Burden To Prove Full Repayment Of Borrowed Amount Is On The Party Claiming It : Supreme Court

A Bench comprising Justices Hemant Gupta and V. Ramasubramanian allowed an appeal challenging the order of the Punjab and Haryana High Court, which had set aside the order and decree of the first appellate court in two money suits, initially dismissed by the trial court. It further imposed a cost of Rs. 50,000 on the respondents.

Factual Background

The Appellant filed two money suits against the respondents for recovery of Rs. 10,48,000 and Rs. 67,31,000 respectively. In the first instance, the appellant alleged that the respondents borrowed a sum of Rs. 10,50,000 and repaid only Rs. 5,00,000. The principal amount along with interest stood at Rs. 10,48,000. In the second suit, the appellant alleged that the respondent lured the appellant and her husband into his real estate business and got the signature of the appellant in some blank papers for ease in business transactions. Later, the appellant found out that an amount of Rs. 54,50,000 had been withdrawn from her account without her knowledge. In this regard, an FIR was lodged against the respondents under Section 420, 467, 468 and 471 read with Section 120-B of the IPC. However, the respondents were granted anticipatory bail upon furnishing a bank guarantee of Rs. 50,00,000. So, the principal amount along with 12 % interest stood at a sum of Rs. 67,31,000.

In the first suit, the respondents admitted the receipt of the money and took the plea that they had paid Rs. 5,00,000 on 07.08.2006 as full and final settlement. For the second suit, the defence taken by the respondents was that the money was received for business transactions, out of which Rs 30,00,000 was given to the respondents by the appellant and his son out of love and affection.

The trial court had dismissed both the suits. On appeal, the first appellate court reversed the order of the trial court which was eventually set aside by the High Court in the second appeal. The High Court had also directed the appellant to refund the money that the respondents had paid in the proceedings for grant of anticipatory bail.

Contentions raised by the parties

Advocate, Mr. Rajiv Bhalla, appearing on behalf of the appellant argued that the trial court and the High Court had erred to accept the respondents' plea of full and final settlement. Senior Advocate, Mr. Nidhesh Gupta contended that the failure to implead the appellant's son in the suit is fatal for her case. He averred that once it was established that the payments to the respondents were authorised, and also the fact that there was a settlement, the case of the appellant fell flat.

Analysis of the Supreme Court

The Court observed that the respondents admitted that they had received Rs. 10,50,000 from the appellant, but claimed that the full and final settlement was for an amount of Rs. 5,00,000. It opined that when the full and final settlement was of a lesser amount than the admitted principal amount received from the appellant, the burden to establish that there was a settlement was cast upon the respondents. It further noted that oral evidence of third party mediators would not suffice, especially when there is no written memorandum of compromise/settlement.

"There was also no written memorandum of compromise/settlement. When payment of a certain amount of money and the repayment of only a portion of the same are admitted, the party pleading that such a part repayment was in full and final settlement, has a huge burden cast upon him to show that there was a settlement. Oral evidence of the so called third party mediators, is not sufficient to establish full and final settlement, in cases of this nature, where all transactions have happened only through banking channels and the defendants claimed that there were business transactions."

The Court observed that with respect to the second suit, the defence of the respondents was that the money received by the appellant was with respect to an investment in real estate business. Out of this amount, Rs. 30,00,000 was a payment made by the appellant and her son to the respondents out of love and affection and an affidavit signed by the appellant's son to this effect was adduced as evidence. The Court opined that the onus was on the respondents to show that there were business transactions and the money was accounted for, which it had utterly failed to do.

"In a suit for recovery of money, a defendant admitting the receipt of money but pleading that the same was a gratuitous payment, is obliged to prove that it was a gratuitous payment."

Further, on perusal of the affidavit dated 08.03.2006, the Court found that there was a material contradiction, as it stated that there was no transaction between the appellant and the respondents, but the respondents on 07.08.2006, made a full and final settlement.

[Case Title: Anita Rani v. Ashok Kumar And Ors., Civil Appeal Nos. 7750-7751 of 2021]

Citation : LL 2021 SC 746

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