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Under The NI Act Both A Signature And A Thumb Impression Are Not Required For A Pro-Note: Madras HC

Mridul Gupta ,
  17 May 2022       Share Bookmark

Court :
The Hon'ble Madras High Court
Brief :

Citation :
S.A.Nos.142 of 2012 and M.P.No.1 of 2012

CAUSE TITLE:
R Barathbaran (Died) And Ors Vs R Nallathambi

DATE OF ORDER:
02 March 2022

JUDGE(S):
The Honourable Mr. Justice RMT.Teeka Raman

PARTIES:
Appellant: R Barathbaran (died)
Respondent: R. Nallathambi

SUBJECT

The Appeal was filed against the judgment and decree made by the Principal District Court, in reversing the judgment and decree, of the Sub Court.

IMPORTANT PROVISIONS

The Negotiable Instruments Act, 1881

Section 20: Inchoate stamped instruments

When one person signs and delivers to another a stamp paper in accordance with the law relating to negotiable instruments, and either wholly blank or having written thereon an incomplete negotiable instrument, he thereby gives prima facie authority to the holder thereof to make or complete, as the case may be, upon it a negotiable instrument, for any amount specified therein and not exceeding the amount covered by the stamp.

Section 118

OVERVIEW

  • The appellant filed the matter in the Sub Court against the respondent for the recovery of money borrowed by him and promissory notes written in favour of the appellant for consideration. After filing a pre-suit notice, the appellant filed a suit to recover the suit claim of Rs.4,59,000/- plus interest.
  • Resisting the suit, the respondent filed a written statement admitting the execution of the suit promissory notes. However, the respondent raised plea that the promissory notes had been executed towards security for the loan borrowed, and that the loan due was settled by way of execution of a sale deed, in the name of the appellant's wife. It was further alleged that the suit promissory notes were not supported by consideration and the blank promissory notes were filled up for the purpose of filing the suit.
  • Upon consideration of oral and documentary evidence and also taking note of the admission, TheTrial Court considered the statutory presumption under Section 118 of the NI Act and the authority of the holder in due course to fill up the promissory notes under Section 20 of the Act, decreed the suit by the judgment.
  • The respondent, who was dissatisfied, filed a complaint with the Principal District Court. It was alleged that the First Appellate Court did not consider the admissions made in the pleadings and evidences, nor did it take note of the statutory presumptions in favour of the appellant, but instead granted the appeal erroneously, holding that the respondent's thump impression was not obtained and that the signatures in each of the promissory notes were different from each other when compared with a naked eye. As a result, the Lower Appellate Court reversed the Trial Court's decision and dismissed the case.
  • The appellant filed this second appeal with the High Court after being dissatisfied with the First Appellate Court's reversal findings.

ISSUES

  • Whether the first Appellate Court erred in law in not considering the scope of Section 118 of the NI Act, and the legal presumptions arising under it before dismissing the suit by reversing the well considered reasonings of the Trial Court?
  • Whether the first Appellate Court erred in law in rejecting the appellant’s right to fill up the suit promissory notes under Section 20 of the NI Act, whereupon the holder is authorised to fill up the blanks and to negotiate the instrument for a certain amount?
  • Whether the First Appellate Court was correct in dismissing the suit on the basis of a comparison by naked eye?

JUDGEMENT ANALYSIS

  • The written statement did not question the execution of the pro-note, signature in the pro-note, or issuance of the pro-note. The Trial Court correctly invoked the presumption under the NI Act, ordering the respondent to return the presumption and dismissing the complaint. The High Court, on the other hand, ruled that the Lower Appellate Court/learned Principal District Judge had not even examined the NI Act's presumption and had not followed the burden of proof or onus of proof as specified in the Indian Evidence Act.
  • There was no need for the appellant to explain why he did not obtain the thump impression in the suit promissory note once the signature contained in the suit documents were admitted. There is no such law that allows to get the thump impression in the suit promissory note. The Lower Court shall presume, among other things, that the promissory notes were made for consideration under Section 118 of the NI Act. When a statutory presumption is raised, the executant bears the burden of proving the absence of consideration. As a result, the High Court determined that the Lower Appellate Court had miserably failed to consider the pleadings and evidence in the proper context and had incorrectly shifted the burden of proof to the appellant with gross ignorance of legal presumption.
  • There is no mandatory provision in the NI Act that both the signature and thump impression be obtained for a pro-note, and the Lower Appellate Judge had completely misguided and misused the NI Act provision, regarding burden of proof, and did not follow the basic rudimentary of Section 20 of the NI Act. Thus, the High Court found that the Lower Appellate Court erred in law in rejecting the plaintiff's right to fill up the suit promissory notes under Section 20 of the NI Act, whereupon the holder is authorised to fill up the blanks and negotiate the instrument for a certain amount and the "execution" of cheque and "issuance" of cheque, in his written statement and in his evidence before the Court, and that the Lower Appellate Court was not right in raising suspicion with regard to the execution merely on the ground that the thump impression of the defendant was not obtained, particularly, when the defendant had not denied the execution.

CONCLUSION

  • The Court concluded that the approach taken by the Lower Appellate Court was unacceptable. The Lower Appellate Court's finding that the suit pro-note was not valid in the absence of thumb impression is legal, especially since the respondent did not dispute the signature, and thus all Substantial Questions of Law were answered affirmatively in favour of the appellant and against the respondent.
  • As a result, the second appeal was allowed. The judgement and decree of the Lower Appellate Court/Principal District Court, was set aside and restored the Trial Court’s decree.

Learn the practical aspects of CrPC HERE, CPC HERE, IPC HERE, Evidence Act HERE, Family Laws HERE, DV Act HERE

Click here to download the original copy of the judgement

 
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