1
IN THE COURT OF THE DISTRICT JUDGE :: GUNTUR
PRESENT: SRI M.SATYANARAYANA MURTHY, B.Com., M.L.,
District Judge, Guntur.
Monday, the 26th day of September, 2013
O.S.No. 234/2007
Between:
Dr. Haranath Babu Rao Tipirneni … Plaintiff
And
Dr. Chintamaneni Suresh … Defendant
This suit came up on 5-8-2013 for hearing before me in the presence of Sri G. Ramalingeswara Rao, Learned advocate for Plaintiff and of Sri A.P.Prakash, Learned advocate for Defendant and the matter is having stood over for consideration till this day, this court delivered the following:
J U D G M E N T
The suit is filed for recovery of Rs.1,09,03,035/- on the foot of promissory note allegedly executed by the defendant in favour of plaintiff, together with subsequent interest and costs.
02.The plaintiff is a doctor by profession settled at United States of America. The defendant is also a doctor by profession carrying on his profession at Tadepalli, Guntur District, by constructing a multi-specialty corporate hospital in the name and style of ‘Sowmya Appollo Hospital”. The plaintiff being an Indian, frequently visiting India. Thus, he has been in constant touch with his friends and relatives. Taking advantage of such cordiality and relationship, the defendant in the 3rd week of December, 2001, contacted the plaintiff in the United States of America and requested him to lend Rs.1,20,00,000/- for the purpose of improving his business i.e., to develop his multi- specialty corporate hospital. The plaintiff having been in affluent circumstances sufficiently earned at USA on his profession, acceded to the request of the defendant, agreed to lend Rs.1,20,00,000/- on payment of agreed interest at 18% per annum. Accordingly, as the plaintiff was in USA at the material point of time at Oak Brook, Illinois State, USA, the plaintiff faxed a letter to the State Bank of India, NRI Branch, Hyderabad, during December, 2001 informing that he is going to issue a cheque for Rs.1,20,00,000/- drawn on his NRI deposit account of said NRI Branch. Further, the plaintiff sent the original letter along with 2 cheque bearing No.804283, dated 1.1.2002 for Rs.1,20,00,000/- in favour of defendant drawn on State Bank of India, NRI Branch, Hyderabad to one B. Anand, Managing Director of M/s. Millennium Finances Limited, Hyderabad as he is known to both the plaintiff and the defendant.
On receipt of letter addressed to State Bank of India, Main Branch, Hyderabad and cheque drawn in favour of the defendant, B. Anand called the defendant and handed over the cheque to him. Soon after, the defendant got the cheque encashed, withdrew the amount and consequently, executed a demand promissory note on 7.1.2002 in favour of plaintiff promising to repay the same with interest at 18% per annum, annually compound, on demand either to him or his order as and when demanded by the plaintiff.
The cheque was encashed in India, demand promissory note is executed in India while the plaintiff was in USA. After handing over the cheque and covering letter thereof, B. Anand obtained the demand promissory note on behalf of the plaintiff and sent the same to the plaintiff in USA.
Subsequently, 2 years after execution of promissory note, on one occasion, when the plaintiff was in India, i.e. on 15.3.2004, the defendant paid an amount of Rs.60,00,000/- by way of cheque, as a part payment towards interest under the suit promissory note. The said payment was endorsed on the reverse of the promissory note duly acknowledging his liability to pay the debt. Later, on 24.12.2004 and on 25.2.2005, the defendant paid an amount of Rs.1,000/- and Rs.60,00,000/- respectively towards interest due under the promissory note and part of the principal amount. The defendant paid Rs.1,000/- in cash and Rs.60,00,000/- by way of cheque and those payments were endorsed on the reverse of the promissory note acknowledging the liability of the defendant.
The defendant issued an undated cheque for Rs.1,20,00,000/- on the date of execution of promissory note in favour of the plaintiff drawn on Global Trust Bank Limited, M.G.Road Branch, Vijayawada as security. Since the plaintiff has never pressed upon security of an undated cheque, the same is filed along with the plaint. Subsequently, despite the demands made by the plaintiff, the defendant did not discharge the debt due under the promissory note. Thereupon, the plaintiff got issued a legal notice dated 24.2.2007 calling upon the defendant to repay the debt due under the promissory note. Having received the notice, the defendant got issued a reply with false allegations. But the defendant failed to discharge the debt due under promissory note. Hence, the suit for recovery of 3
Rs.1,09,03,035/- together with subsequent interest.
03.The defendant filed Written Statement denying material allegations of the plaint and resisted the claim of the plaintiff on the following grounds:-
a)The suit is not maintainable based on promissory note as the plaintiff suppressed the contract between the plaintiff represented by his agent B. Anand and the defendant i.e. loan agreement dated 29.12.2001. The consideration for the suit transaction emanated since the amount was paid by way of cheque for Rs.1,20,00,000/- drawn on State Bank of India, NRI Branch, Hyderabad through one B.Anand, Managing director of M/s, Millennium Finance Limited, Hyderabad and said Anand acted as agent of defendant. The said Anand acted on the instructions of the plaintiff and brought the cheque drawn by the plaintiff in favour of the defendant and delivered the Cheque to the defendant pursuant to the promise made under the above said loan account. Thus, the suit is not maintainable basing on promissory note but the transaction is based on an agreement between the plaintiff represented by B.Anand and the defendant.
b)The defendant further contended that as per the terms and conditions of loan agreement the defendant undertook to pay interest at 18% per annum in rupees and the defendant alone has to bear exchange rate fluctuations between U.S. Dollars and Indian rupee. On the date of filing of suit, the exchange rate was too low and fluctuation is not shown in the plaint. Therefore, the interest shall be scaled down as per the calculation on the date of presentation of plaint.
The defendant further contended that the defendant paid entire suit amount and as on the date of presentation of the plaint and since entire suit amount was paid, the defendant is entitled for counter-claim.
Further, it is contended that both the plaintiff and the defendant are income tax assesses. Therefore, the interest payable is income to the creditor and the principle of tax deduction at source is to be applied to the payments made by the defendant and that the payments were to be appropriated towards principal and appropriation towards interest is untenable under law. Therefore, nothing is due to the plaintiff, payable by the defendant, if the payments are appropriated towards
principal amount. On this ground alone, the suit is liable
to be dismissed.
c)The defendant further contended that as per clause No.7 4 of the loan agreement, any dispute is subject to jurisdiction of the Courts at Hyderabad and there is an arbitration clause in the loan agreement which ousted the jurisdiction of the civil court.
d)That the promissory note was executed as a collateral security for the loan agreement. Hence, the suit is not maintainable based on promissory note.
e)It is contended that no consideration was passed under the promissory note and the amount was paid under agreement of loan by way of cheque and the promissory note was obtained for cash consideration as stated in the printed pronote, but the said word is not scored off. As such, the promissory note was not executed by the defendant receiving consideration, but it is only executed as collateral security. Thereby, the suit is not maintainable.
f)The adhesive stamps affixed on pronote were not cancelled as per law and pronote is deemed to be unstamped.
g)Finally, it is contended that on receipt of a registered legal notice, appropriate reply was issued setting forth the real facts. Hence, the defendant is not liable to pay any amount to the plaintiff and finally prayed for dismissal of the suit.
04.Basing on the above pleadings, my predecessor in office i.e. III Additional District Judge, FAC:V Addl. District
Judge, Guntur, framed the following issues:-
1. Whether the court has got territorial jurisdiction to try the suit?
2. Whether the plaintiff is entitled for the suit amount as prayed for?
3. To what relief?
05. During the course of trial, on behalf of plaintiff, PWs 1 and 2 were examined, marked Exs.A.1 to A.7 before V
Additional District Judge, Guntur. On behalf of the defendant,
D.Ws.1 and 2 were examined, marked Exs.B1 to B5 before this court.
