http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 10  

PETITIONER: OFFICIAL RECEIVER, KANPUR AND ANOTHER

       Vs.

RESPONDENT: ABDUL SHAKUR AND OTHERS

DATE OF JUDGMENT: 11/09/1964

BENCH: SHAH, J.C. BENCH: SHAH, J.C. GAJENDRAGADKAR, P.B. (CJ) AYYANGAR, N. RAJAGOPALA

CITATION:  1965 AIR  920            1965 SCR  (1) 254  CITATOR INFO :  E          1969 SC1334  (8A)

ACT:    Provincial Insolvency Act (5 of 1920), ss. 33, 75(1)  and 80-  Negotiable  Instruments  Act  (26  of  1881),  s.  118- Official   Receiver-If   bound  to   rely   upon   statutory presumption-High  Court-Jurisdiction under s. 75(1)  of  the Insolvency Act.

HEADNOTE:   The second appellant, who had executed promissory notes in favour of the respondents was adjudicated an insolvent on  a petition by them.  The Official Receiver in exercise of  the powers under ss. 33 and 80 of the Provincial Insolvency  Act (5  of 1920) and under directions of the  Insolvency  Judge, inquired  into  the claims of the respondents  and  rejected them.    On  appeal,  the  Insolvency  Judge  directed   the inclusion of their names in the schedule of creditors.   The appeal  to  the  District Court against  the  order  of  the Insolvency Judge was allowed.  In second appeal to the  High Court, it was held, that the inference drawn by the District Court  from  its  findings  was a matter  of  law  and  that therefore the High Court had jurisdiction under s. 75(1), to interfere  with  the order of the District  Court.   Relying upon the presumption in favour of creditors in s. 118 of the Negotiable Instruments Act (26 of 1881), the High Court  set aside  the  judgment of the District  Court.   The  Official Receiver and the insolvent appealed to the Supreme Court. HELD : The appeal should be allowed. Since  all the findings of the District Court were  findings of fact and the question whether a statutory presumption was rebutted by the rest of the evidence was also a question  of fact,  the High Court had no jurisdiction to set  aside  the judgment of the District Court. [259A-C]. Wali  Mohammad V. Mohammad Bakhsh, (1930) L.R. 57  I.A.  86. approved. Section  118  of the Negotiable Instruments  Act,  enacts  a special rule of evidence which operates only between parties to  the instrument or persons claiming under them in a  suit or  proceeding relating to the negotiable  instrument.   The section  does not affect s. 114 of the Evidence Act, and  in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 10  

cases   not  falling  within  s.  118  of   the   Negotiable Instruments  Act  the Court may or may not  presume  that  a promissory   note   was  founded  on   good   consideration. Therefore,  in a proceeding relating to proof of debts,  the question being not one between the insolvent and the proving creditor  alone, and since the rights of other creditors  of the insolvent have of necessity to be considered, the  Court has  jurisdiction  to investigate whether there  is  a  real -debt.   Even  if  for some reason  the  debtor  himself  is estopped  from denying the debt, there could be no  estopped against  the Insolvency Court.  There is thus  no  statutory presumption  of  consideration in favour  of  the  creditors under  promissory  notes in proceedings under s. 33  of  the Provincial Insolvency Act for settlement of the schedule  of creditors, and the Receiver exercising powers under s. 80 of that  Act  is not bound to admit the debts in  the  schedule merely because the insolvent or the creditors have failed to displace such a presumption. [261F-262C; 264E-G]. Case law reviewed. 255

