THE HON'BLE JUSTICE Dr. V.R.K.KRUPA SAGAR

SECOND APPEAL No.227 of 2012

JUDGMENT:

The plaintiff before the learned trial Court filed this second appeal under Section 100 C.P.C. The respondent herein was the 1st defendant before the learned trial Court. O.S.No.85 of 2003 was a suit on promissory note seeking for recovery of money. That was filed by the plaintiff as against three defendants arraying them as defendant Nos.1 to 3. After due trial, the learned Senior Civil Judge at Avanigadda decreed the suit in favour of the plaintiff directing defendant No.1 to pay the suit debt along with interest and costs. The suit against defendant Nos.2 and 3 was dismissed. Defendant No.1 thereafter filed A.S.No.180 of 2006 showing the plaintiff as respondent No.1 and learned I Additional District and Sessions Judge, Machilipatnam, Krishna District allowed the appeal upsetting the trial Court's judgment and as a consequence, it dismissed the suit as against defendant No.1 also. Aggrieved against that, the plaintiff in the suit has come up with this appeal. Before adverting to the substantial questions of law involved in this appeal, it is necessary to see how the legal proceedings took place before both the Courts below.

2. In her plaint, the plaintiff alleged that defendant No.3 is father and defendant Nos.1 and 2 are his sons. They constitute a Hindu joint family. To meet the family expenses, agricultural expenses and business development, defendant No.1 approached the plaintiff and borrowed an amount of Rs.75,000/- from her on 05.12.2000 and executed the promissory note agreeing to repay with 18% interest per annum as and when demanded. Despite demands, there was no repayment. A legal notice dated 11.08.2003 was got issued and a reply notice dated 16.08.2003 was received by the plaintiff. Since the defendants did not repay and since the debt was meant for joint family, the suit was laid as against all the three defendants for recovery of Rs.1,07,662-50 ps. and interest and costs.

3. Defendant No.1 filed a written statement and defendant No.3 filed a written statement and defendant No.2 filed a memo adopting the written statement of defendant No.3. In his written statement, defendant No.1 denied the plaint mentioned averments and denied borrowal of money from the plaintiff and denied execution of the suit pronote. Impleading of defendant Nos.2 and 3 is misjoinder and suit is liable to be dismissed on that ground. It is stated that this defendant never saw the

plaintiff at all and did not have even fair chances of any acquaintance with her. It was only on receiving notices from the plaintiff, this defendant had made enquiries and it was found that she was mother-in-law of Sri Pothula Siva Sankar Babu. It is that Pothula Siva Sankar Babu, who is the master mind behind this litigation, and he got fabricated the pronote and got the suit filed through the plaintiff with a view to cause wrongful loss to this defendant. It is then stated that this answering defendant and his family members had no need of having financial assistance from anybody and on enquiries it was found that the plaintiff had no financial capacity to lend money. It is ridiculous to allege that a junior member of the family would have contracted debts for the benefit of joint family while kartha of the family is at the helm of affairs. The suit pronote is not supported by consideration. It is stated that above referred Pothula Siva Sankar Babu and this answering defendant have been at logger-heads in the last three years and in the year 2003 during July he threatened the mother of this defendant with dire consequences and accosted that he would drag on to the Court. The scribe and attestors of the pronote were henchmen of the plaintiff. For those reasons he sought for dismissal of the suit with exemplary costs.

4. With all similar allegations and averments there is the written statement of defendant No.3, which was adopted by defendant No.2.

5. On those pleadings, the learned trial Court framed the following issues:

• "1. Whether the suit pronote is true, valid and binding on the defendants and suit debt is borrowed for joint family business?
• 2. To what relief?"

6. At the trial, PWs.1 to 3 were examined and Exs.A.1 to A.6 were marked for plaintiff. Defendant Nos.1 and 3 gave evidence as DWs.1 and 2 and Exs.B.1 to B.3 were marked.

