Summary: Electronic books of account have become central to commercial litigation, particularly in disputes involving unpaid invoices, recovery claims and contested financial transactions. However, producing a ledger printout from Tally or other accounting software does not automatically establish the liability of the opposing party. Under the Bharatiya Sakshya Adhiniyam, 2023, three distinct questions arise: whether the accounting entries are relevant, whether the electronic record has been properly proved, and whether the entries are sufficiently corroborated to establish liability. Section 28 BSA recognises entries in regularly maintained electronic books of account as relevant evidence but expressly provides that such entries alone cannot charge a person with liability. Section 63 governs proof of electronic records and the accompanying certification requirements. Separately, Section 128 of the Companies Act, 2013 and the Companies (Accounts) Rules, 2014 prescribe record-maintenance obligations, including audit trail requirements for companies using accounting software. The Supreme Court’s decisions in Common Cause v. Union of India, Anvar P.V. v. P.K. Basheer and Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal clarify important principles concerning accounting entries, corroboration and electronic evidence. The central distinction is between proving the integrity of an accounting record and proving the underlying transaction. An audit trail may establish when an entry was created or modified, but invoices, delivery challans, bank records, correspondence and other supporting evidence remain critical in establishing the actual liability.
Electronic Books of Account as Evidence: Audit Trail, Ledger Entries and Section 28 BSA
Electronic Ledger Entries, Audit Trails and Their Evidentiary Value in Commercial Disputes
One firm is sued by its supplier for ₹40 lakhs. To substantiate the claim, it furnishes a print out from the accounting software of its ledger. Cross-examination of the firm by the lawyer of the buyer is limited to just one question which is, “When were these entries entered?” The hesitation in the answer by the firm’s accountant is understandable.
In commercial disagreements in the present day, most accounting books are digital in nature, which is why the issue revolves around the integrity of the digital data. In this article, you will be able to understand how the legal process deals with the issue of integrity, and what the printout and audit trail cannot do alone.
Three Questions, Not One
When a party relies on electronic books of account, courts are really asking three separate things:
- Relevance: Are the entries the kind of record the law treats as relevant?
- Proof: Has the printout been properly proved as an electronic record?
- Weight: Even if admitted, do the entries alone establish liability?
Many disputes are lost on the third question after the first two are answered correctly.
Applicable Legal Framework
Relevance of the entries. Section 28 of the Bharatiya Sakshya Adhiniyam, 2023 (BSA) states that entries in accounting books, including accounting books made electronically, become relevant when these books are habitually maintained for business purposes and relate to any matter inquired into by the Court. The same section adds that such entries alone are not sufficient evidence to charge any person with liability. Section 28 corresponds to Section 34 of the Indian Evidence Act, 1872, which was amended in 2000 to cover electronic form.
Proof of the printout. A ledger printout is an electronic record. Under the BSA, its contents are proved through Section 63 and the certificate it requires (see my earlier articles on the Section 63 certificate for the mechanics). Relevance under Section 28 does not replace this step.
The company’s record-keeping duties. Under the Companies Act, 2013, books of account are governed by Section 128, and the term is defined in Section 2(13). The Companies (Accounts) Rules, 2014 add technical duties for companies using accounting software. The proviso to Rule 3(1) requires software that records an audit trail of each transaction, creates an edit log of each change with the date of the change, and does not allow that feature to be disabled. Rule 3(5) deals with backing up electronic books on servers located in India. Under Rule 11(g) of the Companies (Audit and Auditors) Rules, 2014, the statutory auditor reports on whether the audit trail operated throughout the year and was preserved.
This is compliance legislation. It does not define how a court would look at an edit log. This is evidence legislation, and that’s where it gets complicated.
Judicial Position
The Supreme Court’s decision in Common Cause v. Union of India, (2017) 11 SCC 731, is the most useful anchor. The Court dealt with seized loose sheets and diaries and held that they were not “books of account” regularly kept in the course of business under Section 34 of the Evidence Act. It also reiterated that even genuine books of account are only corroborative: the person relying on them must show the entries reflect real transactions.
On electronic proof, Anvar P.V. v. P.K. Basheer, (2014) 10 SCC 473, and Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal, (2020) 7 SCC 1, settled that electronic records generally require the statutory certificate unless the original device or document is itself produced. Both were decided under Section 65B of the Evidence Act, which the BSA has replaced with Section 63, with a more detailed certificate.
High Courts have long held that a ledger standing alone does not establish liability. In Mohan Lal Bodj Raj v. Dwarka Nath Kuldeep Kumar, AIR 1985 J&K 85, a recovery suit on the plaintiff’s ledger, the Jammu & Kashmir High Court held that a ledger may not by itself prove a transaction and that no liability can be fastened on a ledger entry alone unless other evidence supports it. According to the Court, the nature of corroboration is determined by the specific circumstances of each individual case, and where the defendant does not contest the validity of the entries, corroboration might not necessarily be required. This ruling was given in terms of Section 34 of the Evidence Act but Section 28 of the BSA.
