AS/801/1996 of KATHIRVELU Vs ANBAZHAGAN on 25 January 1999

JUDGMENT

This appeal is directed against the judgment and decree dated 25.08.1995 made in O.S.No.38 of1993 on the file of the Sub Court, Chidambaram.

2. The appellant herein was the plaintiff in the suit before the trial court. According to the appellant,the respondent having borrowed a sum of Rs.35,000/- on 01.03.1991, executed the suit promissorynote, Ex.A.1, agreeing to repay the said sum together with interest at 18% p.a. Subsequently, theamount was not repaid and thereby the loan was not discharged. Hence, the appellant filed the suitseeking a decree against the respondent directing him to pay a sum of Rs.47,100/- with interest onthe principal amount Rs.35,000/-at 18% p.a. and also for the costs.

3. The respondent herein as defendant has submitted in his written statement that he had notborrowed any amount from the appellant and executed the suit promissory note, as alleged by theappellant. According to him, he was only a subscriber of Chit Fund (P) Ltd., Bhuvanagiri run by theappellant herein. Being a subscriber, he had taken money in the auction held and the dues weresubsequently settled by him and that his wife, A.Vijaya had also joined as a subscriber in a chit forthe value of Rs.20,000/- in group No.BD for which, monthly subscription payable was Rs.500/- for 40months. According to him, the chit transaction was over in the year 1987 and subsequently therespondent joined as a subscriber for chit amount of Rs.50,000/- in Group No.BF Chit No.6, forwhich monthly subscription was Rs.1,250/- for 40 months and that in the auction, he was thesuccessful bidder and took the chit amount by reducing Rs.10,000/- in the value of the chit amountand for prompt payment of the balance for 18 months subscription of Rs.22,500/-, he executed apromissory note on 20.03.1990, which was registered at the office of the Registrar (Chit) ,Bhuvanagiri. According to the respondent, the appellant had also obtained a blank promissory notesigned by the respondent on the revenue stamps towards the chit transaction. He has furthercontended that though there was regular payment made by the respondent, there was a due ofRs.7,500/- and on 06.01.1992 the said amount of Rs.7,500/- was also paid by the respondent.

4. According to him, he handed over the blank signed promissory note format as security for the balance amount to be paid towards the chit transaction. However, the signed blank promissory noteobtained from him was not returned by the appellant, even after the dues were paid. Hence, there isno attestation in the pro-note and no pre-suit notice was issued on him by the appellant before filingthe suit. On the above grounds, the respondent had pleaded for dismissal of the suit. The trial courtdismissed the suit, after considering the oral and documentary evidence and the argumentsadvanced by both sides.

5. On the side of the appellant, P.Ws.1 and 2 were examined and the suit promissory note wasmarked Ex.A.1 and on the side of the respondent, the defendant was examined as D.W.1 apart frommarking the documents Exs.B1 to B8. On a perusal of the impugned judgment, it is seen that thetrial court, considering the oral and documentary evidence, has held that Ex.A.1 was not a genuinepromissory note executed by the respondent, supported by consideration, but held that it was afabricated document and accordingly, the suit was dismissed.

6. The points for determination in this appeal are:-

(i) Whether the finding of the trial Court that Ex.A1 is not a genuine promissory note and also notsupported by consideration is sustainable in law?

(ii) Whether the appellant is entitled to a decree as prayed for in the suit?

7. According to the appellant / plaintiff, the respondent / defendant had borrowed a sum ofRs.35,000/- from him on 01.03.1991 and executed the suit promissory note, Ex.A.1, agreeing torepay the said amount with 18% interest from the date of pro-note till the date of realisation.

8. In the written statement, the respondent herein has denied the plaint averments as false.According to the respondent, he had neither received a sum of Rs.35,000/- on 01.03.1991 from theappellant nor executed any promissory note on the said date for the aforesaid amount. He hasfurther averred that the appellant was running a chit fund company, wherein the respondent was asubscriber along with his wife K.Vijaya. According to him, his wife Vijaya was a subscriber for thechit amount of Rs.20,000/-, for which the monthly subscription was Rs.500/- to be paid in 40 monthlyinstalments. He was a subscriber to Group No. BD Chit No.27 and according to him, the transactionwas closed in the year 1987. The respondent was a subscriber in the chit for the value of Rs.50,000/-in Group No.BF, Chit No.6, for which monthly subscription at Rs.1,250/- had to be paid for 40months and he was a successful bidder in the 22nd auction, whereby he took the amount, byreducing the chit amount to the tune of Rs.10,000/- and for the balance of 18 months, he had to payRs.22,500/-. As requested by the appellant, he had handed over a signed blank promissory note,apart from executing another promissory note for the said amount of Rs.22,500/- registered with theOffice of the Registrar. According to the respondent, the aforesaid amount of Rs.50,000/- wasregularly paid by him. Previously he had joined in the chit group for value of Rs.10,000/- andRs.5,000/-, for which also he had handed over signed blank promissory notes in favour of theappellant, as requested by him. As there was a balance of Rs.7,500/- in the aforesaid chit forRs.50,00/- on 26.10.1991, the appellant had sent a legal notice. When the respondent approachedthe appellant, informed the appellant that he would not take any action, if the subscription amountRs.7,500/- is paid and according he paid the amount. Subsequently, due to the personal enmity, theappellant by filling up the blank promissory note already handed over by the respondent, filed thesuit.

