BHARAT BARREL AND DRUM MANUFACTURING CO. versus AMIN CHAND PEYARELAL

Citation: [1999] 1 S.C.R. 704 · Decided: 18-02-1999 · Supreme Court of India · Bench: V.N. KHARE · Disposal: Appeal(s) allowed

Cited by 4 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

A 
BHARAT BARREL AND DRUM MANUFACTURING CO. 
.. 
v. 
AMIN CHAND PEYARELAL 
'.I 
FEBRUARY 18, 1999 
B 
(V.N. KHARE AND R.P. SETHI, JJ.) 
Negotiable Instruments Act 1881-Section 118( a)-Promissory 
note--Rebuttable presumption as to consideration-Burden of 
proof-Plaintiff's claim that pro
0missory note executed for value 
c received-Defendant alleging that it was collateral security and not for con-
sideration-Evidence of both plaintiff and defendant found not believ-
· able-Whether plaintiff's failure to prove consideration entitles defendant to 
succeed-Held, where defendant fails to discharge initial onus of proof by 
showing non-existence of consideration, plaintiff would invariably be entitled 
D to presumption arising under Section 118( a)-Onus would shift to the plaintiff 
when something probable is brought on record-Bare denial of passing .of 
consideration is no defence and would not shift the onus-Civil Procedure 
Code 1908, Order XXXVIJ. 
Negotiable Instmments Act 1881, Section 118(a)-Civil Procedure 
E Code, 1908, Order XXXVII-Interpretation of Statutes-Purposeful interpreta-
tion -Held, Negotiable Instmments Act to be interpreted in light of objects 
intended to be achieved, despite deviation from general presumptions of law 
and procedure for redress al of grievances of litigants-Presumptions under 
Section 118 and procedure under CPC, held aimed at providing certainty, 
security and continuity in business transactions. 
F 
The defendant respondent admittedly executed a promissory note for · 
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a sum of Rs. 6,20,000 on October 11, 1961 agreeing to pay the said amount 
to the plaintiff appellant on demand. On the failure of the defendant to 
pay, the plaintiff filed a suit for the recovery of the said amount. The 
G 
defendant alleged that the promissory note had not been executed as 
consideration "for value received" but was executed as collateral security 
in a contract for the import of steel drum sheets. Due to freezing of the 
lakes, contract of import of steel drums to be shipped on or before 
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November 30, 1961 could not be performed, it was contended, and the 
contract was cancelled which absolved the defendant of any liability arising 
H out of and in relation to the document executed by him. 
704 
BHARAT BARREL AND DRUM MFRG. CO. v. AC. PEYARELAL 705 
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The trial judge in the High Court dismissed the suit holding that the A 
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~vidence led by the plaintiff and by the defendant was not believable. On 
appeal, Division Bench referred the matter to a larger Bench. A majority 
of two judges dismissed the appeal holding, inter alia, that once the court 
disbelieved the stories of both the plaintiff and the defendant, "the question 
of decreeing the plaintill's suit by continuing the said presumption does B 
not arise inasmuch as once a finding is arrived at that contrary has been 
proved and thus the presumption raised under s. 118(a) or s. 114 of the 
Evidence Act stands rebutted, the presumptive evidence being no longer in 
existence cannot be revived back to life." The dissenting judge held that the 
evidential burden does not shift to the plaintiff until the defendant proves 
that no consideration supported the making and execution of the promis- c 
sory note and held further that "the presumption under s. 118(a) requires 
the Court to be satisfied by proof that no consideration whatsoever has 
passed irrespective of the consideration alleged. Only then would the 
presumption be rebutted" and the rebuttal "must establish the universal 
negative by establishing or rendering probable a case which is inconsistent D 
with presumption of any consideration at all.'' Hence this appeal. 
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Allowing the appeal, the Court 
HELD : 1. Once execution of the promissory note is accepted, the 
presumption under s. 118(a) w&uld,_arise that it is supported by considera-
E 
tion. Such a presumption is rebuttable. Where the defendant fails to 
discharge the initial onus of proof by showing the non-existence of the 
consideration, the Plaintiff would invariably be held to be entitled to the 
benefit of presumption arising under s. 118(a) in his favour. To disprove 
the presumption, the defendant has to bring on record such facts and F 
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circumstances, upon consideration of which the court may either believe 
that the consideration did not exist or its non-existence was so probable 
that a prudent man would, under the circumstances of the case, shall act 
upon the plea that it did not exist. [721-C-D;

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