TMI Blog1996 (8) TMI 568X X X X Extracts X X X X X X X X Extracts X X X X ..... xecuted an agreement on 24-2-1972 in favour of the 4th defendant agreeing to abide by the by-laws of Chit No. A-1. He participated in the auction and became the prized subscriber and received an amount of Rs. 830/- 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-l 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 authoris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the decree and Judgment passed by the lower Court, the present appeal is filed by the plaintiff. The lower Court found under various issues that Ex. A-1 agreement executed by the first defendant in favour of the 4th defendant is not valid as it was mechanically executed by him; that such agreement is inconsistent with the provisions of the Indian contract Act and, therefore, not valid; that the bye-laws of the 4th defendant Society are not valid as they are in contravention of the provisions of A.P. Chit Funds Act and that the suit is, therefore, not maintainable. The lower Court also found that the first defendant was entitled for the dividend of Rs. 2,000/- as claimed by him and that the calculation of interest made by the plaintiff in the suit on the amount said to be due to him is also not correct. He further came to the conclusion that the suit filed by the plaintiff is not maintainable in view of the provisions of Section 26 of the A.P. Chit Funds Act, 1971 and the plaintiff is, therefore, not entitled to collect the suit amount on the basis of Ex.A-l1 deed of assignment executed in his favour by 4th defendant. 5. During the course of arguments the learned Counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the plaintiff is not maintainable in view of the provisions of Section 26 of the A.P. Chit Funds Act, 1971 and whether he is not entitled to recover the suit amount on the basis of Ex.A-11 deed of assignment executed in his favour by the 4th defendant 7. The first defendant is one of the prized subscribers for Chit No. A-l bearing ticket No. 16 and he executed Ex.A-1 agreement in favour of the 4th defendant at the time when he became such subscriber. He became the prized subscriber on 10-6-1972 as he was the highest bidder and he received the amount of Rs. 8,580/- towards the prize amount from the 4th defendant and he then executed Ex.A-2 security bond undertaking to pay the subsequent instalments due from him and the second and third defendants stood as guarantors for the first defendant. The first defendant also executed Ex.A-4 pro-note on the same day for the above said amount received from the 4th defendant. The plaintiff was also one of the subscribers under Chit No. B-l bearing ticket No. 5 and he had paid all the instalments under his chit and thus became entitled to receive the entire chit amount due to him from the 4th defendant. As the 4th defendant was not in a position ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a foreman to receive subscriptions from prized subscribers shall be made without the previous sanction in writing of the Registrar. (2) Any such transfer of the rights of a foreman to receive subscriptions from a prized subscriber shall, on application by the subscriber and if it is likely to affect prejudicially the interest of any non-prized subscriber or unpaid prized subscriber, be set aside by such officer as may be empowered by the Government in this behalf. (3) When under sub-section (2), a transfer is disputed by a subscriber, the burden of proving that the foreman was in insolvent circumstances at the time of the transfer and that the transfer is not likely to affect prejudicially the interests of any such subscriber is upon the transferee. It is, no doubt, true that the 4th defendant did not seek and obtain any previous sanction in writing from the Registrar of Chit Funds before executing Ex.A-11 deed of assignment in favour of the plaintiff, transferring the right to recover the amount due to him from the defendants 1 to 3. But the learned Counsel for the appellant has, however, tried to contend that the relationship between the first defendant who is a prized subscribe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ayment in instalments, (sic) a concessional facility and that a stipulation enabling the Foreman to withdraw the concessional facility on default of the punctual payment of the instalments would not be penal or unconscionable. After referring to the above said decisions of the Supreme Court and the Full Bench decision of the Kerala High Court, it was observed by the High Court of Madras in the above (sic) decision that the prized subscriber becomes a debtor in respect of the prized amount paid to him and he is merely afforded the facility of payment of the amount due in instalments, as a matter of concession and that the suit instituted against the prized subscriber on the basis of the transfer effected in favour of the third party to recover the amount from the prized subscriber will be maintainable. In the present case also the first defendant committed default in paying the subsequent instalments having received the prized amount and having executed Ex.A-4 pronote as well as Ex.A-2 security bond in favour of the 4th defendant agreeing to repay the amount regularly. In view of such default committed by the first defendant who has to be considered as a debtor vis-a-vis the 4th res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sanction obtained from the Registrar of Chit Funds inasmuch as the transfer effected by the 4th defendant in favour of the plaintiff is only voidable but not void. It is observed by the Madras High Court in the above cited decision that a breach of sub-section (1) of Section 26 of the Tamilnadu Chit Funds Act, 1961 which is quite similar to the provisions of Section 26 of A.P. Chit Funds Act, 1971, only renders the transfer voidable under sub-section (2) and not null and void and that, therefore, the transfer of rights in favour of another subscriber by the Foreman cannot be considered to be invalid and inoperative. Under Section 26(1) of the A.P. Chit Funds Act, no transfer of the rights of a Foreman to receive subscriptions from prized subscribers shall be made without the previous sanction in writing of the Registrar. Sub-section (2) of Section 26 states that any such transfer of the rights of a Foreman to receive subscriptions from a prized subscriber shall, on application by the subscriber and if it is likely to affect prejudicially the interest of any non- prized subscriber or unpaid prized subscriber, be set aside by such Officer as may be empowered by the Government in this ..... X X X X Extracts X X X X X X X X Extracts X X X X
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