GOVERDHAN UPADHYAN Vs. A KAMESWARA RAO DIED

JUDGEMENT

(1.) This appeal is filed by the plaintiff in O.S.No. 2/1981 on the file of the Subordinate Judge, Kothagudem (originally O.S.No. 48/76 on the file of the Sub Court, Khammam) questioning the decree and Judgment dated 29-3-1982 by which the suit filed by the plaintiff for recovery of the suit amount was dismissed.

(2.) The appellant-plaintiff had filed the above said suit seeking recovery of Rs.l5,000/-from the defendants l to 4contending as follows: The 4th defendant is a registered Chit Fund Company registered under the A.P. Chitfunds Act and the plaintiff and the first defendant are the subscribers in the chits run by the 4th defendant. The first defendant became the prized subscriber for chit No, A-1 bearing ticket No. 16 and the chit was for Rs. 20,000/- of 40 instalments of Rs,500/- per each instalment. The said chit was started on 20-4-1972 and it was terminated by 10-5-1975. The first defendant executed an agreement on 24-2-1972 in favour of the 4th defendant agreeing to abide by the by-lawsof Chit No. A-1. He participated in the auction and became the prized subscriber and received an amount of Rs. 8,580/- on 10-6-1972 and he had to repay the amount in 34 equal monthly instalments payable in its entirety by 10-5-1975. First defendant executed a pro-note and also a security bond on 13-7-1972 in favour of the 4th defendant undertaking to pay the amount due from him regularly without making any default. Subsequently, the first defendant paid the instalments till the 8th instalment and later on committed default in paying the subsequent instalments. In view of the penalty clause and other terms of the agreement executed by the first defendant, the 4th defendant became entitled to collect the amount with interest without giving the benefit of dividends to the first defendant. Subsequently, the 4th defendant could not pay the chit amount due to the plaintiff who was also a subscriber to Chit No. B-1 bearing ticket No. 5 and as such, he assigned his rights to collect the amounts due from the first defendant to the plaintiff by executing an assignment deed dated 28-5-1975 authorising the plaintiff to collect and receive the amounts due to him from the first defendant as well as from his sureties who are defendants 2 & 3. As the defendants 1 to 3 failed to pay the amounts and as the plaintiff became entitled to collect such amounts onaccount of the assignment deed, the suit was filed for recovery of the suit amount from all the defendants.

(3.) The 4th defendant did not contest the suit and on the other hand, he supported the claim of the plaintiff. The defendants 1 to 3, however, contested the suit contending that the first defendant did not voluntarily execute the agreement in favour of the 4th defendant at the time when he became a subscriber in the chit run by the 4th defendant; that the said agreement was signed by him in a mechanical manner in one of the model forms supplied by the 4th defendant without understanding its purport; that such agreement is in contravention of the provisions of the Indian Contract Act; that the bye-laws framed by the 4th defendant are inconsistent with the provisions of A.P.Chit Funds Act, 1971; that he received only a sum of Rs. 8,580/- as against the chit amount of Rs. 20,000/- and he paid instalments amounting to Rs. 2,500/- and further amount of Rs. 6,500/- in various instalments making a total of Rs. 9,000/- and as such the entire prize amount of Rs. 8,580/- stood discharged; that no penalty can be levied and no interest can be collected from him as alleged in the plaint as the penalty clause in the bye-laws of the 4th defendant regarding the forfeiture of dividend and levy of penalty is not valid and legal; that the security bond executed by him in favour of the 4th defendant is not admissible in evidence; that the plaintiff is not entitled to file the suit on the basis of the alleged assignment deed executed by the 4th defendant as such assignment is in contravention of the provisions of Section 26 of the A P. Chit Funds Act, 1971 and that, therefore, the suit is not maintainable and the plaintiff is not entitled to collect the suit amount from the defendants 1 to 3.