VIDYARTHA DAYINI SABHA, METHALA v. JOSHY KUMAR, T.V. BABU, MADHAVAN PILLAI (deceased) and LEELA, PRAMOD, SEEMA

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR.JUSTICE K.RAMAKRISHNAN** **THURSDAY, THE 3RD DAY OF AUGUST 2017/12TH SRAVANA, 1939** ## **SA.No.147 of 1999 (A)** **----------------------(AGAINST THE JUDGMENT & DECREE DATED 14-07-1997 IN AS 129/1994 OF ADDL.DISTRICT COURT, NORTH PARAVUR) & AGAINST THE JUDGMENT & DECREE DATED 30-03-1994 IN OS 611/1992 OF PRINCIPAL SUB COURT, NORTH PARAVUR** ## **APPELLANT IN SA/APPELLANT/PLAINTIFF: ------------------------------------** **1. VIDYARTHA DAYINI SABHA, METHALA, REPRESENTED BY ITS PRESENT PRESIDENT, K.K. SUBRAMANIAN, S/O.KORUNNI, KOZHIPARAMBIL, ANAPUZHA P.O., METHALA, KODUNGALLOOR.** **2. VIDYARTHA DAYINI SABHA, METHALA, REPRESENTED BY ITS PRESENT SECRETARY, P.K. DHARMARAJAN, S/O.KESAVAN, POYYATHARA, METHALA, KODUNGALLOOR.** **3. VIDYARTHA DAYINI SABHA, METHALA, REPRESENTED BY ITS PRESENT TREASURER, O.M.DHINAMONY, S/O.MAMI, METHALA, KODUNGALLOOR.** **BY ADVS.SRI.B.JAYASANKAR SRI.K.S.SREEKUMAR** ## **RESPONDENTS/RESPONDENTS/DEFENDANTS:** ## **----------------------------------** **1. JOSHY KUMAR, S/O.KAMALAKSHAN, KANDATHI PARAMBIL, MOOTHAKUNNAM VILLAGE, MOOTHAKUNNAM KARA, PARAVUR TALUK.** **2. T.V. BABU, MOORKANADU, MOOTHAKUNNAM VILLAGE, MOOTHAKUNNAM KARA, PARAVUR TALUK. (ASST.EXECUTIVE ENGINEER, KERALA WATER AUTHORITY, COCHIN-11)** **:2:** _**SA.No.147 of 1999**_ ***3. MADHAVAN PILLAI, S/O.NARAYANAN PILLAI (DIED), MANAKKATTU, KOOVAPPADY DESOM, KOOVAPPADY VILLAGE, KUNNATHUNADU TALUK, (MAIL-MAN, R.M.S. OFFICE, ALUVA). (LEGAL HEIRS IMPLEADED)** ## **ADD. RESPONDENTS** **4. LEELA, W/O.MADHAVAN PILLAI, LEELA BHAVANAM, KADUGALLOOR, P.O., U.C.COLLEGE, ALUVA, PIN-683 103.** **5. PRAMOD, S/O.MADHAVAN PILLAI, LEELA BHAVANAM, KADUGALLOOR, P.O., U.C.COLLEGE, ALUVA, PIN-683 103.** **6. SEEMA, D/O.MADHAVAN PILLAI, LEELA BHAVANAM, KADUGALLOOR, P.O., U.C.COLLEGE, ALUVA, PIN-683 103.** - _**(THE LEGAL HEIRS OF DECEASED 3RD RESPONDENT ARE IMPLEADED AS ADDITIONAL RESPONDENTS 4 TO 6 AS PER THE ORDER DATED 24.07.2017 IN I.A.2946/2012)**_ ## **R4-R6 BY ADV. SRI.V.N.SUNIL KUMAR** **THIS SECOND APPEAL HAVING BEEN FINALLY HEARD ON 03-08-2017, THE** **COURT ON THE SAME DAY DELIVERED THE FOLLOWING** : ss **K.RAMAKRISHNAN,J.** _**[C.R.]**_ ------------------------------------------------------- **S.A. No.147 of 1999** -------------------------------------------------------------Dated this the 3[rd] day of August, 2017 ## **JUDGMENT** Defeated plaintiff in O.S.No.611/1992 on the file of the Sub Court, North Paravur is the appellant herein. The suit was filed for recovery of an amount on the basis of a chitty transaction entered into between the plaintiff chitty company, having its registered office at Bangalore and branches in other places including one at Methala within the jurisdiction of Sub Court, North Paravur are the defendants. 2. According to the plaintiff, the first defendant was a subscriber to the chitty having _sala_ of Rs.72,000/- and the chitty was started from its Bangalore branch from 27.04.1988 and they joined the chitty with No.166 and the first defendant bid the chitty on the 10[th] instalment on 02.03.1989 and received the amount and executed Ext.A1 agreement jointly on 27.05.1989, whereby the amount payable as on that day was fixed as Rs.20,100/- and this has to be paid in 67 instalments at the rate of Rs.300/- per month starting from 02.07.1989 onwards. It is also agreed that in default, they have to pay interest at the rate of 12% per annum. The defendants 2 and 3 are the guarantors and they also joined the agreement, undertaking to pay the amount. The first defendant thereafter paid up to 19[th] instalment and from 20[th] instalment onwards it has become due. So an amount of _**S.A. No.147 of 1999**_ 2 Rs.18,300/- was due from 02.01.1990, which the defendants are liable to pay with 12% interest. Though notice was issued on 23.05.1992, they did not pay the amount. So the plaintiff filed the above suit for recovery of Rs.18,300/-, interest of Rs.6,405/- and notice charges of Rs.100/-, totalling an amount of Rs.24,805/- together with future interest at the rate of 12% per annum. 