1. Feeling aggrieved with the decree and judgment dt.24.11.2008 in O.S. No.611 of 2007 passed by the Principal Senior Civil Judge, Vijayawada (for short “the trial court”), whereby dismissed the suit, the plaintiff therein has preferred the present appeal.

2. The parties hereinafter will be referred to as depicted in the suit for convenience.

3. The brief averments culled out from the plaint are that the defendant borrowed Rs.3,00,000/- from the plaintiff for her family expenses on 17.01.2005 and executed a promissory note on the same day, agreeing to repay the amount along with interest @ 24% per annum. However, despite the repeated demands and even after issuance of the registered legal notice dt.02.04.2007, the defendant failed to discharge the said debt. The defendant acknowledged the receipt of the notice on 03.04.2007.

4. The defendant filed a written statement denying the material allegations, contending that:

a) She is unaware of the plaintiff's name and has never seen the plaintiff, the scribe, or the attestors. Moreover, the defendant never borrowed any amount, and she never executed any promissory note in favour of the plaintiff on 17.01.2005 for Rs.3,00,000/- and did not require such a large sum; hence, there is no debtor-creditor relationship.

b) Following the plaintiff's legal notice, she issued a registered notice on 02.04.2007 requesting a Xerox copy of the alleged promissory note and reserving the right to send a detailed reply upon receipt of the alleged promissory note. The plaintiff remained silent.

c) The defendant subscribed to two chits each for Rs.50,000/- operated by one V. Laxmi Kantamma of Poornandampet, Vijayawada; She required the defendant to obtain signatures on two blank promissory notes from other Government Employees for different chits because her income was insufficient. Because of confidence in the defendant being the co-employee, V.Sita Rama Raju, D.Rajeswari, and other employees also handed over the blank promissory notes at Vadlamudi Laxmi Kantamma's house. At the 14th instalment of the auction, the defendant also handed over two blank promissory notes to the said, Laxmi Kantamma. On being asked, the defendant and D.Rajeswari went to Laxmi Kantamma and promised to return the said promissory notes. Surprisingly, the said Rajeswari received the notice from G. Rajani on 30.01.2003. On inquiry, the defendant and Rajeswari learned that the said Laxmi Kantamma had fabricated one promissory note and issued a notice. The said G.

Rajani filed a suit in O.S. No.187 of 2003 on the file of IV Additional Senior Civil Judge's Court, Vijayawada. The suit was dismissed on 29.11.2005. In that suit, the defendant (Y. Mary Metelda) testified as DW.2.

d) They said Laxmi Kantamma had a grudge against Rajeswari and the defendant; she told some people that she would use blank promissory notes to sue Rajeswari and the defendant. While doing so, the said Laxmi Kantamma used the blank promissory note and filed a suit in OS.No.166 of 2007 on the file of the III Additional Senior Civil Judge's Court in the name of Borra Punna Rao for Rs.1,30,000/-. The said Rajeswari has contested, and the case is still pending.

5. Based on the pleadings, the following issues were framed for trial.

1) Whether the suit promissory note is true and genuine

2) Whether the plaintiff is entitled to the suit amount

3) To what relief

6. During the trial, On behalf of the plaintiff, P.Ws.1 to 3 got examined and marked Exs.A.1 to A.4. On behalf of the defendant, D.Ws.1 to 5 got examined and marked Exs.B.1 and B.2. After considering the evidence adduced by the parties, the Trial Court dismissed the suit with costs.

7. The following contentions were raised by the appellant's counsel in support of the grounds taken in the appeal; the Trial court has not dealt with the issues in proper perspective and has not considered the material evidence available on record, which establishes the factum that the defendant executed the Ex.A1 promissory note and received the consideration amount thereunder; the trial court failed to consider the other suits said to have been filed against D.Rajeswari have no relevance to decide the suit and the appeal; the Trial Court was unable to see no evidence adduced by the defendant to establish how the appellant/plaintiff is in any way concerned with the alleged chit transactions held by V.Lakshmi Kantamma and her son in law.

8. In contrast, learned counsel for the respondent contended that the trial court correctly assessed the evidence and concluded that the presumption under Section 118 of the Negotiable Instruments Act could not be drawn.

