IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 22.06.2010 CORAM : THE HONOURABLE Mrs.JUSTICE R.BANUMATHI and THE HONOURABLE Mr.JUSTICE B.RAJENDRAN Writ Appeal Nos.3114 to 3116 of 2001 M/s.Kalpana Chit Funds rep. By its Partner D.Balachander .. Appellant in Coimbatore WA Nos.3114 & 3116/2001 (cause title amended as per Order dated 13.04.2010 in W.A.M.P.Nos. 21 and 23 of 2010) M/s.Sri Kalpana Chit Funds rep.by its Managing Partner R.Damodarasamy ..Appellant in WA 3115/2001 vs. 1.M.Prem Selvi .. First respondent in W.A.No.3114 of 2001 2.The State of Tamil Nadu } rep. By the Secretary to Government, } Commercial Taxes and Religious } Endowment, Fort St. George, } Respondents 2 and Chennai – 9. } 3 in all the appeals } 3.The Deputy Registrar of Chits, } Coimbatore – 641 018. } V.Madhu .. First respondent in W.A.Nos.3115 & 3116 of 2001 Writ Appeals against the common order dated 28.09.2000 made in W.P.No.12530, 12529 and 12531 of 1993. WP Nos. 12530,12529 & 12531 of 1993: Petitions under Article 226 of the constitution of India to issue a writs of Certiorari, calling for the records of the respondents 1 and 2 and quash the order (1) dated 2.3.93 passed by the first respondent in his proceedings ref.G.O.RT.736 confirming the order of the 2nd respondent in his proceedings Ref.No.CPC 30/90 dated 23.9.91 (in WP No.12530/93) (2) dated 21.4.93 passed by the first respondent in his proceedings ref.No.G.O.Rt.1176 confirming the order passed by the 2nd respondent in his proceedings Ref.CPC https://hcservices.ecourts.gov.in/hcservices/ 29/90 (in WP 12529/93), (3)dated 10.7.93 passed by the first respondent in his proceedings ref.G.O.RT.1505 confirming the order of the 2nd respondent in his proceedings Ref.CPC.No.28/99 dated 23.9.91 (in WP 12531/93) For Appellant : Mr.V.Nicholas For Respondents : Mr.K.S.Karthick Raja for M/s.T.R.Rajaraman for R1 in all the appeals Mr.M.Dhandapani, Spl. Govt. Pleader for R2 & R3 in all the appeals COMMON JUDGMENT (Judgment of the Court was delivered by R.BANUMATHI, J.) These Writ Appeals are preferred against the order of learned single Judge allowing the Writ Petitions in W.P.No.12530, 12529 and 12531 of 1993 dated 28.09.2000 and thereby quashing the Government Orders confirming the various orders passed by the third respondent/Deputy Registrar of Chits. 2.Since all the Writ Appeals arise out of common order involving common issues, all Writ Appeals shall stand disposed of by this common judgment. 3.W.A.No.3114 of 2001: The first Respondent M.Prem Selvi was a subscriber to Chit Nos.3 and 4 conducted by the Appellant – M/s.Kalpana Chit Funds, Coimbatore for chit amount of Rs.1 lakh each. She later withdrew from Chit No.4 and she bid chit No.3 for a sum of Rs.70,000/- and received the prize amount on 27.08.1988 after executing a promissory note. The first respondent paid Rs.50,000/- only and failed to pay the balance instalments for Rs.50,000/-. The Appellant - Chit Company therefore filed a petition for arbitration before the third respondent. After conducting enquiry, the third respondent passed an award in favour of Appellant – Chit Company and directed the first respondent to pay a sum of Rs.53,995/- with interest at 12 percent per annum and costs. As against the order passed by the third respondent, the first respondent filed Appeal before the Government under Section 70 of Chit Funds Act contending that there is no money due by her to the Appellant. Upon consideration of the contention of the first respondent and the connected records Government rejected the Appeal filed by the first respondent and dismissed the Appeal by the Order in G.O.Rt.No.736 OR & RE Department dated 2.3.1993. 4.W.A.No.3115 of 2001: The first respondent V.Madhu was a subscriber to ticket Nos.12,13, 14 and 15 in the chits conducted by the Appellant – M/s.Kalpana Chit Funds, Coimbatore. He transferred 3 tickets No.13, 14 and 15 and subscribing to ticket No.13 only. He bid ticket No.13 for a sum of Rs.30,000/- and received the prize amount of Rs.70,000/- on 21.12.1988 after executing a promissory note. The first respondent paid Rs.30,000/- only and failed to pay the balance instalments for Rs.70,000/-. The Appellant - Chit https://hcservices.ecourts.gov.in/hcservices/ Company therefore filed a petition for arbitration before the third respondent. After conducting enquiry, the third respondent passed award in favour of Appellant – Chit Company and directed the first respondent to pay a sum of Rs.76,095/- with interest at 12% till date of realisation and costs. As against the Order passed by the third respondent, the first respondent filed Appeal before the Government under Section 70 of Chit Funds Act. Upon consideration of the contention of the first respondent and the connected records Government rejected the Appeal filed by the first respondent and dismissed the Appeal by the Order in G.O.Rt.No.1176 CT & RT dated 21.4.1993. 