Shaik Abdul Rasheed vs M/S. White Gold Chits And Finance ...
2023 Latest Caselaw 5566 AP

     THE HON'BLE SRI JUSTICE V.GOPALA KRISHNA RAO

                      APPEAL SUIT No. 862 OF 2008

JUDGMENT: -

1)    The Appeal, under Section 96 of the Code of Civil Procedure

[for short 'the C.P.C.'], is filed by the Appellants/Defendant Nos.2

and 4 challenging the Decree and Judgment, dated 16.09.2008, in

O.S. No.715 of 2005 passed by the learned II Additional Senior Civil

Judge (Fast Track Court), Guntur [for short 'the trial Court']. The

Respondents herein are the Plaintiff and the defendant Nos.1, 3 and

5 in the said Suit.

2) The Respondent No.1/Plaintiff filed the Suit praying for

passing of a decree directing the Appellants and defendant Nos.1, 3

and 5 to deposit the Suit amount of Rs.2,75,650/- with subsequent

interest and costs.

3) Both the parties in the Appeal will be referred to as they are

arrayed before the trial Court.

4) The brief averments of the plaint, in O.S. No.715 of 2005, are

as under:

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                                                       AS 862 of 2008

(i) The Plaintiff is the private Chit Fund Company under the name

and style as 'M/s.White Gold Chits and Finance Private

Limited', registered under the companies Act (Act 1 of 1956),

with its registration No.01-20399. The first defendant is a

member, subscriber and a holder of ticket No.23 of chit worth

Rs.3,00,000/- consisting of 30 monthly instalments at the

subscription of Rs.10,000/- to each instalment maintained by

the plaintiff company in the series WGC/SJ3 duly registered

before the Registrar of Chits. The first defendant became

prized subscriber in the draw held on 24.10.2004 and he

agreed to forgo an amount of Rs.1,05,000/-. The defendant

Nos.2 to 5 stood as guarantors on behalf of the first defendant

for payment of subscriptions to the remaining chit instalments.

The plaintiff paid the prize amount of Rs.1,95,000/- to the 1st

defendant by way of cheque and receipt.

(ii) Later the first defendant failed to pay the subscriptions to the

remaining instalments from 6th instalment and committed

default and violated the terms and conditions of the chit

agreement. He is due an amount of Rs.2,50,000/- towards 3 VGKRJ AS 862 of 2008

subscriptions for the chit instalments and he being a member

of the suit chit and the defendant Nos.2 to 5 being guarantors

failed to pay the said amount of Rs.2,50,000/- with interest and

incidental charges. In spite of repeated demands and got

issuance of lawyer notice, they failed to repay the amount due.

Hence, the plaintiff filed the suit for recovery of suit amount.

5) The defendant Nos.1 and 3 remained exparte. The defendant

No.5 died during the pendency of the suit and the plaintiff did not

take steps to implead legal heirs of the deceased 5 th defendant as

parties in the suit and that the suit was abated against the 5 th

defendant. The defendant Nos.2 and 4 filed written statements.

The brief averments of the written statement, filed by the Defendant

Nos.2 and 4 are as under: -

(i) The Defendant Nos.2 and 4 pleaded that they did not give any

guarantee on behalf of the first defendant for payment of

subscriptions to the chit instalments to the plaintiff. They

further pleaded that they joined as members in the plaintiff chit

fund company on agreeing to pay subscriptions daily. The

agent of the plaintiff used to collect subscriptions daily from 4 VGKRJ AS 862 of 2008

them, they did not issue any receipts for the amounts paid by

them towards subscriptions for the said saving scheme.

(ii) They further contend that they questioned and demanded the

plaintiff for issuing receipts and furnish account copy for the

amounts paid by them towards subscriptions to the said saving

scheme and that the plaintiff concocted the alleged documents

and filed the suit with all false allegations to harass them and

to get wrongful gain from them, accordingly, pleaded to

dismiss the Suit with costs.

