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Delhi District Court

S/O Sh. Ram Narain vs Mithun Chit Fund & Finance (P) Ltd on 30 April, 2013

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    IN THE COURT OF SH. ROHIT GULIA, CIVIL JUDGE (WEST)­2, 
                           DELHI
                        SUIT NO.756/06

Unique Case ID No ­ 02401C0134932002

Sh. Rati Ram Sherawat

S/o Sh. Ram Narain,

R/o of 16/64 Old,

Chandrawal, Civil Lines,

Delhi ­ 110054

                                                  ..........................PLAINTIFF

                                  VERSUS

Mithun Chit Fund & Finance (P) Ltd.

Through its Managing Director,

Registered Office : E­1, Model Town,

Delhi ­ 110009

                                                  ........................DEFENDANT



Suit filed on - 26/04/1991

Judgment reserved on ­ 20/04/2013

Date of decision - 30/04/2013



 SUIT FOR RECOVERY OF RS.1,63,400/­ (Rupees One Lakh Sixty Three 

                      Thousand And Four Hundred Only)




Suit No.756/2006                                                          Page 1/16
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JUDGMENT:

­ By this judgment I shall dispose off a suit for recovery of Rs. 1,63,400/­ filed by the plaintiff against the defendant.

1. The brief facts of the case as per plaint are that the defendant is a private limited company registered under the Companies Act, 1956 by the name of Mithun Chit Fund And Finance (P) Ltd. duly registered with the Registrar of Chit Fund, Delhi under the Madras Chit Fund Act, 1961 the defendant has its registered office at E­1, Model Town, Delhi­110009.

That the plaintiff entered into an agreement to subscribe the Chit under and being organised by the defendant, Chit Fund bearing No. SKI, Token No.15.

That the Chit was of the value of Rs.1,00,000/­ (Rupees One Lakh) payable in 40 equal installments of Rs.2,500­00(Rupees Two Thousand Five Hundred only) each. Each installment was to be paid on the receipt of the intimation card from the office of the defendant and offer deducting the amount of dividend.

That the plaintiff continuously paid 39 installments. The defendant has duly acknowledged the receipt of the payment/installment upto 39 installment by making an entry in the pass book issued by it to plaintiff in its own hand.

That the defendant in an auction held on 09/04/1988 declared the plaintiff successful bidder/winner in the 39th installment of the value of Rs. 95,000/­ (Rupees Ninety Five Thousand only). Rs.5,000/­ (Rupees Five Thousand only) was retained by the defendant as Foreman's commission that is, defendant's commission.

Suit No.756/2006 Page 2/16

­ 3 ­ That the defendant prepared a cheque No.016842 dated 08/05/1988 for Rs.95,000/­ (Rupees Ninety Five Thousand only) in favour of the plaintiff drawn on Canara Bank, Delhi.

That the defendant in breach of contract did not hand over the cheque No.016842 dated 08/05/1988 for Rs.95,000/­ drawn on Canara Bank, Delhi to the plaintiff.

That the plaintiff inspite of his best efforts had not been able to recover the Chit amount of Rs.95,000/­ from the defendant.

Therefore, this suit has been filed by the plaintiff for recovery of Rs. 1,63,400/­ against the defendant.

2. The WS has been filed by the defendant wherein certain preliminary objections were taken like that the suit of the plaintiff is false, vexatious and malafied and is liable to be dismissed. It is further submitted that out of the agreed number of installments of each chits, the plaintiff did not pay the last seven installments in all the aforesaid 4 Chits. The installments of the Chits No.SK­1/14 and 15 were Rs.2,500/­ per month whereas the monthly installments for the Chits No. MCF 3/14 and 3/15 was Rs.1,000/­ each. Thus a sum of Rs. 35,000/­ for two chits of SK­1/14 and 14 and a sum of Rs.14,000/­ in the chits bearing No. MCF 3/14 and 3/15 were due and outstanding against the plaintiff. Accordingly, a total sum of Rs.49,000/­ is due and outstanding against the plaintiff.

It is further submitted that the defendant has lien and the first charge over any amount that may be due either personally or as a surety and the defendant has the right set off such credits towards the liabilities of the defendant. Suit No.756/2006 Page 3/16

­ 4 ­ Thus the present suit of the plaintiff is totally false and frivolous and is liable tot be dismissed.

In reply on merits the defendant has denied all the averments made in the plaint.

3. Replication has been filed on behalf of plaintiff wherein the averments made in the WS were denied and those made in the plaint were reiterated and reaffirmed.

