Judgment:
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED:
30. 08 /2013 CORAM THE HONOURABLE MR.JUSTICE C.S.KARNAN W.P.No.44980 of 2002 1.L.Muthaiah 2.L.Govindan ... Petitioners Vs. 1.The Secretary to Government, Commercial Taxes Department, Fort St.George, Chennai - 600 009. 2.The Deputy Registrar of Chits, Chennai North, Chennai 600 012. 3.M/s.Shriram Chits Tamil Nadu Limited, T.Nagar Branch, No.107, Usman Road, 1st Floor, T.Nagar, Chennai - 600 017. ... Respondents PRAYER: Writ Petition filed under Article 226 of the Constitution of India for a Writ of Certiorarified Mandamus, to call for the entire records of the first respondent relating to impugned order of dismissal of the appeal filed by the petitioners against the award passed by the second respondent in ARC No.1228 of 1999 in the proceedings of the appeal vide G.O.(D)No.205, Commercial Taxes Department dated 15.07.2002, quash the same and consequently restrain the third respondent from proceeding with any recover process in respect of the aforesaid award. For Petitioner : Mr.A.Palaniappan Mr.K.Venkateswaran For Respondents : Mr.R.Lakshmi Narayanan Additional Government Pleader for R1 & R2 Mr.K.V.Anantha Krishnan for R-3 Mr.V.Chandrasekaran - - - ORDER
The brief facts of the case are as follows:- The petitioners submit that the third respondent herein, viz., M/s.Shriram Chits Tamil Nadu Limited had filed A.R.C.No.1228 of 1997, on the file of the second respondent herein, viz., The Deputy Registrar of Chits, Chennai, demanding a sum of Rs.8,64,000/- from the petitioners herein. The third respondent had alleged that the first petitioner had joined the Chit Series No.84001, Ticket No.17 for a value of Rs.10,00,000/- payable at the rate of Rs.25,000/- every month for a period of 40 days. The third respondent further falsely alleged that the first petitioner had participated in the auction held on 24.09.1996. It was further alleged by the third respondent in the arbitration case before the second respondent, viz., the Deputy Registrar of Chits, Chennai that the first petitioner had become a successful bidder and prized the chit for Rs.3,00,000/-. The third respondent had further alleged that a promissory note was executed for a sum of Rs.9,00,000/- by the first and second petitioners herein on 22.10.1996. The third respondent has alleged that the aforesaid pronote was executed by the petitioners herein for the purpose of securing the due payment of future installments of the chit prize by the petitioners. The third respondent had falsely alleged that in the said arbitration case before the second respondent he had received the prize money of Rs.7,00,000/- by way of a cheque dated 22.10.1996.
2. The petitioners further submit that the third respondent had without any basis treated the second petitioner as a surety and had proceeded with the arbitration case for recovery before the second respondent. The third respondent has falsely claimed that the first petitioner had defaulted in the payment of monthly subscription after the 8th installment and he is liable to pay a sum of Rs.8,64,000/- to the third respondent being the alleged installment amounts. The third respondent had alleged that it had issued a legal notice dated 19.08.1997. Based upon the aforesaid falsehood, the third respondent had proceeded before the second respondent for recovery of a sum of Rs.8,64,000/-.
3. The petitioners had defended the aforesaid arbitration case before second respondent. The entire case of the third respondent is not sustainable as the first petitioner neither participated in the alleged action nor had he handed over the prized amount cheque as alleged by the third respondent. He further submits that he is only a name lender to the aforesaid chit and the actual persons who had participated in the chit were the employees of the third respondent itself being (1) M.S.Raphael, (2) P.V.Satish, who are attached to the third respondent's chit. They approached the petitioners and had requested to lend their names for a financial arrangement with the third respondent's chit fund. The said officials of the third respondent had made them believe that the said arrangement was itself done at the instance of the third respondent and that the same is an arrangement between the third respondent and its employees in the form of a chit and that they were only the name lenders and that they had no actual liability in respect of the transaction. The said officers of the third respondent had assured that the transaction is at the instance of their company and that they would repay the entire chit monthly subscription payments to the third respondent in the event of the prizing of the chit. The petitioner had believed the same to be true, that it is a financial arrangement between the third respondent and the said persons who are its officers and that the said arrangement is fully known to the third respondent with regard to the mode of operation of the said transaction and the means by which the said funds were utilized by the said officials of the third respondent.
