REPORTABLE  

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.5597 of 2001

MALLAVARAPU KASIVISWESWARA RAO   ..Appellant

VERSUS

THADIKONDA RAMULU FIRM and  Ors.           ..Respondents

J U D G M E N T

TARUN CHATTERJEE,J.

1. This appeal is directed against the final  judgment and

order  dated  30th  of  July,  1999  passed  by  a  Division

Bench  of  the  High  Court  of  Judicature  of  Andhra

Pradesh at Hyderabad in AS No. 721/92 whereby the

High Court had affirmed the judgment and decree dated

5th of August, 1991 in OS No. 33/87 of the 1st Court of

the  Additional  Subordinate  Judge,  Kakinada,  E.G.

District, Andhra Pradesh decreeing the suit filed by the

1

appellant in part for a sum of Rs. 2,33,125/- with interest

@ 18% from the date of the suit till realization.   

2. The facts leading to the filing of this appeal as emerging

from the case made out by the appellant  in the plaint

are as under.

The appellant is the son-in-law of respondent no.2. The

respondent  nos.  3 and 4 are the sons of respondent  no. 2

while respondent  no.  1 is  the firm belonging to  respondent

nos. 2 to 4 whose managing partner is respondent No.2.  The

appellant  introduced  one  Pynda  Ramakumar  to  the

respondents  who  agreed  to  advance  monies  to  the

respondents on the understanding that the respondents would

repay the amount while the appellant would execute pronotes

as  surety.  The  appellant  accordingly  executed  certain

pronotes  whose  consideration  was  received  by  the

respondents.  As  regards  repayment,  the  respondents  were

sending  monies by drafts  or  otherwise in the name of  one

Narayan  Murthy,  who  was  the  clerk  of  the  appellant,  by

depositing  the  same  in  his  account.  The  appellant  would

withdraw such  amount  deposited  in  the  clerk’s  account  by

encashing the TTs or Drafts  which was then paid to Pynda

Ramakumar who then got  the endorsements signed by the

appellant.  This  continued  for  some  time  but  when  the

respondents failed to repay the balance amount due to Pynda

Ramakumar, he pressurized the appellant for payment of the

balance  amount  due  to  him.  The  appellant  made  several

2

demands to the respondents for payment of the amounts due

to  Pynda Ramakumar but  when the  respondents  could  not

pay the amounts,  the respondent  no.  2  as manager of  the

joint family and also on behalf of the respondent No. 1 firm

executed two pronotes  for  sums of  Rs.  2,15,000/-  and Rs.

4,72,000/-  being  Ex.A-20  and  Ex.A-21  respectively  and  a

Khararnama  in  favour  of  the  appellant  whereby  the

respondent  No. 1 agreed to repay amounts with interest  at

Rs. 2.50 ps. and Rs. 1.50 ps. respectively per annum. After

execution of such pronotes, when, despite several demands,

the respondents did not pay the amounts, a notice dated 3rd

of October, 1986 was issued to them by the appellant stating

that  the  pronotes  and  khararnama  were  executed  by

respondent  no.  1  in  favour  of  the  appellant  which may be

discharged.  The  respondents  vide  letters  dated  16th  of

October, 1986 and 20th of October, 1986 replied to the notice

wherein  they did not  specifically  deny the  execution  of  the

pronotes and the Khararnama but referred to the allegations

made in such notice as false and vague.

3. In the backdrop of the above mentioned facts, in 1987,

the appellant,  therefore,  filed O.S.  No. 33/1987 in the

1st Court of the Additional Subordinate Judge, Kakinada

for recovery of the amounts due under the pronotes of

Rs.  4,72,000/-  and  Rs.  2,15,000/-  with  interest  and

costs. The respondent No. 2 contested the suit by filing

written statement on his own behalf and also on behalf

3

of the respondent No. 1 firm denying any execution of

the  pronotes  in  favour  of  the  appellant  and  further

stating that the pronotes were forged by the appellant

with the assistance of his brother-in-law and the Clerk. It

was  further  alleged  that  the  appellant  bore  a  grudge

against  the  respondents  and  was  involved  in  many

criminal cases and since he was not looking after  his

wife and children properly, the respondents had opened

an  account  in  the  name of  Narayanmurthy  and  were

sending  monies  regularly  in  that  account  for  the

maintenance of the appellants’  family and therefore, it

was alleged that no money was ever borrowed from the

said Pynda Ramakumar, whom the respondent no.2 did

not know, through the appellant for the respondent No.

