Loan Dispute and Benami Transaction Allegation: Fair Communication vs. Surendra Kerdile

The case of M/s Fair Communication and Consultants vs. Surendra Kerdile revolves around a financial dispute in which a loan given by the respondent was allegedly not repaid by the appellant. Additionally, an important legal question emerged regarding the nature of the transaction and whether it violated the Benami Transactions (Prohibition) Act, 1988. The Supreme Court was called upon to determine whether the loan was indeed advanced, if it was repaid as claimed by the appellant, and if the defense of a benami transaction was applicable.

Background of the Case

Surendra Kerdile (plaintiff/respondent) filed a suit against Sanjay, the proprietor of Fair Communication and Consultants, for the recovery of ₹80,000, which he claimed was advanced as a loan for business expansion. The suit was initially dismissed by the trial court but later decreed by the High Court.

Surendra, an engineer by profession, owned property in Indore but resided in Nashik. To manage his Indore property, he granted a General Power of Attorney (GPA) to Sanjay. Using this authority, Sanjay entered into an agreement to sell the property on behalf of Surendra. The sale was finalized for ₹1,30,000, but Surendra claimed that the actual consideration was ₹2,30,000, with ₹80,000 being paid separately.

Surendra alleged that Sanjay requested ₹80,000 as a loan for business expansion, which was to be repaid shortly. To secure repayment, Sanjay issued three post-dated cheques for ₹16,500, ₹3,500, and ₹60,000. When Surendra attempted to encash them, they bounced, leading to the legal dispute.

Arguments of the Appellant (M/s Fair Communication and Consultants)

Sanjay, the proprietor, denied liability, asserting that:

Although he received ₹80,000, it was immediately returned to Surendra on the same day.
The cheques were issued only as security and should have been returned to him.
Surendra deposited ₹80,000 into his bank account the next day, proving that no outstanding liability existed.
The claim that the actual property sale price was ₹2,30,000 instead of ₹1,30,000 was false and unenforceable under the Benami Transactions (Prohibition) Act, 1988.

Arguments of the Respondent (Surendra Kerdile)

Surendra maintained that:

The loan was genuinely given to Sanjay and was never repaid.
Although he deposited ₹80,000 in his bank account, that amount came from the property sale and was unrelated to the loan.
Sanjay’s claim that the loan was repaid on the same day was false and unsupported by evidence.
The signed cheques, which remained in his possession, indicated that the liability was still outstanding.

Key Observations of the Supreme Court

The Supreme Court examined the case based on the following key questions:

Whether Sanjay’s claim that the loan was repaid was substantiated by evidence.
Whether Surendra’s claim that the actual property sale consideration was ₹2,30,000 was admissible.
Whether the Benami Transactions (Prohibition) Act, 1988, was applicable.

The Court made the following findings:

The evidence indicated that Sanjay had indeed borrowed ₹80,000, and there was no clear proof that he had repaid it.
The cheques issued by Sanjay remained with Surendra, suggesting that the liability had not been settled.
Although the deposit of ₹80,000 in Surendra’s bank account was noted, it did not necessarily mean the loan was repaid.
The Benami Transactions (Prohibition) Act was not applicable because Surendra was not asserting a benami ownership claim; he was merely establishing the true consideration of a transaction.

Verbatim Court Findings

The Supreme Court stated:

“The High Court in its impugned judgment upheld the plaintiff’s contention that he possessed sufficient amount to advance ₹80,000 to Sanjay. He also had sufficient funds to deposit amounts in the bank account, for which statement of account, Ex. D/1 was on the record.”

Additionally, the Court noted:

“The High Court observed that there was no dispute that another agreement to sell was executed on 30.01.1990 by the plaintiff (Surendra) in favor of Niranjan Singh Nagra, where the sale consideration was shown to be ₹1,30,000. The sale was also undisputedly completed on 31.01.1990.”

Final Judgment

The Supreme Court upheld the High Court’s ruling, dismissing the appeal and ordering:

Sanctions against the appellants for failure to prove repayment.
A decree for ₹80,000 in favor of Surendra, with interest at 6% per annum.
Rejection of the argument that the claim was barred under the Benami Transactions (Prohibition) Act.

Final Verdict: Appeal dismissed.

Petitioner Name: M/s Fair Communication and Consultants.
Respondent Name: Surendra Kerdile.
Judgment By: Justice Indira Banerjee, Justice S. Ravindra Bhat.
Place Of Incident: Indore, Madhya Pradesh.
Judgment Date: 20-01-2020.

Don’t miss out on the full details! Download the complete judgment in PDF format below and gain valuable insights instantly!

Download Judgment: Ms Fair Communicati vs Surendra Kerdile Supreme Court of India Judgment Dated 20-01-2020.pdf

Direct Downlaod Judgment: Direct downlaod this Judgment

See all petitions in Contract Disputes
See all petitions in Cheque Dishonour Cases
See all petitions in Debt Recovery
See all petitions in Judgment by Indira Banerjee
See all petitions in Judgment by S Ravindra Bhat
See all petitions in dismissed
See all petitions in supreme court of India judgments January 2020
See all petitions in 2020 judgments

See all posts in Civil Cases Category
See all allowed petitions in Civil Cases Category
See all Dismissed petitions in Civil Cases Category
See all partially allowed petitions in Civil Cases Category