4. The petitioners further submit that the first petitioner had never participated in the auction alleged to have been held by the third respondent on 24.09.1996. The third respondent had indulged itself in the act of participation in the chit promoted by it through its officers. The said Officers had conducted the said chit on account of their position and proximity were able to knock the bid of the prize money in the first bidding itself nominally in his name. He was made to believe by the said officials that the entire process is done with the knowledge of the third respondent chit company. It would not be out of place for him to state that strangely in the said dubious transaction, the third respondent had not insisted on security by way of immovable property in respect of the aforesaid transaction as it used to usually insist in all other cases. The only security that was called for was the promissory note executed by him and the second petitioner. This clearly establishes the fact that the third respondent and its officials had connived among themselves in the entire transaction and had unwarrantedly dragged the petitioners herein in the said dubious dealing done by the officials of the third respondent.
5. The petitioner further submits that he had raised objections in the counter statement to the petition filed by the third respondent before the second respondent in A.R.C.No.1228 of 1997, wherein he has categorically stated the aforesaid facts and had specifically pleaded that the alleged chit transaction between the first petitioner and the third respondent is not supported by consideration and the said chit transaction was a sham and nominal at the instance of the third respondent. The third respondent at the instance of its own officials orchestrated the entire transaction in the mode of bidding and prizing the chit amount. The third respondent had unwarrantedly imputed the entire chit liability on him for the only reason that he had lent his name as a subscriber to the said chit. The said officials of the third respondent had cajoled them to give a promissory note for the purpose of the record and he assured that the entire transaction is only a nominal one at the instance of the third respondent and the same would not cast any liability on them. On merely subscribing of the above said chit and executing the promissory note at the instance of the officials of the third respondent and himself and the second petitioner herein had not resulted in transaction in any way in receiving the prized amount and the entire prized amount of the chit was received by the said officials of the third respondent. After taking the prize amount the said officials of the third respondent had made payment of the said 8 installments to the third respondent and none of the said payments were made by the first petitioner or second petitioner.
6. The first petitioner had filed an application to implead the said officials of the third respondent in the arbitration proceedings filed by the third respondent before the second respondent. The impleading application was argued on 13.01.1999 and the learned arbitrator had reserved her orders and the case used to be posted from time to time for the same. His lawyer used to attend the second respondent's office to find out the stage of the case and he was orally informed that orders were reserved on the impleading petition. The second respondent had not given any specific number for the said impleading petition. Under the circumstances, he was informed that the main case is posted for orders and the impleading application has been dismissed. The copy of the dismissal order had not been served. Subsequently, an application has been filed to reopen the case for evidence and arguments. Without considering this supplementary application, the second respondent had passed an award on 07.06.1999. Thereafter, on 09.06.1999, the second respondent had returned the said application to reopen the case. Therefore, the award has not been passed on merits. The second respondent had failed to note that the entire facts clearly prove collusion between the third respondent and its own two officers and had passed orders in favour of the third respondent without giving an opportunity to the petitioner. The said order not being covered by any documentary evidence.
7. The petitioner further submits that he had preferred an appeal before first respondent as against the order passed by the second respondent and the same has been numbered on the file of the first respondent. Before the first appellate authority he had raised several valid grounds which includes the non-payment of the prized chit amount to him which clearly establishes that the entire chit auction is only a sham and nominal and the same is only a congenial method of the third respondent in the form of financial arrangement with its set of own officials who are instrumental in the prized chit amount being auctioned in favour of certain individuals. He also raised a ground that the amount was not received by him and the receipt of the cheque issued by the third respondent was not given by him but by the officials of the third respondent. He had categorically stated that facts pertaining to the drawing of the prized amount by the officials and the close relatives of the officials of the third respondent. The petitioner further stated that the first respondent without hearing the arguments of the petitioner's side, the first respondent had passed the impugned order on 15.07.2002. The petitioner further submits that he had suffered an ex-parte award passed by the second respondent and the same was confirmed by the first respondent, which is also an ex-parte award since before furnishing the order, the petitioners' side argument was not heard. Hence, the petitioners filed the writ petition to quash the first and second respondents' order.
8. The third respondent viz., M/s.Shriram Chits, Chennai has filed a counter affidavit and resisted the writ petition. The third respondent stated that the first petitioner herein joined as subscriber in Chit Group Tk.No.84001/17, for chit value of Rs.10,00,000/- payable at Rs.25,000/- per month for 40 months. The first petitioner at the third auction held on 24.09.1996 bid the chit for a discount of Rs.3,00,000/- and was declared as the successful bidder for the prize amount of Rs.7,00,000/-. The prize amount of Rs.7,00,000/- was paid to the first petitioner under cheque No.917474 dated 22.10.1996. The second petitioner herein L.Govindan stood as Guarantor to the subscriber, the first petitioner herein for due repayment of future installments and executed necessary security documents.
