IMPORTANT POINTS
The relationship between a chit subscriber and the chit foreman is a contractual obligation.
On default in subscription instaallments, foreman is entitled to recover the consolidated amount of future subscriptions from the defaulting subscriber in a lump sum.
Chits Funds Act, 1982 impliedly repealed Kerala Chitties Act, 1975.

JUDGMENT :

INDU MALHOTRA, J.

1. The issue which has arisen for consideration in the present Civil Appeal is with respect to the jural relationship between a chit fund entity and the subscribers, created by a chitty agreement; and whether it is a debt in prasenti or a promise to discharge a contractual obligation.

2. The present Appeal arises out of a Chit Fund conducted by the Appellant, a chit fund entity. The duration of the chit fund was from 1978 to 1990. The Respondents were subscribers of the chit fund. During the subsistence of the chit fund, the Respondents defaulted in the payment of 12 installments from 24.11.1981 to 24.11.1984.

2.1 The Appellant – chit foreman instituted two Suits against the Respondent – subscribers before the Subordinate Judge, Thrissur, Kerala. The first Suit bearing O.S. No. 323/1984 was filed for recovery of 12 installments for the period 24.11.1981 to 24.11.1984; and, the second Suit bearing O.S. No. 548/1987 was filed for recovery of future subscriptions due under the chit fund after 24.11.1984.

2.2 The Subordinate Judge, Thrissur, Kerala decreed both the Suits in favour of the Appellant – Company on 09.04.1990.

In O.S. No. 323/1984, the Respondents were directed to pay the Appellant – Company a sum of Rs. 40,915/with Interest @12% on the sum of Rs. 34,800/from the date of filing the Suit till the date of decree, and thereafter Interest @6% per annum from the date of the decree till the date of realization.

In O.S. No. 548/1987, the Respondents were directed to pay the Appellant – Company a sum of Rs. 83,820.68/with Interest @12% on a sum of Rs. 63,800/from the date of filing of the Suit till the date of decree, and thereafter Interest @6% per annum from the date of the decree till the date of realization.

2.3 Aggrieved by the aforesaid Judgment and Decree dated 09.04.1990 passed by the Subordinate Judge, Thrissur, the Respondents herein filed two Appeals bearing A.S. No. 326/1992 and A.S. No. 346/1992 before the Single Judge of the Kerala High Court.

The learned Single Judge of the High Court dismissed both the Appeals filed by the Respondents vide a common Judgment and Order dated 27.06.1994.

The Single Judge held that the Kerala Chitties Act, 1975 does not apply to the Chit Fund in question, since the same was started from Mangalore, Karnataka. The Appellant being a trading company, was exempted under Section 13(1)(e) of the Companies Act, 1956 from specifying the States to which the objects would extend in the Memorandum and Articles of Association.

Reliance was placed by the Single Judge on the Full Bench decision of the Kerala High Court in P.K. Achuthan and Anr. v. State Bank of Travancore, Calicut, AIR 1975 Ker 47 wherein it was held that a chit fund is essentially a debt in praesenti, but permitted to be paid in installments. The facility of this debt is available to the debtor so long as the installments are regularly paid. The nature of the transactions under a chit fund are essentially that of a debtor-creditor relationship.

It was noted that the judgment in P.K. Achutan (supra) had been affirmed by the Supreme Court in K.P. Subbarama Sastri and Ors. v. K.S. Raghavan and Ors., (1987) 2 SCC 424.

2.4 Aggrieved by the common Judgment and Order dated 27.06.1994 passed by the learned Single Judge, the Respondent filed two Second Appeals bearing AFA Nos. 84 of 1994 and 85 of 1994 before the Division Bench of the Kerala High Court.

The Division Bench vide the impugned Judgment and Order dated 15.01.2009, allowed AFA No. 84 of 1994, and dismissed AFA No. 85 of 1994.

The division bench noted that the decision of the full bench in P.K. Achutan (supra) had been overruled in Janardhana Mallan & Ors. v. Gangadharan & Ors., AIR 1983 Ker 178 wherein a five-judge bench of the Kerala High Court held that future installments payable by a chit subscriber are not a debt owed to the chit foreman, and therefore, could not be recovered in case of default in payment of an installment.

The subsequent larger bench decisio