06. During course of argument, the learned counsel for plaintiff advanced oral argument, mainly contending that there was no loan agreement between the plaintiff and the defendant directly or plaintiff represented by B. Anand, Managing Director of M/s. Millennium Finance Limited, Hyderabad and it is an invention made by the defendant obviously for different reasons and to avoid the debt due under the promissory note. The promissory 5 note is in the handwriting of the defendant himself being a highly qualified professional doctor running a corporate hospital at Tadepalli, Guntur District. Mere scoring or failure to score any words in the promissory note in vernacular is not a ground to disbelieve the transaction covered by Ex.A1.
Added to that payment of huge amount of Rs.1,20,01,000/- towards interest and part of principal amount itself is sufficient to conclude that the defendant borrowed amount, executed promissory note evidencing receipt of consideration there-under. Otherwise, there is no need for him to pay huge amount of Rs.1,20,01,000/- and endorse those payments on the reverse of promissory note. As such, the promissory note is an independent transaction unconnected with the alleged loan agreement if any in existence. Therefore, the defendant is liable to discharge the debt due under the promissory note.
It is further contended that when the plaintiff and the defendant are income tax assesses highly qualified professionals, the payments made by the defendant shall be appropriated towards principal as per Section 60 of the Indian Contract Act when the application or appropriation of payments were not specified under agreement and the contention of the defendant regarding appropriation of payments towards principal is without any basis.
The counsel for the plaintiff further contended that the particulars of the plaintiff in Ex.A1 is certain and it is not ambiguous. Hence, the contention of the defendant that Ex.A1 is not a promissory note in view of alleged uncertainty in the name of the plaintiff is untenable.
Lastly, it is contended that two revenue stamps are affixed on Ex.A1 promissory note and they were duly cancelled signing across adhesive stamps affixed on the promissory note marked as Ex.A1. So that those two adhesive stamps shall not be used again on any document. Hence, cancellation of adhesive stamps on Ex.A1 is in accordance with Section 12 of the Indian Stamp Act. Hence, on this ground, the suit cannot be dismissed. Even otherwise, when the document is admitted in evidence, it cannot be questioned again in view of bar contained under Section 35 of the Indian Stamp Act. On this ground alone, the objection raised by the counsel for the defendant cannot be sustained.
Finally, the counsel for the plaintiff contended that this court alone has territorial jurisdiction since the defendant is 6 permanently carrying on business at Tadepalli, Guntur District which is within territorial limits of the District Court, Guntur. Hence, this court has got jurisdiction to try the suit in view of Section 20 of the Code of Civil Procedure. Thereby, the suit is maintainable.
The learned counsel for the plaintiff denied the existence of loan agreement and execution of Ex.A1 as collateral security pointing out several inconsistencies in the evidence and prayed to pass a decree in favour of the plaintiff for the suit amount together with subsequent interest.
Whereas, the counsel for the defendant filed written arguments without advancing any oral argument, and raised several contentions totally contrary to the pleadings in the written statement.
The gist of the contentions is as follows:-
a) The promissory note marked as Ex.A1 did not satisfy the requirements of promissory note as defined under Section 4 of the Negotiable Instruments Act, since, the descriptive details of the plaintiff mentioned in the promissory note Ex.A1 are not true and uncertain. When the details mentioned in Ex.A1 are not sufficient to identify the payee with certainty, in the absence of details like age, father’s name, religion, address and signature on the promissory note Ex.A1, are required to identify the promisee under Ex.A1 to identify the person and it has to satisfy the conditions required under Section 4 of the Negotiable Instruments Act, in view of the language used in Section 4 of the Negotiable Instruments Act. Hence, there is any amount of uncertainty regarding the details of the plaintiff in Ex.A1, thereby, it is not a promissory note within the ambit of Section 4 of the Negotiable Instruments Act.
It is further contended that on online search, there are at least six individuals with the following different addresses:- (1) 17608 San Bernardino Dr, Orland Park, IL 60467 USA (2) Frisco, Texas, USA (3) Oak Brook, Illinois, USA (4) University of Calcutta/N.R.S. Medical College, (5) Plaintiff’s address given in plaint i.e. Sasthanur village, North Bangalore, (6) c/o. Millennium Finance, Hyderabad i.e. address given in Ex.A1. Hence, in view of availability of six persons with the same name at different places due to uncertainty of identification of the plaintiff basing on Ex.A1, it cannot be said to be a promissory note and thereby, no presumption of passing of consideration 7 under Section 118 shall be drawn. On this ground defendant prayed to dismiss the suit.
(b)One of the contentions of the defendant is that B. Anand obtained the promissory note and sent the same to the plaintiff at America and it is a story invented after one year though the promissory note was in the custody of the plaintiff’s nephew by name Yogendar. But, how Yogendar came into possession of the promissory note was not explained and in the absence of examination of B. Anand and Yogendar, the claim of the plaintiff based on Ex.A1 cannot be accepted.
(c)In addition to the above contentions, some words in vernacular were scored off like ‘Sammathi’ and ‘Rokkam’ and the contents of Ex.A1 clearly show that Ex.A1 was not executed with free consent, thereby, Ex.A1 is not enforceable under law.
(d)The plaintiff did not deny the existence of loan agreement in his evidence, signed by B. Anand on behalf of the plaintiff and non-examination of B. Anand is fatal to the case of the plaintiff. Apart from that the notice under Section 12 Rule 8 of C.P.C. was issued for production of loan agreement, but the same was not produced and no reply was filed by the plaintiff. In the absence of any reply or production of loan agreement, an adverse inference shall be drawn and in the absence of any denial of existence of loan agreement, the contention of the defendant is to be accepted and conclude that Ex.A1 was executed as a collateral security for loan agreement executed in favour of B. Anand on behalf of the plaintiff by the defendant.
(e)The defendant also contended that no cash consideration was passed under Ex.A1 and issuance of a cheque itself does not amount to passing of consideration, thereby, the alleged promissory note is not supported by consideration as there is no evidence on record to prove that the cheque was encashed by the defendant presenting the same into bank. When the promissory note is not supported by consideration, the plaintiff is not entitled to recover amount in view of Section 43 of the Negotiable Instruments Act since the promissory note creates no obligation of payment between the parties to the transaction.
(f)Further, it is contended that no presumption under Section 118(a) of the Negotiable Instruments Act shall be drawn since there are several improbabilities and doubts about passing of consideration.
(g)One of the contentions of the defendant is that adhesive stamps on the promissory note were not properly cancelled to validate the promissory note, on 8 the strength of Ex.A1, the suit cannot be decreed.
(h)The plaintiff has no money lending license either in America or in India and any money lending activity by the plaintiff in India is illegal and in violation of Foreign Exchange Management Act, 1999 and according to Reserve Bank of India guide lines, the plaintiff is not entitled to recover the suit amount. At page No.10 of the written arguments, the counsel for the defendant pointed out several inconsistencies in the evidence of plaintiff and prayed for dismissal of the suit.
The defendant’s counsel in support of his contentions, placed reliance on a judgment reported in AIR 1953 Calcutta
page 758 (Ambalal Purusottamdas and Company Vs.
Jawarlal Purusottam Dave and others) and filed Reserve Bank of India guide lines, Foreign Exchange Management Act, 1999 to substantiate his contentions.
07.Though several contentions were raised by the defendant based on both law and fact, most of the contentions are not based on pleas raised in the written statement. My predecessor in office farmed only two issues. The 1st issue is pertaining to territorial jurisdiction of this court and the 2nd issue is pertaining to entitlement of the plaintiff to recover suit amount. However, it is the duty of the trial court to record its finding on various contentions based on law, though not pleaded in the written statement.
ISSUE No.1:
08.The suit is filed based on promissory note executed by the defendant in favour of the plaintiff for Rs.1,20,00,000/-. Ex.A1 is the suit promissory note for Rs.1,20,00,000/- dated 7.1.2002. The promissory note is in the hand writing of the defendant himself and attested by one B. Anand and P.W.2 (Tipirneni Janaki Ramana). The residence of the defendant is mentioned as “Sowmya Nagar, Tadepalli-522 501, A.P.” and the amount was borrowed for business improvement as seen from the contents of Ex.A1. The defendant is residing permanently at Sowmya Nagar of Tadepalli which is part of Guntur District and he is permanently carrying on business establishing a corporate hospital in the name and style of ‘Sowmya Appolo Hospital’.