3. Defendants entered appearance and filed written statement admitting the transaction. According to them, the interest of Rs.6,405/- calculated is not correct. The first defendant had paid Rs.1,500/- which has not been given credit and so the amount claimed is not correct. So they prayed for disposal of the case, accepting their contention. Thereafter first defendant filed additional written statement stating that, the court has no jurisdiction to entertain the case for a chitty that has been taken from Bangalore on 27.04.1998 and prayed for dismissal of the suit. 4. On the basis of the pleadings, following issues were framed by the court below. _i. Is the suit not maintainable? ii. Is the interest claimed excessive? iii. Is the discharged pleading true? iv. Reliefs and costs_ _**S.A. No.147 of 1999**_ 3 5. The representative of the plaintiff was examined as PW1 and Exts.A1 and A2 were marked on the side of the plaintiff. No evidence, either oral or documentary was adduced on the side of the defendants. After considering the contentions of both parties, the trial court came to the conclusion that, in view of Section 64 of Central Chit Funds Act, 1982 which has come into force in Karnataka from 1984, the Civil Court has no jurisdiction to entertain the suit and dismissed the suit without considering the other issues. Dissatisfied plaintiff filed A.S.No.129/1994 before the Additional District Court, North Paravur and the Additional District Court by the impugned judgment dismissed the appeal concurring with the finding of the court below that the civil court has no jurisdiction to entertain the suit in view of the bar under Section 64 of the Central Chit Funds Act, 1982. Aggrieved by the same, the second appeal has been filed by the appellant/dissatisfied plaintiff before the court below. 6. While the appeal was admitted, following substantial questions of law had been formulated. _i. Whether the provisions of the chit funds Act were enforced in the State of Karnataka where from the cury was started?_ _ii. Whether in view of Ext.A2 order staying the operation of the provisions of the chit funds Act in so far as it relates to the plaintiff the civil court has jurisdiction to try the suit?_ _**S.A. No.147 of 1999**_ 4 _iii. Whether the amount is liable to be returned as one received non-gratuitously on the ground of unjust enrichment?_ 7. During the pendency of the appeal, 3[rd] respondent died and supplemental respondents 4 to 6 were impleaded as his legal heirs as per order in I.A.Nos.2946/2012, 2947/2012 and C.M.Appln.No.1229/2012, after condoning the delay and setting aside the abatement. Supplemental respondents 4 to 6 entered appearance through Sri.V.N.Sunil Kumar. Notice was completed as against first respondent by substituted service by publication. Though notice to 2[nd] respondent was served, he did not appear. 8. Heard both sides. 9. The counsel for the appellant submitted that, this position has been covered by this court in two decisions reported in _**Gosri Chit Funds Pvt., Ltd., v. K.N.Dharmapalan and Others** (2009 (4) KHC 604)_ and _**Employees Kuries Ltd., v. O.J.Claramma and Others** (2009(4) KHC 608),_ since the Central Chitty Act has not been extended to Kerala, any transaction that has taken place in Kerala is not affected by the provisions of that Act. Further the transaction has started during the time at which there was stay of implementation of the Act by the Karnataka High Court and even assuming that the transaction is not valid, they are entitled to get back the amount _**S.A. No.147 of 1999**_ 5 invoking the provisions of Section 65 of the Contract Act as party cannot claim unlawful enrichment of the amount obtained by way of void transaction. This aspect has not been considered by the courts below. Further the courts below should have answered the other issues as well. 10. The fact that the plaintiff chitty company was registered in the State of Karnataka is not in dispute. It is also not in dispute that they have got a branch in Kerala within the jurisdiction of North Paravur and the defendants as well as the plaintiffs are coming within the jurisdiction of North Paravur court. It is also not in dispute that first defendant had joined a chitty with the plaintiff concern on 27.04.1988 for a total _sala_ of Rs.72,000/- agreeing to pay the amount in 80 instalments at the rate of Rs.300/- per month. It is also not in dispute that first defendant bid the chitty after the completion of 13[th] instalment and received the amount and executed Ext.A1 agreement along with the defendants 2 and 3 as guarantors agreeing to pay the balance amount of Rs.20,100/- in 67 instalments and in default to pay interest at the rate of 12% per annum. 