IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD PRESENT : THE HON’BLE SRI JUSTICE N.R.L.NAGESWARA RAO APPEAL SUIT NOS.8 OF 2001 & 582 OF 2006 Date:08.02.2011 APPEAL SUIT No.8 of 2001 Between:- P.Vasudeva Reddy and others .. Appellants. A N D Margadarsi Chit Fund Limited, Warangal, Represented by its Manager. .. Respondent. APPEAL SUIT No.582 of 2006 Between:- Margadarsi Chit Fund Limited, Warangal, Represented by its Manager. .. Appellant. A N D P.Vasudeva Reddy and others .. Respondents. The Court made the following: COMMON JUDGMENT: Both the appeals arise out of a judgment passed in O.S.No.298 of 1998 on the file of the II Additional Senior Civil Judge, Warangal. The suit was filed for recovery of Rs.4,20,959/- with interest at the rate of 12% per annum. 2. The allegation in the plaint goes to show that the 1st defendant was a member of the chit for Rs.5,00,000/- for a period of fifty months and monthly premium is Rs.10,000/-. The chit series started on 15.09.1996 and the ticket number of the 1st defendant is LT 05-TW-40. In the auction conducted on 27.07.1997 the 1st defendant became the highest bidder agreeing to forego a sum of Rs.2,25,000/-. Defendants 2 to 6 are the guarantors and the prize money was disbursed to the 1st defendant. In spite of repeated demands and legal notice, as the defendants have not paid the balance amount except partial instalments, the suit was filed for recovery of the money. 3. The 1st defendant filed a written statement denying the allegations in the plaint about his liability. According to the 1st defendant, he is not a defaulting subscriber. The plaintiff demanded for payment of lumpsum amount including the future instalments payable by the 1st defendant and notice was received on 24.12.1997. Thereafter, the 1st defendant approached the officials of the plaintiff and made representations and they assured to settle the grievance of the 1st defendant. The 1st defendant also pleaded for adjustment of the chit amount under LT-6TW-04, in which the 1st defendant was also a subscriber. Thereafter, the plaintiff sent another notice on 06.09.1998 demanding the payment of 25 instalments and with an intention to allow the dividends. Subsequent letters were also sent by the plaintiff attributing default to the 1st defendant, is not correct. 4. The 1st defendant further submitted that he initially joined in the chit LT-5TW-40 worth Rs.5,00,000/- i.e. the suit chit with the plaintiff company and he was declared to be prized subscriber in the said group on 27.07.1997 in the auction conducted by the plaintiff. After complying with all the formalities and documentation, the 1st defendant was given the prize amount in the month of September, 1997. In the same month, the plaintiff started another chit group LT-6TW-04 worth Rs.5,00,000/- and the then local Manager and Foreman of the plaintiff company induced the 1st defendant to join the newly started chit group and assured him that he will be declared as prized subscriber in the first month itself. Believing the plaintiff, the 1st defendant joined in the newly started group in September, 1997 and offered a cheque for Rs.10,125/- towards the first subscription amount. But to his surprise, the 1st defendant was not declared to be a prized subscriber, as such the 1st defendant was returned the said cheque issued by him unpaid. The hide and seek process was repeated by the local Manager of the plaintiff even in the second month also and the 1st defendant was once again returned the cheque issued by him towards second instalment. For the third time also, the plaintiff’s local Manager by repeating the same process and further, by giving the necessary documents to the defendant for declaring him as prized subscriber, collected the instalment amount in cash from the 1st defendant and assured him all his dues of two months in the chit LT-5TW-40 and LT-6TW-04 will be adjusted in the prized amount and having failed to do so, the local Manager of the plaintiff expressing his helplessness to declare the 1st defendant as the prized bidder in LT-6TW-04, promised to adjust all the monies to the credit of the suit chit and obtained debit vouchers and signatures on two blank papers. Under these circumstances, the 1st defendant is prevented from continuing the payment in the suit chit account. Altogether, the 1st defendant paid around a sum of Rs.30,100/- to the plaintiff towards instalment in chit No. LT-6-TW-04 and as per the said promise, if adjusted, there could be no default in the suit chit. The 1st defendant requested the plaintiff to return back his said amounts paid by him towards chit LT-6TW-04. In view of the fraud played on him by local Manager of the plaintiff and his failure to adjust the said amount to the chit LT-5TW-40, the 1st defendant expressed his willingness to pay the remaining amount, if any, in chit LT- 5TW-40 to make it up to date. Accordingly, on the intervention of Sri Ramana Rao the 1st defendant paid Rs.12,000/- towards bringing the suit chit up to date. The Head Office of the plaintiff interfered in the matter and noticed the fraud played on the 1st defendant and assured the 1st defendant to help him by setting the things right. All along since that time, the 1st defendant was under the bona fide impression that his amounts paid in LT-6-TW-04 will be adjusted into chit No.LT-5-TW-40 and was waiting for the intimation from the plaintiff company. To his surprise, the 1st defendant received 2nd notice calling him a defaulter and demanding lumpsum amount. Therefore, the 1st defendant pleaded that there is no liability to pay the amount. 