2014 (11) TMI 1276 - HC - Indian Laws

Time Limitation - Recovery of Arrears - Entitlement for suit claim - limitation for recovery of arrears of installments payable by a subscriber of a chit fund company would commence from the date of the first default in the payment of such installments or from the date of termination of the chit agreement? - HELD THAT - The plea of the appellant is that Article 37 does not apply since the suit is not based either on a promissory note or on a bond. On that basis, they rely upon the residuary clause i.e., Clause 113. There again, the period of three years is to be reckoned from the date on which the right to sue has accrued. If the date on which the third consecutive default in payment of instalments is taken into account, the suit becomes barred by limitation even under that article. Though it is pleaded that the suit is not based upon promissory note, it is clear that a reference has been made in para 4 of the plaint to the agreement of guarantee dated 05-12-2000 as well as the promissory note of the same date, for a sum of Rs. 92,500/- executed by the respondents herein. Further, in the absence of any promissory note, and the guarantee from respondent Nos. 2 to 9, there would not have been any occasion for the appellant to implead at least respondent Nos. 2 to 6. The 1st respondent alone is party to Ex. A-1. In case, the suit was filed only on Ex. A-1, it ought to have been filed against the 1st respondent alone. The judgment rendered by the Kerala High Court in Nanoo Sukumaran's case 1977 (6) TMI 108 - KERALA HIGH COURT perused - Firstly, the judgment is in relation to an enactment of that State. Assuming that the provisions are in pari materia with the Chit Funds Act, we find it difficult to cull out any principle to the effect that the limitation for filing the suits for recovery of amount from a prized subscriber commences from the date on which the chit is concluded. In the instant case itself, the appellant made a mention in the paragraph pertaining to cause of action to 05-12-2000, the date on which the promissory note and the agreements of guarantee were executed and 10-04-2001, the date on which the appellant committed default. The second appeal dismissed.

Summary

Issues:
1. Interpretation of limitation period for suits filed by Chit Fund Companies.
2. Applicability of Article 37 of the Schedule to the Limitation Act.
3. Consideration of precedents from Madras High Court and Kerala High Court.
4. Relevance of promissory notes and bonds in chit transactions.
5. Commencement of limitation period for recovery of arrears from a chit fund subscriber.

Analysis:

1. The Second Appeal addressed the interpretation of the limitation period for suits filed by Chit Fund Companies. The appellant, a Chit Fund Company, filed a suit against the prized subscriber and sureties, with a defense raised on limitation grounds. The trial Court decreed the suit, but the appellate Court set it aside, leading to the Second Appeal.

2. The issue of the applicability of Article 37 of the Schedule to the Limitation Act was crucial. The learned single Judge referred the matter for consideration, questioning whether Article 37 applies to suits by Chit Fund Companies. The appellant argued that Article 37 only applies to suits based on promissory notes or bonds, while the respondent contended that chit transactions involve elements of both, justifying the application of Article 37.

3. Precedents from the Madras High Court and Kerala High Court were considered. The judgment in Vastava Chit Funds (Private) Ltd. v. Medala Benarjee was cited, prompting a re-examination of the applicability of Article 37. Judgments from the Madras High Court were also reviewed, influencing the decision-making process.

4. The relevance of promissory notes and bonds in chit transactions was debated. The appellant emphasized that the suit was based on the chit transaction, not promissory notes or bonds. Conversely, the respondent argued that the nature of chit transactions involves elements akin to promissory notes and bonds, justifying the application of Article 37.

5. The commencement of the limitation period for recovery of arrears from a chit fund subscriber was a key aspect. The Court analyzed the chit agreement clauses and the default history of the prized subscriber, determining that the limitation period starts from the date of default, not the chit's termination. The Court dismissed the Second Appeal, emphasizing that the limitation period for recovery of arrears from a chit fund subscriber starts from the default date, not the chit's conclusion.