7. In proof of the facts alleged about defendant No.1 borrowing money and plaintiff lending money and defendant No.1 executing the promissory note, which was marked as Ex.A.1, the plaintiff as PW.1 gave evidence and one of the attestors by name Sri B.Krishna Murthy supported the version when he deposed as PW.2 and the scribe of the promissory note Sri Talupula Aswani Kumar deposed as PW.3 and supported the version. Thus, all the three witnesses consistently spoke about defendant No.1 borrowing money from the plaintiff and signing the suit pronote. The scribe deposed that it was at the

instructions of defendant No.1 only he scribed the promissory note. He got acquaintance with him since a long time. According to the witnesses, the suit mentioned transaction occurred at the house of the plaintiff/PW.1. On that evidence, the learned trial Court believed the suit mentioned transaction and found defendant No.1 liable to repay the suit debt. As against defendant Nos.2 and 3, it accepted the contentions of the defendants and stated that defendant No.1 was a junior member of the family and defendant No.3 was the kartha of the joint family and defendant Nos.2 and 3 having not signed the pronote were not liable to pay the suit debt. So saying it dismissed the suit against defendant Nos.2 and 3. At the trial, the contentions were raised in consonance with the pleadings in the written statement about wealthiness of defendants and impecuniousness of plaintiff. In support of their plea, defendants also adduced Exs.B.1 and B.2-title deeds showing their wealth in the form of lands. During the course of recording of evidence, it was found that the plaintiff/PW.1 could not even identify defendant No.3 and was able to identify only defendant No.2. DWs.1 and 2 deposed about enmity for Pothula Siva Sankar Babu against them and the relationship of that enemy with plaintiff. Learned trial Court discarded the plea of

enmity stating that, that was not mentioned in reply notices of defendants contained in Ex.A.6. That they also did not explain the cause of disputes etc. It was for those reasons, the enmity angle was discarded. It then stated that defendant No.1/DW.1 admitted his signatures on his own written statement and further admitted that Ex.A.3-postal acknowledgment under which notice was received was also admitted as containing his signature. It then went on to say that in terms of Section 73 of the Indian Evidence Act, the Court compared these signatures and they were found to be same. It then stated that DW.1 during his cross-examination admitted variances in his signatures between vakalat and postal acknowledgement and he failed to explain that. It was for these reasons, it concluded that Ex.A.1-promissory note was signed by defendant No.1. Since defendant No.1 failed to have his signature compared by a handwriting expert, he failed to discharge his burden. It did not make any clear finding as to the financial capacity of the plaintiff to assess her ability to lend amount and finally, it decreed the suit as against defendant No.1. It answered all the issues in favour of the plaintiff and decreed the suit.

8. On considering the material on record and the grounds raised in the memorandum of grounds of appeal, the first appellate Court framed the following point for consideration:

"Whether the suit promissory note is true, valid and binding on the 1st defendant?"

9. It very elaborately considered the oral evidence that was brought on record by both sides. Relative financial capacity on both sides was the main focus before the learned first appellate Court. After a detailed discussion of each witness in chief and in cross, it found that as per the admissions made by PW.1 and as per the evidence of DWs.1 and 2 and as per Exs.B.1 and B.2, the family of defendants has been owning large extent of properties and they have been progressively purchasing new properties and that they have been having business, they were having houses and they were having a sawmill. From the evidence on record, it observed that other than this disputed transaction, defendants were found not having incurred any debt either from the plaintiff or from anybody else. On the other hand, it observed that the plaintiff is only a home maker and she does not have even a bank account and she admitted that she does not have any immovable properties in her name and from her evidence, it was found that her husband was only a

small scale employee and she herself was educated only up to 7th standard. It was on that evidence, it found that the contention of defendant No.1 was found to be correct and as a consequence, it observed that the disputed promissory note was not supported by consideration. It discussed various circumstances and the discrepancies in the evidence of scribe and attestor and it recorded a finding that though PW.1 stated that the attestor and scribe were fetched by defendant No.1, the evidence on record established that such contention was incorrect and the contention of defendant No.1 that they were brought by plaintiff and they are her henchmen was found to be correct. It also observed the failure of plaintiff in identifying defendant No.3 as one of the circumstances to disbelieve her case. It was with those findings, learned first appellate Court allowed the appeal and dismissed the suit as against defendant No.1.

10. In this second appeal, the substantial questions of law on which this appeal was admitted are:

"1. Whether the Courts below were right in discarding the admissions made by defendant No.1?

2. Whether the Courts below failed in noticing the presumptions that were available in Negotiable

8

Instruments Act and erroneously exercised power under Section 73 of Evidence Act?"

