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N. Shivakumar Deceased by L.R. Vs. Sudarshan Trading Co. Ltd. and anr. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtKarnataka High Court
Decided On
Case NumberC.R.P. No. 3023 of 1979
Judge
Reported inILR1984KAR914
ActsKarnataka Debt Relief Act, 1976 - Sections 2
AppellantN. Shivakumar Deceased by L.R.
RespondentSudarshan Trading Co. Ltd. and anr.
Appellant AdvocateM. Shivappa, Adv.
Respondent AdvocateSyed Nizamuddin, Adv. for Respondent - 1 and 2
DispositionRevision dismissed
Excerpt:
.....connotes only amount given with obligation of repayment -- subscriptions to be paid or paid in chit fund transactions not debts.;the decretal liability arose out of a chit fund transaction against original debtor. in execution l.rs. of original debtor sought relief under debt relief act.;the subscriptions to be paid or paid in a chit fund transaction are only subscriptions and they are not at all debts....the definition of 'debt' requires that when the amount was given, it was given only as a debt. the idea of debt postulates that the amount advanced should be returned back and that there is an obligation attached to pay it back. therefore, if at the time of payment there is no such obligation of repayment, it cannot be considered to be a debt in substance.;(b) karnataka debt..........of which the execution is levied, does not amount to a debt within the meaning of karnataka debt relief act, 1976.2. the decree holder levied execution for the recovery of the amount decreed against the original debtor n shiva kumar, the husband of judgment debtor no. 1 (a) and father of judgment-debtor no. 1 (b) nanjundaswamy. the execution has been levied in order to proceed against the property left by the deceased judgment debtor.3. judgment debtors 1 (a) and 1 (b) contended that they were debtors within the meaning of the karnataka debt relief act, 1976 and thus the decree debt stood wiped out.4. the judgment debtors i (a) and (b) are the people belonging to the 'weaker sections of the people' is not disputed. now the only question that arises for consideration is whether the.....
Judgment:
ORDER

Kulkarni, J.

1. This is a revision by Judgment debtor No. 1 (a) against the order dated 4-10-1978 passed by the Munsiff,Nanjangud, in Execution Case No. 426 of 1975, holding that the amount, for the recovery of which the execution is levied, does not amount to a debt within the meaning of Karnataka Debt Relief Act, 1976.

2. The decree holder levied execution for the recovery of the amount decreed against the original debtor N Shiva kumar, the husband of judgment debtor No. 1 (a) and father of judgment-debtor No. 1 (b) Nanjundaswamy. The execution has been levied in order to proceed against the property left by the deceased judgment debtor.

3. Judgment debtors 1 (a) and 1 (b) contended that they were debtors within the meaning of the Karnataka Debt Relief Act, 1976 and thus the decree debt stood wiped out.

4. The judgment debtors I (a) and (b) are the people belonging to the 'weaker sections of the people' is not disputed. Now the only question that arises for consideration is whether the decretal amount in substance amounts to a debt within the meaning of the Karnataka Debt Relief Act.

5. The decretal liability arises out of a chit fund transaction. The decree holder firm was running a chit. The defendant deceasedjudgment debtor was a member of that chit. He bid the chit in the auction and purchased the same. Exhibits P.1 and P.2 establish that the transaction between the deceasedjudgment debtor and the decree holder was a chit fund transaction. What is a chit fund transaction has been discussed in P. N. Raghavan Pattar & Others. - v. - Arumugham & Another. Chit fund transaction, as1. A.I.R. 1935 Madras 385 held in the Madras case, is not one of borrowing but of sale by auction highest discount, and bond for payment by installment constitutes consideration. A chit fund transaction is different from a loan transaction. It is not a case of borrowing. At the auction the person bidding the highest discount is regarded as the purchaser of the subject of the auction i. e., a present sum of money. The contract is one of sale, the auction purchaser, purchasing the subject matter of the chit immediately by offering the highest discount and a bond for the future payments of installments. These two things together constitute the consideration for the purchase. Similar view was taken in A.I.R. 1977. Madras Notes 60.

