M/s. Lakshmi Srinivas Savings& Chit Funds Syndicate Private Limited v. J.S.Raman

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 06- 03-2008CORAM :THE HON’BLE MR. JUSTICE S.TAMILVANANA.S.No.1025 of 1996M/s. Lakshmi Srinivas Savings& Chit Funds Syndicate Private Limitedrep. by its Managing DirectorUdagamandalam. .... Appellant/PlaintiffVs.J.S.Raman ..... Respondent/DefendantAppeal filed under Section 96 of the CPC against the Judgment andDecree, dated 29.03.1996 made in O.S.No.156 of 1994 on the file of theDistrict Judge, Uthagamandalam. For Appellant : Mr.G.Anbumani, Senior Counsel for Mr.C.A.DiwakarFor Respondent : Mr.T.MohanJ U D G M E N T This appeal has been directed against the Judgment and Decree,dated 29.03.1996 made in O.S.No.156 of 1994 on the file of the DistrictJudge, Uthagamandalam.2. The appellant herein was the plaintiff before the trial court.The suit was filed against the respondent herein, directing him to pay asum of Rs.70,100/- with subsequent interest and costs. 3. According to the appellant / plaintiff, on 10.11.1991, therespondent herein had borrowed a sum of Rs.44,000/- from the appellantat Uthagamandalam and executed the suit promissory note, marked asEx.A.3, promising to repay the amount with 24% interest. According tothe appellant, subsequently, no amount was paid by the respondent andhence, the appellant filed the suit, seeking decree against therespondent herein. https://hcservices.ecourts.gov.in/hcservices/

4. According to the respondent, he had not borrowed any amount fromthe appellant and executed the promissory note, as alleged by theappellant. He has further contended that the respondent was a subscriberin the chit transaction run by the appellant, nearly 7 or 8 years priorto the date of filing of the suit, for which signed blank promissorynotes were obtained from the respondent, since he had been thesuccessful bidder, as security for regular payment of subscriptiontowards the chit. The respondent has further contended that the entirechit amount was repaid by him, however, the signed blank promissorynotes entrusted by him were not returned to him by the appellant.According to him, the aforesaid blank promissory note is misused by theappellant for filing the suit. With the above averments, the respondentpleaded for dismissal of the suit.5. It is seen from the impugned Judgment that the foreman of theplaintiff company was examined as P.W.1, apart from marking thedocuments Exs.A.1 to A.6. On the side of the respondent, the respondenthimself was examined as D.W.1 and Exs.B.1 to B.7 were marked. The trialcourt, considering the oral and documentary evidence, held that theclaim of the appellant / plaintiff was not established and accordingly,dismissed the suit. Aggrieved by which, the appeal has been preferred bythe plaintiff in the suit.6. Mr. G.Anbumani, learned senior counsel appearing for theappellant submitted that the respondent had obtained loan for a sum ofRs.44,000/-, as per Ex.A.3, promissory note and it being a negotiableinstrument, the transaction need not be supported by any otherdocuments. 7. It is not in dispute that in the voucher, Ex.A.6, it has beenprinted above the signature made on the revenue stamps as signature ofsubscriber. As contended by the learned counsel for the respondent, hadthe amount received by the respondent was independent to that of chittransaction, there could be no necessity for the printed words"signature of subscriber".8. The point for determination in this appeal are as follows : 1) Whether the suit is not maintainable, as held by the trialcourt? 2) Whether the appellant / plaintiff is entitled to a decree asprayed for ?9. It is seen that Ex.A.6 is a payment voucher, dated 10.11.1991for a sum of Rs.44,000/-, said to have been received by the respondent.Ex.A.3 is the promissory note, dated 10.11.1991 for the aforesaid sum ofRs.44,000/-. Ex.A.3 is in printed form, wherein everything is written bytypewriter, except the signature available on the revenue stamp. Witness https://hcservices.ecourts.gov.in/hcservices/ column is available for two witnesses, but admittedly, nobody has signedas witness. The respondent, who was examined as D.W.1 has stated that hewas a subscriber in the chit transaction run by the appellant herein andfor being a successful bidder for prompt payment of subscription amount,he was asked to execute promissory note, accordingly, he had entrustedblank signed promissory note to the appellant, which was misused forfiling the suit. 10. According to P.W.1, he does not know anything in person aboutthe execution of Ex.A.3. In the cross-examination, he has stated thatthe Managing Director of the appellant company Thiru. Krishnappa wasavailable at station and he had personal knowledge about the executionof Ex.A.3, however, for the reasons best known to the appellant, neitherthe said Managing Director nor any other person conversant with the factof execution of Ex.A.3 and for passing of consideration was examined. 