Defending a Suit on a Promissory Note: Pleading, Proof, and Presumptions in the Written Statement

Defending a Suit on a Promissory Note: Pleading, Proof, and Presumptions in the Written Statement

1. Introduction

Money-lending suits on on-demand promissory notes constitute a sizeable portion of civil litigation in India. While the plaintiff typically relies on the negotiable instrument itself, the defendant’s written statement remains the principal procedural vehicle to controvert liability. This article analyses the substantive and procedural contours of such written statements, examining how Indian courts evaluate defences ranging from denial of execution to challenges based on stamping, consideration, and statutory presumptions. Drawing upon leading precedents—most notably Hiralal v. Badkulal[1]—and the statutory framework of the Negotiable Instruments Act, 1881 (“NI Act”), the Indian Stamp Act, 1899 (“Stamp Act”), and the Code of Civil Procedure, 1908 (“CPC”), the discussion synthesises principles that govern the drafting, admissibility, and evidentiary impact of the written statement in promissory-note litigation.

2. Statutory Context

2.1 Definition and Characteristics of a Promissory Note

Section 4 of the NI Act defines a promissory note as “an instrument in writing… containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument.” Judicial gloss on this definition underscores four essential elements: (i) writing; (ii) signature of the maker; (iii) unconditional undertaking; and (iv) certainty of payee and amount.[2]

2.2 Presumptions of Consideration and Validity

Section 118(a) of the NI Act raises a statutory presumption that every negotiable instrument was made “for consideration”. Section 20 further empowers the holder of an inchoate stamped and signed instrument to fill in blanks up to the value covered by the stamp, thereby affording a sweeping presumption of authority.[3]

2.3 Pleadings under the CPC

Order VIII Rules 3–5 CPC govern how a defendant must traverse the plaint. A bare, evasive or inconsistent denial may operate as an admission. Additionally, Order VI Rule 7 CPC prohibits mutually destructive pleas within the same written statement, as illustrated in the appellate reversal in Nalamothu Saibabu Naidu[4].

2.4 Stamping Requirements

Article 49 (Schedule I) of the Stamp Act mandates specific stamp duty for promissory notes; Section 35 bars an unstamped or insufficiently stamped promissory note from admission in evidence, without any curative payment of penalty.[5]

3. Presumptions, Onus, and the Role of the Written Statement

3.1 Shifting Burden of Proof

In Hiralal v. Badkulal, the Supreme Court held that once the plaintiff produces a statement of accounts acknowledged by the defendant, the onus shifts; the defendant must then produce counter-accounts or specific evidence to rebut the claim.[1] The logic applies with equal force to promissory-note suits: the instrument coupled with Section 118(a) raises a presumption, and the defendant’s written statement must disclose specific grounds—e.g., forgery, want of consideration, or illegality—to dislodge that presumption.

3.2 Effect of Admissions

Any admission in the written statement, even partial—such as acknowledgment of signature but plea of discharge—fixes a distinct burden on the defendant.[6] Conversely, silence on material averments may result in deemed admissions under Order VIII Rule 5 CPC.

4. Substantive Defences and Their Pleading

4.1 Denial of Execution or Forgery

A categorical plea that the defendant “never executed” the promissory note is a recognised defence. Courts have sanctioned comparison of disputed signatures with admitted ones under Section 73 of the Indian Evidence Act, 1872, and occasionally insisted upon expert evidence.[7] Yet, where the defendant admits signature but alleges blanks were subsequently filled, Section 20 NI Act curtails the defence, as reiterated in Chidambaram v. P.T. Ponnuswamy[3]. Thus, the written statement must clarify whether the signature itself is in dispute or merely the contents.

4.2 Absence or Failure of Consideration

Although Section 118(a) presumes consideration, it is rebuttable. In Bharat Barrel & Drum Mfg. Co. v. Amin Chand, the Supreme Court allowed the defendant to prove that the note was executed only as collateral security for an import contract that failed.[8] A written statement raising this defence should plead (i) the real transaction, (ii) failure of the underlying consideration, and (iii) linkage between failure and the instrument.

4.3 Renewal or Novation

Pleading that the suit note merely renews an earlier debt is sustainable, provided it is consistent with other averments. The Andhra Pradesh High Court in Nalamothu Saibabu Naidu condemned the defendant’s volte-face from “forgery” to “renewal” and restored the trial decree, holding that Order VI Rule 7 CPC bars inconsistent pleadings.[4]

4.4 Stamping and Cancellation Objections

Failure to cancel the adhesive stamp, as in Alimane Sahiba v. Kolisetti Subbarayudu, renders the note inadmissible.[5] The objection may be raised even after admission of the document if the defect is apparent on the face of the record, emphasising the need for vigilance in the written statement.

