A plaintiff cannot file a suit against an unregistered chit fund for recovery of money, highlighting the necessity of a valid Board resolution for instituting a suit on behalf of a company.

JUDGMENT :

P. Velmurugan, J.

The suit is instituted by the plaintiff-Company against the defendants for recovery of a sum of Rs.4,83,72,278/- towards the payment of Chit amount to the plaintiff-Company, together with interest @ 18% per annum from the date of plaint till the date of realisation and for costs of the suit.

2. The averments made in the plaint are as follows :-

(a) The first defendant, through its partners, who are defendants 2 to 6, had floated a firm known as Ganapathy Funds and carrying on business in Chit Fund and also accepted the deposits from the public. In the year 2013, the second defendant approached the plaintiff and informed about their business activities and giving a false glowing reports of the activities of the first defendant-group of companies and insisted the plaintiff to invest in the Chits conducted by the first defendant-firm and the second defendant promised to pay high returns by way of dividend on the investment to be made by the plaintiff and also assured the plaintiff-Company that they will be entitled to prize amount/maturity amount which would be promptly settled without any delay.

(b) The second defendant-Chit Fund group informed that a Chit Fund Group was about to commence in the month of May 2013 and the duration of the chit was 20 months therefrom. The second defendant also assured the plaintiff that the group of which the plaintiff subscribes, was registered with the Registrar of Chits under the CHIT FUNDS ACT , 1982 and the Tamil Nadu Rules and the plaintiff need not have apprehension regarding payment of the matured amount of the chit prize amount.

(c) Due to the words and assurances of the second defendant, i.e., it was assured by the second defendant that a substantial sum upon conclusion of 20 months period, could be beneficially invested in the plaintiff's construction business, thereby reaping further profits. In view of the repeated requests made by the second defendant to invest in their business of Chit Fund, the plaintiff, after much hesitation, subscribed to a Chit which was to commence on 05.05.2013, ending on 05.12.2024, the monthly subscription amount to be remitted by the plaintiff, was fixed as Rs.20 lakhs and the maturity value was Rs.400 lakhs, i.e. Rs.4 crores. The second defendant is managing the affairs of the first defendant in his capacity as Proprietor (Managing Parter, amended as Proprietor - as per order dated 01.07.2019 in Appln.No.4150 of 2019).

(d) After commencement of the above said chit, the plaintiff had been regularly remitting the monthly subscription towards the chit, less the sanctioned dividend. When the plaintiff-Company wanted to participate in the bid during the months of 15, 16, 18 and 19 of the chit duration, the second defendant persuaded the plaintiff-Company not to bid, as there was demand for the prize amount and participation of the plaintiff would only increase the bid amount. The second defendant cleverly suggested the plaintiff to wait for the last chit, when there would be no competition and the entire value of the chit, less the foreman's commission, would be paid to the plaintiff.

(e) After completion of the chit in the month of December 2014, the plaintiff approached the defendant(s) to settle the maturity value of the chit payable to him. But the second defendant kept on avoiding payment, claiming that several members had failed to