5.W.A.No.3116 of 2001: The first respondent V.Madhu was a subscriber to Chit No.231/88 conducted by the Appellant – M/s.Kalpana Chit Funds, Coimbatore for chit amount of Rs.1 lakh each. He has subscribed 3 tickets viz., Nos.5, 6, 7 at first. Due to default of subscriptions, he was removed in two tickets i.e., 6 and 7 and he bid the chit for ticket No.5 for a sum of Rs.70,000/- and received the prize amount on 24.6.1988 after executing a promissory note. The first respondent paid Rs.50,000/- only and failed to pay the balance instalments for Rs.50,000/-. The Appellant - Chit Company therefore filed a petition for arbitration before the third respondent. After conducting enquiry, the third respondent passed an award in favour of Appellant – Chit Company and directed the first respondent to pay a sum of Rs.53,995/- with interest at 12 percent per annum and costs. As against the Order passed by the third respondent, the first respondent filed Appeal before the Government under Section 70 of Chit Funds Act contending that there is no money due by her to the Appellant. Upon consideration of the contention of the first respondent and the connected records Government rejected the Appeal filed by the first respondent and dismissed the Appeal by the Order in G.O.Rt.No.1505(CT & RE) Department dated 10.6.1993. 6.Challenging the orders of the Government in various Government Orders, first respondent(s) have filed the Writ Petitions. Learned single Judge held that the first respondent(s) have given some cheques and blank promissory notes as security and third respondent – Deputy Registrar of Chits has not afforded opportunity to the first respondent(s) before passing the order. The learned single Judge further held that since no opportunity was given to the first respondent(s), there is violation of principles of natural justice. The learned single Judge further held that since the pass books in respect of chits withdrawn by the first respondent (s) are in the custody of the Appellant Chit Fund, the third respondent ought to have drawn adverse inference against the Appellant-Chit Fund for not producing the passbooks. Observing that the finding rendered in O.S.No.2727 of 1990 will have a bearing on the merits of the matter, the learned single Judge quashed the Government Orders and allowed the writ petitions, which are subject matter of challenge in these writ appeals. 7.Learned single Judge quashed the Government Orders and allowed the writ petitions mainly on three grounds:- (1) while considering the appeals, no opportunity was given to the first respondent(s) by the second respondent-Government; (2) without https://hcservices.ecourts.gov.in/hcservices/ issuing notice under Section 33 of the Chit Funds Act, 1982, the foreman is not entitled to claim a consolidated payment from a defaulting prized subscriber inasmuch as he makes an attempt to have effect in writing; (3) the civil suit was filed for return of documents and the judgment will have a bearing on the merits of the claim of the appellant-chit funds. 8.Challenging the common Order, Mr.V.Nicholas, learned counsel for the appellant submitted that the learned single Judge ought to have seen that the appellant-chit funds have satisfied the authorities regarding compliance of the procedure prescribed under the Act and especially the notice of demand under Section 33 of the Chit Funds Act. Learned counsel for the appellant further submitted that as per his instructions, the civil suit in O.S.No.2727 of 1990 came to be dismissed for default, which was later disposed and the said suit is in respect of some other promissory note, which has got no relevance to the chits in question bid by the first respondent (s). Learned counsel would further submit that in any event, even assuming that no opportunity was given to the first respondent(s)/ subscriber(s) by the appellate authority, the learned single Judge ought to have remitted the matter back to the second respondent/appellate authority and was not justified in quashing the Government Orders. 9.We have heard Mr.K.S.Karthick Raja, learned counsel for the first respondent(s)/subscriber(s). Learned counsel has submitted that the mandatory requirement of issuing notice of demand under Section 33 of the Chit Funds Act was not followed and no notice of demand was issued by the appellant-chit funds and the learned single Judge rightly quashed the orders of the appellate authority for non- compliance of Section 33 of the Chit Funds Act. Learned counsel would further submit that as per Rule 59(3) of the Chit Funds Rules, 1984, the appellate authority ought to have conducted an independent enquiry with reference to the records examined and absolutely no opportunity was given to the first respondent(s)/ subscriber(s), who filed appeals, challenging the orders of the third respondent/Deputy Registrar of Chits and in view of violation of principles of natural justice, the learned single Judge rightly quashed the orders of the appellate authority. 