4. From the pleadings of the parties the following issues were framed on 29/10/1998 :­

1. Whether the suit of the plaintiff is barred by limitation? OPD

2. Whether the suit is not maintainable as per the preliminary issue no.3 in the WS?

3. Whether the plaintiff is entitled for the recovery of money if so for what sum? OPP

4. Whether the plaintiff is entitled for the interest if so at what rate and for which period? OPP

5. Relief.

Further two additional issue were framed with respect to the right of the set off of the defendant vide order dated 09/04/03 which are as under:­

1. Whether the defendant is entitled to the right of set off for Rs.

35,000/­ with respect to Chit no. SK 1/14 and SK 1/15? OPD Suit No.756/2006 Page 4/16 ­ 5 ­

2. Whether the defendant is entitled to the right of set off Rs.

14,000/­ with respect to chit bearing no. MCF 3/14 and MCF 3/15? OPD

5. That in order to prove his case the plaintiff got examined four PWs i.e. himself as PW­1, Sh. Suresh Chand Verma as PW­2, Sh. Fahimudin as PW­3 and Sh. Ashok Saxena as PW­4. On the other hand defendant got examined only one DW i.e. herself as DW­1.

6. The arguments have been heard and the record has been carefully perused. Now, I shall give my issue­wise findings regarding the issues framed on 29/10/1998, which are as under :­

7. ISSUE NO.1 - Whether the suit of the plaintiff is barred by Limitation Act? OPD The onus to prove this issue was upon the defendant. It has been contended by the defendant that the plaintiff was declared the successful winner of the chit bearing No. SK­1/15 on 09/04/1988, therefore, period of limitation for filing of the case for recovery with respect to the above mentioned suit will be three years from 09/04/1988 and the same will expire on 10/04/1991, but as the suit has been filed by the plaintiff on 26/04/1991, therefore, it has been contended by the defendant that the suit of the plaintiff is barred by limitation.

Suit No.756/2006 Page 5/16

­ 6 ­ But the perusal of the chit agreement executed between the plaintiff and the defendant Ext. PW­2/4 shows that in Clause­10 it has been mentioned that the prize amount shall be paid to the subscriber before the date of next succeeding draw in which he/she will be paid the prize amount after proper verification of the sureties/securities offered by him/her.

Therefore, it is clear that the prize amount with respect to the chit bearing no. SK­1/15 could have been paid within next one month of the declaration of the winner and as the plaintiff was declared a winner on 09/04/1988, therefore, the money could have been paid to the plaintiff within the next one month of the declaration of winner.

Further, it has been mentioned in Clause­4 of the Chit Fund Agreement that the auction of the chit will be held on second Saturday of every month, therefore, it is clear that the second Saturday of the next month i.e. May, 1988 would have only come after 07/05/1988 and the payment could have been made to the plaintiff before 07/05/1988.

Therefore, it cannot be said that the period of limitation started running against the plaintiff when the plaintiff was declared winner on 09/04/1988 as the payment could have been made to the plaintiff before the next succeeding draw and as discussed above the suit filed by the plaintiff on 26/04/1991 is within the period of limitation as the limitation period will start from the next succeeding draw to be held in May 1998 and if the limitation period will start in May 1998 then the suit filed by the plaintiff in April 1991 is within the period of limitation.

Accordingly this issue is decided in favour of the plaintiff and against the defendant.

Suit No.756/2006 Page 6/16

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8. ISSUE NO.2 - Whether the suit is not maintainable as per the preliminary issue no.3 in the WS?

Though nothing have been mentioned regarding the onus to prove this issue in the original order where the issues were framed but the onus to prove this issue should be upon the defendant and accordingly the onus is considered to be upon the defendant.

As per the preliminary objection no.3 it has been stated by the defendant that the present suit is not maintainable as the plaintiff who is guarantor in other chits owes huge sums towards the defendant in various other chits and the defendant has lien over the prize amount of SK­1/15 as per the agreed terms and conditions.

Perusal of the bye­laws of the defendant company Ext. as PW­2/5 shows that Clause­(xiv) talks about lien which states that:­ LIEN OVER AMOUNT :

if the chit subscriber are indebted to the Foreman for any amount either personally or as surety, the Foreman will have in respect of such liabilities a first charge over any amounts that any be due to them from the Foreman. The Foreman has the right to set off such credits towards their liabilities to the Foreman. When the prize amount is drawn, only the balance if any, left after effecting such set off will be given to the subscriber.