6. The learned Counsel Sri Shivappa quoted Narayana Prabhu and Others - v. - Janardhana Mallan and others, He read out to me para 10, which reads as -

'In this context the normal incidents of a Kuri have to be noticed. The Chitty foreman and the subscribers enter into a contract whereby the subscribers oblige themselves to pay subscriptions in statedinstallments and the foreman obliges himself to pay the prized amount when once the chitty is prized by the subscriber at anyinstallment. This obligation of the subscriber arises from the stipulations the contract. Even when he is a prized subscriber he has the same obligation to pay future subscriptions arising not by reason of the fact that he has prized the Kuri but because of the contract entered into by him with the foreman to pay such subscriptions whether the Kuri is prized or not. If he bids the Kuri at anyinstallment and demands the prize money the obligation of the foreman to pay the same also arises under the contract. Future subscriptions paid by the prized subscribers are not in discharge of the liability for the prized amount because the prize amount is received by the subscriber as of right and not as a loan. The liability to pay future subscriptions in terms of the Kuri veriyola is only reinforced by the execution of thesecurity bond by which the prized subscriber agree that, on default, the foreman2.Arunagiri Chit Fund - v. - Mohammed Haneef and others 3. : AIR1974Ker108 may recover the money as against the properties secured also. Quite often the amount of the security bond may bear no relation to the prize amount. The security bond is only for securing future subscriptions. It may not be right to assume that when a prized subscriber executes a security bond it is for repayment of the prize amount, the said amount being treated as a loan advanced by the foreman. It is more appropriate to treat the obligation to pay the futureinstallments as only an obligation arising under the contract of Kuri, with the further fact that by execution of the security bond the properties of the prized subscriber so secured are also made liable on default. In this view, it cannot be said that there is a debt owing from the subscriber to the foreman because of the execution of the security bond. It cannot be said that the prize amount received by him is a debt due from him to the foreman. The debt would arise only as and when theinstallment falls due and remains unpaid. The security is offered to be effective in the event or contingencyof such default being made. If this be the case, then, on the date of Ext. P7 security bond, there was, no debt due from Venkiteswara Mallan to the Lord Krishna Bank. No liability arose thereafter until the date of the sale deed....'

This judgment, in my view, instead of helping the judgment debtor would help the decree holder himself.

7. He then referred me to a decision in Navjeevan Enter prises (Mys) P. Ltd. .In Liqnv. T. N. Ramalingiah & Another. In para No. 14 Chandrakantaraj Urs, J., stated

'I here is yet another reason which comes in the way of the respondents seeking the protection of the K.D.R. Act. More than one High Court has taken the view that the liability of a subscriber to a chit is not a debt. In the case ofMARGADARSI CHIT FUND LTD. V. JOGI KRISHNAMURTHY, (1981) Coy. Cases 399, Andhra Pradesh, the learned Single Judge of the Andhra Pradesh High Court held therein as follows :

The definition of 'debt' in the Andhra Pradesh Agricultural Indebtedness (Relief) Act is an inclusive one. The object is to expand its meaning and field but the expression does not lose its original and natural meaning. There must be, broadly speaking, the relationship of creditor and debtor. In the case of a chit fund transaction the relationship4.1982(2) K.L.J. 88between the stake holder, foreman and the subscriber is not that of a creditor and debtor. A chit fund is an organisation of a number of people who join together and subscribe amounts periodically so that the person or the subscriber who is in need of funds may draw the amount less discount. It is an organisation run on a cooperative basis for the benefit of the subscribers.

The Andhra Pradesh Chit Funds Act, 1971, only regulates the chit fund organisations in the State of Andhra Pradesh and it does not alter or modify the essential nature of a chit transaction. The function of the foreman or stakeholder, by whatever name he is called, under the chit fund scheme is only to organise the chit fund transaction. The money lent to the subscriber in the course of the transaction is not the foreman's money. The relationship that exists between the foreman and thesubscriber is not that of creditor and debtor; consequently, the provisions of the Andhra Pradesh Agricultural Indebtedness (Relief) Act (which provides for abatement of certain debts due from small farmers,agricultural laborers and rural artisans) do not apply to the amounts due from the subscribers to the chit fund organisation.'

The definition of the term 'debt' in the Andhra Act which falls for consideration by the Learned Judge is not very different from the definition of that term in the K.D.R Act and it is as follows :

'(i) 'debt' includes any liability owing to a creditor in cash or in kind, whether secured or unsecured payable under a decree or order of a Civil Court or otherwise and subsisting at the commencement of this Act, but does not include.....'

