1. This petition raises an interesting point of limitation law applicable to a defaulting member of a chit fund.
2. The plaintiff was a stakeholder who conducted in Madura what is called an auction chit of the usual type. There were 100 chit subscribers who contracted to pay Rs. 20 a month for a period of 50 months from 5th December, 1941. The chit auction was to be held on the 20th day of each Tamil month, the bid commencing from Rs. 1,000. At the eleventh call the defendant who had subscribed only to a half share in the chit bought it for Rs. 343 and executed an instalment bond on 9th October, 1942, for Rs. 390, undertaking to pay future subscriptions as they fell due. The bond contained a clause that if default was made in the case of one instalment the whole sum would become payable with 12 per cent, interest. The defendant paid up to the 15th call but defaulted at the 16th call due on 3rd March, 1943. The plaintiff's case is that subsequent to this the defendant paid only a sum of Rs. 8 on 6th September, 1943. After the expiry of the chit period in 1945 the plaintiff sued to recover on the bond he had executed. The defendant pleaded the bar of limitation. The Subordinate Judge held that the suit was barred by limitation under Article 75 of the Limitation Act and dismissed the suit with costs.
3. There are two articles of limitation applicable to instalment bonds. The first is Article 74 which applies to ' a promissory note or bond payable by instalments.' It prescribes three years in respect of each instalment from the expiry of the respective terms of payment, in other words, three years from the date on which the instalment becomes payable under the bond. Article 75 provides specifically for an instalment bond:
payable by instalments, which provides that if default be made in payment of one or more instalments, the whole shall be due.
4. It prescribes three years from the date:
when the default is made, unless where the payee or oblige waives the benefit of the provision, and then when fresh default is made in respect of which there is no such waiver.
Had the matter been res Integra I should have had no difficulty or hesitation in construing these Articles as they stand. Different opinions have been however taken in decided case-law in which there is no Bench decision of our High Court or any other decision by which I appear to be bound. I shall refer to these decisions presently; but I should like to give my own reasons why the finding of the Subordinate Judge cannot be sustained, that the suit should be held to be governed solely by Article 75.
5. In an instalment bond with a default clause, as it appears to me, there are two covenants independent of each other, one by the debtor to pay monthly a particular sum and the other that if he defaulted and the creditor did not waive the provision of the default clause he was entitled to recover the whole amount due on the bond. It is only in cases where the creditor elects to enforce the default clause and sues to recover the whole sum, as may well happen long before the expiry of the whole instalment period, that Article 75 becomes operative. It prescribes three years from the date of the default provided that a plaintiff has not waived such default. The plea of waiver has, as it appears to me, obviously to be set up by the debtor who is entitled in defence of such a suit to enforce the default clause, to show that the plaintiff has by his conduct or other circumstances in the case condoned or waived the default committed by him. If the defendant succeeds in proving waiver of a particular default, another suit can be filed under Article 75 to enforce the default clause within three years of the next default provided again the defendant cannot establish that this default has been waived. This appears to me to be the ordinary meaning to be attached to Article 75. As I read the two articles together Article 75 is no bar to a suit on the instalment bond itself either after or before the expiry of the instalment period for the recovery of the instalments which the debtor has contracted to pay and which have not become themselves time-barred under Article 74. The two remedies appear to me to be co-existent and open to the creditor and he has his choice either to wait and sue for the instalments in default under Article 74 or to enforce the default clause in a suit contemplated by Article 75. A suit falling under Article 75 may be dismissed on the debtor proving waiver by the creditor of the default which entitles the creditor to file such a suit, in which case the creditor can of course still fall back on his right to sue for instalments within the time limits prescribed by Article 74. He also has the other alternative of suing to enforce the default clause for a subsequent default which he has not waived within the period prescribed by Article 75. I find myself unable reading the two Articles together to accept the contention that because the whole amount becomes payable on default, the creditor must sue on the whole bond within three years of such default. This if taken to a logical conclusion will result in somewhat astonishing anomalies, one exemplified in the present case of a debtor pleading his own default in bar of a suit. Another is that a creditor on such instalment bonds containing a default clause which was inserted for the benefit of the creditor will be left with no option, but to sue within three years for the whole amount in the case of any default, although the instalment period itself may cover 10, 15 or 20 years. Otherwise, the creditor would be exposed in suits after or even before the expiry of the instalment period to a defence by a debtor that he had defaulted in an instalment several years before, and as the plaintiff had not sued within three years to enforce the default clause on the basis of that default he was precluded from enforcing his rights under the bond under Article 75. If this were the legal position it would be disastrous for debtors who under such instalments bond with a default clause will receive no forbearance or mercy from their creditors in the event of any default, which no creditor will under any circumstances waive. It would indeed be regret-able to propound such a legal position at the instance of a defaulting and dishonest debtor such as the defendant undoubtedly is, who having received Rs. 343 from the chit fund now seeks to repudiate liability on this technical bar of limitation.
