Majestic Kuries and Loans (P) Ltd v Best Enterprises and Others

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE K.PADMANABHAN NAIR FRIDAY, THE 8TH FEBRUARY 2008 / 19TH MAGHA 1929 AS.No. 306 of 1997(C) --------------------OS.822/1990 of PRL.SUB COURT,THRISSUR .................... ## APPELLANT: DEFENDANTS: - ----------- 1. BEST ENTERPRISES, KUNNAMKULAM, REP. BY ITS PARTNER, C.P.SELEENA, W/O.THEKKEKKARA ROBY, PUTHUSSERI DESOM, CHEMMANTHATTA VILLAGE, P.O. CHOONDAL, THRISSUR DISTRICT. 2. T.A.JOSE, PARTNER, BEST ENTERPRISES, S/O.ANTONY, -DO- -DO- 3. C.P.SELEENA, PARTNER, BEST ENTERPRISES, W/O.THEKKEKKARA ROBY, -DO- -DO- 4. T.C.ROBY, S/O.THEKKEKKARA CHUMMAR, -DO- -DO- BY ADV. SRI.THIYYANNOOR RAMAKRISHNAN SRI.ARUN KUMAR.P RESPONDENTS: PLAINTIFF - ------------- MAJESTIC KURIES AND LOANS (P) LTD, HIGH ROAD, THRISSUR VILLAGE, P.O.THRISSUR, THRISSUR DISTRICT. BY ADV. SRI.P.RADHAKRISHNAN SMT.K.MEERA THIS APPEAL SUITS HAVING BEEN FINALLY HEARD ON 08/02/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: ## **K.PADMANABHAN NAIR, J.** ------------------------------- A.S.No.306 of 1997 ------------------------------- Dated this the 8[th] February, 2008. ## **J U D G M E N T** The defendants in O.S.No.822/1990, on the file of the Subordinate Judge's Court, Thrissur, are the appellants. The appeal is filed against the decree and judgment passed by the court below allowing the respondent, a chitty firm, to recover an amount of Rs.61,317/= with interest at the rate of 6% per annum on Rs.45,000/= from the date of suit till the date of realisation. 2. The short facts necessary for the disposal of the appeal are as follows. The respondent, a chitty firm, having its head office at Thrissur, filed the suit for recovery of money. It was alleged that defendants 2 and 3 were partners of the first defendant firm, and the firm had joined one ticket in the 6[th] Day Quarterly Chit conducted by the plaintiff company from its Bangalore Branch from 6.8.1981. The kuri was bid in auction and the kuri amount was disbursed to the appellants, on their executing the kuri security bond, dated 11.8.1986. It was further averred that defendants committed default in payment of the instalments from 26[th] instalment due on 6.11.1987. There were **A.S.No.306/1997** 2 12 defaulted instalments. So, the suit for recovery of the balance amount due under the security bond. The defendants filed a written statement contending that the plaintiff company does not have a branch at Bangalore. It was further contended that the entire kuri commenced and conducted in the State of Kerala. It was also contended that the suit is premature, since the chitty has not terminated on the date of filing of the suit. The suit was barred by limitation. Since, the kuri was conducted in the State of Kerala, after the commencement of Chitties Act, without the registering the same, the entire transaction is illegal and the security bond executed is a void one. Hence, respondent-plaintiff is not entitled to recover the amount. It was further contended that in the Memorandum and Articles of Association, there is no provision to start a Kuri from the State of Karnataka. Hence, they prayed for a dismissal of the suit. 3. On the side of the plaintiff, PW.1 was examined and Exts.A1 to A9 were proved. 4[th] defendant gave evidence as DW.1. Ext.D1 marked and proved on the side of defendants. The court below found that the plaintiff company had a branch at Bangalore and disputed chitty was being conducted from Bangalore and hence, there is no illegality in filing the suit. It also found that foreman has a right **A.S.No.306/1997** 3 to recover the amount in lump, when the subscriber commits default of the future subscription, after bidding the amount. Hence, a decree was passed. Challenging that decree and judgment, this appeal is filed. 4. The main contention raised in this appeal is that the case of the plaintiff in the plaint was that the kuri mentioned in the plaint was started on 6.8.1981 from Bangalore Branch, but PW.1 himself had admitted that Bangalore Branch was established only in the year 1982. It was contended that the plaintiff had not produced any document to show that Bangalore branch was functioning on 6.8.1981, in spite of a petition to produce necessary documents. It is also argued that plaintiff had filed two affidavits, which were contradictory and mutually distructive. It is also argued that suit was pre-mature and regarding the defaulted instalments, the suit was barred. 5. It is true that the appellants had filed petitions calling upon respondent-plaintiff to produce certain documents. Plaintiff produced Exts.A6 & A6(a), the rent receipts. It is true that those receipts are for a period subsequent to the filing of the suit. They also **A.S.No.306/1997** 4 produced Ext.A7 to show that they paid licence fee to the Bangalore Corporation for conducting a Kuri Company. The mere failure to produce documents which were kept in the Bangalore office on 6.8.1981 alone is not a ground to hold that that branch was not actually functioning. Ext.A1 is the security bond executed by the appellants admitting the existence of a branch at Bangalore. This admission was not withdrawn or explained. The plaintiff produced Ext.A10 authorisation letter, which was also issued to the Bangalore Branch. It is true that at the time of oral evidence, PW.1 deposed that Bangalore branch started only in the year 1982. Merely because of a stray sentence in the deposition, the suit cannot be dismissed, in view of other evidence available on record. 6. Even if the contention of the appellants that chitty was conducted at Kerala without obtaining permission, the transaction conducted cannot be declared as void. In **Nadarajan v. Nadarajan** (1999 (2) KLT 512), a learned Single Judge of this Court considered the entire matter and held that even if a person conducts a chity in violation of Section 3(1) of the Chitties Act, 1975, the transaction is not void. It was further held that it is not opposed to public policy and will not come within Section 23 of the Contract Act. **A.S.No.306/1997** 5 7. The fact that appellants were subscribers of a chitty conducted by the respondent is not denied. The fact that they priced the chitty amount and received the same, after executing Ext.A1 security agreement was also not denied. Ext.A1 agreement is enforceable. So, even accepting the contention of the appellants that chitty was conducted by the appellant from Kerala State in violation of Section 3(1) of the Chitties Act, the respondent is entitled to enforce Ext.A1 security bond. ## 8. It is argued that the suit was pre-mature. In **John v.** **Oriental Kuries Ltd.** (1994 (2) KLT 353), it was held that when a successive bidder who prized chitty after executing a bond commits default, the firm can realise the entire amount in a lump. So, that contention is also without any merit. It is argued that there is no provision in the Memorandum and Articles of Association, which authorises the company to start business from Karnataka. Ext.A8 is the Memorandum and Articles of Association, in which there is a clause which authorises the Company to start business any where in India. The learned counsel for the appellants further argued that the conduct of the chitty from Bangalore branch is a violation of Section 13 of the Companies Act. The evidence on record shows that respondent **A.S.No.306/1997** 6 Company is a Trading Company. So, the provisions contained in Section 13(1) of the Companies Act has no application as held in John's case (supra). So, there is no merit in the contentions raised by the appellant, and the appeal is only to be dismissed. In the result, the appeal is dismissed. ## **K.PADMANABHAN NAIR, JUDGE** ## **nj.** ## **K.PADMANABHAN NAIR, J.** ------------------------------- A.S.No.306 of 1997 ## **J U D G M E N T** Dated: 8[th] February, 2008. -------------------------------