THE HON'BLE SRI JUSTICE SUBBA REDDY SATTI
APPEAL SUIT No.742 of 2006
JUDGMENT:
Unsuccessful defendants filed the above appeal, assailing
the judgment and decree dated 31.10.2006 passed in O.S.No.279
of 2005 on the file of II Additional Senior Civil Judge (Fast Track
Court), Guntur.
2. For the sake of convenience, parties to this appeal are
referred to as they were arrayed in suit.
3. Plaintiff filed the Suit O.S.No.279 of 2005 for recovery of an
amount of Rs.6,82,089/-.
4. The averments in the plaint, in brief, are that the plaintiff
is a company registered under the Indian Partnership Act and
doing chit fund business; that defendant No.1 joined as member
in chit scheme series JCC-A on 21.04.1997; that defendant No.1
was allotted ticket No.40; that each subscriber has to pay an
amount of Rs.10,000/- per month for 50 months and the chit
value is Rs.5,00,000/-; that in the auction conducted on
04.07.1997, defendant No.1 became successful bidder and
agreed to forego Rs.2,00,000/-; that defendant No.1 paid
Rs.50,000/- and his future liability is Rs.4,50,000/-; that the
defendants executed agreement of guarantee on 15.09.1997 and
defendants 2 to 6 stood as guarantors; that all the defendants
executed promissory note on 15.09.1997; that defendant No.1
committed default in payment of installments from 04.04.1998; 2
that the defendants failed to pay the amount in-spite of repeated
demands of the plaintiff; that defendants paid Rs.5,000/- against
receipt dated 29.04.2002 i.e. before expiry of limitation period
and prayed the Court to decree the suit.
5. Defendants 1 to 4 and 6 jointly filed written statement and
admitted that defendant No.1 was successful auction bidder for
the chit amount; that defendant No.1 paid installments
regularly; that the plaintiff did not mention dividend amount;
that the receipt dated 29.04.2002 is forged for the purpose of
saving limitation; that chit commenced in the year 1997 and it
was terminated in 2001, however, the suit was filed in the year
2005, hence it is barred by limitation and eventually prayed
Court to dismiss the suit.
6. Defendant No.5 filed separate written statement reiterating
the stand taken by the other defendants.
7. Basing on the above pleadings, the trial Court framed the
following issues for trial:
1. Whether the plaintiff is entitled to recover the suit amount
as prayed for?
2. Whether receipt dated 29.04.2002 is valid, genuine and
binding on defendants?
3. Whether 1st defendant paid entire amount as contended by
1st defendant is true, valid, binding on plaintiff?
4. To what relief?
3
8. During the trial, Managing Partner of plaintiff firm was
examined as P.W.1 and Exs.A-1 to A-17 were marked. None were
examined on behalf of defendants and no documents were
marked.
9. The Trial Court decreed the suit by judgment dated
31.10.2006 for an amount of Rs.6,82,089/-. Defendants were
directed to pay interest @12% p.a. on Rs.3,69,000/- from the
date of suit till the date of decree and were also directed to pay
interest @6% p.a. from the date of decree till the date of
realization. Defendants were also directed to pay Rs.25,661/-
towards costs of the suit. Against the said judgment and decree,
the above appeal is filed.
10. Heard Sri Atchutuni Rama Mohan Rao, learned counsel for
appellants/defendants and Sri N. Sriram Murthy, learned
counsel for respondent/plaintiff.
11. Learned counsel for appellants would contend that suit
debt is barred by limitation and hence suit is liable to be
dismissed. He further contended that Ex.A-9 payment receipt
dated 29.04.2002 is forged and the Lower Court ought not to
have relied upon the receipt. He further contended that even if
Ex.A-9 is a valid receipt, it being an acknowledgement of time
barred debt, without separate agreement, it cannot be enforced
and thus, the suit claim is barred by time. Hence, prayed the
Court to allow the appeal by dismissing the suit. 4
12. Learned counsel for the respondent would contend that 1st
defendant on emerging as the highest bidder in chit auction,
received the amount, but failed to pay the instalment thereby
committing default. However, as defendants paid Rs, 5,000/-
under Ex.A-9 as part payment, the suit filed is within limitation.
