Telangana High Court

Bethi Sagar Reddy vs Kapil Chits Kakatiya Private Ltd. on 12 July, 2024

Author: K. Lakshman

Bench: K.Lakshman

     THE HONOURABLE SRI JUSTICE K.LAKSHMAN

        CIVIL REVISION PETITION No.1552 OF 2024

ORDER:

Heard Sri Gudi Madhusudhan Reddy, learned counsel for the

petitioner and Sri K.P.Vijay Kumar, learned counsel appearing for

the 1st respondent/Chit Fund Company.

2. Perusal of the record would reveal that 2nd respondent is the

subscriber of the subject chit with 1st respondent. He has participated

in the auction on 31.10.2017 and become successful bidder.

Respondents 3 to 7 stood as guarantors who are jointly and severally

liable to pay the chit amount, if 2nd respondent fails to pay the same.

According to the 1st respondent, 2nd respondent being the subscriber

of the chit, failed to pay the said amount. Therefore, they have filed

an application vide Arb.No.386 of 2021 under Section 64 of the Chit

Fund Act, 1982. The Chit Arbitrator/Deputy Registrar of Chits,

passed an Award dated 24.08.2023 fixing liability on the

respondents 2 to 7 and the petitioner jointly and severally for

recovery of an amount of Rs.15,49,494/- with interest at 18% p.a. on

the principal amount of Rs.11,98,505/-. According to the 1st

respondent, they have not paid the said amount. Therefore, it has

filed execution petition vide E.P.No.71 of 2024. Vide order dated

20.04.2024, the Executing Court/learned IV Additional Junior Civil

Judge, Karimnagar issued Form No.8 warrant of attachment of

movable property.

3. Challenging the same, the petitioner/J.Dr. has filed present

revision on the following three grounds, 1) Along with the said E.P.,

1st respondent failed to file certified copy of the certificate issued by

Chit Arbitrator/Deputy Registrar of Chits. 2) The said award was

passed without putting the petitioner on notice. 3) The Executing

Court issued Form No.8 warrant of attachment against all the J.Drs.

for recovery of an amount of Rs.16,51,720/- each which is illegal

and contrary to the provisions of the Contract Act.

4. It is further submitted that during pendency of the present

CRP, 1st respondent has recovered the amount of Rs.37,50,000/-

from J.Drs. According to the learned counsel for the petitioner, 2nd

respondent has paid an amount of Rs.22 lakhs before filing of the

EP. Without considering the said aspects, Executing Court has

issued the impugned warrant of attachment.

5. According to the learned counsel for the 1st respondent,

executing Court issued warrant of attachment in Form No.8 in

accordance with law.

6. Thus, there is no dispute with regard to the fact that 2nd

respondent is subscriber, respondents 2 to 7 and the petitioner are the

guarantors. 1st respondent has filed an application under Section 64

of the Chit Fund Act, 1994 before the Chit Arbitrator/the Deputy

Registrar of Chits who in turn passed an award dated 24.08.2023.

There is no challenge to the said award. 1st respondent has filed E.P.

No.71 of 2024 before the learned Junior Civil Judge, Karimnagar for

execution of the said award and for recovery of an amount of

Rs.16,51,714/- from J.Dr.Nos.1 to 7 including the petitioner herein.

On filing of such application, learned executing Court issued

impugned warrant of attachment for recovery of an amount of

Rs.16,51,714/- each from the petitioner and other J.Drs.

7. It is relevant to note that this Court vide order dated

03.05.2024 in CRP No.1237 of 2024 considered the said aspects and

set aside the impugned order dated 02.01.2024 in E.P.No.13 of 2022

in Arb.No.71 of 2021 and remanded the matter back to the executing

Court and the relevant paragraphs of the said order are as follows:-

"7. It is relevant to note that Section - 36 of the Arbitration and Conciliation Act, 1996 deals with 'enforcement of award' and the same is relevant for the purpose of considering the lis in the present revisions and it is extracted below:

"Section 36:-Enforcement. --Where the time for making an application to set aside the arbitral Award under section 34 has expired, or such application having been made, it has been refused, the award shall be enforced under the Code of Civil Procedure, 1908 (5 of 1908) in the same manner as if it were a decree of the Court.

(2) Where an application to set aside the arbitral award has been filed in the Court under section 34, the filing of such an application shall not by itself render that award unenforceable, unless the Court grants an order of stay of the operation of the said arbitral award in accordance with the provisions of sub-

section (3), on a separate application made for that purpose.

(3) Upon filing of an application under sub-section (2) for stay of the operation of the arbitral award, the Court may, subject to such conditions as it may deem fit, grant stay of the operation of such award for reasons to be recorded in writing:

Provided that the Court shall, while considering the application for grant of stay in the case of an arbitral award for payment of money, have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure, 1908 (5 of 1908)."