9. I have heard the learned counsel for the parties.

10. I have thoughtfully considered rival submissions and perused the material on record.

11. The following points arise for determination are:

1. Whether the plaintiff has established that the defendant borrowed an amount of Rs.3,00,000/- on the execution of the suit promissory note

2. Whether the decree and judgment passed by the Trial Court need any interference

POINT Nos.1 & 2 :

12. The plaintiff is examined as PW.1, and the defendant is examined as DW.1. Their evidence reiterated their stand in their respective pleadings. Before the filing of the suit, the plaintiff got issued a legal notice dated 02.04.2007 to the defendant calling upon her to pay the suit promissory note amount.

13. The plaintiff relies on Ex.A2 - Office copy of the legal notice to establish the fact. The defendant got issued Ex.A4-Reply notice upon receipt of legal notice vide Ex.A3-postal acknowledgement. The stand in the notices exchanged between the parties and the suit is almost similar. To prove the promissory note transaction, the plaintiff examined PW.2 – M.Rama Krishna, scribe of the promissory note and PW.3-M.D.Vasantha Kumar, second attester to Ex.A.1- promissory note. P.W.s. 2 and 3 testified in support of the plaintiff's case. It is not in dispute that Ex.A1 promissory note bears the defendant’s signature. It is elicited in PW.1's cross-examination that he manufactures the sandals in Gandhi Nagar; he is not doing finance business and is not an income tax assessee; The cross-examination of PW.1 elicited that the monthly income of PW.1 was Rs.15,000/- to Rs.20,000/- per month. He has no documentary proof to show that he had three lakhs on the date of the suit transaction. But he can file the document to show that he has such capacity. The record shows he has not placed any documentary evidence before the Court.

14. In his testimony, PW.2 stated that he did not know whether PW.1 could lend huge amounts. The defendant contends that the plaintiff has no capacity to lend the amount. It is submitted on behalf of the plaintiff that the defendant has not taken a stand questioning the financial capacity of the plaintiff. Per the written statement, the defendant was unaware of the plaintiff's capacity to lend the amount. Even by filing the written statement, the defendant has not enquired about the plaintiff’s financial capacity. As such, it can be inferred that the defendant has not taken a specific plea regarding the plaintiff’s financial ability. The plaintiff, as PW.1 has explained in crossexamination regarding his source of income.

15. In Duggineni Seshagiri Rao Vs. Kothapallil Venkateswara Rao 2001 (3) L.S.239 this Court observed as follows:

'The plaintiff was non-suited as he had not proved that he could advance Rs.1,00,000/. The defendant had not taken a plea at all in his written statement. Questions were only put to the plaintiff and his witness concerning his income. Therefore, the argument advanced that the plaintiff had not the capacity cannot be accepted."

16.In Vinod Kumar Arora Vs. Smt. Surjit Kaur AIR 1987 SC 2179 [LQ/SC/1987/499] The Hon'ble Apex Court observed that

“The pleadings of the parties form the foundation of the case and it is not upon to them to give up the case set out in the pleadings and propounded a new and different case.”

17.In Kondaveti Francis Vs. M.Ludramma and others 2000(3) ALT 433 this Court observed that

"It is well established and expected principle that pleadings form the foundation of the case, and the parties are bound by the pleadings. They cannot travel beyond the pleadings or set up new case which is not propounded in the pleadings, and any amount of evidence contrary to the pleadings cannot be looked into (AIR 1987 SC 2179 [LQ/SC/1987/499] )

18. Bearing in mind the well-established principles, this Court concludes that the defendant's contention regarding the plaintiff's financial capacity cannot be accepted. The defendant claims she was unaware of the plaintiff's identity until she received the notice. In this regard, the plaintiff was subjected to extensive cross-examination. PW.1 stated that he had known the defendant for five years because she was his customer. She lives in Purnandapet and works at the Government Press in Vijayawada. He is unaware of the defendant's cadre or salary. The defendant alone came to him and requested a loan for her family's necessities. Previously also, the defendant secured amounts from him and discharged the loans. But he did not file those promissory notes. The evidence of PW.1 shows his prior acquaintance with the defendant. Despite eliciting such facts in the cross-examination of PW.1, the defendant has not disputed the facts elicited in the cross-examination of PW.1, in her evidence as DW.1. The said evidence of PW.1 establishes his acquaintance with the defendant before the suit transaction.

