C.J. JOHN Vs. ORIENTAL KURIES LTD.

JUDGEMENT

(1.) THESE appeals are by the common defendants in O.S. 323 of 1984 and O.S. 548 of 1987 respectively on the file of the Subordinate Judge's Court of Trichur. The respondent in both the appeals is the same company, a company registered under the Companies Act. The respondent company started a kuri and both the suits were for recovery of money due under a kuri security bond in respect of future installments payable monthly of a prized chit. The first suit O. S. 323 of 1984 was for recovery of 12 installments due from 24 -11 -1981 to 24 -11 -1984. The second suit O. S. 548 of 1987 was for recovery of the entire future subscriptions due under the transaction other than the period covered by the earlier suit. Though various contentions were raised by the defendants the trial court overruled the said contentions and granted the respondent - plaintiff a decree for realisation of Rs. 40915/ -with 12% interest on the sum of Rs. 34,800/ - from the date of suit till date of decree and at the rate of 6% per annum from date of decree in O.S. 323 of 1984 and a decree for realisation of Rs. 83820.68 with 12% interest on the sum of Rs. 63800 from date of suit till date of decree and at 6% per annum thereafter in O. S. 348 of 1987. Preliminary decrees for sale charged on the plaint schedule property was passed in both the suits. The defendants challenge these decrees before this court in these appeals. The learned counsel for the appellants raised three questions before this court. Firstly he contended that the decree passed on an equitable mortgage as granted by the trial court is not sustainable since there was no subsisting relationship of debtor and creditor between the defaulting subscriber and the foreman of the chit and hence the decree to that extent was bad. It is seen that this aspect was not raised before the trial court. The learned counsel for the appellant submitted that the decision of the Full Bench of this court reported in Janardhana Mallan v. Gangadharan ( : A.I.R. 1983 Ker. 178) shows that a subscriber to a chit does not incur a debt on entering into a chitty agreement and hence there was no relationship of debtor and creditor merely because the defendants executed the kuri security bond undertaking to pay the future installments that would fall due. The Full Bench decision had actually overruled the earlier Full Bench decision of this court reported in Achuthan v. State Bank of Travancore ( : A.I.R. 1975 Ker. 47). But the Supreme Court in a subsequent decision reported in Subbaramasastri v. K.S. Raghatan ( : AIR 1987 SC 1257) approved the decision Achuthan's case to the effect that a subscriber on executing the bond really becomes a debtor for the prized amount paid to him and the facility of repayment in installment is only a concessional facility which was capable of being withdrawn by the foreman of the chit. In Subbaramasastri's case no doubt the decision in Janardnana Mallan's case was not specifically referred to. But the effect of the decision of the Supreme Court is clearly that the decision in Janardhana Mallan's case cannot be considered to be good law any more. In fact this very aspect came up for consideration before this court in Mar Aprem v. Narendranath, 1990 (1) K.L.T. 866). The argument was raised before the court that since the decision in Janardhana Mallan's case had not been specifically referred to and overruled by the Supreme Court the said decision continued to be good law and hence as far as this court was concerned the position was governed by the ratio of Janardhana Mallan's case. After referring to the three decisions referred to above and noticing that the Supreme Court in Subbaramasastri's case had specifically approved the law laid down in Achuthan's case Shamsuddin, J. held that in view of the decision in Subbaramasastri's case Janardhana Mallan's case could not be taken to be laying down the correct law or could not be followed. I am in respectful agreement with the view expressed by Shamsuddin, J. in Mar Aprem's case. In my view the Supreme Court has clearly approved the principle of the decision in Achuthan's case by holding that what is incurred by a prized subscriber when he is allowed to draw the kuri amount is a debt in praesenti although solvenda in future. If that be so the decision in Janardhana Mallan's case cannot be taken to lay down the correct law when it holds that the prized subscriber incurs no debt when he prizes the chit and receives the prized amount with an obligation to pay the debt in future installments. The view that Janardhana Mallan's case cannot be taken to be laying down the correct law in the light of Subbaramasastri's case also finds support from the decision of the Madras High Court reported in Angammal v. Sankaranarayanan ( : AIR 1989 Mad. 53) It therefore overrule the first contention raised on behalf of the appellant's that the claim based on the equitable mortgage should have been rejected.

