Telangana High Court

Amidala Sudarshan vs M/S. Kapil Chit Funds P Ltd., on 21 November, 2022

Bench: G.Anupama Chakravarthy

     HON'BLE SMT. JUSTICE G. ANUPAMA CHAKRAVARTHY

                 SECOND APPEAL No.90 of 2014

JUDGMENT :

This Second Appeal is arising out of the judgment dated

23.09.2013 in A.S.No.50 of 2012 on the file of Family Court-cum-

Additional District and Sessions Judge, Karimnagar, which is

arising out of O.S.No.178 of 2007 on the file of Senior Civil Judge,

Karimnagar.

2. For the sake of convenience, the parties are referred to as

arrayed before the trial Court.

3. Heard learned Counsel for the appellants as well as the

learned counsel for the respondent and perused the record.

4. The appellants are defendants in the suit. The suit was filed

by the plaintiff/chit fund Company represented by its Recovery

Officer, for recovery of an amount of Rs.1,86,232/- with future

interest at the rate of 12% per annum from the defendants.

5. The brief averments in the plaint are that defendant No.1

joined the chit fund scheme as a subscriber/member in the month

GAC, J S.A.No.90 of 2014

of March, 2004 and was allotted with Ticket No.3. Defendant

No.1 agreed to subscribe the chit at the rate of Rs.10,000/- per

month, payable on or before 5th of each calendar month for 50

instalments and the value of the chit is Rs.5,00,000/-. Defendant

No.1 also executed agreement of chit on 24.02.2004 as per the

bye-laws of the Chit Fund Company. Defendant No.1 participated

in the auction of chit on 24.09.2006 and agreed to forego

Rs.95,500/- out of Rs.5,00,000/-, which was duly confirmed by the

plaintiff-Company. As per the Rules of the plaintiff-Company, in

order to draw the amount, the successful bidder has to furnish the

sureties of independent guarantors for due payment of future

monthly instalments. Accordingly, defendant No.1 furnished the

guarantors (defendant Nos.2 to 4) and has withdrawn the amount of

Rs.3,86,720/-. The guarantors also agreed to stand as sureties and

they jointly executed demand pronote for Rs.1,90,000/- on

11.11.2006, accepting the future liability. Later, the defendant

No.1 committed default in paying the instalments from the 33rd

instalment which fell due on 05.11.2006 and when the

plaintiff-Company approached the 1st defendant, he did not respond

GAC, J S.A.No.90 of 2014

and the Company was constrained to issue legal notice dated

10.05.2007, demanding for repayment of the amount. Inspite of

receiving the notice, the defendants did not give any reply.

Therefore, the plaintiff-Company has filed the present suit for

recovery of Rs.1,86,232/- from the defendants and prayed to decree

the suit.

6. On the other hand, a detailed written statement was filed by

defendant No.1 contending that he was regularly paying the

monthly instalments without any default upto 42nd instalment

(August, 2007) through cheques and it is his further contention that

the amount of 41st instalment dated 27.06.2007, was adjusted from

the interest over the deposit of Rs.3,00,000/- and Rs.1,50,000/-

deposited by defendant No.1 with the plaintiff, and therefore,

prayed to dismiss the suit in limini. Further, defendant No.1 has

also taken a plea that the trial Court has no jurisdiction to try the

suit, as the cheques were issued at Nizamabad by the

plaintiff-Company.

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7. Basing on the pleadings, the trial Court has framed the

following issue for trial :

"Whether the plaintiff is entitled for the suit claim ?"

Later, the following additional issues are also framed:

"1. Whether this court does not have jurisdiction to try the suit ?

2. Whether the suit is prematured and not maintainable ?

3. To what relief ?"

8. During the course of trial, on behalf of the plaintiff, PWs.1

and 2 were examined and Exs.A-1 to A-9 were got marked. On

behalf of defendants, DWs.1 and 2 were examined and Exs.B-1 to

B-70 were got marked.