8. It is also relevant to extract Order - XXI, Rules - 11 (2), 48 and 48A of the CPC and the same are as under:

"XXI Rule 11 (2) of CPC-Written application- Save as otherwise provided by sub-rule(1), every application for the execution of a decree shall be in writing, signed and verified by the applicant or by some other person proved to the satisfaction of the Court to be acquainted with the facts of the case, and shall contain in a tabular form the following particulars, namely-

(a) the number of the suit;

(b) the names of the parties;

(c) the date of the decree;

(d) whether any appeal has been preferred from the decree;

(e) whether any, and (if any) what, payment or other adjustment of the matter in controversy has been made between the parties subsequently to the decree;

(f) whether any, and (if any) what, previous applications have been made for the execution of the decree, the dates of such applications and their results;

(g) the amount with interest (if any) due upon the decree, or other relief granted thereby, together with particulars of any cross-decree, whether passed before or after the date of the decree sought to be executed;

(h) the amount of the costs (if any) awarded;

(i) the name of the person against whom execution of the decree is sought; and

(j) the mode in which the assistance of the Court is required whether-

(i) by the delivery of any property specifically decreed;

(ii) by the attachment, or by the attachment and sale, or by the sale without attachment, of any property;

(iii) by the arrest and detention in prison of any person;

(iv) by the appointment of a receiver;

(v) otherwise, as the nature of the relief granted may require."

"Order XXI Rule 48 of CPC-Attachment of salary or allowances of servant of the Government or railway company or local authority.- (1) Where the property to be attached is the salary or allowances of a servant of the Government or of a servant of a railway company or local authority or of a servant of a corporation engaged in any trade or industry which is established by a Central, Provincial or State Act, or a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956)] the Court, whether the judgment-debtor or the disbursing officer is or is not within the local limits of the Court's jurisdiction, may order that the amount shall, subject to the provisions of section 60, be withheld from such salary or allowances either in one payment or by monthly instalments as the Court may direct; and upon notice of the order to such officer as the appropriate Government may by notification in the Official Gazette appoint in this behalf,-

(a) where such salary or allowances are to be disbursed within the local limits to which this Code for the time being extends, the officer or other person whose duty it is to disburse the same shall withhold and remit to the Court the amount due under the order, or the monthly instalments, as the case may be;

(b) where such salary or allowances are to be disbursed beyond the said limits, the officer or other person within those limits

whose duty it is to instruct the disbursing authority regarding the amount of the salary or allowances to be disbursed shall remit to the Court the amount due under the order, or the monthly instalments, as the case may be, and shall direct the disbursing authority to reduce the aggregate of the amounts from time to time, to be disbursed by the aggregate of the amounts from time to time remitted to the Court.

(2) Where the attachable proportion of such salary or allowances is already being withheld and remitted to a Court in pursuance of a previous and unsatisfied order of attachment, the officer appointed by the appropriate Government in this behalf shall forthwith return the subsequent order to the Court issuing it with a full statement of all the particulars of the existing attachment.

(3) Every order made under this rule, unless it is returned in accordance with the provisions of sub-rule (2) shall, without further notice or other process, bind the appropriate Government or the railway company or local authority or corporation of Government company, as the case may be, while the judgment-debtor is within the local limits to which this Code for the time being extends and while he is beyond those limits, if he is in receipt of any salary or allowances payable out of the Consolidated Fund of India or the Consolidated Fund of the State or the funds of a railway company or local authority or corporation or Government company in India; and the appropriate Government or the railway company or local authority or corporation or Government company, as the case may be, shall be liable for any sum paid in contravention of this rule.

Explanation.-In this rule, "appropriate Government" means,-

(i) As respects any person in the service of the Central Government, or any servant of a railway administration or of a cantonment authority or of the port authority of a major port, or any servant of a corporation engaged in any trade or industry which is established by

a Central Act, or any servant of a Government company in which any part of the share capital is held by the Central Government or by more than one State Governments or partly by the Central Government and partly by one or more State Governments, the Central Government;

(ii) As respects any other servant of the Government, or a servant of any other local or other authority, or any servant of a corporation engaged in any trade or industry which is established by a Provincial or State act, or a servant of any other Government company, the State Government."

"Order - XXI, Rule - 48A. Attachment of salary or allowances of private employees.- (1) Where the property to be attached is the salary or allowances of an employee other than an employee to whom rule 48 applies, the Court, where the disbursing officer of the employee is within the local limits of the Court's jurisdiction, may order than the amount shall, subject to the provision of section 60, be withheld from such salary or allowances either in one payment or by monthly instalments as the Court may direct; and upon notice of the order to such disbursing officer, such disbursing officer shall remit to the court the amount due under the order, or the monthly instalments, as the case may be.

(2) Where the attachable portion of such salary or allowances is already being withheld or remitted to the Court in pursuance of a previous and unsatisfied order of attachment, the disbursing officer shall forthwith return the subsequent order to the Court issuing it with a full statement of all the particulars of the existing attachment.

(3) Every order made under this rule, unless it is returned in accordance with the provisions of sub-rule (2), shall, without further notice or other process, hind the employer while the judgment-

debtors, is within the local limits to which this Code for the time

being extends and while he is beyond those-limits, if he is in receipt of salary or allowances payable out of the funds of an employer in any part of India, and the employer shall be liable for any sum paid in contravention of this rule."

