In suit for recovery of money, defendant admitting receipt of money but pleading that same was gratuitous payment, is obliged to prove such plea: SC

Read Judgment: Anita Rani vs. Ashok Kumar & Others

Pankaj Bajpai

New Delhi, December 17, 2021:  The Supreme Court has  opined that 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.

A Division Bench of Justice Hemant Gupta and Justice V. Ramasubramanian therefore observed that 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 background of the case was that, Anita Rani (Appellant) filed two money suits against Ashok Kumar & Others (Respondents) for recovery of money, alleging that the respondents borrowed a sum of Rs. 10,50,000/- but repaid only half amount. The appellant also alleged that the respondent lured her and her husband into his real estate business and got their signature, pursuant to which the appellant found that an amount of Rs. 54,50,000/- was withdrawn from her bank account without her knowledge. Accordingly, an FIR was lodged against Respondents u/s 420, 467, 468 and 471 r/w/s 120-B of the IPC. However, later, the respondents were granted anticipatory bail. 

The respondents admitted the receipt of the money but pleaded that they had made full and final settlement. Moreover, on the allegation of withdrawal of sum from bank account, the respondents pleaded that the money was received for business transactions, out of love and affection.

When the matter reached High Court, the Appellant was directed to refund the money that the respondents had paid in the proceedings for grant of anticipatory bail. 

After considering the arguments, the Apex Court found that the case of the appellant in the first suit was one of lending and nonpayment, whereas, the defence set up by the respondents was one of payment of a lesser amount (than the original amount), in full and final settlement. 

A party who admits receipt of certain amount of money on a particular date and pleads discharge by way of a full and final settlement at a latter date, is the one on whom the onus lies, which onus was not discharged by the respondents in the first suit and, hence, the plaintiff was entitled to succeed in the first suit, which aspect is completely overlooked by the High Court, added the Top Court. 

Coming to the second suit, the Apex Court noted that case of the appellant was that various amounts of money were either withdrawn from or transferred out of their accounts, by the defendants unauthorizedly and that the amounts so taken away totaled to Rs.54,50,000/-. 

The defence of the respondents was that the amounts represented authorized payments for the purchase and sale of properties in a real estate business and that out of those amounts, a sum of Rs.30,00,000/ was treated as a payment made out of love and affection, found the Apex Court. 

Speaking for the Bench, Justice Ramasubramanian observed that 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.

Once the plea of gratuitous payment falls to the ground, Section 70 of the Indian Contract Act, 1872 will come into play, added the Bench. 

Justice Subramanian went on to observe that as the respondents have admitted that the moneys as claimed by the appellant were either paid by the plaintiff or flown out of the plaintiff’s account into their own account, therefore, the onus was actually on the respondents to prove either a discharge by way of settlement of accounts or the gratuitous nature of the payment. 

Since, the respondents miserably failed to discharge the onus of proof so cast upon them, hence, the Apex Court allowed the appeal and held that the appellant is entitled to a decree despite a few discrepancies in her evidence, especially when the discrepancies have no bearing upon the payment/flow of monies from the plaintiff to the defendants.