6) Based on the above pleadings, the trial Court framed the

following issues:

(i) Whether the plaintiff is entitled for the suit claim as prayed for?

(ii) Whether the suit is barred by limitation?

(iii)Whether the agreement of chit, agreement of guarantee and pronote are true, valid and binding upon the defendants?

(iv)To what relief?

7) During the course of trial in the trial Court, on behalf of the

Plaintiff, PW1 was examined and Ex.A1 to Ex.A15 were marked.

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                                                          AS 862 of 2008

On behalf of the Defendants 2 and 4, DW1 to DW3 were examined,

but no documents were marked.

8) After completion of the trial and hearing the arguments of both

sides, the trial Court Decreed the Suit vide its Judgment, dated

16.09.2008, against which the present appeal is preferred by the

appellants/Defendant Nos.2 and 4 in the Suit questioning the

Decree and Judgment passed by the trial Court.

9) Heard Sri G.V.S.Mehar Kumar, learned counsel for appellants

and Sri K.Lalith, learned counsel, representing Sri Turaga Sai Surya,

learned counsel for respondent No.1/ plaintiff.

10) The learned counsel for the appellants would submit that the

plaintiff chit fund company violated the clause 20 of agreement of

chit and that the chit fund company is not entitled the suit claim from

the appellants/ defendants 2 and 4 and he would further submit that

the appeal may be allowed.

11) Per contra, the learned counsel for the first respondent/plaintiff

would contend that on appreciation of entire evidence on record, the

learned trial Judge rightly decreed the suit against all the defendants 6 VGKRJ AS 862 of 2008

against which no appeal is preferred by the defendants 1, 3 and 5

and he would further submit that there is no illegality in the decree

and judgment passed by the trial Court.

12) Having regard to the pleadings in the Suit and the finding

recorded by the trial Court and in the light of rival contentions and

submissions made on either side before this court, the following

point would arise for determination:

Whether the decree and judgment passed by the trial court needs any interference against the appellants/defendant Nos.2 and 4? If so, to what extent?

13) Point: The case of the plaintiff is that the plaintiff is running a

chit business and first defendant joined as a subscriber in the

plaintiff chit fund company and the ticket No.23 was allotted to him

and total chit value is Rs.3,00,000/-, consisting 30 monthly

instalments at the subscription of Rs.10,000/- each for 30 months.

The plaint averments further goes to show that the first defendant

became a prized subscriber in the auction held on 24.10.2004 and

he agreed to forgo an amount of Rs.1,05,000/- and the defendants 2 7 VGKRJ AS 862 of 2008

to 5 are stood as guarantors on behalf of first defendant for payment

of subscriptions to the remaining chit instalments and they also

executed an agreement of guarantee in favour of the plaintiff chit

fund company and all the defendants executed a suit pronote for

Rs.2,60,000/- in favour of the plaintiff chit fund company. The

plaintiff further pleaded that the first defendant failed to pay the

remaining instalments from 6th instalment onwards and committed

default and violated the terms and conditions of chit agreement and

the first defendant failed to discharge his liability and other

defendants also failed to discharge their liability as guarantors. The

fact remains that the defendant Nos.1, 3 and 5 are set exparte

before the trial Court. The appellants herein, i.e., defendants 2 and

4 in the Original Suit, contested before the trial Court and filed a

written statement.

14) In order to prove the case of the plaintiff, the plaintiff chit fund

company relied on the evidence of PW1. In cross examination of

PW1, the evidence of PW1 is not at all disturbed on the material

aspects of the case. The evidence of PW1 clearly goes to show that

the first defendant joined as a subscriber in the plaintiff chit fund 8 VGKRJ AS 862 of 2008

company under a ticket No.23 and total chit amount is Rs.3,00,000/-

at the subscription of Rs.10,000/- for each month and the first

defendant participated in the auction and declared as a prized

subscriber on 24.10.2004 and agreed to forgo an amount of

Rs.1,05,000/-. The evidence of PW1 coupled with Ex.A5 clearly

goes to show that the defendants 2 to 5 stood as a guarantors for

payment of the total chit amount by the first defendant and they

executed an agreement of guarantee under Ex.A5. Ex.A3 clearly

goes to show that all the defendants executed a joint promissory

note in favour of the plaintiff chit fund company. Ex.A8 clearly goes

to show that a legal notice was issued by the plaintiff chit fund

company to all the defendants on 24.08.2005. The facts remains

that the appellants herein acknowledged the said notice and did not

choose to give any reply to the counsel for plaintiff.