9. The third respondent denied the allegations made in paragraph 2 that the petitioners have been falsely implicated in the case in A.R.C.No.1228/97. The petitioners averment that he did not join the chit to the value of Rs.10,00,000/- under Groups TK No.84001/17 is false. The first petitioner signed the application for joining the chit. He received the prize amount of Rs.7,00,000/- under cheque No.917474 dated 22.10.1996. The amount was realized by the first petitioner through the bank account maintained by him with Karur Vysya Bank at T.Nagar Branch. The first petitioner before receiving the prize amount fulfilled all formalities including executing promissory note, furnishing surety for the purpose of securing future liabilities.
10. The second petitioner herein stood as guarantor in the event of the first petitioner defaulting in payment and executed surety form. Having stood as guarantor and signed the surety form, the first petitioner's averment that the second petitioner should not be treated as guarantor is wrong. As per the promissory note and security documents executed by the petitioners herein, they are jointly and severally liable under law.
11. The third respondent denied the averment in para 4 that the petitioner has not participated in auction .The first petitioner participated in the auction signed the papers and received the prize amount and encashed through his bankers, viz., Karur Vysya Bank at T.Nagar Branch. The averment that he was only a name lender proves that he has full knowledge of the transaction. The first petitioner's averment that Mr.M.S.Repheal and C.S.Satish were solely responsible for putting him into liability proves beyond doubt that the petitioner's private arrangement with them will not affect the petitioners liability to the third respondent to the extent of Rs.8,69,000/-.
12. The first petitioner admits that the above said persons approached the petitioner herein for financial arrangement. Hence, the private arrangement between the petitioners and the said persons has nothing to do with the third respondent. If at all the petitioners herein having any grievances, with those persons the petitioners should have taken proceedings against them before authorities concerned. The petitioners herein having agreed to lend their name cannot escape from liability by setting up a case against them. The petitioners have not approached this Court with clean hands.
13. The learned counsel for the petitioner vehemently argued that the third respondent and its officials Mr.M.S.Repheal, who is a Business Development Manager, and Mr.P.V.Sathish, Divisional Manager of the third respondent's chit fund, both persons have approached the petitioners to lend in their names for a financial arrangement with the third respondent. The petitioners were only the name lenders and they had no actual liability in respect of the transaction. Further, the first petitioner had not communicated the date of hearing of the appeal proceedings and passed an ex-parte order without considering the valid grounds raised by the petitioners. The second respondent had also passed an exparte order without hearing the petitioners' counsel argument. Further, both the respondents passed their respective orders without any documentary fact. The main ground in the said case that the petitioners had not participated in the said chit and it was an arrangement made between the third respondent and his officials. The bank account was opened in the name of the first respondent by the third respondent's officials, the account also has been operated by the said officials. The learned counsel for the petitioner further submits that 8 chit installments were only paid by the said officials and the subsequent monthly installments had been defaulted by the officials in the name of the petitioners. In the instant case, the said officials are necessary parties as such, the petitioners have filed impleading petition before the second respondent and the same was dismissed. Therefore, the second respondent without hearing the stand of the necessary parties, the order has been passed and as such, the second respondent's order is not sustainable under law since there is a lacuna in the said order. On the basis of this discrepancy order, the first respondent's order also is not maintainable. The first respondent without hearing the arguments of the learned counsel for the petitioner, dismissed the appeal.
14. The very competent counsel for the petitioner further submits that the petitioners have filed a reopen petition before the second respondent to let in evidence and this application was rejected without giving an opportunity and as such, the second respondent's order is prejudicial to the petitioners. The vital documents in this case is the statement of bank account which has not been filed before the second respondent. Both the respondents have not given sufficient opportunities to the petitioner and passed their respective orders, therefore, both their orders are null and void. Hence, the recovery of the money covered by the first and second respondents order is not sustainable under law and the principles of natural justice. Therefore, the learned counsel entreats the Court to quash the orders of the first and second respondents.
15. The highly competent Additional Government Pleader vehemently argued that the second respondent has registered the case in A.R.C.No.1228 of 1997, on her file, which has been levelled by the third respondent herein against the writ petitioners to issue direction to the writ petitioners to pay arrears with interest i.e., Rs.8,64,000/-. The second respondent had decided the case on merits after considering the counter statements of the petitioners and also the averments of the third respondent. Therefore, the second respondent's order is a meritorious one passed in A.R.C.No.1228 of 1997, dated 07.06.1999. Against the said order, the writ petitioners have filed an appeal in G.O.(D)No.205 before the first respondent. The first respondent after well scrutinizing the impugned order passed by the second respondent and on perusing the connected records, the appeal has been dismissed on merits. The first respondent observed that the statements of accounts was taken into consideration and passed the order. Further, the writ petitioners had not denied their signature in the chit application, proposal form, pronote and receipt. Therefore, the orders of the respondents 1 and 2 are sustainable under law.
