In a significant judgment, the Supreme Court restored a decree in favour of a creditor, holding that cash payments in money lending transactions cannot be denied merely due to the absence of bank records, provided the transaction is supported by a valid promissory note and credible oral testimony. The Court clarified that in such circumstances, the burden shifts to the debtor to disprove the alleged payment.
The Supreme Court Bench of Justice Ahsanuddin Amanullah and Justice Vipul M. Pancholi, while adjudicating a Civil Appeal along with a connected Special Leave Petition, held that cash payments in money lending transactions cannot be disregarded solely for lack of documentary or banking evidence when substantiated by a valid promissory note and oral testimony. The Court further observed that once such evidence is presented, the onus lies on the debtor to establish that the alleged payment was not made.
The Supreme Court examined an appeal challenging the reduction of a decretal amount by the High Court in a recovery suit based on a promissory note. The appellant contended that the High Court had erred in reducing the amount from ₹35,29,680/- to ₹22,00,000/-, despite the existence of a valid promissory note acknowledging receipt of ₹30,80,000/- from the appellant. It was argued that the High Court wrongly disregarded the cash component merely because documentary proof or bank records were unavailable, even though the promissory note remained undisputed and bore the respondent’s signature.
The Court observed that the respondent had not contested the execution or validity of the promissory note and had failed to rebut the presumption of a legally enforceable debt arising under the Negotiable Instruments Act, 1881. The Court noted that in financial dealings, it is not uncommon for part payments to be made in cash, and the absence of bank evidence cannot automatically discredit such transactions, especially when there is categorical oral testimony supporting them. The Court emphasised that the burden rested on the respondent to disprove the payment once the promissory note had been accepted as genuine.
Holding that the High Court’s bifurcation between cheque payments and cash payments was erroneous and unsustainable, the Supreme Court restored the Trial Court’s decree for ₹35,29,680/- in favour of the appellant. The appeal was accordingly allowed, and the High Court’s modification of the decretal amount was set aside.