Cash Payment in Promissory Note Cannot Be Denied for Lack of Bank Proof; Decree Restored by Supreme Court
- REEDLAW
- Sep 6
- 3 min read
REEDLAW Legal News Network reports: 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.
Ms. Usha Nandini V., AOR, Mr. Biju P Raman, Mr. John Thomas Arakal, and Ms. Ashima Gupta, Advocates represented the Appellant.
This is premium content available to our subscribers.
To access the full content related to this article — including the complete judgment, detailed legal analysis, ratio decidendi, headnotes, cited case laws, and updates on relevant statutes and notifications — we invite you to subscribe to REEDLAW’s premium research platform.
Click here to Subscribe and unlock exclusive access to structured legal analysis, judicial summaries, and a comprehensive legal research database.
Already a subscriber? Click the link below to access the full document and linked case laws.
REEDLAW Legal Research & Analysis is India’s most trusted legal publishing and research platform, empowering legal professionals with structured judicial insights and authoritative legal intelligence since 1985.
Our comprehensive legal intelligence platform covers Corporate Insolvency, Bankruptcy, SARFAESI, Company Law, Contract, MSMEs, Arbitration, Debt Recovery, and Commercial Laws. Through curated journals — IBC Reporter and Bank CLR — and an advanced digital database, REEDLAW simplifies complex legal research for professionals, institutions, and academia across India.
Comments