1 firm. It was also alleged by the respondent no. 2 that

the  respondent  no.  1  firm  was  not  carrying  on  any

business and in fact, all its branches were closed and

the respondent Nos.      2 to 4 were partitioned in the

year 1980.

4. The respondent nos. 3 and 4 also filed separate written

statements  contending,  inter  alia,  that  they  had  not

signed any pronotes and the scribe of the pronotes in

question was the clerk of the appellant and the Attester

was his brother-in-law.   They also contended that they

were  not  aware  of  the  alleged  borrowing  by  the

respondent no.2 for the respondent no. 1 firm from the

4

said Pynda Ramakumar or the appellant and in fact, the

pronotes in question did not show that the amounts so

borrowed were for the business of the respondent no.1

firm. It was further alleged in the written statement filed

by the respondent Nos. 3 and 4 that the pronotes were

fabricated  on account  of  family  disputes  between the

appellant and the respondent No. 2 and that they had

no necessity  to  borrow any amount  from some other

person.  Infact, Pynda Ramakumar was a friend and an

associate  of  the  appellant.   Even  otherwise,  the

pronotes were not binding on them as no amounts were

borrowed for the benefit of the firm and they were not

signatories to the said pronotes. It was further the case

of the respondent Nos. 3 and 4 that there was no joint

family because the properties of the respondents were

partitioned  in  the  year  1980  and,  therefore,  the

respondent  no.  2  had  no  right  or  authority  to  borrow

debts for the firm on their behalf.  Accordingly,  all

the respondents prayed for dismissal of the suit filed by

the appellant.

5. On  the  basis  of  the  pleadings  of  the  parties,  the

following  issues  were  framed  by  the  trial  court  for

consideration: -

a) Whether  the two suit  pronotes dated  29.08.86  and  29.08.1986

5

are  true,  valid  and  binding  on the defendants?

b) Whether the plaintiff  is entitled to recover the suit amount with subsequent  interest  and  costs thereon?

c) Whether  the  2nd  defendant executed  the  suit  pronotes  in the capacity of Manager of the joint family of the defendants 2 to  4  so  as  to  bind  the defendants 3 and 4?

d) Whether  the  defendant  No.  2 executed  pronotes  as  the Managing Partner of D.1 firm so as to bind its partners 3 and 4?

e) To what relief?   

6. As noted herein earlier,  by the judgment dated 5th of

August,  1991,  the  1st  Court  of  the  Additional

Subordinate  Judge,  Kakinada  decreed  the  suit  of  the

appellant  in  part  for  a  sum  of  Rs.  2,33,125/-  with

proportionate  costs  and subsequent  interest  @ 18  %

p.a. from the date of suit till realization holding the same

to  be  a  commercial  transaction(Ex.A-20).  As  regards

recovery  of  the  amount  due  under  the  other  pronote

Ex.A-21, the trial court held that the appellant was not

6

entitled to recover the same because the said pronote

was not supported by consideration and accordingly, the

rest  of  the claim of  the  appellant  was dismissed with

proportionate  costs.  Feeling  aggrieved  by  the  said

judgment of the trial  court,  both the appellant and the

respondents filed two appeals before the High Court of

Andhra Pradesh at Hyderabad being A.S. NO. 721/87

and 1872/92 respectively. By the impugned judgment of

the  High  Court  dated  30th  of  July,  1999,  both  these

appeals  were  dismissed.  The  appellant  has  filed  this

special  leave petition  before  us  against  the  aforesaid

judgment of the High court passed in A.S. No. 721/87.

