® IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 19TH DAY OF AUGUST 2019 BEFORE THE HON’BLE Dr. JUSTICE H.B.PRABHAKARA SASTRY R.F.A.No.295 OF 2012 BETWEEN:
Mr.Manjunath S.
S/o Sri J.N.Sathyanarayana, Aged about 51 years, R/a.No.510, 10th Main, M.C.Layout, Vijayanagara, Bangalore – 560 040. .. Appellant ( By Sri S.S.Mahendra, Advocate ) AND:
Mr.B.K.Subbarao, Skanda, 902, 10th Cross, J.P.Nagar II Phase, Bangalore – 560 078. .. Respondent ( By Sri M.Dinesh Rao, Advocate a/w. Sri Brian Rego, Advocate ) This Regular First Appeal is filed under Section 96 of CPC against the judgment and decree dated 10.10.2011, passed in O.S.No.15413/2006, on the file of the XXVI Additional City Civil Judge, at Mayohall, Bangalore (CCH-20), dismissing the suit for recovery of money.
This Regular First Appeal having been heard and reserved for judgment on 05.08.2019, coming on for pronouncement, this day the Court delivered the following:
JUDGMENT This is the plaintiff’s appeal. The present appellant had instituted a suit against the present respondent arraigning him as defendant in O.S.No.15413/2006, in the Court of learned XXVI Addl.City Civil Judge, at Mayohall, Bengaluru, CCH-20, (hereinafter for brevity referred to as `trial Court’), for recovery of a sum of `11,25,686/- from the defendant.
2. The summary of the case of the plaintiff in the trial Court was that during the year 2003, when the plaintiff and the defendant were working in a Company called MICO at Audugodi, Bengaluru, in October 2003, at the request of the defendant for a hand loan of a sum of `8,50,000/-, the plaintiff had lent him a sum of `8,50,000/- on 30.10.2003, in the presence of one Sri H.B.Vasudeva Murthy and Sri T.V.Ranganathan. The defendant had agreed to repay the said sum with an interest at the rate of 15% p.a. and in that regard, he had executed an on demand Promissory Note. In view of the repeated requests and demands made by the plaintiff, on 18.11.2004, the defendant gave him a cheque for a sum of `25,000/-, drawn on Karnataka Bank Limited, B.T.M.Layout Branch, Bengaluru, with an assurance of paying the balance interest by the end of November 2004. However, the defendant failed to pay the interest and the principle amount and committed default. This constrained the plaintiff to institute a suit against him for recovery of money.
The plaintiff contended that the defendant was due to him in a sum of `8,50,000/- towards the principle amount and a sum of `3,00,686/- towards the interest at the rate of 15% p.a. from 30.10.2003 to 9.3.2006.
In this amount, after deducting a sum of `25,000/-, paid on 18.11.2004, still, the defendant was due to him in a sum of `11,25,686/-. It is the said sum, the plaintiff sought to recover from the defendant in the suit.
3. In response to the summons served upon him, the defendant appeared through his advocate and filed written statement, wherein he contended that though he was working in MICO, wherein the plaintiff was also working during 2003, but, he had no financial necessity to avail any loan from the plaintiff. He contended that he never approached the plaintiff and borrowed any amount of loan, much less, `8,50,000/-. The defendant has further contended that he assisted the plaintiff in applying for and getting allotment of two sites from Vyalikaval House Building Co-operative Society Limited, Bengaluru, (hereinafter for brevity referred to as `Housing Society’), each for `4,25,000/-. After the registration of those two sites in favour of the plaintiff and his wife, since some dispute had arisen between the Housing Society and the Bengaluru Development Authority, the plaintiff requested the Chairman of the Housing Society through defendant for providing alternative site of higher dimension. To ensure that defendant would impress upon the Chairman to get an alternative site, the plaintiff requested the defendant to sign a Promissory Note assuring that he will not use the said Promissory Note, but, would keep it only as a security. Since the plaintiff was a Senior Officer and his relative, the defendant obliged and signed the Promissory Note in good faith. The said Promissory Note was blank, except the signature and address of the defendant. The plaintiff has made use of the said blank Promissory Note and instituted a false suit.