11. It is alleged in the plaint that first defendant had paid up to 19[th] instalment and thereafter committed default to pay the amount from 02.01.1990 onwards. Though notice was issued, the amount was _**S.A. No.147 of 1999**_ 6 not paid. That prompted them to file the suit. In the written statements, the defendants admitted the transaction, but they have only contended that, the interest claimed is not correct and the first defendant had paid Rs.1,500/- which has not been given credit. So the amount claimed is not correct. By way of additional written statement, the first defendant contended that the trial court has no jurisdiction to entertain the suit in view of the bar under the Chit Funds Act, 1982. 12. The representative of the plaintiff was examined and Exts.A1 and A2 were marked. Ext.A1 is the agreement entered into between the plaintiff company and the defendants agreeing to pay the balance amount of Rs.20,100/- in 67 instalments at the rate of Rs.300/- per month starting from 02.07.1989. PW1 had deposed that the defendant paid only 19 instalments, thereafter the amount is due. There was no much cross examination on the amount due or execution of Ext.A1 agreement except to the extent that the amount of Rs.1,500/- paid was not given credit. PW1 also admitted that they are prepared to give credit to Rs.1,500/- which has been given as a security by the first defendant at the time when the transaction was taken place and they need only a decree to be passed for the balance amount. So plaintiff is confined to their claim to Rs.16,800/- + interest and cost of the suit. _**S.A. No.147 of 1999**_ 7 13. The trial court dismissed the suit on the ground that by virtue of Section 64 of the Chit Funds Act, 1982, the civil court has no jurisdiction to entertain the case. The plaintiff relied on Ext.A2 stay order passed by the Karnataka High Court in a writ petition filed by them, challenging the validity of the Central Chit Funds Act and it was during the pendency of that writ petition that the present transaction had taken place. Thereafter it was admitted by both sides that, the writ petition was disposed of in the year 1988 itself, but after the transaction has taken place. The trial court as well as the appellate court have come to the conclusion that in view of the fact that the Act has been extended to Karnataka in 1984 itself, any transaction which has taken place after that is not valid and the Central Act will have application and on that basis held that, the suit is not maintainable and civil court has no jurisdiction to entertain the suit by virtue of the bar under Section 64(3) of the Chit Funds Act, 1982. 14. But in a similar case, this court in _**Gosri Chit Funds Pvt.,**_ _**Ltd., v. K.N.Dharmapalan and Others** (2009 (4) KHC 604)_ , it has been held that, chit Funds Act 1982 was not in force in Kerala and the chit amount was paid and surety agreement was executed at Ernakulam in that case and in such circumstances, the suit is maintainable and observed as follows: _**S.A. No.147 of 1999**_ 8 “Section 9 of the Code of Civil Procedure confers jurisdiction on the courts subject to provisions contained in that code to try all suits of civil nature excepting suits of which cognizance is either expressly or impliedly barred. Exclusion of jurisdiction of civil court is not to be readily inferred. A provision of law ousting jurisdiction of civil court has to be construed strictly, it is trite law. No doubt Section 64(3) of the Act expressly oust the jurisdiction of civil court, but that provision can apply only to a place where the Act itself is made applicable.” 15. I am unable to think that Section 64(3) of the Act governed suits instituted before courts situated at a place where the provisions of the Act itself have not been extended. That is a principle enunciated by this court in decisions referred to in _**John v. Oriental Kuries Ltd.,** (1994 KHC 350),_ _**Oommen Panicker v. Muthoot Mini Chit Fund (1995 KHC 68)** and_ _**Krishnamoorthy v. Khaleel Rahman** (1996 KHC 401)_ and where it was held that, since Chit Funds Act, 1982 is not made applicable to State of Kerala, when the transaction has taken place between the parties, suit can be maintainable in Kerala. Same view has been reiterated in the decision reported in _**Employees Kuries Ltd., v. O.J. Claramma and Others** (2009(4) KHC 608)_ . 