SKETNA DEV PADMIAH Vs. FIRM OF SRIGIRI VENKIAH

JUDGEMENT

(1.) THIS revision petition arises out of a money suit by the firm of 'Srigiri Venkiah the Organiser of a 'Chit Fund' which had twelve members, each subscribing Rs. 100/ - a month for the period of a year. The Defendant 1 was a member of the fund and held two shares contributing Rs. 200/ - a month. According to the rules of the Chit Fund, it is said, the total amount of subscription collected every month was auctioned among the members, and one who bid the lowest amount, i.e., gave the largest discount, secured the amount bid for. After the conclusion of a successful bid, the purchaser of the lot was required to execute in respect of the annual contribution, as security of the regular payment of the monthly subscription. It was stated in the plaint that Defendant 1 purchased in auction a 'chit' in the fourth month and another in the sixth month and executed a pronotes on each occasion; and Defendant 2 stood surety for the same. According to the Plaintiffs Defendant 1 did not pay his contribution for the six months following. The Defendant 2 on demand paid Rs. 210/ under the two pronotes, and Defendant 1 paid Rs. 100/ - only. Thus the Defendants owe Rs. 1061 -13 -6 including interest.

(2.) DEFENDANT 2 died during the pendency of the suit, and his legal representatives expressed ignorance of the whole transaction. Defendant No. 1 however, admitted the organization of 'Chit Fund' and his membership with two shares, and securing two chits in the auction, and the execution of both the pronotes. But he claimed that Defendant 2 paid Rs. 575/ to the Plaintiff under the pronotes besides Rs. 100/ - paid by himself. He further stated that a sum of Rs. 200/ - was paid by himself to Ramaswamy the father of Venkiah, a partner of the Plaintiff's firm. Thus they have paid in all Rs. 947/ - and only Rs. 252/8/ - are due by Defendant 1. This could not be paid owing to the Defendant having left the place due to disturbed conditions in the State and the 'Chit Fund' also having ceased to function. He pleaded that in view of the Plaintiff's firm not having been registered as a banking company under the Indian Companies Act, and not holding a license under the Hyderabad Money Lenders' Act, the suit is liable to be dismissed. Further as both the pronotes are payable to the bearer, in contravention of Section 15, Hyderabad Paper Currency Act, they cannot form the basis of the suit.

(3.) TAKING into consideration that the members of the 'Chit Fund' together with the organisers are less than 20, the registration of the association is not compulsorily registrable under Section 4 (2), Indian Companies Act as was held in Neelamegha Sastri v. Section Appiah Sastri, 29 Mad 477. The advocate for the Petitioner also does not press this point. As regards the contention that the pronote in question is a bearer bond, and has been drawn up in contravention of the Hyderabad Paper Currency Act, the advocate of the Respondent admits in principle that the note cannot, form the basis of the suit, but he submits that according to his plaint, his suit is based upon the original transaction, and he has given all the facts relating to it culminating in the drawing up of the pronotes, which were taken only as collateral security. This will have to be decided with reference to the statement made in the plaint. Going through the plaint carefully 1 am of the opinion that the suit is not solely based upon the pronotes but on the transaction of the 'Chit Fund' also and the Plaintiff has explained under what circumstances the pronotes were drawn up. Therefore, though the pronotes in question are inadmissible in evidence, Plaintiff can prove the actual transaction and the arrears on that account.