9. The clerk of the appellant and the appellant respectively were examined as P.W.1 and P.W.2before the trial court, apart from marking Ex.A.1, promissory note. The document Ex.A.1 has beenprepared in a printed format, there is no attestor to the document, though there is a column for thesame. According to P.W.1, he had written the details in the printed format of Ex.A.1. He hasadmitted that he is a relative of the appellant, working as clerk under the appellant. In the cross-

examination on 18.08.1994, P.W.1 has further admitted that the respondent had been a subscriberfor the chit amount of Rs.50,000/- run by the appellant. In the 22nd auction, he took the amount,after reducing Rs.10,000/- in the chit amount, for which, the monthly subscription payable wasRs.1,250/-. While, he was cross-examined on 23.06.1994, contrary to the above evidence, P.W.1 hasdeposed that he did not know whether the respondent had been a subscriber of the chit amount ofRs.50,000/- or not, but he has admitted Exs.B.1 and B.2 receipts, whereby the respondent had madepayments on 09.07.1988 and 10.08.1988. Ex.B.1 is the passbook, relating to Rasi Chit Funds PrivateLtd., run by the appellant, wherein the balance amount, as per the chit auction on 10.03.1990 isstated at Rs.22,500/- and as per this passbook, it is seen that the respondent has regularly paid thesubscription amount.

10. According to P.W.2, under Ex.A.1, promissory note, the respondent had received Rs.35,000/- andagreed to repay the amount with 18% interest. In the cross-examination, he has stated that he hadno license to run money lending business, though his brother was having license to run the business.He has admitted that he was doing money lending business without having a valid license.

11. As the appellant has admitted that he was running money lending business, at least he couldhave produced his books of accounts, in order to substantiate his claim. He has further admitted thatthe respondent was the successful bidder in the 22nd auction for the chit amount of Rs.50,000/-,payable for 40 months at Rs.1,250/- p.m. For the balance of 18 months subscription of Rs.22,500/-,he had obtained a promissory note from the respondent and according to him, the same was notregistered, though the same is mandatory as per Chit Funds Act. According to him, the respondenthad paid 33 instalments and the balance was Rs.7,500/- for 7 instalments, for which, legal notice wasissued by him through his counsel, as per Ex.B.5. Subsequently, the respondent paid the amount asper Exs.B.6 and B.7.

12. In the copy of the legal notice issued by the appellant to the respondent, marked as Ex.B.5, it hasbeen averred that the respondent had borrowed a sum of Rs.7,500/- on 11.03.1991 from theappellant and executed a promissory note to repay the same with interest, but in the evidence, theappellant, who was examined as P.W.2 has admitted that the said averments contained in his legalnotice is incorrect. He has further admitted that even after the compete discharge of the dues by therespondent, the registered pro-note, dated 20.03.1990 marked ax Ex.B.4 was not cleared by him.

13. Learned counsel appearing for the respondent contended that the appellant, who is running chittransaction has admittedly not followed the mandatory provisions under the Chit Funds Act andother provisions of law.

14. Admittedly, there is no pre-suit notice issued by the appellant to the respondent for the reasonsbest known to him. As held by the trial court, there is no attestor to Ex.A.1, promissory note toestablish the execution, as well as passing of consideration thereon. The appellant has not producedany other supporting documents, such as account books maintained in the regular course of hisbusiness to establish that there was sufficient funds to make the payment of Rs.35,000/- on01.03.1991, the date of the promissory note and also the corresponding entries made in the books ofaccounts maintained by the appellant. It is seen that the appellant has not disclosed all the relevantmaterial facts in the plaint. Further, the oral and documentary evidence adduced on either sidewould show that the appellant had given only self contradictory versions before the trial court andthe same has been discussed in detail by the trial court in the impugned judgment.

15. Had the pro-note, Ex.A.1 related to the chit transaction between the appellant and therespondent herein, normally, he could have issued pre-suit notice before filing the suit. It is an admitted fact that for the recovery of Rs.7,500/- towards the chit transaction, legal notice Ex.B.5 hasbeen issued on the respondent. Immediately after the issuance of notice, the respondent paid theamount and obtained receipts, though the registered pro-note obtained from the respondent was notreleased to the appellant. The aforesaid fact has been admitted in the evidence by the appellant, asP.W.2.

16. As admitted by the appellant, he was running money lending business, without obtaining license.Though, pre-suit notice is not mandatory, in the instant case, the non-issuance of the notice showsthe conduct of the appellant. As the appellant was running money lending business, he could haveproduced at least books of accounts to substantiate his contention that he had sufficient funds on01.03.1991, the date of promissory note, Ex.A.1 and also for having made corresponding entries inhis books of accounts after the payment. Though it was raised, even in the appeal the saiddocuments were not marked.