JUDGMENT:     CIVIL  APPELLATE JURISDICTION: Civil Appeal No.  257  of 1962. Appeal from the judgment and decree dated February 19,  1957 of the Allahabad High Court in S. A. F. No. 4 of 1952.     S.    T. Desai, and J. P.  Goyal, for the appellants.     G.    S.  Pathak,  B. Dutta, J. B.   Dadachanji,  O.  C. Mathur and Ravinder Narain, for respondent No. 2.  The Judgment of the Court was delivered by    Shah  J.  Respondents I to 3 in this appeal  presented  a petition  before the Insolvency Judge, Kanpur for  an  order adjudicating  the  second  appellant--Kotwaleshwar   Prasad- insolvent.  In their petition they alleged that Kotwaleshwar had  in the course of business dealings with  them  borrowed Rs.  15,000 on September 28, 1935 from respondents I  and  3 and  had  executed a promissory note agreeing to  repay  the amount,  and that he had borrowed Rs. 3,500, on  January  9, 1936  and Rs. 4,000 on April 7, 1936 from respondent 2,  and executed  similar  promissory notes, that he had  failed  to repay  the amounts due by him and with a view to  defeat  or delay  his creditors secluded himself so as to  deprive  his creditors  of the means of communicating with him,  and  had thereby  committed  an act of  insolvency.   The  Insolvency Judge   by   order  dated  October   8,   1937   adjudicated Kotwaleshwar insolvent and appointed the first appellant the Official  Receiver, Kanpur, as receiver of his  estate  with powers  under  s.  80  of  the  Provincial  Insolvency  Act, 1920--hereinafter called ’the Act’.   The Receiver proceeded in exercise of the powers under  s. 33 read with s. 80 of the Act to frame a schedule of  debts. The  claims  set up by the respondents  were  challenged  by Kotwaleshwar  and  a  creditor named Abdul  Sayed,  but  the Official Receiver included the claims of the respondents  in the  schedule  of debts, for in his  view  Kotwaleshwar  had admitted the claims on October 8, 1937 before the Insolvency Court.    In appeal under s. 68 to the Insolvency Judge the  matter -was  remanded to the Official Receiver with  directions  to hold a fresh enquiry into the debts due to the  respondents. The  Official  Receiver  then held  a  further  enquiry  and rejected the claims of the respondents I to 3. He held  that it   was   not  proved  that   Kotwaleshwar   had   received

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 10  

consideration  for the three promissory notes.  In the  view of  the Official Receiver the documentary evidence  produced by  Kotwaleshwar  and the respondents established  that  the promissory notes were executed by Kotwai- 256 eshwar  under the influence of respondents I to 3 and  their servant  Amir  Hassan and that the  evidence  including  the books  of  account of respondents 1 to 3 in support  of  the advance  of  consideration under the  promissory  notes  was unreliable.     In  appeal against the order of the  Official  Receiver, the  Insolvency  Judge, Kanpur directed that  the  names  of respondents I to 3 be included in the schedule of creditors. In  the  view  of the Insolvency Judge  the  presumption  of consideration  arising  under  s.  118  of  the   Negotiable Instruments Act supported the rest of the evidence which was directed to establish the genuineness of the signatures  and the  endorsements  of execution on the promissory  notes  by Kotwaleshwar  and on the receipts executed by him  and  that the  Kachi  Rokar of the respondents were  adequately  corr- borated  by  the evidence of the  creditors,  their  witness Abdul Rashid and others and that Kotwaleshwar had failed  to discharge  the burden which lay heavily on him to  establish want of consideration.    Against  the order of the Insolvency Judge an appeal  was preferred  to  the  District  Court,  Kanpur.   During   the pendency  of  the appeal respondents 1 and 3  were  declared evacuees  under the Administration of Evacuee  Property  Act and  the  Assistant Custodian of Evacuee  Property  in  whom their   property  had  vested  was  impleaded  as  a   party respondent.  In the view of the District Court the testimony of  witnesses of the respondents in support of the  plea  of payment  of  consideration  was  unreliable  and  that   the admission  made by Kotwaleshwar before the Insolvency  Judge on  October  8, 1937 was procured by the exercise  of  undue influence  and that the books of account relied upon by  the respondents  and the oral evidence in support  thereof  were unreliable.    The   District  Judge   observed   that   the presumption  under s. 118 of the Negotiable Instruments  Act in  respect of the promissory notes did arise, but it  stood in  the  circumstances of the case weakened and  the  burden shifted  to respondents I to 3, to prove affirmatively  that the sums covered by the three promissory notes were in  fact paid to the insolvent and that they failed to discharge  the burden.    Against the order passed by the District Judge, a  second appeal  being No. 4 of 1952 was preferred under s.  75  (I.) proviso 2 of the Provincial Insolvency Act. 1920 to the High Court -of Allahabad.  The Division Bench hearing the  appeal referred the following two questions to a Full Bench.  These questions were               (1)   Whether the presumption mentioned in cl.               (a)  of  s. 118, Negotiable  Instruments  Act,               1881 can be               257               invoked  in  insolvency proceedings  where  an               alleged  debt against the insolvent is  called               in  question by the official receiver or by  a               creditor or by the insolvent ?               (2)   If    it   can   be    invoked,    would               circumstances tending to make it doubtful that                             consideration   passed  under  the   n egotiable               instrument  even though coupled with a  denial               on  the part of the maker of  the  instrument,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 10  

