THE COMMISSIONER OF INCOME TAX vs. M/s. A J Wines

13217 | IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD TUESDAY, THE TWENry FIFTH DAY OF FEBRUARY TWO THOUSAND AND TWENTY FIVE PRESENT THE HONOURABLE SRI JUSTICE N.TUKARAMJI APPEAL SUIT NO: 593 OF 2017 Appeal under section 96 R/w Order 41 Rule 1 of C.P.C against the Judgment and Decree Daled 24.01 .2O17 made in O.S.No.334 of 2014 on the file of the Court of the Principal Senior Civil Judge, Ranga Reddy District at L.B.Nagar Between: Atchuta Jagadish Chandra, S/o. Subramanyam, Occ- Business, R/o. Krishna Sree Buildings, 4th Floor, Ayyappa Society, Madhapur, Hyderabad ...Appel lanUDefendant AND Karamsetti Venkata Varaprasada Rao, S/o. Venkata Subba Rao, Occ: Business, Permanent R/o.Podili Village and Mandal, Presently R/o D No.03-3-83' Flat No.403, Besides Hotel Manjeera, Shown Oak Apartments, Kachiguda, Hyderabad. ...RespondenUPlaintiff l.A. NO: 2 OF 2017 (ASMP. NO:1445 OF 20171 Petition under Section 't 51 of CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to stay all further proceedings pursuant to the Judgment and decree passed in OS No.334 of 2014 d1.24.01.2017 on the file of Principal Senior Civil Judge, Ranga Reddy District at L. B.Nagar including execution of decree during the pendency of appeal. Counsel for the Appellant :SRl C VISWANATH Counsel forthe Respondent: SRI V V RAGHAVAN The Court delivered the following: Judgment

a THE HONOURABLE SRIJUSTICE N.TUKT\ IAMJt APPEAL SUIT No. 593 OF 2017 JUDGMENT I have heard Mr.C Viswanath, learned counse tr the appellant and Mr.V.V.Raghavan, learned counsel for the respc I dent. 2. This Appeal Suit is directed against the decre, and judgment dated 24.01 '2017 in O S.No.334 of 2014 passed ry the learned Principal Senror Civil Judge, Ranga Reddy District a1 ..B.Nagar. 3. The respondenUplaintiff (hereinafter 'the plainti f,) filed the suit vrde O.S.No.334 of 2014 for recovery of ant unt from the appellanUdefendant (hereinafter 'the defendant,) bas ng on demand promissory note/Ex.A- l . 4. The plaintiff asserts that on 12.01 .2010, the defendant borrowed a sum of Rs.5,00,000/- for business purpo! es, agreeing to repay the anrount with interest at the rate of 24ot, per annum. ln support of this transaction, the defendant executo, a promissory note, marked as Ex.A-1, in the presence of a witness rpW-2. Despite repeated demands for repayment, the defendant fai >d to setfle the debl. However, on 10.01 .2013, he made a p, i payment of Rs.'l ,000/-, which was duly endorsed on the reverse side of Ex.A-1 t I

rVIRJ -.1..\'.Nat, ) of 20t7 in the presence of another witness/PW-3. Subsequently, fotlowing continued default and upon further demand, the defendant issued two cheques on '15.07.2013-Cheque Nos 043121 and 043125, marked as Exs.A-2 and A-3-for Rs.2,00,000/- and Rs.5,00,000/- respectively, as part payments towards the outstanding amount However, upon presentment for collection, both cheques were returned unpaid with the Bank's memos/ Exs.A-4 and A-5 bearing the endorsemenl,'payment stopped by the drawer.' ln response, the plaintiff served a legal notice/Ex.A-6 and initiated criminal proceedings by filing a complaint before the Judicial Magiskate of First Class, Podili/Ex.A-7. Hence, the suit was filed 5. ln his written statement and deposition as DW-1, the defendant denied the very existence of the suit transaction, including the execution of the promissory note/Ex.A-1 and the alleged part payment endorsement dated 10.01.2013. He produced two receipts dated 27.02.201O/Exs.B-1 and B-2 to support his claim The defendant contends that in July 2013, the plaintiff approached him seeking a hand loan of Rs.7,00,000/-, whereupon the defendant issued the two aforementioned cheques in good faith. However, the plaintiff allegedly informed him later that he had arranged the funds from alternative sources and, therefore, did not deposit the cheques 2

