SREE GOKULAM CHIT AND FINANCE CO. Vs. SAHIR

JUDGEMENT

(1.) The plaintiff in a suit for money, by sale of mortgaged property, is the appellant. The appellant is a private company engaged in the business of conducting chits. The respondent, who is the defendant in the suit, was a subscriber to the chits. He is alleged to have created an equitable mortgage in favour of the appellant to secure the loans availed from the chit. By the impugned judgment, the trial court dismissed the suit holding that a chit transaction cannot be secured by a mortgage and, the suit is barred by limitation.

(2.) The facts necessary for the disposal of this appeal, in brief, are as follows: The respondent joined in nine chits conducted by the appellant, each valued at 10,00,000/-, and on 17/3/2011 he availed a loan of 37,50,000/-, on executing an agreement to repay the due amount in monthly instalments. On the same day, he created an equitable mortgage over the plaint schedule property by deposit of title deeds, which was confirmed by a memorandum dtd. 18/3/2011. Subsequently, he availed an additional loan of 30,00,000/- on 18/10/2011 and extended the equitable mortgage to secure the said amount. The respondent also executed demand promissory notes towards security for the amounts. He prized all the chits and adjusted the amount against the balance outstanding in the loan. As he failed to pay the future installments of the chits, an amount of 95,04,209/- became outstanding, compelling the appellant to institute the suit seeking sale of the mortgaged property.

(3.) In the written statement, the respondent admitted that he had prized the chits, but contended that he had neither availed any loan under the chits nor created any equitable mortgage and that, consequently, the suit is barred by limitation. He raised several other contentions; however, we are not adverting to them, having regard to the limited scope of the present appeal.