M/S Ullattil Agencies v. Baby Alex (dead) and Addl.Appellants 2 to 4

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE MR.JUSTICE T.V.ANILKUMAR** **TUESDAY, THE 10TH DAY OF NOVEMBER 2020 / 19TH KARTHIKA, 1942** ## **RFA.No.883 OF 2008** **AGAINST THE JUDGMENT AND DECREE DATED 18-10-2008 IN O.S.NO. 25/2005 OF PRINCIPAL SUB COURT,KOTTAYAM** ## **APPELLANT/DEFENDANT:** ***1 BABY ALEX(DIED), S/O. ALEX, AGED ABOUT 55 YEARS, ERUTHICKAL HOUSE, NEAR CHERIAPALLY HOSPITAL, PAZHAYACHANTHA, KOTTAYAM.** **ADDL. APPELLANTS 2 TO 4 IMPLEADED** **ADDL.APP.2MRS.ANNAMMA ALEX,** **AGED 58 YEARS, W/O LATE SRI. BABY ALEX, ERUTHICKAL HOUSE, PUTHENANGADY, KOTTAYAM (REPRESENTED BY POWER OF ATTORNEY HOLDER BINO BABY ALEX)** **ADDL.APP.3BINDHU VINO ABRAHAM,** **AGED 40 YEARS, D/O LATE SRI. BABY ALEX, ERUTHICKAL HOUSE, PUTHENANGADY, KOTTAYAM (REPRESENTED BY POWER OF ATTORNEY HOLDER BINO BABY ALEX)** **ADDL.APP.4BINO BABY ALEX, AGED 36 YEARS, S/O LATE SRI. BABY ALEX, ERUTHICKAL HOUSE, PUTHENANGADY, KOTTAYAM** **LEGAL REPRESENTATIVES OF THE DECEASED SOLE APPELLANT ARE IMPLEADED AS ADDL.APPELLANTS 2 TO 4 AS PER ORDER DATED 18.2.2020 IN IA 625/2010.** **R.F.A.No.883 of 2008** **:-2-:** **BY ADVS.SRI.ENOCH DAVID SIMON JOEL SMT.INDU SUSAN JACOB SMT.NISHA JOHN SRI.RONY JOSE SRI.S.SREEDEV** ## **RESPONDENT/PLAINTIFF:** **M/S.ULLATTIL AGENCIES, THAFEQUE BUILDING, MARKET ROAD, KOTTAYAM-686 001, REPRESENTED BY ITS MANAGING PARTNER, ISAAC THOMAS, S/O. ITHAK, AGED 89, RESIDING AT XXIV/74, ULLATTIL HOUSE, NEAR UNION CLUB, KOTTAYAM.** **BY ADVS. SRI.GEORGE ITTY T. SRI.B.ASHOK SHENOY SMT.LAKSHMI B.SHENOY SRI.H.B.SHENOY SRI.THOMAS P.MAKIL** **THIS REGULAR FIRST APPEAL HAVING BEEN FINALLY HEARD ON 05-11-2020, THE COURT ON 10-11-2020 DELIVERED THE FOLLOWING:** ## **R.F.A.No.883 of 2008** ## **:-3-:** ## **Dated this the 10[th] day of November, 2020** ## **J U D G M E N T** Suit for money decreed on the basis of Ext.A3 promissory note dated 19.1.2002 in favour of the respondent/plaintiff is challenged by the sole defendant in O.S.No.25/2005 on the file of Principal Sub Court, Kottayam. The suit was decreed for an amount of Rs.8,20,910/- with 6% interest per annum. 2. During the pendency of this appeal, the sole appellant passed away and his legal representatives were brought on record as additional appellants 2 to 4. 3. The plaintiff in the suit is a money lending partnership firm represented by its Managing partner. The defendant is a businessman and proprietor of Belgium Glass House, Kottayam. The plaintiff's case is that the defendant had ## **R.F.A.No.883 of 2008** ## **:-4-:** outstanding liabilities with the firm which were settled on 19.1.2002 at the firm's office for an amount of Rs.4,31,459/-. It was agreed that the defendant would discharge the debt and evidencing the transaction, Ext.A3 promissory note was executed in the name of the plaintiff. Interest of 24% at quarterly rests was also agreed upon. The principal amount and interest mounted to Rs.8,20,920/- and in spite of demand, it is alleged that defendant did not discharge his liabilities and therefore suit was instituted after sending lawyer's notice. 4. The defendant met the plaintiff's claim by filing a written statement and contending that there were no outstanding liabilities with the plaintiff at any point of time and there was no occasion to undertake discharge of any such liabilities. He denied having executed Ext.A3 promissory note. According to him, being a ## **R.F.A.No.883 of 2008** ## **:-5-:** businessman, he used to discount cheques with the plaintiff firm right from 1997 and whatever amounts received by discounting were timely cleared also. No liability subsisted and he did not maintain any other sort of transaction with the plaintiff at all. He contended that, however, as a security for the cheques discounting transaction, he had entrusted blank papers and blank printed promissory notes with the plaintiff and it was most likely that any of these papers were used by the plaintiff to manipulate Ext.A3 promissory note as against him. He therefore contended that Ext.A3 is void and unenforceable against him. Agreement to pay interest at the rate of 24% was also denied. According to him, charging of 24% itself was against the provisions of Kerala Money Lenders Act, 1958 (for short, 'the Act'). The prevailing bank rate of interest chargeable under law during the relevant period was contended to be far below. ## **R.F.A.No.883 of 2008** ## **:-6-:** 5. The trial court took up the material issue as to the execution of the promissory note and considered on evidence whether it was supported by consideration. In that process, one of the partners of the plaintiff firm was examined as PW1 and staff cum clerk in the firm was examined as PW2. Exts.A1 to A25 were admitted in evidence on plaintiff's side. The defendant did not adduce any evidence on his side and the sole evidence on his side was his own oral testimony as DW1. 