Kerala High Court · 2008

K.PADMANABHAN NAIR, J.-------------------------------A.S.No.306 of 1997 -------------------------------Dated this the 8th February, 2008.J U D G M E N TThe defendants in O.S.No.822/1990, on the file of theSubordinate Judge's Court, Thrissur, are the appellants. The appeal isfiled against the decree and judgment passed by the court belowallowing the respondent, a chitty firm, to recover an amount ofRs.61,317/= with interest at the rate of 6% per annum onRs.45,000/= from the date of suit till the date of realisation. 2. The short facts necessary for the disposal of theappeal are as follows. The respondent, a chitty firm, having its headoffice at Thrissur, filed the suit for recovery of money. It was allegedthat defendants 2 and 3 were partners of the first defendant firm, andthe firm had joined one ticket in the 6th Day Quarterly Chit conductedby the plaintiff company from its Bangalore Branch from 6.8.1981.The kuri was bid in auction and the kuri amount was disbursed to theappellants, on their executing the kuri security bond, dated 11.8.1986.It was further averred that defendants committed default in paymentof the instalments from 26th instalment due on 6.11.1987. There were A.S.No.306/1997212 defaulted instalments. So, the suit for recovery of the balanceamount due under the security bond. The defendants filed a writtenstatement contending that the plaintiff company does not have abranch at Bangalore. It was further contended that the entire kuricommenced and conducted in the State of Kerala. It was alsocontended that the suit is premature, since the chitty has notterminated on the date of filing of the suit. The suit was barred bylimitation. Since, the kuri was conducted in the State of Kerala, afterthe commencement of Chitties Act, without the registering the same,the entire transaction is illegal and the security bond executed is a voidone. Hence, respondent-plaintiff is not entitled to recover theamount. It was further contended that in the Memorandum andArticles of Association, there is no provision to start a Kuri from theState of Karnataka. Hence, they prayed for a dismissal of the suit. 3. On the side of the plaintiff, PW.1 was examined andExts.A1 to A9 were proved. 4th defendant gave evidence as DW.1.Ext.D1 marked and proved on the side of defendants. The court belowfound that the plaintiff company had a branch at Bangalore anddisputed chitty was being conducted from Bangalore and hence, thereis no illegality in filing the suit. It also found that foreman has a right A.S.No.306/19973to recover the amount in lump, when the subscriber commits default ofthe future subscription, after bidding the amount. Hence, a decreewas passed. Challenging that decree and judgment, this appeal isfiled. 4. The main contention raised in this appeal is that thecase of the plaintiff in the plaint was that the kuri mentioned in theplaint was started on 6.8.1981 from Bangalore Branch, but PW.1himself had admitted that Bangalore Branch was established only inthe year 1982. It was contended that the plaintiff had not producedany document to show that Bangalore branch was functioning on6.8.1981, in spite of a petition to produce necessary documents. It isalso argued that plaintiff had filed two affidavits, which werecontradictory and mutually distructive. It is also argued that suit waspre-mature and regarding the defaulted instalments, the suit wasbarred. 5. It is true that the appellants had filed petitions callingupon respondent-plaintiff to produce certain documents. Plaintiffproduced Exts.A6 & A6(a), the rent receipts. It is true that thosereceipts are for a period subsequent to the filing of the suit. They also A.S.No.306/19974produced Ext.A7 to show that they paid licence fee to the BangaloreCorporation for conducting a Kuri Company. The mere failure toproduce documents which were kept in the Bangalore office on6.8.1981 alone is not a ground to hold that that branch was notactually functioning. Ext.A1 is the security bond executed by theappellants admitting the existence of a branch at Bangalore. Thisadmission was not withdrawn or explained. The plaintiff producedExt.A10 authorisation letter, which was also issued to the BangaloreBranch. It is true that at the time of oral evidence, PW.1 deposed thatBangalore branch started only in the year 1982. Merely because of astray sentence in the deposition, the suit cannot be dismissed, in viewof other evidence available on record. 6. Even if the contention of the appellants that chittywas conducted at Kerala without obtaining permission, the transactionconducted cannot be declared as void. In Nadarajan v. Nadarajan(1999 (2) KLT 512), a learned Single Judge of this Court consideredthe entire matter and held that even if a person conducts a chity inviolation of Section 3(1) of the Chitties Act, 1975, the transaction isnot void. It was further held that it is not opposed to public policy andwill not come within Section 23 of the Contract Act. A.S.No.306/19975 7. The fact that appellants were subscribers of a chittyconducted by the respondent is not denied. The fact that they pricedthe chitty amount and received the same, after executing Ext.A1security agreement was also not denied. Ext.A1 agreement isenforceable. So, even accepting the contention of the appellants thatchitty was conducted by the appellant from Kerala State in violation ofSection 3(1) of the Chitties Act, the respondent is entitled to enforceExt.A1 security bond. 8. It is argued that the suit was pre-mature. In John v.Oriental Kuries Ltd. (1994 (2) KLT 353), it was held that when asuccessive bidder who prized chitty after executing a bond commitsdefault, the firm can realise the entire amount in a lump. So, thatcontention is also without any merit. It is argued that there is noprovision in the Memorandum and Articles of Association, whichauthorises the company to start business from Karnataka. Ext.A8 isthe Memorandum and Articles of Association, in which there is a clausewhich authorises the Company to start business any where in India.The learned counsel for the appellants further argued that the conductof the chitty from Bangalore branch is a violation of Section 13 of theCompanies Act. The evidence on record shows that respondent A.S.No.306/19976Company is a Trading Company. So, the provisions contained inSection 13(1) of the Companies Act has no application as held inJohn's case (supra). So, there is no merit in the contentions raised bythe appellant, and the appeal is only to be dismissed. In the result, the appeal is dismissed. K.PADMANABHAN NAIR, JUDGEnj. K.PADMANABHAN NAIR, J.-------------------------------A.S.No.306 of 1997 J U D G M E N TDated: 8th February, 2008. -------------------------------