HC steps in after Kashmiri man takes ‘friendly loan’ for father’s Hajj, stalls cheque encashment, refuses repayment

Srinagar: In a financial dispute involving a gesture extended for a religious obligation, the High Court of Jammu & Kashmir and Ladakh has intervened to rescue a civil money recovery suit, holding that an underlying loan liability does not vanish merely because a cheque issued toward repayment became stale and was not presented to the bank.

A Bench of Justice Shahzad Azeem set aside an order passed by the Additional District Judge, Budgam, which had rejected the lender’s plaint under Order 7 Rule 11 of the Code of Civil Procedure (CPC). Invoking supervisory jurisdiction under Article 227 of the Constitution of India, the High Court restored the lawsuit to its original number, directing the trial court to treat and adjudicate the matter as an ordinary civil suit for recovery of money.

According to the appellant’s pleadings on record, he had advanced a “friendly loan of ₹5.00 lakhs” to the respondent specifically to facilitate the “performance of Hajj by his father.”

In partial discharge of the liability, the respondent issued a cheque of ₹4 lakh in December 2024, promising to clear the balance ₹1 lakh in cash. The appellant submitted that the respondent subsequently approached him through the intervention of “respectable persons,” requesting him not to present the cheque for banking encashment on the assurance that the entire amount would be settled directly in cash.

Trusting the assurance, the appellant withheld presentation, causing the instrument to lapse and turn stale after the mandatory three-month validity period, following which the respondent allegedly refused repayment. Left with no recourse, the appellant instituted a summary suit under Order XXXVII of the CPC for recovery of ₹4 lakh.

Appearing before the trial court, the respondent filed an application seeking leave to defend, denying the liability and claiming that the parties were business partners in a brick kiln unit. The respondent asserted that the appellant owed him ₹24.76 lakh, in respect of which a separate recovery suit is pending before the Principal District Judge, Budgam.

The respondent further contended that certain post-dated cheques were held under a “fiduciary relationship” and alleged that the signature on the cheque in question was not genuine, while arguing that an unpresented cheque disclosed no cause of action.

The trial court had accepted the respondent’s plea, ruling that a summary suit under Order XXXVII cannot lie on an unpresented or un-bounced cheque, and rejected the plaint outright.

Scrutinizing the legal framework, Justice Shahzad Azeem observed that while a special summary suit under Order XXXVII specifically requires presentation and dishonour, the underlying civil transaction, the acknowledgement of debt, and the refusal to repay constitute a complete cause of action for a regular recovery suit.

The Bench said that where triable issues arise or technical preconditions of a summary suit fail, the proper judicial approach is to convert the proceeding into an ordinary civil suit rather than leaving the creditor remediless.

“The Trial Court, while rejecting the plaint under Order 7 Rule 11 of CPC on the ground that the suit was not maintainable under Order XXXVII CPC, appears to have overlooked the fact that the plaint, read as a whole, discloses a complete cause of action for a regular money recovery suit on the underlying loan transaction, the issuance of the cheque as an acknowledgement of debt, and the subsequent refusal to repay,” the Court observed.

The High Court further observed that discarding the plaint entirely causes serious legal prejudice.

“Rejection of the plaint extinguishes the claim and forces the plaintiff to institute a fresh suit subject to limitation. Conversion preserves the suit and enables adjudication on merits,” the Bench held.

Restoring the case before the Additional District Judge, Budgam, the High Court directed that the plaint be tried as an ordinary money suit. The respondent was granted four weeks to file a written statement from the date of appearance, and both sides were directed to appear before the trial court on September 7, 2026.