15) The learned counsel for appellants placed a reliance of

judgment reported in Karnati Mallikarjuna Rao and Company Vs.

Korlapati Krishna Murthy1, in that decision it was held that:

May be section 56 provides for the imposition of penalty for the transgression of various provisions of the Act, but that would not

1986(1) ALT 132 9 VGKRJ AS 862 of 2008

by itself achieve the desired result, which the Legislature so avowedly intended. The dominant object is to deter the chit fund organizations from embarking upon the transactions of that nature without complying with the mandatory provisions of the Act, meant to safeguard the members of the public at large with whose funds gathered by way of contributions the chit fund bodies would otherwise play ducks and drakes, but for the controlled measures which are stringent in their nature provided by the Act.

But in the instant case, there was a clear admission by the

appellants in their evidence in cross examination as DW1 and DW2

that they are the Income Tax assesses. Further more, the

appellants/ defendants 2 and 4 admitted their signatures in the

agreement of guarantee Ex.A5 and so also in the promissory note

Ex.A3. Further more the evidence of appellants goes to show that

they are running educational institutes, in such a case they are not

illiterates. By giving cogent reasons, the objection taken by the

defendants 2 and 4 was overruled by the trial Court. By giving

cogent reasons, the trial Court in its judgment held that "DW1 and

DW2 have admitted in their evidence that they are running

education institutions, furthermore, they are income tax assesses

and that only the foremen of the chit fund company accepted and

permitted the appellants to stood as guarantors on behalf of the first 10 VGKRJ AS 862 of 2008

defendant along with other defendants. The material on record

further reveals that a legal notice was issued by the plaintiff chit fund

company prior to filing of the suit itself. The appellants herein also

admitted in their evidence that they received a legal notice. But the

fact remains that they have not issued any reply notice to deny the

contents in Ex.A8 legal notice. Non-issuance of reply notice to

Ex.A8 legal notice by the appellants is certainly fatal to the case of

the appellants. The material on record reveals that the suit is

decreed against the defendants 1 to 4 jointly. The first defendant

and third defendant have not filed any appeal. The material on

record clearly goes to show that the appellants herein are the

income tax assesses and they are running educational institutions.

Therefore, there are no violations in Ex.A2 chit agreement, because

the appellants are running educational institutions and as they are

the income tax assesses, the plaintiff chit fund company accepted

them to stood as guarantors on behalf of first defendant along with

other defendants. Therefore, there is no force in the contention

taken by the learned counsel for the appellants that the plaintiff chit

fund company violated the terms and conditions of the chit

agreement. The trial Court by giving cogent reasons rightly decreed 11 VGKRJ AS 862 of 2008

the Suit. Therefore, the Judgment and Decree passed by the trial

Court is perfectly sustainable under law and there are no grounds

made out to interfere with the Judgment and Decree passed by the

trial Court.

16) In the result, the Appeal Suit is dismissed confirming the

Judgment and Decree, dated 16.09.2008, in O.S. No.715 of 2005 on

the file of the II Additional Senior Civil Judge (Fast Track Court),

Guntur. No order as to costs.

17) As a sequel, miscellaneous petitions, if any, pending in the

Appeal shall stand closed.

                                     _________________________
                                     V.GOPALA KRISHNA RAO, J
Date: 17.11.2023
sj
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                                            AS 862 of 2008

THE HON'BLE SRI JUSTICE V.GOPALA KRISHNA RAO

APPEAL SUIT No. 862 OF 2008

Date: 17.11.2023

sj

.