6. Article 75, to my mind, clearly and specifically lays down the right of the payee or obligee to waive the benefit of the provision, namely, the default clause. The argument is that if he does not do so, he is compelled to sue straightaway on the whole bond and is allowed three years' time from such default. If this view is accepted, limitation will depend on the question of waiver, and we shall have the plaintiff desparately trying to establish that he waived a default by the defendant who will plead to the contrary to invoke Article 75 whereas this Article, as I read it, does not contemplate any such contingency and only entitles the defendant to resist a suit to enforce a default clause on the ground that the plaintiff has waived or condoned that particular default. The view that I have taken on the wide construction of the two Articles as they stand therefore without any reference to decided case-law, which is in conflict, is that the plaintiff has the option of enforcing the default clause in Article 75 and if he does not do so, he must be deemed to have waived the benefit of the provision, and he then can fall back on his ordinary right of suit on the covenant to pay by instalments under Article 74. The view that I have taken is that taken by Mukerji, J., in his dissenting judgment in a Full Bench decision of the Allahabad High Court in Jawahar Lal v. Mathura Prasad I.L.R. (1934) All. 108. The majority opinion of that Bench prevailed which was to the effect that Article 75 only applied to a case of this kind of an instalment bond with a default clause, and that the only suit that could be filed on such a bond after a default was within three years of such default under this Article, unless the default was waived. With the greatest respect to the majority view I find myself in agreement with Mukerji, J., and unable to accept it. The majority view appears to have been based on an obligation on the creditor to show that he waived the benefit of default clause in order to show that his suit more than three years after the default is in time. This seems to be so from the following observation of King, J.:
I think that Article 75 is clearly applicable. This means that limitation began to run from the time when the default was made, unless the creditor is proved to have waived the benefit of the default clause. No waiver is proved.
As I have said supra I find it difficult to read into Article 75 any obligation at all on a creditor to prove waiver in order to bring his suit within time. That is, as it appears to me, only a defence open to the defendant to show that the default on which the suit to enforce the default clause is filed was condoned or waived by the creditor.
7. There is one material difference in the facts in Jawahar Lal v. Mathura Prasad I.L.R. (1934) All. 108 and the present case, namely, that in the former the creditor gave a notice to the debtors on the 21st May, 1928, claiming that on account of the default the whole amount had become due and demanding payment thereof. He filed no suit until 25th July, 1931. In the present case however no such demand was made. The stakeholder kept an account of the monies owed by the subscribers, and also in making up the defendant's account gave credit to some commission due to the defendant under the chit fund rules on the basis that he had committed no default. The ledger, Ex. P. 2, shows credit for Rs. 8 on 6th September, 1943, the only payment which according to the plaintiff the defendant made subsequent to 3rd April, 1943 when he defaulted at the 17th call. A faint attempt was made to rely on this further payment as bringing the plaint filed on 22nd June, 1946, within time on another ground. There are no grounds for doubting the correctness of that credit; nor does that part payment affect the question of limitation either under Article 74 or Article 75 of the Limitation Act.
8. My attention has been drawn to the decision in Gopala Menon v. Abdul Azees (1934) 68 M.L.J. 244, by Madhavan Nair, J., (as he then was) sitting singly in 1934 in which he appeared in agreement with the majority view in Jawahar Lal v. Mathura Prasad I.L.R. (1934) All. 108 and held that Article 75 barred such a suit. In that case the default occurred on 23rd May, 1922, and a suit was filed on 3rd January, 1927. There is direct support in this decision to the view that I have taken about waiver in the following observation:
Obviously according to this article unless waiver by the plaintiff is pleaded by the defendant time will start from the date when the default is made.
It was also observed that no decision directly bearing on the question of waiver was brought to notice, and indeed no such decision on the subject of waiver being pleaded in a suit to enforce a default clause on an instalment bond under Article 75 of the Act has been placed before me. The view I have taken is also in accordance with Gulab Rao v. Ganpati I.L.R. (1943) Nag. 630, a Nagpur decision by Bose, J.
9. I have considered whether it is necessary to place this case before the learned Chief Justice for reference to a Full Bench; but as there appears to be no Bench decision by which I am strictly bound, as the learned advocates before me concede, I think I am entitled to decide this matter in accordance with my own opinion. I accordingly find that in a suit on an instalment bond with a default clause Article 75 will only operate if the plaintiff elects to enforce the default clause which it is always open to him to waive or forego. In such cases his right to recover the instalments as on an ordinary instalment bond within three years prescribed by Article 74 of the Limitation Act remains unaffected. The suit therefore is, in my opinion, not time barred and all instalments recoverable under Article 74 on 22nd June, 1946, the date on which the suit was filed can be recovered.
10. The plaint claimed 33 instalments commencing from that payable on 3rd May, 1943. The suit was filed on 22nd June, 1946, on the day the Sub-Court opened after the recess. All the instalments claimed in the plaint are admittedly due excluding commission and default interest at 12 per cent, to which both advocates agree. On my finding supra plaintiff will have a decree for Rs. 330 with interest at 6 per cent, from the date of suit with costs to the extent plaintiff has succeeded. Petition is allowed in the result with costs.