Admission of liability in a reply letter validates a promissory note despite claims of blank execution.

The 1st Respondent (Plaintiff), a money lender, filed a suit for recovery of ₹10,72,050/- based on a promissory note (Ex.A.1) and voucher (Ex.A.2) dated 05.01.2016, allegedly executed by the Appellant (1st Defendant) and the deceased 2nd Defendant.

The Plaintiff claimed the Defendants borrowed ₹10 lakhs for real estate business and the Appellant subsequently issued a cheque (Ex.A.3) which was returned for "insufficient funds".

The Appellant contested the suit, admitting to a smaller loan of ₹1,60,000/- in 2014 and claiming he signed blank documents, alleging Ex.A.1 was forged.

The Trial Court decreed the suit in favor of the Plaintiff.

The Appellant challenged the decree on grounds of forgery, the Plaintiff’s lack of financial means, and the non-production of original ledger accounts.

1. Whether the suit promissory note (Ex.A.1) is a forged and fabricated document

2. Whether the Plaintiff lacked the financial capacity/means to advance the loan amount to the Defendants

Section 118 of the Negotiable Instruments Act, which mandates a legal presumption that every negotiable instrument was made for consideration until the contrary is proved.

The principle regarding the burden of proof in rebuttal of presumptions as established in Bharat Barrel & Drum Manufacturing Company v. Amin Chand Payrelal (1999).

Section 114 of the Evidence Act and the principle from Vidhyadhar v. Manikrao, holding that an adverse inference is drawn against a party who fails to enter the witness box to support their pleadings.

Violations of Section 269-SS of the Income Tax Act do not render a debt legally unenforceable under the NI Act as per Prakash Madhukarrao Desai v. Dattatrya Sheshrao Desai.

The court found that while the Appellant alleged forgery, he admitted his signatures on Ex.A.1 (Promissory Note) and Ex.A.2 (Voucher), claiming they were signed in blank.

Under Section 118(a) of the NI Act, once execution (signature) is admitted, the burden shifts to the defendant to provide rebuttal evidence, which the Appellant failed to do.

The court placed heavy reliance on Ex.A.8, a handwritten reply letter from the Appellant, where he explicitly admitted the contents of the legal notice and promised to repay the loan from his voluntary retirement (VRS) benefits.

P.W.2 corroborated the passing of consideration by testifying to the delivery of twenty bundles of ₹500 notes.

The court rejected the defense regarding the Plaintiff’s failure to produce Income Tax Returns, noting that such a plea was not specifically raised in the written statement and that tax law violations are a matter between the assessee and the authorities, not a bar to debt recovery.

The Court affirmed that once signatures are admitted, the statutory presumption regarding consideration stands unless displaced by cogent evidence.

The Appeal Suit was dismissed with costs, and the judgment/decree of the Trial Court in O.S.No.35 of 2016 was confirmed.