^rR,/ oJ 201 7 When the defendant requested the return of the cherl tes, the plaintiff claimed they had been misplaced. Anticipating poter :ial misuse, the defendant instructed his Banker to stop payment on t re cheques. He alleges that the plaintiff subsequently misused th:;e cheques by fabricating a claim and initiating the present procee(l rgs based on a non-existent transaction. Furthermore, he claims ihat any dues arising from the earlier promissory note hac already been discharged. Hence, he contends that the plaintiffls : uit is devoid of merit The trial Court had determined the suit on the I rllowing issues: (i) Whether the suit promissory note dated 111 )1 .2010 is true, valid and suppofted by consideration? (ii) Whether the suif ls bad for misjoinder of th,t oafties? (iii)Whether the plaintiff is entiiled for the rec( very of the suit amount along with the interest and cost? (iv) To what relief? 7. The defendant, examined as DW-1 and r tarked several exhibits in support of his defence, namely t: s.B_1 to B_S. Specifically: (i) Exs.B-l and B-2: Two receipts daed 27.02.2010, purportedly evidencing repayment. (ii) Ex.B-1A: I le defendant,s original ration card, submitted to establish identitrr and residential ,proof. (iii) Ex B-4: A telephone bill submitted to :orroborate the 3 ,.1..\.No.i9) ,. 6 I tt

t\ l1t,/ tL.,f .No. j9J ui 2()l 7 defendant's address and to support the contention that the suit notice was not duly served upon him. (iv) Exs B-2A and B-3: Statements of the defendant's bank accounts, tendered to reflect his financial transactions during the relevant period. (v) Ex.B-5: A statement of account from Margadarshi Chit Funds, reflecting the defendant's financial dealings with that institution. During cross-examination, the defendant, as DW-1 , admitted to having signed the promissory note and the cheques/ Exs.A-1 to A-3, though he disputed the contents and the enforceability of these instruments in his written statement B. Upon evaluating the documentary and oral evidence presented by both parties, the trial Court concluded that the plaintiff had substantiated his claim. Accordingly, the suit was decreed for a sum of Rs.9,97,025/-, along with interest at the rate of 6% per annum on the principal amount of Rs.5,00,000/- from the date of filing the suit until the date of decree, and thereafter at the same rate until realization. The Court also awarded costs in favour of the plaintiff. I Learned counsel for the defendant contended that the trial Court failed to properly evaluate the evidence on record. lt was argued that the trial Court ought to have held that the promissory 4

ry 5 NrRJ ,1.5.\li91 ol 20t 7 note/Ex.A-'l was not supported by valid considerati(rr , and that the plaintiff lacked the financial capacity to advance suc a substantial loan. Further learned counsel submitted that th: alleged loan transaction, having been effected in cash ir d exceeding Rs.20,000/-, violates the provisions of the lncome - ax Act, which prohibit cash transactions above said limit for :; ch purposes. Learned counsel also challenged the validity I the alleged endorsement of part payment of Rs.1,0001 in cash, ( lntending that the same was not accepted by the defendant and lar: ed evidentiary credibility. lt was further urged that the trial Cour should have accepted the receipts indicating repayment, which were already marked in the criminal complaint in C.C. No. 55 o1 2014, pending before the learned Judicial Magistrate of First Class, podili. Additionally, the defendant's counsel submitted that 1l : plaintiff does not hold a valid Money Lender's Licence, and ther: ore, the claim itself stands vitiated and unenforceable under i w. On these grounds, intervention of the appellate Court was sou1ll t. 10. ln response, learned counsel for the plaintiff ontended that the trial Court had rightly appreciated the evidence i nd documents placed on record, and accordingly decreed the suit i r favour of the plaintiff. lt was submitted that the defendant express y admitted his i

N7R,/ ,1.5.N0.59) aJ Z0l7 signatures on the promissory note/Ex.A-1 and the cheques/Exs.A-2 and A-3, and although he disputed the part payment endorsement, he failed to substantiate such denial with any credible rebuttal. The alleged repayments referred to by the defendant were not brought on record during the course of the civil suit. Moreover, it was pointed out that the defendant had not raised any plea before the trial Court concerning the plaintiffs lncome Tax returns or his possession (or lack thereof) of a Money Lender's Licence. Even otherwise, such contentions are irrelevant in the present case, as the defendant had outright denied the very existence of the loan transaction and failed to rebut the statutory presumption under the law relating to negotiable instruments. Therefore, it was argued that the impugned judgment of the trial Court is sound in law and deserves to be upheld 11. I have carefully considered the submissions and perused the materials on record. 12. The pleadings in the appeal give rise to the following point for determination, whether the plaintiff has successfully established the loan transaction evidenced by the promissory note and thereby proved his entitlement to the suit claim? 6

