TMI Blog1934 (10) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... e clause in question is penal but he puts it on the following ground. 2. As the plaintiffs are mere stakeholders who have merely to collect the instalments at stated intervals and as they do not require the entire amount from the first defendant for distribution among the share-holders at once, the ends of justice will be met with in this case if a decree is passed for the instalments that are overdue on the date of the plaint with interest at 18 percent. per annum on the amount of each instalment from the date of default to the date of the plaint as provided for in the bonds. 3. The material facts are as follows: 4. The plaintiffs are the stake-holders of a chit fund. The scheme of this fund was to collect from the contributors to the fund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bond for a larger sum of money with a default clause in that bond. The case in Muthukrishna Aiyar v. Sankaralingam Pillai I.L.R.(1912) 36 Mad. 229 : 24 M.L.J. 135 was accordingly pressed as showing that a clause of this nature should be regarded as a default clause. Muthukrishna Aiyar v. Sankaralingam Pillai I.L.R.(1912) 36 Mad. 229 : 24 M.L.J. 135 is a case of a loan of money on an instalment bond and it has no applicability whatsoever to a case like the present unless this is in essence a loan transaction. In our opinion this is not a' case of borrowing at all. At the auction the person bidding the highest discount is regarded as a purchaser of the subject-matter of the auction. There is no reason we can see why a chit fund auction is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch illustration is a case of loan where the borrower borrows a hundred rupees but gives a bond for rupees two hundred. Here it is said that the chit - purchaser borrows the amount of chit fund and gives a bond for the amount of his instalments. Thus if the amount of the instalments happens to be more than the chit fund that he buys the case is on all fours with the case of a borrower of Rs. 100 who gives a bond for Rs. 200 and is therefore distinguishable from illustration (F). Now the effect of the default clause in a bond given by the purchaser in a chit fund has been considered by a number of Judges and benches of this High Court and the decisions are all one way excepting a decision of Srinivasa Aiyangar, J., in Subbiah Pillai v. Shanmu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Sankaralingam Pillai I.L.R. (1912) 36 Mad. 229 : 24 M.L.J. 135 on the view that in essence the chit purchaser is a borrower of money. 7. Now we have examined the records in Subbiah Pillai v. Muthiah Pillai AIR1933Mad657 and we can find no distinction between that case and this case on the facts. There the bond was larger than the chit fund. Further we are of the opinion that it can make no difference that the amount of the bond is larger than the amount of the chit fund and further we are of the opinion that a chit fund transaction of this kind is entirely different from a loan transaction in which the borrower at the time of the loan gives a bond for more than the amount that he borrows. This is a case of a purchase and it is part of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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