K S RAGHAVAN Vs. SUBBARAMA SASTRIGAL

JUDGEMENT

(1.) THE respondents as stake-holders started a kuri (chit fund) in September 1962, wherein the appellants took two tickets. THEy bid both the tickets, one at the third draw and other at the tenth, and took the amounts. THEy also executed bonds to secure future instalments. However, they committed default in paying the future instalments; and the respondents brought the suit giving rise to the appeal for the realisation of the future instalments in a lump with insterest. THE appellants raised two contentions before the lower court: one, that the kuri vari (the rules of the kuri)contained several unconscionable and penal provisions, more particularly, the provision relating to the payment of all the future instalments in a lump with interest at 12 per cent ignoring the claim of the appellants for their share in the reductions (the dividend); and two, that the respondents (the first respondent, to be more precise) acquiesced in the deafult and gave time to the appellants for the payment of the defaulted instalments, so that the suit for the realisation of all the future instalments together was not maintainable. Both the contentions were rejected by the lower court, and hence the appeal.

(2.) THE main question argued by the counsel of the appellants is the first one mentioned above. Eight or nine decisions have been cited before us by the counsel on both sides-decisions of the Madras High court, of the Travancore High Court and of the Cochin High Court. We shall refer only to the more important of them, they being all of the Madras High court. THE only other decision, to which we propose to refer, is the decision in Krishnan Raman v. Raman Aiyappen (21 TLR. 52), a decision of the Travancore high Court. A chitty scheme (a kuri is a chitty in Travancore) collapsed at the eighth draw; and the foreman assigned, with the consent of the non-prized subscribers, the security bond furnished by one of the prized subscribers to a non-prized subscriber. In the suit brought by the assignee for realising the future subscriptions in a lump, the contention raised was that, since the clause was penal, the benefit of the clause would not enure to the assignee. And this contention was rejected by the Travancore High Court holding that the clause was not penal.

(3.) THE next case is Muthukumarasamiah Pillai v. Subramanian Chettiar (AIR. 1927 Mad. 1105 (2) ). THE learned judge who decided this case (Ramesam J.) was one of the judges who constituted the Division Bench in Vaithinatha Iyer's case already referred to. Reliance was placed by one of the parties before the learned judge on the earlier Division Bench ruling. But, ramesam J. said "i do not understand that case to lay down that the term's of a chit fund contract can never be penal. It only says that in such a contract, the stake-holder undertakes extra risks and is entitled to heavier compensation than ordinary cases and such contracts should be scrutinised with less stringency and jealousy than ordinary contracts. " And Ramesam J. agreed with Srinivasa Aiyangar J.