As Court below considered all these facts and decreed the suit,
prayed the Court to dismiss the appeal.
13. In view of the rival contentions the following points arise
for consideration:
(1) Whether the receipt, Ex.A-9 dated 29.04.2002 is valid, genuine and binding on defendants?
(2) Whether part payment made under Ex.A-9 receipt can be termed as agreement under Section 25(3) of Indian Contract Act?
(3) Whether the suit is barred by limitation?
(4) To what relief?
POINT NOS.1 to 3
Since all these points are inter-connected, they are all dealt
with together.
14. Undisputed facts are that, defendant No.1 joined as
subscriber on 21.04.1997 in chit series JCC-A in plaintiff firm,
he was allotted ticket No.40, had to pay Rs.10,000/- per month
for 50 months and value of the chit is Rs.5,00,000/-. Defendant
No.1 signed the chit agreement on 21.04.1997, emerged as
successful bidder in the auction conducted on 04.07.1997 and
agreed to forgo Rs.2,00,000/-, out of Rs.5,00,000/-. All the 5
defendants executed agreement of guarantee and promissory
note on 15.09.1997. Defendant No.1 committed default in
payment of installments from 04.04.1998.
15. Though defendants paid Rs. 5,000/- on 29.04.2002 towards
part payment, by filing written statement, they denied the
payment and further pleaded forgery.
16. Having pleaded forgery qua Ex.A-9, none of the defendants
choose to enter into witness box. No steps were taken to send
Ex.A-9 to handwriting expert to compare the signature appearing
on Ex.A-9 with that of admitted signature of the person, who
signed on Ex.A-9. Except pleading forgery and putting
suggestion to P.W.1 that Ex.A-9 is concocted document, no other
evidence was let in by the defendants to substantiate that Ex.A-9
is forged one.
17. A perusal of Ex. A-9 receipt dated 29-4-2002 indicates that
defendant No.4, on behalf of defendant No.1, company, paid an
amount of Rs.5,000/-. In fact, a perusal of the receipt manifests
that defendant No.4 signed on Ex.A-9. Though it was contended
that Ex.A-9 is forged, no steps were taken by defendants to prove
the same. On behalf of the plaintiff firm, its Managing Partner
was examined as P.W.1 and Exs.A-1 to A-17 were marked.
Except making suggestions that Ex.A9 is concocted, nothing
contra was elicited from his evidence. Thus, in the absence of
cogent/convincing evidence let in by the defendants, this Court
cannot agree with the contention of learned counsel for the 6
appellants/defendants that Ex.A-9 is concocted for the purpose
of suit claim to save limitation.
18. The appellants/defendants are not disputing their
signatures on Exs.A-4 and A-5 being letter of guarantee and
promissory note. The only contention put forth is that suit claim
is barred by limitation and Ex.A-9 part payment receipt would
not save limitation and hence, the suit is liable to be dismissed.
19. Defendant No.1 joined as member of Chit fund scheme on
21-4-1997 and signed agreement on 21-4-1997. After becoming
prized subscriber, defendant No.1 committed default in payment
of amount from 4-4-1998. All the members have to pay 50
monthly instalments from 21-4-1997.
20. Whether the limitation to institute suit for recovery of
amount, starts from the date of default or termination of chit is
to be considered.
