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Jannet Chit Funds Pvt. Ltd. (In Liqn), Madras Vs. M.N. Ethirajan and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtChennai High Court
Decided On
Case NumberC.R.P. No. 551 of 1978
Judge
Reported inAIR1982Mad133
ActsTamil Nadu Chit Funds Act, 1961 - Sections 25(2)
AppellantJannet Chit Funds Pvt. Ltd. (In Liqn), Madras
RespondentM.N. Ethirajan and ors.
Advocates:K. Krishnamurthi, Adv.
Excerpt:
tamil nadu chit funds act (xxiv of 1961), section 25(2)--promissory note executed by a chit subscriber which does not mention about the chit transaction can be brought under the proviso to section 25(2)--no decree can be passed on such promissory note.; the petitioner, a chit fund company, had gone into liquidation. the official liquidator brought a suit against the subscriber and the two sureties, as the prized subscriber defaulted in making payment of future subscriptions. the official liquidator sought to recover from him the entire amount due under the promissory note executed by the subscriber. the subscriber raised the plea that as the chit company had gone into liquidation he was not under the slightest obligation to pay the future subscriptions. on the footing of the proviso to..........by a limited company which had since gone into liquidation. the official liquidator of the chit fund company in liquidation had brought a suit against three defendants. the first defendant was a subscriber to the chit. the two other defendants were sureties. the first defendant bid at the auction and he became a prized subscriber. he however, defaulted in the payment of the future subscriptions. meanwhile, the company went into liquidation. although the first defendant had defaulted in making payment of future subscriptions, the official liquidator sought to recover from him the entire money due under the promissory note executed by the subscriber. the promissory note was for a sum of rs. 1000 with interest at the rate of 12 per cent per annum. it was executed on 15-3-1971 a week.....
Judgment:
1. This revision is from a decision of a New Trial Bench of the Court of Small Causes, Madras, arising out of a suit based on a chit transaction. The chit in question was conducted by a limited company which had since gone into liquidation. The Official Liquidator of the chit fund company in liquidation had brought a suit against three defendants. The first defendant was a subscriber to the chit. The two other defendants were sureties. The first defendant bid at the auction and he became a prized subscriber. He however, defaulted in the payment of the future subscriptions. Meanwhile, the company went into liquidation. Although the first defendant had defaulted in making payment of future subscriptions, the Official Liquidator sought to recover from him the entire money due under the promissory note executed by the subscriber. The promissory note was for a sum of Rs. 1000 with interest at the rate of 12 per cent per annum. It was executed on 15-3-1971 a week after he had bidden at the auction for a discount of Rs. 610 in a chit of Rs. 1000/-. He received the balance of Rs. 390, but nevertheless executed the Promissory note for Rs. 1000, apparently as security. After the chit fund company went into liquidation, the Official Liquidator issued notice to the, first defendant as a defaulting subscriber, calling upon him to pay the amount due under the Promissory note. Since no amount was paid in response to that notice, the Official Liquidator brought the suit against the first defendant as well as the sureties,

2. The defence was that since the company had gone into liquidation, the subscriber was not under the slightest obligation to pay any future, subscription The suit, however, was disposed of not on this point, but on a point of law, which was spelled out at the trial on the footing of the proviso to Section 25 (2 of the Tamil Nadu Chit Funds Act 1961. Both the trial court and the New Trial Bench of the Court of Small Causes, Madras, upheld the contention that the chit fund company in liquidation was riot entitled to any decree on the basis of the frame of the suit. On this basis, they dismissed the suit. In this revision, the validity of the dismissal of the suit for the reasons stated is being canvassed by the chit fund company in liquidation.

3. The argument of the learned counsel for the chit fund company is that there was no justification for the courts below to place reliance on the proviso to Section 25 (2) of the Act, when there was an admission by the first defendant that the promissory note executed by him on the basis of which the suit had been instituted, was only in respect of the chit fund transaction and for no other liability. The complaint of the learned counsel is that this point had not been fairly considered by the courts below.

4. For appreciating this argument, it would be necessary to refer to the relevant statutory provisions. The Tamil Nadu Chit Funds Act 1961, was enacted for regulation of chit funds in the State. The Act contained provisions governing the liability of subscribers to the chit, both prized subscribers and non-prize subscribers. As for prized subscribers, Section 24 of the Act clearly provided that every one of them shall pay his subscription regularly at the time and place and on the date mentioned in the chit agreement, and, on his failure to do so, he shall be liable to make a consolidated payment of all the future subscriptions at once. The intendment of this provision is that a default, even as to one subscription, would entail the obligation to make a consolidated payment of his entire liability as a subscriber including all the future subscriptions, all at one lump. S. 25 (1) of the Act provides that the foreman of the chit fund has to make a demand in writing to the defaulting prized subscriber calling upon him to make a consolidated payment of the future subscriptions. The provision further lays down that in the absence of any such demand in writing, the foreman shall not be entitled to claim a consolidated payment of all the future subscriptions from a defaulting prized subscriber.