5. On the basis of the above pleadings, the following issues were framed by the trial court for trial: 1. Whether 1st defendant was a default subscriber from 16.09.1997? 2. Whether the plaintiff is entitled for the suit claim? 3. Whether there was any delay in disbursing the prize amount. If so what its effect on suit claim? 4. To what relief? An additional issue was framed on 27.01.2000. Whether the defendant is entitled to seek for adjustment of the amounts paid by him in LT-6-TW-04 into the suit chit? 6. On behalf of the plaintiff, P.W.1 was examined and marked Exs.A-1 to A-14. On behalf of the defendants, D.W.1 was examined and marked Exs.B-1 to B-13. 7. After considering the evidence on record, the learned II Additional Senior Civil Judge, Warangal accepted the contention of the 1st defendant for adjustment of Rs.25,000/- from the other chit and did not accept the contention of the 1st defendant for waiving of the interest or for the dividends to be given and accordingly the suit was decreed. 8. Aggrieved by the said judgment, the 1st defendant has filed A.S.No.8 of 2001 and the plaintiff has filed A.S.582 of 2006, which was originally filed before the District Court, Warangal and was transferred to this Court. 9. The points that arise for consideration are: 1. Whether the 1st defendant is entitled to the waiver of the interest and for grant of the dividends as claimed? 2. Whether the adjustment of Rs.25,000/- ordered by the learned II Additional Senior Civil Judge, Warangal, is legal and sustainable? 3. Whether the judgment and decree passed by the learned II Additional Senior Civil Judge, Warangal, is legal and sustainable? P O I N T S: 10. So far as the adjustment of Rs.25,000/- ordered by the lower Court is concerned, evidently the 1st defendant was a member of the other chit and the chit has been discontinued and as such the money belonging to the 1st defendant to a tune of Rs.25,000/- is available with the plaintiff. In such circumstances, when the plaintiff was running a chit transaction, they have every right to claim that money. When that money was with the plaintiff, in the interest of justice and equity the learned II Additional Senior Civil Judge, Warangal, has ordered that amount should be given credit to the suit claim. Evidently, that is also part of the chit transaction and in all cases the plaintiff will have right over the other chit amount and can retain it. Therefore, when it can retain the said amount, there is no reason as to why it should not give credit of the same to the suit claim, when there is no other liability or forfeiture, by the plaintiff. Therefore, in the above said circumstances the decree passed by the lower Court, so far as it relates to giving credit of Rs.25,000/- is concerned, is valid and consequently A.S.No.582 of 2006 is liable to be dismissed. 11. So far as the appeal of the 1st defendant is concerned, according to the case of the plaintiff the 1st defendant participated in the auction and became highest bidder and he was paid prize money after deducting a sum of Rs.2,25,000/-, which he has agreed to forego. The fact that the 1st defendant and other defendants executed promissory note and guarantee agreement is not in dispute. Evidently, the 1st defendant has not continued to pay the instalments. 12. The learned counsel for the 1st defendant contends that since the amount of Rs.25,000/-, which has to be adjusted as promised was not done, the 1st defendant could not pay the instalments, as such he is not a defaulter. This argument of the learned counsel for the 1st defendant cannot be accepted. Evidently, there is no understanding to give credit such amount to the credit of the 1st defendant. As can be seen from the claim in the plaint, a sum of Rs.22,000/- towards instalments was paid and a default has been committed by the 1st defendant. When the 1st defendant has committed default in payment of the regular instalments, it cannot be said that his conduct is bona fide. Further, the 1st defendant has received substantial money when he participated in the auction and the amount was paid to him under the cheque. Therefore, having received the money and enjoyed the fruits of it, it cannot be contended that he is not liable to pay the interest. Once default is admitted, there cannot be any right of dividends. Therefore, in view of the above circumstances, the contention of the appellant cannot be accepted and the lower Court has rightly rejected the claim of the appellant for waiving of the interest or the dividends. Therefore, I find no merit in the appeal. Accordingly, A.S.No.8 of 2001 is also dismissed. 13. Both the appeals are dismissed. Parties are directed to bear their own costs. ______________________________ N.R.L.NAGESWARA RAO, J 08th February, 2011 KSP