Madras High Court
M/S.Rajarathnam Construction (P) Ltd vs M/S.Ganapathy Funds on 21 January, 2025
Author: P.Velmurugan
Bench: P.Velmurugan
Civil Suit No.926 of 2017
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated: 21.01.2025
Coram:
THE HONOURABLE MR.JUSTICE P.VELMURUGAN
Civil Suit No. 926 of 2017
(Commercial Division suit)
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M/s.Rajarathnam Construction (P) Ltd.,
Rep. by its Managing Director
A.Rathinam
No.20, Anderson Road
Ayanavaram
Chennai - 600 023. .. Plaintiff
Vs.
1. M/s.Ganapathy Funds
Partnership Firm,
Rep. by its Managing Partner
now amended as
M/s.J.S.Ganapathy Funds
Rep. by its Sole Proprietor
J.Srinivasan
2. J.S.Srinivasan
Proprietor
M/s.Ganapathy Funds
3. Jayaraman Srinivasan
Proprietor
M/s.Ganapathy Funds
4. Vichoor Sundaram Jayaraman
Page No.1/73
https://www.mhc.tn.gov.in/judis
Civil Suit No.926 of 2017
Partner
M/s.Ganapathy Funds
5. Thiyagarajan Nataraja
Partner
M/s.Ganapathy Funds
6. Natarajan Sridhar
Partner
M/s.Ganapathy Funds
(designation of the defendants,
amended, Vide order dated 01.07.2019
in Application No.4150 of 2019)
.. Defendants
Prayer:-
Civil Suit has been filed under Order VII, Rule 1 of CPC read with Order IV
Rule 1 of the Original Side Rules of this Court, praying for judgment and decree
against the defendants :
i) directing the defendants to pay a sum of Rs.4,83,72,278/- towards the
payment of chit amount to the plaintiff together with interest @ 18% per annum
from the date of plaint till the date of realization; and
ii) for costs of the suit.
For Plaintiff : Mr.K.Bijay Sundar
For Defendants : Mr.K.N.Nataraaj for D1 to D3
Mr.G.Thyagarajan for D4 to D6
(D4 to D6 - given up, vide endorsement
made by the learned counsel for the plaintiff
on the plaint on 03.11.2022)
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Civil Suit No.926 of 2017
JUDGMENT
The suit is instituted by the plaintiff-Company against the defendants for recovery of a sum of Rs.4,83,72,278/- towards the payment of Chit amount to the plaintiff-Company, together with interest @ 18% per annum from the date of plaint till the date of realisation and for costs of the suit.
2. The averments made in the plaint are as follows :-
(a) The first defendant, through its partners, who are defendants 2 to 6, had floated a firm known as Ganapathy Funds and carrying on business in Chit Fund and also accepted the deposits from the public. In the year 2013, the second defendant approached the plaintiff and informed about their business activities and giving a false glowing reports of the activities of the first defendant-group of companies and insisted the plaintiff to invest in the Chits conducted by the first defendant-firm and the second defendant promised to pay high returns by way of dividend on the investment to be made by the plaintiff and also assured the plaintiff-Company that they will be entitled to prize amount/maturity amount which would be promptly settled without any delay.
(b) The second defendant-Chit Fund group informed that a Chit Fund Page No.3/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 Group was about to commence in the month of May 2013 and the duration of the chit was 20 months therefrom. The second defendant also assured the plaintiff that the group of which the plaintiff subscribes, was registered with the Registrar of Chits under the Chit Funds Act, 1982 and the Tamil Nadu Rules and the plaintiff need not have apprehension regarding payment of the matured amount of the chit prize amount.
(c) Due to the words and assurances of the second defendant, i.e., it was assured by the second defendant that a substantial sum upon conclusion of 20 months period, could be beneficially invested in the plaintiff's construction business, thereby reaping further profits. In view of the repeated requests made by the second defendant to invest in their business of Chit Fund, the plaintiff, after much hesitation, subscribed to a Chit which was to commence on 05.05.2013, ending on 05.12.2024, the monthly subscription amount to be remitted by the plaintiff, was fixed as Rs.20 lakhs and the maturity value was Rs.400 lakhs, i.e. Rs.4 crores. The second defendant is managing the affairs of the first defendant in his capacity as Proprietor (Managing Parter, amended as Proprietor - as per order dated 01.07.2019 in Appln.No.4150 of 2019).
(d) After commencement of the above said chit, the plaintiff had been regularly remitting the monthly subscription towards the chit, less the sanctioned dividend. When the plaintiff-Company wanted to participate in the bid during the Page No.4/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 months of 15, 16, 18 and 19 of the chit duration, the second defendant persuaded the plaintiff-Company not to bid, as there was demand for the prize amount and participation of the plaintiff would only increase the bid amount. The second defendant cleverly suggested the plaintiff to wait for the last chit, when there would be no competition and the entire value of the chit, less the foreman's commission, would be paid to the plaintiff.
(e) After completion of the chit in the month of December 2014, the plaintiff approached the defendant(s) to settle the maturity value of the chit payable to him. But the second defendant kept on avoiding payment, claiming that several members had failed to make payments and that there were several other subscribers, who were in default for several months and assured the plaintiff that once outstanding collections were received, the same would be settled to the plaintiff. Apart from the above said chit scheme, the plaintiff had also invested in the other concerns of the first defendant-group with lesser value, but however, no payments were released, despite all the chits having been completed.
(f) The plaintiff-Company had been repeatedly requesting the defendants to make payment for the completed chit as the plaintiff-Company was facing difficulties with their various Bankers, who wanted to know as to why capital funds to the tune of nearly Rs.600 lakhs were locked up with the first defendant- Page No.5/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 group of firms and due to the above said aspect, the Banks refused to extend further credit to the plaintiff, until and unless the amount lying with the first defendant and their associate Companies were ploughed back into the plaintiff's Bank account. A worse situation arose when the Income Tax Department refused to allow deduction of interest on the amount receivable from the defendant- Companies and also threatened the plaintiff with penal proceedings. Hence, according to the plaintiff-Company, they had been unnecessarily plunged into a huge financial crisis for want of adequate liquid fund for the day-to-day business activities.
(g) Inspite of repeated requests and demands made by the plaintiff- Company, the second defendant, on 27.06.2015, admitted their liability in respect of the chit having a maturity value of Rs.400 lakhs and issued joint statement of accounts, signed by both the plaintiff and the defendant(s). As per the statement of the first defendant, dated 27.06.2016, the first defendant had acknowledged that the total value of the chit that had been subscribed by the plaintiff as Rs.400 lakhs and after making all necessary adjustments, a balance amount of Rs.3,48,00,200/- as due and payable to the plaintiff. According to the plaintiff, this acknowledgement was only in respect of the chit having a value of Rs.400 lakhs.
(h) The defendant(s) had, in response to the plaintiff's letter, dated Page No.6/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 12.12.2015, acknowledged that M/s.Ganapathy Funds was liable to pay Rs.4,48,53,310/- as on 08.12.2014 to the plaintiff-Company in respect of various chit transactions. However, the said amount only represented the money remitted by the plaintiff, less, dividend, which had not been the actual maturity value of the respective chits. Despite the second defendant acknowledging the first defendant being debt on behalf of the defendant-firm, they had failed to make payment citing usual financial crisis that was faced by the chit funds and on the same day, the sister concern of the defendant, namely Shri.Sarvalakshmi Chit Funds India Pvt. Ltd., had acknowledged its liability to the tune of Rs.43,27,000/- due and payable to the plaintiff. But, no payment was forthcoming and instead, the usual excuse of financial crisis was put-forth. By the very same acknowledgement by both the companies, which offered to make over the property in lieu of the money due, which offer was declined by the plaintiff- Company, in view of their stagnating land bank, due to lack of liquid funds to develop the available land.
(i) By letter dated 04.10.2016 and 13.10.2016, it was once again called upon that the first defendant to comply with the earlier promise and assurances and also highlighted the financial crisis faced by the plaintiff-Company, besides the objections and attitude of their Bankers, besides serious issues with the Income Tax Department. The defendant(s) had also acknowledged the receipt of Page No.7/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 a sum of Rs.70 lakhs remitted by the first defendant through RTGS in the account of the plaintiff between 24.03.2016 and 29.06.2016, which had been adjusted towards the dues of other chits.
(j) The second defendant, by their letter dated 14.10.2016, replied to the plaintiff a letter acknowledging the liability, but expressed their inability to make immediate payment by giving every possible excuse available and once more assuring the plaintiff that their account would be settled at the earliest possible opportunity. Once again, the plaintiff, by their communication, dated 14.11.2016, called upon the second defendant to make payment, for which, in turn, by letter dated 26.11.2016, the second defendant had reiterated their liability and cleverly blamed the Government demonetization policy, as the reason for non-payment of the dues payable by the first defendant and once again, the defendants had admitted their liability towards the plaintiff and pleaded for further time to make payment.
(k) Having waited patiently, the plaintiff no longer gave credence to the defendant(s) repeated assurances of re-payment. More than a year had passed without a sigle rupee having been repaid. The last payment being on 23.12.2016 for Rs.10 lakhs, besides the earlier payment of Rs.70 lakhs, totalling for a sum of Rs.80 lakhs. As on date, the liability of the chit conducted by M/s.Ganapathy Funds, the first defendant stands at Rs.3,48,20,000/-, which is due and payable Page No.8/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 as per the ledger extract, dated 27.06.2015, which was confirmed on 27.06.2015 by mutual determination of the amount. The plaintiff-Company, having waited, had also granted indulgence, left with no other alternative, had issued a legal notice to the second defendant through their counsel, on 19.04.2017, for which, the defendant(s) through their counsel, had issued a reply to the plaintiff's counsel as well as a copy marked to the plaintiff, in which, the second defendant had accepted their liability and also prayed to grant sufficient time to make payments and for the reply, dated 22.04.2017, the plaintiff's counsel, had issued re-joinder, dated 25.05.2017, for which, the second defendant had rushed to the City Civil Court by filing a suit against the plaintiff in O.S.No.2285 of 2017 on the file of XI Assistant City Civil Court at Chennai, seeking relief against the plaintiff to grant an order of mandatory injunction to furnish statement of account for the period from 2013 to 2017 duly authenticated to the second defendant and also perpetual injunction restraining the plaintiff or their agents, from in any way interfering with the peaceful running of the business of the second defendant herein.
(l) The defendant(s) having accepted the liability, had successfully dragged the issue for the past more than two years without making any payment and after repeated requests and demands, the defendants had paid a sum of Rs.80 lakhs in respect of other chit transaction and in order to avoid the Page No.9/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 payment, the second defendant had filed the suit before the City Civil Court for injunction when admittedly the plaintiff has not made any attempt to interfere with the affairs of the defendants. The said suit itself is not maintainable, in view of the legal bar contained in Section 69 of the Indian Partnership Act, as the constitution of the defendant had not been disclosed.
(m) The second defendant, having admitted the liability of the first defendant-firm, on more than one occasion, cannot, in law, go back on the undertaking and seek for accounts. The undertaking dated 27.05.2015 had been made only after a due verification of the accounts and the defendants liability had been mutually agreed upon. Hence, the defendants cannot now dispute the undertaking relating to their admitted liability towards the plaintiff for Rs.3,48,00,200/-.