             suffice to deprive the creditor of the benefit               of the presumption and require him to prove by               evidence that consideration did actually  pass               ?   A Full Bench of the High Court by majority having recorded an  affirmative  answer on the first  question,  the  second appeal was placed for hearing before a Division Bench of the High  Court.  The Division Bench observed that the  District Court had recorded certain findings and from those  findings it  had  inferred  as a matter of  law  that  the  statutory presumption  under s. 118 of the Negotiable Instruments  Act stood rebutted.  The High Court then observed :               "The   correctness,  or  otherwise,   of   the               preliminary  inference  must  need  (sic)   be               considered first.  Scrutiny of that  inference               should   however   be   prefaced   with    the               observation  that it is open to  question  not               only because the various findings, or at least               the material ones, described as  circumstances               by the court below, whereon that inference was               based  suffer  from one or the  other  of  the               legal  defects  pointed out  above,  but  also               because the inference drawn by that court as a               result   of  its  view  that   the   statutory               presumption stood rebutted was a finding on  a               question of law and not on a question of fact.               That inference, or finding, of the court below               was that the onus of proving consideration had               shifted           on          to           the               creditors.  .   .   .   .  .  .  . .A  finding               which  has  to draw on a rule of law  for  the               recording  of it or for the  ascertainment  of               its  truth is a finding on a question of  law,               any  other  a finding on a question  of  fact.               The finding that onus has shifted has to  draw               on  the  rules  of  pleading  and  proof,   of               procedure  and evidence, for the recording  of               it  as  well as for the ascertainment  of  its               truth.   It  is  therefore  a  finding  on   a               question of law." The Court then held that in the case before it "not only had the  insolvent  failed to displace, or even to  weaken,  the presumption  in favour of the creditors under s. 118 of  the Negotiable Instru- 258 ments  Act, but the consideration stood  fully  established, even  if there was no initial presumption in favour  of  the creditors,  by  the  evidence adduced by  them  and  by  the insolvent’s own admission." With special leave, this  appeal is preferred by the Official Receiver and Kotwaleshwar.    The  District  Court  found  on  the  evidence  that  the insolvent’s   father  died  in  1933  leaving   considerable properties,  that  the  insolvent was at  the  time  of  his father’s   death  a  young  man  about  20  years  of   age, inexperienced and open to all the temptations of early life, that  the  insolvent  "got mixed up" with  Amir  Hassan  and others  and "they initiated him into the mysteries  of  wine and  women",  that although the promissory  notes  were  not executed ",under the influence of drink" there were  grounds for  holding that he was under the influence of Amir  Hassan when he signed them, that it was significant that the  three promissory  notes were executed in quick succession  and  at that  time  the  insolvent was  already  indebted  to  other creditors  to the extent of Rs. 6,000 that  the  respondents had no previous business relations with the insolvent,  that