4. Based on the pleadings of the parties, the trial Court framed the following issues :
1. Does plaintiff prove that the defendant borrowed `8,50,000/- on 30/10/2003 and executed on demand pronote for the said loan?
2. Does plaintiff further proves that the defendant agreed to pay 15% interest P.A.?
3. Whether plaintiff is entitled for the reliefs claimed in the plaint?
4. What decree or order?
In order to prove his case, the plaintiff got himself examined as PW-1 and one Dr.H.B.Vasudeva Murthy as PW-2 and got marked documents from Exs.P-1 to P-4. The defendant got himself examined as DW-1 and got marked documents from Exs.D-1 to D-4.
After hearing both side, the trial Court by its impugned judgment and decree dated 10.10.2011, dismissed the suit of the plaintiff. It is against the said judgment and decree, the plaintiff has preferred this appeal.
5. Lower Court records were called for and the same are placed before this Court.
6. Heard the arguments of the learned counsel from both side and perused the materials placed before this Court, including the memorandum of appeal and the impugned judgment.
7. For the sake of convenience, the parties would be referred to as per their ranks before the trial Court.
8. The points that arise for my consideration are :
(1) Whether the plaintiff has proved that the defendant borrowed a sum of `8,50,000/- from him on 30.10.2003 and executed an on demand Promissory Note agreeing to repay the said amount, together with interest at the rate of 15% p.a.
(2) Whether the plaintiff is entitled for the relief claimed in the plaint?
(3) Whether the judgment and decree under appeal deserves any interference at the hands of this Court?
It is an admitted fact that the plaintiff and defendant were working during the year 2003 in a Company called MICO at Bengaluru. However, the defendant has categorically denied that there was any loan transaction between them. In order to prove his case, the plaintiff got himself examined as PW-1. In his examination-in-chief in the form of affidavit evidence, the plaintiff has reiterated the contentions taken up by him in his plaint. He has stated that the defendant being his colleague, had borrowed a sum of `8,50,000/- from him on 30.10.2003, by executing an on demand Promissory Note. He had agreed to repay the said loan amount with interest at the rate of 15% p.a. He has also stated that one Sri H.B.Vasudeva Murthy and one Sri V.T.Ranganatha have attested their signature to the said on demand Promissory Note as witnesses. He produced and got marked the said on demand Promissory Note at Ex.P-1 and got marked defendant’s signature therein at Ex.P-1 (a) and signatures of the said attesting witnesses at Exs.P-1(b) and P-1(c) respectively. He also got produced and marked a NIL Encumbrance Certificate at Ex.P-2, Assessment Register Extract at Ex.P-3 and Statement of Account at Ex.P-4.
He was subjected to a detailed cross-examination, wherein he adhered to his original version.
9. Dr.H.B.Vasudeva Murthy was examined as PW-2. The said witness in his affidavit evidence has stated that both the plaintiff and the defendant are his relatives and that he was present on 30.10.2003 when the plaintiff lent a sum of `8,50,000/- to the defendant as a loan. The defendant executed an on demand Promissory Note in favour of the plaintiff agreeing to repay the said loan with interest at the rate of 15% p.a. He also stated that he subscribed his signature as a witness to the said Promissory Note, joined by one Sri V.T.Ranganath. He further stated that, as informed to him by the plaintiff, the defendant failed to repay the loan amount. The witness has identified his signature in the on demand Promissory Note at Ex.P-1(a).
He was subjected to a detailed cross-examination, wherein he adhered to his original version.
10. The defendant got himself examined as DW-1.
In his examination-in-chief in the form of affidavit evidence, he has reiterated the contentions taken up by him in his written statement. Though he has admitted of he executing a Promissory Note, but, stated that the same was not in connection with the alleged availment of loan of a sum of `8,50,000/- by him, but, the same was in connection with an allotment of site to the plaintiff by a Housing Society. He has stated that, since the plaintiff was superior to him in his office, the Promissory Note was obtained by him by undue influence. He categorically denied the alleged loan transaction averred by the plaintiff. He also stated that he had no financial necessity to avail any loan, much less, `8,50,000/- from the plaintiff. In his support, he produced copy of his Bank Passbook at Exs.D-1, D-2, D-3 and D-4.
