IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 16TH DAY OF APRIL, 2025 PRESENT THE HON'BLE MRS. JUSTICE ANU SIVARAMAN AND THE HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL REGULAR FIRST APPEAL NO. 177 OF 2014 (MON) BETWEEN: 1 . C. SRINATH S/O CHANNAKESHAVAIAH AGED ABOUT 52 YEARS R/O. No.184 NARASIMHAIAH COMPLEX OUTER RING ROAD KOTTIGEPALYA VISHWANEEDAM POST BENGALURU-560 091. 2 . M/S. MARUTHI BAKE EQUIPMENTS (PVT) LTD., R/AT. NO.184 NARASIMHAIAH COMPLEX OUTER RING ROAD KOTTIGEPALYA VISHWANEEDAM POST BENGALURU-560 091. (CAUSE-TITLE AMENDED V.C.O. DATED 25.11.2015) ...APPELLANTS (BY SRI. A.V. GANGADHARAPPA, ADVOCATE) AND: D.K. SURESH BABU S/O D.N. KRISHNAMURTHY AGED ABOUT 38 YEARS R/O NO.531, 63RD CROSS - 2 5TH BLOCK, RAJAJINAGAR BENGALURU-560 010. …RESPONDENT (BY SMT. RAKSHITHA D.J., ADVOCATE FOR R1; R2 IS TRANSPOSED AS APPELLANT NO.2) THIS RFA IS FILED UNDER SEC.96 OF CPC, AGAINST THE JUDGMENT AND DECREE DATED 14.08.2013 PASSED IN O.S.NO.7641/2011 ON THE FILE OF THE XIV ADDITIONAL CITY CIVIL JUDGE, BENGALURU, (CCH-28), PARTLY DECREEING THE SUIT FOR RECOVERY OF MONEY. THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR JUDGMENT ON 29.01.2025 AND COMING ON FOR PRONOUNCEMENT OF JUDGMENT THIS DAY, ANU SIVARAMAN J., PRONOUNCED THE FOLLOWING: CORAM: HON'BLE MRS. JUSTICE ANU SIVARAMAN and HON'BLE MR. JUSTICE VIJAYKUMAR A. PATIL CAV JUDGMENT (PER: HON'BLE MRS. JUSTICE ANU SIVARAMAN) The defendants are before this Court, in RFA No.177/2014, assailing the legality and correctness of the judgment and decree dated 14.08.2013, passed in O.S.No.7641/2011 on the file of XIV Additional City Civil Judge (CCH-28) at Bengaluru (hereinafter referred to as 'the trial Court' for short). - 3 2. We have heard Shri. A.V.Gangadharappa, learned counsel for the appellants and Smt. Rakshitha D.J., learned counsel appearing for the respondent. 3. For the sake of convenience, the parties are referred to as per the rankings before the trial Court. 4. Brief facts of the case are as follows:- The learned counsel appearing for the appellants/defendants would submit that the respondent/plaintiff instituted O.S.No.7641/2011 for recovery of an amount of Rs.13,60,000/-, along with costs and interest at the rate of 18% per annum from the date of suit till its complete realisation. The plaintiff’s case is that the plaintiff is carrying on the business in condiments and the defendants are carrying on the business of dealership in Bakery. The first defendant is the Managing Director of the second defendant who is private limited company. In November 2010, defendant No.1, along with one Ganesh, approached the plaintiff for financial assistance to procure machineries from abroad. Accordingly, the plaintiff lent an advance of Rs.11,80,000/- to defendant. The defendant - 4 No.1 executed three on-demand promissory notes for a sum of Rs.4,00,000/-, Rs.4,00,000/- and Rs.3,80,000/-, dated 10.11.2010, agreeing to repay the amount with 18% interest per annum. Later defendant No.1 failed to pay the same. The defendant No.1 issued a post-dated cheque on 25.02.2011 in the name of defendant No.2 for a sum of Rs.11,80,000/-, with a request to present it on 26.02.2011. The cheque was dishonoured and returned with an endorsement "funds insufficient". Upon intimation, defendant No.1, requested the plaintiff to re-present the cheque on 25.08.2011, but it was again dishonoured with the remark "refer to drawer". Consequently, the plaintiff issued a legal notice against the defendants and upon non- payment of sum of Rs.11,80,000/- towards principal amount, Rs.1,77,000/- towards interest at the rate of 18% per annum from 10.11.2010 to 10.10.2011 and Rs.3000/- towards legal notice charges payment by the defendants, in toto, plaintiff initiated a suit for recovery of a sum of Rs.13,60,000/-. - 5 Defendant No.1 entered appearance and filed a written statement denying the plaintiff's claim. The primary defense was that defendant No.1, who was facing financial difficulties, had approached his friend, Ganesh for a loan of Rs.50,000/-. Ganesh introduced him to the plaintiff who agreed to lend the amount only upon execution of blank documents in favour of the plaintiff. It was contended that the loan was subsequently repaid. But the plaintiff failed to return the documents and instead misused them to institute a false suit. The cheque was similarly misused and a legal notice was issued only after deliberately securing its dishonour. Hence, defendant No.1 sought for dismissal of the suit. The plaintiff deposed as PW.1 and produced 12 documents, including Ex.P1 and Ex.P2, which