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 10  

although  the creditors knew that the insolvent’s  share  in the  property left by his father was only Rs. 28,000 to  Rs. 30,000 and that he was joint in estate with his brother,  no kind  of security was taken from the insolvent, nor was  any enquiry  made  whether the said property was  encumbered  or not,  that respondent 3 Abdul Wahid admitted that  about  21 months  after  the execution of the  promissory  note  dated September  28, 1935 he came to know that the  insolvent  was executing "bogus and fictitious promissory notes" in  favour of his friends to defraud his real creditors, and  therefore it  was  incredible  that  further  sums  should  have  been advanced  under the two subsequent promissory notes  of  the aggregate value of Rs. 7,500, that the insolvent was "fairly well  off for his ordinary needs" and there was no  apparent reason  why he should have borrowed those considerable  sums of money, that the respondents did not have sufficient funds or resources with them to advance either the amounts covered by  the  three  promissory notes or those  under  the  prior promissory  notes  of September 4, 1935  and  September  15, 1935,  that the thumb impression of the insolvent  had  been taken in addition to his signatures on the promissory  note, and  that  his signatures were also obtained  on  the  Rokar Bahi, that the oral evidence produced by the respondents  in proof  of  the  payment of  consideration  did  not  inspire confidence,  that  the  admission  of  the  insolvent  dated October  8,  1937  on  the  foot  of  which  the  order   of adjudication  was  passed  appeared to  have  been  made  in suspicious  circumstances and it was an erroneous  admission and therefore did not bind the insolvent and that the Bahi 259 Khatas of the creditors were of a suspicious character.   AR these  findings were findings of fact.  The  District  Court inferred from the facts found that the statutory presumption under  s.  118 of the Negotiable Instruments  Act  had  been weakened  and  the burden which lay upon the  insolvent  was discharged and it was not open to the High Court  exercising jurisdiction  under  s.  75(1) proviso  1,  nor  even  under proviso 2, of the Provincial Insolvency Act to set aside the judgment of the District Court, for it is well settled  that the question whether a statutory presumption is rebutted  by the  rest  of  the evidence is a question  of  fact  :  Wali Mohammad v. Mohammad Bakhsh (1).   This  would be sufficient to dispose of the  appeal.   But the question whether the Official Receiver is bound to  give effect  to  the  statutory  presumption  in  respect  of   a negotiable instrument arising under s. 118 of the Negotiable Instruments Act when the negotiable instrument is sought  to be relied upon by a creditor in the course of the insolvency proceeding  in  proof  of the debts to  be  entered  in  the schedule  of creditors, has been fully argued before us  and as the High Court has overruled an earlier decision of  that Court:  Ram  Lal  Tandon v. Kashi Charan  (2),  and  as  the question  is  of some importance, we deem  it  necessary  to express our opinion on that question.   Section  33 of the Provincial Insolvency Act by the  first subsection provides :               "When  an order of adjudication has been  made               under   this   Act,   all   persons   alleging               themselves to be creditors of the insolvent in               respect of debts provable under this Act shall               tender  proof  of their  respective  debts  by               producing   evidence   of   the   amount   and               particulars  thereof, and the Court shall,  by               order,  determine the persons who have  proved               themselves to be creditors of the insolvent in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 10  