7. We have heard the learned counsel for the parties and

examined the judgment of the High Court as well as the

trial  Court and other materials  on record including the

oral and documentary evidence. The only question that

needs  to  be decided  in  this  appeal  is  whether  in  the

absence of any rebuttal by the respondents to the fact

that  the  promissory  note  was  for  consideration  as

required,  which  gave  rise  to  the  presumption  under

Section  118  of  the  Negotiable  Instruments  Act,  the

courts  below  were  justified  in  holding  that  since  the

appellant  had  given  evidence  inconsistent  with  such

presumption, no decree could be passed on the basis of

such presumption.   

7

8. The learned counsel for the appellant contended before

us that  the trial  court  had found that  the existence of

both  the  pronotes  was  proved  by  evidence  and  the

materials  on  record.  The  learned  counsel  for  the

appellant  accordingly  contended  that  although  it  was

never the defence of the respondents that the pronotes

were not supported by consideration, nevertheless, the

trial court had held that since the appellant had failed to

prove that he had borrowed those amounts from Pynda

Ramakumar and lent the same to the respondent firm,

the pronote Ex.A-21 could not be believed. The learned

counsel for the appellant, therefore, vehemently argued

that  the conclusion reached by the trial  court  and the

High Court to the effect that since the evidence adduced

by the appellant was inconsistent with the presumption,

in the absence of  any evidence by the respondent  to

rebut  the  presumption  about  the  pronote,  such

conclusion was contrary to law. The learned counsel for

the  appellant,  while  elaborating  her  argument  further

also contended before us that once the execution of the

pronote  Ex.A-21  was  proved,  the  presumption  under

Section  118  of  the  Negotiable  Instruments  Act  came

into play and after such presumption, the initial burden

was on the respondents to prove the non-existence of

the  consideration  by  adducing  direct  evidence  or  by

preponderance  of  probabilities  showing  that  the

existence  of  such  consideration  was  improbable,

8

doubtful or illegal and since they had failed to discharge

such  initial  burden,  the  appellant  was  entitled  to  the

benefit  of  the  presumption  that  the  pronote  was  for

consideration. In this regard, the learned counsel for the

appellant  strongly relied on a decision  of  this  court  in

Bharat  Barrel  &  Drum  Company Vs.  Amin  Chand Payrelal [(1993) 3 SCC 35].

9. These  submissions  of  the  learned  counsel  for  the

appellant  were contested by the learned counsel  appearing

on behalf of the respondents. The learned counsel appearing

on  behalf  of  the  respondents  have  contended  that  the

appellant  is not entitled to the benefit  of presumption under

Section 118 of the Negotiable Instruments Act and that the

impugned  judgment  of  the  High  Court  was  passed  after

considering the evidence in extenso to hold that the pronote

Ex.  A-21  was  not  supported  by  any  consideration.  The

learned counsel for the respondents further submitted that the

presumption  under  Section  118  is  rebuttable  and  that  the

respondents  had  all  along  denied  the  execution  of  the

pronotes.         

10. Having heard the learned counsel for the parties, we are

of  the view that  this appeal deserves to be allowed for the

reasons set out hereinafter.

9

11. Section  118  of  the  Negotiable  Instruments  Act  deals

with presumptions as to negotiable instruments. One of such

presumptions  appearing  in  Section  118(a),  with  which  we

would be concerned in this appeal is reproduced as under:-

“that  every  negotiable  instrument  was  made  or  drawn  for consideration,  and that  every  such instrument,  when it  has been  accepted,  endorsed,  negotiated  or  transferred,  was accepted,  endorsed,  negotiated  or  transferred  for consideration.”

12. Under Section 118(a) of the Negotiable Instruments Act,

the court is obliged to presume, until the contrary is proved,

that the promissory note was made for consideration. It is also

a settled position that the initial burden in this regard lies on

the defendant to prove the non-existence of consideration by

bringing on record such facts and circumstances which would

lead  the  Court  to  believe  the  non-existence  of  the

consideration either by direct evidence or by preponderance

of  probabilities  showing  that  the  existence  of  consideration

was  improbable,  doubtful  or  illegal.   In  this  connection,

reference may be made to a decision of this Court in the case

of Bharat Barrel & Drum Manufacturing Company Vs. Amin

Chand Payrelal [supra]. In paragraph 12 of the said decision, this court observed as under: -

“Upon consideration of various judgments as noted hereinabove, the position of law which emerges is  that once execution of

10

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.  The  defendant  can  prove  the non-existence  of  a  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 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  the  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

11

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……”

13.From the above decision of this court, it is pellucid that 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 would 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. It is also discernible from the above

decision that if 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.  

