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TMI Blog1987 (4) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... 64 on the files of the Subordinate Judge's Court, Palghat. The suit was based on a Kuri transaction (Chit Fund). The respondents were subscribers to the Kuri. They committed default after they had prized it and realised the Kuri amounts. Hence the suit was filed for realisation of the principal sum with interest and the balance Kuri due. The suit was decreed by the Subordinate Judge by his Judgment dated 24th June, 1965. An appeal was filed before the High Court. A Division Bench of the High Court heard the appeal and partly allowed it by modifying the decree of the Trial Court refixing the interest, largely influenced by the fact that the Kuri transaction and the contract between the foreman of the Kuri and the subscribers (defaulted) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re in the reduction (the dividend). The Kuri system was in vogue in the erstwhile Travancore State and in the Cochin State, prior to the formation of Kerala State and they were governed in those two areas by the Travancore Chit Act of 1945 (Act 26 of 1120-M.E.) which came into force on 20-6-1945, and the Cochin KUries Act 7 of 1106. There was no corresponding Act for Malabar area from which area the present appeal arises. After the formation of the Kerala State, Kuri transactions in the State are governed by the Kerala Chitties Act, 1975, as amended by Act 19 of 1978. The High Court after taking into account the interest stipulated observed that it was unconscionable and penal and reduced the amount to ₹ 10,000 and modified the decre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ala High Court had occasion to consider the correctness of this view and in a decision reported in 1974 K.L.T. 806, such Kuri transactions were upheld and the decision of the Division Bench was reversed. According to the full Bench, there was nothing unconscionable about the contract. Before the full Bench it was con- tended that this stipulation in the agreement where a sub- scriber prized his chit, providing that on default the Kuri foreman would be entitled to recover the entire balance amount with 12% interest in a lump sum without giving credit to the subscribers, is penal in nature and held in terrorem for securing due performance of their promise and hence not enforceable. Eradi, J. as he then was, speaking for the full Bench held th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the true test for determining whether the said condition is in the nature of a penalty is to find out whether the amounts referred to in the agreement were debita in praesenti although solvenda in futuro or whether they were to become due to the promisee only on the respective dates when the instalments were payable. If on a proper construction of a contract it is found that the real agreement between the parties was to the effect that the whole amount was on the date of the bond a debt due but the creditor for the convenience of the debtor allowed it to be paid by instalments intimating that if default should be made in the payment of any instalments he would with- draw the concession, then the stipulation as to the whole amount of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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