Dismissed

The Registrar of Chits v. Chandra Sajnani

Telangana HC7 Oct 2010CRP/1988/2009

Case brief

AI extract

What is this about?

This revision dismissed the Registrar of Chits application. The court held that the bar on attaching foreman's security under the Andhra Pradesh Chit Funds Act does not apply when a chit subscriber claims the amount from the foreman directly, as the provision aims to safeguard subscriber interests against other dues.

What did the court decide?

Civil Revision Petition dismissed with no order as to costs.

The Registrar of Chits Vs Chandra Sajnani — Pension and Retirement Benefits | Telangana HC (2010)

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THE HON’BLE SRI JUSTICE B. CHANDRA KUMAR

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C.R.P No.1988 of 2009

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Date: 07.10.2010

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Between:

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The Registrar of Chits, Golkonda Division, Red Hills, Lakdikapool, Hyderabad.

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………..Petitioner/Garnishee

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And

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Chandra Sajnani, Rep by G.P.A.Holder, Hot Chand Sajnani, Hyderguda, Hyderabad and others.

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…….Respondents.

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THE HON’BLE SRI JUSTICE B. CHANDRA KUMAR

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C.R.P No.1988 of 2009

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ORDER:

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This revision is directed against the order dated 24.2.2009 passed in E.A.No.10 of 2009 in E.P.No.6 of 2008 in O.S.No.1279 of 2005 on the file of VIII Additional Senior Civil Judge (FTC), City Civil Court, Hyderabad.

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The brief facts of the case are as follows:

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The 1^st respondent herein is one of the chit subscribers with the 3^rd respondent-M/s.G.P.R Chits & Finance Private Limited. Alleging that he was not paid the amount due to him by the Chit Fund Company, he filed O.S.No.1279 of 2005 against the respondents 2 to 5 for recovery of an amount of Rs.1,21,000/- with costs and subsequent interest at the rate of 12% per annum from the date of the suit till the date of realization.

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The said suit was pending on the file of VIII Additional Senior Civil Judge (FTC) City Civil Court, Hyderabad has been decreed on 22.3.2007.

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Then the 1^st respondent filed E.P.No.21 of 2007 for attachment of movables of the JDRs. Since the movables of JDRs are not available, he had withdrawn the said E.P and it was dismissed as not pressed. Then the 1^st respondent filed E.P.6 of 2008 for attachment of deposits of 3^rd respondent in the hands of garnishee (the petitioner herein is the garnishee). The said E.P has been allowed attaching the deposits to the 3^rd respondent (JDR No.2), which were in the hands of the

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garnishee.

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The then Chit Registrar had complied with the said order and deposited the FDRs for Rs.5,00,000/- vide bearing No.0294002, dated 24.12.2001, drawn on Laxmi Vilas Bank Ltd., Hyderabad belonging to the 3^rd respondent for the purpose of crediting the same to the account of the said suit. Then the 1^st respondent filed E.A.No.10 of 2009 seeking a direction to the petitioner/ garnishee to deposit the E.P claimed amount by encashing the FDRs. The said E.A has been allowed directing the petitioner to encash the FDRs and to deposit the cash into the account of the said E.P within 30 days from the date of the order. However, the FDRs are not encashed. In the above circumstances, the present civil revision petition is filed.

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The main contention of the learned Government Pleader for Arbitration is that the security given by the foreman cannot be attached under sub-section 3 of Section 12 of the Andhra Pradesh Chit Funds Act 1971 (Act No.7 of 1971).

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The learned counsel appearing for the respondents Sri N.Ashok Kumar submitted that the above referred provision is not applicable to this case since the main object of the Act is to safeguard the interest of the subscribers and that the respondent is a chit subscriber and that the subscriber himself is claiming the amount from the chit fund company.

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It is further submitted that the intention of the legislature is very clear and only to see that the security given by the foreman to fulfill his obligation towards the subscribers is not defeated the above provision has been made and it will not apply where the chit subscriber himself is claiming the amount. It is further submitted that the security deposit made under the said FDRs was terminated long back and the FDRs became matured by 24.3.2006 and till this date, no claims have been preferred by any other subscriber, except the petitioner and the husband of the petitioner who sought for the payment of the E.P claims out of the said deposit amount lying under the FDRs. The learned

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counsel for the respondents submitted that the decree dated 22.3.2007 passed in O.S.No.1279 of 2005 on the file of VIII Senior Civil Judgecum-Fast Track, City Civil Court, Hyderabad has become final, since no appeal has been filed against the same and the decree holder is entitled to execute the said decree. It is also not in dispute that the 1^st respondent has been claiming the amount as subscriber of the chit from the 3^rd respondent-Chit Fund Company and it appears that he is legally entitled to receive the E.P claim from the respondents 2 to 5 jointly and severally.

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The only point that arise for consideration is whether the impugned order is liable to be set aside. Consequently, whether the security given by the foreman can be attached when the said amount is claimed by one of the chit subscriber.

