The provision of clear documentation in loan transactions is essential for recovery, and the burden of proof lies with the debtor to demonstrate repayment.

JUDGMENT :

Ashok S. Kinagi, J.

1. This second appeal is filed by the appellant challenging the judgment and decree dated 26.07.2011 passed in RA No. 124/2008 by the Principal District Judge at Shimoga.

2. The parties are referred to as per their ranking before the trial Court for the sake of convenience.

3. Plaintiff filed a suit for recovery of money against the defendant. It is the case of the plaintiff that the plaintiff is a registered Partnership firm and is a financial institution. It has obtained money laundering licence from the competent authority. Defendant borrowed a sum of Rs.1 lakh from the plaintiff on 27.04.2000 for the purpose of his business agreeing to repay the said loan with interest at the rate of 23%pa on demand. The plaintiff advanced a sum of Rs.1 lakh to the defendant through a cheque bearing No. 244010 drawn on Union Bank of India, Shimoga. On the same day towards payment of his dues, the defendant had issued a post dated cheque bearing No. 382265 drawn on Vijaya Bank, Shimoga. On 21.11.2000 the plaintiff presented the cheque issued by the defendant for encashment, but on 22.11.2000 the said cheque was returned dishonoured with shara 'funds insufficient'. Plaintiff issued a legal notice as required under section 138 of Negotiable Instruments Act to the defendant. In spite of service of notice, the defendant failed to repay the said loan amount and hence the plaintiff filed a private complaint before the Chief Judicial Magistrate, Shimoga and the same is pending. Hence, cause of action arose for the plaintiff for filing a suit for recovery of the said amount of Rs.1 lakh from the defendant.

4. On service of summons, the defendant appeared and filed his written statement denying the averments made in the plaint. It is contended that the plaintiff is doing money laundering business without obtaining any licence from the competitive authority. It is contended that plaintiff is not entitled for the said claim nor interest. It is contended that defendant borrowed a sum of Rs.1 lakh on 27.04.2000 for his business and agreed to repay the same with interest @ 23% pa. It is contended that the Plaintiff firm filed a private complaint against the defendant. It is contended that defendant had money transaction with the plaintiff and has repaid the same with interest. Plaintiff obtained certain blank cheques and promissory notes at the time of lending the money. Instead of returning or destroying the said cheques and promissory notes to the defendant, the plaintiff has misused the same and instituted the suit with an intention to harass the defendant and to make a wrongful claim. Hence, the suit filed by the plaintiff is not maintainable and prays to dismiss the same.

5. On the basis of the pleadings of the parties, the trial Court framed following six issues for consideration:

“(1) Whether the plaintiff proves that the defendant had borrowed Rs.1,00,000-00 on 27.04.2000 from the plaintiff?

(2) Whether the plaintiff proves that the defendant had agreed to repay the same with interest at the rate of 23%pa?

(3) Whether the suit of the plaintiff is bad for want of money lending license?

(4) Whether the defendant proves that the plaintiff has misused the cheque and promissory note of the defendant taken on blank forms on an earlier occasion of loan transaction?

(5) Whether the plaintiff proves that as on the date of filing of the suit Rs.1,16,293-00 was due from the defendant?

(6) What order or decree?”

6. The plaintiff, in order to prove the case, examined General Power of Attorney Holder of the plaintiff firm as PW1 and got marked six documents as Ex.P1 to P6. Def