6. The signature in Ext.A3 was not a disputed fact and in discharge of initial burden, the plaintiff examined PWs.1 and 2. In proof of consideration, plaintiff relied on certain account books maintained by the firm and admitted in evidence Exts.A4 series, A5 series and A25 series which are journals and ledgers for the relevant period. The court below went through these documents and found that in addition to cheque ## **R.F.A.No.883 of 2008** ## **:-7-:** discounting transactions admitted by the appellant, there were other money dealings also for him with the firm since 1997. In addition to these documents, it was proved that the appellant simultaneously with execution of Ext.A3 promissory note, issued Ext.A22 cash debit slip for the amount on 19.1.2002 itself. Ext.A23 which is a loan application dated 15.1.2002 alleged to have been signed by the appellant was also relied on by the court in support of its finding that promissory note was executed and appellant was liable for payment of the agreed amount. 7. Even though signature in Ext.A23 was denied by the appellant, the court below comparing it with other admitted signatures in Exts.A3 and A22 held that all were identical. Taking these documents along with the oral evidence given by PW2, the contention denying execution of pro note was rejected. PW2's evidence that appellant signed the ## **R.F.A.No.883 of 2008** ## **:-8-:** documents in his presence, was accepted as convincing and denial of transaction testified by appellant, was disbelieved. PW2 is the scribe under whose hand Exts.A3, A22 and A23 were prepared. Placing absolute reliance on PW2 and evidence as to consideration for the transaction, the court below was pleased to grant a decree in favour of the respondent. The findings of the court below are challenged in this appeal. **==> picture [402 x 10] intentionally omitted <==** additional appellants and the learned counsel for the respondent. **==> picture [402 x 13] intentionally omitted <==** consideration in this appeal is as to whether the deceased appellant executed Ext.A3 promissory note for consideration. 10. Signature in Ext.A3 is not disputed by the parties. The additional appellants have sought to explain the circumstances under which Ext.A3 came to be ## **R.F.A.No.883 of 2008** ## **:-9-:** issued by their predecessor to the respondent. They have stated that Ext.A3 was not issued for any consideration and it happened to be issued as security in connection with cheque discounting transaction carried on with the firm in past years. It is trite law that mere subscription of signature in a blank document is not an acknowledgment of execution and acceptance of the contents thereof. Even in respect of a negotiable instrument containing the signature of the drawer also, the presumption of consideration cannot accrue unless the drawer is proved to be the executant. This legal position is evident from the decisions reported in **Chirag Enterprises v. Star Traders, Merchants & anr. (2012(4) KHC 271)** , **Velayudhan v. Velayudhan (2001(1) KLT 392)** , **Madappillil Brothers v. Ullattil Agencies (2006(4) KLT 196)** and **Raveendranathan Nair v. Vijayakumar (2014(2) KLT 157)** . ## **R.F.A.No.883 of 2008** **:-10-:** 11. That means the plaintiff who seeks to secure a decree for money based on the disputed document has to prove the transaction and also the consideration. The plaintiff's case is that Ext.A3 was executed in discharge of pre-existing liabilities of the defendant with the firm which he denied in the written statement. The precise contention of the appellants is that except cheque transactions with the firm, the defendant did not have any sort of dealings with the plaintiff and further the amounts received under discounted cheques had been cleared also then and there as if no pre-existing liabilities existed with the plaintiff. This contention has been disproved by the respondent by Exts.A4 series, A5 series and A25 series account books maintained by the firm. 12. In Ext.A4 series journals dated 19.1.2002, six promissory notes executed during 1997-98 by the defendant for various amounts are mentioned. This ## **R.F.A.No.883 of 2008** ## **:-11-:** is corroborated by the relevant entries in Ext.A25 series pro-note ledger also. The total value of the six pro-notes comes to an amount of Rs.1,07,500/-. As per the account maintained by the respondent, the said amount was shown to be outstanding due from the defendant as on 19.1.2002. Even though the defendant did not admit this liability in the written statement, in his evidence during cross examination, he admitted having issued various promissory notes also which belied his contention that he did not maintain any sort of transaction with the firm other than related to cheque discounting. 