Ajith Govind & Mega Sales Corporation v. Sebastian Mathew

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE K. BABU** **MONDAY, THE 15[TH] DAY OF NOVEMBER 2021 / 24TH KARTHIKA, 1943 RSA NO. 997 OF 2005** **AGAINST THE JUDGMENT AND DECREE IN AS 105/2003 OF ADDITIONAL DISTRICT COURT, KOTTAYAM AGAINST THE JUDGMENT AND DECREE IN OS 165/2000 OF PRINCIPAL MUNSIFF COURT, KOTTAYAM** ## **APPELLANTS/RESPONDENTS/DEFENDANTS:** 1 AJITH GOVIND, AGED 33, AJITH BHAVAN, AYMANAM KARA,AYMANAM VILLAGE, KOTTAYAM, REP. BY HIS POWER OF ATTORNEY HOLDER AJITH KUMAR K., S/O. KUMARAN,PANDIKKATT, MELUKAVUMAKOM P.O., MELUKAVU VILLAGE, MEENACHIL TALUK. 2 MEGA SALES CORPORATION, MANAGING DIRECTOR, AJITH GOVIND, REP.BY HIS POWER OF ATTORNEY HOLDER AJITHKUMAR K., S/O. KUMARAN, PANDIKKATT, MELUKAVUMAKOM P.O., MELUKAVU VILLAGE, MEENACHIL TALUK. BY ADV SRI.DINESH R.SHENOY ## **RESPONDENT/APPELLANT/PLAINTIFF:** SEBASTIAN MATHEW, S/O. MATHEW VARGHESE, AGED 35, THALITHARA KUNNEL HOUSE,MOOLAVATTOM KARA, NATTAKOM VILLAGE, KOTTAYAM TALUK. BY ADV SRI.SURIN GEORGE IPE THIS REGULAR SECOND APPEAL HAVING BEEN FINALLY HEARD ON 15.11.2021, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: R.S.A No.997 of 2005 2 K.BABU, J . -------------------------------------R.S.A No.997 of 2005 --------------------------------------Dated this the 15[th] day of November, 2021 ## JUDGMENT The judgment dated 18.08.2004 in A.S.No.105/2003 of the Additional District Court, Kottayam, emanated from the judgment dated 20.01.2003 in O.S.No.165/2000 of the Principal Munsiff's Court, Kottayam, is under challenge in this Regular Second Appeal. 2. The facts giving rise to this appeal are as follows: 2.1. Defendant No.1 borrowed a sum of Rs.35,000/- from the plaintiff. In the discharge of this liability, defendant No.1 executed Ext.A1 cheque dated 25.08.1997. Cheque was presented for encashment. But the same was dishonoured due to insufficient funds in the account maintained by defendant No.1. The plaintiff caused to issue a notice to defendant No.1 demanding the amount due to him. However, defendant No.1 failed to return the amount due to the plaintiff. 2.2. The defendants resisted the claim of the plaintiff. Defendant No.1 pleaded that he had not borrowed any amount from R.S.A No.997 of 2005 3 the plaintiff as contended. There was a money transaction between the plaintiff and defendant No.1, who was managing a partnership firm in the name and style 'Mega Sales Corporation'. Defendant No.1 had given two cheque leaves to the plaintiff but not with the intent to be used as a negotiable instrument. The plaintiff presented the cheques without the consent of defendant No.1. The plaintiff had filed C.C.No.318/1998 before the Judicial First Class Magistrate Court-III, Kottayam. The entire transactions were settled between the plaintiff and the defendants in that case. 3. The Trial Court dismissed the suit holding that the defence raised by the defendants is probable. 4. The First Appellate Court set aside the judgment of the Trial Court and decreed the suit, directing the defendants to pay the plaint amount with 6% interest per annum till realisation. Accordingly, the defendants are before this Court in this Regular Second Appeal filed under Sec.100 of the Code of Civil Procedure. 5. After hearing both sides, this Court reformulated the substantial questions of law as follows: - (i) Did the First Appellate Court misconstrue the R.S.A No.997 of 2005 4 evidence in recording the finding that the plaintiff established execution of Ext.A1 cheque by defendant No.1 in favour of him? - (ii) Whether the finding of the First Appellate Court that the defendants failed to establish probable defence that meets the standard of preponderance of probabilities sufficient to reverse the mandatory presumption under Sec.118 of the Negotiable Instruments Act, was vitiated by non-consideration of pleadings and evidence? 6. Heard Sri.Dinesh.R.Shenoy, the learned counsel for the appellants/defendants and Sri.Surin George Ipe, the learned counsel for the respondent/plaintiff. 7. The learned counsel for the appellants contended that the First Appellate Court misconstrued the evidence and recorded the finding that the plaintiff established execution of Ext.A1 cheque in favour of him by defendant No.1. The learned counsel further contended that even if it is assumed that the plaintiff proved the execution of Ext.A1 cheque, defendant No.1 could succeed in establishing defence which is sufficient to rebut the presumptions so drawn in favour of the plaintiff. R.S.A No.997 of 2005 5 8. Defendant No.1 admitted the signature in Ext.A1 cheque. His contention is that two cheque leaves were given to the plaintiff as security for a transaction relating to defendant No.2-Partnership firm. 9. The First Appellate Court relying on the oral evidence of PW1, the plaintiff, and the admission of his signature in Ext.A1 cheque by defendant No.1 held that the plaintiff established execution of Ext.A1 in favour of him. 10. In Rangappa v. Mohan [AIR 