09.Prior to filing of the suit, a legal notice marked as Ex.A3 was got issued by the plaintiff through his advocate Dama Seshadri Naidu, Advocate, Hyderabad demanding the defendant to discharge the debt due under the promissory note. The notice 9 was addressed to Manipal Hospitals (Saumya Hospitals), Tadepalli, Guntur District was received and the same was acknowledged. Again Ex.A4-notice was issued addressing the same to the address mentioned above. Ex.A5 is the postal receipt, but it is not relevant. However, Ex.B3 is the reply notice got issued by the defendant. Even according to the particulars of the defendant mentioned in Ex.B3, the defendant is resident of ‘Saumya Nagar’ care of Manipal Hospital (Saumya Hospital), Tadepalli. The defendant was examined as D.W.1. In descriptive particulars of his affidavit filed under Order 18 Rule 4 of C.P.C., he clearly shown his address particulars as “Doctor/Business, resident c/o. Manipal Hospital, Sowmya Hospital, Tadepalli, Guntur District”. Even in the descriptive particulars of the witness in the deposition recorded by this court in the cross examination, he is the resident of Tadepalli which is part of Guntur District. Thus, the voluminous documentary evidence available on record is sufficient to conclude that the defendant is permanent resident of Tadepalli and is running Saumya Hospital at Tadepalli which is within the territorial limits of Guntur District Court.
10.According to Section 20 of the Code of Civil Procedure, every suit shall be filed in a Court within the local limits of whose jurisdiction, where the defendant or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain or any of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain, provided that in such case either the leave of the Court is given, or the defendants who do not reside, or carry on business, or personally work for gain, as aforesaid acquiesce in such institution; or the cause of action, wholly or in part, arises. In the instant case on hand, the defendant is permanently residing at Tadepalli and carrying on business running a corporate hospital by name ‘Saumya Appolo Hospital’, now renamed as ‘Manipal Hospital’, that means, he is carrying on business or working for gain at Tadepalli which is part of Guntur District. Though the cheque was handed over and encashed at Hyderabad and executed Ex.A1 at Hyderabad, since the defendant is permanently residing at Tadepalli and carrying on business or working for gain at Tadepalli which is within the jurisdiction of this court, this court is having jurisdiction to try the present suit. Hence, the objection of the defendant with regard to the territorial jurisdiction of the court is untenable.
11.One of the contentions raised by the counsel for the defendant is that there is a loan agreement and Ex.A1 is executed as a collateral security. According to Clause 7 of the 10 said agreement, the dispute if any is subject to jurisdiction of Hyderabad and there is an arbitration clause for referring the disputes to the Arbitrator. Undoubtedly, if there is any agreement in existence, limiting the jurisdiction to Hyderabad or containing a clause to refer the dispute to the Arbitrator, the civil court has no jurisdiction in view of Section 8 of the Arbitration and Conciliation Act. According to the defendant, B. Anand as Managing Director of M/s. Millineum Finance Limited as an agent of the plaintiff entered into loan agreement with the defendant and the said agreement contained an arbitration clause to refer the disputes and limiting the jurisdiction of the courts at Hyderabad. But, the alleged loan agreement has not seen the light of the day till today. Even otherwise, any such agreement is in existence, the said Anand is not competent to enter into a loan agreement as an agent of the plaintiff, unless he is authorized in writing by the plaintiff either specially or generally to act on his behalf that means by executing any Special or General Power of Attorney. But in the written statement, a specific contention is raised that the loan agreement was entered with B. Anand and made an attempt to introduce the Photostat copy of the agreement to prove the said contention and further contended that the existence of loan agreement was not denied by the plaintiff originally, but by filing additional affidavit as examination in chief contended that Anand was not authorized to enter into any agreement.
12.The plaintiff denied the existence of any such loan agreement entered into by B. Anand with the defendant on behalf of the plaintiff styling it as loan agreement. However, there is absolutely no evidence on record to establish that the said B. Anand, Managing Director of M/s. Millinium Finance Limited was authorized to enter into any agreement with the defendant. It is settled law that in the absence of any authorization in writing by the plaintiff, said B. Anand cannot enter into any agreement with the defendant. As on today, no such agreement is brought on record and marked as exhibit for inspection of this court to believe the contention of the defendant. Hence, I find absolutely no evidence to establish existence of any loan agreement and execution of Ex.A1 as collateral security.
13.The defendant adopted a different procedure by issuing notice under Order 12 Rule 8 of the Code of Civil Procedure to the plaintiff to produce the alleged agreement and contended that when notice under Order 12 Rule 8 of C.P.C. was issued, it is for the plaintiff to produce the loan agreement, otherwise, an adverse inference is to be drawn. In fact, the plaintiff denied the very existence of loan agreement and even according to the defendant, the loan agreement was not between the plaintiff and the defendant, but it was between the plaintiff 11 represented by B. Anand and Doctor Chintamaneni Suresh i.e. the defendant herein. It is well settled legal position that when Anand was not authorized to enter into such loan agreement with the defendant, the agreement if any in existence is not binding on the plaintiff and no adverse inference shall be drawn for non production of loan agreement by the plaintiff, as the court did not direct the plaintiff to produce such document. In the absence of any direction to produce the documents, non-production of the documents would not go against the person who did not produce and it does not amount to discharging initial burden as rests on the defendant to prove his contention. Hence, an inescapable conclusion can be arrived at that B. Anand was not authorized to enter into loan agreement with the defendant and no adverse inference shall be drawn by this court for non production of such agreement by the plaintiff after receiving notice under Order 12 Rule 8 of the C.P.C.
14.The defendant though contended that there is a clause to refer the disputes to the Arbitrator and in view of Section 8, the Civil Court has no jurisdiction, the same is not substantiated by any documentary or oral evidence, except raising a plea in the written statement. In the absence of any documentary evidence and proof of existence of any loan agreement, this court has no option except to conclude that no loan agreement is in existence which takes away territorial or inherent jurisdiction of this court.
15.In view of my foregoing discussion, I find that the defendant is permanently residing at Tadepalli and carrying on business, working for gain which is within the territorial jurisdiction of this court and that in the absence of any agreement to refer the disputes to the sole Arbitrator, the inherent jurisdiction of the civil court is not ousted. Thus, this court alone has got territorial and inherent jurisdiction to try the suit. Accordingly, this issue is answered in favour of the plaintiff and against the defendant.
ISSUE No.2:-
16.The plaintiff based the claim on the foot of promissory note marked as Ex.A1 and also the part-payments made by the defendant towards discharge of the interest due under Ex.A1 and endorsed on the reverse of the promissory note, acknowledging his liability. Whereas, the defendant contended that Ex.A1 was executed as a collateral security for the loan transaction covered by a loan agreement between the plaintiff represented by B. Anand and the defendant. Therefore, suit basing on the promissory note marked as Ex.A1 is not maintainable. When the plaintiff filed the suit basing on promissory note and execution of the same is admitted by the defendant, it is for the defendant to prove that it was executed as a collateral security for the loan agreement and the burden heavily lies on the defendant in view of Sections 102 and 103 of the Evidence Act. According to Section 102 of the Evidence Act, 12 the burden of proof in a suit or proceeding lies on the plaintiff who would fail if no evidence at all were given on either side. According to Section 103 of the Evidence Act, the burden of proof as to any particular fact lies on that person who wishes the Court to believe its existence, unless it is provided by any law that the proof of that fact shall lie on any particular person. In the instant case on hand, the defendant set up a loan agreement between the plaintiff represented by B. Anand and the defendant and Ex.A1 was executed as a collateral security. The plaintiff denied existence of any such loan agreement. Therefore, the execution of particular loan agreement is within exclusive knowledge of the defendant and the said B. Anand, if any, the agreement is in existence. If the defendant failed to adduce any evidence to prove existence of such loan agreement, the claim of the plaintiff is to be accepted. Therefore, the burden lies upon him to prove the existence of such loan agreement. Here, except examining the defendant himself, no other evidence is adduced to prove the existence of such loan agreement between the plaintiff and the defendant and that Ex.A1 was executed as a collateral security.
