Karnataka High Court
Maxworth Realty India Ltd vs Jt Registrar Of Coop Societies on 15 April, 2025
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 15TH DAY OF APRIL, 2025
PRESENT
THE HON'BLE MRS JUSTICE ANU SIVARAMAN
AND
THE HON'BLE MR JUSTICE RAJESH RAI K
WRIT APPEAL NO.785 OF 2021
C/W
WRIT APPEAL NO.781 OF 2021
WRIT APPEAL NO.792 OF 2021
WRIT APPEAL NO.866 OF 2021
WRIT APPEAL NO.886 OF 2021
BETWEEN
1 . MAXWORTH REALTY INDIA LTD
A PRIVATE LIMITED COMPANY
HAVING ITS OFFICE AT KMP HOUSE,
#12/2, YAMUNA BAI ROAD,
MADHAVANAGAR,
BENGALURU - 560 001
REPRESENTED BY ITS
CHAIRMAN & MANAGING DIRECTOR
K. KESAVA
2 . K. KESAVA
AGED ABOUT 50 YEARS
S/O MUNIYAPPA
3 . HEMALATHA
AGED ABOUT 43 YEARS
W/O K. KESAVA
SL.NOS.2 & 3 ARE RESIDING AT
#17, 4TH CROSS,
NETAJINAGAR, MATHIKERE,
BENGALURU-560 054.
2
4 . H.G. SAGAR
AGED ABOUT 36 YEARS
S/O GANGARAJU
#5, 2ND FLOOR,
DEFENCE COLONY, 1ST CROSS,
HESARAGHATTA, MAIN ROAD,
BENGALURU - 560 073.
...APPELLANTS
(COMMON)
(BY SRI. ADITHYA SONDHI, SENIOR COUNSEL A/W
SRI. VINAYA KEERTHY M, ADVOCATE)
AND
1 . JT. REGISTRAR OF COOP SOCIETIES
BENGALURU CENTRAL ZONE
DEVARAJ URS ROAD
BENGALURU - 560 001.
2 . DY. REGISTRAR OF COOP. SOCIETIES
ZONE-3, BENGALURU URBAN DIST.
146, 2ND FLOOR, SAHAKARA SOUDHA
8TH CROSS, 3RD MAIN,
MARGOSA MALLESHWARAM
BENGALURU - 560 003.
3 . SURABHI CHITS LTD
#5, 1ST FLOOR, GAJENDRA TOWERS
11TH MAIN ROAD, 4 TH BLOCK,
JAYANAGAR, BENGALUORU - 560 011
REPRESENTED BY ITS
RECOVERY MANAGER SRINIVASA RAO
...RESPONDENTS
(COMMON)
(BY SRI. DEVARAJ C.H, HCGP FOR R1 & R2,
SMT. T.P. VIVEKANANADA, ADVOCATE FOR R3)
WRIT APPEAL NO.785/2021 IS FILED U/S 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER
PASSED IN THE WRIT PETITION NO.1369/2021 DATED 09.04.2021.
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WRIT APPEAL NO.781/2021 IS FILED U/S 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE
IMPUGNED ORDER DATED 09.04.2021 IN W.P.NO.1455/2011 (GM-
CFA) PASSED BY THE LEARNED SINGLE JUDGE OF THIS HON'BLE
COURT, AND ALLOW THE W.P.NO.1455/2021 (GM-CFA).
WRIT APPEAL NO.792/2021 IS FILED U/S 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE ORDER
PASSED IN THE WRIT PETITION NO.1360/2021 DATED 09.04.2021.
WRIT APPEAL NO.866/2021 IS FILED U/S 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE
IMPUGNED ORDER DATED 09.04.2021 IN W.P.NO.1424/2021(GM-
CFA).
WRIT APPEAL NO.886/2021 IS FILED U/S 4 OF THE
KARNATAKA HIGH COURT ACT PRAYING TO SET ASIDE THE
IMPUGNED ORDER DATED 09.04.2021 IN W.P.NO.1388/2021(GM-
CFA) PASSED BY THE LEARNED SINGLE JUDGE OF THIS HON'BLE
COURT, AND ALLOW THE W.P.NO.1383/2021 (GM-CFA).
THESE APPEALS HAVING BEEN RESERVED FOR JUDGMENT
COMING ON FOR PRONOUNCEMENT THIS DAY, RAJESH RAI K, J.,
DELIVERED THE FOLLOWING:
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CORAM: HON'BLE MRS JUSTICE ANU SIVARAMAN
and
HON'BLE MR JUSTICE RAJESH RAI K
CAV JUDGMENT
(PER: HON'BLE MR JUSTICE RAJESH RAI K) These intra Court appeals are filed by the appellants challenging the order dated 09.04.2021 passed by the learned Single Judge in W.P.No.1360/2021 connected with W.P.No.1369/2021, W.P.No.1383/2021, W.P.No.1424/2021 and W.P.No.1455/2021, whereby the learned Single Judge dismissed the writ petitions.
