Lack of Documentary Proof Doesn’t Invalidate Cash Payments Backed by Promissory Note: Supreme Court
In a recent order, the Supreme Court (SC) of India held that the lack of documentary proof does not invalidate cash payments backed by a promissory note. The bench said, “Only because documentary proof was not available, we find such view taken to be erroneous.” The SC bench of Justice Ahsanuddin Amanullah and Justice Vipul M Pancholi was hearing an appeal against the Kerala High Court’s (HC) decision, which reduced the loan amount given by the Appellant to the Respondent from Rs. 30.8 lakhs to Rs. 22 lakhs because the difference amount was disbursed via cash rather than any banking channel. While passing the order, the top court bench said that the bifurcation made by the HC was clearly erroneous and, therefore, unsustainable.
In this case, the learned counsel appearing for the appellant submitted that once the promissory note was accepted by both the Courts and also by the respondent, the amount clearly specified in such promissory note would not have been unilaterally reduced. He added, “...the course taken by the High Court with regard to there being proof of only Rs. 22,00,000/- (Rupees twenty two lakhs) having been paid by the appellant to the respondent is erroneous for the reason that the clear cut stand was that Rs. 22,00,000/- (Rupees twenty two lakhs) was given through various instruments/bank transactions whereas the remaining was given by cash.” The Counsel further added that rejecting the cash amount only on the ground that it was an oral statement is not correct, “for the reason that the document i.e., the promissory note, as a whole has to be taken, especially when there was no complaint by the respondent that the promissory note though signed by him, contained incorrect fact and/or there was manipulation in the same.”
After hearing the matter, the SC bench said, “Having considered the matter and going through the material on record, we find that a case for interference has been made out. There being specific stand by the appellant that he has paid Rs. 30,80,000/- (Rupees thirty lakhs eighty thousand) to the respondent pursuant to a promissory note, which incidentally has been upheld and not disbelieved, the onus would be on the respondent to dispel such fact.” Further, the top Court highlighted, “...it is not uncommon that in money transactions, there is a component of cash also involved and just because a person is not able to prove the transfer through official modes i.e., through any negotiable instrument or bank transaction, would not lead to the conclusion that such amount was not paid through cash, especially when there was a categorical statement to this effect by the appellant before the Court concerned.”
Moreover, the SC opined, “the initial presumption of legally enforceable debt comes from the Negotiable Instruments Act, 1881 also and thus the onus is on the respondent to prove that no such amount was given. Only because documentary proof was not available, we find such view taken to be erroneous. A person who gives cash obviously would not be having any documentary proof per se. Sometimes there may be an occasion where even for a cash transaction, a receipt is taken, but absence of the same would not negate and disprove the stand that the cash transaction also took place between the parties. In the present case, the bifurcation made by the High Court is clearly erroneous and therefore, unsustainable.” Lastly, the bench allowed the appeal and set aside the HC’s order.
