Saturday, December 18, 2010

Unaccounted cash amount is not legally enforciable debt

Bombay High Court held in Sanjay Mishra  v  Kanishka Kapoor @ Nikki and Another 2009 AllMR(Cr) 1080 that the unaccounted cash amount  can not be said to be a legally recoverable debt.
Sanjay Mishra  v  Kanishka Kapoor @ Nikki and Another 2009 AllMR(Cr) 1080

“…In the present case, there is a categorical admission that the amount allegedly advanced by the applicant was entirely a cash amount and that the amount was "unaccounted". He admitted not only that the same was not disclosed in the Income Tax Return at the relevant time but till recording of evidence in the year 2006 it was not disclosed in the Income Tax Return. By no stretch of imagination it can be stated that liability to repay unaccounted cash amount is a legally enforceable liability within the meaning of explanation to section 138 of the said Act. The alleged debt cannot be said to be a legally recoverable debt.” (SEE para 13)

“……….. The alleged liability to repay an unaccounted cash amount admittedly not disclosed in the Income Tax Return cannot be a legally recoverable liability. If such liability is held to be a legally recoverable debt, it will render the explanation to section 138 of the said Act nugatory. It will defeat the very object of section 138 of the Act of ensuring that the commercial and mercantile activities are conducted in a healthy manner. The provision of section 138 cannot be resorted to for recovery of an unaccounted amount. A cheque issued in discharge of alleged liability of repaying "unaccounted" cash amount cannot be said to be a cheque issued in discharge of a legally enforceable debt or liability within the meaning of explanation of section 138 of the said Act. Such an effort to misuse the provision of section 138 of the said Act has to be discouraged.” (See Para 15)