But the perusal of the Chit Agreement Ext. PW­2/4 shows that there is nothing mentioned regarding the fact that the defendant will have lien over the prize amount as stated by the defendant and mentioned in the above mentioned Para.

Suit No.756/2006 Page 7/16

­ 8 ­ But in my considered opinion even if the defendant has lien over the prize amount, then also it has to be proved by the defendant that there are some payments due upon the plaintiff. Then only the defendant can claim set off on the basis of lien. Further, the defendant himself has claimed set off against the plaintiff in the present suit by claiming that the plaintiff has not paid the last 7 installments in the chit SK­1/14 and 1/15, MCF­1/13 and 1/14.

Therefore, it cannot be said that the defendant has lien over the prize amount unless and until it is proved by the defendant that there are some balance payment remaining to be paid by the plaintiff and as the specific issues has already been framed regarding the set off claimed by the defendant, therefore, the same will be decided at the time of disposal of those issue but it cannot be said that the suit is not maintainable as the defendant has lien over the prize amount claimed by the plaintiff with respect to the chit no. SK­1/15.

This issue is accordingly decided in favour of the plaintiff and against the defendant.

9. ISSUE NO.3 ­ Whether the plaintiff is entitled for the recovery of money if so for what sum? OPP The onus to prove this issue was upon the plaintiff. The main contention of the plaintiff is that he was declared successful bidder with respect to the chit bearing No. SK­1/15 on 09/04/1988 but thereafter the defendant despite preparing the cheques failed to handover the prize amount to the plaintiff and, therefore, the suit has been filed by the plaintiff to recover the same.

Suit No.756/2006 Page 8/16

­ 9 ­ On the other hand the main contention of the defendant in the written statement was that the plaintiff has failed to make the entire payment as per the agreement with respect to the chit bearing No. SK­1/14 and 1/15 and MCF­1/13 and 1/14.

But in the cross­examination of the witness i.e. PW­5 i.e. Vinod Kant, who was the accountant in the defendant company, it has been accepted by the witness that one last payment of Rs.2,500/­ is pending with respect to Ext. PW­4/1, which is related to SK­1/15. Further, in the cross­examination of the DW­1 i.e. Yogesh Kant it has been accepted by the witness that 39 entries in PW­4/1 are there in his hand writing and the said entries are in respect to the payment made by the plaintiff in chit bearing No. SK­1/15. Further, when the said witness i.e. Yogesh Kant was examined as PW­4 on 03/03/05 similar fact has been accepted by the witness in his chief examination.

Therefore, it can be said that the SK­1/15 was fully paid by the plaintiff except last installment of Rs.2,500/­ which was to be paid after declaring the plaintiff as winner. Therefore, from the above mentioned facts and circumstances it becomes clear that the plaintiff has paid 39 installments with respect to the chit bearing no. SK­1/15.

Further, one of the main defence taken by the defendant is that the suit filed by the plaintiff is governed by the Chit Fund Act 1982 and not by the Madras Chit Fund Act 1961, which was later christened as the Tamil Nadu Chit Fund Act 1961 and it has been contended by the defendant that as per Section­64 (3) of the Chit Fund Act 1982, the suit of the plaintiff is not maintainable in a Civil Court.

Suit No.756/2006 Page 9/16

­ 10 ­ But the perusal of the Section­1 of the Chit Fund Act 1982 shows that it shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different States.

It was held by the Hon'ble Delhi High Court in the case of 'Sanjiv Kumar V. M/s Ramwa Chit Funds (P) Ltd.' AIR 2006 DELHI 274 that:­ A bare reading of the above provision shows that the enforcement of the Act was postponed to a date that may be fixed by the Central Government by notification in the Official Gazette. The Central Government has also been given the power to fix different dates on which the said enactment may be enforced in different States. The right to fix the date for commencement of the Act has been delegated and left to the discretion of the Central Government. The Act did not come into operation on being passed by the Parliament or by the Presidential assent. The legislative enactment itself provides that the delegatee i.e. the Central Government is empowered to decide when and in which part of the country the enactment should be brought into operation.

Further, it is the matter of record that the Act became applicable to the National Capital Territory of Delhi on 01/04/2007 vide S.O. 338(E), dated 09/03/2007, published in the Gazette of India, Ext., Pt. II,S. 3(ii), dated 09/03/2007. Therefore, the Act came into force on 01/04/2007 and the Act was not in operation when the Chit Agreement was entered into by the parties in the year 1985.