(n) Inspite of repeated requests and plea, the defendants have not come forward to discharge their admitted liability towards the plaintiff. The plaintiff had bona-fidely entered into the chit transaction with the defendant(s) only on the basis of the assurances of the second defendant. According to the plaintiff- Company, they are unable to even ascertain from the defendant chit firm as to whether they are registered under the Chit Funds Act and the Tamil Nadu Chit Fund Rules.
(o) The defendant(s) are due and liable to pay the plaintiff Page No.10/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 Rs.3,48,00,200/- towards the value of the chit subscribed to pay the plaintiff, which chit was conducted by the first defendant. The second defendant, having admitted the liability on behalf of the first defendant, had no defence in the present suit. Hence, this suit has been filed for recovery of a sum of Rs.3,48,00,200/- jointly and severally from the defendant, together with interest at the rate of 18% per annum, as the transaction being commercial one. Till date, the accrued interest on the principal amount of Rs.3,48,00,200/- from 27.06.2015 being the date of admission of the liability, which comes to Rs.1,35,72,078/- at the rate of 18% per annum. (The relief claimed in the plaint is Rs.3,48,00,200 + Rs.1,35,72,078/- = Rs.4,83,72,278/-.)
3. The third defendant has filed written statement, and the same was adopted by the first and second defendants. The crux of the written statement is:
3.1. The suit is not maintainable because of mis-joinder of parties and mis-description of the parties, without any basis of footing.
3.2. The third defendant is the Proprietor of M/s.J.S.Ganapathy Funds and it had been wrongly described as M/s.Ganapathy Funds, a partnership firm, represented by its Managing Partner as the first defendant. The second defendant is shown as J.S.Srinivasan, Managing Partner of M/s.Ganapathy Funds.Page No.11/73
https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 The third defendant is Jayaram Srinivasan, Managing Partner of M/s.Ganapathy Funds. Further, J.Srinivasan (son of Jayaraman) is the sole proprietor of M/s.J.S.Ganapathy Funds. The proprietary concern of M/s.J.S.Ganapathy Funds, registered as Document No.855 of 2011 on the file of the Sub-Registrar Office, Sembium, dated 05.09.2011, is also filed in this case.
3.3. The constitution of the parties, viz., defendants 1 to 3 is not correct and the suit is not maintainable. The name and description of the defendants, as given in the cause title, are wrong, inasmuch as the name of the third defendant. Ergo, the very foundation itself is not sustainable in the eye of law. The existence of the firm, as described in the cause title, is not founded.
3.4. There has to be a right of relief against the party in respect of the matters involved in the suit. Only then, the Court could pass a decree. In the absence of such a clear and unambiguous identity of parties, no decree could be passed in illusion. The re-joinder of parties to the suit is arrayed as envisaged under the code. Where there are two or more persons having been joined as one suit, but the right to relief alleged to exist against such defendant, will not arise out of the same act or transaction and if separate suits are brought against each defendant, no common question of fact or law could have arisen and hence, there is mis-joinder of defendants. In this regard, the third defendant relies on a judgment of the Honourable Supreme Court reported in AIR 1966 SC 1271 (State Page No.12/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 of Orissa Vs. Shyam Sundar Patnaik).
3.5. The cause of action is multi-fariousness. Where in a suit, there are two or more defendants or two or more causes of action, the suit would be bad for mis-joinder of defendants and if there is different causes of action which are joined against different defendants, separately, such a mis-joinder will lead to multi-fariousness. In this regard, the third defendant relies on the decision of the Supreme Court reported in 1992 (2) SCC 524 (Ramesh Hiranand Kundammal Vs. Municipal Corporation, Greater Bombay).
3.6. The defendants 4 to 6 are un-necessary parties and they have been joined without any causes of action against them and further, without any allegations against them. The plaintiff has not averred anywhere in the pleading regarding their involvement in the alleged transaction between them and that of the plaintiff and the first defendant. They have been added as a party under the presumption that the first defendant is a partnership-firm. The presence of the defendants 4 to 6 is not necessary in resolving the matters of alleged controversy so far as their rights and interest of the parties actually before it.
3.7. To allow a limited Company to sue in the business name (proprietary concern) is an in-road upon the Code of Civil Procedure (i.e CPC) and that the suit would not be competent against the defendant(s), which has no legal basis and no legal character. It is only because an individual or a body of individuals Page No.13/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 carry on business in a certain name that their compendious name is recognised under the provisions of Order 30 of CPC so that it is known that the legal persons are the persons sued in that name. If a suit is filed against the name of either a proprietary concern or an unregistered partnership firm, the suit is not maintainable and is incompetent. Further, the sole proprietary concern is not a person within the meaning of Order 30 of CPC. The CPC does not recognise a trading name, but it recognises only the individual persons who are legal entities carrying on trade in a name. In this regard, the third defendant relies on a judgment of a Division Bench of Calcutta High Court, reported in AIR 1969 Calcutta 496 (DB) (Modi Vanaspati Manufacturing Company Vs. Katihar Jue Mills (P) Ltd.) 3.8. The suit is not maintainable, as Order 6 Rule 3 CPC had not been complied with.
3.9. The suit is not maintainable, as it is not filed in compliance of Order 29 Rule 1 of CPC.
3.10. The plaintiff had not adduced any scrap of paper to show that the first defendant, through their partners, being defendants 2 to 6, floated a firm in the name of the first defendant and carried on business in the Chit Fund and also accepted the deposits from the public. The first defendant is not a partnership firm and that the first defendant as a sole proprietary concern, has not Page No.14/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 conducted any chit fund business and accepted any deposits from the public. The plaintiff-Company has not filed any documentary evidence such as chit pass- book, subscription receipt, chit agreement, etc., to prove their claim. The third defendant, at no point of time, had given any false glowing reports of the activities of the first defendant. While the first defendant is the sole proprietary concern, the question of the first defendant-group of companies, and as such, insisting the plaintiff to invest in the chits conducted by the first defendant-group and promise by the second defendant to pay high returns by way of dividend on the investment, does not arise. It is only a pigment of imagination of the plaintiff to narrate such story in the plaint. When the status of the parties is misnomer, the entire pyramid of cause of action pleaded in the plaint, is demolished as pyramid of cards collapse, as no case is made out.
3.11. The plaintiff is not sure of identity of parties as stated in the cause title, assuming without admitting the same that the first defendant is a partnership firm and in a partnership firm, there cannot be six managing partners. When the first defendant is a sole proprietary concern, there can be only one proprietor, i.e. the third defendant and so, the second defendant is a fictitious person. No suit can be laid against a fictitious person, except a deity, that too, it has to be represented by the Trustee/E.O. Admittedly, except the third defendant, no other defendant has any link/involvement in the transactions Page No.15/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 allegedly took place between the plaintiff and that of the third defendant. At no point of time, the second defendant, who is non-est, had informed the plaintiff that they are going to commence a Chit Fund group in the May 2013 and the duration of the chit was 20 months there-from. There is no assurance that the plaintiff is a registered under the Chit Fund Act and the plaintiff need not have any apprehension regarding the payment of the matured amount of the chit price amount. The plaintiff has not filed any piece of document to sustain such averment. The plaintiff-Company is bereft of requisite material details.
3.12. While in the cause title, where all the defendants are shown as managing partners of the first defendant, they choose to aver that the second defendant is managing the affairs of the first defendant in his capacity as managing partner. No document is filed along with the plaint to bring out the fact that the alleged chit commenced on 05.05.2013 and ended on 05.12.2014. Not even a single receipt, acknowledging monthly subscription amount is remitted by the plaintiff. The plaintiff had made a concocted story for the plaint so as to make out a case. As the plaintiff is a non-est entity, the question of avoiding payment will not arise. The allegation that the first defendant-group concern made no payment inspite of all the chits, had been completed, is false. The entire transaction between the plaintiff and the third defendant, is one-to-one in individual capacity.
Page No.16/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 3.13. As the third defendant is the sole proprietor of the first defendant, the necessity of the associate Companies of the first defendant, ploughed back into the plaintiff's Bank account, and the same is unimaginable. The Income Tax Department refused to allow deduction of interest on the amount receivable from the defendant-Companies and they threatened with the penal proceedings, which are irrelevant which the plaintiff should know. The third defendant had not acknowledged the confirmation of the balance as on 31.03.2015 as per the alleged letter, dated 27.06.2015 executed by the second defendant and a ledger abstract on the very same day allegedly signed by the third defendant. A cursory comparison of the two fabricated documents filed along with the plaint, will bring out the factum that while the letter dated 27.06.2015 is typed in a white paper and above named J.S.Srinivasan, in which the third defendant's signature appears. While in the ledger abstract, the signature of the third defendant appears above the name of J.Srinivasan, the ledger abstract is also typed in a white papers and without any authentication by the competent Auditor recognised under the Income Tax Act. The third defendant denies execution of those documents. The third defendant is seriously disputing the genuineness of these two documents, since it is fabricated on the white paper where the signature of the third defendant for various other reasons, is obtained in blank. The status of either J.S.Srinivasan or J.Srinivasan is revealed in those documents. Page No.17/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 Further, even on the address, it is simply stated M/s.Ganapathy Funds, and its constitution is not found. In order to make out a false case, these two documents are created, when the plaintiff is embolden enough to approach this Court with unclean hands.
3.14. A letter was sent on 12.12.2015 by the plaintiff to the first defendant with no constitution details in a white paper, dated 12.12.2015, wherein, it is alleged that the first defendant is liable to make payment of a sum of Rs.4,48,53,310/-. The alleged letter is in a white paper and it is not even signed by the Managing Director of the plaintiff-Company. The third defendant replied the same on 19.12.2015. That letter has been filed as Document No.5 of the plaint. This letter is also a typed one, wherein the date is in ink and hand- written. The constitution of the Ganapathy Funds, is not revealed. Similarly, the capacity under which J.Srinivasan was alleged to have signed, is also not disclosed. Therefore, all the fabricated document Nos.5 to 8 are only manifestly fabricated to make unlawful claim and even though the plaintiff alleged that on the same day, the sister-concern of the third defendant and they did not specify the same as to which defendant it lies. The said sister-concern Sree Sarvalakshmi Chit Funds (P) Ltd., had acknowledged the liability to the tune of Rs.43,27,000/-. In that letter also, the capacity under which J.Srinivasan had allegedly signed, is not made out. The date is manuscript while the content is Page No.18/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 typed.
3.15. In continuation of the fabricated letters filed as Document Nos.5 to 9, the plaintiff chose to create a record on 04.10.2016 and as a reminder on 13.10.2016 addressed to Sri J.Srinivasan Group of Companies M/s.Sree Sarvalakshmi Chit Funds (P) Ltd., M/s.Ganapathy Funds. The third defendant replied the same in an individual capacity as J.Srinivasan, for which the plaintiff also responded on 14.11.2016. That letter had been suitably replied by the third defendant on 26.11.2016. Hence, the status and constitution of the defendants 1 and 3, is well exposed to the plaintiff and the plaintiff cannot plead innocence at this stage.
3.16. After summarising the entire episode, the plaintiff chose to issue a legal notice on 19.04.2017 addressing the third defendant as J.S.Srinivasan, Managing Partner M/s.Ganapathy Funds, threatening criminal action under the Tamil Nadu Protection of Interest of Depositors (Financial Establishment) Act, while earlier point of time making the claim as a chit subscriber, thereby switching on to claim as a depositor.
3.17. The first defendant is not a partnership firm as described in the cause title, but it is a sole proprietary concern. It is also registered with Sub- Registrar of Sembium as Document No.855 of 2011. Further, the second defendant is shown as J.S.Srinivasan, Managing Partner of M/s.Ganapathy Funds, Page No.19/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 which is factually not true. As the third defendant stated earlier that J.Srinivasan is the Proprietor of M/s.J.S.Ganapathy Funds. Therefore, the description of the first defendant is ought to be M/s.J.S.Ganapathy Funds.
3.18. Since the constitution of the party itself is on the wrong-footing, the allegations cannot be sustained on that basis. The suit may be dismissed for representing the parties incorrectly as it exists. The liability can be fastened only when the person is directly involved in the day-to-day affairs of the business. Hence, the defendants 4 to 6 are no way connected with the transactions. The first defendant is M/s.J.S.Ganapathy Funds and it has Registered Office at New No.21/7, Thirunavakarasu Street, Perambur, Chennai-600 011 and its Proprietor is J.Srinivasan, son of V.S.Jayaraman. The defendants 4 to 6 cannot be the partners of M/s.Ganapathy Funds.
3.19. The locus-standi of the plaintiff to institute a suit against the defendants and others, required deliberations. In order to ascertain as to whether the suit is maintainable or otherwise, may be rejected on two grounds, namely that the plaint does not disclose the cause of action and that the suit appears from the pleadings in the plaint that is barred by a special law. The prayer in the suit speaks for itself. The plaintiff is a private limited company. The company is a legal entity and so, it can sue and be sued. The list of documents filed along with the plaint, does not include any Board Resolution or the Page No.20/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 Memorandum/Articles of Association of the plaintiff-Company. In this regard, Order 29 Rule 1 of CPC applies to the case. Even a Director is not competent to file a suit on behalf of the Company, unless a specific power if conferred on him. The Power of Attorney should have been issued to the Director to file the suit on behalf of the Company on the basis of the Resolution passed by the Board of Directors in the meeting held in that regard. The suit is only then held to be validly instituted by the competent person who has been authorised by the Company and when once the Resolution is passed, authorising the Managing Director by giving Power of Attorney in favour of the Director of the Company and then, no further Resolution in that regard is necessary. Neither the Board Resolution is filed, nor the Memorandum/Articles of Association of the plaintiff- Company is filed, authorising the Managing Director to institute the present suit. The constitution of the plaintiff-Company itself is cryptic and it does not even disclose as to whether it is registered under the Companies Act, 1956 or the Companies Act, 2013 (Act 18 of 2013). There is no proof to show that the Managing Director is authorised by the Board of Trustees in their meeting as per Section 179 of the Act 18 of 2013, authorising him to institute the suit. Nowhere, the Registered Office of the plaintiff-Company is stated. As a Managing Director, he can sign the pleadings.
3.20. According to the third defendant, on a reading of the provisions of Page No.21/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 the Act 18 of 2013, the Directors who should jointly authorise to decide to institute or not to institute a suit. The Directors have passed no Resolution in deciding to institute a suit binding the institution with the result of the suit. The suit having been filed without there being any Resolution. The plaintiff-Company can only file a suit, if there is a Resolution for the same and the present suit was not filed by an authorised person under Order 29 Rule 1 CPC. According to the third defendant, the suit as such is not maintainable, in view of the decision of a Division Bench of this Court reported in 1998 (1) MLJ 724 (Swadharma Swaraja Sangha Vs. Indian Commerce and Industries Co. (P) Ltd.
3.21. According to the third defendant, under Section 291 of the Companies Act, 1956, there is express provision made to the effect that the powers of the Company in respect of the particular manner, are to be exercised only by the Company in General Meeting, and in all other cases, the Board of Directors are entitled to exercise all its powers. The individual Directors have such powers only as are vested in them by Memorandum and Articles of Association. It is true that ordinarily, the Court will not un-sue a person on account of technicalities. However, the question of authority to institute a suit on behalf of a Company, is not a technical matter and it has far-reaching effect. It often affects policy and finances of the Company. Thus, unless a power to institute a suit is specifically conferred on a particular Director, he has no Page No.22/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 authority to institute a suit on behalf of the Company. Such a power can be conferred by the Board of Directors only by passing a Resolution in that regard, as held by the Calcutta High Court in the case of AL-Amin Seatrans Ltd. Vs. Owners and party interested in Vessel M.V-Loyal Bird (reported in AIR 1965 Calcutta 169).
3.22. The suit has been instituted by the Managing Director alone, without any specific power or authority conferred on him to institute the suit. The Managing Director, either to institute the suit by himself or through his agent or to appoint any constituted Attorney for the said purpose. The suit has been instituted without due and proper authority and the suit is therefore liable to be dismissed.
3.23. As the Supreme Court and this Court held that on going through the entire pleadings of the plaintiff, it should be clear that Order 29 Rule 1 CPC does not authorise the persons mentioned therein to institute suit(s) on behalf of a Corporation. It only authorises to sign and verify the pleadings on behalf of the Corporation.
3.24. Filing of a suit for recovery of money without Board's Resolution, is an irregularity going into the root of the matter. It is not an internal management of the Company in which this Court may not interfere. The filing of the suit is an initial infirmity with regard to the maintainability of the suit, which is incapable. Page No.23/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 It cannot be equated with an administrative act like appointment of an Architect, as in the case of Freeman & Lockyer (a firm) Vs. Buckhurst Park Properties (Mangal) Ltd., (reported in 1964 (34) Company Cases 405).
3.25. The fulcrum of the relief sought by the plaintiff allegedly with regard to chit transactions. The prayer speaks about it. The root of cause of action as enshrined in the plaint that culled out that the claim is made out of a chit transaction. Section 64 of the Chit Funds Act, 1982 sub-section (3) stipulates that no Civil Court shall have jurisdiction to entertain any suit or other proceedings in respect of any dispute referred to in sub-section (1).
3.26. It is the averment of the third defendant that according to the plaintiff-Company, they are past subscriber as well as prized subscriber. Even though the third defendant is not liable to pay any money much less than the suit claim, as the entire sum had been re-paid, if any, due to the plaintiff and the course open to him is else-where and not before this Court. The suit is barred by special law and hence, on this ground, the suit may be dismissed.
3.27. The third defendant denies that he owe much less than a sum of Rs.4,83,71,278/- together with interest @ 18% p.a. Absolutely, there is no document to make out a prima-facie case. As to what is stated in the plaint regarding the payment of chits, it is the internal matter of the plaintiff-Company and the third defendant has no knowledge about the same. Page No.24/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 3.28. The alleged letter(s) dated 27.06.2015 said to have been executed by the second defendant, are denied by the third defendant. It is a fabricated one for the purpose of the case. There is no authenticated statement of the Accounts filed by the plaintiff-Company. The alleged joint statement of account is a forged one. The liabilities had not been admitted any-where by the third defendant. Hence, the third defendant filed a civil suit before the City Civil Court at Chennai, calling upon the plaintiff-Company to produce the authenticated statement of Accounts relating to the period 2013-2017. Since the present suit is filed, the suit for mandatory injunction to direct the plaintiff to produce the accounts, was dismissed for default. Frequently, the plaintiff chose to use the words -- liability is admitted and claim is acknowledged by the third defendant. But while reading between the lines of all alleged admitted letters and acknowledged receipts, do not infer any meaning so as to construe that the liability has been admitted by the third defendant. The so-called letter was forged and fabricated and they have been designed to exploit the third defendant.
3.29. As far as any liability as stated in the plaint, nothing prevented the plaintiff to implead Sarvalakshmi Chit Funds India (P) Ltd., as a party to the proceedings. As the transaction is between one to one, the transactions were dealt by the third defendant alone. Though the third defendant repaid the amount, in entirety, by cash/RTGS/cheque, the plaintiff, in order to exploit in the Page No.25/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 form of interest, had filed the present suit without rendering proper accounts.
3.30. The third defendant admitted the re-payment of money in entirety, but the allegation that he is liable to make payment of a sum of Rs.3,48,00,200/- as revealed in the plaint, is denied by the third defendant.
3.31. The plaintiff had chosen to repeat the averment that the third defendant has admitted the liability and sought time to make payment, because of the financial crisis, is absolutely false. As the plaintiff did not come forward to render accounts, he was constrained to file the suit for mandatory injunction to furnish statement of Account in O.S.No.2285 of 2017 before XI Assistant City Civil Court, Chennai. No sooner the summons were served on the third defendant, he was under the bona-fide impression that the plaintiff ought to have filed the authenticated document revealing the statement of accounts. The third defendant was not maintaining robust health to let in evidence in the suit before the City Civil Court, Chennai and that suit came to be dismissed for default. The suit has not been abandoned. The plaintiff stated that Rs.10,00,000/- was paid on 23.12.2016 and in all, a sum of Rs.80,00,000/- was paid and the balance Rs.3,48,20,000/- remained unpaid. Nothing prevented the plaintiff to file authenticated statement stating as to on what are the ways by which he has paid the amount and as to how he has arrived such an amount to prove his claim.
Page No.26/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 3.32. The plaint is not duly signed and verified by competent person. The plaintiff has not filed true and original document to prove their claim. No authenticated statement of accounts had been filed. The constitution of the defendant is mis-described and resultantly, the suit itself collapses. The memo of valuation in case of suit for recovery of money, as stated by the plaintiff is critic in nature and cannot be considered as true and fair. The alleged statement of account produced by the plaintiff is inadmissible in evidence. The plaintiff had not made out a case regarding the liability of payment of any interest much less than 18% p.a. and there is no cause of action to make such excessive claim. Hence, for all the above reasons, the third defendant prayed that the suit may be dismissed.
4. The fourth defendant has filed written statement stating as follows:
The prayer in the suit is not specific against whom the relief is sought for.
The first defendant is not a partnership firm and it is a sole proprietary concern.
Except the third defendant, nobody is connected with the alleged transactions as stated by the plaintiff. Except the third defendant, others have no role to play.
There is no allegation against the fourth defendant. The connectivity between the parties, had not been asserted by the plaintiff any-where in the plaint. The third defendant is the son of one of the sons of the fourth defendant and that the fourth defendant has nothing to do with the alleged transactions, besides Page No.27/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 that, he has no knowledge about the same. Neither the fourth defendant is partner, nor a Managing Director of the first defendant-M/s.Ganapathy Funds, as described by the plaintiff. Thus, the fourth defendant prayed to dismiss the suit.