9. On considering the oral and documentary evidence on

record, the trial Court has partly decreed the suit for a sum of

Rs.96,354/- in favour of plaintiff directing the defendants to pay

the said amount, charging interest at the rate of 6% per annum on

the principal amount from the date of suit till the date of

realisation. It is the specific finding of the trial Court that DW-1

admitted in his evidence that he paid 31 instalments of Rs.8,864/-

each as on 24.09.2006 and the plaintiff has paid the prize amount

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on 11.11.2006 by way of cheques drawn on SBH, Karimnagar to a

tune of Rs.3,86,720/-, which were encashed by him and that the

plaintiff also adjusted instalment Nos.32 and 33 while paying the

amount to a tune of Rs.1,71,170/-. The trial Court also held that no

record was produced by the defendants to show that they have paid

subsequent subscription since 34th instalment onwards, therefore,

the plaintiff is entitled to recover the amount from the defaulted

subscribers/defendants and that the suit is not premature and it is

maintainable.

10. Being aggrieved by the judgment and decree of the trial

Court, defendants have filed an appeal in A.S.No.50 of 2012 on the

file of Family Court-cum-Additional District and Sessions Judge,

Karimnagar.

11. The first appellate Court, after hearing the appellants and

considering the material on record, has framed the following points

for consideration:

"1. Whether the plaintiff is entitled for the suit claim and on the otherhand the defendant No.1 is entitled for Rs.1,33,919/- as claimed in the written statement ?

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2. Whether the judgment and decree in O.S.178 of 2007 dt.13-6-2012 of the trial Court is sustainable ?

12. On considering the rival contentions of the parties and

material on record, the first appellate Court has dismissed the

appeal confirming the judgment of the trial Court with a specific

finding that as far as the decree passed in the suit is concerned, the

defendant failed to substantiate any ground in the appeal and the

alleged adjustment pleaded by the defendants cannot be taken into

consideration in the suit, as there is no set-off or counter-claim

before the trial Court.

13. Being aggrieved by the judgment of the first appellate Court,

this second appeal is filed by the defendants raising the following

substantial questions of law along with the grounds of appeal:

"1. That, the trial court and appellate court failed to take into consideration, that the suit filed by the respondent is not maintainable in law in facts.

2. That the trial Court and appellate Court failed to take into consideration that the suit is not maintainable since the subject chit has not been conducted as per A.P.Chit Fund Act, 1971, more particularly Section 3, 4, 7 and 8 of the Act.

3. That, the trial Court and appellate Court failed to take into consideration, that the respondent failed to file mandatory documents i.e. registered by-

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laws, without which no person shall start or conduct any chit.

4. That the trial Court and appellate Court failed to take into consideration, the appellant has specifically taken a ground that the respondent has not registered the by-laws of specific Chit and in the Cross examination, PW-1 deposed "I cannot give the reasons for non filing of the by-laws of suit chit. That the details of payment of dividend are available in the registered by-laws. It is not true to say that, only to suppress the contents of the registered by-laws, the registered by-laws are not filed into the court.

5. That, the trial court and appellate court failed to take into consideration that the respondent fails to take commencement of chit certificate, in regard to subject chit, as per law, without the said certificate no person shall commence any auction are draw of any chit.

6. That, the trial Court and appellate court failed to take into consideration that the respondent fails to furnish the copies of registered by-laws and chit agreement to the subsisting of the chit subscribers which is contravention of the Section 8 of the Chit Fund Act.

7. That, the appellate court mechanically endorsed the judgment and decree passed by the trial court without discussing anything about grounds of appeal and law.

8. That, the trial court and appellate court failed to take into consideration that the appellate court and trial court fails to give any reasoning for the adjustment of the money paid to the respondent, even after the respondent admitted the receipt of the same except saying that "these cannot be taken into consideration of the same".

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9. That the trial court and appellate court failed to take into consideration that admittedly the plaintiff behalf the PW-1 and PW-2 were examined both the PW-1 and PW-2 admitted and acknowledged the Exhibits B3, B4, B5, B9 [deposit receipts].