Even in his cross-examination, he adhered to his original version.
11. From the above evidence of the parties, the fact remains that the defendant has admitted of he signing a Promissory Note at Ex.P-1 and that the said Promissory Note was given to the plaintiff. Though the defendant has stated that the said Promissory Note was blank when it was signed by him and that no witnesses were present when he was said to have executed the said Promissory Note, but, PW-1 and PW-2 in their evidence have clearly stated that the said Promissory Note was executed by the defendant in their presence.
Admittedly, PW-1, PW-2 and DW-1 are all relatives. Thus, PW-2 is a relative both to the plaintiff and the defendant. He has in his cross-examination given some more details as to the alleged loan transaction. He has stated that defendant had told that for higher education of his son, he was requiring the amount, as such, he availed the said loan. The denial suggestions made to him were not admitted as true by him.
Further, even though defendant in his cross- examination has denied the suggestion that he executed an on demand Promissory Note after receiving a cash loan of `8,50,000/- from the plaintiff, but, has not denied or disputed his signature on Ex.P-1. Though defendant has taken a contention that the amount mentioned in the original Promissory Note was `5,60,000/-, but, not `8,50,000/- and that the plaintiff had altered the said amount, rate of interest etc., in the Promissory Note, but, he could not substantiate the same. Though he produced a photocopy of the Promissory Note depicting an amount of `5,60,000/-, but, the said document was marked only for identification purpose. The defendant could not able to substantiate that there was any alteration or tampering of Ex.D-1(a) to convert it into Promissory Note for higher amount at Ex.P-1. Therefore, the defendant could not establish his contention that there was any alteration or tampering of the Promissory Note at Ex.P-1.
12. The first argument of the learned counsel for the appellant was that when the execution of on demand Promissory Note at Ex.P-1 is admitted or established, then, a presumption under Section 118 of Negotiable Instruments Act, 1881 (hereinafter for brevity referred to as `N.I.Act’), operates in favour of the plaintiff. Since the defendant has failed to rebut the said presumption, the suit ought to have been decreed in favour of the plaintiff. However, the trial Court has committed an error by dismissing the suit, by observing that on demand Promissory Note was executed in connection with site transaction between a House Building Co-operative Society and the plaintiff and also the plaintiff could not establish his source of fund to lend loan of `8,50,000/- to the defendant.
13. Learned counsel submitting that the defendant has not come up with any explanation as to why he signed a blank on demand Promissory Note in favour of the plaintiff and no suggestion was made to PWs.1 and 2 in their cross-examination that defendant has not borrowed `8,50,000/-, also submitted that the alleged lack of source of fund cannot be a ground for rebuttal of the presumption for the consideration under Section 118 of N.I.Act.
In his support, he relied upon the judgment of Hon’ble Apex Court in Rohitbhai Jivanlal Patel –vs- State of Gujarat and another, in Criminal Appeal No.508/2019, disposed of on 15th March 2019. In the said case, the Hon’ble Apex Court while dealing with an appeal involving dishonour of cheque and an offence under Section 138 of N.I.Act, was pleased to consider the scope of presumption under Section 118 and Section 139 of N.I.Act and the rebuttal of the said presumption. In Paragraph-16 of its judgment, the Hon’ble Apex Court was pleased to observe that, time and again, it has emphasised that, though there may not be sufficient negative evidence which could be brought on record by the accused to discharge his burden, yet mere denial would not fulfill the requirement of rebuttal as envisaged under Section 118 and Section 139 of the N.I.Act.
