The purchase of a chit in auction gives rise to a liability which is not considered a debt under the relevant Acts.

1. This is a civil revision petition against an order of the learned Principal District Munsif of Tirunelveli, holding that the defendants, who are the respondents herein, cannot be sued for the amounts doe to the plaintiff on a chit transaction because they are entitled to the benefits of the Tamilnadu Indebted Agriculturists (Temporary Relief) Act, 15 of 1976 and the Tamilnadu Indebted Persons (Temporary Relief) Act, 16 of 1976. He held that the definitions of ‘debt’ in S. 2(c) of Act 15 of 1976 and S. 2.(1) of Act 16 of 1976 are wide enough to include the liability, if any, of the defendants to pay the suit amount on the basis of a chit transaction. S. 2(c) of Act 13 of 1976 defines a debt as ‘any sum of money which a person is liable to pay under a contract, express or implied, for consideration received and includes rent in cash, or kind which a person is liable to pay or deliver in respect of the lawful use and occupation of ‘agricultural land” S. 2(1) of Act 16 of 1976 deflect a debt as “any liability in cash or kind whether secured or unsecured, due from an indebted person whether payable under a decree or order of a civil or revenue court or otherwise but does not include; (i) rent as defined in clause (5), (ii) any debt to which Tamilnadu Indebted Agriculturists (Temporary Relief) Act 1976 is applicable.” The question to be considered is whether the amount payable by the respondents towards the chit which they had purchased in auction and which amount (hey have received, is a debt. This quest ion has been considered in Raghavan Pattar v. Arumugham 1935 M.W.N. 70: 41 L.W. 376 by a Bench of this court. That case arose out of a chit transaction. The plaintiffs in that cast were the stake-holders of a chit fund who put to auction the amounts collected from the contributors and the person offering the highest discount got that fund less the discount.

The discounts was distributed among the other contributors. The auction purchaser thereafter bound himself to pay the future instalments. The defendant in that case accordingly bound himself by two bonds which provided that he should pay the future instalments as they became due and if he failed to pay any of the instalments, he should pay the same within 15 days from the date of the default with interest at 2 per cent per annum. If default was committed in respect of any one instalment, he should pay in one lump sum the entire amount of all the instalments etc. The question then arose whether the clause was penal so as to attract the provisions of S. 74, (iii)(g) of the Contract Act. In considering this question, a bench of this Court has held that the transaction with the auction-purchaser is one of sale and not of borrowing the consideration being (1) the highest discount, and (2) a bond for the future payment of instalments. It was further observed that a chit transaction of this kind is entirely different from a loan transaction in which the borrower at the time of the loan gives a bond for more than the amount he borrows. It is a case of a purchase and it is a part of the contract that the purchaser has to pay the principal sum reserved by the bond together with interest. With respect, I agree with the principles laid down in the aforesaid decision and find that the purchase of a chit in auction gives rise to a liability which is not a debt within the meaning of the word ‘debt’ as defined in S. 2(c) of Act 15 of 1976 or as defined in S. 2(1) of Act 16 of 1976. Hence the order of the lower court is set aside and the learned principal District Munsif is directed to take the suit on file. The civil revision petition is all owed accordingly. No costs.