Assignment of chit recovery rights is not void without prior sanction; defaulting prized subscriber loses dividend and owes interest.

Section 26 of the A.P. Chit Funds Act, 1971 restricts transfer of the foreman's right to recover subscriptions from a prized subscriber without prior written sanction, but the transfer is not void and is only voidable at the instance of affected subscribers. The court held that the foreman could assign the debt recovery right, so the suit on the assignment deed was maintainable. Where the prized subscriber defaulted after receiving the prize amount, the contractual terms denying dividend and allowing interest on the amount due applied, and the subscriber was liable for both consequences. The dismissal decree was set aside and the suit was decreed with costs.

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Issues: (i) Whether the suit based on the deed of assignment was barred by section 26 of the A.P. Chit Funds Act, 1971. (ii) Whether the defaulting prized subscriber was liable to forfeit dividend and pay interest on the amount due.

Issue (i): Whether the suit based on the deed of assignment was barred by section 26 of the A.P. Chit Funds Act, 1971.

Analysis: Section 26 imposes a restriction on transfer of the foreman's right to receive subscriptions from prized subscribers without prior written sanction of the Registrar, but it does not declare such transfer void. The statutory scheme indicates that the transfer is only voidable and may be set aside on application by a non-prized subscriber or unpaid prized subscriber if prejudicially affected. The prized subscriber, after receiving the amount and executing security documents, stood in the position of a debtor, and the foreman could assign the right to recover the amount due.

Conclusion: The suit on the basis of the assignment deed was maintainable and the objection under section 26 failed.

Issue (ii): Whether the defaulting prized subscriber was liable to forfeit dividend and pay interest on the amount due.

Analysis: The agreement provided that on default the subscriber would not get the benefit of dividend and the foreman could recover interest on the amount found due. Since the subscriber had received the prize amount and thereafter defaulted in paying instalments, the contractual consequence of denying dividend and charging interest applied.

Conclusion: The defaulting subscriber was not entitled to dividend and was liable for interest on the amount due.

Final Conclusion: The decree of dismissal was set aside and the suit was decreed with costs in favour of the appellant.

Ratio Decidendi: A transfer by a foreman of the right to recover amounts from a prized subscriber without prior sanction is not void but voidable, and therefore does not by itself bar a suit by the transferee to recover the assigned debt.

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