The Burden of Proof for Commercial Contracts Rests on the Claimant and Cannot Shift to the Defendant to Prove a Negative.

Canara Bank (Respondent) claimed that M/s Nisha Designs (later taken over by Petitioner No. 1) booked 48 Forward Purchase Contracts (FPCs) between April and August 2008 to mitigate foreign exchange risks

The Bank alleged the petitioners failed to utilize or cancel these FPCs, resulting in a loss of ₹14,55,60,750/- plus interest

The Petitioners denied booking the specific disputed FPCs, asserting the lack of written contracts required by banking regulations

The Debt Recovery Tribunal (DRT) dismissed the Bank's claim for lack of primary evidence and failure to examine a material witness, Mrs. Vijaya Kamath

The Debt Recovery Appellate Tribunal (DRAT) reversed this, holding the Petitioners liable for the principal amount while denying interest, primarily by shifting the burden onto the Petitioners to prove their alleged representative (Mr. Dinesh Singh) was not authorized

1. Whether the DRAT was legally justified in reversing the DRT’s judgment by casting a negative burden of proof on the Petitioners

2. Whether the Bank proved the existence of a concluded contract regarding the 48 FPCs in the absence of written documentation and material witnesses

Sections 101 and 102 of the Indian Evidence Act, 1872, which dictate that the initial burden of proof rests on the party asserting the affirmative of an issue

Principle of Ei incumbit probatio qui dicit, non qui negat (the burden of proof lies upon him who affirms, not him who denies)

Section 114 of the Evidence Act regarding adverse inference for withholding evidence

Section 34 regarding entries in books of account requiring independent corroboration

Anil Rishi v. Gurbaksh Singh (2006) on the inflexibility of Section 101

CBI v. V.C. Shukla (1998) regarding the insufficiency of account entries alone to fix liability

The Court found that the DRAT erroneously shifted the burden of proof onto the Petitioners (Defendants) to prove a negative—that Mr. Dinesh Singh was not their authorized employee—without the Bank first discharging its initial burden under Section 101

The Court observed that Bank witnesses (AW1-AW3) admitted FPCs must be concluded in writing and that such documents should be in the Bank’s custody, yet none were produced

The Bank’s failure to examine Mrs. Vijaya Kamath, despite her availability and central role in the transactions, justified the DRT’s drawal of an adverse inference under Section 114

The Court determined that the DRAT ignored the lack of primary evidence and improperly relied on "circumstantial" entries in registers that did not explicitly link to the disputed contracts

The Bank’s violation of RBI guidelines by failing to cancel overdue contracts within seven days further weakened its claim

The High Court set aside the DRAT’s order and restored the DRT’s judgment dismissing the Bank's application

W.P. No. 3120/2018 was allowed; the Bank’s petition for interest (W.P. No. 27021/2019) was dismissed as infructuous; and W.P. No. 24893/2016 was dismissed

The Court emphasized that banks must strictly adhere to RBI guidelines and maintain transparent, written records when dealing with public money