5. The fifth defendant has filed the written statement almost on the same lines as stated by the fourth defendant.
6. The sixth defendant has filed the written statement stating that the prayer is not specific as against whom the relief is prayed for; that except the third defendant, others have no role to play; that there are no allegations against the sixth defendant; the connectivity between the parties, have not been asserted by the plaintiff any-where in the plaint; the sixth defendant is the employer of the third defendant and has nothing to do with the alleged transactions; the sixth defendant has no knowledge about the same; neither the sixth defendant is a partner, nor a Managing Director of the first defendant as described by the plaintiff, particularly, all the transactions of the plaintiff- Company was dealt by the third defendant alone.
7. Upon considering the pleadings and the other documents, originally, the following issues were framed by this Court on 22.07.2019 :
(i) Whether the first defendant is conducting an unregistered chit fund while holding out that the same was registered under the provisions of the Chit Funds Act, 1982 ?
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(ii) Whether the defendants had played a fraud on the plaintiff by having projected that the defendants 2 to 6 were partners of the 1st defendant firm thereby inducing the plaintiff to subscriber for the chits ?
(iii) Whether the defendants 1 and 2 had acknowledged their liability towards the plaintiff's herein ?
(iv) Whether the second defendant had floated several chit funds into which the plaintiff's subscription amount had been credited ?
(v) Whether the suit is maintainable as it is laid against the name of the first defendant concern ?
(vi) Whether the suit claim arise out of a contract or chit transaction or a loan transaction ?
(vii) Whether the suit claim is barred by limitation ?
(viii) Whether the suit bad for mis-joinder of parties viz., defendants 4 to 6 as partners, while the Ganapthy Funds the 1 st defendant is a sole proprietary concern ?
(ix) Whether the plaintiff is entitled to the interest, if so, at what rate ?
8. Upon perusing the amended plaint, the above-said issues have been re- cast as below, by this Court on 18.06.2024 :
(i) Whether the first defendant is conducting an unregistered chit fund while holding out that the same was registered under the provisions of the Chit Funds Act, 1982 ?
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(ii) Whether the defendants had played fraud on the plaintiff, having projected the defendant-Proprietorship concern, thereby inducing the plaintiff to subscribe for chits ?
(iii) Whether the suit claim arise out of the contract or chit transaction or loan transaction?
(iv) Whether the suit claim is barred by limitation ?
(v) Whether the plaintiff is entitled to the interest, if so, at what rate ?
9. After framing issues, during trial, on the side of the plaintiff, one A.Rathinam was examined as P.W.1 and 53 documents were marked as Exs.P.1 to P.53. On the side of the defendants, one Jayaraman Srinivasan was examined as D.W.1 and one N.G.Yabesh was examined as D.W.2 and two documents were marked as Exs.D1 and D2.
10. Learned counsel for the plaintiff submits that the defendants filed an application in A.No.4805 of 2018 in C.S.No.926 of 2017 seeking rejection of plaint, and the said application was dismissed on 10.09.2018 and challenging the same, the defendants filed an appeal in O.S.A.No.466 of 2018, which was dismissed as withdrawn on 06.12.2018. He further submitted that the first defendant is the proprietor of M/s.Ganapathy Funds. The second defendant is managing the entire affairs of the first defendant in his capacity as a Proprietor. Page No.30/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 However, when the plaintiff entered into a chit scheme, it was informed by the defendants that it is a registered chit fund and many people have invested in their group and also accepted the deposits from the public and it is a partnership firm. The said chit group was commenced from May 2013 and the plaintiff had remitted the payment through cheques and paid a sum of Rs.4,00,00,000/- to the defendants. After the commencement of the chit, the plaintiff had been regularly remitting the monthly subscription towards the chit, less the sanctioned dividend. After completion of the last subscription of the chit in the month of December 2014, when the plaintiff approached the defendants to settle the maturity value, the second defendant kept on avoiding the payment by claiming several reasons. Due to that, the plaintiff company had been facing the difficulties with their various bankers who wanted to know why capital funds to the tune of more than Rs.400 lakhs had been locked up with the 1st defendant-group of companies and refused to extend further credit to the plaintiff company. After repeated request and demands made by the plaintiff, the defendants had acknowledged that the total value of the chit had been subscribed by the plaintiff as Rs.400 lakhs and that after making all necessary adjustments since the defendants had paid a sum of Rs.80 lakhs on instalments to the plaintiff towards the above said chit transaction and the balance sum of Rs.3,48,00,200/- as due and payable to the plaintiff. The defendants are also liable to pay interest towards the above said Page No.31/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 sum at 18% per annum till the date of realisation.
11. Learned counsel for the plaintiff further submitted that the defence raised by the defendants in rejection of plaint with regard to point of limitation, cause of action, barred by special law etc., had been answered by this Court in the order in Appln. No.4805 of 2018. In the said application the main plea of the defendants is that the chit conducted by the defendants is a registered one and barred by Special law and this Court in Paragraph No.19 of the said order had categorically dealt with Section 64 of the Chit Funds Act and held that unless the chit is registered one, the suit is barred by Special Law, but the chit fund conducted by the defendants is an unregistered one and therefore, the plea that the suit is hit by sub-section (3) of Section 64 of Chit Funds Act fails and there is no difficulty in holding that the plaint is not liable to be rejected as being by sub- section (3) of Section 64 of Chit Funds Act. This Court, while deciding Appln.No.4805 of 2018 dated 10.09.2018, held that "with regard to testing of rejection of plaint application itself, I have borne in mind the time honoured well- established principle that a rejection of plaint application has to be tested on a demurrer and not just on a demurrer, but on a extreme demurrer, meaning it has to be tested by assuming all the averments in the plaint to be true and correct by looking at the plaint averments with a hood. To put it differently, it has to be Page No.32/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 tested on uncontroverted averments in the plaint without adding or subtracting the same by assuming that the averments are true and correct. I have borne this principle in mind in testing the rejection of plaint application''. Further this Court in the above said application had also referred judgment of the Andhra Pradesh High Court in S.Anilkumar Reddy Vs. Margadarsi Chit Fund Limited, reported in CDJ 2006 APHC 183, to say that defect if any, under Order XXIX Rule 1 of CPC is curable. In the said application, this Court had also further observed that it may be necessary in this regard to be noted, learned counsel for the plaintiff submitted that there is a Board Resolution and that he would press that into service in the trial. Hence, the defence raised by the defendants in rejection of the plaint, had been answered by this Court in the above said application. Subsequently, the plaintiff had taken out an application in Appln.No.5677 of 2019 to file Memorandum of Article of Association, Board Resolution, Certificate of Incorporation etc., and this Court was pleased to allow the same.
12. Learned counsel for the plaintiff further submitted that inspite of dismissal order passed in O.S.A.No.466 of 2018, the defendants took more than 4 years to file the written statement and dragged the proceedings when admittedly the suit is commercial in nature. He further submitted that after filing the above suit, Mr.J.Srinivasan/third defendant had filed a suit before XI Assistant City Civil Court at Chennai in O.S.No.2285 of 2017 against the plaintiff for the relief of Page No.33/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 mandatory injunction directing the plaintiff to furnish the statement of accounts for the period from 2013 to 2017 duly authenticated to the plaintiff to act upon the same and also for perpetual injunction restraining the defendants from interfering with the peaceful running of the business of the plaintiff and for costs, which was dismissed for default. He further submitted that after filing the suit, the defendants at the time of filing an application in Appln.No.4805 of 2018 seeking for rejection of plaint only disclosed that it is a proprietory concern, by marking the documents in rejection of the plaint which is a registered document wherein it is mentioned that the first defendant is the sole proprietor of the concern namely, J.S.Ganapathy Funds for the purpose of doing business of Finance and Real Estate. He further submitted that during the cross examination of the plaintiff, a specific question had been asked to the plaintiff i.e., whether the plaintiff can produce the income tax assessment for the financial years 2018 - 2019 and 2019-2020, the plaintiff had answered that he had filed the returns and the same can be produced on the next hearing date and thereafter, the plaintiff's counsel had served the income tax returns pertaining to the period from 2014 to 2020-2021 along with Auditor Report to the defendant's counsel on 01.11.2021 and that the defendants' counsel had omitted to ask further questions in this regard. The plaintiff had taken out the applications in Appln.Nos.2639, 2640, 2641 of 2022 to reopen the plaintiff's side evidence, recall PW1 and permit the Page No.34/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 plaintiff to exhibit the additional documents listed in the schedule of the judges summon. This Court by order dated 22.07.2022 allowed the said applications on payment of costs of Rs.25,000/-, after remitting the said costs the plaintiff had marked the Income Tax Returns for the assessment year 2019-2020 which is marked as Ex.P.36 and the Income Tax Returns for the year 2020-2021 was marked as Ex.P.37 and the letter dated 30.10.2021 from plaintiff's counsel to the defendants' counsel was marked as Ex.P.39 and the bank statements obtained from various banks pertaining to the cheque transactions of the above said suits were marked as Ex.P.40 to Ex.P.53
13. Learned counsel for the plaintiff further submitted that the defendants counsel by omitting the transactions reflected in the Bank Statement, since for the entire year of the Bank Statement, it will not reflect in certain period and by taking advantage of the said aspect the counsel had confused the witness by asking the question that transactions do not reflect i.e., in Question No.18 after the recall dated 19.09.2022 in which Exs.P.46, P.47, P.48 and P.49 bank statements issued for the period 01.09.2014 to 31.12.2014 does not disclose any returns as though the bank statements did not reflect the statements and very conveniently omitted to ask the question in the bank statements i.e., Ex.P.42 to P.53 and by omitting Exs.P.42, P.43, P.44, P.45, P.50, P.51 and P.51 and by avoiding that the questions have been asked pertaining to Exs.P.46 to P.49 in Page No.35/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 order to create impression before this Court that no transaction were seen in the bank statement. He further submitted that during the cross examination of defendants' Power Agent in Question No.38, the signature found in Ex.P.8 was admitted by the Power Agent of the defendants and also admitted Question No.40 pertaining to the signature found in Ex.P.12 and also Ex.P.17 the signature was not denied by the Power Agent of the defendants. He further submitted that the first defendant vide letters in Ex.P.8 and Ex.P.12 had admitting their liability and confirming the amount payable by them is Rs.3,48,20,000/- as on 31.03.2015. Further, the first defendant in Ex.P.12 admitted that they have collected Rs.4,48,53,310/- and also expressed that company is having heavy financial crisis. The first defendant mutually agreed to offer property equivalent to the money from us. During the cross examination of the defendants' side witness in Question No.52 : when Ex.P.19 shown to the witness in which it is stated that he was not in a position to arrange funds to pay the liability and requested to bear with the plaintiff and the defendants would see that the plaintiff being made to discharge the liability at the earliest, had answered that "it is not related to chit transactions" but Ganapathy Funds transaction. The defendants' side witness had also admitted in his cross examination in Question No.29, when it is asked who will go for collection of the amount from the plaintiff Company, for which it is answered by him that, "we will not go for collection, Page No.36/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 since our owner (defendant) and the plaintiff are friends. Either the plaintiff would come to our office and give the amount or our owner would go to his office and collect the amount". He further submitted that the deposition of cross examination of the defendants' Power Agent in Question No.80, it was specifically questioned that, "your boss in all his correspondence as stated in unable to pay the chit amount because the subscribers did not pay the chit amount regularly but you have stated in your cross examination that it is not a chit transaction and only a payment of dividends and whose statement is correct", for which the defendants' Power Agent had mentioned that his statement is correct and also confirmed that he is aware of the suit filed by the first defendant against the plaintiff on the file of the City Civil Court in O.S.No.2285 of 2017. Subsequently, in question No.72 the defendants' side witness has stated that accounts were not properly maintained.
14. Learned counsel for the plaintiff further submitted that the certified copy of the FIR in Crime No.72 of 2021 had been marked on the side of the defendants by the plaintiff, since the 1st defendant and others are party to the said FIR which is marked as Ex.P.35. Further, the defendants' side witness during the cross examination in Question No.76 has admitted that Al's name is J.Srinivasan and when a specific question had been put to the defendants pertaining to the averments in the FIR that D1 had been conducting the monthly Page No.37/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 chits and after receiving the monthly subscription D1 had refused to settle the same for which D2, who is the proprietor of D1 got arrested by the CCB Police in Crime No.72 of 2021 for cheating the general public without paying the chit subscription to them. He further submitted that due to the friendly relation and due to the compulsion of the defendants, the plaintiff had subscribed the chit and only later on the plaintiff had come to know that the defendants had been conducting chit companies in the name of Ganapathy Funds, Sarvalakshmi Chit Funds, out of which, Sarvalakshmi Chit Funds alone is the registered Chit and apart from that the defendants are also carrying the business in the name and style of Sai Sree Milk Food Products Pvt. Ltd. and Sai Sree Aqua Products India Private Limited and the said facts are denied by the Power Agent of the defendants herein. The plaintiff further submitted that D2 had filed his proof affidavit and after filing the same he did not appear on the subsequent hearing and took time and that the plaintiff had took out an application in Appln.No.1572 of 2022 before this Court to eschew the evidence of the defendants. Since it has been expressed by D2 that due to his medical issues he was not in a position to withstand, for which the plaintiff had took out an application to eschew the evidence of the defendants and this Court vide order dated 13.04.2022 had permitted the defendants' agent to let in evidence and on behalf of the defendants, their Power of Attorney had filed the proof affidavit and deposed Page No.38/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 chief and cross examination before this Court and only two documents had been marked on the side of the defendants. Further during the cross examination of the defendants' Power Agent and he had specifically accepted in Question No.16 of his cross examination that, "he knows the facts of the case only through his boss", who is the 2nd defendant herein. From the documentary evidence viz., letter transactions, bank statements and also the Income Tax Returns reflect that defendants 1 to 3 are liable to pay the suit claim to the plaintiff company and the defendants did not get into witness box in order to prove their case and also failed to establish their case.
15. Per contra, learned counsel for defendants 1 and 3 submitted that in the present suit, an application in Appln.No.4805 of 2018 was filed by defendants 1 to 3 under Order VII Rule 11 (a) and (d) of CPC. The primary objection raised by the defendants 1 to 3 was with regard to jurisdiction of this Commercial Division qua of this suit. This Court vide order dated 10.09.2018 held that Commercial Division has jurisdiction to entertain this suit. Further, defendants 1 to 3 have raised three vital points for the rejection of the plaint i.e.,
(i) there is no cause of action for the suit; (ii) the suit as laid is not maintainable in view of sub-section 3 of Section 64 of the Chit Funds Act, 1982; and (iii) the suit is not laid as contemplated under Order XXIX Rule 1 of CPC. This Court after considered all the relevant points raised by the defendants and after perusal of Page No.39/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 documents held that prima facie there is a case for the plaintiff and it is for it to buttress such claim with documentary and oral evidence and dismissed the application for rejection of plaint, subject to the following caveat. Though obvious, it is made clear that all the observations made in this order are solely for the purpose of disposal of instant rejection of plaint application and the rights and contentions of all the parties including those aspect which have been dealt with in the order are left open to be decided in trial of the main suit. In other words, if the issues which have been dealt with in this order are raised in the suit, the same will be decided in a manner known to law untrammelled and uninfluenced by any of the observations made in the order. Assailing to the said order, defendants 1 to 3 have preferred O.S.A.No.466 of 2018 before this Court, which came to be dismissed as withdrawn on 06.12.2018.
16. Learned counsel for defendants 1 to 3 further submitted that the plaintiff/Company took out an application to amend the pleadings accordingly, but eventually, they categorized the first defendant as a Sole Proprietory concern and left the other defendants as Partners of the first defendant and also the plaintiff has not chosen to amend any pleadings in the plaint whatsoever in the original plaint filed by him. Further, the plaintiff/Company has also specifically not mentioned that against which they are claiming the right and it is not made clear even after the amendment of the plaint. He further submitted that on the Page No.40/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 said issue a specific question vide question Nos.6 to 8 were put to P.W.1, while he was in witness box, and he replied that it is against all the defendants. Further, when the fourth defendant passed away, and it was brought to the notice of this Court by the counsel for defendants 4 to 6, the plaintiff replied that he does not want to implead the legal heirs of the fourth defendant for the reasons best known to him. Furthermore, he has given up, 5 th and 6th defendants in-toto. Eventually, the plaintiff/Company has given up the relief as against defendants 4 to 6, so there is inconsistency in the pleadings, evidence and between documentary and oral evidence. In other words, even now, the plaintiff is in the state of perplex mind against whom he seeks the relief.
17. Learned counsel for the defendants 1 to 3 further submitted that though defendants 1 to 3 have taken a specific plea in the application for rejection of plaint that the first defendant/Firm is not conducting any chits, however this Court gave a finding, on the basis of the counter affidavit filed by the plaintiff in the above application that it is open to the parties to agitate their right by letting in necessary evidence at the time of trial. However, during the course of trial, there is no piece of document to show that the plaintiff subscribed to the chit said to have been conducted by the first defendant concern. The plaintiff, by oral evidence has stated that they have periodically subscribed to the chits, perhaps, quite contrarily, there is no such periodical remittance of any Page No.41/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 amount to the first defendant firm towards subscription to any chit. However, there are remittances in lump sum at irregular intervals, which is evidenced by the Bank entries. In Ex.P-8 relating to confirmation of balance, it is stated that the amount received from the plaintiff on monthly basis, was Rs.2,50,30,000/- being the dividend payable at Rs.97,90,000/-, being the total amount payable by the defendants on 31.03.2015 i.e., Rs.3,48,20,000/- This confirmation of balance is given on a white paper. It neither bears the letter head of the plaintiff- company, nor on the defendant's concern. There was a question put to PW-1 -- whether with regard to the admissibility of the aforesaid document, the case of the defendants in that was the signature, which is admitted, but the contents were disputed. Mere admission of signature does not amount to admission of contents. The plaintiff is under obligation to prove the contents in accordance with law. In the instant case, the plaintiff ought to have produced any chit agreements, chit pass-books, chit receipts. Mere production of the books of entry is not evidentiary value according to Section 34 of the Indian Evidence Act. It has to be supported by ancillary documents relating to the transactions. Admittedly, there is no scrap of paper, except the bank entry to substantiate their claim.
18. Learned counsel for the defendants further submitted that even assuming that without admitting that the first defendant conducted the chits, which is said to be unregistered, in the absence of any registered agreement Page No.42/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 filed by neither the plaintiff nor the defendants, the suit is not maintainable for recovery of money. In a case wherein similar circumstances were dealt in, this Court has delivered judgment in S.A.No.559 of 2008 on 07.07.2010 and certain excerpts from it would run thus:
"10. The trial court had found, on facts, that the chits were unregistered. It had also found that there were discrepancies while comparing the documents filed by the plaintiff and the documents filed by the defendants. Even though the defendants have filed exhibits B-1 to B-8 to show that the four chits, in respect of which the plaintiff had made its claim had been registered, the trial court had found that they cannot be taken as sufficient evidence, without other supporting documents for accepting the claim of the defendants."
11. It had also been held that they do not relate to the entries in the passbooks given to the plaintiff. Therefore, the claim of the defendants that suit is not maintainable in view of Section 64 (3) of the Chit Fund Act, 1982 have not been accepted by the trial court. In such circumstances, the trial court had decreed the suit, as prayed for by the plaintiff, by its judgment and decree dated 07.02.2007 made in O.S.No.172 of 2004."
12. A mere perusal of the said decision would clearly show that this point was not argued before the said court and no decision was rendered on it. As such, in respect of this point is concerned, the doctrine of subsilentio to be focused as Page No.43/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 against the said judgment."
13. At this juncture, it is relevant to extract the relevant portion from Salmond Jurisprudence, in 12th Edition at Page No.155 ".... The earlier case the court before whom the precedent is cited may be reluctant to hold that its predecessors failed to consider a point directly raised in the case before it (o), and this reluctance will be particularly pronounced if the subsilentio attack is levelled against not one case, but a series (p).
We now turn to the wider question whether a precedent is deprived of its authoritative force by the fact that it was not argued, or not fully argued, by the losing party. If one looks at this question merely with the eye of common sense, the answer to it is clear. One of the chief reasons for the doctrine of precedence is that a matter that has once been fully argued and decided should not be allowed to be reopened, where a judgment is given without losing party having been represented, there is no assurance that all the relevant considerations have been brought to the notice of the court and consequently the decision ought not to be regarded as possessing absolute authority, even if it does not fall within the subsilentio rule.
............
If there is a general exception for an unargued cases, the subsilentio rule turns out to be merely a particular application of wider principle. .."
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19. In the cited judgment, the defendant therein is trying to wriggle out off his liability from the suit by pointing out that the suit transaction was based on unregistered chit over which the Registrar of Chits, under the Chit Funds Act had jurisdiction and not the civil court for which the court held that since the evidence would speak to the effect that it was not registered, only civil court had jurisdiction. This point No.2 supra was not raised in that case to the effect that based on an unregistered chit, no suit would lie. But, here the Point No.2, which is raised based on Sections 4 and 76 of the Chit Funds Act.
20. Mere perusal of those provisions, clearly shows that there is a legal embargo as against such a conduct of unauthorised chits, which is punishable under law.
