IOB Must Repay Sree Gokulam’s ₹3-Crore FDs After Failing To Prove Company Took Loans, Madras HC Upholds Decree

The respondent issued three crossed account-payee cheques totalling ₹6 crore to the second appellant bank to create fixed deposits in the respondent’s name. The bank issued three fixed deposit receipts (FDRs); the respondent received the proceeds of the third FDR but not those of the first two, totalling ₹3 crore.

The bank’s position was that third parties had fraudulently obtained loans against the first two FDRs. The respondent denied authorising the loans and sued to recover the principal and interest. The single Judge decreed the suit, and the bank appealed.

The Court applied the evidentiary principle that, once a claimant establishes foundational facts supporting its claim, the onus shifts to the opposing party to prove facts asserted in defence.

Here, proof that the respondent’s cheques were encashed and that the bank issued the FDRs established the respondent’s claim; the bank then had to prove that the loans were obtained on the respondent’s behalf by authorised persons.

The Court also treated the bank’s receipt of the deposit funds as giving rise to an obligation to repay the FDR proceeds on maturity.

No statute or precedent was identified as a basis for the decision.

The respondent established through documentary evidence that its cheques were encashed and that the bank issued the first and second FDRs. The bank therefore had to substantiate its defence that the respondent had authorised the loans.

The Court noted that the loan documentation was not in order and that a bank official had been convicted in connection with the charged offence. It concluded that the bank had not discharged its shifted onus, while the respondent had proved its entitlement to the unpaid FDR proceeds.

The appeal was dismissed, the connected civil miscellaneous petition was closed, and no order as to costs was made.