9. It is also relevant to extract Section - 71 of the Chit Fund Act, 1982 and the same is as under:

"71. Money how recovered.--Every order passed by the Registrar or the nominee under section 68 or section 69 and every order passed by the State Government in appeal under section 70 for payment of any money shall, if not carried out,--

(a) on a certificate issued by the Registrar, be deemed to be a decree of a Civil Court, and shall be executed in the same manner as a decree of such Court, or

(b) be executed in accordance with the provisions of any law for the time being in force for the recovery of amounts as arrears of land revenue: Provided that no application for execution under clause (b) shall be made after the expiry of three years from the date fixed in the order, and if no such date is fixed, from the date of the order."

10. It is also relevant to extract Sections - 126, 128 and 146 of the Indian Contract Act, 1872 and the same is as under:

"126. "Contract of guarantee", "surety", "principal debtor" and "creditor".--A "contract of guarantee" is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the "surety"; the person in respect of whose default the guarantee is given is called the "principal debtor", and the person to whom the guarantee is given is called the "creditor". A guarantee may be either oral or written."

"128. Surety's liability.--The liability of the surety is co- extensive with that of the principal debtor, unless it is otherwise provided by the contract."

"146. Co-sureties liable to contribute equally.--Where two or more persons are co-sureties for the same debt or duty, either jointly or severally, and whether under the same or different contracts, and whether with or without the knowledge of each other, the co- sureties, in the absence of any contract to the contrary, are liable, as between themselves, to pay each an equal share of the whole debt, or of that part of it which remains unpaid by the principal debtor."

11. Thus, the liability of the co-surety is co-extensive with that of principal debtor unless it is otherwise provided by the contract. The said principle was also laid down by a Division Bench of the High Court of Judicature for the States of Telangana and Andhra Pradesh at Hyderabad in Punyamurthula Venkata Viswa Sundara Rao v. M/s. Margadarsi Chit Fund Pvt. Ltd. 1.

12. The aforesaid relevant provisions would reveal that for realization of the amount covered under the arbitration award, respondent No.1 - decree holder has to file an application under Section

- 36 of the Arbitration and Conciliation Act, 1996, and Order - XXI Rule 11 (2) of CPC. Accordingly, respondent No.1 had filed the aforesaid execution petition vide E.P.No.13 of 2022.

13. In Punyamurthula Venkata Viswa Sundara Rao1, the Division Bench on consideration of the arguments advanced by the parties, framed the following two (02) points for consideration:

. 2017 (3) ALT 82 (D.B.)

i. whether the decree holder has to proceed against all the judgment debtors, who are guarantors, by claiming proportionate amount decreed.

ii. whether the execution Courts in which E.Ps. were filed against the present judgment debtors, who are revision petitions herein, have jurisdiction to entertain the execution petitions.

14. On consideration of the provisions of the Chit Fund Act and the CPC, the Division Bench held that the course that has to be followed by the decree holder is to make an application to the Registrar for execution, to be forwarded to the proper authority at the option of the decree holder and the Registrar shall himself issue the certificate and forward the said application to the Court or revenue authority, as chosen by the decree holder. The decree holder has an option to proceed against either the principal debtor or any of the guarantors or against all of them. Referring to Section - 128 of the Indian Contract Act, the Division Bench held that the liability of a surety is co-extensive with that of the principal debtor unless it is otherwise provided by the contract.

15. In Madamanchi Anill Kumar v. Margadarshi Chit Fund Pvt. Limited, 2 Division Bench of the High Court of Andhra Pradesh at Hyderabad considering the said principle laid down by the Division Bench in Punyamurthula Venkata Viswa Sundara Rao1, held that the liability of the sureties is joint and several. The Division Bench also negatived the contention raised by the petitioner therein that a Recovery Certificate issued by the Deputy Registrar of Chits cannot be acted upon,

. C.R.P. NO.2338 of 2018, decided on 05.11.2018

as per Rule - 55 of the Andhra Pradesh Chit Fund Rules, 2008 and that an execution is maintainable only if the recovery certificate has been issued by the Registrar of Chits to the competent Civil Court.

16. On consideration of the aforesaid provisions and on examination of the facts of the case therein, in Prattipati Srinivasa Rao v. M/s. Shriram City Union Finance Limited 3, this Court held that respondent No.1 - decree-holder cannot recover double the awarded amount from the petitioners - judgment debtors, and it is entitled for the decretal amount and interest as claimed by it from the judgment debtors."

8. The facts of the present case are squarely covered by the

said order. 1st respondent cannot file Execution Petition seeking

recovery of an amount of Rs.16,51,720/- each from the J.Drs. and

executing Court without considering the said aspects issued

impugned attachment order. Therefore, the impugned attachment

order in Form No.8, dated 30.04.2024 issued by the Executing Court

is liable to be set aside.

9. As discussed supra, as per the award, 1st respondent being the

Chit Fund Company is entitled for recovery of an amount of

Rs.15,43,494/- along with interest at 18% p.a. i.e. decretal amount.

. Common Order in CRP Nos.133 & 151 of 2023, decided on 02.03.2023

10. In the light of the aforesaid discussion, the Civil Revision