My analysis: since Section 28 BSA keeps the substance of the old Section 34, these decisions should continue to guide courts. I have not found a Supreme Court ruling that interprets Section 28 BSA directly, and readers should watch for one.
What an Audit Trail Can and Cannot Do
An edit log responds to such queries like who made an alteration, when it was made, and what were its contents prior to the change. Such logs have much importance in proving that the entry was indeed made on a particular date.
What it cannot do is prove the underlying transaction. A perfectly logged entry for goods that were never delivered is still an entry for goods that were never delivered. The audit trail goes to the integrity of the record. Corroboration goes to the truth of the transaction. A party needs both.
The existence of a missing, disabled, or incomplete audit trail, however, presents a different issue. With the new requirement for the existence of an edit log, the other party has a right to question why one is not available, and this will impact on the credibility of the party in question before the courts.
Practical Examples
The corroborated ledger. A distributor sues for unpaid invoices. Besides the ledger printout with a Section 63 certificate, it produces signed delivery challans, e-way bills, and the customer’s emails acknowledging the dues. The ledger fits into a larger picture and the claim holds.
The late entries. A company produces a ledger, but the edit log shows that a batch of entries was posted after notice was served, with invoice dates set earlier. Here the entries were not “regularly kept in the course of business”, and the damage goes beyond those entries: the whole ledger’s credibility is in question.
Common Mistakes
- Relying on the ledger alone, without invoices, challans or witnesses.
- Printing from the software and filing the printout without a Section 63 certificate.
- Allowing broad administrator access, so that edits cannot be traced to a person.
- Changing accounting software without migrating or preserving the old edit logs.
- Presenting Excel workings or summaries kept outside the accounting software as “books of account”. After Common Cause, informal papers will struggle to look like regularly kept books. I have discussed the tax side of this in my article on seized phones and Excel sheets.”
- Assuming that audit trail compliance for the auditor’s report is the same as being ready for litigation.
Practical Steps
- Keep the edit log enabled and preserve it for as long as the books themselves. Section 128 of the Companies Act requires books to be preserved for a minimum period (verify the current period on India Code).
- Restrict user rights, so that every change maps to a named user.
- Keep backups as Rule 3(5) requires, and document the backup process.
- When a dispute is foreseeable, take a forensic copy of the data and logs before anyone touches it. (see my article on preserving electronic records before litigation).
- Collect corroboration from the start: invoices, challans, bank entries, correspondence.
- Have the Section 63 certificate prepared by the person actually in charge of the system, with expert involvement authenticity and reliability of electronic evidence is likely to be challenged.
- Do not backfill entries after a dispute arises. If a correction is genuinely needed, make it visibly and record the reason.
The first objection to a Tally printout is rarely about the numbers in practice. It’s usually a question of timing: when the entry was posted and by whom. Those who can show a clean edit log and back it up with invoices, challans and bank entries are in a much stronger position than those who only rely on the ledger. Parties who start tidying entries up as soon as they receive a notice will usually do more harm to their own case than the original gap ever could.
Conclusion
An electronic book of accounts is no less than a paper book of accounts; however, both are subject to different procedures of examination. The beginning of entry is revealed by Section 28 BSA, the print out gets in through Section 63, and the proof of its value depends upon the corroboration. An audit trail does not prove that any transaction occurred. It only proves that the record was not fabricated afterwards.
Cases Discussed
- Arjun Panditrao Khotkar v. Kailash Kushanrao Gorantyal, (2020) 7 SCC 1 (Supreme Court) — Reaffirmed the mandatory certificate requirements for secondary electronic evidence under Section 65B of the Indian Evidence Act, 1872, while distinguishing the production of original electronic records.
- Common Cause v. Union of India, (2017) 11 SCC 731 (Supreme Court) — Held that loose sheets and informal records not regularly maintained in the course of business do not qualify as books of account under Section 34 of the Indian Evidence Act, 1872. The decision supports the requirement for corroboration.
- Anvar P.V. v. P.K. Basheer, (2014) 10 SCC 473 (Supreme Court) — Established that electronic records produced as secondary evidence must satisfy the statutory certificate requirements under Section 65B of the Indian Evidence Act, 1872.
- Mohan Lal Bodj Raj v. Dwarka Nath Kuldeep Kumar, AIR 1985 J&K 85 (Jammu & Kashmir High Court) — Considered the evidentiary value of ledger entries in a recovery suit and the requirement for supporting evidence to establish the underlying transaction and liability.
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Disclaimer: This article is purely informative and does not provide any legal advice. For advice related to specific facts, please seek assistance from a professional.