Therefore, it cannot be said that the Chit Fund Act 1982, become applicable in Delhi before 01/04/2007 and further the Chit Agreement Ext. Suit No.756/2006 Page 10/16

­ 11 ­ PW­2/4 shows that as per Clause­1, the parties will be governed by the Madras Chit Fund Act 1961.

It was held in the case of 'Smt. Shakuntala Devi & Ors V/s M/s Madadgar Chit Fund Pvt. Ltd. RSA No.29/2001 that:­ It is thus clear that in the instant case although both the parties had voluntarily entered into this chit agreement under the mistaken belief that the Tamil Nadu Chit Fund Act 1961 was still in operation; yet this mistake of law is not by itself a ground to make such a contract voidable. This is clear from a reading of Section­21 of the said Act.

Therefore, even if we consider that the Chit Fund Act 1982 was applicable then also the agreement entered into by the plaintiff and the defendant due to lack of knowledge of law is not voidable as per Section­21 of the Indian Contract Act and the same has been held in the above mentioned case.

Further, as per Section­90 (2) of the Chit Funds Act 1982, the Acts which has been repealed by the Chit Fund Act 1982, shall continue to apply to the chits in operation on the commencement of this Act, in the same manner as they applied to such chits before such commencement.

Therefore, from the above mentioned provisions it is clear that the Tamil Nadu Chit Fund Act 1961, will continue to apply to chits in operation on the commencement of this Act, in the same manner as it applied to such chits before such commencement. As the Chit Fund Act 1982, became applicable to Delhi on 01/04/2007, therefore, any chit in operation before 01/04/2007 governed by Tamil Nadu Chit Fund Act 1961, will be continued to be governed by the Tamil Nadu Chit Fund Act 1961, even after 01/04/2007 in the same manner as it Suit No.756/2006 Page 11/16 ­ 12 ­ applied to such chits before such commencement.

Therefore, from the above discussion it becomes clear that the chit agreement entered into by the plaintiff and the defendant on 12/03/1985 is still governed by the Tamil Nadu Chit Fund Act 1961.

Now coming further, as discussed above it has been accepted by the witness of the defendant i.e. Yogesh Kant, the Director of the defendant company that the entries from Sl. No.31 to 39 are in his own handwriting and further it has been accepted by the defendant that the plaintiff was declared winner on 09/04/1988 with respect to the chit bearing no. SK­1/15 for the total amount of Rs. 95,000.

Further, it has also been accepted by the defendant that a cheque was also prepared for the same amount but the same was not handed over to the plaintiff as there was lien against the balance payments of the plaintiff. All the defences taken by the defendant has been dealt with during the disposal of the present issue.

Now, nothing more remains to be adjudicated in this issue as it has been accepted by the defendant that the plaintiff was declared successful winner in SK­1/15 for the amount of Rs.95,000/­ and the and the claim of the plaintiff with respect to set off will be decided in later issues. Therefore, it can be said that the plaintiff is entitled to a sum of Rs. 95,000/­.

In view of the above mentioned facts and circumstances, this issue is accordingly decided in favour of plaintiff and against the defendant.

10. ISSUE NO. 4 ­ Whether the plaintiff is entitled for the interest if so at what rate and for which period? OPP Suit No.756/2006 Page 12/16 ­ 13 ­ The onus to prove this issue was upon the plaintiff. As the plaintiff is entitled for a sum of Rs. 95,000/­ from 09/04/1988, therefore, the plaintiff is also entitled for interest on the above mentioned amount from 09/04/1988. Accordingly interest @ 10% p.a. is awarded to the plaintiff from 09/04/1988 till the realisation of the amount.

This issue is accordingly decided in favour of the plaintiff and against the defendant.

Now, I shall decide the issues framed vide order dated 09/04/2003:­

11. ISSUE NO.1 ­ Whether the defendant is entitled to the right of set off for Rs.35,000/­ with respect to Chit no. SK 1/14 and SK 1/15? OPD The onus to prove this issue was upon the defendant. One of the main contention of the defendant in the WS is that the plaintiff has not paid the last 7 installments in the chits bearing no. SK­1/14 and SK­1/15.

