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1999 Supreme(Mad) 913
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE V. KANAGARAJ
Dr. Vimala
Versus
M/s. Shriram Chits & Investments Pvt. Ltd
Civil Revision Petition No. 1450 of 1996 and CMP No. 7872 of 1996
Decided On : 09-09-1999
Mr.P. Rathinadurai, Advocate for Petitioner. Mr. M. Sathyanarayanan for Mr.M.M. Suresh, Advocate for Respondent.
THE SURETY OF A SUBSCRIBER CAN BE REFERRED TO THE REGISTRAR FOR ARBITRATION UNDER SECTION 64(1)(B) OF THE CHIT FUNDS ACT. THE REGISTRAR HAS THE POWER TO ORDER SUBSTITUTED SERVICE UNDER SECTION 67 OF THE ACT. HOWEVER, THE MANDATORY NOTICE REQUIRED UNDER SECTION 33(1) OF THE ACT MUST BE SERVED BEFORE A FOREMAN CAN CLAIM A CONSOLIDATED PAYMENT FROM A DEFAULTING PRIZED SUBSCRIBER. DUAL EXECUTION PROCEEDINGS CANNOT BE MAINTAINED FOR THE RECOVERY OF ONE AND THE SAME DECREE AMOUNT.
Headnote:
CHIT FUNDS ACT - SURETY - ARBITRATION - SERVICE OF NOTICE - EXECUTION OF DECREE - DUAL PROCEEDINGS - [SECTION 33(1), 64(1)(B), 67] - THE COURT HELD THAT THE SURETY OF A SUBSCRIBER CAN BE REFERRED TO THE REGISTRAR FOR ARBITRATION UNDER SECTION 64(1)(B) OF THE CHIT FUNDS ACT. THE REGISTRAR HAS THE POWER TO ORDER SUBSTITUTED SERVICE UNDER SECTION 67 OF THE ACT. HOWEVER, THE MANDATORY NOTICE REQUIRED UNDER SECTION 33(1) OF THE ACT MUST BE SERVED BEFORE A FOREMAN CAN CLAIM A CONSOLIDATED PAYMENT FROM A DEFAULTING PRIZED SUBSCRIBER. THE COURT ALSO HELD THAT DUAL EXECUTION PROCEEDINGS CANNOT BE MAINTAINED FOR THE RECOVERY OF ONE AND THE SAME DECREE AMOUNT.
Fact of the Case:
THE PETITIONER, A SURETY, CHALLENGED THE VALIDITY OF AN AWARD PASSED AGAINST HER IN AN ARBITRATION PROCEEDING UNDER THE CHIT FUNDS ACT. SHE ARGUED THAT THE ARBITRATOR HAD NO JURISDICTION TO PROCEED AGAINST HER, THAT NO STATUTORY NOTICE HAD BEEN SERVED UNDER SECTION 33(1) OF THE ACT, AND THAT THE ARBITRATOR HAD ACTED BEYOND HIS POWERS IN GRANTING INTEREST. THE RESPONDENT ARGUED THAT THE ARBITRATOR HAD JURISDICTION UNDER SECTION 64(1)(B) OF THE ACT, THAT THE STATUTORY NOTICE WAS NOT REQUIRED IN THIS CASE, AND THAT THE ARBITRATOR HAD THE POWER TO GRANT INTEREST.
Finding of the Court:
THE COURT HELD THAT THE SURETY OF A SUBSCRIBER CAN BE REFERRED TO THE REGISTRAR FOR ARBITRATION UNDER SECTION 64(1)(B) OF THE CHIT FUNDS ACT. THE REGISTRAR HAS THE POWER TO ORDER SUBSTITUTED SERVICE UNDER SECTION 67 OF THE ACT. HOWEVER, THE MANDATORY NOTICE REQUIRED UNDER SECTION 33(1) OF THE ACT MUST BE SERVED BEFORE A FOREMAN CAN CLAIM A CONSOLIDATED PAYMENT FROM A DEFAULTING PRIZED SUBSCRIBER. THE COURT ALSO HELD THAT DUAL EXECUTION PROCEEDINGS CANNOT BE MAINTAINED FOR THE RECOVERY OF ONE AND THE SAME DECREE AMOUNT.
Issues: 1. WHETHER THE ARBITRATOR HAD JURISDICTION TO PROCEED AGAINST THE SURETY? 2. WHETHER THE STATUTORY NOTICE UNDER SECTION 33(1) OF THE ACT WAS REQUIRED? 3. WHETHER THE ARBITRATOR HAD THE POWER TO GRANT INTEREST? 4. WHETHER DUAL EXECUTION PROCEEDINGS CAN BE MAINTAINED FOR THE RECOVERY OF ONE AND THE SAME DECREE AMOUNT?
