The Supreme Court has ruled that a loan advanced partly in cash cannot be disbelieved merely because documentary proof is unavailable, provided the promissory note records the entire transaction and is admitted by the borrower.
A bench comprising Justices Ahsanuddin Amanullah and Vipul M. Pancholi set aside a Kerala High Court judgment that had reduced the loan amount acknowledged by the borrower from ₹30.8 lakhs to ₹22 lakhs, on the ground that ₹8.8 lakhs was paid in cash and lacked banking records.
Court’s Findings
The Court underscored that once the borrower admits the genuineness of a promissory note, a legal presumption arises in favour of the creditor regarding the full debt mentioned therein. It noted that oral evidence is equally admissible in civil disputes, and cash transactions—though not always supported by formal receipts—remain a common feature of money dealings.
The bench observed:
“It is not unusual for money transactions to involve a cash component. Merely because a person is unable to prove payment through official modes such as negotiable instruments or bank transfer does not mean the cash portion was never paid. The initial presumption of legally enforceable debt under the Negotiable Instruments Act, 1881, places the burden on the debtor to disprove it.”
The Court held that the High Court erred in splitting the loan into “proven” (via banking channel) and “unproven” (cash) portions, despite the debtor’s clear acknowledgment of the full ₹30.8 lakhs in the signed promissory note.
Final Order
Allowing the appeal, the Supreme Court restored the trial court’s decision and emphasized that the absence of a receipt or bank entry cannot, by itself, negate the existence of a cash loan. The High Court’s reduction of the decretal amount was declared “unsustainable.
