The Madras High Court has observed that a Judge should not sit like a sphinx and must engage in a dialogue with the Bar.

The Court added that he must pose questions to the witness to disabuse his mind of lingering suspicions. 

The Court set aside a trial court's judgment dismissing a money recovery suit, ruling that the absence of income tax records or a technical cash-advancement breach under Section 269SS of the Income Tax Act does not render a loan transaction invalid or statutorily void.

The Court emphasized that when an ex-parte defendant fails to file a written statement, omit cross-examination, and leave a promissory note and the possession of original title deeds completely unchallenged, the statutory presumption of consideration under Section 118 of the Negotiable Instruments Act operates fully in favor of the plaintiff.

The Division Bench of Justice GR Swaminathan and Justice R Poornima observed, "The Judge should not sit like a sphinx. He must engage in a dialogue with the Bar. He must pose questions to the witness to disabuse his mind of lingering suspicions. This is also a facet of the principles of natural justice. The litigant cannot be taken by surprise. Our adjudicatory system contemplates laying all cards on the table. There can be no ace up the Judge's sleeve. The outcome of the judgment may be a bolt from the blue but its substance must not. In the sense, it should contain nothing that was not discussed during the course of the proceedings or during the interface of the bar and bench. If the judgment were to rest on an adverse element, the litigant concerned should have been put on notice."

Advocate Raghuvaran Gopalan appeared for the Appellant/Plaintiff, while Advocate J.Lawrance appeared for the Respondent/Defendant.

Brief Facts

The appellant, as plaintiff, filed a suit for the recovery of a loan amount with interest against the defendant. The plaintiff asserted that he advanced a substantial sum to the defendant for family expenses and debt discharge, against which the defendant executed a promissory note and deposited an original title deed as security. Upon default, the plaintiff issued a legal notice, which was countered by a reply notice but yielded no repayment, prompting the recovery suit.

Although the defendant entered an appearance, she failed to file a written statement, cross-examine the plaintiff, or adduce any evidence. The trial court framed issues regarding the plaintiff's financial capacity, mode of payment, and proof of execution. Despite the plaintiff entering the witness box and marking documentary exhibits, the trial court dismissed the suit, leading to this first appeal under Section 96 of the Code of Civil Procedure.

Contention of the Appellant (Plaintiff)

The learned counsel for the appellant argued that the trial court erred in dismissing the suit since the defendant failed to contest the claim via a written statement or cross-examination. It was contended that the court attached unwarranted importance to the plaintiff’s financial wherewithal in the absence of a defense challenge. Furthermore, the appellant submitted that the trial court failed to appreciate the admissions made by the defendant in her reply notice, praying for the impugned judgment to be set aside.

Contention of the Respondent (Defendant)

Conversely, the learned counsel for the respondent submitted that the trial court properly exercised its jurisdiction rather than passing a mechanical decree. Relying on settled law, the respondent argued that the absence or ex-parte status of a defendant does not absolve the court of its onerous obligation to satisfy itself regarding the veracity of the claim. It was contended that the impugned judgment was well-reasoned and required no appellate interference.

Observations of the Court

The High Court observed that the trial court was wholly unjustified in dismissing the suit based on the plaintiff’s alleged lack of financial capacity. It held that the mere non-reflection of a transaction in income tax returns does not prove it never occurred.

Since the defendant failed to file a written statement, she was legally precluded from leading evidence, as no evidence can be considered outside the scope of pleadings.

Furthermore, by choosing not to cross-examine the plaintiff, the defendant left the plaintiff’s testimony entirely unchallenged. The Court critiqued the trial Judge for failing to invoke Section 165 of the Indian Evidence Act or Order 10 Rule 2 of the Code of Civil Procedure to question the witness if any doubts existed, declaring the finding of a lack of wherewithal to be perverse and unsupported by evidence.

"It is more to aid the administration of justice. The Judge should not rely on his memory in such cases. The substance of the examination must be contemporaneously recorded. Only then, the advocate or the party will be in a position to note as to whether the response to the court question was correctly noted down", the Court said.

The Court further held that under the rule of non-traverse in Order 8 Rule 5 of the Code of Civil Procedure, facts not specifically denied are deemed admitted. In her reply notice, the defendant did not dispute her signatures or the receipt of funds, but merely claimed the plaintiff was a front for a third party.

Consequently, the statutory presumption of consideration under Section 118 of the Negotiable Instruments Act applied. The onus was entirely on the defendant to rebut this presumption by entering the witness box, which she failed to do.

Finally, the Court clarified that any breach of Section 269SS of the Income Tax Act via cash advancement does not render a transaction illegal or void; it merely attracts a statutory penalty and does not bar a recovery suit.

The Court concluded that the case was clinched by the plaintiff's possession of the defendant's original title deeds—an essential piece of evidence the trial court completely overlooked.

Furthermore, since a promissory note does not legally require attestation, the non-examination of an attesting witness was not fatal. The High Court therefore set aside the unsustainable trial court judgment and allowed the appeal suit.

Cause Title: P. Palanikumar v. R. Selvi [A.S.(MD)No.162 of 2018]

Appearances:

Appellant/Plaintiff: Advocate Raghuvaran Gopalan 

Respondent/Defendant: Advocate J.Lawrance

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