The Hon’ble Apex Court after referring to its previous judgments in Kumar Exports –vs- Sharma Carpets, reported in {(2009) 2 SCC 513} and in Rangappa –vs- Sri Mohan, reported in {(2010) 11 SCC 441}, was pleased to observe at Paragraph-19 of its judgment as below :
“ 19. Hereinabove, we have examined in detail the findings of the Trial Court and those of the High Court and have no hesitation in concluding that the present one was clearly a case where the decision of the Trial Court suffered from perversity and fundamental error of approach; and the High Court was justified in reversing the judgment of the Trial Court. The observations of the Trial Court that there was no documentary evidence to show the source of funds with the respondent to advance the loan, or that the respondent did not record the transaction in the form of receipt of even kachcha notes, or that there were inconsistencies in the statement of the complainant and his witness, or that the witness of the complaint was more in know of facts etc. would have been relevant if the matter was to be examined with reference to the onus on the complaint to prove his case beyond reasonable doubt. These considerations and observations do not stand in conformity with the presumption existing in favour of the complainant by virtue of Sections 118 and 139 of the NI Act. Needless to reiterate that the result of such presumption is that existence of a legally enforceable debt is to be presumed in favour of the complainant. When such a presumption is drawn, the factors relating to the want of documentary evidence in the form of receipts or accounts or want of evidence as regards source of funds were not of relevant consideration while examining if the accused has been able to rebut the presumption or not……”
With the above, learned counsel for the appellant vehemently submitted that in view of the proof of execution of on demand Promissory Note in favour of the plaintiff, mere non-proving of the source of income of the appellant would not weaken the case of the plaintiff. He further submitted that the plaintiff being a higher officer in MICO Company and his wife is also being an employee and earning member and further he also being a Chartered Accountant, is presumed to have so much source of funds with him to lend. He also stated that, PW-1 in his cross-examination has stated that, on the date of the loan, he had cash in his house.
14. Learned counsel for the respondent in his argument submitted that the plaintiff who was an employee in MICO Company cannot be a practising private Chartered Accountant. As such, it cannot be believed that he was practising as a Chartered Accountant and had any income from it. He also stated that, it is unbelievable that such a salaried person would have retained `8.5 lakhs cash in his house without anticipating any loan to be given to the defendant. Further, no details of the alleged salary of the plaintiff and his wife have been placed before the Court. This creates a serious doubt in the case of the plaintiff about he possessing financial capacity to lend such a huge amount. As such, there is rebuttal of presumption under Section 118 of N.I.Act.
In his support, he relied upon an unreported judgment of Hon’ble Apex Court in Basalingappa –vs- Mudibasappa, in Criminal Appeal No.636/2019, disposed of on 9.4.2019. He also submitted that no demand with respect to the payment of alleged loan has been made by the plaintiff to the defendant, as such, the on demand Promissory Note cannot be considered. In his support, on the said point, he relied upon the judgment of High Court of Orissa in Braja Kishore Dikshit –vs- Purna Chandra Panda, reported in MANU/OR/0042/1957.
15. In the cross-examination of PW-1, the suggestion made to the witness that the only transaction between the plaintiff and the defendant was with respect to the site which the plaintiff is said to have been applied with Vyalikaval House Building Co-operative Society, was not admitted as true by the witness. PW-1 has also not admitted a suggestion as true that the Promissory Note at Ex.P-1 was signed by the defendant in connection with the said site transaction. The suggestion that PW-1 had no financial capacity to pay the amount to the defendant was also not admitted as true by the witness. PW-1 stated as incorrect that, as a Chartered Accountant, he had the knowledge that any transaction more than `50,000/- cannot be done in cash. The witness admitted a suggestion as true that a cheque for `50,000/- issued by him at the end of the year 2003 was dishonoured.
16. PW-2 though has stated that he was present when the defendant executed a Promissory Note at Ex.P-1 in favour of the plaintiff and received the alleged loan from the plaintiff, but, his evidence has to be read and appreciated taking the entire evidence of the plaintiff’s side since PW-2 is admittedly a nearest relative of the plaintiff.
The evidence of PW-1 and PW-2 when read in its entirety, it shows that neither of the witnesses any where stated that any demand for repayment of the loan under Ex.P-1 was made by the plaintiff demanding the defendant to repay the loan amount with interest thereupon. Neither of the witnesses have stated as to whether such a demand was made and if so, when and in what manner such demand was made. Had any such demand was made by PW-1, then, definitely he would have stated about the same in his evidence. Being a Chartered Accountant and a responsible officer at MICO, it is expected of him to know that when the Promissory Note is an on demand Promissory Note, then, there ought to be a demand for the payment of the amount promised under the Promissory Note. Interestingly, even in the cross-examination of DW-1 also, no suggestion was made to the witness that any such demand was made by the plaintiff to the defendant. Therefore, the fact remains that the plaintiff has failed to prove that any such demand for the repayment of the alleged loan amount was made by him to the defendant.
