The High Court of Delhi has set aside a Trial Court judgment that had dismissed a recovery suit for lack of evidence, holding that under Section 58 of the Indian Evidence Act, 1872, facts admitted by the parties need not be proved. Justice Neena Bansal Krishna ruled that once a defendant admits to receiving a loan, the burden of proof shifts to them to establish that the amount was repaid.
The court further observed that while large cash transactions may attract penalties under the Income-tax Act, the transactions themselves cannot be disregarded in a civil suit if they are otherwise proved.
Background of the Case
The appellant, Mr. Moti Lal, filed a suit for the recovery of ₹4,90,000 (Principal of ₹3,00,000 plus interest). He alleged that in May 2017, he advanced a cash loan of ₹7,00,000 to the respondent, Mr. Prem Chand, at an interest rate of 1% per month. The respondent issued a handwritten undertaking/receipt on his firm’s letterhead on June 2, 2017.
According to the appellant, the respondent repaid ₹4,00,000 in three installments between 2018 and 2020, leaving a balance of ₹3,00,000. When the respondent failed to pay the remaining amount despite a legal notice, the appellant approached the court.
The Trial Court had dismissed the suit on November 22, 2024, on the grounds that the plaintiff (appellant) failed to adduce evidence to prove his case or put the relevant documents to the defendant during evidence.
Arguments of the Parties
The respondent, in his written statement and during his examination as DW-1, admitted to receiving the ₹7,00,000 loan and executing the undertaking. However, he contended that the entire loan was repaid in cash in July 2017. He claimed that no receipt was taken for the repayment due to “good relations” with the appellant.
The appellant argued that the Trial Court failed to appreciate Section 58 and Section 103 of the Indian Evidence Act. He asserted that since the advancement of the loan was an admitted fact, the onus to prove the “plea of discharge” (repayment) rested solely on the respondent.
Court’s Analysis
Justice Neena Bansal Krishna noted that the foundational fact of the loan’s advancement was established by the respondent’s own admission.
“The controversy does not center around ‘whether a loan was advanced’ for which the burden was on the Plaintiff, but narrows down to the Defendant’s plea of discharge, namely, whether the entire loan stood repaid in cash in July, 2017, the onus of which, rests on the Defendant,” the Court observed.
The Court scrutinized the testimonies of the respondent (DW-1) and his wife (DW-2). It found several inconsistencies:
- Lack of Documentation: While a receipt was executed at the time of taking the loan, no document was produced to acknowledge its return. The Court remarked, “It is highly unbelievable and improbable that while the Receipt of loan is prepared, there would be no document in the acknowledgement of its return.”
- Vague Testimonies: DW-1 could not provide a specific date for the repayment. DW-2, who claimed to have handed the cash to her husband, admitted she had not counted the money nor could she specify the denomination of the notes.
- Source of Funds: The Court found it “imperative” to explain the source of such a “huge amount” being arranged within just one month of taking the loan, which the respondent failed to do.
Regarding the Trial Court’s concerns over cash transactions exceeding statutory limits, the High Court clarified:
“It is pertinent to mention that the Plaintiff/Appellant and the Defendant/Respondent may be in violation of the provisions of the Income Tax Authorities, which may attract penalty under the Income-tax Act, but the transaction, though in cash, is proved in this Civil Suit, and cannot be disregarded.”
Decision
The High Court concluded that the respondent had “miserably failed” to discharge the onus of proving repayment. Consequently, the Court set aside the Trial Court’s decree and allowed the appeal.
The suit was decreed in favor of the appellant for ₹4,90,000, along with interest at the rate of 6% per annum from the date of filing the suit until realization.
Case Details:
- Case Title: Moti Lal v. Prem Chand
- Case No.: RFA 271/2025 & CM APPL 16971/2025
- Bench: Justice Neena Bansal Krishna
- Judgment Date: March 13, 2026
