Special Rules of evidence
Until the contrary is proved, the following presumptions shall be made in case of all negotiable instruments. In other words the following need not be proved as they are presumed to exist in every negotiable instrument. These rules apply only as between parties to the instrument and those claming under them.
It shall be presumed that every negotiable instrument was made or drawn, for consideration. Every such instrument when it has been accepted, negotiated or transferred was accepted, endorsed negotiated or transferred for considerations.
Presumption arises only when due execution of the instrument is established. Presumption continues until it is rebutted. It is for defendant to prove its non existence. This the defendant can prove by establishing existence of fraud. Undue influence unlawful consideration, etc. Once the defendant proves that consideration is absent, onus then shifts on the plaintiff to establish its existence.
The statutory presumptions envisaged in section 118 (a) are rebuttals by the defendant proving that the instrument was not supported by considerations by adducing (1) direct evidence (2) circumstantial evidence and by (3) relying upon presumptions of fact mentioned in section 114 of the evidence Act or others similar provisions of law raising presumptions of fact in his favor.
Section 118 only says for considerations it does not say consideration as stated in the negotiable instrument. The words for consideration are quite general and they have to be applied in their full literal sense. Therefore, hand note is not invalidated when another consideration is proved to exist. In a suit in hand note when the consideration set up in the plaint is different from that set out in the instrument presumption under section 118 (a) in favor of the plaintiff that the instruments was made for consolidation is not destroyed merely because the consideration set out in the instruments is found to be wrong, because the presumption that is raised under section 118(a) is not respect of the consideration mentioned in the negotiable instrument but the presumptions is in favor of there being a consideration for the negotiable instrument any consideration which is a valid considerations in law.
Under section 118(a) until the contrary is proved presumptions shall that every negotiable instrument was made for consideration. Once there is admission of execution of the promissory note, or the same is proved to have seen executed the presumptions under Section 118 (a) is raised that it is supported by consideration. However, where Plaintiff pleads different considerations the presumption under section 118(a) is not available.
Negotiable instruments are thus an exception to the general rule that the plaintiff must show that contract was entered into for consideration because contract law does not presume considerations. In case of contract on negotiable instruments considerations is presumed until contrary is proved. Presumption exists irrespective of the consideration mentioned in the instruments or not.
Negotiable instruments made etc; without considerations. A negotiable instrument made drawn, accepted indorsed or transferred without consideration or for a consideration which fails, creates no obligation of payment between the parties to the transaction. But if such party has transferred the instrument with or without indorsement to a holder for considerations such holder and every subsequent holder deriving title from him, may recover the amount due on the such instrument for consideration or any prior party thereto.
A is the holder of the bill. A Transfers it without consideration to B. B transfers it without considerations to C. C transfers is for value to D, D transfers it without consideration to E. E gave no considerations. He has therefore no right against D. But E recovers the amount of the bill from A B and C in the same manner as D would have been entitled to, even though E gave no value.