11. Learned counsel for appellant submits that the first appellate Court in terms of Section 96 and Order XLI Rule 31 C.P.C. had to decide all the facts and law, but the learned first appellate Court failed in that regard. It is contended that only the point the first appellate Court considered was whether the suit pronote is true, valid and binding on defendant No.1, but its findings were contrary to that and it went on to discuss the financial capacity of plaintiff and defendants, which is not even made an issue in the trial Court as well as in the first appellate Court. Therefore, the first appellate Court's judgment cannot be sustained.

12. Learned counsel for respondent submits that the point that was considered by the first appellate Court includes validity and binding nature of suit promissory note and that part of the point encompasses within itself the contentions concerning financial capacity of the parties and that averments in the written statement and evidence of DWs.1 and 2 and the crossexamination of PWs.1 to 3 would all go to show that both parties went to trial with full knowledge of the contentions concerning relative financial capacities of parties and the error

committed by the trial Court in failing to answer that aspect of the matter was rectified by the first appellate Court and therefore, there is no interference that is required in this second appeal.

13. To sustain the contentions concerning incorrect disposal of first appeal, learned counsel for the appellant cited Malluru Mallappa (Dead) through Legal Representatives v. Kuruvathappa1. That was a case for specific performance of an agreement for sale. The trial Court found that the plaintiff was found not ready and not willing to perform his part of contract and that the suit was barred by limitation. It finally dismissed the suit. The first appellate Court was the High Court of Karnataka. The Hon'ble Supreme Court of India having verified the judgment of the High Court observed that the first appellate Court failed to examine any evidence and law concerning limitation as well as readiness and willingness and simply concurred with the trial Court's judgment and that was against the principles contained in Order XLI Rule 31 C.P.C. Therefore, the first appellate Court's judgment was set aside and the matter was remanded leaving it open to both parties to raise

1 (2020) 4 SCC 313

their contentions before the first appellate Court. In the context of above facts, the Hon'ble Supreme Court of India was pleased to reiterate the manner in which the first appellate Court had to dispose of the first appeal. It stated that the first appeal being continuation of suit, it has to advert to points for determination and then render its decision on it and then record its reasons for reaching to such decision. The first appeal was to rectify all the errors that are found in the judgment of the trial Court. It is on these principles, learned counsel for appellant urges this Court that the approach of the first appellate Court stands against this ruling and therefore, it has to be set aside.

14. This Court has gone through the entire judgment of the first appellate Court. It finds that the first appellate Court has recorded the contentions raised in the plaint and the contentions raised in the written statement and the issues that were settled by the trial Court and it also recorded all the contentions raised in the memorandum of grounds of appeal and it noted the precedent and then recorded that it had heard the arguments on both sides and on consideration of all that material it chose to frame the question for consideration as whether the suit promissory note is true, valid and binding on the first defendant. It then extensively recorded the findings of

the trial Court and as to how it believed the execution of pronote and failed to give due regard to the evidence on such aspect of the matter and then after referring to the entire evidence concluded that the defendants' case was more probable and recorded its reasons about the failure of trial Court in adverting to relevant material and only then it reached to its conclusions. Thus, the judgment impugned before this Court is certainly in accordance with the mandate in Order XLI Rule 31 C.P.C. and the ruling of the Hon'ble Supreme Court of India. The material on record indicates that the defendants have been questioning the financial capacity of the plaintiff and have also been claiming that they themselves were wealthy enough and there was no need for them to borrow from anyone. The trial Court's judgment shows that these pleadings were adverted to by the trial Court, but it did not pay required attention on that part of the case and it went on decreeing the suit only on the basis that it found execution of pronote by defendant No.1 as correct. The first appellate Court's judgment shows that the defendants have been able to establish through record the improbability of passing of consideration. Therefore, the first appellate Court reversed the judgment and decree of the trial Court. When the point for consideration before the first appellate Court consists

of truth and validity of the pronote, as rightly contended by the learned counsel for respondent, that covers the aspect of financial capacity of both parties. There were required pleadings, there was required evidence and attention of the appellate Court on that aspect is reflected in the point it framed for consideration. Therefore, no separate issue was framed is of no consequence. Therefore, on this procedural aspect, this Court finds no merit in the contentions raised by the appellant in this second appeal.

