V VENKATAMUNIYAPPA Vs. SUDARSHAN TRADING CO LTD

JUDGEMENT

(1.) - By an order of the Hon'ble the Chief Justice dated 5-2-1988 the matter was referred to the Division Bench. It reads as follows:

(2.) In Economic Chit Funds Private Limited v. P. S. Krishnoji Rao (1)Nesargi, J. (as he then was) had an occasion to consider as to whether the Chit transactions is a transaction of creditor and debtor and whether the decretal amount does not amount to 'debt' within the meaning of the word 'debt' as defined in S. 2(5) of the Karnataka Debt Relief Act, 1980 ('Act' for short). The learned Judge, relying on the decision of the Full Bench of Kerala High Court in P. K. Achuthan v. State Bank of Travancore, AIR 1975 Kerala 47 has held that chit fund transaction is also a debt and brings about the relationship of a creditor and debtor and as such the person who takes advance from the fund was a debtor within the meaning of the Act. (1) C. R. P. 3750/1981 D/-16-2-1984: (AIR 1986 Kant 211).

(3.) In Shivakumar v. M/s. Sudarshan Trading Co. and another (2)Kulkarni, J. (as he then was) following the ratio of the decision of our High Court in (1972) 2 Kar LJ 476 and (1980) 1 Kar LJ 345 held: that in the case of chit fund transaction at the time when the amount is given, it would not be an advance of a debt and as such a transaction which did not assume the character of debt at all, when it took place cannot become a debt subsequently. The learned Judge, held that use of the word "advanced" in S. 4 of the Act, makes it clear that in order that the act is attracted it must be a debt at the time when the amount was advanced and that (if) it is not so, then it cannot be considered to be a debt at all. Therefore, the learned Judge held that in substance the result of a chit fund transaction will not partake the character of debt within the meaning of the Karnataka Debt Relief Act, 1976. In this decision there is no reference to earlier decision of the learned Judge in Krishnoji Rao's case referred to above. Perhaps, it was not brought to the notice of the learned Judge, who rendered the later decision. However, it is found that in these two judgments there is conflict of opinion. Hence the matter is referred to the Division Bench. (2) ILR 1984 (2) Karnataka 914