14.Keeping  the  aforesaid  in  mind,  let  us  now  see  if  the

respondents in this case had discharged the initial burden,

which lay on them to prove that the pronote being Ex.A-21

was not supported by consideration.    

12

15. The learned counsel for the appellant, as noted herein

earlier, contended that the respondents had neither taken the

plea that there was no consideration for the pronote Ex.A-21,

either in the reply notice or in the written statement, nor had

they adduced any evidence to prove the non-existence of the

consideration.  The  learned  counsel  for  the  respondents,

however, contended that the respondents had denied the very

execution of  the pronotes and referred the same as forged

both in the reply notice as also in the written statement. We

are unable to accept the contentions of the learned counsel

for the respondents. In the written statements, the plea of the

respondents was that on the face of the pronotes, no cash

was  paid  by  the  appellant  and  therefore,  the  respondents

were not liable to pay the amount because the pronotes were

forged. It was a finding of the trial court, which was affirmed

by the High Court in the impugned judgment that the pronotes

were  indeed  executed  by  the  respondents.  It  was  also  a

finding of the High Court that except in the reply notice issued

by  the  respondents,  nowhere  had  they  stated  that  the

consideration had not passed.  It is also an admitted position

that  the  findings  of  the  two  courts  below  was  that  the

execution  of  the  pronotes  having  been  proved,  the

presumption under Section 118(a) must come into play and

the appellant must be entitled to a decree in the absence of

evidence  to  the  contrary.  Having  said  this,  the  High  Court

proceeded to observe that if there was evidence inconsistent

13

with  the  presumption  under  Section  118(a)  of  the  Act,  the

court would not be in a position to pass a decree in favour of

the appellant on the basis of the presumption and therefore,

proceeded  to  examine  the  evidence  of  the  appellant  in

extenso. In view of the decision of this Court in Bharat Barrel

&  Drum Manufacturing  Company Vs.  Amin Chand Payrelal

[supra]  and  also  in  view of the  findings  arrived  at  by  the

Courts below, we are of the view that since the initial burden

on the respondents to show that the pronote being Ex.A-21

was not supported by any consideration was not discharged

by them, the High Court was not justified in not decreeing the

suit of the appellant in respect of the amount covered by the

pro-note Ex.A-21. It is an admitted position that the finding as

to the execution of the pronotes had become final. Also, we

are of the view that the respondents had not discharged the

initial  burden  of  proving the  non-existence  of  consideration

either by direct evidence or by preponderance of probabilities.

The mere denial, if there be any, by the respondents that no

consideration had passed would not have been sufficient and

something probable had to be brought on record to prove the

non-existence of consideration. In this view of the matter, we

are,  therefore,  of  the  view that  once  the  execution  of  the

pronote has been proved, the appellant would be entitled to

the benefit  of  the presumption  under Section  118(a)  of  the

Negotiable  Instruments  Act  because  the  respondents  had

failed to discharge the initial burden and therefore, the High

Court  was  in  error  in  appreciating  the  evidence  of  the

14

appellant to come to the conclusion that since such evidence

was  inconsistent  with  the  pronote  being  Ex.A-21,  the

appellant could not be given the benefit of the presumption.  

16. For  the foregoing reasons,  the appeal  is  allowed and

the judgments of the courts below are, therefore, modified to

the extent that the suit of the appellant must stand decreed in

its entirety. There will be no order as to costs.                    

…………..……………..J. [TARUN CHATTERJEE]

New Delhi ;     …………..……… ……..J. May 16, 2008       [HARJIT SINGH BEDI]

15