TaxTMI 
TaxTMI 
2026 (7) TMI 522
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....ph (since died) and 2nd respondent/3rd defendant (LR of 2nd defendant Joseph). The appellant/1st defendant contested the suit. The suit was decreed in toto by the trial Court. 4.For the sake of convenience, the parties are referred to as per their rank before the trial Court. 5.The brief facts are as below: (a) The case of the plaintiff is that the plaintiff is doing money lending business; on 05.01.2016, the defendants 1 & 2 approached the plaintiff and borrowed Rs. 10 lakhs on execution of a promissory note, dated 05.01.2016 agreeing to repay with interest at 1% per one hundred; on the same day 05.01.2016 both the defendants 1 & 2 gave signed voucher to the plaintiff; on 06.06.2016, the 1st defendant issued a cheque, upon presentation to the bank, the cheque was returned on 07.06.2016 as 'insufficient funds'; so the plaintiff sent a legal notice, dated 19.07.2016; on receipt of the same, the 1st defendant sent a letter in his own handwriting with an undertaking that he would repay; in spite of several demands, the defendant did not repay. Hence, the plaintiff laid the suit for recovery of money with interest. (b) The case of the 1st defendant is th....
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....estate business. The 1st defendant was working for the Port Trust and he did not do any real estate business. In Ex.P.5 - legal notice, it is stated that the 2nd defendant signed as guarantor. The plaintiff specifically admitted in his evidence that the 1st defendant alone borrowed money, but Ex.A.1 shows that the defendants 1 and 2 put their signatures. So, the Ex.A.1 is forged, and fabricated one. The plaintiff marked a photocopy of ledger account relating to loan of defendants as Ex.A.10, but he did not produce and mark the original ledger before the Court, so the alleged entries in Ex.A.10 are not made in regular course of business and it has no evidentiary value and it is inadmissible in evidence. 12. In support of this contention, the learned counsel relied on ruling of the Hon'ble Supreme Court in the case of Ishwar Dass Jain (dead) through LRs. v. Sohan Lal (dead) by LRs reported in AIR 2000 Supreme Court 426, in which it is held in paragraph Nos.23, 24 and 31 as follows: ''23. Now under Section 34 of the Evidence Act, entries in "account books" regularly kept in the course of business are admissible though they by themselves cannot create any liabil....
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.... such huge loan, he has to mention it in his income tax returns. But he has not obtained any loan and the same is not shown. The plaintiff has no means to pay such an amount and the plaintiff has not produced any income tax returns to show the advance of the loan amount. P.W.1 has also admitted in his evidence that he has not produced any income tax returns. So, the presumption u/s. 118 of the Negotiable Instruments Act is in favour of the 1st defendant. Moreover, the plaintiff has attached the retirement benefits of the 1st defendant. It is a settled position that the retirement benefits cannot be attached. So, the finding of the trial Court is not correct and the same is liable to be set aside. The appeal may be allowed. 14.In support of his arguments, the learned counsel for the appellant/1st defendant has relied on the following decisions of this Court and of the Hon'ble Supreme Court: (1)2009 (2) CTC 725 in the case of K.Murugesan vs. E.Ulaganathan and Anr. (2)2025 (5) CTC 355 in the case of Nisha vs. Sulochana and Ors. (3)2025(5) CTC 517 in the case of R.Saravanan /v/ Tecknoweld Alloys (India) Pvt. Ltd., (4)2025 (5) CTC 525 in the case o....
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....c examination along with his admitted signatures. He did not take that step. 25.A perusal of the evidence shows that the respondents had also examined one B.Jayaprakash as P.W.2, who was a witness to the execution of the promissory note and who also deposed that the consideration was paid to the appellant at the time of its execution. The witness stood the test of cross-examination, and nothing adverse to the case of the respondents was elicited from him. 27.It is further to be mentioned that the appellant had questioned the source and availability of funds for the plaintiff to lend a sum of Rs. 16 lakhs. However, this had been explained by P.W.1, who stated that a Poclain machine had been sold and that the plaintiff had the necessary funds at the relevant point of time. It is to be noted that there was no requirement on the part of the plaintiff to further prove the source of funds, particularly, when more than sufficient evidence had been adduced regarding the execution of the promissory note, the passing of consideration, and direct testimony from a witness to the execution. (2) (2008) 7 Supreme Court Cases 655 in the case of Mallavarapu Kasiv....
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.... the pro-note Ex.A-21. (3) Order dated 28.02.2025 in A.S(MD)No.67 of 2021 of this Court in the case of Veerammal and Ors. /v/ Murugalakshmi, it is held in paragraph Nos.17 to 19 as follows: ''17. P.W.1, the holder of the promissory note Ex.A2, in her evidence has categorically spoken about the consideration passed to the first defendant on her husband and about Ex.A2, pronote came to be executed by the first defendant and her husband. Similarly, P.W.2, who is the daughter of P.W.1, who is also scribe of Ex.A2, has categorically spoken about the manner in which she wrote the Ex.A2. It is settled law that when the defendants specifically denies their execution of the suit promissory note and contends that suit promissory note has been fabricated (or) forged, the initial burden is upon the plaintiff to establish the execution of the suit promissory note. 18. On perusal of entire evidence of P.W.1 and P.W.2, no circumstances, whatsoever, brought in their evidence to show that any of the circumstances, which lead to rebut the legal presumption attached to Ex.A2. The purpose of examining the scribe is to identify the persons, who have put their signatur....