11. Ex.A.4 is the alleged ledger of suit transaction maintained bythe appellant and the folio relating to the transaction was marked asEx.A.5. It is not in dispute that the appellant company is an income-taxassesse. However, it has been admitted by D.W.1 that there is noevidence, such as endorsement or seal for the verification of income-taxauthorities available in the ledger, marked as Ex.A.4 and therefore, asfound by the court below, the genuineness of Ex.A.4 is doubtful.12. As per the evidence of P.W.1, the respondent had depositedRs.50,000/- with the appellant, out of which on 10.11.1991, a sum ofRs.44,000/- was paid to him under Ex.A.3, but no such detail isavailable in Ex.A.3. Even in the plaint, the plaintiff has notspecifically stated anything that the amount was paid on the basis ofthe amount deposited by the respondent with the appellant. It is acategorical admission by P.W.1 that the main business done by theappellant was only chit transaction and for doing some other business,no general or special permission had been obtained from the Government.As per the evidence of P.W.1, the plaintiff, Lakshmi Srinivas Chit Fundsand Lakshmi Srinival Finance are different entities. At one stage of hisevidence, he has stated that both are different branches of the samecompany and no separate company was registered to perform financebusiness independently.13. Section 12 of Chit Funds Act, 1982 reads thus :" Prohibition of transacting business other thanchit business by a company – (1) Except with thegeneral or special permission of the StateGovernment, no company carrying on chit businessshall conduct any other business. https://hcservices.ecourts.gov.in/hcservices/ (2) Where at the commencement of this Act, anycompany is carrying on any business in addition tochit business, it shall wind up such other businessbefore the expiry of a period of three years fromsuch commencement :Provided that the State Government may, if itconsiders it necessary in the public interest or foravoiding any hardship, extend the said period ofthree years by such further period or periods notexceeding two years in the aggregate."14. As per Section 12 of Chit Funds Act, 1982, it is clear thatexcept with the general or special permission of the State Government,no company carrying on chit business shall conduct any other business.In the instant case, admittedly the plaintiff is a private limitedcompany carrying on chit business and P.W.1 has also deposed in hisevidence that neither general nor special permission of the StateGovernment was obtained to carry on any other business, other than chitbusiness.15. The Hon'ble Supreme Court in the decision, M/s. Shriram Chits &Investment (P) Ltd., vs. Union of India, reported in AIR 1993 SC 2063held as follows :" 33. This section creates a bar for a Companycarrying on chit to desist from carrying on any otherbusiness. Similar provisions in regard to the ban arecontained in S.8 of the Banking Regulation Act, 1949which restrain the banks from carrying on any otherbusiness. Sub-sec.(1) of S.12 of the Act, however,provides that "with the general or special permissionof the State Government" the chit company can carryon any business other than the chit business. Thissection is intended to leave discretion with theState Government to decide whether or not to allowthe chit company to do any other business..."16. According to the appellant, Ex.A.3, promissory note was notexecuted by the respondent in connection with the chit transaction, inwhich he was a subscriber and therefore, even according to theappellant, the suit promissory note is not related to chit transaction.As contended by the learned counsel for the respondent, according to theappellant, the suit is not based on chit transaction. There is a barunder Section 12 of Chit Funds Act, 1982, for a company carrying on chitto do any other business, without the general or special permission fromthe State Government. https://hcservices.ecourts.gov.in/hcservices/