             respect of such debts, and the amount of  such               debts,   respectively,  and  shall   frame   a               schedule of such persons and debts :   The Act imposes a duty upon the court to frame a  schedule of creditors and of the debts due to them which are provable under  the Act.  For that purpose the court has to  hold  an enquiry  into  the  debts due by  the  insolvent  which  are provable.    A proceeding under s. 33 of the Provincial Insolvency Act is  not a proceeding between the insolvent and  the  proving creditor. (1) L.R. 57 I.A. 86, 92. (2) A.I.R. 1928 All. 380. 260 The  proceeding is between the creditors represented by  the official  receiver  and  the insolvent.   When  a  creditor, seeking   to  prove  a  debt  relying  upon   a   negotiable instrument, or other evidence makes a claim for inclusion of the  debt due to him, the court, or where he  is  authorised the  receiver  of  the estate of the insolvent,  has  to  be satisfied  about the existence of the debt, the amount  due, its  particulars  and  that it is  provable  in  insolvency. Section 33 does not indicate the quantum of proof which  may be  regarded  as sufficient to prove a debt.   A  court  may accept  in proof of a debt a registered letter to the  court and an affidavit verifying  the debt (see s. 49 of the Act). That however is a matter of procedure, and does not lay down as to what is sufficient to prove the debt.  In each case it is  for  the  court or the receiver (Subject  of  course  to review  in  the  manner provided by  the  Act)  to  consider whether  the debt of which the creditor claims inclusion  is proved.   The  decision of the question  must  of  necessity depend upon the circumstances and the evidence led to  prove the debt.    In  the present case the High Court by majority took  the view  that in a proceeding under s. 33 when  the  promissory note  is  brought  before  the  Court  by  the  promisee,  a presumption   that   the  promissory  note  was   made   for consideration  arises  under  s.  II  8  of  the  Negotiable Instruments  Act and unless that presumption is rebutted  by the  promissory by other creditors or by the  receiver  that the amount for which the promissory note is executed must be included in the schedule.  In so holding the High Court pri- marily relied upon absence of any reference to the nature of the proceeding in which the presumptions are required to  be raised in relation to negotiable instruments.   It,,must be noticed in the first instance that presumption under  s.  118  of  the  Negotiable  Instruments  Act  is  a presumption  of  consideration : it does not  in  all  cases prove  the quantum of debt due by the insolvent at the  date of  insolvency.   The  Insolvency  Court  has,  it  must  be remembered,  to  ascertain  whether a debt  is  due  by  the insolvent,  whether the debt is provable in insolvency,  and the quantum of the debt due at the material date.  In making this  enquiry  in its three aspects even the judgment  of  a court against the debtor may not be regarded as binding upon the  Court.   In  Ex Parte Lennox(1), it  was  held  that  a judgment  which  the judgment debtor cannot set  aside,  may still  be  subjected  to  investigation  by  the  court   of Bankruptcy to enquire whether the debt on which the judgment was  founded was a good debt, and if the Court be  satisfied that it was not, the Court may refuse to make a receiving (1)   [1885]16 Q.B.D. 315, 261 order  in respect of the debt.  The principle of  that  case

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 10  

was  extended  in In Re.  Fraser Ex Parte  Central  Bank  of London(1).  It was held in that case that "upon the  hearing of  a  creditor’s petition for a receiving order  against  a judgment  debtor, the Court of Bankruptcy has power, at  the instance  of the debtor himself, to go behind  the  judgment and  to inquire into the validity of the debt,  even  though the debtor has previously applied in the action to set aside the judgment, and his application has been refused, and  the refusal affirmed by the Court of Appeal." Lord Esher, M. R., observed at pp. 636-637               "The decision (Ex parte Lennox) is based  upon               the  highest  ground-viz., that  in  making  a               receiving  order,  the Court  is  not  dealing               simply  between the petitioning  creditor  and               the  debtor,  but it is interfering  with  the               rights  of  his other creditors, who,  if  the               order  is  made, will not be able to  sue  the               debtor  for  their debts, and that  the  Court               ought not to exercise this extraordinary power               unless  it is satisfied that there is  a  good               debt  due  to the petitioning  creditor.   The               existence  of the judgment is no  doubt  prima               facie evidence of a debt; but still the  Court               of  Bankruptcy is entitled to enquire  whether               there really is a debt due to the  petitioning               creditor." A  debt  to be entered in the schedule must therefore  be  a real  debt.  A judgment against a debtor which is sought  to be  relied  upon  in proving a  debt  does  not  necessarily establish the existence of a real debt for the judgment  may have gone by default, it may have gone by consent or it  may have  been procured for any other reason.  In  a  proceeding relating  to proof of debts the question which arises  being not  one  between  the insolvent and  the  proving  creditor alone,  the rights of other creditors of the insolvent  have of necessity to be considered.  Even if for some reason  the debtor himself is estopped from denying the debt there  will be no estoppel against the Insolvency Court. The  Court  therefore  in  each  case  has  jurisdiction  to investigate whether there is a real debt: whether production of  a judgment or a negotiable instrument or other  evidence may  be regarded as sufficient to regard the debt as  proved is  a  matter  for  the Insolvency  Court  to  decide.   The question is not to be adjudged in the light of any  estoppel which   may  operate  against  the  insolvent  or   of   any presumption.  The Court in a given case may rely merely upon a  judgment or a negotiable or other instrument,  and  admit the debt to the schedule not because there is an estoppel 1. [1892] 2 Q  .  B.D. 633. L2Sup./64-4 262 against the Receiver or the other creditors, or  presumption of  1aw in favour of the evidence produced, but  because  in its  view  in  the light of  the  circumstances  no  further enquiry   beyond  proof  of  the  judgment   or   negotiable instrument  or other document evidencing the debt and  proof of  non-satisfaction of the debt since the date  thereof  is sufficient.   The Court has power, however, to  insist  upon proof of the debt apart from the judgment or the  negotiable or  other  instrument.  The reason is  that  the  Insolvency Court  with a view to effectively distribute the  estate  of the  insolvent among the creditors is entitled to go  behind outward forms of transactions and to ascertain the truth  of the debts sought to be proved, and the estoppel to which the insolvent  may  have  subjected  himself  will  not  prevail

