1988 (2) TMI 482 - HC - Indian Laws

Appeal Success: Promissory Note Recovery with Interest Approved; Appellant Wins Costs & Dismisses Adjustment Claims.

The HC allowed the second appeal, reversing the lower appellate court's decision, and ruled in favor of the appellant for the recovery of Rs. 2550 with ... - Issues Involved:1. Validity of the assignment of the promissory note.2. Applicability of Section 25 and Section 26 of the Tamil Nadu Chit Funds Act, 1961.3. Entitlement of the appellant to recover the amount based on the assigned promissory note.4. Claim of adjustment by the respondent for amounts paid towards other chits.5. Determination of the amount payable by the respondent.Issue-Wise Detailed Analysis:1. Validity of the Assignment of the Promissory Note:The trial court found that the appellant is a holder in due course and that Uma Investments was entitled to assign the promissory note executed by the respondent to the appellant. The lower appellate court, however, held that the promissory note was executed as security for future instalments and could not be assigned to a third party. The High Court concluded that the promissory note represented the liability of the respondent and that liability had been transferred to the appellant by endorsement, making the appellant entitled to enforce it.2. Applicability of Section 25 and Section 26 of the Tamil Nadu Chit Funds Act, 1961:The lower appellate court found that the assignment was in contravention of Section 26 of the Act, which requires the previous sanction in writing of the Registrar for the transfer of the rights of a Foreman. The High Court, however, clarified that Section 26(2) makes such a transfer voidable, not void, and it can be set aside only on an application by a non-prized or unpaid prized subscriber whose interests are prejudicially affected. The High Court held that the assignment in favour of the appellant was legally valid.Regarding Section 25, the High Court noted that there was no claim by the Foreman against the defaulting prized subscriber, and therefore, no need for a written demand as required by Section 25(1) of the Act. The court found that even if the appellant stood in the position of a Foreman, the notices issued under Exs. A-5 and A-7 were sufficient.3. Entitlement of the Appellant to Recover the Amount Based on the Assigned Promissory Note:The trial court granted a decree in favour of the appellant for the recovery of Rs. 2550 with interest. The lower appellate court dismissed the suit, but the High Court reversed this decision, holding that the appellant, as a holder in due course, was entitled to recover the amount based on the promissory note assigned to her.4. Claim of Adjustment by the Respondent for Amounts Paid Towards Other Chits:The respondent claimed that the amounts paid towards other chits should be adjusted against the amount due to the appellant. The High Court found that the respondent did not provide evidence of payments made towards other chits and had not specifically claimed an adjustment. The court held that each chit is a separate transaction, and there could not be an adjustment against amounts paid for other chits.5. Determination of the Amount Payable by the Respondent:The trial court determined that the respondent was liable to pay Rs. 2550 after accounting for payments made. The High Court upheld this determination, noting that the respondent had paid Rs. 2450, leaving a balance of Rs. 2550 payable to the Foreman. The appellant was entitled to recover this amount with interest at 12% per annum from 20-8-1974 till the date of the decree and at 6% per annum till the date of realization.Conclusion:The High Court allowed the second appeal, set aside the judgment and decree of the lower appellate court, and decreed in favour of the appellant for the recovery of Rs. 2550 with interest as specified. The appellant was also awarded costs throughout.