4.5 Instrument Not Amounting to a Promissory Note

Courts have declined to treat instruments lacking an unconditional undertaking or certainty of amount/payee as promissory notes. Examples include:

  • Ratan Singh v. Pirbhu Dayal – mere acknowledgment of liability, no promise to pay.[9]
  • Raghunath Prasad v. Seth Mangi Lal – uncertainty due to unspecified interest rate.[10]
  • Raghunath Bhandary v. Seetharama Punja – omission of “order” or “bearer” does not defeat negotiability post-1919 amendment.[11]

A defendant wishing to invoke this line of defence must reproduce the instrument’s language in the written statement and demonstrate how statutory requirements are unmet.

5. Evidentiary Tools Triggered by the Written Statement

5.1 Handwriting Comparison

While Section 73 of the Evidence Act empowers the court to compare signatures, recent High Court decisions caution against the court acting as a handwriting expert in complex cases.[7] A party disputing execution should, therefore, pray in the written statement for an order under Section 45 Evidence Act to engage a forensic expert.

5.2 Production of Accounts and Secondary Evidence

Following Hiralal, failure to produce defendant’s own account books may justify an adverse inference under Section 114(g) Evidence Act.[1] The written statement should thus explain the non-availability of such documents or proactively annex them.

6. Jurisdictional and Procedural Considerations

Although promissory-note suits seldom dispute jurisdiction, the Supreme Court’s exposition on acceptance communication in Bhagwandas Goverdhandas Kedia remains instructive.[12] Where the note is alleged to have been executed in one place but delivered in another, the written statement must plead facts attracting or ousting territorial jurisdiction (Sections 15–20 CPC).

7. Consequences of Inadequate or Contradictory Pleadings

An evasive written statement may culminate in:

  • Deemed admissions (Order VIII Rule 5 CPC);
  • Rejection of belated, contradictory amendments (Order VI Rule 17 CPC read with Nalamothu);
  • Adverse cost or interest orders under Section 34 CPC.

Meticulous drafting—articulating clear, consistent and fact-supported defences—remains essential to shift or at least balance the evidentiary burden mandated by Section 118 NI Act.

8. Conclusion

The trajectory of Indian case-law demonstrates that the substantive fate of a promissory-note suit often turns on the calibre of the defendant’s written statement. Where the instrument enjoys statutory presumptions of validity and consideration, only cogent, precisely pleaded defences—supported by contemporaneous documents, expert evidence, or legal infirmities such as improper stamping—can succeed in rebuttal. The doctrinal legacy of Hiralal reconfirms that mere reliance on abstract rules of onus is futile; parties must engage with the evidentiary substance of their transactions. Accordingly, counsel drafting a written statement should: (i) choose a coherent theory of defence, (ii) particularise factual foundations, (iii) plead requisite legal ingredients, and (iv) anticipate the evidentiary burdens imposed by the NI Act, Stamp Act, and CPC. Such disciplined pleading not only aligns with procedural mandates but also enhances the integrity of commercial litigation in India.

Footnotes

  1. Hiralal & Ors. v. Badkulal & Ors., AIR 1953 SC 225.
  2. Bahadurrinisa Begum v. Vasudev Naick, 1965 SCC OnLine AP 267 (elements of promissory note).
  3. Chidambaram v. P.T. Ponnuswamy, 1995 SCC OnLine Mad 206 (Section 20 NI Act).
  4. Nalamothu Saibabu Naidu v. Chidipothu Krishnaiah, 2003 SCC OnLine AP 294.
  5. Alimane Sahiba v. Kolisetti Subbarayudu, 1932 SCC OnLine Mad 83.
  6. S. 20 illustration: SHIVAPUTRAPPA v. Parvatevva, 2023 Karnataka HC (signature admission and comparison).
  7. G. Ravichandran v. V. Devendiran, 2019 Madras HC; R. M. Natarajan Chettiar v. Sahid Hameed, 2001 Madras HC.
  8. Bharat Barrel & Drum Mfg. Co. v. Amin Chand Payrelal, (1999) 3 SCC 35.
  9. Ratan Singh v. Pirbhu Dayal, 1930 All HC.
  10. Raghunath Prasad v. Seth Mangi Lal, 1959 Rajasthan HC.
  11. Raghunath Bhandary v. Seetharama Punja, 1971 Karnataka HC.
  12. Bhagwandas Goverdhandas Kedia v. Girdharilal Parshottamdas, AIR 1966 SC 543.