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
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W.P.(C) No.8412/2025
:2:
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:
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W.P.(C) No.8412/2025
:3:
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
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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
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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
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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
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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
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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
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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
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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
