JAMAL PAIKKATT S/O. KUNHAMMAD PAIKKATT v MOHANDAS KARANDOTE PARAMBATH

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.HARILAL & THE HONOURABLE MRS. JUSTICE ANNIE JOHN THURSDAY ,THE 13TH DAY OF SEPTEMBER 2018 / 22ND BHADRA, 1940 RFA.No. 422 of 2017 AGAINST THE JUDGMENT & DECREE IN OS 6/2014 of SUB COURT, VADAKARA DATED 17-03-2017 ## APPELLANT/PLAINTIFF IN RFA: JAMAL PAIKKATT S/O. KUNHAMMAD PAIKKATT, AGED 44, RESIDING AT 'PAIKKATT', KUMMANKODE AMSOM, NADAPURAM DESOM, NADAPURAM POST, VATAKARA TALUK, KOZHIKODE DISTRICT, PIN 673 504. BY ADVS. SRI.P.B.KRISHNAN SRI.P.B.SUBRAMANYAN SRI.P.M.NEELAKANDAN SRI.SABU GEORGE SRI.S.NITHIN (ANCHAL) ## RESPONDENT/S/DEFENDANT: MOHANDAS KARANDOTE PARAMBATH, S/O. KANNAN KARANDOTE PARAMBATH, AGED 50,RESIDING AT 'KARANDOTE PARAMBATH HOUSE' MOKERI POST,MOKERI AMSOM, KARANDOE DESOM, VATAKARA TALUK,KOZHIKODE DISTRICT, PIN 673 507 BY ADV. SRI.U.K.DEVIDAS THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 13.09.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: R.F.A No.422/2017 -2- ## **JUDGMENT** ## K. Harilal,J. The appellant is the plaintiff in O.S. No. 6 of 2014 of the Sub Court, Vatakara. The aforesaid suit was one for realisation of Rs.48,00,000/- from the respondent on the basis of four cheques. According to the averments in the plaint, the plaintiff and the defendant were doing business in Manama, Bahrain for the last so many years. The plaintiff had invested money in the jewellery business of the defendant at Manama and the defendant used to pay share of profits to the plaintiff from time to time. While so, the plaintiff decided to withdraw the investment in August, 2013 and asked the defendant to settle the account. It was found that the defendant was liable to pay Rs.50,00,000/- to the plaintiff. Thus, when they were in India, the defendant offered to pay Rs.48,00,000/- in full and final settlement of the transaction. The defendant executed and issued four cheques dated 16.12.2013, 23.12.2013, 31.12.2013 and 31.12.2014 drawn on the Canara Bank, Vattoli Branch to the plaintiff. When the plaintiff presented the first three cheques, those were returned unpaid for the reasons 'funds insufficient' and 'account blocked'. According to the plaintiff, he is entitled to recover Rs.48,00,000/- from the defendant with interest. Hence, the suit was filed for realisation of Rs.48,00,000/- with interest from the defendant. R.F.A No.422/2017 -3- 2. The defendant filed a written statement denying the averments in the plaint that the said cheques were issued in discharge of the amount due from him to the plaintiff. According to him, he had no business at Bahrain or anywhere in the world. He has no jewellery business as alleged by the plaintiff. He was working in Bahrain as a goldsmith in 'Galaxy Gold Workshop'. He denied the allegation that the plaintiff had invested money with him for conducting his jewellery business. He did not owe any amount to the plaintiff. There was no occasion for the defendant to execute and issue cheques mentioned in the plaint to the plaintiff. He has further contended that the plaintiff was conducting chitty business and the defendant, his brother-in-law Raghavan and friend Suresh had joined in so many chitties conducted by the plaintiff from 2006 onwards ranging from Rs.5,00,000/- to Rs.20,00,000/- in different periods. The plaintiff used to collect signed cheques as security for payment of balance amount from the defendant when the chitties were bid. The defendant once paid Rs.1,00,000/towards the chitty amount through his friend Majeed Kunnummal at the request of the plaintiff. The defendant and others bid chitties on three or four occasions and after closing the chitties, the defendant used to demand return of cheques given to the plaintiff and after closing the chitties, the defendant used to demand return of cheques to the plaintiff. But the plaintiff used to say that he had destroyed the same. The R.F.A No.422/2017 -4- cheques given as security by the defendant were misused by the plaintiff to make illegal gain. His account was closed prior to 2007. Thus, the defendant prayed for dismissal of the suit. 3. On the aforesaid rival pleadings, both sides adduced evidence which consists of the oral testimony of PWs 1 and 2 and the documentary evidence of Exts.A1 to A1 and the oral evidence of the defendant as DW1 and the documentary evidence of Exts. B1 to B8. After considering the aforesaid evidence on record, the court below dismissed the suit. The legality and correctness of the reasoning whereby the court below dismissed the suit are assailed in this appeal on various grounds. 