19. At the outset, it will be appropriate to note that the defendant has taken a specific plea that one Lakshmi Kantamma is doing private business at Purnandapeta, Vijayawada. The defendant was a member of two chits conducted by Lakshmi Kantamma for Rs.50,000/-. As her income was insufficient, the said Lakshmi Kantamma procured the signatures of other Govt. employees on two blank promissory notes. Because of faith and confidence in her V.Sita Rama Raju, Typist and D.Rajeswari and other employees, they also handed over the blank promissory notes. In support of the contentions, the defendant got examined DW.2 – D.Rajeswari and DW.3 – N.Sita Rama Raju. DW.2's cross-examination could not be held due to her death. However, the trial court considered her evidence. It is the defendant's case Lakshmi Kantamma got filed a suit in OS.No.187 of 2003 against D. Rajani. In the suit, the defendant herein deposed as DW.2 and a certified copy of her deposition got marked as Ex.B2; the said suit was dismissed. It appears that the defendant has not provided a copy of the judgment to establish the reasons for the dismissal of the suit.

20. In his testimony, DW.3 - N.Sita Rama Raju stated that Lakshmi Kantamma used D.Rajeswari's blank promissory notes and filed another suit in OS.No.166 of 2007 in the name of B.Punnarao. DW.3 stated during cross-examination that the defendant is her colleague, that he is not a party to the suits mentioned in his chief affidavit, and that he did not give PW.1 any blank promissory note. According to the defendant's plea in the written statement, one V.Sita Rama Raju also handed over the blank promissory note. It appears that DW.3 is N.Sitarama Raju but not V.Sitarama Raju. There is no effort to explain the same.

21. It is the same evidence of DW.4 – Gummadi Chittemma, also Lakshmi Kantamma, was running a chit business. She also joined as a Subscriber in Chit Four years back. The said Lakshmi Kantamma used to take blank promissory notes from the bidders to participate in the auction. In the cross-examination, she stated that she is working at Raj Tower Hotel. She does not know anything about this case. She does not know about the plaintiff, Lakshmi Kantamma and T.V. Krishna Rao. It is not the evidence of DW.4 that said Lakshmi Kantamma had obtained a blank promissory note from her. She has not explained why Lakshmi Kantamma did not obtain a blank promissory note from her.

22. DW.5 – Mullu Adilakshmi also supported the defendant's version by deposing that she also joined as Subscriber in chits conducted by Lakshmi Kantamma, who used to take blank promissory notes from bidders and the defendant and her colleagues gave blank promissory notes to the said Lakshmi Kantamma. Her evidence does not show why Lakshmi Kantamma has not obtained signatures on blank promissory notes from her. She deposed that she did not know anything about this case.; At the request of the defendant, came to Court. The defendant is her friend, and she does not know the relationship between the plaintiff and Lakshmi Kantamma. This Court views that much credence cannot be attached to the evidence of DWs.4 and 5. It goes to the root of the contest of the defendant. It is not their evidence that they had given blank promissory notes containing their signatures to Lakshmi Kantamma or that they were presented at the time of handing over blank promissory notes by DW.1 to Lakshmi Kantamma. It is not the defendant's stand that she had issued any notice to Lakshmi Kantamma demanding her to return the promissory note. After service of the summons in the suit, the defendant is expected to take such steps. Though the defendant has taken a specific plea at the instance of Lakshmi Kantamma, the plaintiff filed this suit; no material is placed before the Court to show the relationship between the plaintiff and Lakshmi Kantamma. Nothing on record suggests that Lakshmi Kantamma was aware of this suit proceedings. Despite giving evidence in OS.No.187 of 2003, there is nothing to show that DW.2 had initiated any action against Lakshmi Kantamma demanding the return of the alleged blank promissory notes. Simply because DWs.3 and 5 stated in their evidence that Lakshmi Kantamma is in the habit of filing false cases through third parties in the absence of any clinching evidence; it cannot be concluded that this suit was filed at the instance of Lakshmi Kantamma.

