Disputes between a foreman and a subscriber under the Chit Funds Act, 1982 must be referred to arbitration under Sections 64 and 65; civil courts lack jurisdiction. The foreman cannot unilaterally reject a subscriber's cancellation request without arbitration.

JUDGMENT:

The instant appeal has been filed by the Appellant/Plaintiff Chit Fund Company against the judgment and decree, dated 04.06.2001 in O.S.No.1037 of 1997 passed by the learned VII Senior Civil Judge, City Civil Court, Hyderabad (for short, “the trial Court”), dismissing the suit filed by the plaintiff for recovery of arrears of subscription amount.

2. For the sake of convenience the parties will hereinafter be referred as arrayed in the original suit.

3. The brief facts of the case are that the plaintiff, M/s.Vijay Bhargavi Chit Fund Company is registered with the Registrar of Chits. The defendant No.1 invested in chit fund with series No.MT1SA-32 for an amount of Rs.4,00,000/- payable in equal 40 monthly installments of Rs.10,000/- each, in the plaintiff company. Originally, one M/s. Gayathri Maintenance Services (P) Ltd. was the subscriber of ticket No.32 and the said subscriber paid the subscription only few months but later discontinued in the chit series No.MT1SA-32 therefore the defendant No.1 was admitted in the place of the original subscriber in the month of November, 1996 and paid an amount of Rs.91,600/-, through a cheque, which was the amount payable upto said month subscription. Further, he has participated in the chit dated 17.11.1996 and was declared as a successful bidder for an amount of Rs.1,60,000/- and submitted the guarantee of defendant Nos.2 to 4 on 22.11.1996. Further, though the guarantor bonds were presented on the very same day, the prize amount was paid to the defendant No.1 on 22.12.1996 i.e., for an amount of Rs.2,33,250/- through cheque and Rs.6,650/- was adjusted towards the subscription for the month of December.

4. It is further contended that defendant No.1 defaulted after receipt of the said amount and has not paid any subscription amount thereafter. Pursuant to which, a legal notice was issued to all the defendants i.e., subscriber and the guarantors, which was returned un-served except to the defendant No.2, and the plaintiff filed the suit for recovery of arrear subscription of total amount of Rs.2,60,000/- and claimed Rs.15,129.85 towards interest @ 12% p.a. from the date of default to the date of filing of suit, including incidental and legal charges and claimed a total suit amount of Rs.2,75,329.85/-.

5. The defendant No.1 filed the written statement which was adopted by the other defendants, contending that he joined the said chit on 09.11.1996 in the middle of it after the original subscriber discontinued and the defendant has joined the chit on the promise of the plaintiff, that the chit amount would be paid to him in the same month to meet his urgent necessities. However, the chit amount was paid only on 22.12.1996 that is after a month from the bid date i.e., 17.11.1996 despite furnishing guarantors and the documents on the same day. It was contended by the defendant No.1 that the amount has not been paid to him within

10 days as promised by the plaintiff or at least within 30 days as per the bye-laws of the plaintiff company. Further it was contended that as the chit amount was not paid to him as promised, he borrowed amounts from others to meet his dire necessities and after receiving the prize amount he returned an amount of Rs.1,41,750/- on the very same day, after excluding the initial amount of Rs.91,600/- already paid to the plaintiff and addressed a letter dated 28.12.1996, whereby he sought for cancellation of the chit and dis