2005 (3) TMI 826 - HC - Indian Laws

Summary

Issues Involved:
1. Whether the suit filed by the petitioner is barred by limitation.
2. Determination of the starting point of the limitation period for filing the suit.
3. Applicability of the judgments cited by the petitioner and the respondent.

Detailed Analysis:

1. Whether the suit filed by the petitioner is barred by limitation:
The petitioner, a chit fund company, filed a suit for recovery of dues from the respondents. The Junior Civil Judge, Vijayawada, returned the plaint as time-barred, stating that the suit was filed beyond the three-year limitation period from the due dates of the 29th to 32nd instalments. The petitioner contended that the limitation period should start from the date of termination of the contract (31-05-1997) and not from the date of default.

2. Determination of the starting point of the limitation period for filing the suit:
The petitioner argued that the limitation period starts from the date of termination of the contract, citing the decision in Tuticorin Trading and Credit Corporation Pvt. Limited v. J.S. Sundararaj, where it was held that in chit transactions, the limitation and cause of action arise on termination of the contract, not from the date of default. This decision was based on the Supreme Court judgment in Shriram Chits and Investments (P) Limited v. Union of India, which stated that chit agreements do not create a debtor-creditor relationship but are contractual obligations.

However, the court referred to its own previous decisions, including Jillellamudi Dhanalakshmi v. The Union Bank of India and K.V. Raghavulu v. The Hindupur Mutual Benefit Permanent Fund Limited, which held that the limitation period begins from the date of default unless the payee waives the benefit. The court emphasized that the limitation starts from the date of default in payment of the first instalment or from the dates of continuous default for three months, not from the termination date of the contract.

3. Applicability of the judgments cited by the petitioner and the respondent:
The court analyzed the decisions cited by both parties. It noted that the Supreme Court in Shriram Chits and Investments (P) Limited v. Union of India did not address the limitation period for filing suits by chit fund companies. The court relied on its own Division Bench judgment in Jillellamudi Dhanalakshmi v. The Union Bank of India and the Single Judge decision in K.V. Raghavulu v. The Hindupur Mutual Benefit Permanent Fund Limited, which established that the limitation period begins from the date of default.

The court concluded that the petitioner's reliance on the Madras High Court decision in J.S. Sundararaj was misplaced and that the limitation period should be calculated from the date of default. Therefore, the suit filed by the petitioner was rightly rejected as time-barred by the lower court.

Conclusion:
The court dismissed the Civil Revision Petition, upholding the lower court's order that the suit was time-barred. The petitioner was given the liberty to refile the plaint for recovery of the consolidated sum in terms of the agreement, after addressing the objections raised by the lower court.