Karnataka HC Upholds Dismissal Of ₹13.6 Lakh Loan Suit After Cheque’s Stop-Payment Instruction Predated Alleged Loan By Two Years

The plaintiff sued to recover ₹13,60,000, comprising an alleged cash loan of ₹10,00,000 advanced to the defendant on 1 December 2021 and interest, relying principally on a cheque dated 14 March 2022 that was dishonoured with the endorsement “payment stopped by the drawer”

The defendant denied the loan and claimed that the cheque had been given as security for a ₹10,000 loan in 2015, repaid in 2016. Bank information showed that the stop-payment instruction for the cheque was given on 15 March 2019

The Commercial Court dismissed the suit, finding the alleged loan unproved and the defendant’s explanation more probable. The plaintiff appealed under Section 13(1A) of the Commercial Courts Act, 2015

The appeal was brought under Section 13(1A) of the Commercial Courts Act, 2015

In determining the civil claim, the Court applied the preponderance-of-probabilities standard: the plaintiff had to establish the pleaded loan transaction and the cheque’s connection to that liability; proof that the cheque belonged to the defendant, or that funds were available to the plaintiff, did not by itself prove that the loan was advanced

The Court identified no particular statutory presumption or named precedent as governing its decision; it distinguished the plaintiff’s cited authorities concerning signatures on promissory notes from the facts of this cheque-based dispute

The Court held that the 15 March 2019 stop-payment instruction for the same cheque substantially undermined the plaintiff’s claim that it was issued in March 2022 to repay a loan advanced in December 2021. The plaintiff did not satisfactorily explain that chronology

His bank statement showed a withdrawal of ₹17,00,000, but not payment of ₹10,00,000 to the defendant; the income-tax records and money-lending licences likewise did not prove the specific advance

The absence of contemporaneous loan documentation, considered alongside the plaintiff’s evidence about usual lending documents, further weakened his account

The defendant’s admission that the cheque was his and that he had instructed the bank to stop payment did not establish the alleged 2021 liability; his earlier-transaction explanation was supported by the bank record

The Court therefore found no material error in the Commercial Court’s assessment

It dismissed the appeal at the admission stage, without issuing notice or calling for the Commercial Court record, and affirmed the judgment and decree dismissing the suit