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....hers, AIR 1974 Punjab & Haryana, drew a presumption under Section 114 of the Evidence Act, 1872 against a party who did not enter into the witness box. 17. Heard the arguments of both sides and perused the material records of the case. The plaintiff has produced Ex.A.1 - Pronote to support the advancement of the loan to the defendants. The plaintiff has also produced Ex.A.2 - Voucher, Ex.A3 cheque and Ex.A.10 photocopy of the account ledger. The 1st defendant has filed a written statement contending that he has only borrowed Rs. 1,60,000/- and he did not receive Rs. 10,00,000/- and the pronote is a forged and fabricated one. From perusal of records, it is very clear that the 1st defendant has not denied the signature found in Ex.A.1, Ex.A.2 and also he has not even made a formal denial regarding the issuance of Ex.A.3 cheque. Further, the plaintiff issued a pre-suit legal notice, dated 18.07.2016 marked as Ex.A5, in which it is clearly mentioned that the 1st defendant borrowed Rs. 10,00,000/- from the plaintiff on 05.01.2016 and the same was received by the 1st defendant. The 1st defendant has sent a reply letter in his own handwriting, which is marked as Ex.A.8. The 1st defenda....
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.... is a holder in due course - that the holder of a negotiable instrument is a holder in due course; provided that, where the instrument has been contained from its lawful owner, or form any person in lawful custody thereof, by means of an offence or fraud, or has been obtained from the maker or acceptor thereof by means of an offence or fraud, or for unlawful consideration, the burden of proving the holder is a holder in due course lies upon him." In this case, the 1st defendant contended that he signed blank documents. When the signature in the pro-note is admitted therein and when the signatory states that he executed the pro-note in blank, it is an incohate pro-note, i.e., the plaintiff therein is authorised the creditor to fill-up the pro-note. 21.This Court had an occasion to deal with the similar issue, in the decision reported in 2002 (4) LW 360 (supra), wherein it has been held that when the signature in the pro-note is admitted and the signatory states that he executed the pro-note in blank, it is incohate pro-note and held that the pronote is proved in the absence of any rebuttal evidence by the defendant, based on the decision of the Hon'ble Supreme Court, which is ....
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....f and twenty bundles of Rs. 500/- was given to the defendants. The defendants has not elucidated any contrary evidence from P.W.2 during his cross examination. 23. The 1st defendant has further contended that the 2nd defendant has not signed the Ex.A.1 pronote and Ex.A.2 voucher, and that the 2nd defendant stated in his written statement that he has not borrowed any loan from the plaintiff. However, unfortunately, after filing the written statement, the 2nd defendant died and his wife was added as his legal heir and ranked as 3rd defendant. The 3rd defendant has not participated in the suit proceedings and remained exparte. Since the 3rd defendant has not entered into the witness box and was not subjected to examination, an adverse presumption can be drawn against the 2nd defendant. It is also the case of the 1st defendant that the ink in Ex.A.1 and Ex.A.3 cheque found to be different. Except for the 1st defendant, no witness was examined on his side. Moreover, even the 1st defendant had not taken any steps to get expert opinion regarding the period when the contents were written in the Ex.A.1 pronote, when he claims that he signed on blank stamp paper. The defendant has not cho....
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....d sum, otherwise than by an account payee cheque or account payee bank draft or use of electronic clearing system through a bank account [or through such other electronic mode as may be prescribed], if, - (a) the amount of such loan or deposit or specified sum or the aggregate amount of such loan, deposit and specified sum; or (b) on the date of taking or accepting such loan or deposit or specified sum, any loan or deposit or specified sum taken or accepted earlier by such person from the depositor is remaining unpaid (whether repayment has fallen due or not), the amount or the aggregate amount remaining unpaid; or (c) the amount or the aggregate amount referred to in clause (a) together with the amount or the aggregate amount referred to in clause (b), is twenty thousand rupees or more: Provided that the provisions of this section shall not apply to any loan or deposit or specified sum taken or accepted from, or any loan or deposit or specified sum taken or accepted by, - (a) the Government; (b) any banking company, post office savings bank or co-operative bank; (c) any corporation established by a Central, State or Pr....
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....at the object behind introducing the said provision was to curb and unearth black money. Referring to the provisions of Section 271-D and Section 273-B of the Act of 1961, it was observed that even though contravention of Section 269-SS resulted in a stiff penalty being imposed on the person taking the loan or deposit, the rigor of Section 271D was whittled down by Section 273B on the proof of bona fides. Hence such transactions could not be declared to be illegal, void and unenforceable. Similar view has been taken by the learned Single Judge of the Himachal Pradesh High Court in Criminal Appeal No.295 of 2017 (Surinder Singh Versus State of H. P. & Another) decided on 03.11.2017. 18. In view of the aforesaid discussion, it is held that a transaction not reflected in the books of accounts and/or Income Tax returns of the holder of the cheque in due course can be permitted to be enforced by instituting proceedings under Section 138 of the Act of 1881 in view of the presumption under Section 139 of the Act of 1881 that such cheque was issued by the drawer for the discharge of any debt or other liability, execution of the cheque being admitted. Violation of Sections 269-SS a....