OFFICIAL LIQUIDATOR HIGH COURT Vs. JAMES EDVIN

JUDGEMENT

(1.) This is an application under S. 448 (2) (b) of the Companies Act, 1956, made by the Official Liquidator praying for an order directing respondents 1, 2 and 3 to pay to him the sum of Rs. 1,998-75 being the principal and interest thereon in respect of the chit transaction the 1st respondent had with the Company in liquidation, viz., Smitha Chits and Trading Co. Ltd. (hereinafter referred to as the Company)..

(2.) Respondent-1 James Edvin was a member of the chit Group DD of the Company having Chit No. 19 with the Chit value of Rs. 2000. He was the highest bidder at the auction held for his Group on 21-2-1977 and he received the payment of the prize amount on 5-4-1977. On the same day, he executed a promissory note for Rs. 1,500 in favour of the Company. Respondent-2 David Franklin Soans and respondent-3, N. Basha joined the 1st respondent in the execution of the pronote as sureties. 2nd and 3rd respondents also signed on 8.3.77 the surety and security proposal form of the Company agreeing to be sureties for respondent- 1 repaying the chit value. Respondent-1 has subscribed Rs. 360-25 including the dividends due to him in his chit group. The Official Liquidator issued notices to respondents on 19-5-1978 and 17-10-1979 calling upon them to pay the amounts due in respect of the chit transaction as they were jointly and severally responsible for the repayment of the chit value. Respondents having failed to pay the sum demanded, he has presented this application on 18-1-1980. The Official Liquidator's claim is as follows: <FRM>JUDGEMENT_310_KANTLJ1_1982Html1.htm</FRM> Respondents entered appearance through Counsel. 1st Respondent was represented by Shri C. S. Shantamallappa, while respondents 2 and 3 were represented by Smt. G. Anasuya. Respondent-1 showed no interest in the proceedings as also his Counsel. He did not file any statement of objections to the claim though more than one opportunity was given. On the other hand, respondents 2 and 3 have filed their statement of objections to the claim and contested the claim. In the statement of objections filed by the 2nd and 3rd respondents they admit the claim transaction relating to the first respondent in chit group DD bearing No. 19 for Rs. 2000. They also admit that they executed the pronote in respect of the transaction as sureties along with the first respondent. It is stalled by them that the 2nd respondent was a member of the Chit Group DF 1 bearing No. 22 and that he had subscribed Rs. 600 towards that chit till 25-5-1977 and that amount is due and payable by the Company in liquidation to him. Similarly, it is stated that respondent-3 was a member of 2 other chits -Chit Group D.F. bearing number 49 and Chit Group D.F. bearing number 50 and had subscribed Rs. 650 and Rs. 550 respectively and the said amounts are due and payable by the Company in liquidation to him. Therefore, the 2nd and 3rd respondents claim a set off in the sum of Rs 1900 and adjustment of their liability as sureties. They also claim that interest charged at 18 per cent is excessive. In fact they have made a counter claim for the balance due after deducting the sum of Rs. 1639-75 due by the 1st respondent to the Company in liquidation as the principal amount. They appear to have replied the notices issued by the Official Liquidator stating their above stand. In these circumstances, they have prayed for the dismissal of the claim of the Official Liquidator and for a direction that the Official Liquidator do pay to them the difference between Rs 1900 and Rs. 1639-75.

(3.) Respondents 2 and 3 have examined themselves as R.W. 1 and R. W. 2 in support of their stand. Pass book No. 22 belonging to DF. No. 1 has been marked as Ext.-R. 1. Pass Book belonging to DF 49 has been marked as Ext.-R. 2 and pass book belonging to Group DF 50 has been marked as Ext.-R. 3. Ext.-R. 4 is a receipt for Rs. 100 issued to the 3rd respondent in respect of Group DF 49. Respondents 2 and 3 have admitted the execution of the promissory note Ext.-P1 and have identified their signatures at Ext.-P1 (a) and Ext.-P1(b). In Ext.-R1 the closing entry is Rs. 600-50 including the fifth dividend paid to the subscriber, In Fxt.-R2 the last entry is Rs. 550 including the dividends paid to the subscriber. In Ext.-R3 the last entry is Rs. 550 including the dividends paid to the subscriber. The oral evidence in substance supports the averments in the statement of objections.