10.Section 33 of the Chit Funds Act stipulates a foreman to issue a written notice to demand future subscriptions. Under Section 33 of the Chit Funds Act, 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. Learned counsel for the appellant-chit funds has drawn our attention to additional typed set of papers filed by the appellant and submitted that in C.F.C.No.29/90 and C.F.C.No.30/90, the notice contemplated under Section 33 of the Chit Funds Act was issued while so, the learned single Judge was not right in observing that no notice of demand was issued. Taking us through various claim petitions filed by the appellant-chit funds, the learned counsel has also submitted that the notice of demand in writing as contemplated under Section 33 was issued and the third respondent/Deputy Registrar of Chits was satisfied as to the compliance of the provisions under Section 33 of the Chit Funds Act, while so, the https://hcservices.ecourts.gov.in/hcservices/ learned single judge was not right in saying that the mandatory provisions under Section 33 of the Chit Funds Act was not complied with. 11.Per contra, learned counsel for the first respondent(s)/ subscriber(s) has drawn our attention to the order passed by the third respondent in C.F.C.No.29/90 (pertaining to W.A.No.3110/2001) and submitted that the order does not reflect filing of the notice in writing issued under Section 33 of the Chit Funds Act. It was further submitted that the orders passed by the third respondent in other claim petitions also do not reflect the filing of Section 33 notice and the compliance of the provisions under Section 33. We are not inclined to go into the question whether the appellant-chit funds issued notice in writing under Section 33 of the Chit Funds Act and we do not propose to express any opinion on this issue since on the question of non-affording of opportunity to the first respondent(s)/subscriber(s), we remit the matter to the appellate authority/second respondent. 12.In sofar as the question of non-affording of opportunity to the first respondent(s)/subscriber(s) who preferred appeals before the appellate authority/Government, referring to the contention of the first respondent(s)/subscriber(s), learned counsel for the first respondent(s)/subscriber(s) submitted that no opportunity was actually afforded to the first respondent(s)/subscriber(s) by the appellate authority. As per rule 59(3) of the Chit Funds Rules, the appellate authority on the basis of the enquiry conducted and with reference to the records examined and pass such order as may deem just and reasonable. Though the appellate authority/Government has referred to the contention of the appellant, in our considered view, it would have been in order if the appellate authority has afforded reasonable opportunity to the first respondent(s)/subscriber(s), who preferred appeals before the Government under Section 70 of the Chit Funds Act. We are of the view that the appellate authority/second respondent ought to have afforded an opportunity to the first respondent(s)/subscriber(s) and ought to have independently arrived at the conclusion with reference to the enquiry and with reference to the records examined. Since no opportunity was afforded to the first respondent(s)/subscriber(s) who preferred appeals, the matter ought to have been remitted back to the appellate authority. Merely because there was non-affording of opportunity the learned single judge was not right in quashing the entire Government Orders. In our considered view the order of the learned single Judge cannot be sustained and the matter has to be remitted back to the appellate authority/second respondent for considering the matter afresh after affording reasonable opportunity to the first respondent(s)/ subscriber(s) as well as to the appellant-chit funds. 13.For the foregoing reasons, the order of the learned single Judge in W.P.No.12530, 12529 and 12531 of 1993 dated 28.09.2000 is set aside and these writ appeals are allowed. The matter is remitted back to the second respondent/State of Tamil Nadu and the second respondent is directed to consider the appeals preferred by the first respondent(s)/subscriber(s) afresh after affording reasonable opportunity to the first respondent(s)/subscriber(s) as well as to the appellant-chit funds M/s.Kalpana Chit Funds and after affording https://hcservices.ecourts.gov.in/hcservices/ opportunity to both parties, the second respondent shall dispose of the appeal as expeditiously as possible and pass orders. In the circumstances of the case, both parties are directed to bear their own costs. Sd/- Asst. Registrar //true copy// Sub Asst.Registrar usk/mmi To 1.The Secretary to Government, Commercial Taxes and Religious Endowment, Fort St. George, Chennai – 9. 2.The Deputy Registrar of Chits, Coimbatore – 641 018. +1cc to Mr.V.Nicholas, Advocate sr 44688 +1cc to Mr.T.R.Rajaraman, Advocate Sr 44682 +1cc to Govt. Pleader Sr 44741 KLT(CO) km/5.7. W.A.Nos.3114 to 3116 of 2001 https://hcservices.ecourts.gov.in/hcservices/