IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESH AT HYDERABAD FRIDAY, THE TWENTY NINTH DAY OF APRIL, TWO THOUSAND AND ELEVEN PRESENT THE HON’BLE SRI JUSTICE N.R.L.NAGESWARA RAO APPEAL SUIT No. 1037 OF 2001 BETWEEN: Gariga Mamatha and another …APPELLANTS AND Pranathi Chit Fund Pvt. Ltd., and others …RESPONDENTS The Court made the following: THE HON’BLE SRI JUSTICE N.R.L. NAGESWARA RAO APPEAL SUIT No. 1037 OF 2001 JUDGMENT: Defendants Nos.5 and 6 in O.S.No. 236 of 1997 on the file of the II Additional Senior Civil Judge, Warangal, are the appellants herein. 2. The suit was one filed for recovery of Rs.1,55,755/- being the amount due under the chit transaction. 3. The allegations in the plaint go to show that the 1st defendant joined as a member of the chit on 24.09.1994 for value of Rs.2,50,000/- at monthly contribution of Rs.5,000/- and entered into an agreement on 28.09.1994. The chit was commenced from 30.09.1994. On 29.10.1995 the 1st defendant became the highest bidder agreeing to forego a sum of Rs.1,12,500/- and future liability by the date was Rs.1,80,000/- after deducting the payments. Defendants Nos. 2 to 6 are the guarantors. A sum of Rs.1,37,500/- was paid to the 1st defendant and a promissory note was also executed by the defendants. The 1st defendant committed default in payment of the monthly instalments and in spite of repeated demands, the amount was not paid. Hence the suit. 4. The 1st defendant did not appear and the 3rd defendant filed a written statement, which was adopted by the 2nd defendant. The defendants denied the chit transaction and the 1st defendant being a member and also their furnishing guarantee. There is no cause of action to file the suit and the suit is liable to be dismissed. Defendants 5 and 6 filed a separate written statement pleading that they have no knowledge about the chit, in which the 1st defendant was a member. They also denied being the guarantors. The chit was commenced on 30.09.1994 and the agreement was executed prior to the commencement of the chit. Hence, the suit is liable to be dismissed. It was further pleaded that the chit is not registered under the Chit Funds Act and the suit is barred by limitation and not maintainable. The person filed the suit is not competent. Therefore, the defendants pleaded for dismissal of the suit. 5. On the basis of the above pleadings, the following issues have been framed by the trial court, for trial: 1) Whether D2 to D6 are not liable to pay the suit claim and whether they did not stand as guarantors? 2) Whether plaintiff is entitled to the suit claim? 3) Whether the suit claim is barred limitation? 4) To what relief? 6. On behalf of the plaintiff, PW.1 was examined and marked Exs.A.1 to A.20. On behalf of the defendants, no evidence is adduced and no documents were marked. 7. After considering the evidence on record, the learned II Additional Senior Civil Judge, Warangal, decreed the suit of the plaintiff. Aggrieved by the said judgment and decree, the present appeal is filed. 8. The points that arise for consideration are: 1) Whether the chit was not properly registered and the suit is not maintainable? 2) Whether the appellants are not liable to pay the suit amount? 3) Whether the judgment and decree passed by the learned II Additional Senior Civil Judge, Warangal, is legal and sustainable? 9. POINTS: Evidently, though the appeal was preferred by defendants Nos. 5 and 6, they have not gone into box to disprove any of the facts. PW-1 is the Foreman of the company, who spoke about the transaction in which defendant No.1 was the member and he also spoke about the auction and defendants Nos.2 to 6 standing as guarantors. In cross- examination by the appellants, he stated that he was the Foreman by the date of Ex.A.1. The chit was commenced on 30.09.1994 and the 1st payment was made by the 1st defendant on 24.09.1994. It was also suggested that there was no certificate of registration. The learned counsel for the appellants contends that there is no proof of valid commencement of the chit and the certificate was not filed and therefore, the suit is not maintainable. 10. So far as the transaction and the appellants being the guarantors is concerned, the evidence of PW.1 clearly establishes that defendants Nos. 2 to 6 were the guarantors and the 1st defendant was member of the chit and he has filed several documents. If the defendants are interested in denying their liability, they should have gone into box and denied the signatures on the guarantee bond or the promissory notes. Ex.A.1 is the registration of the plaintiff firm, Ex.A.2 is the chit agreement, which clearly goes to show that the 1st defendant was a member and the commencement of the chit was from 30.09.1994. Merely because the money was paid towards the 1st instalment, the chit agreement does not become un-enforceable. The agreement of guarantee is also filed as Ex.A.3 and Ex.A.4 is the promissory note. 11. The learned counsel for the appellants contends that the proof of registration of the chit was not filed and in the absence of such registration, the suit cannot be maintained. Section 7 of the Chit Funds Act prescribes the commencement of the chit business. Section 6 of the Chit Funds Act prescribes the method of filing of the chit agreement and the endorsement of the Registrar about the filing of the same. 12. In this case, according to the counsel for the appellants, the proof of registration before the Registrar and the certificate as such is not filed and therefore, there is no valid transaction. He relied on a decision reported in Dodda Brahmanandam Vs. State of A.P., rep. by its Secretary for Law Department, Hyderabad and others[1], wherein it was held that if the chit was run against the provisions of the Act, it is not enforceable. 13.. Evidently, the contention raised by the counsel for the appellants is not only a question of law but also a question of fact. The appellants are only guarantors. PW.1 denied the suggestions that they are running the chit without certificate from the Registrar. In fact, the chit agreement Ex.A.2 shows that there was registration of the bye- laws dated 13.09.1994 and for the conducting of the chit L.P.2G. The chit evidently commenced on 30.09.1994. Therefore, the chit agreement Ex.A.2 clearly indicates the factum of registration of the chit agreement and clause 9 of Chit Agreement also reflects the same. Merely because separate certificate issued by the Registrar is not filed, the suit cannot be said to be bad when Ex.A.2 clearly discloses the factum of registration of the chit. If the defendants are interested in disputing the same, they should have gone into the box. Even otherwise, the defendants have also executed the collateral security of the promissory note, which is Ex.A.4 on 29.11.1995 on the basis of that document also the suit can be maintained. 14. Therefore, for all the above reasons, I find no merits in the appeal and the judgment and decree passed by the learned II Additional Senior Civil Judge, Warangal, does not call for any interference. 15. In the result, the appeal is dismissed with costs. ________________________ N.R.L.NAGESWARA RAO, J Date: 29-04-2011. INL [1] 1986(1) ALT 141