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2016 Supreme(Cal) 362
IN THE HIGH COURT OF JUDICATURE AT CALCUTTA
I.P. MUKERJI, J.
Ravi Udyog Private Limited - Plaintiff
Vs.
S.G. Projects Ltd. - Defendant
C.S. No. 295 of 2010
Decided On : 18-08-2016
For the Plaintiff : Mr. Dhruba Ghosh, Ms. Ahana Sikdar, Mr. Kaushik Banerjee, Ms. Nilanjana Adhya, Ms. Rashmita Halder.
For the Defendant : Mr. Jishnu Saha, Mr. Hasnuhana Chakraborty, Mr. D. Manna, Mr. S. Karmakar, Mr. P. Ghosh.
An admission of liability in a party's balance sheets, corroborated by other evidence, can be sufficient to establish a loan agreement and the defendant's obligation to repay, even if oral testimony and other evidence are presented to contradict the admission.
Headnote:
LOAN REPAYMENT - ACCOUNT BALANCE SHEET ADMISSION - EVIDENCE ACT, SECTION 34 - INTEREST ACT, 1978 - BURDEN OF PROOF - JOINT VENTURE DEFENCE - ORAL TESTIMONY - RES JUDICATA - ADMISSION AND JUDGMENT - ORDER XII, RULE 6, CPC - COURT'S DISCRETION - BALANCE SHEET ENTRIES AS ADMISSION OF LIABILITY - CREDIBILITY OF ORAL EVIDENCE - REPAYMENT WITHOUT DOCUMENTATION - INTEREST CALCULATION.
Fact of the Case:
Plaintiff claimed that it lent Rs. 1 crore to the defendant between April 1, 2003, and July 15, 2003, through account payee cheques, which the defendant encashed. The defendant admitted receiving and encashing the cheques but claimed that the money was invested in a joint venture and later repaid in cash. The plaintiff relied on the defendant's balance sheets, which showed an unsecured loan of Rs. 1 crore from the plaintiff and an entry of Rs. 1 crore as a loan/advance in favor of the defendant.
Finding of the Court:
The court held that the defendant failed to discharge the burden of proof to establish the joint venture defense or provide details about the alleged repayment in cash. The court found the defendant's balance sheet entries to be an admission of liability, which was not adequately explained or contradicted by other evidence. The court dismissed the defendant's counterclaim for recovery of an amount paid to a third party as a garnishee, as it was a voluntary payment without any legal obligation.
Issues: 1. Whether the plaintiff discharged the initial burden of proof to establish the loan agreement and the defendant's receipt of Rs. 1 crore. 2. Whether the defendant successfully established the defense of a joint venture and repayment in cash. 3. Whether the defendant's balance sheet entries constituted an admission of liability under Section 34 of the Indian Evidence Act, 1872. 4. Whether the defendant's oral testimony and other evidence were sufficient to rebut the admission in the balance sheets. 5. Whether the defendant's counterclaim for recovery of the amount paid as a garnishee was valid.
Ratio Decidendi: 1. The plaintiff's admission of receipt of money in the balance sheets, coupled with the absence of any denial by the defendant, shifted the burden of proof to the defendant to establish the joint venture defense and repayment. 2. The defendant failed to provide sufficient details or evidence to support the joint venture defense, and its claim of cash repayment was contradicted by the oral testimony of its witness. 3. The defendant's balance sheet entries, consistently acknowledging the loan from the plaintiff, constituted an admission of liability under Section 34 of the Indian Evidence Act, 1872. 4. The defendant's oral testimony and other evidence were insufficient to explain or rebut the admission in the balance sheets, which were corroborated by corresponding entries in the plaintiff's balance sheets and the actual receipt of money by the defendant. 5. The defendant's counterclaim was dismissed as it voluntarily paid the amount to a third party without any legal obligation or adjudication by the court.
Final Decision: The court decreed the suit in favor of the plaintiff for Rs. 62,47,010.28, representing the principal amount of Rs. 1 crore minus the amount paid by the defendant as a garnishee. The plaintiff was also entitled to interest at 18% per annum from September 15, 2010, on the principal amount until payment.
I.P. MUKERJI, J.
1. The reference to the defendant, in this judgement, will mean and include Jai Mangala Coal Pvt. Ltd. the former name of the defendant.
2. If you want to advance money to someone, with the expectation of getting it back with interest, you should be very careful. It is not enough that you remit the amount to the other person by cheque. You must have documents evidencing this agreement between yourselves. In other words, the documents must show that the money was tendered as a loan. Otherwise you might well not get the money back. When you file a suit for its recovery, a defence may be well taken that there was a joint venture by the parties in which this money was utilised and nothing is payable to you. Or you might expect a defence that the money was repaid in cash.
3. This is what has happened to the plaintiff in this case. It is only because of the able and tenacious advocacy of Mr. Jishnu Saha, senior Advocate for the defendant that this court heard the defendant for a number of days.
4. There is no dispute whatsoever that between 1st April, 2003 and 15th July 2003 the plaintiff issued several account payee cheques in favour of the defendant, which they encashed, aggregating to a sum of Rs. 1 crore. In fact, in the written statement, the defendant has not denied receipt and encashment of the above cheques. According to the plaintiff this sum was lent and advanced by them to the defendant and had to be repaid with interest @ 18% per annum.
5. The defendant has taken two material points in defence. First, there was a joint venture between the parties in which the money was invested. Secondly, the money was repaid in cash.
6. Mr. Ghosh, senior Advocate for the plaintiff made straightforward and simple submissions. He relied on the admitted fact that these cheques for Rs. 1 crore had been encashed by the defendant. He showed their balance sheets which are exhibit-C collectively, that in the financial years ending 31st March, 2008 and 31st march, 2009, the years immediately preceding the year of filing of the suit and consistently in the previous financial years, they had admitted receipt of an unsecured loan of Rs. 1 crore from the plaintiff. This loan was shown in the balance sheets under the head “Sources of Fund” and was explained in schedule “C” thereof as having been obtained from the plaintiff.
7. He said that on 14th September, 2010 a notice was issued by the plaintiff to the defendant claiming 18% per annum interest on this amount. This document is exhibit-B at pg. 468 of the Judges Brief of documents. This had to be taken as a notice demanding interest under the interest Act, 1978. Learned counsel said that in a suit filed by Citi Corp. in this court the plaintiff was the defendant and had suffered a decree. Execution proceedings were started by Citi Corp Finance Ltd. (G.A. No. 1450 of 2009 and E.C. No. 4 of 2009). In this execution proceeding, the defendant herein, as a debtor of the defendant in that suit (the plaintiff herein) was noticed as a garnishee. The defendant as a garnishee paid in court Rs. 37,52,989.75 to Citi Corp. without prejudice to its rights and contentions, as recorded in the order dated 19th January, 2011.
8. He added that in the present suit the plaintiff made two application, one for judgement upon admission (G.A. 100 of 2011) and the other for attachment before judgement (G.A. 401 of 2011). In the final order dated 8th May, 2011 passed in those applications, this court held that the judgement upon admission application was liable to be dismissed. The defendant had volunteered to deposit Rs. 64 lacs with the Registrar Original Side. In default of making the deposit a decree for Rs. 64 lacs would follow, it was ordered.
9. He also submitted that the defendant gave no reply to the notice of demand for interest dated 14th September, 2010 relying on Xn 24 to 28 of the evidence of Mr. Deepak Kumar Loyalka, giving evidence for the plaintiff.
10. Furthermore, the breakup of the total
