Absence of documentary proof would not lead to conclusion that cash amount was not paid when the receiver has executed a promissory note – Supreme Court
In a recent judgment, Hon’ble Supreme Court has held that absence of documentary proof would not lead to the conclusion that cash amount was not paid when the receiver had executed a promissory note duly acknowledging the amount received.
ABCAUS Case Law Citation:
4741 (2025) (09) abcaus.in SC
In the instant case, the appellant was aggrieved by the fact that though his suit for recovery of an amount pursuant to a promissory note had been upheld but the amount to be recovered had been reduced by the High Court.
The respondent had executed a promissory note in favour of the appellant agreeing to pay the amount of Rs. 30,80,000/- due from the respondent to the appellant with 12% interest per annum. But thereafter in spite of repeated demands the respondent did not pay the amount as promised.
The appellant filed a suit for recovery of the said amount and interest. Before the Trial Court the respondent contended that he had not borrowed any amount from the appellant and he not issued any promissory note towards repayment of the amount.
The respondent stated that he was a small scale real estate broker and was acting only as an agent for the appellant for the purchase of a property. The appellant had paid advance sale consideration to the seller. It was stated that he executed the said promissory note only as a security deposit for ensuring and preservation of money which the appellant was entitled to receive from the said seller in case of default.
It was further stated by the respondent that the appellant in the name of income tax requirement made him to execute a document styled as a promissory note. The plaintiff has not advanced any amount to the defendant. However, the said sale deed could not be executed as agreed between the appellant and the seller and a dispute arose between them. Since then, the appellant started demanding money from him.
The Trial Court rejected the above contentions observing that no ordinary prudent man who acted as a broker in a property transaction would execute and issue a promissory note for such a huge amount as a security for the advance sale consideration paid by the purchaser to the owner of the property.
The Trial Court further observed that the respondent had admitted execution of the promissory note. He also admitted that promissory note was in his own handwriting. Further based on the entries in the passbook of the respondent, it was observed that the appellant had transferred Rs. 22 lakhs to the respondent and this fact was admitted by respondent during cross examination.
The trial Court further observed that the appellant further deposed that thereafter the respondent had also borrowed Rs. 8,80,000 in cash from him and thereafter the promissory note was executed by him wherein the total amount borrowed wa duly mentioned.
The Trial Court held that there was absolutely no reason to disbelieve the above version of the appellant. The respondent had admitted execution and issuance of demand promissory note for Rs. 30,80,000/- to the plaintiff with 12% per annum on demand.
In view of the above, the Trial Court issued allowed the suit for recovery of Rs. 35,29,680/- (Rs. 30,80,000/- + interest).
Aggrieved, the respondent challenged the decree of the Trial Court before the High Court.
The Hon’ble High Court observed that apart from documentary proof of payment of Rs. 22 lakhs, there was no documentary proof for remaining amount of Rs. 8.80 lakhs except the oral assertion made which was not sufficient.
The Hon’ble High Court observed that when there is evidence to show a part of consideration, the presumption available under Section 118 of the Negotiable Instruments Act would come into play with respect to the consideration so proved and in the absence of any satisfactory evidence for the rest of amount, there is no wrong in decreeing the suit for the amount so proved and there can be a partial rebuttal of presumption available under Section 118 of the Act.
In view of the above, the Hon’ble High Court modified the decree of the Trial Court by reducing the amount to be recovered to only Rs. 22,00,000/-.
Before the Hon’ble Supreme Court, the appellant submitted that once the promissory note had been accepted by both the Courts and also by the respondent, the amount clearly specified in such promissory note could not have been unilaterally reduced.
It was submitted that the course taken by the High Court with regard to there being proof of only Rs. 22,00,000/- having been paid by the appellant to the respondent was 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. It was submitted that to reject the cash amount, that too, only on the ground that it was an oral statement, was 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 signed by him, contained incorrect fact and/or there was manipulation in the same.
The Hon’ble Supreme Court observed that 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.
Further, the Hon’ble Supreme Court pointed out that the initial presumption of legally enforceable debt comes from the Negotiable Instruments Act, 1881 also and thus the onus was on the respondent to prove that no such amount was given. Only because documentary proof was not available, the view taken by the High Court was erroneous.
The Hon’ble Supreme Court further stated that 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.
The Hon’ble Supreme Court held that in view of the facts of the case, the bifurcation made by the High Court was clearly erroneous and therefore, unsustainable.
Accordingly, the appeal was allowed and the impugned order of the High Court was set aside restoring the order of the Trial Court.
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