TaxTMI 
TaxTMI 
2019 (11) TMI 1818
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....4. 2.1. The Appellant-chit foreman instituted two Suits against the Respondent-subscribers before the Subordinate Judge, Thrissur, Kerala. The first Suit bearing O.S. No. 323/1984 was filed for recovery of 12 installments for the period 24.11.1981 to 24.11.1984; and, the second Suit bearing O.S. No. 548/1987 was filed for recovery of future subscriptions due under the chit fund after 24.11.1984. 2.2. The Subordinate Judge, Thrissur, Kerala decreed both the Suits in favour of the Appellant-Company on 09.04.1990. In O.S. No. 323/1984, the Respondents were directed to pay the Appellant-Company a sum of Rs. 40,915/- with Interest @12% on the sum of Rs. 34,800/- from the date of filing the Suit till the date of decree, and thereafter Interest @6% per annum from the date of the decree till the date of realization. In O.S. No. 548/1987, the Respondents were directed to pay the Appellant-Company a sum of Rs. 83,820.68/- with Interest @12% on a sum of Rs. 63,800/- from the date of filing of the Suit till the date of decree, and thereafter Interest @6% per annum from the date of the decree till the date of realization. 2.3. Aggrieved by the aforesaid Judgment and Decree dated ....
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.... longer hold the field, since it had been over-ruled by the larger bench in Janardhana Mallan's case. The Division Bench held that by entering into a chitty agreement, a debt is not created at once by the subscriber in respect of payment of all future installments, as the chitty variola only contains a promise to pay, which is not a promise to repay an existing debt, but only to pay and discharge a contractual obligation. The execution of the security bond is to ensure fulfillment of the terms of the contract by the parties. If the subscriber fails to pay future installments in terms of the contractual obligations, then the subscriber would become a defaulter, he would incur a debt to the foreman, and would not be a liability to pay in future of an existing liability. On the facts of the case, the division bench held that the Appellant-Company was entitled to recover 12 installments from the Respondents for the period from 24.11.1981 to 24.11.1984. However, future installments could not be recovered. 2.5. Aggrieved by the judgment of the Division Bench, the Appellant-chit fund company filed the present Special Leave Petition. This Hon'ble Court vide Order dated 10.....
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....bject to the stipulation that the said concession is liable to be withdrawn in the event of default being committed in payment of any of the installments. It is a debt in prasenti, but permitted to be paid in installments, for the benefit of the debtor so long as the installments are regularly paid. This being the true nature of the, the stipulation for furnishing a security bond which would enable the foreman to recover from the prized subscriber, the whole of the balance amount due from him in a lump sum when default occurs in payment of any of the installments. Such a stipulation cannot be regarded as a penalty clause. It is necessary for the foreman of a chit who occupies a special relationship with all the subscribers of the chit fund, which would justify stringent provisions being incorporated in the agreement for safeguarding the interest of all the subscribers. Without punctual payments by the individual subscribers, the foreman will not be in a position to discharge his obligations to the other subscribers. It is therefore necessary that the foreman should reserve to himself the power to recover in a lump sum, the entire balance amount due in respect of future installments....
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....s held not penal in nature in the case of kuri transaction under the Kerala Chitties Act, 1975. While upholding the transaction a Bench of this Court approved the decision of the earlier Full Bench decision of the Kerala High Court in the case P.K. Achuthan (supra) wherein the Kerala High Court had upheld such a transaction and held it, to be of not a penal nature. In this context Eradi, J. (as His Lordship then was) speaking for the Full Bench observed that a subscriber truly and really becomes a debtor for the prized amount paid to him. It will be noticed that the later Full Bench decision of the Kerala High Court in Janardhana Mallan and Ors. (supra) was not brought to the notice of this Court and the Court was referred to the over-ruled decision of the Kerala High Court. The fact remains that the question involved before us as to the true nature of transaction for the purpose of finding out the relevant entry in the Constitution into which it may fall, was not involved in that case. 16. It appears to us, but for the discordant note struck by the other Full Bench of the Kerala High Court in the aforesaid case of P.K. Achuthan (Supra), the consistent view of all the High....
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....as follows: 31. Prized subscriber to furnish security.--Every prized subscriber shall, if he has not offered to deduct the amount of all future subscriptions from the prize amount due to him, furnish, and a foreman shall take, sufficient security for the due payment of all future subscriptions and, if the foreman is a prized subscriber, he shall give security for the due payment of all the future subscriptions to the satisfaction of the Registrar. 32. Prized subscriber to pay subscriptions regularly. -- Every prized subscriber shall pay his subscriptions regularly on the dates and times and at the place mentioned in the chit agreement and, on his failure to do so, he shall be liable to make a consolidated payment of all the future subscriptions forthwith. 33. Foreman to demand future subscriptions by written notice.-- A foreman shall not be entitled to claim a consolidated payment from a defaulting prized subscriber Under Section 32 unless he makes a demand to that effect in writing. (2) Where a dispute is raised under this Act by a foreman for a consolidated payment of future subscriptions from a defaulting prized subscriber and if the subscribe....