Period of limitation is three years from date of termination of the chit.

Prayer: Appeal against the judgment and decree dated 18.09.1986 made in O.S.No.936 of 1985 on the file of V Additional Subordinate Judge, Tiruchirapalli.

M. Karpagavinayagam, J.

The question referred to this Full Bench is as follows :

Whether, in respect of a chit transaction, the starting point of limitation for filing a suit is from the date of default or from the date of termination of chit period ?

2. The short facts are as follows :

“(i) A.M.Srinivasan, plaintiff/first respondent herein, carried on chit business. One Chinnakaruppan, being a subscriber in respect of two chits, was the prized subscriber in those two chits. The two chit transactions commenced on 01.02.1982 and 20.04.1982 respectively. In respect of the first chit, the said Chinnakaruppan committed default from the date of sixth instalment, namely, 01.06.1982. In regard to the second chit, he committed default from the date of third instalment, namely, 20.06.1982. The period of 20 months for the first chit got terminated on 30.09.1983 and the second chit on 19.12.1983.

(ii) Chinnakaruppan died, possessing of property and leaving behind the legal representatives. Therefore, A.M.Srinivasan sent a notice to the legal representatives of Chinnakaruppan on the termination of the chit period on 18.10.1984, claiming the chit amount. However, the amount was not paid. Hence, the said A.M.Srinivasan, as plaintiff, filed O.S.No.936 of 1985 on 04.11.1985 against the heirs of Chinnakaruppan, as defendants, for recovery of the defaulted subscriptions, in respect of the two chit transactions.

(iii) The trial Court decreed the suit against the defendants to the extent of the assets of the deceased Chinnakaruppan in the hands of the defendants.

(iv) Fifth defendant alone has challenged the said decree and filed the present appeal in A.S.No.200 of 1988 before this Court.â€

3. When the matter came up before a learned single Judge of this Court for final disposal, learned counsel for the appellant, assailing the decree of the trial Court, raised the only point that the suit is not maintainable, as it is barred by limitation.

4. The learned single Judge, after hearing the counsel for the parties in this appeal, was pleased to refer the matter to a Full Bench, to decide the issue, in view of the conflicting judgments of the two Division Benches, reported in 1997 (1) CTC 471 (M. Gopal v. Sri Vetrivel Chit Funds Pvt. Ltd.) and 1999 (1) CTC 238 (Shriram Chits and Investments (P) Ltd. v. M.Krishnan).

5. As per the judgment of the Division Bench in M. Gopal v. Sri Vetrivel Chit Funds Pvt. Ltd. (1997 (1) CTC 471), Article 37 of the Limitation Act is applicable and the commencement of limitation for filing a suit against the prized subscriber would commence on the day when the last instalment was paid and the suit should be filed within three years from the date of default.

6. On the other hand, another Division Bench, in Shriram Chits and Investments (P) Ltd. v. M.Krishnan (1999 (1) CTC 238), held that where a chit agreement is for a period of 60 months, the chit company has to wait till the end of the last instalment, as the period of limitation would commence from the date of termination of the chit period, though the prized subscriber committed default much prior to the date of termination of the chit period.

7. We have heard the learned counsel for the parties and also gone through the judgments referred to above.

8. Now, the point for determination is, which view of the said two Division Benches is correct ?

9. The first chit commenced on 01.02.1982. It was a twenty month chit. It expired on 30.09.1983. Chinnakaruppan committed default from the sixth instalment i.e., 01.06.1982. The second chit commenced on 20.04.1982. It was also a twenty month chit, which got terminated on 19.12.1983. In the second chit, Chinnakaruppan committed default from the third instalment i.e., 20.06.1982. Admittedly, notice was issued on 18.10.1984 in respect of these two chits, only after terminati