23. Simply because it is alleged Lakshmi Kantamma got filed the suits based on promissory notes and the said suits were dismissed, and in one of the suits, DW.1 had given evidence alleging that Lakshmi Kantamma obtained her signatures on two blank promissory notes, it cannot be concluded that the said Lakshmi Kantamma filed this suit through the plaintiff in the absence of any evidence before the Court showing the relationship of the plaintiff with Lakshmi Kantamma. It is the evidence of DW.1 that being a Government employee, she does not need to borrow the amounts. In the cross-examination, she stated that one Dadi Koteswara Rao filed a promissory note suit and a cheque dishonour case. She filed her written statement in the said promissory note suit; she does not remember the defence in the said proceedings. She denied the suggestion that she put the same defence in that suit. It is not the evidence of DW.1 in the said suit; that Lakshmi Kantamma was behind the litigation. On the facts of the case, it is clear that she did not file any document to show that Lakshmi Kantamma is connected with this case, and the plaintiff in any way concerned to Lakshmi Kantamma, T.V.Krishna Rao, G.Rajani and D.Rajeswari. She has no proof to show that the said Lakshmi Kantamma runs the chit business, and in that connection, she gave an empty promissory note to her, and the said the promissory note was used by the plaintiff to file this suit. She also admitted that the plaintiff is not concerned about the suit in OS.No.187 of 2003 and OS.No.167 of 2007. She has not filed any document to show the plaintiff's relationship with Lakshmi Kantamma. The trial court has given much importance to the evidence in DWs.3 and 5 and accepted the defendant’s case.

24. It is palpably evident that the defendant admitted her signature on the promissory note. She also revealed that she has not been in the habit of signing the promissory note without taking money. Having observed the same, the Trial Court failed to give reasons to accept the defence. The defendant examined the witnesses to show the filing of suits in OS.No.166 of 2007 and 187 of 2003. The defence taken by the defendants in those two suits and the defence in this suit is the same, and the defendant herein has given evidence in O.S.No187 of 2003 in support of the defendants in OS.No.187 of 2003 as such, the Trial Court has accepted the defendant’s case. As it is worth mentioning here, the defendant has not filed a copy of the Judgments in OS.No.187 of 2003 and 166 of 2007. It may not be out of place to mention that the Trial Court has not discussed the relevance of dismissing those two suits while accepting the defendant's case in the present suit. The trial court has wrongly placed the burden on the plaintiff by observing that by adducing oral evidence and filing documentary evidence, the plaintiff did not establish the parties in OS.No.187 of 2003 and OS.No.167 of 2007 are not connected to the suit. The burden is on the defendant to establish how the judgments passed in those suits are relevant to decide the present suit when the plaintiff herein was not a party to those suits, when the defendant failed to establish the relationship between the plaintiff and Lakshmi Kantamma. I am conscious of the fact that Lakshmi Kantamma is neither a party nor a witness to the present suit. She has no opportunity to explain the contentions against her in the present suit. It is unclear how the Trial Court concluded that Lakshmi Kantamma obtained blank promissory notes from the defendant and gave them to the plaintiff, and he filed the present suit. The Trial Court is not supposed to have taken into consideration the defence taken by the defendants in OS.No.187 of 2003, and OS.No.167 of 2007 as Lakshmi Kantamma is not a party to the two suits. It is not the evidence of DW.1 that she sent a legal notice to Lakshmi Kantamma after giving evidence in OS.No.187 of 2003 and after receipt of summons in the present suit. Simply because PW.2 has testified that he did not know the plaintiff’s capacity to lend the amount, the trial court is not supposed to have observed that it shows the inconsistent version of PW.2. The scribe is not supposed to make enquiries about the plaintiff’s financial capacity. The trial court also observed that PWs.2 and 3 categorically stated that the defendant received the consideration amount in their presence. It is the observation of the Trial Court that DWs.1, 3 to 5 have categorically stated that the suit promissory note is not supported by consideration; still, the plaintiff did not put any rebuttal evidence in support of the contention. It is not the plaintiff’s case that DWs.3 to 5 were present at the time of the suit transaction. The Trial Court has considered that the plaintiff has not sent the Xerox copy of the promissory note to the defendant despite the demand made in the reply notice. Be that as it may, at any stretch of the imagination, it cannot be concluded that the suit transaction is disproved. It is pertinent to note that the plaintiff has taken a specific plea in the plaint that the defendant is trying to alienate her properties to third parties to delay and, if possible, defeat the realization of the amount under the suit promissory note.