16. The very competent counsel for the third respondent vehemently argued that the first petitioner joined as a subscriber in chit group T.K.No.84001/17, to chit value of Rs.10,00,000/-, payable at Rs.25,000/- per month for a total period of 40 months. The first petitioner, in the third auction held on 24.09.1996 bid the chit for a discounted prize of Rs.3,00,000/- and was declared as the successful bidder for the prize amount of Rs.7,00,000/-. The said amount was paid to the first petitioner under cheque No.917474, dated 22.10.1996. The second petitioner herein should have carried on to the subscriber i.e., the first petitioner herein for due repayment of further installments and executed necessary security documents. The learned counsel further submits that the first petitioner enrolled his name in the application for enrollment on 24.08.1996 and he had duly signed in the form. Further, the first petitioner had executed an agreement in favour of the third respondent to draw the prized amount, under the said group chit. The first petitioner had signed in the documentation sheet and received a cheque on 22.10.1996, besides, the first petitioner had also signed in the chit payment receipt affixed in a revenue stamp. Further, he had executed a pronote along with the second petitioner. Therefore, there was a bona-fide chit transacted between the petitioner and the third respondent. Hence, the highly competent counsels requests this Court to dismiss the above writ.
17. After the above discussion, this Court's view is that:- (i) It is evident that the first petitioner herein had submitted an application for enrollment with the third respondent on 24.08.1996. Further, he had executed a deed in favour of the third respondent in the capacity of the prized bidder to draw the prize amount under group chit No.17, duly signed in the said agreement. Subsequently, on 22.10.1996, he had received a cheque in his name which has been issued by the third respondent herein. The cheque bearing No.917474, dated 22.10.1996 for a sum of Rs.7,00,000/-. To confirm the same he had executed a pronote in favour of the third respondent. This clearly establishes that there is a chit transaction between the third respondent and the writ petitioners. This view is taken by this Court on the basis of documentary facts. (ii) The writ petitioners allegation that they have filed impleading petition in A.R.C.No.1228 of 1997, on the file of the second respondent and made a prayer that Mr.M.S.Repheal, Business Development Manager, and Mr.P.V.Sathish, Divisional Manager, both attached to the third respondent, who have opened an account in the name of the first petitioner at Karur Vysya Bank, T.Nagar Branch and they have operated the said account and had withdrawn the said amount by drawing cheques in favour of themselves and their relatives. If it is true that the first petitioner has to lodge a criminal complaint against the said officials of the third respondent since the allegation is covered against defraud instead of that the writ petitioners raising this point after inviting case proceedings in A.R.C.No.1228 of 1997, on the file of the second respondent, which came as an afterthought and at a belated stage. (iii) The writ petitioners have filed an impleading petition before the second respondent and also to reopen a petition to render evidence and both of which were dismissed / rejected / not considered. The aggrieved writ petitioners ought to have filed a revision against those orders, but was not carried out. (iv) If the second respondent passed the order in ARC.No.1228 of 1997, dated 07.06.1999 without impleading necessary parties, then the writ petitioners can challenge the impugned order of the second respondent before the proper forum by way of a separate suit for setting-aside the said order, stating that the second respondent's order is not maintainable against them and the said two officials of the 3rd respondent are liable to pay the said recovery amount of the third respondent. (v) The second and first respondents have passed their impugned orders respectively after considering the facts and circumstances of the case and relevant records produced by the third respondent. Further, the first and second petitioners had duly signed the chit application proposal from, guarantee letter, documentation sheet for payment, chit payment receipt and pronote which are valid under the Indian Contract Act. (vi) The Bank account opened in the name of the first petitioner at karur Vysya Bank, T.Nagar Branch, may be legal tender even though it is beyond his residence and jurisdiction of the first petitioner.
18. Now, on verifying the facts and circumstances of the case and arguments advanced by the very competent counsels on all sides and on perusing the impugned orders of the second and first respondents and the view of this Court as narrated above viz., (i) to (vi), this Court does not find enough force to allow the writ petition.
19. In the result, the above writ petition is dismissed. Consequently, the award passed in G.O.(D)No.205, on the file of the Secretary to Government, Commercial Taxes Department dated 15.07.2002, confirming the award passed in A.R.C.No.1228 of 1999, on the file of the Deputy Registrar of Chits, dated 07.06.1999 is confirmed and the first respondent's order is fit to be considered for execution. There is no order as to costs. 30/ 08 / 2013 Index : Yes/No.Internet : Yes/No.r n s C.S.KARNAN, J.
r n s To 1.The Secretary to Government, Commercial Taxes Department, Fort St.George, Chennai - 600 009. 2.The Deputy Registrar of Chits, Chennai North, Chennai 600 012. Pre Delivery Order made in W.P.No.44980 of 2002 30/ 08/2013