RAZA ALI KHAN Vs. RAHAT HUSAIN KHAN

JUDGEMENT

(1.) This is a plaintiff's second appeal arising out of a suit instituted by him against Rahat Husain, defendant 1, on foot of a promissory note. The plaintiff's case was that Rabat Husain had executed a promissory note for Rs. 900 in favour of Ali Ahmad, defendant 1, on 26 November 1928, that he was a holder in due course of that promissory note and therefore entitled to claim the amount due on it. The defendant 1 pleaded in defence that the promissory note in suit was without consideration and that the plaintiff was not its holder in due course. The trial Court decreed the suit. There was an appeal by defendant 1 with the result that the decision of the trial Court was reversed by the appellate Court and the suit of the plaintiff was dismissed. The plaintiff has come up to this Court in second appeal. The most important question for determination is whether the plaintiff appellant is the "holder of the promissory note in due course." The learned Counsel for the appellant rightly argued that if it be held that the appellant was the holder of the promissory note in due course then, Section 120, Negotiable Instruments Act, would come to his aid and defendant 1, the executant of the promissory note, would not be permitted to defeat the claim of the appellant by showing that the promissory note was without consideration. But before the plaintiff can be allowed to rely on the provisions of Section 120, he has to show that he is a holder in due course. We proceed to consider this question. The definition of a "holder in due course" is given in Section 9, Negotiable Instruments Act. It runs thus: Holder in due course means any person who for consideration becomes the possessor of a promissory note, bill of exchange or cheque, if payable to bearer, or the payee or endorsee thereof, If payable to order, before the amount mentioned in it became payable, and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title.

(2.) Section 118 of the Act raises a presumption in favour of the possessor of the negotiable instrument that he is a holder in due course," unless contrary is proved. But this presumption is not Conclusive and is often very easily shifted. The question is, when is the burden of proof shifted ? The Negotiable Instruments Act does not make any specific provisions on the subject like the English Bills of Exchange Act of 1882, in which Section 30, Clause 2, lays down that if in an action it is admitted or proved that the acceptance, issue or subsequent negotiation of the bill is affected with fraud, duress, or force and fear, or illegality, the burden of proof is shifted, unless and until the holder proves that, subsequent to the alleged fraud and illegality, value has in good faith been given for the bill. No such provisions are to be found in the Negotiable Instruments Act. But the presumption will stand rebutted if it is shown by the maker of the instrument that it had been obtained by means of fraud, or an offence, or for unlawful consideration, or that the transferee of it had sufficient cause to believe that some defect existed in the title of the transferor.

(3.) In the case before us defendant 1, while admitting the execution of the promissory note, pleaded that it was without consideration and challenged the right of the plaintiff, the possessor of the promissory note, to sue on its basis. The initial presumption raised by Section 118(g), was in favour of the plaintiff. It was therefore for defendant 1 to prove that the plaintiff was not a holder in due course. It appears to us that this question has to be decided in each case on the evidence produced with due regard to the legal presumption raised by Section 118(g). It is generally difficult, if not impossible, to prove by direct evidence that the possessor of a particular promissory note is not a "holder in due course." Circumstantial evidence afforded by probabilities, the position of the parties and other surrounding circumstances will in general be found to be the only satisfactory means of arriving at a conclusion. In the present case the plaintiff's contention was that a sum of Rs. 900 had been paid by defendant 2 to defendant 1 at the time of the execution of the promissory note in suit. The learned Subordinate Judge in appeal has held that no cash consideration passed. This is a finding of fact which is binding in second appeal though we wish to add that we do not agree with all the reasons which the learned Subordinate Judge has given for coming to this conclusion. The learned Subordinate Judge has held that the promissory note in suit was executed by defendant 1 under the following circumstances: