Kerala High Court
Ajith Kumar R.C vs The Kerala State Financial Enterprises ... on 3 July, 2025
Author: N.Nagaresh
Bench: N.Nagaresh
2025:KER:48273
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR.JUSTICE N.NAGARESH
THURSDAY, THE 3RD DAY OF JULY 2025 / 12TH ASHADHA, 1947
WP(C) NO. 8412 OF 2025
PETITIONER:
AJITH KUMAR R.C
AGED 57 YEARS
2/484, SOUPARANIKA PANANGAD,
KUMBALAM P.O. ERNAKULAM,
PIN - 682506
BY ADVS.
SHRI.SHINTO THOMAS
SRI.RAM VINAYAK
SHRI.MOHAMED ASLAM V.P.
RESPONDENTS:
1 THE KERALA STATE FINANCIAL ENTERPRISES LTD.(KSFE)
REPRESENTED BY ITS MANAGING DIRECTOR
BHADRATHA, MUSEUM ROAD,
P.B. NO.510, THRISSUR, PIN - 680020
2 KERALA STATE FINANCIAL ENTERPRISES(KSFE)
SHAKTHIKULANGARA BRANCH
REPRESENTED BY THE BRANCH MANAGER
KERALA STATE FINANCIAL ENTERPRISES(KSFE)
SHAKTHIKULANGARA BRANCH
NEENDAKARA, KOLLAM, KERALA,
PIN - 691581
2025:KER:48273
W.P.(C) No.8412/2025
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BY ADV SRI.K.A.SALIL NARAYANAN
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY
HEARD ON 01.07.2025, THE COURT ON 03.07.2025 DELIVERED
THE FOLLOWING:
2025:KER:48273
W.P.(C) No.8412/2025
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N. NAGARESH, J.
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W.P.(C) No.8412 of 2025
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Dated this the 3rd day of July, 2025
JUDGMENT
~~~~~~~~~ The petitioner is the Managing Partner of a Partnership Firm named M/s. Ashirvad Builders. The petitioner joined six different Chits of KSFE. The petitioner duly paid the instalments. In the auctions conducted, the petitioner successfully secured all the six Chits in the year 2024. The total prize amount was ₹42,15,122/-. An amount of ₹21 lakhs was given to the petitioner.
2. In order to release the balance prize amount, the petitioner offered a property jointly owned by the petitioner and his mother. As the mother could not 2025:KER:48273 W.P.(C) No.8412/2025 :4: come from Bangalore consequent to a knee surgery, the petitioner proposed another property owned by the petitioner's Partner Mr. Aravind. The said property has an extent of 3.84 Acres. The said property is more than sufficient to release the balance amount of ₹21,15,122/-. Mr. Aravind later withdrew his consent to offer his property as security for the petitioner's Chit.
3. The petitioner thereupon proposed to substitute the security by another property belonging to Ms. Valsala Kumari. The KSFE had already accepted the said property as security in other chits. The petitioner states that by Ext.P6 communication, the KSFE demanded Blood Relationship Certificate in order to accept the property of Valsala Kumari as security. Though the petitioner filed W.P. (C) No.42419/2024 before this Court, the said writ petition was disposed of directing the KSFE to consider Ext.P7 representation therein. Again, the respondents issued Ext.P11 letter requiring the petitioner to produce a Blood 2025:KER:48273 W.P.(C) No.8412/2025 :5: Relationship Certificate establishing the petitioner's relationship with Valsala Kumari.
4. The petitioner states that the Clause in the Circular of the KSFE requiring production of Blood Relationship Certificate to accept a property as security is ultra vires the Chit Funds Act, 1982. Any Circular or Clause that imposes additional conditions beyond what is expressly provided in the Act exceeds the legal authority of the issuing body. The impugned Clause runs contrary to the object and purpose of the Chit Funds Act, 1982. The respondents are therefore compellable to disburse the prized amount of ₹21,15,122/- to the petitioner accepting the security offered by the petitioner, urged the petitioner.
5. The 2nd respondent resisted the writ petition filing counter affidavit. The 2nd respondent stated that the writ petition is filed by just being a name lender to another person who has subscribed to various chits with the respondent company and has failed to remit the outstanding 2025:KER:48273 W.P.(C) No.8412/2025 :6: dues and has forced the KSFE to resort to revenue recovery proceedings. The said person does not stand to lose anything as he never mortgages any property of his own and at the same time cheats gullible persons who are in need of money and utilise their ignorance and makes them pledge their properties and he takes advantage of their ignorance and their stringent financial condition and makes them a prey to his own fraudulent activities.
6. The said person had even approached this Court by producing fabricated documents which were found out and the Court had strictly warned him in the said case. The present petitioner is only a name lender to the said person and the original culprit is doing a back seat pedalling. The petitioner, after prizing the chit, failed to produce sufficient security to the satisfaction of the respondent company so as to get the prized chit amount released. The person who initially offered his property as security, found out the illegal motive of the petitioner and 2025:KER:48273 W.P.(C) No.8412/2025 :7: withdrew from giving his property as security.
7. The allegation that it was the officers of the respondent company who instigated him to join the above Chitty is baseless. His initial Partner found out his fraud and he withdrew from the promise of standing as a guarantor. The subsequent surety whom the petitioner put forward namely, Ms. Valsala Kumari, could only give property which were already subjected to pledge at various institutions and had a heavy liability upon them. Hence, the KSFE could not release the prized amounts to the petitioner on the basis of the said security. It was for the said sole reason that the petitioner could not be disbursed the prized amount.
8. The condition in Clause 8 of Ext.P10 which the petitioner challenges was stipulated to protect innocent and gullible persons, who will stand as surety.
9. I have heard the learned counsel for the petitioner and the learned Standing Counsel representing the respondents.
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10. The petitioner succeeded in six Chitty auctions. The total prize amount comes to ₹42,15,122/-. The petitioner was paid ₹21 lakhs. The balance payable to the petitioner is ₹21,15,122/-. The petitioner offered property of one Valsala Kumari as security to get the balance prized amount released. The respondents required the petitioner to produce a Blood Relationship Certificate to show his relation with the said Valsala Kumari. The petitioner challenges the said communication in Ext.P11 notice.
11. Clause No.8 in Ext.P10 Circular reads as follows:
The Company will not accept landed property as security by way of additional charge for the liability of a person other than the subscriber and the mortgagor in the first mortgage. However, acceptance of property as additional charge for liabilities of persons standing in fiduciary relation (i.e. father and son/daughter, brothers, sisters, son- in-laws, daughter-in-laws etc.) to the mortgagor can be considered on merit of each case by the Regional Manager provided a registered mortgage is prepared to be executed.
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12. Though the respondents justified the demand for production of Blood Relationship Certificate based on Clause No.8, in the statement filed by the respondents, it has been stated that the property of Valsala Kumari was already subjected to pledge at various institutions and had a heavy liability upon it. It was for the said sole reason that the petitioner could not be given or rather disbursed the prized amount. The condition in Clause 8 of Ext.P10 which the petitioner wants to get quashed, is intended to protect innocent and gullible person, who will stand as surety.
13. From the arguments and pleadings, it is evident that the respondents have objection in accepting the property of Valsala Kumari as security for the reason that the said property is already subjected to pledge at various financial institutions and had a heavy liability upon it. The Standing Counsel for the respondents would submit that the said property is subjected to attachment orders. If that be 2025:KER:48273 W.P.(C) No.8412/2025 : 10 : so, the respondents will be justified in not accepting the said property as security.
14. The transaction being a monetary transaction and the 1st respondent being a commercial venture, the 1st respondent will be justified in insisting for a property without liability as security for advancing the amount. In the facts of the case, I find it unnecessary to adjudicate upon the legality of Clause 8 of Ext.P10.
The writ petition hence fails and it is dismissed.
Sd/-
N. NAGARESH, JUDGE aks/01.07.2025 2025:KER:48273 W.P.(C) No.8412/2025 : 11 : APPENDIX OF WP(C) 8412/2025 PETITIONER'S EXHIBITS Exhibit P1 THE PARTNERSHIP DEED DATED 29.07.2024 Exhibit P2 THE ACKNOWLEDGEMENT OF REGISTRATION OF FIRMS ISSUED BY THE DEPARTMENT OF REGISTRATION ON 06.08.2024 Exhibit P3 THE CHIT AGREEMENT BY KSFE Exhibit P4 THE AMENDED PARTNERSHIP DEED DATED 07.08.2024 Exhibit P5 THE LETTER SUBMITTED BY MR. ARAVIND BEFORE THE 2ND RESPONDENT, DATED 15.11.2024 Exhibit P6 THE LETTER DATED 30.10.2024,SUBMITTED BY THE PETITIONER BEFORE THE 2ND RESPONDENT Exhibit P7 THE LETTER SENT BY THE 2ND RESPONDENT TO THE PETITIONER, DATED 06.11.2024 Exhibit P8 THE REPRESENTATION MADE BY THE PETITIONER BEFORE THE 1ST RESPONDENT, DATED 16.11.2024 Exhibit P9 THE INTERIM ORDER DATED 17.12.2024 THE INTERIM ORDER DATED 17.12.2024 OF THIS HON'BLE COURT IN W.P.(C) NO.
42419 OF 2024 Exhibit P10 THE COUNTER AFFIDAVIT FILED BY RESPONDENT NO. 1, DATED 13.01.2025 Exhibit P11 THE LETTER DATED 17.02.2024 SENT BY RESPONDENT NO. 1 TO THE PETITIONER