JANARDANA MALLAN Vs. GANGADHARAN

JUDGEMENT

(1.) IN this reference we are called upon to answer the question:

(2.) WHEN a prized subscriber in a chitty receives the prize money and executes a security bond to secure the payment of future subscriptions in accordance with the obligations Under the contract embodied in the chitty variola, does the prized subscriber become a debtor to the foreman? A Full Bench of the Travancore High Court had in the decision in Sundaram Pillai Easwaramoorthiya Pillai v. Vallithaiy Narayana Vadiyu, XVI T.L.T. 143 expressed the view that the obligation of the prized subscriber to pay future subscriptions arises under the contract embodied in the chitty variola and consequently the debt could arise only on the date the future installment falls due and not on the date of the execution of the security bond. A Division Bench of the Kerala High Court expressed the same view in Varkey Thomas v. Travancore Forward Bank Ltd.,, 1962 K.L.T. 383. The matter again came up in this Court before a Division Bench in Nrayana Prabhu v. Janardhana Malian, : A.I.R. 1974 Ker. 108 when the Division. Bench followed the earlier view after noticing the different views held on the subject by the High Court of Madras, all along, though in Maruda Konar v. Veerammal,, AIR 1936 Mad. 985 Varadachariar J. had struck a different note. The reference of the question now before us has been occasioned mainly because the Full Bench in Achuthan's case. (1974 KLT 806) has not noticed the earlier Division Bench decisions of this Court and the earlier Full Bench decision of the Travancore High Court.

(3.) THE Acts regulating Chitties were intended to define and limit the rights and obligations of the Chitty foreman as well as the subscribers, since collapse of chitties on a large scale would have adverse impact upon the economy and in particular the rural economy of the State. The obligation of the chitty foreman to each one of the subscribers and the subscribers inter se were governed only by the terms of the contract. The chitty foreman would collect the subscriptions from the subscribers at each installment and after taking his commission and deducting the discount he would pay the balance to the subscriber who prized the chitty at that installment. The chitty would function properly so long as the chitty foreman was prompt in his collection and the subscribers were equally prompt in paying their subscriptions. The default by a prized or nonprized subscriber would naturally have impact on the due payment of prize money to the subscribers. If the chitty foreman was unable to run his chitty properly and regularly and the chitty collapsed amounts would be due to nonprized subscribers by way of paid up chitty subscriptions while the foreman would be entitled to collect future subscriptions from the prized and nonprized subscribers. Though in the case of nonprized subscribers this could be adjusted against the amounts due to them, in the case of defaulting prized subscribers the amounts had to be recovered. Naturally the foreman may, under pressure from his creditors, the nonprized subscribers, assign his rights to collect future subscriptions from prized subscribers to one or other of them. Sometimes this may amount to preferring some creditor to the others, sometimes this may be in fraud of creditors and questions have arisen before courts on the right of the foreman to transfer the right to collect future subscriptions from prized subscribers. The courts had to consider in this context, the nature of the relationship between the subscribers and the foreman. We are speaking of time prior to the Regulation of chitties in the States of Travancore and Cochin by appropriate enactments.