17.The learned counsel for the plaintiff has drawn the attention of this court to several judicial admissions in the written statement of the defendant regarding execution of Ex.A1, so also, the registered correspondence between the plaintiff and the defendant. In para No.9 of the written statement, the defendant made clear admissions about execution of Ex.A1 and for better appreciation, the judicial admissions made by the defendant are extracted hereunder:- “The suit promissory note is in printed vernacular Telugu and the blanks are filled up in English. Therefore, it is clearly provided that the consideration for the pronote was paid in cash but the loan was given by cheque. It is therefore, submitted that the loan agreement by cheque and the pronote was obtained for cash consideration as stated in the printed pronote from which is not scored off. Therefore, the suit pronote is not a promissory note executed by the defendant towards loan given to the defendant since the loan was given under loan agreement. It is submitted that the pronote is obtained towards collateral security and therefore, the words 'consideration' paid in cash mentioned in the pronote have not been cancelled. Thus, the pronote by itself is not actionable at law since the consideration is not certain which is vague. The said promissory note is attested by the plaintiff Agent B. Anand.”
From the judicial admissions made in the written statement extracted above, it is clear that promissory note was executed by the defendant. But contended that it was executed towards a collateral security. When, I advert to the evidence of D.W.1 in the examination in chief, D.W.1 made the following admission:- 13 “The suit promissory note is in printed vernacular Telugu and the blanks are filled up in English. Therefore, it is clearly provided that the consideration for the pronote was paid in cash but the loan was given by cheque. It is therefore, submitted that the loan agreement by cheque and the pronote was obtained for cash consideration as stated in the printed pronote from which is not scored off. Therefore, the suit pronote is not a promissory note executed by me towards loan given given to me since the loan was given under loan agreement. It is submitted that the pronote is obtained towards collateral security and therefore, the words 'consideration' paid in cash mentioned in the pronote have not been cancelled. Thus, the pronote by itself is not actionable at law since the consideration is not certain which is vague. The said promissory note is attested by the plaintiff Agent B. Anand.”
In the cross examination, the defendant denied scribing of Ex.A1 and signature as executant on Exs.A1, A6 and A7 while admitting signature on Ex.A2 and writing there in. He also admitted in 12th and 13th lines of cross examination from the bottom that the contents of his written statement and the affidavit filed by him by way of examination are true. If the admissions in written statement and examination in chief are accepted, the defendant himself admitted about execution of Ex.A1 while contending that it was executed as a collateral security. When he was cross examined, he totally denied execution of Ex.A1 giving go bye to his judicial admissions in the written statement, so also in his examination in chief, by filing an affidavit under Order 18 Rule 4 of C.P.C. Therefore, D.W.1 is not wholly reliable witness though he is a qualified professional doctor running a corporate hospital, in his evidence denied his own judicial admission in the written statement and also in the examination in chief.
18.In view of the specific qualified judicial admission in the written statement referred supra, it is the best piece of evidence. Admissions are two types, one is judicial admission and another is evidentiary admission. In the instant case on hand, the qualified judicial admission in the written statement and reply notice are clear that the defendant himself executed Ex.A1-promissory note. But the evidence in cross examination is totally contrary to the judicial admission. Admissions are not conclusive proof, but the admissions estop the person who made such admission under Section 18 of the Evidence Act. More over, the judicial admission is on different footing than the evidentiary admission. When the judicial admission is made in the pleadings or in any document regarding a particular fact in issue, such fact need not be proved by adducing any amount of evidence in view of Section 58 of the Indian Evidence Act. It is settled law that admission is best piece of evidence in view of the principle laid down in a judgment reported in AIR 1977 SC 1712 (Sita Ram Bhau Patil Vs. Ramachandra Nago Patil),wherein it was held 14 that:- “Admission is the best piece of substantive evidence that an opposite party can rely upon, though not conclusive, is decisive of the matter, unless successfully withdrawn or proved erroneous. Admission may in certain circumstances, operate as an estoppel. The question which is needed to be considered is what weight is to be attached to an admission and for that purpose it is necessary to find out as to whether it is clear, unambiguous and a relevant piece of evidence, and further it is proved in accordance with the provisions of the Evidence Act. It would be appropriate that an opportunity is given to the person under cross-examination to tender his explanation and clear the point on the question of admission.” In view of the above, the law on the admissions can be summarised to the effect that admission made by a party though not conclusive, is a decisive factor in a case unless the other party successfully withdraws the same or proves it to be erroneous. Even if the admission is not conclusive it may operate as an estoppel. Law requires that an opportunity be given to the person who has made admission under cross- examination to tender his explanation and clarify the point on the question of admission. Failure of a party to prove its defence does not amount to admission, nor it can reverse or discharge the burden of proof of the Plaintiff.”
In another decision reported in AIR 1956 SC 593
(Nagubai Ammal and others Vs. B. Shama Rao and others)
wherein the Apex Court held that:
“Admission made by a party is admissible and best evidence, unless it is proved that it had been made under a mistaken belief. While deciding the said case reliance has been placed upon the judgment in Slatterie v. Pooley, , wherein it had been observed "What a party himself admits to be true, may reasonably be presumed to be so."
The aforesaid two judgments along with some other judgments of High Court were considered by the Apex Court in a judgment reported in (2012) 8 SCC 148.
In view of the principle laid down in the above judgments, the judicial admission made in the written statement and examination in chief of D.W.1 which is a evidentiary admission and earlier registered correspondence Ex.B1 are sufficient to establish that the defendant executed Ex.A1 for Rs.1,20,00,000/- in favour of the plaintiff.
19. One of the contentions of the defendant is that Ex.A1 was executed as collateral security, but the said fact was not proved by producing the loan agreement. On the other hand, the counsel for the defendant requested to draw an adverse inference for non-production of the document as the plaintiff did not produce the loan agreement in spite of notice under Order 12 Rule 8 of C.P.C. In the absence of any pleadings that the loan agreement is in possession of the plaintiff, the plaintiff is not required to produce the same before this court. On the other 15 hand, the plaintiff denied about existence of any such agreement between himself and the defendant. As such, the court cannot draw any adverse inference as per the principle laid down in a judgment reported in 2005(1) SCC 639 (Mahendra L. Jain and others Vs. Indore Development Authority and others), wherein it was held as follows:- “Mere non-production of documents would not result in adverse inference. If a document was called for in the absence of any pleadings, the same was not relevant. An adverse inference need not necessarily be drawn only because it would be lawful to do so.”
20.Added to that, under Order 11, Rule 12 of the Code of Civil Procedure coupled with Rule 14, on the application of any party to the suit, the court may direct the other party to produce the documents, which are in possession or power of adversary. But, in the instant case on hand, no notice as contemplated under Order 11 Rule 12 of the Code of Civil Procedure was issued to direct the plaintiff to produce the loan agreement. In the absence of any such direction, non production of the loan agreement by the plaintiff is not sufficient to draw any adverse inference under Section 114(g) of the Evidence Act, in view of the principle laid down in the judgment reported in AIR
1967 SC page 1134 (Ramrati Kuer Vs.Dwarika Prasad
Singh and others), wherein it was held as follows:
“It is true that Dwarika Prasad Singh said that his father used to keep accounts. But no attempt was made on behalf of the appellant to ask the court to order Dwarika Prasad Singh to produce the accounts. An adverse inference could only have been drawn against the plaintiffs-respondents if the appellant had asked the court to order them to produce the accounts and they had failed to produce them after admitting that Basekhi Singh used to keep accounts. But no such prayer was made to the court, and in the circumstances, no adverse inference could be drawn from the non-production of accounts.”
In another judgment reported in AIR 1915 PC page 96 (Mt.Bilas Kunwar Vs. Desraj Ranjit Singh), the Privy Counsel held as follows:
“It is open to a litigant to refrain from producing any document that he considers irrelevant; if the other litigant is dissatisfied, it is for him to apply for interrogatories/inspections and production of documents. If he fails to do so, neither he nor the Court at his suggestion, is entitled to draw any inference as to the contents of any such documents.”
