This Court finds upon a scrutiny of the evidence tendered by the plaintiff in
its entirety that credence is unlikely to be fastened on it for reasons stated below:
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day.
to file the suit for realisation of money on behalf of the plaintiff.
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from Bank of Baroda, Varkkala to establish the availability of Rs.12,25,000/- therein.
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Act is unlikely to be attracted. Therefore, the plaintiff is not entitled to get a decree for realisation of money. The trial court has correctly found against the plaintiff and dismissed the suit. The appeal deserves no merits.
In the result, appeal is dismissed.
Sd/-
MARY JOSEPH, JUDGE
JJ/NAB
3 issues framed by the court
Could the plaintiff invoke the presumption under Section 118 without establishing execution of the disputed cheques?
Was the plaintiff entitled to recover the alleged loan on the strength of the disputed cheques?
Had the trial court improperly relied on the criminal court's judgment when deciding the civil claim?
Colour shows how this judgement treated each authority
M/s.Kumar Exports v. M/s.Sharma CarpetsRelied on¶85
M/s.Kumar Exports v. M/s.Sharma Carpets (2009(2) SCC 513) · Who else cites this
Kishan Singh (D) through L.Rs vs. Gurpal Singh & Ors.Relied on¶113
Kishan Singh (D) through L.Rs vs. Gurpal Singh & Ors. [2010 (6) SCC 516] · Who else cites this
2 provisions across 2 enactments
VELUCHANDRAN
VILASINI AMMA
V.V. SWAPNA
GREESHMA
THUSHARA
VIPIN
MARY JOSEPH
As recorded by the court registry
Judgements on the same questions, provisions and authorities, from every court
