INDIAN BANK versus K. NATARAJA PILLAI AND ANR.

Citation: [1992] SUPP. 2 S.C.R. 109 · Decided: 22-10-1992 · Supreme Court of India · Bench: KULDIP SINGH · Disposal: Appeal(s) allowed

Judgment (excerpt)

... 
INDIAN BANK 
v. 
K. NATARAJA PILLAI AND ANR. 
OCTOBER 22, 1992 
[KULDIP SINGH AND N.M. KASLIWAL, JJ.] 
Constitution of India, 195()-Article 136-Appea/-Execution of promis-
sory note, equitable mortgage etc. for loans from bank-Proof-Statutory 
presumption u/s. 118-Negotiable Instrnments Act, 1881-Liability of defen-
dants to pay the amount claimed by bank. 
Negotiable lnstrnments Act, 1881-Section 118-Promissory note-
Consideration-Presumption of-Proof of execution of pronote, equitable 
mortgage etc. for bank loans-Liability of defendants to pay the amount 
claimed by bank. 
The appellant-Bank filed a suit for the recovery of an amount of 
Rs.1,21,006.98 due under an equitable mortgage and pronote against the 
defendant No. I, his wife and his son, the defendant Nos. 2 and 3 respec· 
lively. 
According to the Bank, the defendant Nos. 1 to 3 executed a promis-
sory note for Rs. 1,00,000 on 26.8.1971 in favour of the Bank and two 
hypothecation deeds in respect of 'A' schedule properties. They also ex-
ecuted an equitable mortgage on 28.8.1971 for 'B' schedule properties. 
A 
B 
c 
D 
E 
The consideration for the transaction also included an amount of F 
Rs.71,000 granted by the Bank in favour of 37 persons by way of short 
term loans. The defendant No. 1 had executed a guarantee agreement on 
14.6.1971 in favour of the Bank in respect of the short term loan in favour 
of 37 persons. 
The defendant No.1 denied the execution of guarantee agreement as G 
well as the promissory note. He also denied the furnishing of any guaran-
tee with regard to the repayment of loans· amounting to Rs.71,000 to 37 
persons. He contended that the agent of the bank in order to ward off his 
own prosecution and arrest for having advanced large amounts as loans 
to landless persons in an irregular manner, obtained the signatures of the H 
109 
110 
SUPREME COURT REPORTS [1992] SUPP. 2 S.C.R. 
A 
defendants on a printed promissory note without the details having been 
filled up; and that the documents were got executed by exercise of fraud, 
undue influence, coercion and misrepresentation. 
B 
c 
The defendant Nos. 2 and 3 in their separate written statements took 
the same stand as taken by the defendant No. l. 
The defendant No. 3 also filed a separate additional written staje-
ment taking the ground that as he was born on 12.11.1953, he being minor 
on the date of the alleged execution of the promissory note, the same was 
void as against him. 
The trial court decreed the suit in favour of the Bank and against 
the defendant Nos. 1 and 2. The suit against defendant No. 3 was dis-
missed as he was found to be a minor on 26.8.1971, i.e., on the date of the 
execution of the promissory note. 
D 
The defendant Nos. 1 and 2 liled an appeal in the High Court. 
E 
F 
The High Court though upheld the finding of the trial court, that the 
promissory note was executed with the full knowledge that it was a promis-
sory note for Rs.1,00,000, but the same was void for want of consideration 
to the extent of the loan advanced to 37 borrowers. It further held that 
the loans amounting to Rs.71,000 to 37 persons were advanced from 
17.12.1970 to 4.5.1971 and as such there was no consideration for execut-
ing the guarantee agreement nor for executing the promissory note. It 
also held that the promissory note c.ould be taken to have been supported 
by consideration only to the extent of Rs. 21,616.25 which represented the 
amount due against defendant Nos. 1 and 2 on account of their personal 
borrowings from the Bank. 
The High Court allowed the appeal in part and passed a decree in 
favour of the Bank for an amount of Rs. 21,616.25 only with interest at the 
rate of 10-1/2 per cent per annum from the date of the plaint till the date 
G of the decree of the trial court and at the rate of 6 per cent per annum 
from the date of the decree till the date of the recovery of the amount. 
Against the judgment and decree of the High Court, the Bank moved 
this Court, in the persent appeal by special leave. 
H 
Allowing the appeal filed by the Bank, this Court, 
INDIAN BANK 1·. K. Nt\TARAJA Pll.1.1\I [KASLIWAL. l.[ 
111 
HELD : 1.01. All the three defendants had taken loans from the A 
bank and those were outstanding against them at the time of execution of 
the pronote. (115-B) 
1.02. The defendants had executed the pronote and also created 
equitable mortgage in favour of the Bank and the pronote itself contained 
an endorsement of "for value received". (1

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