OMANA T.N Vs. A.K.SINI

JUDGEMENT

(1.) A suit for recovery of money based on a dishonoured cheque for Rs.17,50,000.00 was dismissed by the trial court on the reason that the alleged cheque was issued about 2 1/2 years after the alleged transaction that too without any liability for interest and that the oral evidence tendered by Pws 1 to 3 cannot be relied on. It appears that the trial court has committed a grave mistake. The admission made in the written statement regarding issuance of a signed blank cheque by way of security to the plaintiff in connection with a money transaction was not properly considered or addressed by the trial court. It is a case wherein the defendant has admitted issuance of a cheque to the plaintiff by way of security in connection with a loan transaction. But according to the defendant, it was in connection with borrowal of an amount of Rs.50,000.00, the abovesaid signed cheque was issued to the plaintiff. It would discharge the initial burden lies on the plaintiff to prove the due execution. It is true that a mere admission of signature found affixed as that of the executant may not itself prove the due execution of the document when it is brought under challenge. But in the instant case, the admission refers to the issuance of the cheque in a money transaction to the plaintiff. Necessarily, it must be understood that the cheque was drawn and issued to the plaintiff in connection with the money transaction, but at the same time, it is the version of the defendant that it was issued as a signed blank cheque by way of security at the time of borrowal of Rs.50,000.00. When there is an admission regarding issuance of the cheque in connection with a money transaction either as security or in lieu of cash, the initial onus lies on the plaintiff to prove the due execution would stand discharged. The presumption available under Sec. 118 of the Negotiable Instruments Act including the one that the cheque is supported by consideration would come into play. But it is argued that there cannot be any presumption as to quantum of consideration even under Sec. 118 of the Negotiable Instruments Act, hence it will not relieve the plaintiff from proving the actual consideration covered by the cheque. Reliance was taken from a three Judge Bench decision of the Apex Court in The Official Receiver, Kanpur v. Abdul Shakoor [AIR 1965 SC 920) in support of the said argument, wherein it was held that there cannot be any presumption as to the quantum of debt due by the insolvent at the date of insolvency, but the Insolvency Court has to ascertain whether a debt is due by the insolvent, whether the debt is provable in the insolvency and the quantum of the debt due at the material date. The Apex Court has not applied the presumption available under Sec. 118 of the Negotiable Instruments Act as against the consideration stated in the document or the actual amount due on the reason that no such presumption can be extended to a third person so as to defeat his claim in an insolvency proceedings. The principle behind it is that the presumption available under Sec. 118 of the Act would operate only against the drawer of the cheque or the person litigating under him and not against the creditor of the drawer of the cheque in an insolvency proceedings. Necessarily, a mere admission of execution of negotiable instrument, including a cheque by its drawer or maker, would not make Sec. 118 of the Act applicable and no presumption under that sec. can be drawn, when it is adverse to the interest of any of the creditor under him in an insolvency proceedings. To put it in short, in an insolvency proceedings, no presumption under Sec. 118 of the Negotiable Instruments Act can be drawn in a routine way as against a creditor of the insolvent, based on the admission by the insolvent, the drawer of the cheque, simply on the reason that there is no scope for such admission by him, as against the interest of other creditor/s. A right to admit a fact is resting on the person whose interest would stand affected by such admission. In an insolvency proceedings, after the submission of asset and liabilities of the person sought to be declared insolvent will not have any such right of admission as against the defeated creditors. Necessarily, in an insolvency proceedings, the validity or the due execution or the debt due under, is a matter to be agitated in relation to the other creditors. As such, the admission made by the executant or the drawer of the cheque or the maker of the promissory note who sought to be declared insolvent may not have much relevance as against the interest of other creditors. Hence, no presumption can be gathered as against the other creditors, unless they themselves admit its execution and consideration thereof. Necessarily, the legal position laid down by the Apex Court in the abovesaid decision must be understood pertaining to the insolvency proceedings and the limitation in the matter of presumption under Sec. 118 of the N.I. Act against a stranger or a third person.

(2.) As discussed earlier, the presumption that can be drawn under Sec. 118 of the Act should always be against the drawer of the cheque or maker of the promissory note and the persons litigating under them and rebuttable in nature. The wording used "of consideration" under Sec. 118 of the Act, when it is permissible to draw presumption under that provision would stand initially for the amount made endorsed therein though it can be rebutted either by evidence or by preponderance of probability. There is no scope for drawing a presumption in part, though it is permissible to rebut the same either in part or in whole in consonance with Sec. 45 of the N.I. Act or otherwise. The application of presumption available under Sec. 118 of the Negotiable Instruments Act and under Sec. 114 of the Evidence Act was elaborately considered by a co-equal Bench of Apex Court in an earlier decision in Kundan Lal Rallaram v. Custodian, Evacuee Property, Bombay [AIR 1961 SC 1316] and laid down the legal position that the presumption that can be drawn either under Sec. 114 of the Evidence Act or under Sec. 118 of the Negotiable Instruments Act is with respect to the existence of any fact, though it is rebuttable. What is laid down by the Apex Court in The Official Receiver's case (supra) in paragraph 15 would make the legal position crystal clear, which runs as follows:" "

(3.) The nature of presumption that can be drawn came up for consideration before the Privy Council in Murugesam Pillai v. Gnana Sambandha Pandara Sannadhi [AIR 1917 PC 6], wherein it was observed that: