Telangana High Court
Vemula Srinivas vs Kapil Chits (Kakatiya) Private Limited on 21 April, 2026
Author: N.Tukaramji
Bench: N.Tukaramji
IN THE HIGH COURT FOR THE STATE OF TELANGANA
AT HYDERABAD
THE HONOURABLE SRI JUSTICE N.TUKARAMJI
CIVIL REVISION PETITION No.4269 OF 2025
DATE:21.04.2026
Between :
Vemula Srinivas and six others.
... Petitioners
AND
KAPIL CHITS KAKATIYA PRIVATE LIMITED
Represented by its Divisional Manager, SIRICILLA Branch D
Hanumanth Rao So Bhoomaiah, Aged about 56 Years, R/o
Karimangar.
... Respondent.
O R D E R:
This Civil Revision Petition is filed under Article 227 of the Constitution of India challenging the propriety and legality of the order passed in E.P. No.386 of 2025 on the file of the II Additional Junior Civil Judge, Karimnagar District.
2. The petitioners herein are the judgment debtors in Arbitration Application No.734 of 2020 filed by the respondent before the Chit Arbitrator/Deputy Registrar of Chits, Karimnagar. 2
2. Heard Mr. Anjeel Miya, learned counsel appearing on behalf of Ms. Jangili Soujanya, learned counsel for the petitioners, and Mr. K. Sudhakar Reddy, learned counsel appearing for the respondent. 3.1. Learned counsel for the petitioners contended that the arbitral proceedings initiated by the respondent-chit fund are vitiated by an abuse of the process of law. It is submitted that there exists a material inconsistency in the respondent's claim, inasmuch as the legal notice dated 20.11.2018 quantified the alleged liability at Rs. 2,20,000/-, whereas the claim petition was restricted to Rs. 1,91,920/-, thereby casting serious doubt on the correctness and bona fides of the claim. 3.2. It is further contended that there was an inordinate and unexplained delay of approximately 680 days in initiating arbitration proceedings after issuance of the legal notice, which, according to the petitioners, goes to the root of the matter.
3.3. It is also urged that the arbitral award dated 30.11.2024 was passed in violation of the principles of natural justice, as the learned Arbitrator proceeded ex parte despite the petitioners' alleged presence and their attempts to bring to notice the coercive methods adopted by the respondent. The Arbitrator is stated to have mechanically accepted the respondent's version without proper adjudication. On these grounds, it is prayed that the award be set aside.
33.4. It is further contended that the decree-holder, without first exhausting remedies against the principal borrower, has proceeded to execute the decree against the guarantors for the entire decretal amount. Such a course of action is ex facie unsustainable in law, particularly when the liability of the judgment debtors is asserted to be equal under Section 146 of the Indian Contract Act, 1872. 4.1. Per contra, learned counsel for the respondent submits that the revision petition is devoid of merit and is liable to be dismissed in limine. It is contended that the arbitral award is based on cogent documentary evidence, including the chit agreement, promissory notes, and guarantee agreements. It is not disputed that petitioner No. 1 subscribed to the chit, received the prize amount, and defaulted in repayment.
4.2. It is further submitted that the guarantors have undertaken joint and several liability and are bound by the terms of the agreement. The alleged discrepancy in amounts is not material and does not vitiate the proceedings, as the claim adjudicated is duly supported by accounts and documentary proof. The delay in initiating proceedings is stated to be within the permissible legal framework governing chit transactions. 4 4.3. It is also contended that summons were duly served and that the petitioners failed to contest the matter, thereby justifying the ex parte proceedings. It is asserted that there is no violation of the principles of natural justice.
4.4. Reliance is placed on Section 128 of the Indian Contract Act, 1872 to contend that co-sureties are jointly and severally liable. It is thus argued that no interference is warranted under Article 227 of the Constitution of India.
5. I have perused the material on record and considered the submissions advanced.
6. At the outset, it is undisputed that petitioner No. 1 subscribed to the chit, received the prize amount, and thereafter committed default in the payment of installments. The execution of guarantee agreements by the remaining petitioners has also not been seriously contested. The arbitral award is founded upon cogent documentary evidence, including the chit agreement, account statements, and related records, all of which clearly establish the liability of the petitioners.
7. It is trite that minor variations between pre-litigation demands and the quantified claim in arbitration do not, by themselves, vitiate the proceedings, unless such discrepancy results in demonstrable prejudice to the opposite party. In the present case, the final 5 adjudicated claim is supported by documentary evidence and has been duly considered by the arbitral tribunal. Hence, the alleged discrepancy is neither material nor sufficient to invalidate the award.
8. Equally untenable is the plea relating to delay in initiating arbitration proceedings. Mere delay, in the absence of the claim being barred by limitation, does not render arbitral proceedings invalid. So long as the claim is legally enforceable and falls within the prescribed limitation period, the initiation of arbitration cannot be faulted.
9. With regard to the alleged violation of the principles of natural justice, the record reveals that summons were duly issued to the petitioners at the addresses furnished in the chit agreement. In the absence of any material indicating that the petitioners had notified a change of address to the respondent, service must be deemed valid. Section 27 of the General Clauses Act, 1897 raises a statutory presumption of valid service when a document is properly addressed, prepaid, and dispatched by registered post. The petitioners have failed to rebut this presumption by adducing any credible evidence. Their non-participation in the arbitral proceedings, therefore, cannot be construed as denial of opportunity. Consequently, the ex parte award cannot be assailed on this ground.
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10. Turning to the issue of liability, the contention advanced by the judgment debtors/sureties that their liability is limited under Section 146 of the Indian Contract Act, 1872 (hereinafter, 'the Act') it is to be noted that, the liability of a surety is governed by Section 128 of the Act, which unequivocally provides that the liability of the surety is co- extensive with that of the principal debtor, unless otherwise contractually stipulated.
11. The legal position in this regard stands authoritatively settled by the Hon'ble Supreme Court in Bank of Bihar Ltd v. Damodar Prasad, AIR 1969 SC 297, wherein it was held that the liability of the surety is immediate and co-extensive, and that the creditor is not bound to exhaust remedies against the principal debtor before proceeding against the surety. This principle was reiterated in State Bank of India v. Indexport Registered, (1992) 3 SCC 159, where it was held that the decree-holder is entitled to proceed directly against the surety for recovery of the entire decretal amount.
12. The reliance placed on Section 146 of the Act is legally untenable. The said provision governs only the inter se rights and liabilities between co-sureties and does not curtail the creditor's right to recover the entire debt from any one of them. In State of Madhya Pradesh v. Kaluram, 1967 AIR SC 1105, the Hon'ble Supreme Court clarified that the surety, upon payment of the debt, is entitled to the 7 benefit of all securities and rights held by the creditor against the principal debtor, including subrogation under Section 140 and protection under Section 141 of the Act. Similarly, in Amrit Lal Goverdhan Lalan v. State Bank of Travancore, 1968 INSC 100, it was held that each surety is liable for the entire debt vis-à-vis the creditor, and the right to contribution arises only after one surety has discharged more than his proportionate share.
13. This settled position has been consistently reaffirmed in Industrial Investment Bank of India Ltd. v. Biswanath Jhunjhunwala, (2009) 9 SCC 478, wherein the Hon'ble Supreme Court, after reviewing earlier precedents including Bank of Bihar Ltd. and SBI v. Indexport Registered,(supra) held that the liability of the guarantor is independent, immediate, and co-extensive with that of the principal debtor. The Court further observed that a creditor cannot be compelled to first exhaust remedies against the borrower or the secured assets before proceeding against the guarantor. Consequently, the attempt of the surety to invoke Section 146 at the stage of execution to limit liability is wholly impermissible, as the provision neither overrides nor dilutes Section 128.
14. In view of the aforesaid settled legal position, the decree-holder is entitled to recover the entire decretal amount from the surety. The surety, if so advised, may seek contribution from co-sureties in 8 independent proceedings, but cannot resist execution on that ground. The objection raised is therefore devoid of merit and contrary to binding judicial precedents.
15. Accordingly, the contention that the respondent must first proceed against the principal borrower, or that the surety's liability is limited under Section 146 of the Indian Contract Act, is unsustainable in law. The arbitral award fastening joint and several liability upon the petitioners is fully consistent with established principles of contract and guarantee law.
16. Upon a comprehensive consideration of the material on record, this Court finds that the arbitral award is based on a proper appreciation of evidence and does not suffer from any jurisdictional error, patent illegality, or perversity warranting interference. The execution proceedings initiated pursuant thereto are also in accordance with law. Consequently, no ground is made out for interference with the impugned order in exercise of supervisory jurisdiction under Article 227 of the Constitution of India. 9
17. The Civil Revision Petition is, therefore, dismissed. No order as to costs.
Pending miscellaneous applications, if any, shall stand closed.
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Date: 21.04.2026 N.TUKARAMJI, J
MRKR