21. Article 37 of the Limitation Act, 1963 is applicable to the
suit in question. It reads thus:
_____________________________________________________________________________ Description of Suit Period of Limitation Time from which period begins to run ______________________________________________________________________________
On a prommissory-note Three years When the default is made or bond payable by unless where the payee instalments, which or obligee waives the provides that, if default benefit of the provision be made in payment of and then when fresh default one or more instalments, is made in respect of which the whole shall be due. there is no such waiver. _______________________________________________________________________________ 7
22. The Division bench of composite High Court in Jillelamudi
Dhanalakshmi Vs the Union Bank of India1 while dealing with
Article 37 of the Limitation Act held that the period of three years
begins to run when the default is made unless the payee or
obligee waives the benefit. It was further held that when the first
installment fell due on 30-6-1976, the limitation began to run
from 30-6-1976 and the suit filed beyond three years is held to
be barred by limitation.
23. In Vastava Chit Funds (Private) Limited Vs Madala
Benarjee and others2 it was held as under:
"10. The first respondent herein is a prized subscriber, and therefore, penalty of 6 paise per rupee or part thereof will be charged for the first month. If the default continues over a month, such a person will not be entitled for the dividend in addition to the penalty charges of 6 paise per rupee or part thereof. If the default is continued consecutively for a period of three months, the prized subscriber and the executants of the security bonds or sureties lose the future dividends and the benefit of paying the future subscriptions in instalments with interest at the rate of 12% per annum from the date of default. Therefore, this clause makes it abundantly clear that if the prized subscriber commits default in payment of instalments, the plaintiff Chit company is entitled to impose penalty of 6 paise per rupee or part thereof for the first month, if the default continues over a month the subscriber will not be entitled to dividends also, in addition to the aforesaid penalty at 6 paise per
1 1992(1) ALT 696 (D.B.) 2 2005(2) ALT 405 8
rupee or part thereof. If the default is continued for more than three months, the prized subscriber and the executants of the security bonds or sureties lose the future dividends and the benefit of paying the future subscriptions in instalments. But they shall become liable to make a consolidated payment of all the future subscriptions inclusive of defaulted instalments with interest at the rate of 12% per annum from the date of default.
11. Therefore, having regard to the ratio laid down by the Apex Court as well as this court, in the decisions referred to above and this being a special contract, the limitation prescribed under Article 37 of the Limitation Act is relevant. Evidently, on 12-5-1995 the chit agreement was entered into between the plaintiff and the defendants and the defendants have committed default on 15-6-1996 and the contract was terminated on 31-5- 1997, therefore, the limitation to file the suit, be it a special contract or otherwise, the limitation starts from the date of default in payment of first instalment or from the dates of continuous default of payment of instalments for a period of three months, on which date both the prized subscriber and the sureties who executed the surety bonds are liable to pay all the future subscriptions including defaulted instalments with interest at the rate of 12% per annum, but the limitation does not start from the date of termination of the contract i.e. from 31-5-1997. Therefore, the Court below had rightly rejected the plaint following the Division Bench Judgment of this Court referred to above."
24. In Chit Fund Pvt Ltd Vs Nafeesuhhis Begum and
others3, the division bench of composite high Court subscribed
3 2015(3) ALD 183 9
to the view taken by the learned single judge in Vastava Chit
fund's case on a reference.
25. The case on hand indicates that the chit transaction
commenced on 21-4-1997; defendant No.1 became successful
bidder on 4-7-1997; amount was paid to successful bidder on
15-9-1997 on which date defendants executed promissory note
and agreement of guarantee and defendant No.1 committed
default in payment of installments from 4-4-1998. In this case
after the default, the prized subscriber did not pay a single
instalment and hence the limitation to recover the amount
reckons from 4-4-1998. However, an amount of Rs.5,000/- was
paid on 29.04.2002 under Ex.A-9 i.e. after expiry of three years
from the date of default.
26. Since the appellants committed default in payment of
installments from 4-4-1998, the suit is to be filed within three
years from the date of default. However, the plaintiff presented
the suit on 29-4-2005 seeking recovery of amount beyond the
period of three years prescribed under Article 37 of the
Limitation Act.
27. Though defendants pleaded that suit is barred by
limitation, no issue was framed by the Lower Court to that effect.
However, evidence was let in by the plaintiff and P.W.1 was cross
examined by defendants. Thus, as parties to the suit were aware
of plea taken by each other, Non-framing of issue with regard to
limitation is of no consequence.
