Writ Petition No. 42570 of 2013 · The High Court
Case Details
- 1 - NC: 2025:KHC:11484 WP No. 42570 of 2013 R IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 18TH DAY OF MARCH, 2025 BEFORE THE HON'BLE MR JUSTICE SURAJ GOVINDARAJ WRIT PETITION NO. 42570 OF 2013 (GM-RES) BETWEEN: SRI. H. B. SHIVAKUMAR S/O. SRI. BASAPPA, AGED ABOUT 52 YEARS, R/AT. DOOR NO.541, 4th MAIN, 6th CROSS, 3rd STAGE, KESARA, MYSORE - 570 007. (BY SRI. GANAPATHI BHAT VAJARAHALLI, ADVOCATE) …PETITIONER Digitally signed by SHWETHA RAGHAVENDRA Location: HIGH COURT OF KARNATAKA AND: 1. SRI. GOKULAM CHITS AND FINANCE PVT., COMPANY LTD., HAVING ITS REGISTERED OFFICE AT: NO.28, MUTHUGRAMANI STREET, MAILAPUR, CHENNAI - 600 004. HAVING ITS BRANCH OFFICE AT: MAHARAJA SHOPPING COMPLEX, B.N.ROAD, MYSORE, REP. BY ITS MANAGER - 570 007. 2. SRI. R. RAMAKRISHNA RAJU, S/O. SRI. VENKATANARASIMHA RAJU, AGE MAJOR, R/AT. DOOR NO.506, 3RD STAGE, KESARE, MYSORE - 570 007. (BY SRI. H.K. SINGH, ADVOCATE FOR R1; SRI. R. RAMAKRISHNA RAJU, ADVOCATE FOR R2 SD) …RESPONDENTS - 2 - NC: 2025:KHC:11484 WP No. 42570 of 2013 THIS WP IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE ARBITRATION PROCEEDINGS INITIATED BY THE 1ST RESPONDENT IN ARBITRATION CASE NO.843/2010 AND CASE NO.874/2010 BEFORE THE ARBITRATION FOR CENTRAL, CHENNAI, CHIT FUNDS CASES COURT, CHENNAI AT ANN-J & K INITIATED BY 1ST RESPONDENT AGAINST THE PETITIONER AND ETC. THIS PETITION, COMING ON FOR PRELIMINARY HEARING IN 'B' GROUP, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE SURAJ GOVINDARAJ 1. The Petitioner is before this Court seeking for the ORAL ORDER following reliefs; the 1st Respondent "Issue WRIT of CERTORARI or any appropriate order quashing the Arbitration Proceedings initiated by in Arbitration Case No.843/2010 and Case No.874/2010 before the Arbitration for Central, Chennai, Chit Funds Cases Court, Chennai at ANNEXURE -J & K initiated by 1st respondent against the petitioner in the interest of justice and equity. "Issue WRIT of MANDAMUS or any appropriate direction to the 1st Respodent to take action against the property of the 2nd Respondent as per the Sale Deeds and Encumbrance Certificate at ANNEXURE - E. F. G & H in the interest of justice and equity. GRANT SUCH OTHER RELIEFS as this Hon'ble Court Deems fit to grant on the facts and circumstances of the case, in the interest of justice and equity." 2. The Petitioner claims to be a guarantor for the loan of Rs.5,00,000/- availed by respondent No.2 from - 3 - NC: 2025:KHC:11484 WP No. 42570 of 2013 respondent No.1. Respondent No.1 had earlier filed a suit in O.S.No.419/2008 before the Principal Civil Judge (Junior Division) at Mysore for recovery of a sum of Rs.4,65,131/-. In the said suit, an application under Order 23 Rule 3 of the Code of Civil Procedure, 1908, was filed stating that respondent No.2 had undertaken to pay the claim amount within 2 months from that date and as such, the Petitioner contends that the dispute between respondent No.1 and respondent No.2 had been settled and compromised, accordingly, the suit was dismissed. 3.
