The Supreme Court of India, in a recent judgment, has held that a court cannot reduce the amount recoverable under a promissory note merely because a portion of the consideration was paid in cash and lacks documentary proof. The bench, comprising Justice Ahsanuddin Amanullah and Justice Vipul M. Pancholi, set aside a Kerala High Court order that had reduced the decretal amount in a suit for recovery, and restored the trial court’s original decree for the full amount.
Case Background
The case, Georgekutty Chacko vs. M.N. Saji, originated from a suit for recovery of money based on a promissory note. The appellant, Georgekutty Chacko, had lent Rs. 30,80,000 to the respondent, M.N. Saji, who acknowledged the debt by executing the note. When the respondent failed to repay, the appellant filed a suit.
The Trial Court decreed the suit in favor of the appellant, ordering the recovery of Rs. 35,29,680. However, the respondent challenged this decision before the High Court of Kerala at Ernakulam. The High Court modified the decree, reducing the recoverable amount to Rs. 22,00,000. This reduction prompted the appellant to approach the Supreme Court.
Appellant’s Arguments
Before the Supreme Court, counsel for the appellant argued that the High Court erred in unilaterally reducing the amount specified in the promissory note, especially since the note’s validity was accepted by both lower courts and the respondent himself.
The appellant contended that the High Court’s reasoning—that there was documentary proof for only Rs. 22,00,000—was flawed. The appellant’s “clear cut stand” was that Rs. 22,00,000 was transferred through banking instruments, while the remaining sum was paid in cash. It was argued that rejecting the cash portion of the transaction solely on the ground that it was an “oral statement” was incorrect, particularly when the respondent never alleged any factual inaccuracy or manipulation in the promissory note he had signed.
Supreme Court’s Analysis and Decision
The Supreme Court noted that despite being served twice, the respondent chose not to appear in the proceedings.
After reviewing the material on record, the bench concluded that “a case for interference has been made out.” The Court observed that since the promissory note itself was upheld and not disbelieved, the onus shifted to the respondent to disprove the facts contained within it.
The judgment emphasized the nature of cash transactions, stating, “it is not uncommon that in money transactions, there is a component of cash also involved.” The Court made a crucial observation regarding the burden of proof for such transactions. “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,” the bench stated.
Elaborating further, the Court said, “A person who gives cash obviously would not be having any documentary proof per se.” It acknowledged that while receipts may sometimes be taken for cash payments, the “absence of the same would not negate and disprove the stand that the cash transaction also took place between the parties.”
The Court also invoked the Negotiable Instruments Act, 1881, noting that 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.”
Finding the High Court’s decision to bifurcate the amount based on available documentation to be “clearly erroneous and therefore, unsustainable,” the Supreme Court allowed the appeal. The judgment, dated September 1, 2025, set aside the impugned order of the High Court and restored the order of the Trial Court in its entirety.