In another judgment reported in AIR 1967 SC page
256 (Mahant Shri Srinivas Ramanuj Das Vs. Surjanarayan
Das and another), it was held as follows:
“It is true that the defendant-respondent also did not call 16 upon the plaintiff-appellant to produce the documents whose existence was admitted by one or the other witness of the plaintiff and that therefore, strictly speaking, no inference adverse to the plaintiff can be drawn from his non-producing the list of documents. The Court may not be in a position to include from such omission that those documents would have directly established the case for the respondent. But it can take into consideration in weighing the evidence or any direct inferences from established facts that the documents might have favoured the respondent case.”
The law is well settled that basing on drawing adverse inference, the court cannot dismiss the suit, ignoring the burden of proof.
In the recent judgment reported in AIR 2012(8) SCC page 148 (Union of India Vs. Ibrahim Uddin and another), Their Lordships Justice B.S.Chowhan and Deepak Misra discussed about the presumption under Section 114(g) of the Evidence Act at length and held in para 16 as follows:
“In case one party has asked the court to direct the other side to produce the document and other side failed to comply with the court’s order, the court may be justified in drawing the adverse inference. All the pros and cons must be examined
before the adverse inference is drawn. Such presumption is
permissible, if other larger evidence is shown to the contrary.”
From the entire law laid down by the Hon’ble Apex Court, it is clear that the presumption can be drawn only in certain circumstances referred above and the notice is required to be given calling upon the adversary to produce the documents. In the absence of any direction to produce the document, non- production of the document would not go against the person who did not produce and it does not amount to discharging initial burden rests on the defendant to prove his contention in the suit.
By applying the principle laid down in the above decision, it is clear that the burden is upon the defendant to prove that there exists a loan agreement between the plaintiff and the defendant and Ex.A1 is executed as a collateral security for the debt covered by loan agreement. Thus, the burden is only on the defendant to prove existence of any such loan agreement. Here, no such agreement is brought on record and marked the same to substantiate his contention and failed to discharge his burden. Hence, by drawing an adverse inference, the court cannot accede to the request of the defendant.
On overall consideration of entire evidence on record, the defendant miserably failed to establish about existence of loan agreement and execution of Ex.A1 as collateral security. Therefore, I find no substance in his contention and the same is not accepted while believing execution of Ex.A1.
17
21.Though my predecessor in office framed a comprehensive issue regarding entitlement of the plaintiff to recover suit amount, the pleadings and evidence on record give raise to several aspects which are required to be considered in view of the serious contest in the suit between the parties. Hence, the following are the controversial points between the parties, required to be decided by this court.
(1)Validity of cancellation of adhesive stamps affixed on Ex.A1-promissory note; (2)Appropriation or application of payments; (3) Scoring off letters 'Sammati'and passing of consideration by cash i.e. 'rokkham' but issued a cheque invalidates the promissory note.
(4) Ex.A1 is not a promissory note as defined under Section 4 of the Negotiable Instruments Act due to uncertainty of promissee.
(5)Plaintiff is a money lender without license; hence, he is not entitled to recover the suit mount.
(6) Validity of part payments endorsed on the reverse of Ex.A1.
(7)Passing of consideration; (8)Entitlement of the plaintiff to a decree in view of Foreign Exchange Management Act, 1999 and Reserve Bank of India Guidelines.
In view of the specific contentions raised in the written statement and in the written arguments, I would like to decide each of the points raised by the defendant in the order mentioned above.
(1) Validity of cancellation of adhesive stamps affixed on Ex.A1-promissory note;
22.In para No.10 of written statement, the defendant mainly contended that two adhesive stamps were 18 affixed on the promissory note and they were not cancelled properly putting the date across the stamp from one end to the other and thereby, the promissory note is deemed to be unstamped and on the strength of the same, decree cannot be passed. Specific procedure is prescribed for cancellation of adhesive stamps affixed on any document under Section 12 of the Indian Stamp Act. At the same time, Section 11 of the Indian Stamp Act permits use of adhesive stamps on several instruments referred in clauses (a) to (e) of Section 11 of the Indian Stamp Act, but it is not relevant. Section 12 of the Indian Stamp Act prescribed the procedure for cancellation which is extracted hereunder for better appreciation.
“12. Cancellation of adhesive stamps:- (1)(a) Whoever affixes any adhesive stamp to any instrument chargeable with duty which has been executed by any person shall, when affixing such stamp, cancel the same so that it cannot be used again; and
(b) whoever executes any instrument on any paper bearing adhesive stamp shall, at the time of execution, unless such stamp has been already cancelled in manner aforesaid, cancel the same so that it cannot be used again. (2) Any instrument bearing an adhesive stamp which has not been cancelled so that it cannot be used again, shall, so far as such stamp is concerned, be deemed to be unstamped. (3) The person required by sub-section (1) to cancel an adhesive stamp may cancel it by writing on or across the stamp his name or initials or the name or initials of his firm with the true date of his so writing, or in any other effectual manner.”
A bare look at clauses 1 to 3 of Section 12 of the Indian Stamp Act, any person who affixed an adhesive stamp on any instrument is required to cancel the same. So that it cannot be used again in sub clauses (a) and (b) of clause 1. Thus, the purpose of cancellation is to prevent any person from using the same adhesive stamp again.
23.According to clause 2, if the adhesive stamp is not cancelled, so that it can be used again, the document shall be deemed to be unstamped and it supports the contention raised in para No.10 of the written statement filed by the defendant. Clause (3) specifically prescribes the mode of cancellation. According to it, an adhesive stamp can be cancelled by writing on or across the stamp his name or initials of his firm with the true date etc. or in any other “effectual manner”. Clause 3 is comprehensive in nature and it specifies the modes of cancellation by writing across the stamp his name or initials of his firm with the true date of his so writing or in any other effectual manner.
24.The word 'any other effectual manner' includes 19 different kinds of cancellation of adhesive stamps affixed on the document. The main purpose of cancellation is only that the same adhesive stamp shall not be used again on any other document. If the cancellation in any other effectual manner prevents any person from using those stamps, that is sufficient cancellation. The plea that the promissory note is not cancelled properly is sustainable, if, the adhesive stamps are not cancelled as contemplated under Section 12 of the Indian Stamp Act. Drawing two parallel lines on the stamps is held to be due cancellation of stamps as held by the High Court in a judgment reported in 2007(6) ALT 69 (Valluru China Lakshmi Vrs. Majji Dharma Rao).
25.There is no particular manner of cancellation provided in the Stamp Act. What is important is that the cancellation should be in a manner that the stamps cannot be used again, it shall prevent any person from using those stamps again, to constitute proper cancellation. In that view, the Hon'ble High Court of Andhra Pradesh laid down the law as follows:-
In a decision reported in AIR 2010 AP 155 (Chaganti Venkata Bhaskar vs. C. Chandrasekhar Reddy), Her Lordship Justice G. Rohini, held as follows:- “C ancellation of adhesive stamps affixed on any instrument chargeable with duty is mandatory. Section 12(2) stated that in absence of such cancellation, instrument should be deemed to be unstamped.”
In the facts of the above judgment, the signature of defendant on adhesive stamp did not commence with, actually on promissory note and promissory note was fabricated. So, the trial court had rightly recorded a finding that the suit promissory note should be deemed to be unstamped and the same was upheld by the Hon'ble High Court.
In another judgment reported in AIR 2009 AP 14
(Mohd. Jani Miya alias Khaja Moinuddin Jani vs. Koriginja
(Varala) Ramesh and Another, his Lordship Justice L. Narasimha Reddy reiterated the same principle.
However, in the earliest judgment reported in AIR
1963 AP 378 (A. Narayana Reddy vs. Dr. J. Sarojini Devi
and Another), His Lordship Justice Narasimham held as follows:- “A plain reading of this section would indicate that the section postulates the cancellation of a stamp in a manner that it cannot be used again. The provision also indicates that cancellation of a stamp may be done by writing the name of the 20 executant on it or initialling the same or in any other effectual manner. There can be no controversy that the provision does not say that cancellation has to be effected only by signing the name. It would appear that advisedly this provision was introduced to give effect to the customary ways of cancelling stamps obtaining in the law merchant. The true test, therefore for determining whether an adhesive stamp has been effectually cancelled is whether an ordinary man would, on seeing the stamp, believe that it had already been used so as to preclude him from using it again. This question, in its very nature, is one of fact to be decided on an examination of the stamp in each particular case. Having a careful look at the instrument in question, it would be difficult to say that the stamp which bears a line across it would carry an impression that it was not used. It is sufficiently indicative of its user.”