As discussed above, during the cross examination of PW­5 i.e. Vinod Kant, the accountant in the defendant company, it has been admitted that as per Ext. PW­4/1 last installment for Rs.2,500/­ is pending. The perusal of Ext. PW­4/1 shows that the same is related to chit bearing no. SK­1/15 and as per PW­4/1 39 installments have been paid by the plaintiff with respect to SK­1/15. Further, in the chief examination of PW­4 i.e. Sh. Yogesh Kant, director of the defendant company, it has been accepted by the witness that the entries at serial no.31 to 39 in Ext. PW­4/1 are in his hand writing but there are certain cuttings and overwriting on the same. Further, in the cross examination dated 07/12/10 of Suit No.756/2006 Page 13/16 ­ 14 ­ Yogesh Kant as DW­1 it has been accepted by the witness that one chit which is prized has only one installment pending. Therefore, it can be said that that the claim of set off of the defendant with respect to the chit bearing no. SK­1/15 is groundless and as discussed above the plaintiff has paid all of the installments with respect to chit no. SK­1/15, except the last one.

Therefore, it shows that Sh. Yogesh Kant is not a credible witness as the WS filed by the defendants bears the signature of Sh. Yogesh Kant, who has verified the pleadings and it has been verified by Sh. Yogesh Kant that the preliminary submissions are true and correct to his knowledge but during the evidence of Sh. Yogesh Kant as PW­4 and DW­1, it has been accepted by him that the entries no. 31 to 39 in Ext. no. PW­4/1, relating to chit no. SK 1/15, were in his hand writing which shows that all the installments except the last one has been paid by the plaintiff.

The onus to prove this issue was upon the defendant and the initial burden of proof was upon the defendant to prove that the plaintiff has not paid last 7 installments of chit no. SK­1/14 and SK­1/15. To prove this issue only one witness i.e. Yogesh Kant was examined as the DW­1 and no other witness was examined by the defendant and neither any documents have been filed by the defendant to substantiate its claim. Further, in the cross examination dated 07/12/10 of the witness i.e. DW­1 it has been accepted by the witness that the statements of account of chit no. SK­1/14, 1/15 and MCF­3/14, 3/15 are available with the defendant, however the same are not produced before this court, despite the fact that the defendant is a company and not an individual.

In the evidence affidavit of DW­1 i.e. Yogesh Kant only oral averments are there that the last 7 installments of the chit no. SK­1/14 and Suit No.756/2006 Page 14/16 ­ 15 ­ SK­1/15 are pending without any documentary proof and even the statement of account with respect to chit no. SK­1/14 and SK­1/15 has not been filed by the defendant. Further, as discussed above DW­1 is not a trustworthy witness. The documents produced on record by the defendant are only chit agreements, notice to produce documents and postal receipt. No document has been filed to show the liability of the plaintiff with respect to the remaining 7 installments in the chit no. SK­1/14 and SK­1/15.

But it has been accepted by the plaintiff that he has not paid the last installment of chit no. SK­1/15. Therefore, only the last installment which is for Rs. 2,500/­ can be set off against the claim of the plaintiff.

Therefore, in view of the above mentioned discussion it can be said that the defendant has failed to prove this issue and accordingly this issue is decided in favour of the plaintiff and against the defendant except as mentioned in the above mentioned para.

12. ISSUE NO.2 ­ Whether the defendant is entitled to the right of set off Rs. 14,000/­ with respect to chit bearing no. MCF 3/14 and MCF 3/15? OPD The onus to prove this issue was upon the defendant. As discussed above DW­1 is not a trustworthy witness and no document has been placed on record by the defendant to show that the plaintiff has not paid last 7 installments of the chit no. MCF­3/14 and MCF­3/15.

Therefore, the defendant has failed to prove this issue also and accordingly this issue is also decided in favour of the plaintiff and against the defendant.

Suit No.756/2006 Page 15/16

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13. ISSUE NO.5 RELIEF - In view of the findings given on issues no.1 to 4 and additional issue no.1 & 2 framed on 09/04/03, documents placed on record, pleadings of the parties and evidence led by the parties, the plaintiff has prove his case on the scale of preponderance of probabilities. Accordingly, the suit of the plaintiff is hereby decreed in his favour and against the defendant and following reliefs are awarded to the plaintiff :­

1. A decree for a sum of Rs.92,500/­ (Rupees Ninety Two Thousand Five Hundred Only) as principle amount alongwith interest @ 10% per annum from 09/04/1988 till the realisation of the amount.

2. Costs of the suit.

Decree sheet be prepared accordingly. File be consigned to record room after completing the necessary formalities.

(ROHIT GULIA) Civil Judge, Delhi (West)­02 Announced in the open court on 30/04/2013.

Suit No.756/2006 Page 16/16