Legal Reasoning
It is contended that after withdrawal of the suit when respondent No.2 did not make payment of the amount, respondent No.1 could have sought for attachment of the property of respondent No.2, which not having been done, the respondent No.1 has initiated Arbitration proceedings in Arbitration Nos.843/2010 and 874/2010 for recovery of the said amount before the Arbitrator for Central Chennai Chit Funds Case Court, Chennai. - 4 - NC: 2025:KHC:11484 WP No. 42570 of 2013 4. The Petitioner, having received the notice apprehending that the Arbitrator appointed by respondent No.1 may not grant any relief to the Petitioner, has approached this Court. 5. The Petitioner contends that an illegal action has been taken by respondent No.1 against the Petitioner, and as such, this Court ought to exercise its powers and, under Articles 226 and 227 of the Constitution of India, issue a writ of certiorari and quash those proceedings. 6. Sri.Ganapathi Bhatt Vajarahalli, learned counsel for the Petitioner, submits that, 6.1. Respondent No.1 ought to have taken action against respondent No.2 borrower; instead of doing the same, respondent No.1 is proceeding against the Petitioner, who is a guarantor, which is not permissible. 6.2. There are enough and sufficient properties available of respondent No.2, which could be attached and brought for sale by respondent - 5 - NC: 2025:KHC:11484 WP No. 42570 of 2013 No.1 to secure the loans made by respondent No.1 to respondent No.2. 6.3. The matter had been compromised, and an application under Order 23 Rule 3 had been filed, so the question of initiating arbitration proceedings would not arise. 6.4. The Arbitrator having been appointed unilaterally, the Petitioner apprehends that the Petitioner will not get justice in the matter. 6.5. On the above basis, he submits that the petition is required to be allowed. 7. Sri.H.K.Singh, Learned counsel for respondent No.1 submits that: 7.1. The Arbitration Case No.843/2010 has been initiated by Respondent No.1 under Section 64 of the Chit Funds Act, 1982 and Rule 45 of the Tamilnadu Chit Fund Rules, 1984, which is a statutory remedy available for respondent No.1 – who is a Registered Chit Fund. - 6 - NC: 2025:KHC:11484 WP No. 42570 of 2013 7.2. There is no unilateral appointment of the Arbitrator as sought to be contended by the Petitioner under Section 21 of the Arbitration and Conciliation Act, 1996. The Arbitration under Section 64 of the Chit Funds Act, 1982 being a Statutory remedy, there being a designated Court namely - the Arbitrator for Central Chennai Chit Fund Case Court, Chennai before whom an application in Form-17 of Rule 45 of the Tamilnadu, Chit Fund Rules, 1984 has been filed, the said Court being the designated Court would act in terms of the Chit Funds Act, 1982 and Tamil Nadu Chit Fund Rules, 1984. 7.3. The Presiding Officer who is called Arbitrator of the said Court is not a personal choice or appointment of Respondent No.1 but is a designated Officer under the said Rules of 1984. As such, it is submitted that no allegations could be made regarding the - 7 - NC: 2025:KHC:11484 WP No. 42570 of 2013 Petitioner not getting justice from the Arbitrator. 7.4. As regards the application under Order 23 Rule 3 of CPC, he submits that there was only a memo which had been filed and it is the said memo which has been taken note of by the Court and recording the memo, the suit has been dismissed as not pressed. He refers to the said document to contend that it was titled as “Memo” subsequently, the title has been struck off and titled as a Compromise Petition. The same was never to be treated as a compromise petition; as such, the Court itself treated it as a memo. 7.5. There is no compromise that has been recorded in the said suit, nor has a compromise been entered into in the said suit. There being no finding or disposal of the suit on merits, there is no embargo for initiating of Arbitral proceedings under Section 64 of the Chit Funds Act, 1982. - 8 - NC: 2025:KHC:11484 WP No. 42570 of 2013 On the basis of the above, he submits that the present petition is required to be dismissed. 8. Heard Sri.Ganapathi Bhatt Vajarahalli the learned counsel appearing for Petitioner and Sri.H.K.Singh the learned counsel appearing for respondent No.1. Perused the records. 9. The points that would arise for consideration in present matter are; (ii) (i) Is the initiation of proceedings before the designated Court under Section 64 of the Chit Funds Act, 1982 proper? Is there a compromise which has been entered into between the parties in O.S. No. 419 / 2008 disentitling Respondent No.1 further proceedings? initiating any from (iii) What order? 