17. As per the case of the appellant, the suit transaction is notrelated to chit business, however, there was no general or specialpermission obtained from the State Government for running financebusiness, since it is a business other than chit business and therefore,this Court is of the view that there is no error in the finding of thetrial court holding that the suit was not maintainable in view ofSection 12 of Chit Funds Act, 1982 and answer the first point fordetermination against the appellant.18. It is seen that P.W.1 has admitted in his cross-examinationthat the originals of Exs.A.3 and B.3 were also executed by therespondent in favour of M/s. Lakshmi Srinivas Finance & Investment.Ex.B.3 is the xerox copy of the promissory note said to have beenexecuted by the respondent for a sum of Rs.44,000/- on 10.11.1991. It isseen that the original of Ex.B.3 is different from Ex.A.3. In Ex.B.3also the address and other particulars are written by typewriter,however, within two lines, the address of the respondent has beenstated, whereas in Ex.A.3, the address is stated in three lines and thesignatures available in both of the promissory notes are different.Similarly, Ex.A.6, voucher is similar to that of original of Ex.B.4,voucher, dated 10.11.1991. Ex.B.4 is only a xerox copy and it is seenthat the format is different from Ex.A.6, however, both the sets ofdocuments have been admitted by P.W.1 in his evidence. There is noexplanation from the plaintiff, as to how on the same date, two separatepromissory notes, each for Rs.44,000/- with two separate vouchers forthe aforesaid amounts have been obtained by the appellant from therespondent herein.19. According to the learned counsel appearing for the respondent,the respondent was a regular subscriber for about 12 years in theappellant's chit company and he had been the successful bidder in threeoccasions and as requested by the appellant, he had signed and handedover the stamped blank promissory notes and also vouchers, which hadsubsequently filled by way of typing and misused by the appellant-company.20. The only witness examined on the side of the appellant, asP.W.1 to prove the execution of Ex.A.3 and passing of consideration hascategorically deposed that he did not know anything in person about theexecution of Ex.A.3, promissory note by the respondent and also passingof consideration. Even, he could not say whether he had gone to theoffice on the alleged date, 10.11.1991. Further, before instituting thesuit, there was no legal notice by the appellant for the reasons bestknown to them. Though the pre-suit notice is not mandatory, it is also afactor to decide the alleged transaction, while considering thegenuineness of the relevant documents, based on evidence. https://hcservices.ecourts.gov.in/hcservices/

21. It is not in dispute that the respondent herein had filed apetition, original of Ex.B.1 before the Consumer Disputes RedressalForm, Nilgris in C.O.P.No.13/94 against the appellant herein, based onthe fixed deposit made by the respondent for the period from 28.09.1989to 27.09.1993. On maturity, he claimed Rs.1,00,000/- from the appellant,who was the respondent therein. According to the respondent, no amountwas paid on 10.11.1991 by the appellant, much less than Rs.44,000/-. Thecopy of the counter filed by the appellant in C.O.P.No.13/94 has beenmarked as Ex.B.2, wherein the appellant had stated that the respondenthad obtained a loan of Rs.44,000/- and was also co-obligant for a sum ofRs.75,000/- obtained by one A.C.Ajja Gowder son of Chandra Ajja Gowderof Aravenu. In order to show that the respondent had been co-obligant,no supporting document has been produced by the respondent, though thesame was denied by him. Ex.B.4 is the pass-book issued by the appellant.According to the respondent, as D.W.1, the said pass-book was issued bythe appellant. 22. It is clear from the evidence, that Ex.A.3, promissory note isconnected with Ex.A.6, voucher, wherein it has been printed as signatureof subscriber. Further, Exs.B.3 and B.4 are the xerox copies of similardocuments for the very same amount on the very same date, which wouldprobablise the case of the respondent that after getting blanksignatures in various forms, the matters have been typed even withoutgetting any attestation. The evidence of P.W.1, who does not knowanything about the execution of Ex.A.3 and passing of considerationthereon would not help the case of the appellant / plaintiff. The trialcourt considering all these aspects in detail has held that theappellant /plaintiff has not established his case and as such notentitled to a decree as prayed for. The second point for determinationis answered accordingly against the appellant. 23. Considering the findings of the court below with reference tothe evidence both oral and documentary and in the light of the decisionof the Hon'ble Apex Court referred to above, this Court is of the viewthat there is no error or infirmity in the impugned Judgment, wherebydismissing the suit filed by the appellant.24. In the result, the appeal fails and accordingly, the same isdismissed. However, there is no order as to costs.Sd/Asst.Registrar/true copy/Sub Asst.Registrar https://hcservices.ecourts.gov.in/hcservices/ tsvnToThe District JudgeUthagamandalam. Copy ToThe Record Keeper,V.R.Section, High Court, Madras. A.S.No.1025 of 1996CK(CO)RVL 20.03.2008