4. Heard the learned counsel for the appellant and the learned counsel for the respondent. 5. The sum and substance of the arguments advanced by the learned counsel for the appellant is that the court below has omitted to consider the legal presumption envisaged under Section 118 of the Negotiable Instruments Act. Therefore, the appreciation of the evidence and the findings thereon are legally perverse and unsustainable. It is pointed out that the issues were framed wrongly without understanding the pleadings and the burden of proof envisaged under the Act in its correct perspective. 6. _Per contra_ , the learned counsel for the respondent/defendant R.F.A No.422/2017 -5- advanced his arguments to justify the findings of the courts below whereby the suit stands dismissed. According to the learned counsel for the defendant, the initial burden of proof is on the plaintiff to prove that the cheque was isused in discharge of the liability under the original transaction pleaded in the suit. According to him, unless and until, the original transaction is proved, no relief can be granted on the dishonour of the cheque. 7. In view of the arguments at the Bar, the point to be considered is whether the courts below is justified in dismissing the suit. Going by the pleadings, it could be seen that it is the specific case of the plaintiff that the cheques were issued in discharge of the liability arose from the original transaction, that he had invested money with the defendant for his jewellery business, and that they have settled the accounts and found that Rs.50,00,000/- was due to the plaintiff. In discharge of that debt, four cheques were issued and out of four cheques, three cheques were dishonoured for the reasons 'funds insufficient' and 'account blocked'. On the other hand, the defendant admitted that the cheques were issued by him and he has not denied his signature in the cheque. Thus, the execution and issuance of the cheques were admitted. But according to him, the cheques were issued in different context for a different purpose. He has no case that the cheques were issued as blank cheques. According to him, the plaintiff has chitty business. The R.F.A No.422/2017 -6- defendnt, his brother-in-law Raghavan and friend Suresh had joined in so many chitties conducted by the plaintiff from 2016 ranging from Rs.5,00,000/- to Rs.20,00,000/-. The plaintiff used to collect signed cheques from the defendant as security for payment of the balance amount when the chitties were bid. The four cheques involved in the instant case were also issued as security for the amount received by them in a chitty transaction. 8. It is well discernible from the impugned judgment that the suit was dismissed on the sole finding that the plaintiff failed to prove that he had invested money with the defendant and on settlement of account between the plaintiff and the defendant, Rs.48,00,000/- was found due to the plaintiff and in discharge of that debt, cheques were issued. Going by the written statement, it is revealed that the defendant had admitted issuance of the cheque, more particularly the signatures in the cheque. Similarly, he has no case that those cheques were issued as blank cheques. Thus, he himself has admitted that the cheques were executed and issued by him. But according to him, the cheques were issued in a different context and circumstances. 9. In the above context, the legal presumption under Section 118 of the Negotiable Instruments Act would come into play. But, on an examination of the findings in the impugned judgment, we find that the courts below has lost sight of Section 118 of the NI Act and issues were R.F.A No.422/2017 -7- framed on a wrong understanding on the burden of proof. Section 118 of the NI Act reads as follows: “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 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 indorsements 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 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.” 