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 10  

against the Receiver.  Whether the power should be exercised in the case of a judgment debt in a given case depends  upon the  discretion  of the Court which has to be  exercised  on sound  judicial  principles.   It is  true  that  the  Court ordinarily;  does  not  go behind  a  judgment  against  the debtor,  on  a bare suggestion by the debtor that  the  debt which  is merged in the judgment did not exist or  was  bad. There   must  undoubtedly  be  circumstances   prima   facie justifying  an enquiry There must appear something that  the judgment  was procured by fraud or collusion, or that  there has  been miscarriage of justice But a mere irregularity  or error  in  form will not be a sufficient  reason  for  going behind the judgment.   When  a debt secured by a promissory note is sought to  be proved, the Insolvency Court must enquire into the  reality, and  the quantum of consideration.  What shape this  enquiry may take will depend upon the circumstances of the case.  In a  given case the Insolvency Court may regard  an  affidavit setting  out  the particulars ,of the  debt,  and  affirming execution  of  the  promissory note by  the  insolvent,  and asserting  non-satisfaction  of the debt, as  sufficient  In other cases, the Court may enter upon a fuller enquiry which the circumstances of the case may demand.  But in all  cases of  proof  of  debts  under s. 33 the  burden  is  upon  the -creditor.   That burden may be discharged by the  affidavit of  the creditor viewed in the light of a presumption  which the Court may raise under s. 114 of the Evidence- Act,  that a  bill  of  exchange accepted or  endorsed,  was  for  good consideration.  If that be the true effect of. s. 33 of  the Provincial  Insolvency Act, and we think both  on  principle and  authority  that is the true effect,  of  necessity  the presumption under s. 118 of the Negotiable Instruments   Act that  every  negotiable  instrument was made  or  drawn  for consideration  cannot  avail  against the  Receiver  of  the estate of the insolvent 263      It  is true that s. 118 of the  Negotiable  Instruments Act, unlike s. 119 to s. 122 which occur in Ch.  XIII,  does not  refer  to  a  proceeding  in  suit  where  the  various presumptions  directed  have to be raised.  The  section  is undoubtedly  in  terms general.  But there is no  reason  to suppose that it was intended to apply to a proceeding  which is not in the nature of a civil dispute between the  parties to   the  negotiable  instrument  or  their  privies.    The Negotiable  Instruments  Act is intended to codify  the  law merchant   relating  to  ’dealings   concerning   negotiable instruments.  The presumptions which are raised under s. 118 do undoubtedly set out special rules of evidence relating to negotiable instruments, but in our opinion the nature of the presumptions from their very nature operate in favour of  or against  the parties to the negotiable instrument  or  their privies  and  cannot generally apply to persons who  do  not claim  under  the parties to the  instrument.   In  Anumolus Narayana Rao v. Chattaraju Venkatappayya(1) it was  observed by  Varadachariar  J.,  that a suit  on  a  promissory  note instituted  against  an undivided son of  a  Hindu  promisor governed  by  the Mitakshara law after  the  latter’s  death cannot   be   regarded   as  one  against   the   heirs   or representatives  of the promisor, because it only  seeks  to enforce the Hindu law theory of pious obligation of the sons in  respect  of the property which the sons  have  taken  by survivorship.   The pious obligation can arise only  on  the assumption of the existence of a debt due by the father  and in such a case the onus of proving the existence of the debt must prima facie be laid on the creditor who can call in aid