21. Learned counsel for the defendants 1 to 3 further submitted that the defendants brought to the notice of this Court the relevant portion from Broom's Legal Maxims, Tenth Edition by Herbert Broom at Page Nos.499 and 501, which reads as follows:
" In Collins V. Blantern (m) [2 Wills.341:See 1 Sm.L.C., 13th Ed., p406] which is a leading case to show that illegality may well be pleaded as a defence to an action on a bond, it was alleged that the bond had been given to the oblige as an indemnity for a note entered into by him Page No.45/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 for the purpose of inducing the prosecutor of an indictment for perjury to withhold his evidence. For the plaintiff, it was contended that the bond was good and lawful, the condition being singly for the payment of a sum of money, and that no averment should be admitted that the bond was given upon an unlawful consideration not appearing upon the face of it; but it was held that the bond was void ab initio, and that the facts might be specially pleaded; and it was observed by Wilmot, C.J., delivering the judgment of the Court, that "the manner of the transaction was to gild over and conceal the truth; and whenever Courts of law see such attempts made to conceal such wicked deeds, they will brush away the cobweb varnish and show the transactions in their true light", and again, "this is a contract to tempt a man to transgress the law, to do that which is injurious to the community; it is void by the common law; and the reason why the common law says such contracts are void for the public good: you shall not stipulate for inequity. As a general rule, then, a contract cannot be made the subject of an action, if it be impeachable on the ground of dishonesty, or as being opposed to public policy, if it be either contra bonos mores, or forbidden by the law (d). In answer to an action founded on such an agreement, the maxim may be urged, ex maleficio non oritur contractus (e) a contract cannot arise out of an act radically vicious and illegal; "those who come into a court of justice to seek redress must come with clean hands, and must disclose a transaction warranted by law" (f); and "it is quite clear, that a court of justice can give no assistance to the enforcement of contracts which the law of the land has interdicted (g). "Hence, it is quite obvious and axiomatic that the suit should not have been entertained by the Courts below. This is purely a law point based on admitted and indubitable facts and hence this court in revision was justified in framing that issue and deal with it." "In the result, the judgment and decrees of both the Courts below are set aside; this civil revision petition is partly allowed and the suit filed by the plaintiff shall stand dismissed."Page No.46/73
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22. Learned counsel for the defendants further submitted that the plaintiff, who admittedly, subscribed to the unauthorized chit conducted by the defendants, cannot file a suit for recovery of money from the defendants and the Court cannot extend its help in that regard. In this regard, this Court may consider the answer of the plaintiff in the cross-examination to Question Nos.94 to 98.
23. Further, the other point for consideration is that the Board Resolution was not filed and also Order XXIX Rule 1 CPC is not complied with. Both these points were raised by the defendants in the application for rejection of plaint. However, this Court held that it is a curable defect. On that basis, the plaintiff also appreciated this Court that he would take appropriate steps to cure the defects, but the fact remains that even filing of the Board Resolution dated 24.02.2006 along with Memorandum of Association and Articles of Association, does not satisfy the statutory requirement. He further submitted that during the cross examination of P.W.1, they put a specific question to indicate the clause by which P.W.1 is authorized to verify the plaint and sign the pleadings, for which, he answered it is there, but could not pinpoint the same. In fact, it is a general resolution to carry out the company works, which deals with the construction activities and it does not empower the Managing Director or any other person to Page No.47/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 join in Chits or invest money in other companies for gain. More so, the said resolution was passed 11 years prior to the launching of prosecution. It is another point to mention here that whether it has been filed before the ROC in accordance with law, is not explained for the reasons best known to him. This Court gave liberty to the defendants, to raise all these issues during the time of trial and they have to be adjudicated on merits by this Court and hence, the defendants 1 to 3 raises the issue once again. The Directors, who should jointly operate to decide to institute a suit? Conceding that the Directors have not passed any Resolution in deciding to institute the suit, binding the institution with the result of the suit. The suit has been filed without there being any specific Resolution either to subscribe to the unauthorized chit or to prosecute the defendants for the alleged non-payment of prize amount and as the company can only file a suit if there is a Resolution for the same. The suit was not filed by authorized person under Order XXIX Rule 1 of CPC. Therefore, the suit as such is not maintainable, as held by the Division Bench of this Court in the case of Swadharma Swarajya Sangha Vs. Indian Commerce and Industries Company Pvt. Ltd., reported in 1998 (1) MLJ 724.
24. It is well settled that under Section 291 of the Companies Act, except where express provision is made, the powers of the Company in respect of a particular matter are to be exercised by the Company in general meeting and in Page No.48/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 all other cases, the Board of Directors are entitled to exercise all their powers. Individual Directors have such powers only as are vested in them by the Memorandum and Articles of Association. It is true that, ordinarily, the Court will not un-sue a person on account of technicalities. However, the question of authority to institute a suit on behalf of a Company is not a technical matter. It has far-reaching effects. It often affects the policy and finances of the Company. Thus, unless a power to institute a suit is specifically conferred on a particular Director, he has no authority to institute a suit on behalf of the Company. It is needless to say that such a power can be conferred by the Board of Directors only by passing a Resolution in that regard, as held in the case of Al-Amin Cseatrans Limited Vs. Owners and Party Interested in Vessel M.V Loyal Bird, rendered by the Calcutta High Court and reported in AIR 1995 Calcutta 169.
25. In the instant case, however, the facts are quite different. No authority is given in the Articles of Association to the Directors to delegate the power. Even the so-called Resolution dated 24.02.2006 filed by the plaintiff is not specific on the issue. So, this Court may not be in a position to resist its conclusion that the suit is laid without any specific authority in the absence of any Resolution in the Board of Directors to that effect. To put it differently, the suit has been instituted at the instance of the Managing Director alone, without any specific power or authority to him. The Managing Director had no power to institute the suit by Page No.49/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 himself. The suit has been instituted without due and proper authority, and therefore, the suit is liable to be dismissed on that ground alone.
26. Learned counsel for the defendants further submitted that with regard to limitation, the plaintiff chose not to present any document, wherein and whereof to give a categorical finding that on such and such date, either the plaintiff subscribed to the chit lastly or admittedly, the defendants 1 to 3 or any other defendants acknowledged the liability by producing any receipt or indicating it in the Bank statement about the cut-off date. The cause of action paragraph of the plaint is also silent with regard to limitation. So, in the absence of any documentary evidence, on presumption, this Court is not inclined to admit the claim of the plaintiff, i.e., within the time limit granted by the statutory provision, when the suit has been filed. The documents having been filed as acknowledgment of liability, which are marked with objection, Exs.P-13 to P.15 also do not lead to any conclusion that the liability is admitted by the defendants. Those documents are not proved in accordance with the procedures known to law. All the Bank statements merely mentions the transfer of funds, that too, only one transaction in the name of the first defendant and all other statements only indicate "Ganapathy". At no stretch of imagination, it can be gathered in the given circumstances that the plaintiff has subscribed to the chit alone, allegedly conducted by the first defendant, irrespective of the fact as to whether Page No.50/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 it is registered or unregistered. In such circumstances, it is the duty of the plaintiff-Company to prove the suit claim. However, the plaintiff-Company did not let in any tangible or convincing oral and documentary evidence before this Court to prove the same. In other words, it has miserably failed to prove that the plaintiff-Company is entitled to the suit claim from the defendants. The defendants submit that the plaintiff filed 53 exhibits to prove the claim in the suit. The exhibits include Bank statements, income-tax Returns and alleged admission of liability of letters said to have been exchanged between the parties to the proceedings. To be noted that none of the exhibits substantiate the claim of the plaintiff, which are usually to be the vouchers, receipts, chit pass-books, chit agreements, specifically. Mere marking of exhibits would not mean that the contents were also proved. Truth or correctness of contents of a document is to be ascertained only from the corroborative evidence. The contents of a document mean only what the document states. Section 61 of the Indian Evidence Act, provides that the content of a document may be proved either by primary or secondary evidence. He further submitted that the plaintiff has filed the balance sheet filed before the Income Tax Department as Exs.P.36 to 38. With regard to the proof of balance sheet, Section 34 of the Indian Evidence Act is relevant to be referred herein. It has been held that the statement made in the balance sheet cannot be proved, unless it is proved by relevant acceptable Page No.51/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 evidence, which is the dictum held by Honourable Apex Court in the case of State of Bombay Vs. M/s. Supreme General Films Exchange Limited, reported in AIR 1960 SC 980, which has been followed in AIR 1967 SC 1058. He further submitted that the certified extract of annual Returns, is not supported with corroborative evidence such as vouchers, ledger extracts, which will not bring the truth of the contents of originals. It does not establish the truth, accuracy or correctness of its original. The truth of what the document states must be separately established, as held by the High Court of Bombay, in Om Prakash Berlia Vs. UTI, reported in AIR 1983 Bombay 1. The income-tax Returns exhibited, without objection from the defendants, will not form as substantive piece of evidence, unless and otherwise it is supported by books of accounts, but that it did not take away the rights of this Court to question and scrutinize the evidentiary value of the same. Section 61 of the Indian Evidence Act provided that the contents of the exhibits were not proved either by primary or secondary evidence, and so, the exhibits must be brushed aside.
27. It is submitted that to prove the execution of a document, it must be shown that the person executing it consciously subscribe to it in the name that he put his mark or signature on it after having known and understood the contents of it. Mere proof that the person's signature appears on the documents, cannot by itself amount to the execution of document, as held by the High Court Page No.52/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 of Madhya Pradesh, reported in the case of Ramjankhan Vs. Baba Raghunathdass (AIR 1992 Madhya Pradesh 22). In the case on hand, Ex.P.10 is said to have been executed confirming the balance as on 31.03.2015 by D3. The contents of the document have been disputed and to that effect, a question was put to P.W.1. Even according to the document, amount received from the plaintiff on monthly basis is Rs.2,50,30,000/-, which is not supported by either primary or documentary evidence. Likewise, it is also stated that dividend payable is Rs.97,90,000/- in the very same document. However, surprisingly, the number of chits the plaintiff company joined, what is the value of each chit, what is the monthly subscription, when the chit commenced and when the chits concluded, when the amount fell due disclosing all these facts, there is no documentary evidence such as chit agreement, chit pass-book, chit payment receipts having not been produced. The above contention is equally applicable to Ex.P.9, which also says balance confirmation letter dated 27.06.2015. It merely states the ledger abstract of Ganapathy Funds. It is not authenticated by the qualified competent Auditor, who has conducted the audit in accordance with mercantile system of accounting. At this juncture, it may be pointed out that the burden of proof is on the person, who claims. Here, the burden of proof is on the plaintiff, to prove its entitlement to recover the suit claim by virtue of the maxims:
(1) Affirmanti Non Neganti Incumbit Probatio - The burden of proof lies upon Page No.53/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 him, who affirms, not upon one who denies. (2) Affirmitis Est Probare "He who affirms must prove."
28. Therefore, when once the defendants impeach the genuineness of the accounts, the burden cannot be taken as one having been got shifted from the plaintiff to the defendants. Over and above that, as per Section 105 of the Indian Evidence Act, the party within whose knowledge there are certain facts, should come forward to disclose all the facts. Here, through the Court, no accounts were taken and that when the evidence of PW-1 is perused, it creates some flutter or cloud in the claim of the plaintiff. It is the case of the plaintiff that all the books of accounts and records were taken away by the Income Tax authority, while the company was raided. Admittedly, no steps were taken by the plaintiff-company to procure the same and produce before this Court to establish their claim. That itself is casting clouds on the claim of the plaintiff. It is further submitted that every trial is a voyage of discovery in which the truth is the quest and this proposition is found embedded in the precedent reported in A.Shanmugam Vs. Arya Kshatriya Rajakula Vamsathu Madhalaya Nandavana Paripalana Sangam, reported in 2012 (2) MWN (Civil) 535 (SC).