10. ANSWER TO POINT NO.1: Is the initiation of proceedings before the designated Court under Section 64 of the Chit Funds Act, 1982 proper? 10.1. It is not in dispute that, respondent No.1 is a registered Chit Fund under the Chit Funds Act, - 9 - NC: 2025:KHC:11484 WP No. 42570 of 2013 1982. Section 64 of the Chit Funds Act, 1982 reads as under: " 1. Notwithstanding anything contained in any other law for the time being in force, any dispute touching the management of chit business shall be referred by any of the parties to the dispute, to the Registrar for arbitration if each party thereto is one or the other of the following, namely:— (a)a foreman, a prized subscriber or a non-prized subscriber, including a defaulting subscriber, past subscriber or a person claiming through a subscriber, or a deceased subscriber to a chit; (b)a surety of a subscriber, past subscriber, or a deceased subscriber. Explanation—For the purposes of this sub-section, a dispute touching the management of a chit business shall include,— (i)a claim by or against a foreman for any debt or demand due to him from a subscriber, or due from him to a subscriber, past subscriber or the nominee, heir or legal representative of a deceased subscriber whether such debt or demand is admitted or not; (ii)a claim by a surety for any sum or demand due to him from the principal borrower in respect of a loan by a foreman and recovered from the surety owing to the default of the principal borrower, whether such sum or demand is admitted or not; and (iii)a refusal or failure by a subscriber, past subscriber or the nominee, heir or legal representative of a deceased subscriber to deliver possession to a foreman of land or any other asset resumed by him for breach of conditions of the assignment. (2)Where any question arises as to whether any matter referred to for the award of the Registrar is a dispute or not for the purposes of sub-section (1), the same shall be decided by the Registrar whose decision thereon shall be final. - 10 - NC: 2025:KHC:11484 WP No. 42570 of 2013 (3)No civil court shall have jurisdiction to entertain any suit or other proceedings in respect of any dispute referred to in sub-section (1)." 10.2. A reading of Section 64 would indicate that notwithstanding anything contained in any other law for time in force any dispute between the parties described under Clause (a) and (b) thereof could be referred to the Registrar for Arbitration. 10.3. The definition of a party in terms of Clause (a) includes a defaulting subscriber, past subscriber or a person claiming through a subscriber, as also a deceased subscriber; under Clause (b) a surety of a subscriber, past subscriber or a deceased subscriber is included. 10.4. The Petitioner would come under Clause (b) being a surety of the subscriber, viz., respondent No.2. That being the case, the proceeding which has been initiated by respondent No.1 is a Statutory Arbitration as recognised under Section 64 of the Chit Funds - 11 - NC: 2025:KHC:11484 WP No. 42570 of 2013 Act, 1982, in fact, the document which has been being produced by the Petitioner at Annexure-J would indicate that an application under Form-17 has been submitted by respondent No.1 under Section 64 of the Chit Funds Act as per Rule 45 of the Tamil Nadu Chit Fund Rules, 1984 before the Arbitrator for Central Chennai Chit Funds Cases Court. 10.5. Rule 45 of the Tamil Nadu Chit Fund Rules, 1984 is reproduced hereunder for easy reference: “45. Reference of dispute.—A reference of a dispute under Section 64 shall be made in writing to the Registrar in form XVII Wherever necessary, the Registrar may require the party referring the dispute to him to produce a certified copy of the relevant records on which the dispute is based and such other statements or records as may be required by him, before the proceeding with the consideration of such reference.” - 12 - NC: 2025:KHC:11484 WP No. 42570 of 2013 10.6. A perusal of Rule 45 would indicate that a reference of dispute under Section 64 shall be made in writing to the Registrar in Form-17 and the Registrar may require the party referring the dispute to produce a certified copy of the relevant records on which the dispute is based and such other statement of records as may be required before proceeding with the consideration of such reference. 