13. Ext.A4 series journals further prove that an amount of Rs.76,000/- was due from the defendant towards five dishonoured cheques issued to the respondent. This is further corroborated by Ext.A25 series cheque ledger as well. In my opinion, the lower court rightly held that the defendant owed ## **R.F.A.No.883 of 2008** ## **:-12-:** liability for an amount of Rs.76,000/- on account of dishonour of cheques. In proof of the liability of the defendant which subsisted as on 19.1.2002 as per the pro-notes and cheques, the burden cast on the respondent was satisfactorily discharged. The contention of the defendant that relevant cash books and the personal loan account of the debtor were not produced by the respondent has no merit since the initial burden of the respondent has been discharged by the entries in the account books. The defendant does not deny having issued the cheques and he contends to have cleared the amounts received under discounted cheques. The person who pleads discharge has to prove that the liabilities were in fact discharged by production of convincing evidence. I am satisfied agreeing with the court below that as on 19.1.2002 when Ext.A3 promissory note was allegedly executed, there was outstanding liability for the appellant at least to the tune of ## **R.F.A.No.883 of 2008** ## **:-13-:** Rs.1,83,500/-. Therefore the contention of the appellant as if Ext.A3 was executed for no consideration, is not convincing. 14. The contention of appellant that one of the blank printed pro-notes given as security in connection with cheque discounting was misused has no probability in view of the testimony given by PW2 clerk of the firm. He is the scribe of Ext.A3. Appellant does not seem to dispute that the pronote was prepared under the hand of PW2. There is no dispute that he is not the staff of the firm. He had occasion to prepare entries in Exts.A4 and A5 series. His evidence shows that appellant came to the office of the firm at Kottayam on 19.1.2002 and signed Ext.A3 pro-note prepared by him. There is no reason to disbelieve the evidence given by the clerk because appellant is an educated person and admittedly was formerly the elected Chairman of Kottayam Municipality. It is very difficult to ## **R.F.A.No.883 of 2008** ## **:-14-:** accept his plea that he signed blank papers. Even accepting his case that blank papers were given as security for discounting transactions, the blank papers and notes should have been necessarily got back from the respondent after the timely clearance of his liabilities as contended by himself. 15. In addition to Ext.A3 pro note, Ext.A22 cash debit memo was also signed by the appellant, according to PW2. Ext.A23 is a loan application dated 15.1.2002 in which a request is seen made that appellant was willing to renew the loan liability, though signature therein was denied by the appellant. But PW2 proved all these documents stating that he prepared them and appellant signed them right in his presence. In the cross examination, DW1 admitted signature in Ext.A22 alone while he denied Ext.A23. I find that the signatures in all these three documents are of the same hand and that is the very impression formed by ## **R.F.A.No.883 of 2008** ## **:-15-:** the trial court also. There is no reason to disbelieve PW2's evidence that the appellant signed the documents at the office of the firm on the respective dates. I therefore hold that the finding of the trial court that Ext.A23 was executed on 19.1.2002 accords with evidence and is legal. 16. Though execution of Ext.A3 as on 19.1.2002 was proved, it is difficult having regard to the evidence and broad circumstances on record to hold that the appellant signed the note accepting liability for the entire amount of Rs.4,31,459/mentioned therein. The presumption as to consideration under Section 118 of the Negotiable Instruments Act is always rebuttable and the entries in the account books read in the light of oral evidence given by PW2 are sufficient to rebut the presumption as to consideration. 