Mar Apprem Company Ltd. vs V.M. Narendranath and others

P.K. Shamsuddin, J.—Plaintiff in O.S. No. : 290 of 1982 on the file of the Sub Court, Trichur is the appellant. Suit was for realization of amount on the basis of kuri security agreement. Plaintiff company started a kuri from its Bangalore branch on 5-6-1979. 1st defendant was a subscriber. Defendants prized the kuri and received the amount and they executed a security agreement on 30-1-1980 in favour of the plaintiff agreeing to pay a sum of Rs. 10, 300/- being the amount due for the future 103 instalments at the rate of Rs. 100/- per month from 5-2-1980 onwards. They also agreed that in case of default of one installment, the subscription for that month shall be paid with 12% interest on the date of the next installment. In case of default of the subsequent installment also, the Foreman shall be entitled to realise the entire future installments in lump with 12% interest on the whole amount from the date of 1st installment and that the defendants shall be liable jointly and severally for the amount due. They paid subscription upto 5-10-1980 and committed default from 5-11-1980 onwards. Inspite of demand made for payment of the subscription, they failed to pay the amount. In the circumstances, plaintiff filed the suit for realization of the entire installments together with interest.

Defendants filed a joint written statement stating that they were prepared to discharge the defaulted subscription and the suit tiled for the entire future installments is not maintainable.

The court below relying on a Full Bench decision of this court in Janardhana Mallan & others v. Gangadharan & others (1983 KLT 197) held that the plaintiff is entitled to recover only the defaulted installments and not the entire installments and in that view of the matter, a decree was given in favour of the plaintiff for realization of a sum of Rs. 2,230/- with costs and 6% interest on the principal amount from the date of suit till realization. In this appeal, learned counsel for the appellant contended that in view of the Supreme Court decision in K.P. Subbarama Sastri and Others Vs. K.S. Raghavan and Others, , the Full Bench decision referred to above is no longer good law. In the decision which came up for the consideration of the Supreme Court referred to above, the Supreme Court has approved the Full Bench decision of this court in P.K. Achuthan v. State Bank of Travancore, Calicut ( 1974 KLT 806 (F. B). A similar question came before a larger Full Bench of, this court, consisting of 5 Judges, in Janardhana Mallan''s case (supra). After discussing the question and reviewing the decision of the earlier Full Bench in Achuthan''s case (supra), the court observed thus:-

In the light of the above discussion, we do not think it would be possible to say that on entering into the chitty agreement a debt is incurred by the subscriber for the amount Of all the future instalments and in respect of such amount there is a debtor-creditor relationship. As we have stated earlier in this judgment the chitty variola only embodies a promise to pay Oh future dates. That is not a promise-to repay an existing debt, but to pay in discharge of a contractual obligation. For similar reasons neither the prizing of the chitty not the execution of the security bond would give rise to a debt, for the prize amount is not received as a loan, but as of right by virtue of the terms of the contract between the parties. We reiterate that the provisions of the relevant Acts relating to chitties to which we have made advertence also only indicate this. In this view we are of the opinion that to the extent the earlier decision of the Full Bench in P.K. Achuthan and Another Vs. State Bank of Travancore, Calicut, has referred to the creation of the debtor-creditor relationship on the prizing of the chitty and the execution of the security bond we respectfully differ. The decision of the Division Bench in State Bank of Travancore Vs. May C. George, which follows the Full Bench decision must also therefore be found to have not rightly stated the law.

In the Supreme Court case, the appellants were plaintiffs. Suit was based on a kuri transaction. Respondents were subscribers to Kuri. They committed default after they bad prized the kuri and realized the prize amount. Hence the suit was filed for realization of the principal sum with interest. The suit was decreed by the Sub Court. An appeal was filed before the High Court. The Division Bench of the High Court heard the appeal and partly allowed it and modified the degree refixing the interest. The court was largely influenced by the fact the kuri transaction and the contract between the foreman of the kuri and the subscribers burdened the subscribers with unconscionable interest and were unreasonable. The Supreme Court then referred to the Full Bench decision in Achuthan''s case (supra) and made the following observations:-

Before the Full Bench, it was contended that this stipulation in the agreement where a Subscriber prized his chit, providing that on default the kuri foreman would be entitled to recover the entire balance amount, with 12% interest in a lump sum without giving credit to the subscribers, is penal in nature and held in terrorem for securing due performance of their promise and hence not enforceable. Eradi, J. as he then was, speaking for the Full Bench held that a subscriber truly and really becomes a debtor for the prized amount paid to him, that the facility of repayment in installment is only a concessional facility and that stipulation enabling the foreman to withdraw the concessional facility on default of punctual payment of the installments would not be penal or unconscionable.

After quoting the observations of the Full Bench in Achuthan''s case (supra), the Supreme Court held:-

We agree with the law so laid down by the Full Bench.

In that view of the matter, the Supreme Court set aside the judgment of the High Court and allowed the appeal. In view of the Supreme Court decision referred to above, which I am bound to follow, it has to be held that the view taken by the lower court is not correct, Achuthan''s case (supra) has taken the view that it is a debt and the Supreme Court approved the same and upheld the provision enabling the foreman to realise the entire future instalments with interest. No doubt a larger Bench of this Court in Janardhan''s case (supra) differed from the view expressed in Achuthan''s case, but in view of the Supreme Court''s decision in Subbarama Sastri''s case (supra) approving the view in Achuthan''s case, I have no option but to follow the Supreme Court decision.

In the result, the appeal is allowed and a decree is given in favour of the plaintiff as prayed for in the plaint with 12% interest on the principal amount till date of decree and at 6% from the date of decree tilt realization. In the circumstances of the case, there will be no order as to costs.