17. Learned counsel for the respondent in his argument relied upon the judgment of Orissa High Court in Braja Kishore Dikshit’s case (supra). In the said case, the Orissa High Court after referring to the judgment of Madras High Court in Gopalan –vs- Lakshminarasamma, reported in AIR 1940 Mad 631, was pleased to observe that, in the case of a Promissory Note, which is payable on demand, it does not become payable until the demand is made.
The Division Bench of Lahore High Court in Ghania Lal –vs- Karam Chand, reported in AIR 1929 Lahore 240, with respect to Section 64 and Section 66 of Negotiable Instruments Act, 1881, was pleased to observe as below :
“ Be that as it may, I consider that the natural interpretation of the section is that a maker of a promissory note is not relieved from liability simply because the holder has not made a demand for payment. The action itself is a sufficient demand even though the instrument be payable on demand. The maker cannot put forward the absence of demand as a defence, though he may ask the Court to relieve him from costs if an action is brought against him without any previous demand. This interpretation is in consonance with the rule of the English Law that presentment for payment is not necessary in order to render the maker of a note liable except where the note is made payable at a particular place.”
Thus, the Braja Kishore Dikshit’s case (supra) and Karam Chand’s case (supra), appears to have taken two different views. However, our Hon’ble Apex Court in Syndicate Bank –vs- Channaveerappa Beleriant and others, reported in AIR 2006 SC 1874, wherein the question of when do a guarantor’s liability would arise under Sections 126, 128, 129 and 130 of Contract Act, had an occasion to analyse the word `on demand’. At Paragraph-12 of its judgment, it was pleased to observe as below :
“ 12 : We will examine the meaning of the words `on demand’. As noticed above, the High Court was of the view that the words `on demand’ in law have a special meaning and when an agreement states that an amount is payable on demand, it implies that it is always payable, that is payable forthwith and a demand is not a condition precedent for the amount to become payable. The meaning attached to the expression `on demand’ as `always payable’ or `payable forthwith without demand’ is not one of universal application. The said meaning applies only in certain circumstances. The said meaning is normally applied to promissory notes or bills of exchange payable on demand. ”
The above observation of the Hon’ble Apex Court would go to show that in case of a promissory note, normally the word `on demand’ implies that it is always payable forthwith and demand is not a condition precedent for the amount to become payable. Admittedly, in the instant case, the Promissory Note at Ex.P-1 is an on demand Promissory Note. Further, as observed above, the plaintiff has failed to prove that before instituting the present suit, he had made any demand for the repayment of the amount under the Promissory Note from the defendant. Therefore, the present suit is filed without there being a demand by the promisee under an on demand Promissory Note which is at Ex.P-1.
18. The second and the only important point on which the trial Court has dismissed the suit of the plaintiff and the only important point which the learned counsel for the appellant canvassed in his argument is that, in view of the presumption under Section 118 of N.I.Act, a presumption about existence of consideration would be there in favour of the promisee under the Promissory Note, as such, he need not prove his financial capacity or source of fund to lend money to the promissor under the Promissory Note.
Section 118(a) of the N.I.Act reads as below :
“ 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.”
The Hon’ble Apex Court in Bharat Barrel & Drum Manufacturing Company –vs- Amin Chand Pyarelal, reported in { (1999) 3 SCC 35}, while considering Section 118(a) of the N.I.Act, was pleased to hold that, once execution of the Promissory Note is admitted, the presumption under Section 118(a) would arise that it is supported by a consideration. Such a presumption is rebuttable and defendant can prove non-existence of a consideration by raising a probable defence.
Similarly, in M.S.Narayana Menon Alias Mani –vs- State of Kerala and another, reported in { (2006) 6 SCC 39}, the Hon’ble Apex Court was pleased to hold that, “presumptions both under Sections 118(a) and 139 are rebuttable in nature.” As held in catena of cases, including in Basalingappa’s case (supra), the standard of proof of rebutting the presumption is that of preponderance of probabilities. It is also held in Basalingappa’s case (supra) that, inference of preponderance of probabilities can be drawn not only from the materials brought on record by the parties, but, also by reference to the circumstances upon which they rely.
