ANGAMMAL Vs. R SANKARANARAYANAN

JUDGEMENT

(1.) The plaintiff in O. S. 901 of 1976, District Munsif Court, Coimbatore, who succeeded before the trial court and lost before the lower appellate court, is the appellant in this second appeal. The circumstances giving rise to this second appeal are briefly as under. The appellant was a subscriber to a Rs. 5000 chit conducted by M/s. Uma Investment's (P) Ltd., Coimbatore (hereinafter referred to as Uma Investments for short). The subscription payable was Rs. 125 per month for 40 months and the chit commenced on 23-12-1971. The appellant subscribed towards that chit, inclusive of dividends earned, a sum of Rs. 4452-19 and she took the chit in the auction held on 3-6-1974 for Rs. 4500. Before the amount could be paid to the appellant, the Foreman appears to have encountered some financial difficulties. The respondent was a subscriber to another chit for Rs. 5000 conducted by the same Foreman, Uma Investments, through its branch at Palani. The monthly subscription payable by him was Rs. 250 and the chit was for 20 months. The respondent became the prized subscriber at the auction held on 9-7-1973 for Rs. 4000 and received the amount. On 21-9-1973, the respondent executed a promissory note for Rs. 4250 in favour of Uma Investments for the balance of the amounts payable by him to it. On 20-8-1974, Uma Investments assigned the promissory note executed by the respondent for Rs. 4250 in its favour on 21-9-1973, in favour of the appellant for Rs. 3000 towards portion of the amount payable to her by Uma Investments. On the strength of the assigned pronote, the appellant sued for the recovery of a sum of Rs. 3750 together with interest at 12% p.a. on Rs. 3000 from 21-9-1976 till the date of decree and thereafter at 6% p.a. till the date of realisation and for costs.

(2.) In the written statement filed by the respondent, he stated that he had been subscribing for three chits with Uma Investments and that with reference to one of such chits for Rs. 5000, he bid at the auction held on 9-7-1973 for Rs. 4000 and received the amount and also executed a promissory note for Rs.4250 in favour of Uma Investments. Alleging that Uma Investments ceased to continue its business and claiming that the Foreman is bound to refund the chit subscriptions paid by the respondent, the respondent pleaded that if the amount paid by him towards the other chits is adjusted, no amount will be due to the appellant. It was also the further plea of the respondent that without making the adjustments, Uma Investments is not entitled to assign the pronote in favour of the appellant. An objection that the appellant will have to rank as a creditor of Uma Investments, was also raised. The respondent also took the objection that without impleading Uma Investments and the co-executants of the promissory note assigned in favour of the appellant, the suit is not maintainable.

(3.) Before the trial court, on behalf of the appellant, Exs. A 1 to A 8 were marked and the appellant and another gave evidence as P.Ws. 1 and 2, while, on behalf of the respondent, Exs. B 1 to B 6 were filed and the respondent examined himself as D. W. 1. On a consideration of the oral as well as the documentary evidence, the trial court found that the appellant is a holder in due course, that Uma Investments is entitled to assign the promissory note executed by the respondent in its favour to the appellant, that the suit laid without impleading the Foreman and the co-executants of the promissory note is in order, as they are not necessary parties to the suit and that taking into account the payments made by the respondent in a sum of Rs. 2450, the respondent was still liable to pay the balance of Rs. 2550 to Uma Investments and that amount could be, recovered by the appellant. In view of the aforesaid conclusions, the trial court granted a decree in favour of the appellant for the recovery of a sum of Rs. 2550, with interest at 12% p.a. from the date of assignment (20-8-1974) till the date of decree (17-1-78) and thereafter at 6% p. a. till the date of payment. Aggrieved by this, the respondent preferred an appeal in A. S. 73 of 1978, Sub Court, Coimbatore. The lower appellate Court however, took the view that the promissory note executed by the respondent under Ex. A. 3 was as a security in respect of the future instalments of the chit for which the respondent was a subscriber and it cannot be assigned by the Chit company in favour of a third party, and therefore, the appellant cannot derive rights to recover the amount due under the promissory note from the respondent. In addition, the lower appellate Court also found that even the Foreman is not entitled to claim a consolidated payment of the future subscriptions from a defaulting subscriber without issuing a notice and inasmuch as Uma Investments did not issue any notice to the respondent, the assignee from it, viz., the appellant cannot have a better right and, therefore, the appellant cannot call upon the respondent to pay the future instalments in one lump sum. The assignment by Uma Investments was also held to have been effected in contravention of S.26 of the Tamil Nadu Chit Funds Act, 1961 ( hereinafter referred to as the Act). Holding that the assignment of the promissory note was made with a view to defeat the right of the respondent to claim adjustment in respect of the amounts paid towards other chits, the lower appellate Court concluded that the appellant cannot be considered to be a holder in due course entitled to recover the amount from respondent. On the aforesaid conclusion, the lower appellate Court allowed the appeal and dismissed the suit. It is the correctness of thin, that is questioned in this second appeal.