16. In the earlier case, this court has further held that, even if the transaction was based on a void agreement, applying the provisions of Section 65 of the Contract Act, the plaintiff is entitled to _**S.A. No.147 of 1999**_ 9 recover the amount from the person who obtained unlawful enrichment on account of the void agreement and in view of that principle the suit is maintainable for recovery of the amount, even though the transaction is void on account of non-registration of the plaintiff company under the provisions of the Chit Funds Act, 1982. 17. Further this court also observed that, since the transaction has taken place at the time when stay was in force, it cannot be said that the transaction had taken place after the Act came into force as the operation of the Act has been stayed during that period. Same view has been taken in the earlier decisions cited (supra) as well. So under such circumstances, the findings of the courts below that the suit is not maintainable in view of Section 64(3) of the Chits Act, 1982 is unsustainable in law and the same is liable to be set aside, holding that the suit is perfectly maintainable before Sub Court, North Paravur. 18. Since the evidence has already been taken and there is no dispute regarding the amount payable, this court feels that there is no necessity to remit the case to the trial court for considering the other issues as both the courts below did not consider the other issues, since it was found that the civil court has no jurisdiction to entertain the suit. It will only cause unnecessary delay. 19. Further the only dispute is regarding payment of amount of _**S.A. No.147 of 1999**_ 10 Rs.1,500/- which PW1 had admitted in his evidence that they were prepared to adjust by the amount and they need only required a decree for the balance amount. If that be the case, this court feels that there is no necessity to remit the case for the purpose of considering other issues and this can be decided by this court itself as evidence has already been taken, no other further contention regarding the maintainability or bar of limitation has been raised. Further going by the allegations also, the suit is not barred as the last instalment payable was on 02.01.1990 and the suit was filed on 20.04.1992 within limitation. So under such circumstances, this court feels that there is no necessity to remit this case for considering the other issues by giving opportunities to the parties. But however, this court feels that instead of granting 12% interest restricting the interest to 9% from the date of default will be sufficient. If Rs.1,500/- is adjusted, then that will cover 5 monthly instalments more and the balance amount payable will only Rs.16,800/-. If that be the case, the default can be taken only from 02.06.1990 onwards. So the defendants will be liable to pay interest only from 02.06.1990 only for the principal amount of Rs.16,800/- from the date of default till the date of suit and thereafter at the rate of 6% per annum till payment, that will meet the ends of justice. Since 3[rd] respondent is no more, the legal _**S.A. No.147 of 1999**_ 11 representatives will be liable only to the extent of any estate inherited by them and not personally. So the second appeal is allowed setting aside the decree and judgment passed by the court below dismissing the suit and decreed as follows: The defendants 1 to 3 are jointly and severally liable to pay an amount of Rs.16,800/- together with interest at 9% from 02.06.1990 till the date of suit namely, 24.11.1992 and thereafter at 6% per annum on the principal amount of Rs.16,800/- from the date of suit till realisation. Since 3[rd] defendant is no more, his legal representatives namely additional respondents 4 to 6 impleaded in this case will be liable to pay the amount extent of any estate inherited by them from the 3[rd] defendant and they are not personally liable for the amount. The parties are directed to bear the respective costs through out. The second appeal is allowed and disposed of accordingly. Registry is directed to communicate the judgment and sent back the records to the court below at the earliest. _Sd/-_ **(K. Ramakrishnan, Judge)** _//True Copy//_ _P.A. to Judge_ ss