19. It is in the light of the above settled principle of law, the evidence placed by the parties in this case is required to be analysed. In the instant case, as already observed above, though the defendant has admitted of he signing the Promissory Note at Ex.P-1, but, has stated that no consideration under the Promissory Note was passed on to him and that the plaintiff had no capacity to lend such a huge amount in the form of cash to him. In the cross-examination of PW-1, as observed above, it was suggested to the witness that he had no financial capacity to pay the amount to the defendant, however, PW-1 has denied the said suggestion.
Further, PW-1 has stated that in the month of October 2003, defendant telephonically contacted him and requested for an advance amount. The witness has also stated that on 30.10.2003, he had a cash of `8,50,000/- in his house. However, the witness has not stated as to how come he had such a huge amount in his house. The witness himself claiming to be a Chartered Accountant and a salaried officer in MICO, he is required to and expected to know that such a transaction involving huge amount cannot be made in cash. On the other hand, the witness has denied that he got the knowledge that any transaction more than `50,000/- cannot be done by in cash. Admittedly, PW-1 except denying that he had no financial capacity to lend, has not produced any documents or corroborative evidence to show that he had such a huge balance in his bank account and that he had withdrawn the same and kept the cash in his house. He has not even produced any evidence to show that without drawing any amount from his bank accounts also, he had retained such a huge cash in his house. Though he has stated that one month prior to 30.10.2003, he had a sum of `8,50,000/- with him, but, admittedly he has not produced any documents in that regard. According to PW-1, one month prior to 30.10.2003, he had such huge cash with him.
According to the very same witness, the request for loan from the defendant to him came over the telephone only in the month of October 2003, which means, even prior to the plaintiff receiving a request for loan from the defendant, he had already retained a cash of `8,50,000/- in his house. It is hard to believe as to why and for what reason plaintiff had retained such a huge amount in cash in his house when there was no anticipation of he lending said money to the defendant or keeping that money with him for any particular purpose.
Added to the above, PW-1 himself in his cross- examination has admitted that a cheque for a sum of `50,000/- issued by him was dishonoured. Though witness has volunteered to say that he had paid the said amount in cash, but, the fact remains that the cheque was dishonoured without its payment. It is not the case of the plaintiff that he had issued any stop-payment order to the Banker which is the reason for dishonour. Further, the same PW-1 in his cross-examination has also stated that he does not remember if his bank account with No.01090009249 with National Co-operative Bank Limited, Agrahara Dasarahalli Branch, was showing a minimum balance up to 30.10.2003. Thus, all these evidences clearly creates a serious doubt in the alleged financial capacity of the plaintiff to possess and lend such a huge amount of `8,50,000/- to the defendant as a loan in the form of cash.
20. Therefore, the presumption that has arisen in favour of the plaintiff about the existence of consideration stands successfully rebutted. In such an event, the onus of proving that he had sufficient source of fund was upon the plaintiff, which, as already observed above, he has failed to discharge. Therefore, it has to be held that defendant could able to successfully rebut the presumption that was in favour of the plaintiff under Section 118(a) of N.I.Act and that the plaintiff has failed to establish that he had financial capacity or source of fund to lend a sum of `8.5 lakhs to the defendant on 30.10.2003.
21. Learned counsel for the appellant in his argument relied upon Rohitbhai’s case (supra) and drew the attention of this Court to a portion of Paragraph-19, which is referred above. A reading of the entire judgment in Rohitbhai’s case (supra) would go to show that raising a genuine doubt regarding the source of fund with the lendor is not a point of consideration in the process of rebuttal of the presumption. However, what it says is, when a presumption under Section 118 and Section 139 of N.I.Act is drawn in favour of the complainant, then, factors relating to the want of documentary evidence in the form of receipt or accounts or want of evidence as regards source of funds were of not relevant consideration while examining if the accused has been able to rebut the presumption or not.