15. Learned counsel for appellant urges that since the trial Court found Ex.A.1-pronote bears the signature of defendant No.1 and since that finding was not disturbed by the first appellate Court, the presumption under Section 118 of the Negotiable Instruments Act (for short, 'the N.I. Act') applies and borrowal of money, in other words passing of consideration, should have been presumed and on such presumption, the first appellate Court should have upheld the trial Court's judgment.

16. Having given consideration to this contention, the record is seen and it is to be stated that both the Courts below stated that Ex.A.1-promissory note bears the signature of defendant No.1. Thus, the primary burden of plaintiff was discharged.

Section 118 of the N.I. Act permits the Court to draw presumption of passing of consideration. If no other evidence was available, a Court of law was entitled to decree the suit, which was based on such a pronote. However, one should notice that the presumption of consideration raised under Section 118 of the N.I. Act is made available for rebuttal by the defendants. If the defendants are successful in rebutting that presumption of consideration, then the evidential of burden goes back to the plaintiff. Then the plaintiff has to prove actual passing of consideration. If the plaintiff fails to prove, the matter rests there and the suit shall be dismissed. This has been the law in G.Vasu v. Syed Yaseen Sifuddin Quadri2. The first appellate Court having judiciously scrutinized the oral and documentary evidence, found that defendant No.1 and his family are having movables and immovables and have their own house, agricultural lands and business concerns and were found not indebted to anyone and therefore, recorded an observation that it was improbable on their part to seek financial assistance from the plaintiff. It also analyzed the entire evidence led by the plaintiff and observed that the plaintiff was not engaged in any gainful employment and was a

² 1986 Lawsuit (AP) 99 (FB)

mere home maker without earnings and studied 7th class and had no assets in her name and her husband was a small employee and nothing was there to see her financial capacity. It then observed that she did not even have a bank account and that holding Rs.75,000/-, which was a huge cash with her was to be explained by her and she failed to show any possibility of accumulation of so much money with her. It was in that context of facts it observed that the plaintiff was not having this amount and was not in a position to lend money. It observed that Rs.75,000/- was a huge amount. It was then recorded that it was improbable for the plaintiff to have handed over cash of Rs.75,000/- to the defendants. Though the first appellate Court did not say in so many words, the theme underlined the impugned judgment indicates that the learned judge had in his mind the law laid down by the Full Bench of this Court referred earlier. The finding of the first appellate Court that the 1st defendant was successful in showing the improbability of consideration is an indication that it went in accordance with the law. The approach of the first appellate Court is fully in accordance with law. There was no material before the first appellate Court showing that the plaintiff was able to prove her contention of passing of consideration after the burden was

shifted to her shoulders. Therefore, there is no merit in the second appeal on the question of legal presumptions contained in N.I. Act raised by the appellant.

17. Another contention raised is about admissions of defendant No.1 and the first appellate Court ignoring that. Having considered the entire material on record, one could not see any admission of defendant No.1 about receiving Rs.75,000/- from the plaintiff. The admissions were only with reference to his signatures on vakalat, written statement and postal acknowledgement etc. The other admissions are about inadequate evidence brought on record about the disputes between defendant No.1 and the son-in-law of plaintiff etc. None of them have got any bearing on the principal contention raised before the Courts below. Therefore, there is no merit in the contentions raised in this second appeal. Learned trial Court in the context of evidence that was placed before it adverted to an exercise of comparison of signatures on pronote as against written statement etc. in terms of Section 73 of the Indian Evidence Act. All that has no relevance in this appeal since the signature of defendant No.1 on Ex.A.1-pronote was recorded as proved by both the Courts below. On a total consideration of the material before this Court, it has to be

stated that the judgment impugned here, which is that of the first appellate Court, indicates full consideration of facts and reaching to appropriate findings on fact. No perversity is noticed except the numerous typographical errors, which remained uncorrected. There is nothing in this second appeal to interfere with that well reasoned judgment of the first appellate Court. Therefore, the points are answered against the appellant.

18. In the result, the Second Appeal is dismissed confirming the first appellate Court's judgment. There shall be no order as to costs.

As a sequel, miscellaneous applications pending, if any, shall stand closed.

_____________________________ Dr. V.R.K.KRUPA SAGAR, J

Date: 28.10.2022 Ivd

Dr. VRKS, J S.A.No.227 of 2012

THE HON'BLE JUSTICE Dr. V.R.K.KRUPA SAGAR

SECOND APPEAL No.227 of 2012

Date: 28.10.2022

Ivd