10. That, the trial court and appellate court failed to take into consideration that the admitted facts need not be proved."

14. This Second Appeal is coming up for admission since 2014

and it underwent numerous adjournments. It is the specific

contention of the appellants that the registered by-laws of the Chit

Fund Company were not filed before the Court and that the chit

was not conducted as per the A.P. Chit Funds Act, 1971. But, the

above said two questions cannot be considered as substantial

questions of law and are not tenable as defendant No.1 himself has

admitted that he is one of the subscribers to the, has entered into

agreement of chit with the plaintiff and that the chit was auctioned

and he received an amount of Rs.3,86,720/- after paying 31

instalments. Further, the defendant/appellant also entered into

agreement of guarantee under Ex.A-3 along with defendant Nos.2

to 4. The 1st defendant, after knowing well about the plaintiff's

Chit Fund Company, subscribed to the chit, paid 31 instalments,

participated in the auction and received payment of Rs.3,86,720/-

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from the plaintiff's Company, and therefore, now cannot question

about the registration of the Chit Fund Company at a belated stage.

On perusal of the substantial questions of law, it is evident that

they relate to the findings of factual aspects by both the Courts

below, but are not on law. Both the Courts have given a concurrent

finding that the appellants are in due to the Chit Fund Company.

15. The learned counsel for appellants has relied on the

judgments of Apex Court in Commissioner & Secretary to Govt.,

Commercial Taxes & Religious Endowments Department and

others v. Sree Murugan Financing Corporation, Coimbatore

and others1 and on the judgment of High Court of Andhra Pradesh

in Margadarsi Chit Fund Pvt. Ltd., Hyderabad v. Government

of Andhra Pradesh & others2, wherein, their Lordships have held

as under :

"when a Foreman starts a chit, under Section 3 he has to apply for registration of the bye-laws. It is only thereafter, he can approach the subscriber and get the chit agreements as prescribed under Section 5 executed and file them under Section 6. He cannot commence the business till he secures the certificate under Section 7(2)."

AIR 1992 SC 1383

MANU/AP/0718/1999

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16. The aforesaid proposition does apply to the facts and

circumstances of the present case, as defendant No.1 in this case

has not taken the plea before the trial Court that the Chit Fund

Company is not duly registered. If at all defendant No.1 has any

grievance against the plaintiff-company, he is at liberty to take

legal action against it for not getting it registered. It is also

relevant to mention that the plaintiff-Company has filed the Xerox

copy of Certificate of Incorporation as per Annexure-I, but as it is a

Xerox copy, the trial Court has not marked it as an exhibit. Hence,

it can be construed that the plaintiff-Company is registered as per

Sections 3 to 5 of the A.P. Chit Funds Act.

17. Learned counsel for the appellants has also relied on the

judgments of Hon'ble Supreme Court in Saurav Jain & another

v. M/s.A.B.P.Design & another3 and in Bharat Kala Bhandar

Ltd. v. Municipal Committee, Dhamangaon4, wherein, their

Lordships have held as under:

"New grounds can be raised for the first time if it involves substantial question of law, which does not

AIR 2021 SC 3673

AIR 1966 SC 249

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require adducing additional evidence specifically, one concerning the jurisdiction of the Court."

But, the aforesaid proposition is not applicable to the facts of the

present Case, as the Apex Court has got plenary jurisdiction under

Article 136 of the Constitution read with its power to do complete

justice under Article 142, but not for the High Courts. In the

present case, admittedly, the appellants have not filed any

counter-claim or set-off before the trial Court to claim any dues as

stated by him.

18. Further, there is limited scope under Section 100 of CPC

while dealing with the appeals by the High Courts. In a Second

Appeal, if the High Court is satisfied that the case involves a

substantial question of law, then only, the Court can interfere with

the orders of the Courts below. On perusal of the entire material,