25. In a decision Duggineni Seshagirirao Vs. K.Venkatarao 2001(6) A.L.T. 95 in the facts and circumstances of the case, this Court held that:

“the plaintiff has been able to prove the execution of the document. If the document was disputed or doubted the onus was on the defendant to show that the document was forgery because the presumption in favour of the plaintiff under Section 118 of Negotiable Instrument Act”.

26. In a decision Bonalaraju Vs. S.Sarupula Srinivas 2006(2) ALD 202, wherein this Court held that :

“once execution is proved, the presumption under Section 118 of N.I. Act that it is supported by consideration automatically applies, and the contention that the plaintiff is not only to establish the execution but also establish passing on the consideration is rejected".

27. In a decision G. Vasu Appellant V. Syed Yaseen Sifuddin Quadri AIR 1987 A.P. 139 Full Bench, wherein this Court held that

“Once the defendant shows either by direct evidence or circumstantial evidence or by use of other presumptions of law or fact that the promissory note is not supported by consideration in the manner stated in the promissory note or the manner stated in the suit notice or the pleading, the evidential burden shifts to the plaintiff and the legal burden of the plaintiff is revived, i.e., to prove that the promissory note is supported by consideration and at that stage. The presumption of law covered by S.118” disappears and no longer subsists”.

“It is further held that once both parties have adduced evidence the Court has to consider the same and the burden of proof loses all its importance”.

28. In a decision Abbisetti Krishnamoorthy V. Singasani Raghuramaiah (died) per L.R.s 2011(5) ALT 143, wherein this Court held that

“Section 118 of the N.I Act shows that the presumption attached to passage of consideration (as is the subject matter of this appeal) just like other presumption also is clearly rebuttable and it is for the defendant to satisfy the Court that in a given case, the presumption cannot be drawn”.

29. In the light of the settled legal position and present facts of the case, the burden lies on the defendant to prove the non-existence of consideration by bringing on record such facts and circumstances, which would lead the Court to believe the non-existence of the consideration. If the defendant discharges the onus of proof showing that the existence of consideration was improbable or doubtful and the execution of the promissory note, the onus would be shifted to the plaintiff. Then he will be obliged to prove the existence of the consideration.

30. The defendant failed to show any reason or circumstance to disbelieve the evidence of P.Ws.1 to 3 regarding the execution of the promissory note by the defendant; it is to be borne in mind that the evidence of P.Ws.1 to 3 is consistent regarding the execution of the promissory note by the defendant on receipt of the consideration amount. Though P.Ws 1 to 3 were subjected to lengthy cross-examination, nothing was elicited to discredit their evidence. The plaintiff and his witnesses have no reason to fabricate a suit promissory note. P.W.2 has no reason to depose falsehood against the defendant's interest and he would gain nothing by supporting the plaintiff's case unless there is a truth in it. It is not defendant’s case that he has enmity with him to depose falsehood against her case. However, even the rebuttal could be given by direct evidence or by proving on record the preponderance of probabilities. In the present case, the presumption has not been rebutted by the defendant, even by the preponderance of probabilities.

31. From the facts which have been brought on record, it is clear that the plaintiff made out a case that the promissory note was signed by the defendant and consideration was passed on to the defendant. Once those materials were available; naturally, the presumption u/Sec.118 of the Negotiable Instruments Act would come into play when the defendant admitted that she put the signature in the promissory note in question. It is relevant to quote para 14 of the decision in Bharat Barrel and Drum Manufacturing Company Vs Ameen Chand Pyarelel reported in AIR 1999 SC 1008, wherein it is held as follows:

“Upon consideration of various judgments as noted herein above, the position of law which emerges is that once execution of the promissory note is admitted, the presumption u/Sec.118-A would arise that it is supported by consideration. Such a presumption is rebuttable".