2. The abridged facts of the case are as follows:
The appellants challenged the order passed by the Joint Registrar of the Co-operative Society-respondent No.1 in individual Chit Appeal No.JRB/Chit/Appeal/62/2019-20, 63/2019-20, 56/2019- 20, 57/2019-20 and 64/2019-20 before the learned Single Judge in W.P.No.1369/2021, W.P.No.1455/2021, W.P.No.1360/2021, W.P.No.1424/2021 and W.P.No.1383/2021 respectively.
3. The appellants had subscribed for a total of 11 chits in respondent No.3's company for different amounts reckoning to a total of Rs.20.50 Crore. Out of these 11 chits, payment with respect to 6 chits were made to the appellants and 5 chits which were realized by the appellants were adjusted towards the installments of 5 the remaining chits. The appellants also remitted several installments. However, it is the case of the appellants that the respondents have not duly calculated the payments already remitted by the appellants and also adjustments made therewith. Further, the appellants have cleared the entire due of respondent No.3 towards the chit subscription. Suppressing the same, respondent No.3 filed the dispute before the respondent No.2, however, the respondent No.2 on perusal of evidence and materials allowed the claim in Dispute No.DRB-C/CFS/DIS/321/2015-16 and Dispute No.DRB-C/CFS/DIS/322/2015-16, partly allowed in Dispute No.DRB-C/CFS/DIS/324/2015-16 and Dispute No.DRB- C/CFS/DIS/325/2015-16, dismissed in Dispute No.DRB- C/CFS/DIS/323/2015-16. Against the said order, the appellants and respondent No.3 approached respondent No.1. On reassessing the entire materials, respondent No.1 rejected the appeal filed by the appellants by confirming the order passed by respondent No.2 and allowed the appeal filed by the respondent No.3. The said order was challenged by the appellants before the learned Single Judge of this Court. However, the learned Single Judge dismissed the writ petitions by upholding the order of respondent No.1. Challenge to the same is lis before this Court.
4. We have heard the learned senior counsel Sri Adithya Sondhi along with learned counsel Sri Vinaya Keerthy M., for the 6 appellants, learned HGCGP Sri C.H. Devaraj for respondents No.1 and 2 and learned counsel Sri T.P. Vivekananda for respondent No.3 in all the appeals.
5. The primary contention of the learned senior counsel for the appellants is that, the respondent No.1 and the learned Single Judge grossly erred by allowing the claim of respondent No.3, albeit they failed to comply with the mandatory provision stipulated in Section 23(c) of the Chit Fund Act, 1982 (hereinafter referred to as 'the Act') by not producing valid books, records, statements of accounts before the respondent No.2 while substantiating their claim. Hence, their claim under Section 64 of the Act stands unjustified.
6. He further contended that, the learned Single Judge failed to appreciate the defence put forth by the appellants in their evidence specifically regarding their signatures being obtained on blank forms/papers by respondent No.3 and thereby defrauding the appellants by filling up the said blank forms. The learned senior counsel submitted that the amount due to respondent No.3 has already been paid. Further, respondent No.3 failed to place proof of assertion that the appellants participated in the chit auction held on 29.06.2013. Additionally, there is also no evidence to prove that the appellants received the chit amount by respondent No.3. The agreement placed by the respondent No.3 is also in contravention to 7 the provisions of the Act. According to the learned senior counsel, Annexure-R1 relied by the respondent No.3 is a self-serving statement. Further, he contended that, respondent No.1 while dismissing the appeal filed by the appellants imposed an interest of 16% on the principal amount from the date of order till the date of actual payment without any such plea being raised by respondent No.3. Additionally he contended that, the case instituted by respondent No.3 against the appellants under Section 138 of the Negotiable Instruments Act, 1881 was dismissed. In order to buttress his argument, he relied on the judgment passed in Dharmaraj and others V/s Chhittan and others reported in (2006) 12 SCC 349.
7. Refuting the submission of the learned senior counsel for the appellants, the learned counsel for the respondents submitted that, as per Section 64 of the Act, it is not mandatory to produce the books of account before the Registrar. Despite, the respondent No.3 placed Annexure-R1-Statement of chit accounts details and also other relevant documents to prove its claim. Additionally, respondent No.3 has elaborately enumerated in the facts regarding the chit transactions of the appellants in the company; they also placed documents for having participated in the chit auction and for receiving the chit amount after deducting the bid amount and other adjustments.
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8. It was further contended that, it was categorically proved that, the appellants issued acknowledgment for having received the amount and the respondent No.3 executed on demand pro-note receipt along with adjustment letters. Further, the appellants made all the transaction through cheques. In such circumstances, it is proved beyond reasonable doubts that the appellants participated in the auction and received the chit amount, thereby, establishing that the appellants defaulted in paying the same. By emphasising on Annexure-R4-the authorization letter and Annexure-R7-receipt in Writ Appeal No.785/2021, he submitted that, the appellants received prize amount after making adjustments to other chits. In such circumstances, there is no reason to disbelieve the case of respondent No.3.