2010 SC 1898], the Apex Court held that when the signature on a cheque is admitted, the statutory presumptions under Sections 118 and 139 of the Negotiable Instruments Act come into play. 11. In Bir Singh V. Mukesh Kumar [(2019) 4 SCC 197], the Apex Court held that even a blank cheque leaf, voluntarily signed and handed over by the accused, which is towards some payment, would attract presumption under Section 139 of the Negotiable Instruments Act, in the absence of any cogent evidence to show that the cheque was not issued in discharge of a debt. R.S.A No.997 of 2005 6 ## 12. In Kalamani Tex and others v. P. Balasubramanian [2021 (2) CTC 357 : 2021 (2) KHC 517] , the Apex Court, while dealing with the drawing of statutory presumptions under Sections 118 and 139 of NI Act, held thus: “14. Adverting to the case in hand, we find on a plain reading of its judgment that the trial Court completely overlooked the provisions and failed to appreciate the statutory presumption drawn under Section 118 and Section 139 of NIA. The Statute mandates that once the signature(s) of an accused on the cheque/negotiable instrument are established, then these ‘reverse onus’ clauses become operative. In s uch a situation, the obligation shifts upon the accused to discharge the presumption imposed upon him. This point of law has been crystalized by this Court in Rohitbhai Jivanlal Patel v. State of Gujarat MANU/SC/0393/2019 : (2019) 18 SCC 106, p 18 in the following words: “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 appellant-accused…..” 13. The legal position settled by the Apex Court is that once the signature on the negotiable instrument is established, then the R.S.A No.997 of 2005 7 reverse onus clauses become operative, and in such a situation, the obligation shifts upon the respondent/defendant to discharge presumption imposed upon him. 14. The next question to be considered is whether defendant No.1 succeeded in rebutting the mandatory presumptions drawn under Secs.118(a) and 139 of the Negotiable Instruments Act. In M.S.Narayana Menon v. State of Kerala and another [(2006) 6 SCC 39], the Apex Court held that a probable defence needs to be raised, which must meet the standard of preponderance of probability and not mere possibility. These principles were affirmed by the Apex Court in Kumar Exports v. Sharma Carpets [(2009) 2 SCC 513] 15. In Rangappa (supra) the Apex Court held that the reverse onus clause under Sec.139 of the Negotiable Instruments Act imposes an evidential burden, not a persuasive burden. It was further held that when an accused has to rebut the presumption under Sec.139, the standard of proof for doing so is that of ‘preponderance of probabilities’. 16. Now, coming to the present case. The defendants mainly relied on Exts.B1 to B3 to contend that defendant No.1 R.S.A No.997 of 2005 8 succeeded in rebutting the mandatory presumption drawn in favour of the plaintiff. Exhibit B1 is the copy of a cheque dated 28.05.1997, based on which a complaint was filed against defendant No.1 by the present plaintiff before the Judicial Magistrate of First Class-III, Kottayam. Exhibit B2 is the copy of the complaint in that case (C.C.No.318/1998). Exhibit B3 is the copy of an application dated 25.02.2000 submitted by the plaintiff, who was the complainant in C.C.No.318/1998, to withdraw the complaint. 17. The learned counsel for the appellant contended that the contradiction in the oral evidence of PWs 1 and 2 would discredit the version of the plaintiff. The learned counsel for the appellants/defendants would contend that the recitals in Ext.B3 would go to show that the entire transactions between the plaintiff and defendants were settled in that matter. The relevant portion of Ext.B3 is extracted below: “The complainant and the accused have arrived at a settlement regarding the disputes in this case. Hence there is no need to proceed with this case.” (Translated from vernacular) 18. The First Appellate Court held that it could not be concluded that the transaction covered by Ext.A1 was also covered R.S.A No.997 of 2005 9 in Ext.B3. The First Appellate Court was not inclined to accept the contention that the transaction covered by Ext.A1 was also included in Ext.B3, as there was no sufficient evidence to establish that the amount due to the plaintiff as per Ext.A1 was also repaid by the defendants as per Ext.B3. The Court also held that the defendants failed to establish that Ext.A1 cheque was issued as security as pleaded by them. On a careful perusal of Ext.B3, it could be seen that reference was made only with regard to the transaction covered by the criminal complaint in C.C.No.318/1998. This Court is of the opinion that the defence raised by the appellants/defendants does not inspire confidence to meet the standard of preponderance of probability. Accordingly, this Court holds that the defendants failed to rebut the presumption drawn in favour of the plaintiff. The Regular Second Appeal is dismissed as above. Sd/K.BABU, JUDGE KAS