SRI VISALAM CHIT FUNDS LTD. Vs. P.N. SRINIVASA MUDALIAR AND ANR.

JUDGEMENT

(1.) The unsuccessful Plaintiff in Original Suit No. 156 of 1967 on the file of the Court of the City Civil Judge, Madras, is the Appellant in Appellant Suit No. 744 of 1969. The Plaintiff is a public limited company carrying on business in chit fund transaction in Madras. On 8th February 1965 the 1st Defendant became a subscriber to a chit whose terms was 20 months, the monthly installment being Rs. 1,250. The value of the chit was Rs. 25,000. The chit was an auction chit. The 1st Defendant took in auction the chit by bidding for Rs. 16,025. The 1st Defendant received the amount on 22nd June, 1965, as evidenced by exhibit A -2, Under exhibit A -3 the 2nd Defendant stood as guarantor to the 1st Defendant for the due repayment of the amount due to the Plaintiff. The future subscriptions were paid upto and inclusive of the fifteenth installment. Thereafter, the 1st Defendant defaulted. The Plaintiff, as per the by -laws regulating the chit, claimed under exhibit A -4 the balance due by the 1st Defendant in a lump sum and included in the claim so made the dividend or kasar already earned and credited to the 1st Defendant and also interest at 12 per cent per annum on the amount due from the date of default, namely, 9th May 1966. The Defendants admitted their liability to pay the balance due in one lump sum together with the interest claimed bat their main defence was that the Plaintiff is not entitled to deny the privilege already gained by the 1st Defendant in the matter of his entitlement of dividends already declared till date of default and the provision in the by -laws governing the chit enabling the stack holder to forfeit such dividends is in the nature of a penalty. On the above pleadings the following issues were framed:

(2.) Is the chit rule that deprives defaulting prized subscriber of the dividend penal and unenforceable at law?

(3.) To what reliefs are the parties entitled?