17. It is pointed by the learned counsel for the respondent that the two component amounts among ## **R.F.A.No.883 of 2008** ## **:-16-:** others which constitute appellant's liability for Rs.4,31,459/- are Rs.43,956/- being discounting commission and Rs.2,04,003/- being the interest payable on the total outstanding debt. These two figures are evident from the entries made in Ext.A4 series journals. Ext.A3 pro note and the amount of liability mentioned in Ext.A5 series ledger are relied on as corroborative item of evidence in support of the respondent's case. 18. Except the mere argument that Rs.43,956/- was discounting commission owed by the appellant, there is no convincing evidence to prove as to how appellant incurred liability. Neither PW1, nor PW2 spoke to the mode of liability. It is not made clear as to how this figure was arrived at. If the liability for commission existed, the charging rate should have been substantiated by corresponding entries in other records or by other evidence. No evidence was brought forth in this regard. It is ## **R.F.A.No.883 of 2008** ## **:-17-:** the settled law that entries in the account books by themselves are not sufficient to charge a person with the liability for the amount claimed. The respondent being in custody of the account books, chances of manipulations at its own instance cannot be ruled out. DW1 denied liability for payment of commission in the testimony. A part to a document is not bound by the admissions therein if the acknowledgment of the liability could be shown to be made under erroneous impression or of a doubt which he did really incur. None of the account books relied on by the respondent proves that appellant was liable for payment of any discounting commission. 19. So far as Rs.2,04,003/- which is charged as interest payable also, the appellant cannot be held liable for strict legal reasons. Even on facts, the respondent has failed to convince the court as to how such a huge amount of interest was quantified ## **R.F.A.No.883 of 2008** ## **:-18-:** even though Ext.A24 series computer print was produced to show the accounting made as to the calculation of interest. PW2 made it clear in his evidence that this amount represents compound interest at the rate of 30% charged on Rs.1,83,500/- payable by the appellant being the value of dishonoured five cheques and six promissory notes. 20. The learned counsel for the appellant contended that charging of such a huge amount of interest is illegal and opposed to Section 7(1) of the Act and therefore the appellant is to be relieved. It is not disputed that during the relevant period of time, the bank rate of interest prevailing was 11.5%. As per Section 7(1) of the Act, a money lender could not have charged interest exceeding 2% above the prevailing commercial bank rates notified by the RBI. If that be the position, the respondent was quite unjustified for ## **R.F.A.No.883 of 2008** ## **:-19-:** having charged interest at 30% compounded at quarterly rests. There is no reliable evidence as such to prove that the appellant had agreed for payment of compounding rate of interest. That means, Ext.A3 promissory note executed for a debt exceeding the legally chargeable rate of interest is not valid. In other words, the promissory note to the extent it cannot legally sustain cannot be enforced against the appellant. This aspect of the matter was not taken notice of by the court below being misled by the entries in the account books and unaware of the legal questions involved. The impugned judgment and decree are therefore liable to be interfered with. 21. The respondent firm could not have claimed more than an amount of Rs.1,83,500/- along with 13.5% (11.5%+2%) of simple interest disregarding the provisions under Section 7(1) of the Act. Ext.A3 could be sustained only to the above limited ## **R.F.A.No.883 of 2008** ## **:-20-:** extent and the decree for the excess amount will have to be set aside. The liability of the appellant, if quantified at 13.5% on Rs.1,83,500/right from 1.1.2002 till the date of suit, would come to an amount of Rs.2,57,817/- (1,83,500 x **13.50 /100** x 3). The court below without appreciating the legal issues involved in the matter of interest legally chargeable granted decree for a grossly highȀer amount. This has to be set at naught and the decree suitably modified. As regards the _pendente lite_ interest as well, the respondent firm cannot demand 24% of compound interest as claimed in Ext.A3 pro-note. The claim shall have to stand restricted to 13.5%. In view of the aforesaid discussion, I hold that the liability of appellant under Ext.A3 pro-note shall be limited to a sum of Rs.2,57,817/-. In the result, appeal is allowed and the judgment and decree of the court below is modified ## **R.F.A.No.883 of 2008** **:-21-:** as hereunder; The respondent will recover from the additional appellants 2 to 4 a sum of Rs.2,57,817/- with 13.5% interest per annum from the date of suit till realisation. Additional appellants being the legal representatives of the deceased sole appellant, they will be liable for the amount only to the extent of assets which they inherited from the deceased. The respondent will recover costs of the suit from both courts. All pending interlocutory applications are closed. Sd/- ## **T.V.ANILKUMAR JUDGE** ami/