Therefore, it becomes crystal clear that the subscriptions to be paid or paid in a chit fund transaction are only subscriptions and they are not at all debts.

8. The word 'debt' has been defined in Section 2(b) of the Karnataka Debt Relief Act, 1976.

' 'debt' means any liability in cash or in kind, whether decreed or not and includes any amount which is in substance a debt; but does not include arrears of taxes due to the Central or the State Government or a local authority.'

Therefore, this definition requires that when the amount was given, it was given only as a debt. The idea of a debt postulates that the amount advanced should be returned back and that there is an obligation attached to pay it back. Therefore, if at the time of payment there is no such obligation of repayment, it cannot be considered to be a debt in substance. Further Section 4 of the Act clarifies as to what the legislature intended by the word 'debt'. Section 4 reads -

'Relief from indebtedness. - Notwithstanding anything in any law for the time being in force or in any contract or instrument having force by virtue of any such law and save as otherwise expressly provided in this Act, with effect from the date of commencement of this section, -

(a) every debt advanced before the commencement of this Section including the amount of interest, if any, payable by the debtor to the creditor shall be deemed to be wholly discharged.'

Therefore, the specific use of the word 'advanced' in Section 4 clearly goes to show that at the time when the amount was given it was advanced only as a debt.

9. A similar matter came up for consideration in Ganesh Bisto Desai - v. - Nagesh Bisto Desai. The Division Bench of this Court held -

'To be entitled to relief under the Act, the claimants must show that two conditions coalesce. The first is that they must show that they are debtors by the statutory standards. Secondly they must show that the transaction respecting which they claim relief is and the liability the discharge of which they seek arises out of a 'debt advanced'. These two conditions must co exist.'

If the transaction in question, when it took place, did not assume the character of a debt at all, it cannot become a debt subsequently. The use of the word 'advanced' makes it clear that it must be a debt at the time when the amount was advanced. If it is not so, then it cannot be considered5. 1977 (2) K.L..J. 476 to be a debt at all. Therefore, the amount in question, which is in substance the result of a chit fund transaction, will not partake the character of a debt within the meaning of the Karnataka Debt Relief Act, 1976.

10. The Learned Counsel Sri Shivappa then urged that it was for the first time in the year 1980 that the legislature excepted the chit fund transactions from the operation of the Debt Relief Act. Merely because the 1980 Act excepted the chit fund transactions from the operation of the Act, it does not mean that the Chit fund transactions embraced the character of a debt within the meaning of the Karnataka Debt Relief Act, 1976. Perhaps in 1980 Act, for the purpose of clarification, chit fund transaction might have been enumerated as one of the excepted debts. But that does not mean that the legislature intended even in the 1976 Act that the chit fund transaction should be considered as a debt transaction within the meaning of the Karnataka Debt Relief Act, 1976. Therefore, the Court below rightly held that the decretal amount did not amount to a debt within the meaning of the Karnataka Debt Relief Act, 1976.

11. How another question that would arise in this case is whether the legal representatives of the original debtor can claim the benefit of the Karnataka Debt Relief Act. The person entitled to a relief from indebtedness is governed by section 4. Section 4(a) of the Act reads as -

'Every debt advanced before the commencement of this Section including the amount of interest, if any, payable by the debtor to the creditor shall be deemed to be wholly discharged.'

The decree was passed against the original defendant Shiva kumar. In the execution, his wife and son have been brought on record as his legal representatives and they have been proceeded against only to the extent of' the property of the deceased that has come into their hands. Therefore, there is no personal liability cast on the legal representatives of the original defendant to pay the amount. It is only the property of the deceased that has come into their hands, that is being proceeded against for the recovery of the amount. Therefore, it cannot be said that it is an amount payable by the L.Rs. to the creditor. It is only an amount payable out of the property of the deceased defendant, which has come into the hands of the legal representatives. It has been held by this Court in Ramegowda - v. - Sarojamma, that it is not open to the legal representatives of the original borrower to take shelter under the provisions of the Karnataka Debt Relief Act. Therefore, the legal representatives of the deceased defendant, against whom the decree was passed, cannot claim the relief under the Karnataka Debt Relief Act.

12. Looked at from any point of view, the legal representatives of the deceased defendant are not at all entitled to claim the benefit of the Karnataka Debt Relief Act.

13. In the result, there is no substance in the revision and it is dismissed.


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