Cash Loan Not Negated Merely Due To Absence Of Documentary Proof : Supreme Court

The Supreme Court held that merely because a part of a money transaction was done through cash instead of bank transfer, it would not mean that only the amount transferred through the banking channel can be accepted as proved, especially when the promissory note records the entire transaction.

The Court added that the absence of documentary proof would not by itself negate the cash transaction. The Court acknowledged that there would be situations where transactions have to be made, for which there wouldn't be any proof.

A bench of Justices Ahsanuddin Amanullah and Vipul M Pancholi heard the case arising out of the Kerala High Court's decision which had deducted the loan amount given by the Appellant to the Respondent, from ₹30.8 lakhs to ₹22 lakhs just because the difference amount of ₹8.8 lakhs wasn't disbursed via banking channel but through cash.

The Appellant contended that the High Court failed to acknowledge the signed promissory note of the Respondent, where he admitted receiving ₹30.8 lakhs from the Appellant.

Setting aside the High Court's decision, the Court emphasized the primacy of the promissory note, stating that once its genuineness was admitted, then a legal presumption is created of the debt as a whole unless disproved by the maker.

Since the Respondent had admitted accepting the whole amount of ₹30.8 lakhs in the promissory note, the Court observed that the High Court erred in bifurcating the loan into two parts i.e., “proven” and “unproven” components. It highlighted that oral evidence remains a valid and credible form of proof in civil cases, and that cash components in commercial transactions cannot be disregarded merely for lack of receipts or banking records.

“…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 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.”, the Court observed.

“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.”, the Court added.

Accordingly, the appeal was allowed, noting that the High Court erred in reducing the decretal amount.

Cause Title: GEORGEKUTTY CHACKO Vs. M.N. SAJI

Citation : 2025 LiveLaw (SC) 878

Click here to read/download the order

Appearance:

For Petitioner(s) : Ms. Usha Nandini V., AOR Mr. Biju P Raman, Adv. Mr. John Thomas Arakal, Adv. Ms. Ashima Gupta, Adv.

For Respondent(s) : None