It is also for the reason that, in the very same judgment, at Paragraph-17, the Hon’ble Apex Court has held as below :
“Para- 17. In the case at hand, even after purportedly drawing the presumption under Section 139 of the NI Act, the Trial Court proceeded to question the want of evidence on the part of the complainant as regards the source of funds for advancing loan to the accused and want of examination of relevant witnesses who allegedly extended him money for advancing it to the accused. This approach of the Trial Court had been at variance with the principles of presumption in law. After such presumption, the onus shifted to the accused and unless the accused had discharged the onus by bringing on record such facts and circumstances as to show the preponderance of probabilities tilting in his favour, any doubt on the complainant’s case could not have been raised for want of evidence regarding the source of funds for advancing loan to the accused –appellant. The aspect relevant for consideration had been as to whether the accused-appellant has brought on record such facts/material/circumstances which could be of a reasonably probable defence.
Thus, the accused is not totally precluded from taking defence that the lender had no source of fund to lend him the alleged money as loan. However, it is for the accused/lonee to prove at least by preponderance of probabilities, his contention that the lender had no source of fund.
In Basalingappa’s case (supra), which was heard and decided by Hon’ble Apex Court subsequent to Rohitbhai’s case (supra), at Paragraph-24, it was pleased to observe as below :
“ Para-24 : ………In the year 2010-2011, as per own case of the complainant, he made payment of Rs.18 lakhs. During his cross- examination, when financial capacity to pay Rs.6 lakhs to the accused was questioned, there was no satisfactory reply given by the complainant. The evidence on record, thus, is a probable defence on behalf of the accused, which shifted the burden on the complainant to prove his financial capacity and other facts.
In Paragraph-28 of the very same judgment, the Hon’ble Apex Court was pleased to observe as below :
“ Para-28 : We are of the view that when evidence was led before the Court to indicate that apart from loan of Rs.6 lakhs given to the accused, within 02 years, amount of Rs.18 lakhs have been given out by the complainant and his financial capacity being questioned, it was incumbent on the complainant to have explained his financial capacity. Court cannot insist on a person to lead negative evidence. The observation of the High Court that trial Court’s finding that the complainant failed to prove his financial capacity of lending money is perverse cannot be supported………”
Further in the very same judgment at Paragraph- 29, the Hon’ble Apex Court further observed as below :
“ Para-29: ……. We are, thus, satisfied that accused has raised a probable defence and the findings of the trial court that complainant failed to prove his financial capacity are based on evidence led by the defence…..”
With the above observation, the Hon’ble Apex Court was pleased to confirm the judgment of acquittal passed by the trial Court, acquitting the accused for the offence punishable under Section 138 of N.I.Act and set aside the judgment of conviction passed by the High Court reversing the judgment of acquittal passed by the trial Court and convicting the accused for the alleged offence.
22. In the instant case, as already observed above, since the defendant could able to rebut the presumption which was in favour of the plaintiff under Section 118(a) of N.I.Act successfully and since the plaintiff has failed to discharge his onus to show that he had financial capacity to lend a huge amount of `8.5 lakhs in cash to the defendant, there is no evidence to hold that the Promissory Note at Ex.P-1 was supported with consideration. As such, the evidence of PW-2 that he was an eye witness to the alleged transaction proved to be not safe to believe.
23. Further, since PW-1 could not substantiate his contention that he had lent `8.5 lakhs to the defendant as a consideration for the Promissory Note at Ex.P-1, it cannot be held that plaintiff has proved that the defendant had borrowed a sum of `8.5 lakhs from him on 30.10.2003. Since the trial Court has arrived at the same conclusion and dismissed the suit of the plaintiff, I do not find any reason to interfere in it.
24. Accordingly, I proceed to pass the following order:
ORDER The Appeal is dismissed. The judgment and decree dated 10.10.2011, passed by the learned XXVI Addl.City Civil Judge, at Mayohall, Bengaluru (CCH-20), in O.S.No.15413/2006, is confirmed.
In view of dismissal of the appeal, the pending IA.No.1/2012 does not survive for consideration.
The Registry is directed to transmit a copy of this judgment along with lower Court records to the lower Court without delay.
Sd/- JUDGE bk/