N]"R,/ 1.5 N0.593 of 201 7 13. The plaintrff as PW-1, reaffirmed the loan trar r action wherein the defendant is alleged to have borrowed a sum ,n 12.01 .2010, supported by the execution of the promissory r ( te marked as Ex.A-1. The testimony of PW-2 corroborated the pli intiff's version. Notably, the defendant, while deposing as DW-1 admitted his signature on the promissory note. Given the defen<l; nt's admission of signature on Ex.A-1, and subject to the cr tcome of the defendant's defence, it shall be held that the plaintiff i rs preliminarily established the suit claim. Consequently, the statutcl presumptions under Section 118 of the Negotiable lnstruments t\ t, 1881, stand attracted in favour of the plaintiff lt is a well-setflec rrinciple of law that the presumption under Section 'l 1B of the N.l.Ar:i encompasses the existence of a legally enforceable debt or liability 14. The core defence raised by the defendant s that he had already repaid the amount due under the suit promiss try note. While DW-1's oral testimony and ce(ain documents file<l along with the complaint in C.C. No. 55 of 2014 may tend to suppc r this assertion, those documents were not brought on record in ll e present suit proceedings. Hence, their evidentiary value rerr tins untested. Paradoxically, the very plea of repayment tends t reinforce the plaintiffs assertion that a valid loan transaction rl i occur under 7 I I

r\7R,rI .,1.5.No.5% o[2017 Ex.A-1. The plaintiff s case is further supported by the alleged part- payment endorsement and the subsequent issuance of two cheques/Exs.A-2 and A-3. Although the defendant denied the authenticity of the endorsement, he failed to take any effective steps during trial, such as seeking expert verification or leading rebuttal evidence, to disprove its authorship or to establish that the signature thereon was not his. Consequently, an adverse inference must be drawn against him under the principles of evidence law. 15. With respect to the issuance of the cheques, the defendant's claim that they were issued upon a separate request for a hand loan contradicts his primary defence denying the transaction. This alternative explanation nonetheless confirms that the cheques were indeed issued by the defendant, thereby undermining his broader defence and reinforcing the plaintiff's claim. Thus, the defendant has failed to substantiate his contentions or to dislodge the statutory presumptions. 16. Regarding the contention that the plaintiff lacked a Money Lender's Licence, the Court finds no merit in this argument. The defendant did not plead, nor has he established, that the suit transaction arose in the course of the plaintiff s business as a professional money lender. ln fact, he categorically denied_the B l i I I l I I

N]&/ ,1..\'.\lt9l of 20/ 7 transaction itself No evidence has been adduced to s tggest that the loan was part of a regular money-lending activity re(l iring licencing. Furthermore, the law does not prohibit private r dividuals from advancing loans on an occasional basis without a roney lender,s licence. For these reasons, this contention must fail. 17. As for the allegation that the plaintiff failed to file income tax returns reflecting the loan transaction, the burde r to establish repayment rests initially on the defendant. Until I .lch burden is discharged, no corresponding burden shifts to the p aintiff to justify tax disclosures. Moreover, there is no statutory ma tdate requiring every loan transaction to be reflected in income rx returns. As clarified under the lncome Tax Act, while acceptirr ce of loans in cash exceeding Rs.20,000/- is regulated, no pror;ion has been cited to establish that such a transaction, if undertaken in contravention, renders the loan void or unenfc,r ;eable in civil proceedings. Hence, these contentions are legall,r untenable and merit rejection. 18. For the reasons stated above, this Court is crl the considered view that the triar court righfly appreciated the oral rrr d documentary evidence and correctly decreed the suit. ln the abse ce of any legal 9 i \

10 }IR,/ ,1.5'.N0.59) aj 2017 infirmity or procedural irregularity, the judgment under appeal warrants no interference and is hereby affirmed 19. Resultantly, the Appeal Suit is dismissed. There shall be no order as to costs Pending miscellaneous applications, if any, shall stand closed. SD/.P.GOWRI SHANKAR DEPUW REGISTRAR //TRUE COPY/I SECTION OFFICER To, The Principal Senior Civil Judge, Ranga Reddy District at L B Nagar [with 1 recordsl 2. 6;;';-i to sRl c vlswANArH' Advocate tgf!.q],. ;. il; 6c i" snr v v RAGHAVAN' Advocate [oPUCl 4. Two CD CoPies ADK./psl

HIGH COURT DATED:2510212025 JUDGMENT AS.No.593 ot 2017 DISMISSING THE APPEAL SUIT WITHOUT COSTS r R TiiE S t4 () .\ 1 ? itl 20n '-l; !"/ '\=p+P.-t-'j'' t (,\4