In the instant case on hand, Ex.A1 is the promissory note on which two adhesive stamps were affixed worth Re.1/- each. The defendant signed twice across the stamps. The signature commenced on the paper and ended on the 2nd adhesive stamp. Below the stamps also, he put his signature. Thus, it is clear from the cancellation of two adhesive stamps affixed on Ex.A1, the signature did not end on the paper, but terminated on the 2nd adhesive stamp. The promissory note is required to be stamped with one rupee adhesive stamp as per Article 49 of Schedule 1 of Indian Stamp Act. The first, one rupee adhesive stamp was cancelled strictly adhering to Section 12 of the Stamp Act, but the 2nd adhesive stamp was not properly cancelled as the signature terminated in the middle of the 2nd adhesive stamp. As the promissory note requires one rupee stamp, cancellation of first stamp is sufficient and as such, the document can be said to be properly cancelled and it is valid cancellation of the 1st stamp as the same stamp cannot be used again on any instrument.
26.Though a specific plea was raised in para No.10 of the written statement about improper cancellation of the adhesive stamps, at the time of marking Ex.A1 in evidence, the defendant did not arise any objection about the admissibility of Ex.A1 in evidence. When no objection was raised at the time of admitting Ex.A1 in the evidence and when the document was admitted without any objection, the objection cannot be raised during argument in view of the bar under Section 35 of the Indian Stamp Act. Even otherwise, when the 1st adhesive stamp is properly cancelled (without any deficiency) in the stamp, the document Ex.A1 can be said to be duly stamped as required stamp of Re.1/- was properly cancelled on Ex.A1. Hence, the contention of the defendant cannot be accepted as the adhesive stamps affixed on the promissory note are cancelled in accordance with Section 12(3) of the Indian Stamp Act.
21
2. Appropriation or application of payments:-
27.One of the contentions raised in para No.5 of the written statement is with regard to application or appropriation of amount already paid towards principal, but not towards interest. According to the plaintiff, the defendant paid Rs.1,20,01,000/- on three different occasions towards interest and part of the
principal. Thus, appropriated the part payments towards interest,
but not towards principal. Now the manner of appropriation is questioned in the written statement as well as in the written arguments. Ex.A1 is the basis for the suit claim and there is no method of appropriation or application of order of payments.
28.The suit document is promissory note governed by the provisions of Negotiable Instruments Act and it is a special contract. In the absence of any provision regarding appropriation of payment under Negotiable Instruments Act, the parties may take advantage of general law of contract and appropriate the payment if any made as per agreement or in the absence of any such agreement for appropriation or application of payments, the procedure laid down under the provisions of the Contract Act can be resorted to. Sections 59, 60 and 61 of the Indian Contract Act are the provisions pertaining to appropriation of payments. Section 59 of the Indian Contract Act deals with appropriation of payment where the debt is to be discharged is indicated. That means when there is direction for appropriation of payments, the manner in which it is agreed by the parties, the payment shall be appropriated. But, in the absence of any such contract for appropriation of payments or application of payments, Section 60 of the Indian Contract Act is applicable which says that where the debtor has omitted to intimate and there are no other circumstances indicating to which debt the payment is made, the creditor may apply at his discretion to any lawful debt actually due and payable to him from the debtor, where its recovery is or is not barred by the law in force for the time being or laws to the limitation of suits. Thus, omission of debtor to intimate, as to which debt the payment is to be applied, the creditor is at liberty to appropriate the amount towards any debt even if its recovery is barred by law of limitation. Similarly, in the absence of any express instruction, the payment can be appropriated towards interest, to the present facts of the case; Section 60 of the Indian Contract Act alone is applicable. Therefore, taking advantage of Section 60 of the Indian Contract Act, the learned counsel for the plaintiff contended that in the absence of any direction or instruction for appropriation or application of payments, the plaintiff appropriated the payments towards interest and part of the principal. Apart from the above contention, the learned counsel for the plaintiff drawn the attention of this court to the allegation in para No.5 of the written statement when it is contended that both the plaintiff and the defendant are income 22 tax assesses, when the defendant is income tax assessee, running a corporate hospital in the name and style of 'Saumya Appolo Hospital' (now Manipal Hospital), he is not entitled to claim the benefits of Andhra Pradesh Act 4 of 1938 and thereby, the amount shall be appropriated only towards interest and drawn the attention of this court to a decision reported in AIR
1922 PC 233 (Meka Venkatadri Appa Rao Zamindar v. Raja
Parthasarathi Appa Rao Bahadhur Zemindar ), wherein the Judicial Committee of the Privy Council observed that:
“The ordinary rule with regard to payments by the debtor unappropriated either to principal or interest that they can first to be applied to the interest.”
The same principle is reiterated in Meghraj's case reported in 1970 1 SCR 523, wherein the Supreme Court held that:- "The normal rule is that in the case of a debt due with interest any payment made by the debtor is in the first instance to be an applied towards satisfaction at interest and thereafter to the principal."
In another decision reported in AIR 2006 SC 2927
(National Textile Corporation (Gujarat) Limited VS. State
Bank of India and others) also, the Apex Court laid down the same principle.
In view of the principles laid down in the above decision, considering the provisions of Indian Contract Act, particularly, Sections 59 and 60, the defendant being a doctor and income tax assessee running a corporate hospital, is not entitled to claim benefits of Andhra Pradesh Act 4 of 1938. In the absence of any agreement for appropriation or application of payment, the same shall be appropriated towards interest first and later towards principal in view of the Supreme Court Judgment and the Privy Council Judgment. Thus, the plaintiff appropriated the payments in accordance with law and the contention of the defendant holds no substance and the same is turned down.
3. Scoring off words ' sammathi ' and passing of
consideration by cash i.e. 'r okkham ' but issued a cheque
invalidates the promissory note:
29.In fact there is no specific plea in the written statement with regard to this point and for the first time, the counsel for the defendant in the argument pointed out those aspects. In the absence of specific plea in the written statement, 23 the contention raised for the first time in the written argument cannot be looked into. Even otherwise, the defendant himself is the scribe of document Ex.A1 and signed as scribe of Ex.A1, so also, as executant of Ex.A1. The promissory note is a printed proforma in vernacular. The defendant scored the words 'sammati' in vernacular, that does not mean Ex.A1 was obtained without free consent. If really, Ex.A1 was obtained without free consent, either by using coercion or undue influence etc., that must be pleaded specially in the written statement. In the absence of any specific plea in the written statement, it is not open to the defendant to raise such contention for the first time in the written argument after completion of trial. Mere raising a plea in the written statement is also insufficient and it must be proved with cogent and satisfactory evidence. In the instant case on hand, absolutely no plea and no evidence about execution of Ex.A1 without free consent. Hence, mere scoring of the words 'sammathi' in vernacular in printed proforma of the promissory note is not a ground to disbelieve the transaction covered by Ex.A1.
30.Similarly, it is pointed out in the written argument that as seen from Ex.A1, there is a clear recital that the defendant received cash (mee vadda appugaa pucchukonna rokkam). The word 'rokkham' in vernacular was not scored out by the defendant and allowed to continue in Ex.A1. But the amount was paid by way of cheque. Merely because the defendant did not score the word 'rokkham' in vernacular, that would not invalidate the document. In fact, the defendant admitted about receipt of Rs.1,20,00,000/- from the plaintiff, but pleaded a different contemporaneous loan agreement and that Ex.A1 was executed as collateral security. Therefore, receiving consideration of Rs.1,20,00,000/- is not in dispute by way of cheque and collection of the amount from NRI Account of the plaintiff. Hence, failure of the defendant to score the word 'rokkam' in vernacular is not sufficient and on that ground, the suit cannot be dismissed.