29. Learned counsel for the defendants further submitted that the plaintiff though makes a monetary claim based on the alleged admission of liability said to have been given in the letters and correspondence, that claim is not Page No.54/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 corroborated by substantial evidence. This Court note that the plaintiff's claim is solely based on Exhibits P-8 confirmation of balance and that such confirmation is not evidenced either by books of account or relevant ledgers or entries in the books of account. In other words, claim is excessive and the evidence is insufficient. Leave alone the books of accounts, the plaintiff did not produce any other chit pass-book, chit receipts, chit agreement, any complaint to the Registrar of Chits, etc., to corroborate the claim of the plaintiff. He further submitted that in a suit for recovery of money, advanced by way of loan, entries in the register of lender were held not sufficient to charge the alleged borrower in the case of Ajitchandra Bagchi and others Vs. Harishpurt Co. Pvt. Ltd., reported in AIR 1991 Guwahati 92, followed in Piramal Kejriwal and another Vs. Radheshyam Paul (Gauhati High Court - in C.R.P.No.284 of 2015, dated 15.09.2016).
30. It is submitted that where the question was as to whether the money had been entrusted, it was held that on entry in the books of accounts could not be given much weight. The Court has to examine the whole statement of accounts at the material point of time, as held in Dadarao Vs. State of Maharashtra, reported in AIR 1974 SC 389. In the case on hand, the plaintiff did not produce any cash book or ledger maintained by the plaintiff-Company in respect of the defendants. It is also to be noted that the claim of the plaintiff is Page No.55/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 against not a particular defendant, though it is stated in the prayer column, the defendants, without mentioning as to which defendant. Interestingly, the first defendant is a sole Proprietary concern after amendment of the pleadings. In such a case, the plaintiff does not know against whom the claim is to be established. Keeping that in mind, the evidence is let in, which is bereft of any detail and deserves no consideration by this Court. Therefore, defendants 1 to 3 should succeed in the suit and hence, this Court may dismiss the above suit.
31. Heard the learned counsel for the plaintiff and the learned counsel for the defendants 1 to 3 and perused the materials available on record.
32. The present suit has been filed for recovery of money. The specific case of the plaintiff-Company is that, after repeated requests and demands made by the plaintiff, the defendants had acknowledged that the total value of the chit had been subscribed by the plaintiff at Rs.400 lakhs and that after making all necessary adjustments, since the defendants had paid a sum of Rs.80 lakhs in installments to the plaintiff towards the above said chit transaction and the balance amount of Rs.3,48,00,200/- as due and payable to the plaintiff. The defendants are also liable to pay interest towards the above said amount at 18% per annum till the date of realisation.
33. The plaintiff is the subscriber of the unauthorised chit conducted by the defendants and cannot file the suit for recovery of money from the Page No.56/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 defendants and the Court cannot extend its help in this regard. The plaintiff has not filed Board Resolution and Order 29 Rule 1 CPC is not complied with. Even filing of the Board Resolution dated 24.02.2006 along with Memorandum of Association and Article of Association, does not specify the statutory requirements. The present suit filed by the plaintiff is barred by limitation and there is no cause of action to file the present suit and the plaintiff-Company did not let in any tangible or convincing oral and documentary evidence before this Court to prove their case. No voucher receipts, chit pass-book, chit agreement, etc., had been produced. The plaintiff has not escaped their case and the suit is liable to be dismissed.
34. The plaintiff's claim is solely based on Ex.P-8 confirmation of balance and such confirmation is not evidenced either by books of accounts or by the relevant ledgers or entries in the pass-books. The plaintiff-Company had not produced any other chit pass-book, chit receipt or the chit agreement or any compliance, to the Registrar of Chits, thereby, corroborating the claim of the plaintiff. The first defendant is the sole proprietary concern and the plaintiff- Company does not know as to against whom the plaintiff has to establish. Therefore, the suit filed by the plaintiff-Company, is liable to be dismissed.
35. Issue Nos.(i) and (ii):
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(i) Whether the first defendant is conducting an unregistered chit fund while holding out that the same was registered under the provisions of the Chit Funds Act, 1982 ?
(ii) Whether the defendants had played fraud on the plaintiff, having projected the defendant-Proprietorship concern, thereby inducing the plaintiff to subscribe for chits ?
36. The plaintiff-Company has entered into the chit scheme and it was informed by the defendants that it was a registered chit fund and many people have invested in their group and also accepted the chit from the public and their partnership concern. The said chit group was commenced from May 2013 and the plaintiff had remitted the payment through the cheques and paid Rs.4 crores to the defendants. After commencement of the chit, the plaintiff had been regularly remitting the monthly subscription towards the chit, less, the sanctioned dividend. After completion of the last chit in the month of December 2015, when the plaintiff approached the defendants to settle the maturity value, the second defendant was keeping on avoiding the payment by claiming several reasons due to that, and the plaintiff-Company had been facing difficulties with their various Bankers, and wanted to know as to why the capital funds to the Page No.58/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 tune of more than Rs.400 lakhs had been locked up with first defendant- Group of Companies and refused to extend further credit to plaintiff. On repeated requests, they did not pay the amount and at last, they have only paid Rs.80 lakhs in instalments to the plaintiff towards the said chit transaction and the balance sum of Rs.3,48,00,200/- was due. Therefore, when the plaintiff- Company has specifically stated that the plaintiff was informed that the first defendant was a partnership firm. The suit was also filed in the name of the partnership firm. Admittedly, pending the present suit, the defendants have filed a suit for rejection of the plaint, in which the defendant was described as a Proprietary concern. However, application for rejection of the plaint was dismissed, however, the defendants were granted liberty to work out their remedy and take all their defences during trial. Thereafter, the plaintiff came to know that the first defendant was not a partnership firm and it was only a proprietary concern and therefore, the cause title was amended. Further, the second defendant filed proof affidavit and he had not come for cross- examination, since he was not subjected to cross-examine and his chief examination was eschewed. The Power Agent was examined as D.W.2 and he has no personal knowledge about the conversation between the plaintiff and the second defendant. The plaintiff had also further averred that due to the friendly relations and due to the compulsion of the defendants, the plaintiff had Page No.59/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 subscribed the chit only later and the plaintiff had come to know that the defendants had been conducting chit companies in the name of Ganapathy Funds, Sarva Lakshmi Chit Funds, out of which, the Sarva Lakshmi Chit funds alone is the registered chit organisation and apart from that, the defendants are also carrying on their business in the name and style of Sai Sree Milk Food Products Pvt. Ltd. and Sai Sree Aqua Products India Private Limited and the said facts are denied by the Power Agent of the defendants. Admittedly, the second defendant filed his proof affidavit and after filing of the same, he did not appear before Court for cross-examination. Therefore, on the application in Appln.No.1572 of 2022, the Court eschewed the evidence of the defendants.
37. Further, during cross-examination of defendants' Power Agent, he has specifically admitted in Question No.16 that he knows the facts of the case only through his Boss who is second defendant herein. Since the defendants did not come to Witness Box and prove their defence taken in the written statement, the second defendant was not subjected to cross-examination. On the other hand, plaintiff, through oral and documentary evidence, had proved the said fact and by believing the words of the second defendant, the plaintiff had subscribed the chit funds company as if it is a registered partnership firm and running registered chits and later, only after filing suit, he came to know that it is only a proprietary Page No.60/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 concern and the said Ganapathy Funds is not a registered chit funds company. Since contention of plaintiff has not been refuted by second defendant by entering into witness box, he came to know that it is only a proprietary concern and the said Ganapathy Funds is not a registered chit funds Company. As contention of plaintiff has not been refuted by second defendant by entering into the witness box and the case of the plaintiff alone, as averred, is acceptable by preponderance of probabilities and the plaintiff-Company has also proved their case. These issue Nos.(i) and (ii) are answered in the above terms against the defendants and in favour of the plaintiff.
38. Issue No.3:
(iii) Whether the suit claim arise out of the contract or chit transaction or loan transaction?
The plaintiff has specifically stated that he has subscribed the chits based on the request made by the defendant(s) and though the defence taken by the defendant(s) is not that it is a chit fund and the plaintiff has specifically stated that it is only the chit transaction and the defendant(s) has also not specifically denied, as already stated, the second defendant has not come to the witness box and he was not subjected to cross-examination.
39. The main defence taken by the defendants is that it is an un- registered chit fund Company and the suit is barred, in view of Section 64 of the Page No.61/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 Chit Funds Act. The plaintiff cannot file the suit against the un-registered chit fund as per Section 64 of the Chit Funds Act and they have to approach the Registrar of Chit Funds and another ground taken is that the plaintiff has not complied with Order 29 Rule 1 CPC by authorising the plaintiff, who verified the plaint, and therefore, the suit is not maintainable and the same is barred by limitation. They have not stated that it is not a chit transaction. The main ground taken is that it is only the Proprietary concern and not the partnership firm. As already stated, the plaintiff has clearly averred that the first defendant told that it is a partnership firm and it is a registered chit fund Company and believing his words, he subscribed the chit after filing the suit only, from the application filed under Order 7 Rule 11 CPC for rejection of the plaint and the plaintiff came to know that it is only a proprietorship concern and it is not M/s.Ganapathy Funds, which was not registered. Therefore, in the above circumstances, this Court finds that it is only the chit transaction and it is not either contract or loan transaction. Issue No.(iii) is answered accordingly.
39. Issue No.4: Whether the suit claim is barred by limitation ? One of the main defence taken by the defendant(s) is that the present suit is barred by limitation, whereas, the plaintiff has averred that the Chit group was commenced in May 2013 onwards and the plaintiff has admitted payment through cheque only for Rs.4 crores to the defendant. After commencement of the chit, the Page No.62/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 plaintiff has been regularly remitting the monthly subscription towards the share, less sanctioned dividend and after completion of the last monthly subscription in the month of December 2024, the plaintiff approached the defendant and settled the maturity value and the second defendant kept on paying the payment by claiming several reasons. After repeated requests and the demand made by the plaintiff, the defendant(s) had acknowledged that the total value of the chit has been subscribed by the plaintiff as Rs.4 crore and that after making all necessary adjustments, the defendant(s) had paid a sum of Rs.80 lakhs on instalment basis to the plaintiff towards the chit transaction and the balance sum of Rs.13,48,200/- was due with 18% interest. Ex.P-8 being the letter, dated 27.06.2015 from the first defendant to the plaintiff and Ex.P-9 the ledger extract of the first defendant, maintained by the plaintiff, dated 27.06.2015, which shows that Ex.P-8 dated 27.06.2015 from the firm run by M/s.Ganapathy Chits, signed by the second defendant and its confirmation of total amount payable by them is Rs.3,48,20,000/- as on 31.03.2015. The break-up details was also given and the amount received from the plaintiff on monthly basis being Rs.2,50,30,000/- dividend payable at Rs.90,00,000/- the total amount being payable by the plaintiff as on 31.03.2016 at Rs.3,48,20,000/-. The second defendant on behalf of the first defendant and the confirmed the total amount on 27.06.2015 and the suit came to be filed on 22.09.2017 itself, i.e from the date of Ex.P-8, and the Page No.63/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 suit has been filed within three years, and therefore, the suit is not barred by limitation. Since the present suit is for recovery of money, the suit is filed within three years from the date mentioned in Ex.P-8. This issue is answered accordingly.
40. Issue No.5 : Whether the plaintiff is entitled to the interest, if so, at what rate ?
Since as per Ex.P-8, the second defendant himself had admitted the liability of Rs.3,48,20,000/- and admittedly, the last chit was in the month of December 2014 and according to the plaintiff-Company, they have approached the second defendant and he did not pay the amount for one reason or the other and he also in several instalments and he paid only Rs.80 lakhs as per Ex.P-18. Except for the year 2015, the balance Rs.3,48,20,000/- has to be paid. The suit was filed in 2017 and Ex.P-9 shows the same.