5. Sub-section (2) of Section 25 lays down the manner in which a suit by a foremen against a defaulting subscriber should be dealt with where the claim in the suit is for payment of a consolidated amount of all the future subscriptions. There are two parts in this sub-section (2). One is the enacting part and the other its proviso. The enacting part provides how a decree is to be passed in a suit for realization of the consolidated future subscriptions from a defaulting prized subscriber especially where the defendant pays into court the arrears of subscription till that date together with interest thereon. The Legislature, in brief, provided that in such a case the decree to be passed by the court would be in such a form as to enable the foreman of the chit fund to execute the decree as against the defaulting subscriber with reference to all the future subscriptions, less the amount already deposited by him into court. It is in this background that the proviso, which the Legislature has put in Section 25 (2) of the Act, has got to be understood. The Proviso is by way of an exception to the decree which a court can pass as against a defaulting prized subscriber. The proviso says that where the foreman brings a suit against a defaulting prized subscriber for a consolidated payment of future subscriptions and that suit is based upon a promissory note executed by the defaulting subscriber, then unless the Promissory note on which the suit is based itself mentions that the amount due under the promissory note is towards payment of subscriptions to the chit, then no decree at all can be passed in a suit based on such promissory note. The Proviso, in short, stipulates that even though the suit may be for unrealized subscriptions by a defaulting prized subscriber, the suit shall fail if it is based upon a promissory note and that promissory note does not mention that it is being executed by the subscriber in respect of his subscriptions under a chit.

6. The matter, therefore, entirely turns upon the construction of the promissory note on the basis of which the present suit had been brought. The promissory note has been marked at the trial as Ex. P. I. The document is signed by the first defendant and countersigned underneath by defendants 2 and 3 as guarantors. The operative part of the promissory note is as follows-

"On demand ....... do here by promise to pay M/s. Jannet Chit Fund Pvt. Ltd, or order the sum of Rs. 1000 (Rs. One thousand only) with interest at 12% (twelve per cent) per annum for value received this 15th day of March 1971."

It does not need any, effort of the mind to find that this promissory note does not mention a single word about the chit transaction. It is clear, therefore, that this promissory note must be brought within the mischief of the proviso to Section 25 (2). If it is so, it follows as a necessary corollary that the suit must fail.

7. Learned counsel for the Official Liquidator submitted that although the promissory note is not explicit about the subject-matter of the liability being the subscriptions payable by the promissory under a chit fund, there is no controversy, and there can, indeed be no controversy, that it was, in Point of fact, executed on the first defendant only in respect of the chit and the liabilities undertaken by the first defendant as subscriber to the chit. I quite agree that on the evidence aliunde, the learned counsel is quite justified in this submission. But, what the proviso to Sec. 25(2) stipulates is that the promissory note itself must, in so many words expressly say that the promise under the promissory note is towards payment of - subscriptions to a chit. It might be very hard on the Official Liquidator or any chit fund or foreman of chit fund similarly placed to be defeated in a suit claim merely because the promissory note is not strictly in accordance with the requirements of the proviso to Section 25 (2) of the Act. But the courts have got to administer this statute as they find it. They cannot go behind the provisions and to adjust liabilities of suitors according to their whims. The result is, there is no way by which, on, the facts of the present case and on the terms of the promissory note, the plaintiff can escape being non-suited.

8. As I earlier indicated no plea based on the proviso to Section 25 (2) was, in terms put forward by any of the defendants at the trial. This is one of the grounds on which the Official Liquidator has come by way of revision to this court. If it were an ordinary kind of suit which has to be decided on the basis of the pleadings, there might be substance in the learned counsel's objection that the issues must arise at the trial. What the courts have been required to do under the Chit Funds Act, however, is not merely to adjudicate on the civil suit, but also to administer the statute, which as I had earlier Pointed out, was passed by the Legislature with the avowed intention of regulation of chit funds in the State. As one of the law enforcing agencies of the State, it is the duty of the court to apply the provisions of the statute. The court cannot shirk this responsibility leaning, merely, on the technicality of trial procedure. Besides, for deciding about the maintainability of a suit under the proviso to Section 25 (2) of the Act, no issue of fact need at all be raised. For all that the proviso demands, by way of scrutiny, is to go into the terms of the promissory note and find out whether it expressly contains a reference to the amount due under the promissory note as being towards the payments of chit subscriptions. In other words, what the proviso involves is an inquiry into a question of construction of a document, which cannot be regarded as a question of fact and which does not require to be considered on the basis of a hearing of evidence. In this sense, therefore the fact that no specific plea has been raised in defence based on S. 25 (2) proviso does not put the plaintiff at all to any disadvantage particularly since it was the plaintiff who had Put the promissory note into the record as the very basis of the suit. In these circumstances, I do not think that I should make much of the fact that the defendants did not raise, in express terms, a plea invoking the proviso to Section 25 (2) of the Act. In my judgment both the courts below were quite within their competence in testing the maintainability of the suit on the touchstone of the proviso to that section.

9. The result is that this revision has to be dismissed as untenable. I accordingly dismiss it. But there will be no order as to costs considering that the defendants, although served with notice, remained ex parte.

10. Revision dismissed.


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