4. Ex.A1 is not a promissory note as defined under
Section 4 of the Negotiable Instruments Act due to
uncertainty of promissee:-
31.One of the contentions of the defendant for the first time in the written argument is that Ex.A1 is not a promissory note satisfying the requirements of promissory note as defined under Section 4 of the Negotiable Instruments Act, due to uncertainty of the promissee on the ground that the details of the plaintiff mentioned as “Haranath Babu Rao Tiperneni, c/o. Millenium Finance Limited, Hyderabad (resident of America)”. As seen from the details of the plaintiff in Ex.A1, the 24 full address particulars of the plaintiff at America were not given, but care of address is furnished and the plaintiff can be identified basing on the name of the plaintiff mentioned in Ex.A1 and care of address mentioned in Ex.A1.
Section 4 of the Negotiable Instruments Act defined the word 'promissory note' as follows:- “4. "Promissory note":_ A "promissory note" is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a ‘certain person’, or to the bearer of the instrument.”
Taking advantage of the word 'certain person' in the definition of promissory note under Section 4 of the Negotiable Instruments Act, it is contended that when the address details were not furnished, the plaintiff cannot be said to be a “certain person” as required under Section 4 of the Negotiable Instruments Act. At any point of time, the identity of the plaintiff is not disputed either in the pleadings or in the evidence of plaintiff. On the other hand, the registered correspondence between parties clearly shows that the plaintiff is the person who lent amount under Ex.A1 and identity of the plaintiff was not questioned in the registered correspondence also. But for the first time, identity is questioned basing on online search of the address particulars referred in para 2 of the written arguments at page No.3 contending that there were six persons at the address mentioned therein. But this contention cannot be accepted in the absence of any specific plea in the written statement or in the absence of questioning the same during cross examination of P.W.1. On the other hand, the defendant himself admitted the transaction between the plaintiff and the defendant, but pleaded a different loan agreement for Rs.1,20,00,000/-. Hence, identity of the plaintiff is not in dispute at all. The recitals of Ex.A1 clearly shows that the plaintiff is the promissee under Ex.A1 and the defendant is maker or promissor under Ex.A1. Hence, I find no amount of uncertainty in the address particulars of the plaintiff. Thereby, the contention of the defendant cannot be accepted and Ex.A1 satisfied all the requirements of the promissory note as defined under Section 4 of the Negotiable Instruments Act.
5. The plaintiff is a money lender without licence; hence, he is not entitled to recover the suit amount:-
32.The defendant in the written argument contended that the plaintiff has no license under Money Lenders 25
Act and in the absence of any such license, the plaintiff is not entitled to a decree. Admittedly, the plaintiff is a doctor by profession in United States of America, but he lent Rs.1,20,00,000/- to the defendant due to his acquaintance. When any amount was lent due to friendship with the plaintiff or occasionally lending under promissory note requires no license under Andhra Pradesh (Telengana Area) Money Lenders Act (since the transaction took place at Hyderabad i.e. Telangana area) as held by the Hon'ble High Court in a judgment reported in AIR 1963 AP 442 wherein it was held:- “A person advancing money casually does not fall under the definition of money lender.”
In another judgment reported in 1968(1) ALT 341 also, the Hon'ble High Court held that:- “A mere isolated transaction of money lending and a person making it cannot be termed as a money lender.”
Hence, the contention of the defendant that the plaintiff without holding any license under Andhra Pradesh Money Lenders Act, is not entitled to a decree is without any substance. Apart from that no specific plea is raised in written statement. Hence, the defendant's contention is not accepted.
6. Validity of Part payments endorsed on the reverse of Ex.A1:
33.The plaintiff pleaded that the defendant paid Rs.1,20,01,000/- on three different occasions, except Rs.1000/- in cash, other two payments at the rate of Rs.60,00,000/- each was paid by way of cheque. The defendant denied part payments in the written statement. On the other hand, the defendant pleaded in para 5 of the written statement that the defendant paid entire suit amount already and claimed scaling down of interest in view of fluctuations in the rupee value equivalent to dollar value. Thus, the plaintiff admitted payment of amount towards part payments and also claimed in the same para that the payments made by the defendant have to be appropriated towards principal but not interest. Therefore, there is absolutely no dispute regarding part payments. In the entire written statement, the defendant did not deny part payment endorsements made on the reverse of Ex.A1 marked as Exs.A6 and A7. Hence, the part payments made under Ex.A1, endorsed on the reverse of Ex.A1 marked as Exs.A6 and A7 have to be accepted as it is supported by cogent and satisfactory evidence. I, therefore find that the defendant himself paid part payments towards discharge of the 26 debt due under the promissory note, endorsed those payments on the reverse of Ex.A1 marked as Exs.A6 and A7 acknowledging his liability to pay the debt due under Ex.A1-promissory note. If really, the defendant did not borrow amount under Ex.A1, the question of making part payments endorsements on the reverse of Ex.A1 does not arise. Hence, it is sufficient to conclude that the defendant made part payments and acknowledged his liability. Apart from that Rs.60,00,000/- on two occasions was paid by way of cheques. Those cheques were also encashed and amount covered by those cheques was deducted from the suit claim. Therefore, the part payments were established by the plaintiff and accepted by the defendant in the written statement which is a judicial admission.
7. Passing of consideration:
34.The defendant also contended that when no cash consideration was passed under Ex.A1, but issued a cheque for Rs.1,20,00,000/-, a presumption cannot be drawn under Section 118 of the Negotiable Instruments Act. As per my discussion in earlier paras, the defendant himself admitted execution of Ex.A1 which is a qualified judicial admission, but failed to prove that it was executed as a collateral security for the loan agreement. The plaintiff himself examined as P.W.1 besides examining P.W.2 who is one of the attestors to prove execution of Ex.A1. According to settled principles of law, a document can be proved by examining a person who witnessed the execution of the document as held by the Apex court in a judgment reported in AIR 1979 SC 14 [State (Delhi Admn.) Vs. Pali Ram], wherein the Hon'ble Apex Court in para 23 made the following observations:- “Just as in English Law, the Indian Evidence Act recognizes two direct methods of proving the handwriting of a person:
(1) By an admission of the person who wrote it; and (2) By the evidence of some witness who saw it written.
These are the best methods of proof. These apart, there are three modes of proof by opinion. They are:
(I) By the evidence of handwriting expert (Section 45); (II) By the evidence of a witness acquainted with the handwriting of the person who is said to have written the writing in question 27 (Section 47); and (III) Opinion formed by the Court on comparison made by itself (Section 73).
All these three cognate modes of proof involve a process of comparison.”
Thus, the plaintiff proved execution of Ex.A1 resorting to mode of proof laid down by the Apex Court in the judgment referred above. But, whereas, the defendant failed to prove that Ex.A1 was executed as a collateral security at least by examining with whom the defendant entered into agreement representing the plaintiff. In the absence of any evidence, the defendant's contention cannot be accepted and the plaintiff by adducing cogent and satisfactory evidence established execution of Ex.A1, passing of consideration of Rs.1,20,00,000/- to the defendant for improvement of his business i.e. corporate hospital.
35. When execution of promissory note is admitted, the burden is upon the defendant to prove that the promissory note Ex.A1 is not supported by consideration. The presumption under Section 118 of the Negotiable Instruments Act is rebuttable presumption since the language used in the section itself indicates that the court shall draw a presumption until the contrary is proved. Therefore, it is the obligation of the defendant to prove that Ex.A1 was not supported by consideration to dispel the legal rebuttable presumption contained under Section 118 of the Negotiable Instruments Act. In the instant case on hand, except contending that no cash consideration was paid, but cheque was issued, no other contention was raised. On the other hand, the admissions made in para 5 of the written statement are suffice to conclude that Ex.A1 is supported by consideration. Added to that the defendant miserably failed to adduce evidence to rebut or dispel the legal presumption by examining any witnesses independently or by eliciting anything in the cross examination of P.Ws.1 and 2.