Ratio Decidendi: 1. SECTION 64(1)(B) OF THE CHIT FUNDS ACT ALLOWS FOR ARBITRATION AGAINST A SURETY OF A SUBSCRIBER. 2. SECTION 33(1) OF THE ACT REQUIRES A MANDATORY NOTICE TO BE SERVED BEFORE A FOREMAN CAN CLAIM A CONSOLIDATED PAYMENT FROM A DEFAULTING PRIZED SUBSCRIBER. 3. THE ARBITRATOR HAS THE POWER TO GRANT INTEREST AS PER THE CONTRACT. 4. DUAL EXECUTION PROCEEDINGS CANNOT BE MAINTAINED FOR THE RECOVERY OF ONE AND THE SAME DECREE AMOUNT.
Final Decision: THE COURT ALLOWED THE REVISION PETITION, SETTING ASIDE THE ORDER OF THE LOWER COURT AND DISMISSING THE EXECUTION PROCEEDING.
1. The above civil revision petition is directed against the fair and decretal order dated 210. 1995 made in E.A.No. 2899 of 1994 in E.P.No. 2373 of 1993 in A.R.C. No. 907 of 1991 by the Court of IXth Assistant Judge, City Civil Court, Madras.
2. The petitioner has filed E.A.No. 2899 of 1994 in the lower Court under Section 47. CPC with averments (i) that the Chit Funds Act does not provide for any arbitration in respect of a claim by the Foreman against the surety; (ii) that the arbitrator has no power to order substituted service for service of notice and the award passed against the petitioner is a nullity; (iii) that the arbitrator has no authority to grant interest in the manner set out in the award; and (iv) that the arbitrator has acted beyond the scope of Section 64 of the Chit Funds Act and hence the award passed against the petitioner is a nullity and inexecutable against her. With the above grounds, the petitioner in the Execution Petition would pray with the lower court to declare that award passed in ARC No. 907 of 1991 by the District Registrar of Chits (North Madras) is a nullity and unexecutable.
3. In the counter filed by the respondent, it would be urged that (i) under Section 64(1) (b) of the Chit Funds Act, 1982 (hereinafter referred to as the ‘Act’) a surety can be proceeded against for any dispute relating the chit business; (ii) that under Section 128 of the Indian Contract Act, the liability of the surety is co-extensive with that of the Principal Debtor; that under Section 67 of the Act, the Registrar or the nominee hearing a dispute, shall in addition to the powers conferred on him under the Act, have the same powers as are vested in a Civil Court while trying a suit under CPC in respect of summoning and enforcing the attendance of persons and examining them on oath; and (iii) that the Chit Funds Act provides for allowing interest as per the contract. The petitioner having jointly and severally executed the Promissory Note, is liable to pay the interest as per the Promissory Note. With the above contentions, the respondent would pray for dismissing the above petition.
4. During arguments, the learned counsel appearing for the petitioner would contend that the subject matter is one covered by the Chit Funds Act and the above civil revision petition is filed testifying the validity of the dismissal order dated 210. 1995, under Section 47, CPC questioning the validity and enforcibility of the decree; that the petitioner is the second respondent before the arbitrator; that an ex-parte decree has been passed against her on ground that she had been served by substituted mode of service i.e., by publication; that under Section 64(1)(b) of the Act, no arbitration is contemplated as it is drafted and there is no scope for initiating proceeding under the Arbitration Act.
.5. Secondly, there should be a mandatory notice served under Section 33(1) of the Act and this statutory provision has not been complied with at all. Thirdly, a fraud had been played upon the Court by the respondent in so far as the substituted service is concerned, that Rule 50 contemplates the service, but does not contemplates the substituted service.
6. The learned counsel for the petitioner would lay emphasis on Section 33(1) of the Act which is mandatory; that in this matter, no notice has been served or filed; that this mandatory notice cannot be waived at all; that the lower court presumes that the respondent Company would have given waiver of notice. Coming to the next point i.e. Section 64, the learned counsel would contend that it a statutory arbitration, all the requirements contemplated under this Section should have been complied with. He would further point out that the surety has not suffered with a decree and there is no question of the surety claiming against the Principal Debtor; that his answer is that he is concerned only with regard to the arbitration as contemplated under Section 64 and would ascertain t