“It is further held that the burden upon the defendant of proving the non-existence of consideration can be either direct or by bringing on record the preponderance of probability by reference to the circumstances upon which he relies”.

"It is further held that the bare denial of the passing of 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".

"It is further held that it is true that the plaintiff had produced evidence and the evidence was in fact, the evidence in rebuttal, of the evidence produced by the defendant in the case. Even though, it is true that the plaintiff's evidence was not believed yet the same could not be made basis for rejecting the claim because obligation upon the plaintiff to lead evidence to prove his case could not have been insisted upon, because the defendant has prima-facie or initially in not discharge his onus of proof by showing directly or probabalizing the existence of nonconsideration".

32. Thus the case is required to be considered in the light of the aforesaid legal position; the Trial Court mainly relied on the evidence of DWs.3 to 5. This Court views that their evidence is not relevant to the suit transaction for the reasons already recorded. D.W.1, in cross-examination, clearly and categorically stated that she was not in the habit of signing the promissory note without taking the money. It goes without saying that she signed Ex.A1 promissory note by taking money. When viewed in this context, it will be clear that the trial court failed to consider such a piece of important evidence elicited in the cross-examination. The said evidence manifestly indicates that the case of the defendant regarding handing over a blank promissory note containing her signature to Lakshmi Kantamma in connection with the chit transaction is incorrect. From the reading of Section 20 of the Negotiable Instrument Act, it is clear that it is itself an authority to the holder of the signed instrument to fill up the blanks and to negotiate the instrument. It needs to be stated once it is admitted that the defendant has signed in the promissory note, her liability cannot be denied. It becomes obvious that once it is pleaded and proved that the suit promissory note had been signed by the defendant and the presumption would arise, and the same has to be rebutted by the defendant. If the defence put forth by the defendant is found correct, she would have preferred a complaint against the plaintiff and the said Lakshmi Kantamma or at least issued a Lawyer’s notice. Having regard to the evidence, which is adverted to supra, without any substantial documents, the oral evidence given by DW.1 cannot be relied on. As already observed, the defendant has not produced any evidence to discharge the onus on her. I repeat at the cost of repetition that the defence taken by the defendant is not substantiated. The presumption under Section 118 of the Negotiable Instruments Act, 1981 is a Statutory one, and unless it is rebutted, it has to be presumed that consideration has passed. In studied scrutiny, this Court is not in a position to accept the contentions raised by the defendant and also the findings recorded by the Trial Court. What emerges from the above discussion and analysis is the defendant executed Ex.A1 suit promissory note on receipt of consideration.

33. The question that is required to be considered is the rate of interest claimed by the plaintiff. This Court is of the view that the private party, like the plaintiff, was not justified in demanding interest at the rate of 24% per annum from the defendant and that too when the amount is borrowed for her family necessities but not for business purposes. Therefore, it is just and proper to award interest at 12% per annum on the principal amount of Rs.3,00,000/- from the date of suit promissory note transaction till the date of filing of the suit and thereafter at 9% per annum till the date of decree and thereafter at 6% per annum till the date of realization with proportionate costs on Rs.3,00,000/-.

34. The upshot of the aforementioned discussion, while answering points, this Court views that the Trial Court has come to an erroneous conclusion in dismissing the suit.

35. For the reasons stated above, this Court finds the judgment and decree passed by the trial court are liable to be set aside against the defendant, and the judgment passed by the trial court needs interference. Accordingly, these points are answered.

36. IN THE RESULT, the appeal is partly allowed with proportionate costs and the suit in O.S. No.611 of 2007 on the file of Principal Senior Civil Judge Vijayawada is partly decreed for principal amount of Rs.3,00,000/- together with interest at 12% per annum on the principal amount from the date of suit promissory note transaction till the date of filing of the suit and thereafter at 9% per annum till the date of decree and thereafter at 6% per annum till the date of realization on Rs.3,00,000/- with proportionate costs.

37. Miscellaneous petitions, if any, pending in this appeal shall stand closed.