SUDARSHAN CHIT FUNDS Vs. SRINIVASA JYOTHI DEVI

JUDGEMENT

(1.) PLAINTIFF is the appellant. Its suit based on the basis of exhibit A-1 letter and exhibit A-5 promissory not dated August 19, 1971, and Katha, was dismissed by the court below as being barred by limitation.

(2.) IT is the admitted case that the first respondent is the holder of a chit run by the plaintiff-company for a sum of Rs. 20,000 payable in fifty instalments at Rs. 400 every month. She became the successful bidder on July 10, 1971, for a commission of Rs. 5,000. She executed a promissory note along with respondents Nos. 2 to 4 as sureties for a sum of Rs. 18,400. On executing exhibit A-5 pronote dated August 19, 1971, the first respondent went on paying the amounts from time to time and the last payment made was on December 19, 1972. Thereafter,s he committed default. It is the case of the appellant that her husband who is acting as agent on he behalf, admitted the liability and undertook to discharge the liability. Since he was evading payment, the suit notice, exhibit A-2, dated July 7, 1973, was issued. On receipt thereof, the husband of the first respondent agreed for payment and pleaded for time. Since he failed to pay, the suit was laid on October 11, 1974. Two defences were taken by the respondents. The first defence is one of limitation. It is contended that since the suit was laid beyond three years of the execution of the pronote, the suit is barred by limitation. It is further contended that the consideration payable under exhibit A-5 was Rs. 15,000, which was actually paid to the first respondent, and, therefore, though it is reflected in exhibit A-5 that Rs. 18,400 was to be the consideration, part of the consideration was not, in fact, paid and so the suit is not supported by consideration to the full extent. The trial court accepted the contention of the respondents that the suit pronote is supported by consideration to the extent of Rs. 15,000 only and not to the full extent of Rs. 18,400, but dismissed the suit on the ground that it is barred by limitation. According to the court below, limitation begins to run from the date of executing the pronote; since there are no endorsements thereon, running of limitation was not arrested. The husband of the first respondent did not act as an agent on her behalf. Therefore, the letters written by the husband do not operate as acknowledgments within the meaning of section 19 of the Limitation Act. Sri Subbareddy, learned counsel for the appellant, has contended and I find considerable force in his contention, that in the case of chit fund transactions, the limitation beings to run every month as and when default is committed and on committing default, the liability undertaken under the pronote becomes enforceable; since the last payment was made on December 19, 1972, and the default has occurred thereafter, the suit was filed within three years and therefore the suit is well within time. Shri Subramanyam, learned counsel for the respondent, resisted the contention contending that the pronote is not a collateral security; it is enforceable as soon as it is executed and the suit is to be laid within three years from that date. It is not the case of the respondent that the pronote is a collateral security and there is no agreement to that effect. Therefore, it is not binding and valid in law. I am unable to agree with learned counsel. In the case of a chit fund transaction of payment of the amount by monthly instalments, the liability begins to run from the date when the contract is enforce the liability arises. Take for instance, where the holder of a chit continues to regularly discharge the liability monthly under the contract, then the need to enforce the debt incurred under the pronote does not arise. As soon as the liability is completely discharged, then the debt under the pronote automatically gets extinguished. Obviously, as a collateral security for enforcement of the liability under the original contract as a holder of the chit, the pronote was taken. Therefore, as and when any default is committed in discharge of the debt, then, to the extent of the liability subsisting as on that date, the pronote debt can be enforced as it is obtained by way of collateral security but not as an independent transaction to enforce the debt under exhibit A-5 pronote. If the contention of Sir Subramanyam is accepted, then, as soon as the pronote is execute, to have unjust enrichment, the chit unit company can enforce the liability though the holder of the chit is continuing to perform her part of the contractual liability and the sureties can be mulcted with the liability without any default being committed by the holder of the chit. Therefore, the very contention runs in the teeth of the object of the transactions and the liability undertaken by the sureties. Therefore, I find that the limitation to enforce the debit under the promissory note begins to run only when the holder of the chit commits default in the payment of instalments, but not anterior thereto. Accordingly, I hold that that the limitation begins to run only after the month next to December, 1972. Therefore, since the suit is within three years from that date, it is not barred by limitation. As already seen, respondent Nos. 2 to 4 are only sureties for the amount actually received by the first respondent. No doubt, in exhibit A-5 pronote, they undertook the liability of Rs. 18,400 but the amount actually paid to the first respondent in only Rs. 15,000. Therefore, to that extent, the pronote is supported by consideration, and to that extent only the sureties are co-extensively liable but not to the entire extent mentioned in the pronote. The first respondent, however, is liable for the entire suit claims.

(3.) THE appeal is accordingly allowed, the decree of the court below is set aside, and the suit is decreed with costs declaring that the first respondent is liable for the entire pronote amount of Rs. 18,400 with interest at 12% from the date of August 19, 1971, till date of suit and 6% from the date of suit till realisation and respondents Nos. 2 to 4 are jointly liable to discharge the liability to the extent of Rs. 15,000 and the interest accrued thereon from the above dates and rates till date of realisation.