10. In the above context, the decision laid down by the Supreme ## Court in _**Bharat Barrel and Drum Manufacturing Company v Amin**_ _**Chand Payrelal**_ [AIR 1999 SC 1008] assumes relevance. We hope that the aforesaid proposition laid down by the Supreme Court would enlighten the learned Judge as regards the legal presumption under R.F.A No.422/2017 -8- Section 118(a) of the Negotiable Instruments Act and the burden of proof which stands on the defendant under the presumption. Paragraph 12 of the aforesaid decision reads thus: "Upon consideration of various judgments as noted hereinabove, the position of law which emerges is that once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by consideration. Such a presumption is rebuttable. The defendant can prove the non-existence of consideration by raising a probable defence. If the defendant is proved to have discharged the initial onus of proof showing that the existence of consideration was improbable or doubtful or the same was illegal, the onus would shift to the plaintiff who will be obliged to prove it as a matter of fact and upon its failure to prove would disentitle him to the grant of relief on the basis of the negotiable instrument. The burden of proof upon the defendant of proving the non-existence of the consideration can be either direct or by bringing on record the preponderance of probabilities by reference to the circumstances upon which he relies. In such an event, the plaintiff is entitled under law to rely upon all the evidence led in the case including that of the plaintiff as well. In case, where the defendant fails to discharge the initial onus of proof by showing the non-existence of the consideration, the 'plaintiff' would invariably be held entitled to the benefit of presumption arising under Section 118(a) in his favour. The court may not insist upon the defendant to disprove the existence of consideration by leading direct evidence as existence of negative evidence is neither possible nor contemplated and even if led is to be seen with a doubt. The bare denial of the passing of the consideration apparently does not appear to be any defence. Something which is probable has to be brought on record for getting the benefit of shifting the onus of proving to the plaintiff. To disprove the presumption the defendant has to bring on record such facts and circumstances, upon consideration of which the Court may either believe that the consideration did not exist or its non-existence was so probable that a prudent man would, under the circumstances of the case, shall act upon the plea that it did not exist. We find ourselves in the close proximity of the view expressed by the Full Benches of the Rajasthan High Court and Andhra Pradesh High Court in this regard." 11. The learned counsel for the respondent cited the decisions R.F.A No.422/2017 -9- ## reported in _**Raveendranathan Nair N and another v. Vijayakumar**_ [2014(2) KLT 157 and _**Shaji v. Ignatious**_ [2009 (2) KLT 491]. Going by the aforesaid decisions, we find that the facts involved in this case is entirely different and in the light of the contention raised by the defendant, the presumption under Section 118(a) of the Act would not come into play. Therefore, the findings in the aforesaid decision cannot be applied to the instant case, wherein the legal presumption under Section 118(a) of the NI Act would automatically come into play, in view of the fact that the execution and issuance of the cheque are admitted. 12. When applying the presumption under Section 118 of the NI Act to the instant case, indisputably the presumption would come in favour of the plaintiff as the execution and issuance of the cheque as such were not denied by the plaintiff. Thus, the question is whether the defendant had succeeded in rebutting the presumption under Section 18(a) of the NI Act. Unfortunately, no issue was framed in this respect. It follows that the court below has miserably failed to understand the pleadings and issues which would arise from the pleadings, in its correct perspective. In short, the impugned judgment was passed in derogation of the statutory presumption envisaged under Section 118 of the NI Act. 13. In the above analysis, we further find that the matter in issue requires fresh consideration of the court below. In view of the legal position described above, the court below shall re-frame the issues in R.F.A No.422/2017 -10- accordance with the observations made above and in the light of the decision laid down by the Supreme Court in _**Bharat Barrel and Drum**_ ## _**Manufacturing Company.**_ 14. Therefore, we find that the entire findings of the courts below are legally unsustainable and the judgment as such is liable to be set aside and we do so. The Original Suit is remitted to the Sub Court, Vatakara. The parties are allowed to adduce further evidence in the Original Suit. The court below shall dispose of the Original Suit at the earliest, at any rate within three months from the date of receipt of a copy of this judgment. It is made clear that the appellant is entitled to get the court fee refunded. This appeal is allowed as above. **K. HARILAL, JUDGE.** **ANNIE JOHN, JUDGE.** _Rv_ R.F.A No.422/2017 -11-