were marked despite being insufficiently stamped, subject to proof and admissibility. The matter was posted for cross-examination of PW.1, but in the absence of defendant No.1 and his counsel, cross-examination was recorded as "nil." Thereafter, defendant No.1 filed an application to recall the - 6 cross-examination of PW.1 and subsequently filed two applications dated 24.07.2013 under Order XIII Rule 3 of Civil Procedure Code, 1908(CPC) and Section 151 of CPC to reject Ex.P1 and Ex.P2. It is contended by the learned counsel appearing for the appellant that the matter was posted for orders on 26.08.2013. However, on that day, while awaiting the order, it was discovered in Civil A-Dairy that the suit had already been partly decreed on 14.08.2013. This unexpected development was immediately brought to the notice of the counsel for the plaintiff. 5. The Trial Court based on the pleadings, framed the following issues for its consideration:- 1. Whether plaintiff proves that the first defendant has borrowed a sum of Rs.11,80,000/-and has executed three on demand promissory notes and consideration receipts in favour of the plaintiff agreeing to repay the same with an interest of Rs.18% p.a.? 2. Whether the defendant No.1 proves that he had borrowed only Rs.50,000/- and has - 7 executed blank documents in favour of the plaintiff? 3. Whether the plaintiff is entitled for the suit claim? 6. In order to substantiate their claims, the plaintiff examined himself as PW1, in support of his oral evidence, got marked the documents as Exs.P1 to P12. On the other hand, defendants neither adduced any evidence nor produced any documents. 7. Based on the pleadings, oral evidence and documentary evidence, the trial Court decreed the suit in part with costs. Defendants No.1 and 2 are jointly and severally directed to pay a sum of Rs.13,60,000/- along with costs. They shall also pay interest at 13% per annum on sum of Rs.11,80,000/- from the date of suit until full realization. Defendants are granted three months time to pay the decreetal amount, failing which, the plaintiff may execute the decree as per law. The suit schedule moveable properties in Item No.1 of the plaint are attached. - 8 8. It is contended by the learned counsel appearing for the appellants/defendants that the trial Court proceeded to pass the judgment without disposing of the pending applications filed by defendant No.1 under Order XIII Rule 3 of CPC and Section 151 of CPC. Further, the trial Court erred in relying on Ex.P1 and Ex.P2, despite having previously observed that these documents were insufficiently stamped and could only be marked subject to proof, admissibility and relevancy. The Order dated 11.03.2013 specifically records that the plaintiff had undertaken to pay the requisite duty and penalty, yet no such compliance was made. In contravention of settled legal principles, the trial court, in para No.11 of its judgment, proceeded to consider Ex.P1 and Ex.P2 without ensuring that the plaintiff removed the stigma attached to Ex.P1 and Ex.P2. Since Ex.P1 and Ex.P2 formed the foundation of plaintiff’s case and in the absence of proof regarding their admissibility, the trial Court ought to have dismissed the suit. The failure to do so has resulted in a miscarriage of justice. - 9 9. It is further contended that the trial Court also failed to appreciate that the signature - Ex.P1(a), purportedly on-demand promissory note, does not belong to either defendant No.1 or defendant No.2. PW.1, the plaintiff, deposed that the signature belonged to the wife of defendant No.1, who was not made a party to the proceedings. Given that the plaintiff relied on Ex.P1 to establish the claim and the person allegedly executing the document was not a party, the trial Court erred in decreeing the suit without ensuring the presence of a necessary party. 10. It is contended that further, the suit is bad for non-joinder of necessary parties, particularly concerning defendant No.2, which the plaintiff has described as a Company. The plaintiff failed to disclose who was representing defendant No.2, despite specific contentions raised in the written statement by defendant No.1. The trial Court ignored this crucial defect and proceeded to pass the judgment without ensuring that the suit was properly constituted. The trial Court failed to frame appropriate issues necessary for the proper adjudication of the case. The - 10 issues framed were insufficient to determine the plaintiff’s entitlement to relief. 