10.7. In the present matter what is filed is Form-17 by respondent No.1 for reference to Arbitration to the aforesaid Court, which is so permitted under Section 64 and Rule 45 afore extracted. The Arbitration is not in terms of the Arbitration and Conciliation Act, 1996 but, is a Statutory Arbitration in terms of Section 64 of the Chit Funds Act, 1982. Hence, the contention of the Petitioner apprehending that the Arbitrator is unilaterally appointed by the respondent No.1 and that the Petitioner may not get any relief - 13 - NC: 2025:KHC:11484 WP No. 42570 of 2013 from the said Arbitrator as if to contend that a private Arbitrator has been appointed is completely misplaced and misconceived. 10.8. This Court stops short of attributing any malafides and motives to the Petitioner on such statement being made, the Petitioner knowing fully well that the notice has been issued under Form-17 of the Tamil Nadu Chit Funds Rules and Chit Fund Act 1982 has sought to contend otherwise, and the proceedings have been stayed from the year 2013 till now, depriving Respondent No.1 of the right to get its grievance adjudicated. 10.9. In that view of the matter, I answer point No.1 by holding that the Arbitration proceedings initiated by respondent No.1 is not a private Arbitration proceeding but is a statutory Arbitration proceeding as regards which Petitioner cannot have any objection and or grievance. The Petitioner, being a surety to the - 14 - NC: 2025:KHC:11484 WP No. 42570 of 2013 subscriber, is covered under Clause (b) of Sub- section (1) of Section 64 and would be bound by any arbitral proceedings and as such, the Arbitration Proceeding initiated by Respondent No.1 before the designated Court under Section 64 of the Chit Funds Act, 1982 is proper and in accordance with law. 11. ANSWER TO POINT NO.2: there a compromise which has been entered into between the parties in O.S. No. 419 / 2008 disentitling Respondent No.1 from initiating any further proceedings? Is 11.1. A very vehement contention has been taken that there is a compromise which has been entered into in O.S.No.419/2008 by referring to document title as compromise petition filed under Order 23 Rule 3 of the CPC at Annexure- C to the petition. It is on that basis that it is contended that once a compromise has been entered into O.S.No.419/2008, the question of initiating any other proceedings being - 15 - NC: 2025:KHC:11484 WP No. 42570 of 2013 arbitration or otherwise would not arise. The Petitioner himself has produced the order sheet in the said suit in O.S.No.419/2008 and the suit came to be disposed on 4/12/2012, in the following manner: "The counsel of plaintiff has filed a memo. Not pressed the suit against the defendant. Heard the plaintiff, in view of the memo filed, the suit against the defendant is dismissed as not pressed. Return of Court fee to plaintiff.” 11.2. Reading of the above Order dated 04.12.2012 does not indicate any compromise being recorded by the Court, but only indicates that the suit has been dismissed on the basis of a memo which has been filed. A memo having been filed there is a writing in said memo at Annexure-C "under Order 23 Rule 3 of CPC, 1908", which appears to be in a completely different handwriting than that in which the memo has been written. - 16 - NC: 2025:KHC:11484 WP No. 42570 of 2013 11.3. It is on the basis of the said writing that the counsel for the Petitioner has contended that there is a compromise which has been entered into in O.S.No.419/2008 which apart from being contrary to the order passed in the said proceedings which has been produced by Petitioner at Annexure-D is one which has not been recorded by the trial Court. 11.4. That being the case, I am of the considered opinion that the submission made and the contention taken that there is a compromise which was entered into in O.S.No.419/2008 is completely malafide and not in terms of the records produced before the Court. In fact, the same is contrary to the records. 11.5. What has been accepted by the trial Court is a memo and there is no compromise which has been recorded. The submission made by the Counel for the Petitioner is completely misconceived, contrary to records and malafide. - 17 - NC: 2025:KHC:11484 WP No. 42570 of 2013 11.6. Hence, I answer point No.2 by holding that there being no compromise which has been entered into in O.S.No.419/2008, there is nothing which prevented respondent No.1 to initiate proceedings under Section 64 of the Chit Funds Act, 1982 read with Rule 45 of Tamil Nadu Chit Funds Rules, 1984. 11.7. In view of the above, I am the considered opinion that there are no grounds made out, the petition stands dismissed. Though costs could have been imposed, I refrain from doing so, considering that the Petitioner is a Guarantor. SD/- (SURAJ GOVINDARAJ) JUDGE List No.: 1 Sl No.: 23 AMM