Case Note & Summary
The dispute arose from a suit filed by the Indian Bank for recovery of Rs. 1,21,006.98 under an equitable mortgage and promissory note against three defendants. The Bank claimed that the defendants executed a promissory note for Rs. 1,00,000 on 26.8.1971 and two hypothecation deeds, along with an equitable mortgage for additional properties. The defendants denied execution of the documents, alleging fraud and coercion. The trial court ruled in favor of the Bank against two defendants but dismissed the suit against the third defendant, a minor. The High Court upheld the trial court's finding regarding the execution of the promissory note but ruled it void for lack of consideration related to loans to 37 borrowers. The Bank appealed to the Supreme Court, which found that the promissory note was executed with full consideration and that the defendants were liable for the entire amount claimed. The Supreme Court set aside the High Court's judgment and restored the trial court's decree in favor of the Bank, emphasizing the statutory presumption of consideration under the Negotiable Instruments Act.
Headnote
A) Negotiable Instruments - Presumption of Consideration - Statutory presumption under Section 118 - The court held that the promissory note was executed with full consideration, and the defendants were liable to pay the entire amount claimed by the Bank. The High Court's conclusion that the promissory note was void for want of consideration was incorrect as the statutory presumption of consideration applied (Paras 115-B, 117-F).
Issue of Consideration
Whether the promissory note was void for want of consideration to the extent of loans advanced to 37 persons.
Final Decision
The Supreme Court allowed the appeal, set aside the High Court's judgment, and restored the trial court's decree in favor of the Bank for the full amount claimed.
Law Points
- Execution of promissory note
- equitable mortgage
- statutory presumption of consideration
- liability of defendants
- guarantee agreement
- novation of contract
