Limitation in chit recovery suits starts when contractual acceleration makes the consolidated liability due, not on later termination of the chit.

A chit recovery suit was held barred by limitation because the contractual acceleration clause made the prized subscriber liable for the consolidated future subscriptions and defaulted instalments after three consecutive defaults. Limitation was held to begin when the third default was completed and the consolidated liability arose, not from the later termination of the chit agreement. On the admitted facts, the default had continued uninterruptedly from 10-04-2001, so the right to sue accrued on expiry of the three-month default period. The contrary argument that time ran only from termination was rejected, and the earlier view governing such recovery suits was followed.

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Issues: Whether the suit for recovery of chit amounts from a prized subscriber was barred by limitation, and whether limitation commenced from the date of the first/defaulting instalment or from the date of termination of the chit agreement.

Analysis: The chit agreement provided that on continued default for three consecutive months, the prized subscriber and the sureties would lose future dividends and the facility of paying future subscriptions by instalments, and would become liable to make a consolidated payment of the future subscriptions together with the defaulted instalments. On the admitted facts, the default commenced on 10-04-2001 and continued uninterruptedly. The Court held that the liability to pay the entire amount arose on expiry of three months from the date of default, when the contractual acceleration clause operated, and the corresponding right to sue accrued from that date. The plea that limitation should run only from termination of the chit was rejected. The Court also did not accept the contrary view taken in the decisions relied on by the appellant and concurred with the earlier view that governed such recovery suits.

Conclusion: The suit was barred by limitation, as it ought to have been filed within three years from the date when the third consecutive default completed and the consolidated liability arose, not from the date of termination of the chit agreement.

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