The single judge bench of the Andhra Pradesh High Court held that when the suit is based on the promissory note and the promissory note is proved to have been executed, Section 118-A of the Negotiable Instrument Act, 1881 raises the presumption, until the contrary is proved, that the promissory note was made for consideration.

Brief facts

The factual matrix of the case is that the husband of Defendant no. 1 and the father of Defendant no. 2 and 3 borrowed an amount of Rs.3,50,000/- from the plaintiff for the business purpose. Thereafter, in order to discharge his liability, he executed a promissory note on the same day in favor of the plaintiff agreeing to repay the same with interest at 18% per annum. Then, again he borrowed a sum of Rs.3,50,000/- from the plaintiff and then, again executed a promissory note but even after demanding several times, he refused to pay the amount and died intestate. After his death, the Plaintiff requested the defendants to discharge the liability due under the pronotes from the estates of Atluri Venkateswara Rao, which on his death devolved upon the defendants, but the defendants postponed the matter of discharging the debt and trying to dispose of the properties of late Atluri Venkateswara Rao to evade the debts due to the plaintiff. Therefore, the suit was filed. The trial court decreed the suit against which the present appeal is filed by the defendants.

Contentions of the Petitioner

The Appellant contended that the pronotes are the forged documents and the decision passed by the court below in decreeing the suit is contrary to law.

Observations of the court

The Hon’ble Court observed that Section 118-A creates the presumption that the promissory note was made for consideration unless the opposite is demonstrated when the dispute is based on the promissory note and it is proven to have been executed.

The court furthermore observed that when the plaintiff specifically raises different considerations in the plaint, the initial presumption made under Section 118-A is no longer applicable. The onus is on the defendant to show that the suit pronotes are not supported by consideration if he argues that the promissory note is supported by consideration as stated in the Negotiable Instrument and the evidence presented in favour of it. The Court would assess whether the suit promissory notes are supported by valid consideration or legally enforceable consideration if the consideration is not valid or enforceable under the law.

The court noted that mere denial of consideration is insufficient to be construed as a defence. However, something that is probable has to be brought on record to get the benefit of shifting the onus of proving to the plaintiff. To disprove the presumption the defendants have to bring on record, such facts, and circumstances upon consideration of which the Court may neither believe that the consideration did not exist or its non-existence was so probable that prudent man would under the circumstances of the case act upon the plea that it did not exist.

The court furthermore noted that the defendants failed to provide any cogent evidence and failed to discharge their burden.

Based on these considerations, the court was of the opinion that the trial court was justified in decreeing the suit in the favour of the Plaintiff/Respondent.

The decision of the Court:

With the above direction, the court dismissed the appeal.

Case Title: Atluri Anuradha V. Nuvvula Venkata Raju

Coram: Hon’ble Mr Justice V Gopala Krishna Rao

Case No.: APPEAL SUIT No.755 OF 2008

Advocate for the Appellant: Ms.Bindu

Advocate for the Respondent: Sri Josyula Bhaskara Rao

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