Whether farmers can be convicted in cheque bounce cases for non-payment of loans entered in “bahi khata.?

In a significant judgment expected to prevent exploitation of farmers by commission agents, the Punjab and Haryana High Court has made it clear that entries in the “bahi khata” are not enough to prove that loan has been sanctioned to cultivators. The court has also said that farmers cannot be convicted in cheque bounce cases for non-payment of loans entered in the “bahi khata.”

The loaner, in fact, is debarred from filing a complaint for bounced cheque under Section 138 of the Negotiable Instruments Act on basis of such entries as these are not negotiable instruments or documents for advancing loan.

Commission agents have often been accused of obtaining blank and undated cheques from farmers as security before suing them for non-payment of loan on the basis of entries made in the “bahi khata”.

The ruling came on a petition filed by Narsi Dass against Surender. The petitioner claimed that the respondent was a farmer who had borrowed money from him for agricultural purposes on the understanding that he would repay the loan with a yearly interest of 24 per cent. He had also promised to sell his agricultural produce at the complainant’s shop but had stopped doing so in 2010. The loan allegedly given to the respondent was stated to have been entered in the “bahi khata”

Narsi Dass instituted a criminal complaint and Surender was summoned to face trial, but was acquitted, leading to the filing of the petition.

Taking up the issue, Justice Mehinder Singh Sullar made it clear that an entry into the “bahi khata” was “merely an admission by its maker in his own favour and it is only admissible in evidence if it is accepted by the opposite side, the loanee, and not otherwise. Such entries shall alone be not sufficient to charge any person with liability”.

Justice Sullar asserted: “What cannot be disputed is bahi entries are not the instruments (documents) of advancement of loan like pro-note, bonds or bill of exchange, which can legally be enforced, as recognised in the Negotiable Instruments Act. “These entries are only relevant under Section 34 of The Indian Evidence Act, 1872, that too in case the same were kept regularly in the course of business. At the same time, such entries must be kept in conformity with some known system of accountancy, either in the official language or customary language well known to the parties and not otherwise.

“Where the books produced in a case are merely ledgers, are not supported by any daybook or roznama, do not contain entries of transactions and there is no daily opening or closing balance, the same are meaningless. Therefore, such entries cannot and indeed should not be taken to be an account book regularly kept in the course of business…

“It is common knowledge that commission agents would obtain such blank/undated cheques from the farmers as security in good faith, not in lieu of any legal liability…”

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