17. As per Section 118(a) of the Negotiable Instruments Act, 1881, when the execution of theinstrument is admitted, it has to be legally presumed that proper consideration has been passed onthe instrument, until the contrary is proved by the person disputing the same. Hence, it is only arebuttable presumption. In the instant case, as found by the court below, there are various vitalcircumstances to draw rebuttable presumption against the appellant.

18. The respondent had not admitted the execution of the promissory note, Ex.A.1, though he hasadmitted his signature available in the said document. As he has admitted his signature available inEx.A.1, as per the Indian Evidence Act, the burden is upon him to establish that he had signed, whileit was a blank format. According to the respondent, the appellant had obtained his signature in theblank promissory note formats, while he was a subscriber and successful bidder in the chit auctionand he handed over the signed promissory note to the appellant as security for prompt payment offuture subscriptions.

19. As per Section 12 of Chit Funds Act, 1982, there is prohibition of transacting business other thanchit business by a company carrying on chit business without obtaining general or specialpermission from the Government. In the instant case, as per the evidence of P.W.1 and P.W.2, it isclear that the appellant himself was running chit company as Managing Director, the same has beenspecifically stated in Ex.B.5, legal notice, relating to the chit transaction. The appellant has alsoadmitted that he was running money lending business, without obtaining license. Admittedly, therespondent was a subscriber in the chit transaction run by the appellant herein and pro-note wasobtained from him in connection with the chit transaction. In such circumstances, non-production ofaccount books by the appellant would lead to a rebuttable presumption against the appellant underSection 118 of the Negotiable Instruments Act.

20. Even in this appeal, after knowing the defence raised by the respondent, the appellant has notproduced his books of accounts to establish that he had sufficient funds to lend money under Ex.A.1and also the entries made in the books of accounts for the payment made to the respondent. In orderto establish the rebuttable presumption, the respondent has produced the pass book of Rasi ChitFunds (P) Ltd., run by the appellant as Ex.B.1. As per this document, he was the successful bidder inthe auction that had taken place on 10.03.1990 and an amount of Rs.22,500/- was due and payableby him. The entries for various payment made by him are found in Ex.B.1 and a specific entryavailable in the pass book has been marked as Ex.B.2.

21. As per Ex.B.5, legal notice, the respondent was asked to pay a sum of Rs.7,500/- stating that hehad obtained the said loan on 11.03.1991 by executing the promissory note in favour of the appellantherein, as Managing Director, Rasi Chit Funds (P) Ltd.,. The appellant, who was examined as P.W.2

has admitted that after the notice, the amount Rs.7,500/- was paid by the respondent and the matterwas settled. He has also admitted that on 11.03.1991, no amount was borrowed by the respondentby executing any promissory note, promising to repay Rs.7,500/- with 24% interest, as alleged byhim in his notice, Ex.B.5. It is seen that the appellant had sent the legal notice, admittedlycontaining false and incorrect particulars. However, the respondent immediately paid the amount,since he had to pay the amount towards the chit transaction. In such circumstances, had there beenRs.35,000/- due and payable by the respondent under Ex.A.1, promissory note, the appellant couldhave normally issued a legal notice, but no pre-suit notice was issued by the appellant. Admittedly,there is no attestor to Ex.A.1 to speak about the alleged execution and also passing of consideration.The aforesaid factors are discussed in detail by the court below, only based on the evidence, theCourt below held that Ex.A.1 document has been created by the appellant, by using the signatureavailable in the blank format, otherwise, the appellant could have produced his books of accounts tosubstantiate the passing of consideration, apart from issuing pre-suit notice.

22. As per Section 3(1) of the Tamil Nadu Money-Lenders Act, 1957, no person shall, on and afterthe date of commencement of the Act shall carry on or continue to carry on business as a money-lender, without holding license and the person holding license shall also run the same in accordancewith the terms of such license. As per Section 9 of the said Act, the Money-lender must keep booksof accounts and maintain regular records, relating to the money lending transaction and also givereceipts for every payment received by the money-lender. Here in this case, admittedly, theappellant was running money lending business without having any license and no books of accountsor other connected records were produced to substantiate the suit claim. As submitted by thelearned counsel for the respondent, as the claim is not genuine, the appellant has not followed themandatory provisions and produced his books of accounts and other relevant documents, which areneeded to establish the claim of the appellant.

23. Considering the facts and circumstances, I am of the view that there is no error or infirmity inthe impugned Judgment and Decree passed by the court below, so as to interfere with the same andaccordingly, the points for determination are answered in favour of the respondent and against theappellant.

24. In the result, the appeal fails and accordingly the same is dismissed. However, there is no orderas to costs.

12-03-2008Index : YesInternet : Yes

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Judgment in A.S.No.801 of 1996

12-03-2008