Deed of Undertaking and Dishonoured Cheques Prove Acknowledgment of ₹1.68 Crore Liability: Madras High Court Decrees Counter Claim

“Where Plaintiff Fails to Deny Promissory Notes, Cheques, and Admitted Executions in a Commercial Transaction, Court Cannot Deny Counter Claim Based on Uncontested Documentary Evidence”— Madras High Court  delivered a significant judgment enforcing a counter claim of ₹1.68 crores based on admitted documentary evidence including a promissory note, deed of undertaking, and dishonoured cheques, after the original civil suit filed by the plaintiff was dismissed for non-prosecution.

Justice C.V. Karthikeyan noted that once the plaintiff failed to prosecute her case, and did not appear to contest or cross-examine, and when the defendant produced cogent evidence including promissory notes and cheque return memos, the counter claim had to be decreed in full, with costs.

“A Suit May Be Dismissed for Non-Prosecution—But a Legally Supported Counter Claim Must Proceed to Conclusion”

The suit was originally filed by N. Vedavalli, seeking a decree for ₹50 lakhs allegedly loaned to the defendant, along with interest of 18% per annum. However, when the suit came up for hearing on 23.08.2024 and again on 27.08.2024, there was no appearance by the plaintiff, resulting in dismissal of the suit for non-prosecution.

But critically, the defendant, Ramyashri Natarajan, had filed a counter claim with appropriate court fee and supporting documents, which the Court treated as an independent proceeding.

“This court by its order dated 27.08.2024 has dismissed the suit for non-prosecution... since counter claim has been filed by the defendant along with the stamp duty and written statement, this court directs the Registry to post the counter claim before the learned Additional Master for recording evidence.”

“Plaintiff Collected ₹64.25 Lakhs from Public Under False Promise of Government-Backed Goods Scheme”—Factual Background Reveals Fraud and Breach of Trust

The counter claim was grounded on a series of commercial representations made by the plaintiff, who claimed her sister worked in the Gold Control Section of the Central Excise Department, and that she was an agent under a scheme to deliver household goods at 1/3rd of MRP, tax-free.

The defendant stated she was induced into joining this scheme and helped the plaintiff gather over 200 customers, from whom ₹64.25 lakhs was collected. But when goods were partially delivered and commission withheld, and public pressure mounted, the defendant paid ₹7.08 lakhs from her own pocket to settle flat dues and demanded repayment.

“The plaintiff executed a deed of undertaking dated 28.12.2007 and a promissory note dated 27.12.2007 for a sum of ₹1.68 crores for the amount due to the customers and a personal loan amount of ₹25 lakhs.”

Further, the plaintiff issued post-dated cheques totaling ₹35 lakhs, all of which were dishonoured on presentation, leading to FIR No. 192/2010 registered at Valasaravakkam Police Station, now pending in C.C. No. 330/2012 for offences under Sections 406 and 420 IPC.

“Documentary Evidence is Conclusive Where Plaintiff Fails to Deny—Execution of Promissory Note and Undertaking Undisputed”

Justice C.V. Karthikeyan examined the documentary trail presented by the defendant, noting:

“The plaintiff had not entered appearance to deny the said document... It is thus seen that the plaintiff had admitted to the liability while issuing the promissory notes and while issuing the three cheques.”

The Court found the defendant’s evidence not only credible but also unchallenged, given the absence of any rebuttal from the plaintiff. The case of Adamson vs. Jarvis (1827) 4 Bing 66 was cited in relation to indemnity for misrepresentation, holding that liability follows when a person misleads another into financial harm through false representations of status or capacity.

“Fraudulent Schemes and Misuse of Blank Promissory Notes—Plea of Misuse Rejected”

The plaintiff had reportedly taken blank signed promissory notes and cheques from the defendant earlier for another purpose and allegedly misused them. However, the Court found that the plaintiff subsequently issued her own promissory notes and cheques, which confirmed her acknowledgment of liability.

“In Ex.D2/Deed of Undertaking, the plaintiff had admitted to the execution of the promissory note dated 27.12.2007 for a sum of ₹1.68 crores. The plaintiff had not entered appearance to deny the said document.”

Accordingly, the Court found no merit in any possible implied defence of document misuse or fabrication.

Suit Dismissed, Counter Claim Decreed in Full with Costs

With the plaintiff’s suit already dismissed for non-prosecution, and in the absence of any cross-examination or denial of key documents, the Court decreed the defendant’s counter claim for ₹1.68 crores, accepting the execution of instruments and failure to honour payment as sufficient proof.

“In view of these reasons, I hold that the defendant is entitled to a judgment and decree against the plaintiff as prayed for together with costs. The counter claim stands decreed as prayed for.”

Date of Decision: 22 August 2025