The law is well settled on this point and it is summarized as follows:
In a decision reported in AIR 1987 A.P. page 139 [G.Vasu Vs. Syed Yaseen Sifuddin Quadri), the Hon’ble High Court discussed the scope of Sec.118 of Negotiable Instruments Act and the view expressed by the Hon’ble High Court was approved by the Hon’ble Apex Court in another decision reported in AIR 1999 Supreme Court Page 1008 [Bharat Barrel and Drum Manufacturing Company Vs. Amin Chand Payrelal], 28 wherein Their Lordships Justice V.N.Khare and Justice R.P.Sethi held as follows:
“Once execution of the promissory note is admitted, the presumption under Section 118(a) would arise that it is supported by consideration. Such a presumption is rebuttable. The defendant can prove the non-existence of 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 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 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.”
In another decision reported in 2008(1) SCC Page 258 [K.Prakashnan Vs. Surenderan], it was held as follows:
“Whether presumption stood rebutted or not, would depend upon the facts and circumstances of each case.”
Similar view is reiterated AIR 2009 SC Page 1518 [Kumar Exports Vs. Sharma Carpets] and in another decision reported in AIR 2008 S.C. Page 1325 [Krishna Janardhan Bhat Vs. Dattatraya G.Hedge], the Hon’ble Apex Court held as follows:
“Defendant can prove 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 29 instrument. 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 he relies”.
Similar view is expressed in another judgment reported in 2008(7) Supreme Court Cases Page 655
[Mallavarapu Kasivisweswara Rao Vs. Thadikonda Ramulu
Firm and others], wherein Their Lordships Justice Tarun Chatterjee and Justice H.S.Bedi held as follows:
“Under Section 118(a) of the Negotiable Instruments Act, the court is obliged to presume, until contrary is proved, that promissory note was made for consideration. Initial burden in this regard lies on the defendant to prove non-existence of consideration by bringing on record such facts and circumstances which would lead the court to believe non- existence of consideration either by direct evidence or by preponderance of probabilities showing that existence of consideration was improbable, doubtful or illegal. 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 negotiable instrument. If 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”.
36.From the consistent principles laid down by the
Hon'ble Apex Court in the above decisions, non-passing of
consideration and non-existence of consideration as stated in the plaint or in the document can be proved by producing any positive evidence or by eliciting certain facts in the evidence of plaintiff basing on preponderance of probabilities.
37.In the instant case on hand, the case of the defendant from the beginning is not consistent and failed to establish that the suit promissory note was not supported by consideration by adducing cogent and satisfactory evidence or by eliciting anything in the cross examination of P.Ws.1 and 2. Thus, the defendant miserably failed to rebut the legal presumption under Section 118 of the Negotiable Instruments Act. Hence, the judicial admissions in para No.5 of the written statement are suffice to conclude that Ex.A1 is supported by consideration. Thereby, the contention of the defendant is without any substance and the same is turned down.
8. Entitlement of the plaintiff to a decree in view of
Foreign Exchange Management Act, 1999 and Reserve
Bank of India Guidelines:
38.The last contention of the defendant is that in 30 view of provisions of Foreign Exchange Management Act, 1999 and Reserve Bank of India Guide Lines, the plaintiff is not entitled to claim decree. The counsel for the defendant drawn the attention of this court to Sections 2 and 6 of the Foreign Exchange Management Act, 1999, so also, the Reserve Bank of India Guide Lines issued under Foreign Exchange Management Act, 1999. According to those provisions, a permission is to be obtained from the Reserve Bank of India to invest in shares, securities, commercial papers of an Indian company or for purchase of immovable property in India provided such investment/purchase is covered by the regulations made, or the general/special permission granted, by the Reserve Bank. At the same time, any borrowing or lending in rupees in whatever form or by whatever name called between a person resident in India and a person resident outside India is liable for penalty under the Foreign Exchange Management Act. Even Reserve Bank Guide Lines did not say anything about dis-entitlement of the plaintiff to claim any decree. Thus, the provisions of the Foreign Exchange Management Act and the Reserve Bank of India Guide Lines would not come to the aid of the defendant to decline passing of any decree in favour of the plaintiff for recovery of the suit amount; more over no specific plea was raised in written statement. Hence, I find no substance in any of the contentions of the defendant.
39.Finally, the counsel for the defendant contended that there are several discrepancies in the evidence of plaintiff with regard to possession of Ex.A1 and pointed out some of the discrepancies at pages 10 to 12 of written arguments. Those discrepancies are minor in nature and it is settled law that minor discrepancy which would not go to the root of the case is guarantee of truth, when the evidence of witnesses inspires confidence of the court, the court is bound to accept the evidence of independent witness P.W.2 who was present at the time of execution of Ex.A1. On the other hand, those inconsistencies in the evidence are insignificant for the reason that the defendant himself admitted about execution of Ex.A1, but pleaded that it was executed as a security for the loan agreement which remained unproved. On the other hand, in para No.5 of the written statement, the defendant contended that he discharged entire amount covered by suit transaction which is based on promissory note and also claimed appropriation of payments towards principal. Thus, these crucial qualified judicial admissions in para No.5 of the written statement are suffice to disbelieve the contentions of the defendant raised in the written argument and most of them are not based on any pleadings. Therefore, I find nothing on record to disbelieve the evidence of P.Ws.1 and 2 and to believe the case of the defendant and self serving statement of D.W.2 who is a manager in the hospital of defendant.
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40.One of the contentions raised by the defendant is that he discharged the debt. In fact, discharge of the debt must be to the promisee or to the person authorized by him as per Section 82 of the Negotiable Instruments Act. The maker, acceptor or endorser respectively of a Negotiable Instrument is deemed to be discharged from liability thereof or cancellation. Here, the defendant pleaded discharge by payment which is not proved as required under Section 82 clause (c) of the Negotiable Instruments Act. Therefore, the discharge pleaded by the defendant is not accepted under any of the modes contained under Section 82 of the Negotiable Instruments Act.
41.On overall consideration of entire material available on record, I find that the plaintiff proved the suit transaction that the defendant borrowed Rs.1,20,00,000/- from the plaintiff and executed Ex.A1 and the debt remained un- discharged. Hence, the plaintiff is entitled to recover the suit amount. Accordingly, the issue is answered in favour of the plaintiff and against the defendant.
42. In the result, the suit is decreed with costs for Rs.1,09,03,035/- together with interest thereon at 12% p.a. from the date of suit till the date of decree and thereafter at 6% p.a. from the date of the decree till realization.
Dictated to the Personal Assistant, transcribed by him,
corrected and pronounced by me in the open Court, this the 26th day of September, 2013.
DISTRICT JUDGE.
GUNTUR .
APPENDIX OF EVIDENCE
WITNESSES EXAMINED
FOR PLAINTIFF:
P.W.1Dr.Haranath Baburao.T
P.W.2Tipirneni Janaki Ramana.
FOR DEFENDANT:
D.W.1Dr. Ch.Suresh.
D.W.2G.Hanumantharao.
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DOCUMENTS MARKED
FOR PLAINTIFF:
Ex.A.1Demand promissory note executed by the defendant in favor of plaintiff dt.7.1.2002.
Ex.A.2Original undated cheque for Rs.1,20,00,000/- favoring the plaintiff drawn on Global Trust Bank Ltd., Vijayawada.
Ex.A.3Office copy of legal notice dt.24-2-2007 issued by the plaintiff to the defendant.
Ex.A.4 Office copy of legal notice dt.17-12-2007 issued by the plaintiff to the defendant.
Ex.A.5Original Postal receipt.
Ex.A.6Part payment endorsement made by defendant on 15-3-2004 by way of cheque for Rs.60,00,000/-.
Ex.A.7Another part payment endorsement for Rs.1000/- by way of cash on 24-12-2004.
FOR DEFENDANT:
Ex.B.1Office copy of reply notice issued by defendant to plaintiff’s notice dt.31.3.2007.
Ex.B.2Postal acknowledgment of proof of service.
Ex.B.3Office copy of reply notice issued by defendant to plaintiff’s second notice dt.17.12.2007.
Ex.B.4Postal acknowledgment of proof of service of Ex.B.3 dt.2.1.2008.
Ex.B.5Copy of fax message to defendant from B.Anand.
D.J. ,