11. The learned counsel appearing for the respondent has placed reliance on the following judgments:- • Shri Anil s/o Ramachandra mashalkar v. Shri Babu s/o Hasansab Kadakol, by Order dated 15.12.2022 passed in WP No.112448/2017; • Javer Chand and Others v. Pukhraj Surana, reported in 1961 AIR (SC) 1655; • Bharat Barrel and Drum Manufacturing Company v. Amin Chand Payrelal, reported in 1999(2) ALL MR 269; • H. Shamanna and Another v. Smt. Anusuya, by Order dated 02.06.2015 passed in RFA No.1265 of 2009; • Lingamma v. Bhyramma and Another, by Order dated 26.09.2012 passed in RFA No.760/2003; • Munikrishnappa s/o Thathaiah v. P.V. Paul s/o Verghese, by Order dated 05.02.2016 passed in RFA No.581/2007. 12. The learned counsel appearing for the respondent, on the other hand, contends that the appellant - 11 had admitted the financial transaction between the parties and had not disputed his signature on the promissory notes or the acknowledgments. The documents were marked in evidence and relied on without any objections having been raised. Having chosen not to cross-examine the witness or to adduce any evidence, the contentions on fact, cannot be raised in this appeal. 13. We have considered the contentions advanced, the pleadings and the evidence on record. The plaint averments specifically are that the plaintiff on the recommendation of Mr.Ganesh, paid a sum of Rs.11,80,000/- to the defendant and the first defendant executed three On Demand Promissory Notes each for Rs.4,00,000/-, Rs.4,00,000/- and Rs.3,80,000/- on 10.11.2010. It is further alleged that the first defendant in one of the pronotes put his signature in the column meant for signature and the signature of his wife was put on the stamp paper that was done by bonafide mistake which was not noticed by the plaintiff, so also the address of the defendant instead of the plaintiff. A letter of confirmation - 12 dated 13.10.2011, and further letters dated 10.01.2011 and 13.01.2011, were relied on in support of the contentions. 14. The first appellant in his written statement denied the plaint allegations. He set up a contention that he was introduced to the plaintiff by one Ganesh, who was also doing business in Bakery. The first defendant approached Ganesh and requested him for a financial assistance to an extent of Rs.50,000/-. Ganesh contacted the plaintiff, who stated that he will make arrangements to get a loan and the defendant believing the version of the plaintiff had executed the document as directed by the plaintiff. After such execution, an amount of Rs.50,000/- was paid to the defendant by the plaintiff. The plaintiff was collecting the interest for the said amount as well. It was contended that he had paid upto date interest as well as the principal amount of Rs.50,000/- through the plaintiff to the money lenders but the papers and documents signed by him were not returned to him. It is on such pleadings that the parties had adduced evidence. - 13 15. The plaintiff examined himself and produced documents, Ex.P1 to Ex.P3 - three promissory notes and consideration receipts, Ex.P4 - cheque, Ex.P5 to Ex.P7 - three return memos and Ex.P8 - legal notice, Ex.P9 - postal acknowledgment as well as Ex.P10 and Ex.P11- letters dated 10.01.2011 and 13.01.2011, to show the borrowing of the amount as well as the transaction between the parties as alleged in the plaint. The defendant did not adduce any evidence. Though the plaintiff's evidence was closed on 11.03.2013, an application to recall PW.1 seems to have been filed only on 16.07.2013 by the defendant. So also, an application seeking to hold Exs.P1 and P2 as insufficiently stamped and therefore inadmissible in evidence also seems to have been filed on 24.07.2013. However, by that time, the evidence had been closed and the case was taken for judgment and the judgment was pronounced on 14.08.2013. 16. In the specific facts and circumstances of the instant case and in view of the fact that financial transactions between the parties had been admitted and in - 14 view of the presumption under section 118 of the Negotiable Instrument Act, 1881, we are of the opinion that the view taken by the trial Court cannot be found fault with. The trial Court had found that the transaction was admitted and that in the absence of any evidence being adduced by the defendants, the contention of the defendant that the documents could not be accepted in evidence cannot be countenanced. 17. In the above factual situation, we are of the opinion that there is no ground made out for interference in the judgment of the trial Court. The appeal fails and the same is accordingly dismissed. Sd/- (ANU SIVARAMAN) JUDGE Sd/- (VIJAYKUMAR A. PATIL) JUDGE cp*