TaxTMI 
TaxTMI 
1981 (10) TMI 138
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.... had with the company in liquidation, viz., Smitha Chits and Trading Company Limited (hereinafter referred to as "the company") . Respondent No. 1, James Edvin, was a member of the chit group DD of the company having Chit No. 19 with the chit value of Rs. 2,000. He was the highest bidder at the auction held for his group on February 21, 1977, and he received the payment of the prize amount on April 5, 1977. On the same day, he executed a promissory note for Rs. 1,500 in favour of the company. Respondent No. 2, David Franklin Soans, and respondent No. 3, N, Basha, joined the 1st respondent, in the execution of the pronote as sureties. 2nd and 3rd respondents also signed on March 8, 1977, surety and security proposal form of the company agre....
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.... 3rd respondents they admit the claim transaction relating to the first respondent in chit group DD bearing No. 19 for Rs. 2,000. They also admit that they executed the pronote in respect of the transaction as sureties along with the first respondent. It is stated by them that the 2nd respondent was a member of the chit group DF-1 bearing No. 22 and that he had subscribed Rs. 600 towards that chit till May 25, 1977, and that amount is due and payable by the company in liquidation to him. Similarly, it is stated that respondent No. 3 was a member of two other chits-chit group DF bearing No. 49 and chit group DF bearing No. 50 and had subscribed Rs. 650 and Rs. 550, respectively, and the said amounts are due and payable by the company in liqu....
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....aid to the subscriber. The oral evidence in substance supports the averments in the statement of objections. The official liquidator has not adduced any oral evidence except to get the pronote marked through the respondents. On the pleadings and the evidence as above in the case and having regard to the admissions of the respondent only the following points arise for determination : (1)Whether, the 2nd respondent and the 3rd respondent were independent subscribers in their respective chit groups in the company in liquidation ? and, (2)If they were, whether they are entitled to claim set-off in respect of their subscriptions against their joint and several liability against the claim of the official liquidator ? The first point should n....
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....no more, shall be claimed or paid on either side. The Division Bench ruled as such after considering several Indian and English decisions and after distinguishing the decision of the Supreme Court in the case of Union of India v. India Fisheries (P.) Ltd. [1965] 35 Comp. Cas. 669; 57 ITR 331 (SC). The decision in Ldkshmi Kuity's case has been affirmed by the Supreme Court. (See Official Liquidator, High Court of Karnataka v Smt. V. Lakshmikutty [1981] 51 Comp. Cas. 566 (SC); [1981] 2 Kar. LJ 289) But S. Vijayashankar, learned counsel for the official liquidator, has attempted to distinguish that decision on the ground that in Lakshmi kutly's case, the courts wore dealing with the case of a principal debtor herself claiming set-off and whet....
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....it transaction who are subscribers (creditors) inasmuch as they would have been paid in full without waiting in the queue, while subscribers (also creditors) who are not sureties for some one else, have to wait for pari pasu payment by the official liquidator which may not be the full amount due to them from the insolvent. This cannot be avoided. Subscribers to a chit fund or kuri who offer themselves as sureties take upon themselves an additional risk and liability and, therefore, are entitled to the benefit of section 46 of the Provincial Insolvency Act and further they satisfy the test of mutuality of the dealings between themselves and the insolvent. I am fortified in the conclusion reached by three decisions of other High Courts direc....