(2.) THE second contention urged on behalf of the appellants is that the plaintiff, has violated the Kerala Chitties Act, 1975 since the kuri conducted by the plaintiff violates Sec. 3 (1) of that Act. Sec. 3 (1) of the Kerala Chitties Act provides that no chitty shall, after the commencement of that Act be started and conducted unless the previous sanction of the Government or of any such officer as may be empowered by the Government in that behalf is obtained or the chitty is registered in accordance with the provisions of that Act. What is contended by the learned counsel for the appellant is that the chitty in question has not been registered. It is also pointed out that in the light of the penalty provided by Sec. 60 for contravention of any of the provisions of the Act, the suit could not be maintained by the plaintiff company on the basis of the kuri transaction run by it in violation of Sec. 3 of the Chitties Act.

(3.) NEXTLY it is contended that the suit is not maintainable in view of the fact that the Memorandum of Association of the plaintiff company and its articles of association do not empower it to start a kuri from Mangalore in Karnataka State. Though this plea was not there in the original written statement, the same was raised by way of an additional written statement before the trial court. According to the learned counsel for the appellants Sec. 13 (1) (e) of the Companies Act provides that the Memorandum of every company shall state in the case of Companies (other than Trading Corporations) with objects not confined to one State, the State to whose territories the objects extend. According to the learned counsel Karnataka State is not mentioned in clause 3 (j) of the Memorandum which states that the object was to establish, promote and carry on any other business, but not banking business which may seem to the company profitable or advantageous and to establish offices and other places of business in this State or anywhere in India as the directors deem necessary. Clause 96 of the Articles of Association Ext A85 authorises the Directors to establish branches of the company in any such place as the Directors deem it necessary. Ext. A17 resolution shows that the Director Board had resolved to start new kuries at Mangalore branch. It is the submission of the learned counsel that since the Memorandum of Association does not refer to the State of Karnataka the conduct of the chitties by the Mangalore branch is in violation of the requirement of Sec. 13 of the Companies Act. The learned counsel for the respondent - plaintiff submits that the plaintiff is a trading company and hence Sec. 13 (1) (e) of the Companies Act has no application at all. Clause 3 (j) of the Memorandum of Association of the company clearly indicates that the object therein is to establish, -promote and carry on business in the State of Kerala or anywhere in India. The contention of the learned counsel for the appellants is that so long as the different states are not specifically mentioned in this clause it cannot be said that the memorandum provides for the starting of a kuri beyond the state of Kerala. The court below has taken the view that the expression 'anywhere in India' is a wide term covering all the states and so no separate mention need be made to each state in clause 3(j) of the Memorandum of Association. It appears to me that this is a very reasonable and proper way of reading and understanding Article 3(j) of the Memorandum of Association. In that view it is not possible to agree with the contention of the learned counsel for the appellants that there is any violation of Sec. 13(1)(e) of the Companies Act when the company started the kuri from its branch office at Mangalore. I also find some force in the contention raised on behalf of the plaintiff -respondent that the plaintiff company is a trading corporation coming with in the exemption provided under Sec. 13 (1) (e) of the Companies Act. As per the definition contained in Sec. 2(49) of the Companies Act a Trading Corporation means a Trading Corporation within the meaning of entries 43 and 44 in list I in the 7th Schedule of the Constitution. Item 43 of List I of the 7th schedule of the Constitution states that incorporation, regulation and winding up of Trading Corporation including banking insurance and financial corporations, but not including Co -operative Societies. In paragraph 8 of the plaint it is clearly pleaded that the plaintiff company is registered under the Indian Companies Act. It has been observed in the decision reported in Hakam Singh v. Gammon ( : A.I.R. 1971 SC 740) that a company registered under the Companies Act is a Corporation. As observed in State of Punjab v. M/s Bajaj Electricals Ltd. ( : A.I.R. 1968 SC 739) trade in its primary meaning is exchanging of goods for goods or goods for money and in its secondary meaning it is repeated activity in the nature of business carried on with a profit motive, the activity being manual or mercantile as distinguished from the literal arts or modern profession or agriculture. In the present case the object of the company is to start and conduct kuries as can be seen from clause 3 (j) of the Memorandum of Association. It is therefore clear from the objects of the company that it can start any business with a view to earn profits and in that view it cannot be held that the plaintiff company could not be a Trading Corporation as referred to in Sec. 13 (1) (e) of the Companies Act. On an overall survey of the Memorandum of Association of the company in the light of the meaning to be attributed to trade as expounded by the Supreme Court I am of the view that the plaintiff company is a trading company coming within the exemption contained in Sec. 13 (1) (e) of the Companies Act. Though the learned counsel for the appellants raised a further contention that certain amounts paid by the defendants have not been credited, no specific payment was referred to in support of that contention.