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 10  

the  presumption  permissible  under  the  general  law   of evidence, namely, s. 114 of the Indian Evidence Act and  not the   presumption  under  s.  118  (a)  of  the   Negotiable Instruments Act.  The learned Judge observed               "Though this section is not, like sections 119               to  122, limited in terms to a suit  upon  the               instrument,  it seems only reasonable to  hold               that  the special rules of evidence laid  down               in  section  118 must have  been  intended  to               apply  only  as  between the  parties  to  the               instrument  or those claiming under them.   In               other cases the presumption can only be in the               terms  enacted in section 114 of the  Evidence               Act  (vide illus. c) which by the use  of  the               expression ’may presume leaves it to the Court               to  apply the presumption or not according  to               circumstances." (1) I.L.R. [1937] Mad. 299. 264     Section  114 of the Indian Evidence Act  authorises  the Court  to presume the existence of any fact which it  thinks likely  to  have happened, regard being had  to  the  common course  of  natural  events, human conduct  and  public  and private  business  in  their relation to the  facts  of  the particular case.  Under the third illustration of s. 114 the Court  may  presume  that a bill  of  exchange  accepted  or endorsed  was  accepted  for good  consideration.   But  the section provides, that the, Court shall also have regard  to other  material facts in considering whether the maxim  does or  does not apply in the particular case before it.  It  is therefore  open  to  the Court to  consider  in  its  proper setting, the fact that the drawer of a bill of exchange  was a man of business, and the acceptor was a young and ignorant person completely under the former’s influence.  This is one illustrative  fact which the Court may consider  in  raising the presumption.  There may be other circumstances which may also   justify   the  Court  in  declining  to   raise   the presumption.  Mr. Pathak for the respondents urged that  the Indian  Evidence Act was enacted in 1872 and the  Negotiable Instruments Act having been enacted in 1881, and as the  two provisions  conflict  or overlap, s. 118 of  the  Negotiable Instruments  Act must supersede S. 114 of the Evidence  Act. We are unable to accept that contention.  Undoubtedly S. 114 of the Evidence Act is a general provision which enables the Court  to presume, though not obliged to do so, that a  bill of  exchange  or a promissory note were founded  on  a  good consideration.   Section 118 of the  Negotiable  Instruments Act,  however,  enacts  a special  rule  of  evidence  which operates  between  parties  to  the  instrument  or  persons claiming under them in a suit or proceeding relating to  the bill  of exchange and does not affect the rule contained  in s.  114 of the Evidence Act, in cases not falling within  s. 11 8 the Negotiable Instruments Act.   In our view the High Court was in error in holding that  a statutory  presumption of consideration arose in  favour  of the   respondents  in  the  proceedings  under  S.  33   for settlement  of the schedule of creditors, and  the  Receiver exercising  power under S. 80 of the Act was bound to  admit the  debts  in the schedule if the insolvent  or  the  other creditors failed to displace that presumption   The  appeal  must therefore be allowed, the order  of  the High  Court set aside, and the order of the  District  Court restored, with costs in this Court. Appeal allowed 265

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 10