Cash Component Doesn't Invalidate Deal Loan Valid Despite No Documentary Proof: SC

(MENAFN- KNN India) New Delhi, Sep 9 (KNN) The Supreme Court ruled that the use of cash for part of a monetary transaction does not invalidate the whole deal, nor does it mean that only the portion transferred through a banking channel can be considered proven-particularly when the promissory note reflects the entire transaction.

The Court further observed that the absence of documentary evidence does not, by itself, invalidate a cash transaction, acknowledging that there are circumstances in which transactions may necessarily occur without formal proof.

A bench of Justices Ahsanuddin Amanullah and Vipul M. Pancholi heard the case stemming from a Kerala High Court ruling that reduced the loan amount owed by the Respondent to the Appellant from Rs 30.8 lakhs to Rs 22 lakhs, solely on the ground that the remaining Rs 8.8 lakhs had been disbursed in cash rather than through a banking channel.

The Appellant argued that the High Court overlooked the Respondent's signed promissory note, in which he had acknowledged receiving the full sum of Rs 30.8 lakhs.

Overturning the High Court's ruling, the Supreme Court underscored the primacy of the promissory note, holding that once its authenticity is admitted, a legal presumption arises regarding the entire debt unless rebutted by the maker.

Since the Respondent had acknowledged in the promissory note receiving the full Rs 30.8 lakhs, the Court found that the High Court erred in splitting the loan into 'proven' and 'unproven' parts.

It further stressed that oral testimony is a valid and credible mode of proof in civil disputes and that cash components in commercial transactions cannot be dismissed merely due to the absence of receipts or banking records.

The Court remarked that it is 'not uncommon' for money transactions to involve a cash component, and the mere inability to demonstrate payment through official channels-such as negotiable instruments or bank transfers-does not mean that the amount was not paid in cash, particularly when the appellant has made a categorical statement to that effect before the concerned court.

It further noted that under the Negotiable Instruments Act, 1881, there is an initial presumption of a legally enforceable debt, placing the burden on the respondent to prove otherwise.

The Court concluded that treating the transaction as invalid solely for want of documentary proof was erroneous.

The Court further noted that a person paying in cash would not ordinarily possess documentary proof of the transaction, and while a receipt may sometimes be taken, its absence cannot by itself discredit the claim that such a transaction occurred between the parties.

In this case, the Court held that the bifurcation made by the High Court was clearly erroneous and therefore unsustainable.

The appeal was accordingly allowed, with the Court observing that the High Court had erred in reducing the decretal amount.

(KNN Bureau)

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