9. We have given our anxious consideration on the submission made by both counsel for the respective parties so also perused the materials placed before us.
10. As could be gathered from records, it is undisputed fact that the respondent No.3 is in chit business and the appellants are the subscribers of 11 chits of different groups for different chit value. Further, on perusal of the order passed by the original authority i.e., respondent No.2, it could be gathered that the appellants on becoming successful bidders in auction draw conducted on different dates, received the chit amount of Rs.1.50 9 Crore and have also consented to adjust the bid amount towards instalments of the remaining chits. To that effect, the respondent No.3 has not only placed the Annexure-R1-statement of chit accounts details but also the authorization letter issued by the appellant No.1 to respondent No.3. In the said authorization letter, the respondent No.3 categorically admitted the prize amount received by them after adjustment. Further, the receipts were issued by the chairman of the appellant No.1-company to the respondent No.1 for having received a sum of Rs.1.50 Crore from respondent No.3. The learned Single Judge while dismissing the writ petition observed in paragraphs No.7 to 10 as under:
"7. Undisputed facts of the case are, all these writ petitions arise out of different chits to which petitioners have subscribed. Chit company has initiated criminal proceedings under Negotiable Instruments Act, 1881. Annexure-R11 is the deposition of Shri. K. Kesava, the Managing Director of first petitioner and the deponent in the Affidavits verifying these writ petitions. Shri. Vivekananda is right in his submission that Shri. K. Kesava has stated in his evidence that, in all, he has paid Rs.8,66,62,704/-. Annexure-R1 is the Statement of accounts maintained by chit company with regard to 11 chits subscribed by the petitioners. It contains details of the chit value, the group number, defaulting dates, cheque details etc. The total amount paid shown in the said statement is Rs.8,66,41,229/-. Thus, the Statement of Shri. K.Kesava that he has paid Rs.8.66 Crores matches with the Statement of account maintained by the chit company.10
8. The DRCS, has accepted petitioners' contention that chit company had obtained petitioners' signatures in blank forms. It is relevant to note that chit value of 11 chits is Rs.20.50 Crores. Petitioners have made payments through cheques. It is stated in paragraph No.12 of the Statement of objections filed by the chit company that petitioners have published a brochure claiming to be an ISO 9001-2008 Company.
9. Admittedly, first petitioner is a Public Limited Company. All transactions of Public Limited Companies are audited. In any event, as per the admission of Shri. K. Kesava, the total amount repaid is only Rs.8.66 Crores as against the 11 chits accounts having total chit value of Rs.20.50 Crores.
10. It is settled that High Court in a proceeding under Article 226 of the Constitution of India shall only examine the decision making process. It is not disputed by petitioner's company that they were not heard. JRCS is the appropriate appellate and the last fact finding authority. On reconsideration of evidence on record, JRCS has allowed the appeal and directed petitioners to pay the amounts due. It is settled that if the appellate authority has taken a particular view and if any other view is possible, the findings of fact recorded by the statutory appellate authority shall not be interfered with unless the party approaching the High Court makes out a case for interference."
11. On meticulous examination of the documents and the admissions made by the appellants for having received chit amount, the judgment relied by the learned senior counsel for the appellants does not apply in the instant case since this is not a case where the respondent No.1 passed the order based on conjectures or 11 summaries and devoid of evidence. We are afraid, we are unable to accept the contention of the learned senior counsel for the appellants that the respondent No.3 failed to place documents under Section 23(c) of the Act for the simple reason that there is no such mandatory requirement to produce the accounts book as stipulated in Section 64 of the Act. Nevertheless, as discussed supra, apart from Annexure-R1 i.e., the statement of chit accounts details, the documents i.e., the authorization letter and the receipts were addressed by appellant No.1 to respondents No.3 and 1 respectively clarifies the said position. While rejecting the appeal filed by the appellants, the respondent No.1 imposed 16% interest on the principal amount from the date of order till the date of actual payment. Considering the facts and circumstances of the case, in our considered opinion, the same is exorbitant and the appellants are liable to pay the interest at the rate of 12% to the outstanding amount passed by the respondent No.2 i.e., the original authority. Hence we proceed to pass the following:
ORDER i. The W.A.No.785/2021, W.A.No.781/2021, W.A.No.792/2021, W.A.No.866/2021 and W.A.No.886/2021 are allowed-in-part.
ii. The order passed by the learned Single Judge in W.P.No.1360/2021 connected with W.P.No.1369/2021, W.P.No.1383/2021, 12 W.P.No.1424/2021 and W.P.No.1455/2021 are confirmed. However, the interest rate imposed by the respondent No.1 is modified to 12% instead of 16%.
Pending Interlocutory Applications[s], if any, stands disposed of in all the appeals.
SD/-
(ANU SIVARAMAN) JUDGE SD/-
(RAJESH RAI K) JUDGE HKV