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The Chit Fund Act was enacted by the Central Government for the first time in 1982. It falls within entry 7 of the list 111 of seventh schedule to the Constitution of India. This Act has been brought into force in the State of Andhra Pradesh w.e.f 15.09.2008 through Government of India notification No.F.19/50/2006-BO-1, Dt.15.09.2008 simultaneously repealing the existing Andhra Pradesh Chit Funds Act, 1971. However, provision is made to the effect that the repealed Act continues to apply to the chits in operation on the date of commencement of the Central Act.

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Section 20 deals with Chapter III i.e., Rights and Duties of Foreman.

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Section 20 envisages that for the proper conduct of the chit, every foreman shall, before applying for a previous sanction under Section 4, -

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(a) deposit in the name of the Registrar an amount equal to [Clause (a) substituted as follows by Central Act No.10 of 2001 with effect from 01-10-2001]

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(i) fifty percent of the chit amount in cash in an approved bank;

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and

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(ii) fifty percent of the chit amount in the form bank guarantee from

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an approved bank.

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Clause (b) sub-section 1 of Section 20 of the Act envisages that a firm shall transfer government securities of the face or market value (whichever is less) of not less than one and a half times the chit amount in favour of the Registrar; or

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(c) transfer in favour of the Registrar such other securities being securities in which a trustee may invest money under Section 20 of the Indian Trusts Act 1882, of such value as may be prescribed by the state government from time to time and the proviso envisages that value of the securities referred to in clause (c) shall not, in any case, be less than one and half times the value of the chit amount.

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Sub-sections (4) & (5) of Section 20 of the Act, which reads as

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hereunder:

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(4) The security given by the foreman under subsection (1), or any security substituted under sub-section (3), shall not be liable to be attached in execution of a decree or otherwise until the chit is terminated and the claims of all the subscribers fully satisfied:

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(5) Where the chit is terminated and the Registrar has satisfied himself that the claims of all the subscribers have been fully satisfied, he shall order the release of the security furnished by the foreman under sub-section (1) or the security substituted under sub-section (3), as the case may be, and in doing so, he shall fallow such procedure as may be prescribed.”

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Sub-sections (1), (2) & (3) of Section 12 of the Act, which reads as hereunder:

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“(1) For the proper conduct of the chit, every foreman shall, before applying for the certificate of commencement under Section 7.

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(a) execute in indenture of mortgage and trust in favour of the Registrar as trustee charging by way of security property sufficient to the satisfaction of

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the Registrar for the realization of the chit amount:

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(b) (i) deposit in any approved bank an amount not less than half of the chit amount: or (ii) invest in Government securities of the face value or market value, whichever is less, of not less than half the chit amount, and transfer the amount so deposited or the Government securities in favour of the Registrar to be held in trust by him as security;

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Provided that, where movable property is charged by way of security, only such kind of movable property as may be prescribed shall be so charged and such movable property shall be deposited in such manner and with such person or officer as may be prescribed.

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(2) Where a foreman conducts more than one chit, he shall furnish security in accordance with the provisions of subsection (1) in respect of each such chit.

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(3) Subject to the provisions of Section 530 of the Companies Act, 1956 the security given by the foreman under sub-section (1) shall not be liable to be attached in execution of a decree or otherwise-

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(i) until the chit is terminated and the claims of all the subscribes are fully satisfied;

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(ii) until all dues payable by the foreman under this Act to the Registrar of any other officer have been paid; (iii) where owing to the default of the prized subscriber the prize amount due remains unpaid even after the termination of a chit, until the foreman deposits the prize amount in an approved bank mentioned in the chit agreement and intimates in writing the fact of such deposit to the prized subscriber.”

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Sub-section (3) of Section 12 of the Act makes it clear that the security given by the foreman cannot be attached until the chit is terminated and the claims of other subscribers are fully satisfied; and until the dues payable by the foreman under this Act to the Registrar of any other officer have been paid. In fact a reading of the above provisions makes it clear that it is only to safeguard the interest of the

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subscribers, they have been made. However, the same cannot be used against the subscribers, who is claiming the amount from the foreman.

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It is not in dispute that the 1^st respondent is a chit subscriber and that he claimed the prize amount from the foreman. It is also not in dispute that FDRs given as security are with the petitioner. It is not the case of the petitioner or chit fund company that any other claims by any other subscriber is pending with them. It is also not their case that any preferential payments payable under Section 530 of the Companies Act are due by the chit fund company.

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In view of the same, I am of the considered view that there is no force in the contention of the learned counsel for the petitioner and therefore, the petition is liable to be dismissed.

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Accordingly, the Civil Revision Petition is dismissed. No order as to costs.

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______________________ Justice B.Chandra Kumar

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Date: 07-10-2010 mrb

The Registrar of Chits v. Chandra Sajnani

Case brief

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The Registrar of Chits v. Chandra Sajnani

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