Books of account alone do not prove liability; underlying transactions and cash repayment must be established by admissible evidence.

Entries in books of account, without proof of the underlying transaction and supporting oral evidence, are insufficient to fasten liability. The text explains that a limitation and res judicata objection failed because no prior adjudication on the same issue between the same parties was shown. It also notes that the alleged loan and pledge of shares were not proved, and that admission of cheque receipt did not establish cheque discounting, cash repayment, or the alleged acknowledgment by the purported agent. On the record, fraudulent diversion and enforceable liability against the concerned respondent were not established.

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Issues: (i) Whether the claim was barred by limitation or principles of res judicata. (ii) Whether the notified party proved that the sums of Rs. 3,44,12,538 were advanced to respondent no.1 as a loan and against pledge of shares. (iii) Whether respondent no.1 proved that the cheques were received for cheque discounting and that the amounts were repaid in cash to respondent no.4 as agent of respondents nos.2 and 3, including the alleged acknowledgment by respondent no.4. (iv) Whether the petitioner established fraudulent diversion of funds and a cause of action or liability against respondent no.4.

Issue (i): Whether the claim was barred by limitation or principles of res judicata.

Analysis: The plea of limitation was not substantiated on the record. The petition was based on a disclosure made in earlier proceedings, and the mere withdrawal of another petition did not establish res judicata or constructive res judicata. No earlier adjudication on the same issue between the same parties was shown.

Conclusion: The objection was rejected and the claim was held not to be barred.

Issue (ii): Whether the notified party proved that the sums of Rs. 3,44,12,538 were advanced to respondent no.1 as a loan and against pledge of shares.

Analysis: The burden lay on respondent no.2, which did not lead oral evidence to prove the alleged loan. Mere entries in books of account were insufficient by themselves to charge liability. The cash book entries relied upon did not clearly describe the amounts as loans, and no primary evidence of a loan transaction or pledge of shares was proved.

Conclusion: The alleged loan and pledge were not proved.

Issue (iii): Whether respondent no.1 proved that the cheques were received for cheque discounting and that the amounts were repaid in cash to respondent no.4 as agent of respondents nos.2 and 3, including the alleged acknowledgment by respondent no.4.

Analysis: Receipt and encashment of the cheques were admitted, but the further case that the amounts were repaid in cash, after deduction of commission, was not proved by admissible evidence. The alleged acknowledgment by respondent no.4 was not proved, and the witness on whose affidavit reliance was placed did not present himself for cross-examination. Limited admissions regarding agency did not establish actual receipt of cash by respondent no.4 or discharge of liability.

Conclusion: Cheque discounting, cash repayment, and the alleged acknowledgment were not proved.

Issue (iv): Whether the petitioner established fraudulent diversion of funds and a cause of action or liability against respondent no.4.

Analysis: The record did not establish the true nature of the disputed transactions as fraudulent diversion. Although respondent no.4 was shown to have acted as a power of attorney holder to a limited extent, there was no direct evidence that he collected the cash or paid it over to respondents nos.2 or 3. The petition did disclose a possible role for respondent no.4, but the evidentiary foundation for fastening liability was absent. In the absence of proof of the underlying transaction, no recovery could be ordered on the basis of illegality.

Conclusion: Fraudulent diversion and enforceable liability against respondent no.4 were not proved.

Final Conclusion: The petitioner failed to establish the alleged loan transaction, the alleged cash repayment, and the consequent liability of the respondents, so the petition could not succeed.

Ratio Decidendi: Entries in books of account, without proof of the underlying transaction and supporting oral evidence, are insufficient to fasten liability; admissions may prove receipt of cheques, but not the disputed legal character of the transaction or repayment in cash to an alleged agent.

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