Gannaboina Sridhar vs Hima Chit Fund Pvt. Ltd., Through ...
2023 Latest Caselaw 3033 Tel

     THE HONOURABLE SMT. JUSTICE P.SREE SUDHA

              SECOND APPEAL No.1110 of 2004

JUDGMENT:

This appeal is filed against the Judgment and decree

dated 07.07.2003 in A.S.No.102 of 1998 passed by the learned

V - Additional District Judge, Warangal, in which the Judgment

and decree dated 04.09.1998 in O.S.No.386 of 1995 passed by

the learned II - Additional Junior Civil Judge, Warangal, was

confirmed.

2. The suit in O.S.No.386 of 1995 was filed by the

respondent No.1/plaintiff against the appellant herein and

respondents No.2 to 4 for recovery of Rs.25,000/- with interest

@ 12% per annum. The trial Court after considering the

arguments of both sides decreed the suit in favour of the

respondent No.1/plaintiff. Aggrieved by the said Judgment,

defendant No.1 therein preferred an appeal before the first

appellate Court and the same was dismissed by confirming the

Judgment of the trial Court. Aggrieved by the concurrent

findings of both the Courts, defendant No.1 preferred the

present second appeal and raised the following substantial

questions of law.

i) Whether the courts below were right in holding that the chit will not become illegal if it run without permission of Registrar of Chits. As per the section 4 of Chit Funds Act, 1982 no chit shall be commenced or conducted without obtaining any previous sanction of the Government and said sanction shall lapse if the chit is not registered within 12 months from the date of such sanction. The finding given by the courts below stating that registration is not necessary to become the chit legal is contrary to the provisions of Chit Funds Act, 1982.

ii) Whether the courts below were justified in not following the Section 4, 5 and other provisions of Chit Funds Act while giving finding whether the chit is legal or illegal.

iii) Whether the courts below are right in decreeing the suit without following the section 4, 5 and other provisions of the Chit Fund Act since the chit fund by the respondent No.1/plaintiff was not registered one and no sanction was obtained from the Government.

3. The parties herein are referred as plaintiff and defendants

as arrayed in the trial Court for the sake of convenience.

4. The brief averments of the plaintiff in the suit are that it

was a registered chit fund company and defendant No.1 was

joined as a member of the chit fund scheme and subscribed to a

chit of Rs.1,00,000/- @ Rs.4,000/- per month payable for 25

months and became successful bidder in the auction and

agreed to forego Rs.35,000/-. He received the prize amount and

later defaulted to pay the future installments and hence

defendant No1 and defendants No.2 to 4 as guarantors are

liable to pay the suit amount with interest and costs.

5. Defendants No.1 to 3 filed the written statement

disputing all the averments made by the plaintiff in the plaint.

They also disputed the participation of defendant No.1 in the

auction and agreed to forego Rs.35,000/- and receive the said

amount and that he paid Rs.8,000/- and is liable to pay

Rs.92,000/-. They further stated that plaintiff has not registered

its chit with Registrar of Chits, as such the chit fund business

itself was illegal. They never executed agreement of guarantee

and pronote as collateral security either on 18.08.1993,

10.01.1995 or on 31.05.1995 and that the entire suit itself was

fictitious and was liable to be dismissed.

6. The recovery assistant of the plaintiff company was

examined as P.W.1 and marked Exs.A1 to A8 through him on

behalf of the plaintiff. Defendants got examined Registrar of

Chits as D.W.1 and also got examined defendant No.1 as D.W1

and marked Exs.B1 on their behalf.

7. P.W.1 in his evidence stated that from 06.06.1993,

defendants joined their firm and was allotted a ticket No.63A12

for the chit value of Rs.1,00,000/- payable in 25 installments @

Rs.4,000/- per month. The chit agreement was executed on

26.03.1993 which was marked under Ex.A1 and on being

successful bidder defendant No.1 agreed to forego Rs.35,000/-

and furnished the guarantors and Ex.A2 was the agreement of

guarantee. Ex.A3 was the promissory note executed by the

defendant No.1 along with defendants No.3 and 4. Ex.A4 was

the cash voucher, Ex.A5 was the office copy of the legal notice

issued to the defendants, Exs.A6 and A7 were the postal

acknowledgments and Ex.A8 was the returned postal cover of

the defendant No.3. He further stated that defendants have to

pay Rs.25,000/- as on the date of filing the suit. In his

Cross-examination he stated that signatures of all the members

were obtained by the Managing Director while introducing them

as subscribers. He admitted that the total amount of the chit

has to be deposited with the Registrar of Chits and the chit

becomes illegal, if no permission was obtained from the

Registrar of Chits. He also stated that by Law No.48/93-94

envisages the amount foregone by each member was deducted

on the payment of the chit amount. He denied the suggestion

that defendant No.1 was not the successful bidder of the chit

amount and defendants No.2 to 4 were not the sureties.