41. It is settled proposition of law that the admitted facts need not be proved. The defendants have not denied Exs.P-8 and P-9, though the defence taken by the defendants is under Section 34 of the Indian Evidence Act, mere production of the accounts, is not sufficient and it has to be proved.
42. It is also settled proposition of law, as stated above, that the admitted facts need not be proved. Admittedly, the second defendant had not come to the witness box and not subjected for cross-examination and he has not specifically Page No.64/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 denied Ex.P-8. Therefore, under the above circumstances, the contentions raised by the defendants, are not acceptable and since the amount was due in December 2014 till the filing of the suit. The defendants had not paid the amount and therefore, the plaintiff is entitled to get interest @ 18% per annum on the disputed amount. Issue No.5 is answered accordingly.
43. One of the defence taken by the defendants is that the plaintiff has not complied with the statutory provisions of Order 29 Rule 1 CPC, whereas, Ex.P-1 clearly shows that the Board Resolution, which also is clearly authorised signatory even to file the suit.
44. One of the contentions raised by the defendants is that it was not particularly authorised regarding the recovery of the chit amount. It is not disputed or challenged by any of the Director or officials of the plaintiff-Company that the authorised signature was not authorised to file the suit. When once the defendants admitted that the second defendant was running the chit funds, and he has admitted Ex.P-8, he cannot take advantage of the same technical grounds. Though it is settled principle of law that the plaintiff has to prove the case on their own strength and the plaintiff cannot take advantage of the loopholes left by the defendant. Equally, it is also settled principle of law that to prove the case by the plaintiff, in civil cases, is not that as heavy as the criminal case by the prosecution has to prove the case beyond all reasonable doubts. In Page No.65/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 civil dispute, the plaintiff can prove their case by preponderance of probabilities. In this case, the un-controvered materials that the first defendant was running chit funds and one of the chit funds was registered one and the plaintiff has also subscribed to the chit funds. According to the plaintiff-Company, the first defendant induced the plaintiff that he was running registered chit funds, however, admittedly, one of the chit funds was not registered. As already stated, the first defendant did not come to the witness box. Though he filed the proof affidavit, later, the same was eschewed, since he did not come for cross- examination. Therefore, the plaintiff has proved the case with preoponderance of probabilities. Even the defendants had not denied Ex.P-8, which is un- controverted materials.
45. Therefore, in the above circumstances, the defendants cannot take the technical grounds for evading to pay the amount. There is no material to show that the plaintiff, despite knowing the fact that the first defendant was the sole proprietor of the chit fund concern, which was not a registered one. The plaintiff has clearly averred all the material facts and the defendants have also filed application pending suit for rejection of the plaint on various grounds and the same was also rejected, of course, liberty was given to the defendant(s) to take all his defence in the suit. As stated earlier, the first defendant has not subjected himself to cross-examination and D.W.2 who came to the witness box, Page No.66/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 did not have personal knowledge about the same.
46. It is settled proposition of law that the Power Agent cannot give any evidence regarding the personal knowledge between the Principal and the other parties. Therefore, this Court finds that the plaintiff-Company has proved their case with preponderance of probabilities with admitted facts, and therefore, this Court finds that the plaintiff-Company is entitled to get the relief as sought for in the plaint.
47. There is no quarrel over the proposition of law laid down therein by the Supreme Court and various High Courts in the referred citations. Considering the peculiar nature of the facts and circumstances, the decisions relied on by the learned counsel for the defendant(s), are not applicable to the facts of the present case on hand.
48. As already stated, the plaintiff has already averred in the plaint all the factual matrix of the matter, though the defendants had denied in the written statement, and that the second defendant has not come to the witness box and substantiated their defence. The witness who entered into the witness box is not competent to speak about the personal knowledge of the transaction between the plaintiff and the defendants.
49. In the result, the suit is decreed with costs.
21.01.2025 Page No.67/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 (1/2) cs/ms List of Witness examined on the side of the plaintiff:
A.Rathinam - PW1 List of documents marked on the side of the plaintiff:
Sl. Exhibits DESCRIPTION OF DOCUMENTS DATED
No
1. P1 Board Resolution of the Company 24.02.2006
2. P2 Memorandum of Association of the 24.02.2006
plaintiff-Ccompany
3. P3 The Articles of Association of the 24.02.2006
plaintiff-Company
4. P4 Photocopy of Summary of Accounts 21.08.2014
held by the plaintiff in ICICI Bank,
Ayanavaram Branch
5. P5 Statement of Account for the period
from 01.04.2014 to 08.05.2014
6. P6 Statement from 01.04.2014 to
31.10.2014 in Indian Overseas Bank,
Shenoy Nagar Branch of plaintiff
7. P7 Summary of Account given by ICICI 17.02.2015
Bank to the plaintiff
8. P8 Original letter from 1st defendant to 27.06.2015
plaintiff
9. P9 Ledger Abstract of 1st defendant 27.06.2015
maintained by the plaintiff
10. P10 Letter from plaintiff to the 1st defendant 12.12.2015
11. P11 Letter from 1st defendant to the plaintiff 19.12.2015
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Civil Suit No.926 of 2017
12. P12 Letter from the Sarvalakshmi Chit 19.12.2015
Funds India Pvt. Ltd to the plaintiff
13. P13 Letter sent by the plaintiff to the 1st 07.03.2016
and 2nd defendants
14. P14(Series) the Acknowledgment Cards 09.03.2016
nd
15. P15(Series) letter sent by the plaintiff to the 2
defendant dated 04.10.2016 with
postal receipt and acknowledgment
card.
16. P16(Series) Letter sent by the plaintiff to the 2nd defendant dated 13.10.2016 with Post receipt and Acknowledgment Card.
17. P17(Series) Reply from the 2nd defendant to the plaintiff dated 14.10.2016 with postal cover
18. P18(Series) Letter from plaintiff to the 2nd defendant dated 14.11.2016 with Post receipt and Acknowledgment Card.
19. P19 Reply from the 2nd defendant to the 26.11.2016 plaintiff
20. P20 Photocopy of Statement of Account 17.04.2017 from 01.12.2016 to 17.04.2017 maintained by the plaintiff in the Indian Overseas Bank Anna Nagar Branch.
21. P21 Office copy of notice from plaintiff's 19.04.2017 counsel to the 2nd defendant
22. P22 Statement of Accounts maintained by the plaintiff in ICICI Bank from the period 01.06.2014 to 30.06.2014
23. P23 Statement of Accounts for the period from 01.07.2014 to 31.07.2017 maintained by the plaintiff in ICICI Bank Ltd., Ayanavaram Chennai
24. P24 Reply notice issued by the 2nd 22.04.2017 defendant counsel to the plaintiff's Page No.69/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017 counsel
25. P25 Photocopy of summon and plaint in O.S.No.2285 of 2017 filed by the defendant against the plaintiff dated 26.04.2017.
26. P26 Rejoinder issued by the plaintiff's 25.05.2017 counsel to the 2nd defendant's counsel
27. P27 Photocopy of the Minutes of the Board of Directors of plaintiff Company.
28. P28 Original Challan 14.11.2007
29. P29 Certified true copy of Compliance Certificate dated 01.09.2006 from the Company Secretary to the plaintiff
30. P30 Form 66 filed before the Registrar of Companies
31. P31 Form 20B filed before the Registrar of Companies
32. P32 Payment Challan 14.11.2007
33. P33 Statement of Accounts given by Indian Overseas Bank, Shenoy Nagar Branch to the plaintiff
34. P34 Statement of Account given by the ICICI Bank to the plaintiff
35. P35 Certified copy of FIR No.324 of 2020
36. P36 Print-out of the Income tax returns for 30.10.2019 the assessment year 2019-2020 filed by the plaintiff company
37. P37 Print-out of the Income Tax returns for 29.12.2020 the assessment year 2020-2021 filed by the plaintiff company
38. P38 Print-out of the provisional balance 10.06.2021 sheet of the plaintiff company as at 31st March 2021
39. P39 Print-out of the letter from plaintiff's 30.10.2021 counsel to defendant's counsel Page No.70/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017
40. P40 Print-out of the bank statement filed 25.05.2022 by the plaintiff for the period from 01.10.2013 to 31.01.2013 issued by ICICI bank
41. P41 Print-out of the bank statement filed by 26.05.2022 the plaintiff for the period from 01.01.2014 to 31.01.2014 issued by the ICICI bank
42. P42 Print-out of the bank statement filed by 26.05.2022 the plaintiff for the period from 01.04.2014 to 30.04.2014 issued by ICICI bank
43. P43 Print-out of the bank statement filed by 26.05.2022 the plaintiff for the period from 01.06.2014 to 30.06.2014 issued by ICICI bank
44. P44 Print-out of the bank statement filed by 26.05.2022 the plaintiff for the period from 01.07.2014 to 31.07.2014 issued by the ICICI bank
45. P45 Print-out of the bank statement filed by 26.05.2022 the plaintiff for the period from 01.08.2014 to 31.08.2014 issued by the ICICI bank
46. P46 Print-out of the bank statement filed by 26.05.2022 the plaintiff for the period from 01.09.2014 to 30.09.2014 issued by ICICI bank
47. P47 Print-out of the bank statement filed by 26.05.2022 the plaintiff for the period from 01.10.2014 to 31.10.2014 issued by the ICICI bank
48. P48 Print-out of the bank statement filed by 26.05.2022 the plaintiff for the period from 01.11.2014 to 30.11.2014 issued by the ICICI bank Page No.71/73 https://www.mhc.tn.gov.in/judis Civil Suit No.926 of 2017
49. P49 Print-out of the bank statement filed by the plaintiff for the period fro 01.12.2014 to 31.12.2014 issued by ICICI bank dated 26.05.2022
50. P50 Print-out of the bank statement filed by 26.05.2022 the plaintiff for the period from 01.01.2015 to 31.01.2015 issued by ICICI bank
51. P51 Print-out of the bank statement filed by 26.05.2022 the plaintiff for the period from 01.02.2015 to 28.02.2015 issued by ICICI bank
52. P52 Print-out of the bank statement filed by 26.05.2022 the plaintiff for the period from 01.03.2015 to 31.03.2015 issued by ICICI bank
53. P53 Print-out of the bank statement filed by the plaintiff for the period from 01.01.2014 to 31.01.2014 issued by the Axis bank List of Witnesses examined on the side of the defendants:
Jayaraman Srinivasan - DW1
N.G.Yabesh - DW2
List of documents marked on the side of the defendants:
Sl. Exhibits DESCRIPTION OF DOCUMENTS DATED
No
1. D1 Original Proprietary concern Registered 05.09.2011
Deed
2. D2 Original Indian Bank Account 1st page 01.11.2014
to
30.11.2014
21.01.2025
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Civil Suit No.926 of 2017
(2/2)
cs/ms
P.VELMURUGAN, J
cs
Pre-Delivery Judgment in
C.S.No.926 of 2017
(Commercial Division suit)
Judgment delivered on
21.01.2025
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