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28. It is settled principle of law that when the pleadings of both
parties are available and each party knows about the case of
other and adduces evidence in support of the same, non-framing
of an issue, is of no consequence. The very purpose of framing
the issue is to know as to what is the lis involved in the suit. The
parties went to trial knowing fully well what they were required
to prove.
29. In Kunju Kesavan v. M.M. Philip & Others4, the Hon'ble
Apex Court held that :
"The parties went to trial, fully understanding the central fact whether the succession as laid down in the Ezhava Act applied to Bhagavathi Valli or not. The absence of an issue, therefore, did not lead to a material sufficient to vitiate the decision. The plea was hardly needed in view of the fact that the plaintiff stated in his replication that the suit property was obtained as makkathayam property, by Bhagavathi Valli under the Ezhava Act".
30. Thus, the position of law is well settled that where parties
adduce evidence in respect of a matter for which an issue has
not been framed and both sides are well aware of the dispute
which relates to the issue, the defect of non-framing of the issue
is cured. There will be no inherent lack of jurisdiction in the
Court to go into that question and decide that aspect of the
matter.
4 [1964] 3 SCR 634 11
31. Whether the receipt Ex A-9 saves the limitation? To deal
with said contention, it is apt to extract Section 25 (3) of Indian
Contract Act, 1872.
Section 25. Agreement without consideration, void, unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law:
An agreement made without consideration is void, unless
(1) ----
(2) ----
(3) it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.
32. A perusal of Sub-Section 3 of Section 25 makes it clear
that if a promise is made in writing signed by one party in
payment of entire amount or part of the debt of which the
creditor might have enforced payment but for the law of
limitation.
33. Whether promise is implied or express is no longer res
integra.
34. In Shivjiram Dhannalal v. Gulabchand Kalooram5 it was held that :
"If then the appellants are correct in saying that the suit is founded on a mere acknowledgment, then it is barred
5 AIR 1941 Nagpur 100 12
by limitation. This therefore brings us to the question whether the suit is so founded and whether there was any consideration for the acknowledgment. Under S. 25(3), Contract Act, an agreement made without consideration is void unless it is a promise, made in writing and signed by the person to be charged therewith, or by his agent generally or specially authorized in that behalf, to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits. The nature of an acknowledgment, such as that we are now considering, came before Bose J., in ILR (1940) Nag 441 and his reasoning in that case appears to us to be unanswerable:
Unless a promise to pay is in writing it cannot fall within the purview of Sec. 25(3), Contract Act. The implied promise to pay which is contained in all acknowledgments does not attract the provisions of S. 25(3) of the Act, because the promise to pay is not in writing."
35. It is clear from perusal of Ex A-9 that it doesn't contain any
specific promise as mandated under Section 25(3) of Contract
Act. It is only a simple receipt evidencing making of payment of
Rs. 5,000/-. There is no separate agreement between the parties
in connection with payment of balance amount. Thus, even the
part payment made under Ex A-9 without any specific agreement
may not be useful to the plaintiff in saving limitation.
36. In view of the legal position, this Court came to conclusion
that the suit filed for recovery of amount is barred by limitation
and hence is liable to be dismissed.
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POINT No.4
37. Thus, the appeal filed by defendants in the suit deserves to
be allowed by setting aside the judgement and decree passed by
the Lower Court.
38. Hence, the appeal is allowed with costs and the decree and
judgment dated 31.10.2006 passed in O.S.No.279 of 2005 on the
file of II Additional Senior Civil Judge (Fast Track Court), Guntur
are hereby set aside.
As a sequel, pending miscellaneous petitions, if any, shall stand closed.
_______________________________
JUSTICE SUBBA REDDY SATTI Date : 04.05.2022
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HON'BLE SRI JUSTICE SUBBA REDDY SATTI
APPEAL SUIT No.742 of 2006 04.05.2022
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