8. The trial Court held that though the defendant No.1

denied his signature on the exhibits filed by the plaintiff, he has

admitted his signatures on the summons sent by the Court. The

trial Court held that he also denied his signature even on the

petitions filed by him and also on the affidavit in I.A.No.496 of

1997, this clearly shows the evasive attitude of the defendants

to avoid payment of the chit amount. It was also held that on

comparison of signatures of the defendant No.1 on the petitions

with that of the signatures on exhibits, any prudent man can

come to the conclusion that signatures belong to the same

person and thus Exs.A1 to A8 proved the liability of the

defendant No.1 in paying the suit amount.

9. The main argument of the appellant/defendant No.1 is

that the chit was not registered with the Registrar of Chits, but

the trial Court clearly held that no suggestion was made by the

defence Counsel that no such permission was given by the

Registrar, as such chit would become illegal. Though the

defendants in the suit contended that chit itself was illegal due

to rejection of permission of the Registrar of Chits, they have not

filed the copy of the rejection. They contended that it is for the

plaintiff to prove that it was validly registered with the Registrar

of Chits. In fact, defendant No.1 became the subscriber for a

chit of Rs.1,00,000/- and executed the chit agreement on

26.03.1993 and also executed a promissory note marked under

Ex.A3, but only at the time of filing the written statement, he

came up with the plea that chit was not registered with the

Registrar of Chits and he has not given any suggestion to the

plaintiff to prove that effect. Defendant No.1 was a chit

subscriber and he was the successful bidder, he paid

considerable amount towards installment and committed

default only for Rs.25,000/- as on 10.01.1995. Defendants also

contended that P.W.1 was not authorized to depose on behalf of

the plaintiff company.

10. Admittedly, defendant No.1 was the subscriber of

Rs.1,00,000/- chit, but defaulted an amount of Rs.25,000/-, as

such plaintiff filed the suit for recovery of the said amount with

interest and costs. It was also clearly stated that he was

participated in the bid and forgone an amount of Rs.35,000/-

and received the prize amount. Plaintiff filed Exs.A1 to A4 to

substantiate their version, but defendants filed only Ex.B1 i.e.,

by laws of the plaintiff company. The trial Court and the first

appellate Court has not considered the defence of the

defendants as they have not given any suggestion to P.W.1 that

no such permission was given by the Registrar of chits. Plaintiff

in the suit itself stated that it was a registered chit fund

company and he discharged his burden. Now, the onus shifts

on to the defendants to prove that permission was rejected to

the plaintiff company by filing the document, but they failed to

do so. Mere allegation that Chit Fund Company was not

registered with the Registrar of chits and it was illegal is not

sufficient to establish the defence of the defendants. The trial

Court also held that defendant No.1 denied his admitted

signatures in the petitions and in the affidavit and it clearly

shows his evasive attitude to evade chit fund amount and

accordingly decreed the suit with a direction to the defendants

to pay the amount. It was also held that suit was decreed

against the defendants No.1 to 3 as the case against defendant

No.4 was dismissed as default. The trial Court granted interest

@ 12% on the principal amount of Rs.24,000/- from the date of

suit i.e., from 20.06.1995 till the date of realization. Even the

first appellate Court held that the interest @12% is permissible

under the Chit Funds Act and accordingly confirmed the

Judgment of the trial Court. In spite of answering the questions

advanced, in detail by the trial Courts, the appellant herein

raised the same questions as substantial questions of law before

the present appeal and in fact he filed this appeal only to drag

on the proceedings. Therefore, this Court finds that the present

appeal is devoid of merits and is liable to be dismissed with

costs.

11. In the result, the second appeal is dismissed with costs,

confirming the Judgment and decree dated 07.07.2003 in

A.S.No.102 of 1998 passed by the first appellate Court and also

the Judgment and dated 04.09.1998 in O.S.No.386 of 1995

passed by the trial Court.

Miscellaneous petitions pending, if any, shall stand

closed.

_________________________ JUSTICE P.SREE SUDHA

DATE:10.10.2023 tri

THE HONOURABLE SMT. JUSTICE P.SREE SUDHA

SECOND APPEAL No.1110 of 2004

DATE: 10.10.2023

TRI