M/S. KAPIL CHIT FUNDS PVT. LTD. & ANR. vs SRI PAYAKARAO UPENDRA

This revision petition has been filed under section 21(b) of the Consumer Protection Act, 1986, against the impugned order dated 29.11.2010, passed by the A.P. State Consumer Disputes Redressal Commission, (hereinafter referred to as "the State Commission") in First Appeal No. 329/2008, M/s. Kapil Chit Funds Pvt. Ltd. & Anr. vs. Sri Payakarao Upendra, vide which, while allowing the appeal, the order passed by the District Consumer Disputes Redressal Forum, Karim Nagar, dated 27.12.2007, in Consumer Complaint No. 104/2007, was ordered to be modified.

The facts of the case are that the complainant/respondent Payakarao Upendra joined as a chit member in chit series RTL05J-8 conducted by the opposite parties (OPs)/petitioners for a chit value of Rs. 5 lakhs with date of commencement being 25.11.2005 and date of termination being 25.12.2009 with a monthly subscription of Rs. 10,000/- for a period of 50 months. It is stated in the consumer complaint that the complainant paid 22 installments amounting to Rs. 2,20,000/- and did not participate in chit auction and had not claimed any price amount in respect of the said chit. It is further stated in the complaint that the complainant stood as surety to one A. Surya Prakash, who committed default in paying the chit amount and a suit for recovery of money of Rs. 46,308/- was filed against the said A. Surya Prakash and others, including the complainant vide O.S. No. 364/2005 before the Civil Judge Junior at Karim Nagar. The OPs started making phone calls in the first week of July, 2007 to the complainant, telling him that they were going to deduct amount from the complainant''s chit to adjust the same to the account of the said A. Surya Prakash. He got issued legal notice on 09.07.2007 to the OP-2, requesting that deduction of any amount should not be made from his Chit. However, the OPs stopped receiving further installments from the complainant. The complainant tried to send some cheque to the OPs drawn on State Bank of Hyderabad for Rs. 16,000/- towards monthly subscription for July and August, but the same was not accepted by the OPs. The complainant sent another legal notice dated 17.08.2007 to the OPs alongwith the cheque, but the OPs sent him a removal letter, stating that the complainant did not pay the arrears in spite of notice sent by them on 13.07.2007. In the removal letter, the OPs stated that the complainant had paid an amount of Rs. 85,120/- with them and after deducting 5% of the chit amount towards damages for breach of the contract, amounting to Rs. 25,000/-, the net amount payable to the complainant was Rs. 59,970/-. The complainant filed the consumer complaint in question, seeking directions to the OPs to pay Rs. 2,20,000/- to him alongwith interest @ 24% per annum from the date of complaint till realization and a compensation of Rs. 25,000/- on various counts.

The complaint was resisted by the OPs by filing a written statement, in which they stated that the complainant had paid only 20 installments and not 22 installments and that he had stood surety for A. Surya Prakash, who had committed default and against whom a Civil Suit had been filed. It is further stated in the reply that as per the request of the complainant, the OPs had adjusted an amount of Rs. 55,865/- out of the chit amount of the complainant to the credit of A. Surya Prakash. The Civil Suit was then withdrawn as ''not pressed''. In the removal notice dated 09.08.2007 sent by them, they had clearly stated that after adjustment of Rs. 55,865/-, the amount payable to the complainant was Rs. 85,120/-, from which the foreman''s commission of Rs. 25,000/- and Rs. 150/- towards incidental charges had been deducted and the complainant was entitled for Rs. 59,970/-. In addition, a sum of Rs. 16,000/-, paid by the complainant after the said removal notice, was also payable to him. It was requested that the complaint in question should be dismissed.

The District Forum, vide their order dated 27.12.2007, allowed the complaint and directed the OPs to pay a sum of Rs. 2,04,000/- to him with 9% interest from the date of the complaint. The District Forum worked out the said amount after deducting Rs. 16,000/- from the sum under 22 installments i.e. Rs. 2,20,000/-. Being aggrieved against the said order, the OP/petitioner challenged the same by way of an appeal before the State Commission. The State Commission observed that as per legal notice sent by the complainant, he had paid only 20 installments, amounting to Rs. 2,00,000/-. Thereafter, he sent a cheque of Rs. 16,000/- to the OPs for July-August 2007 and hence, he paid a total sum of Rs. 2,16,000/- to them. After deducting an amount of Rs. 25,000/- from the said amount, the complainant was entitled to get a sum of Rs. 1,91,000/- with interest @ 9% per annum from the date of filing the complaint till realization. Being aggrieved against the said order, the OP/petitioner has filed the present Revision Petition before this Commission.

During hearing, the learned counsel for the petitioner argued that it had been stated in the bye-laws (j) of the Scheme as follows:-

" (j) if the subscriber is a surety to any prized subscriber, who becomes a defaulter subsequently, the amount paid by such subscriber either for non-prized chits or deposits will be foreclosed by the Foreman and the amounts will be adjusted towards the defaulted subscriptions as he is jointly and severally liable to the debts."

It had also been provided in the bye-laws that if the subscriber became a defaulter for more than two months, he would not be entitled to dividends. The petitioners had strictly acted in accordance with the bye-laws of the Scheme and hence, the complaint was liable to be dismissed. The learned counsel also stated that the complainant had admitted in the written statement filed before the Civil Court that he had stood guarantor of A. Surya Prakash. The OPs had, therefore, rightly proceeded against him and decided to deduct money for the default of A. Surya Prakash from his chit fund.

In reply, the learned counsel for the complainant/respondent stated that once the petitioner had filed Civil Suit against the defaulting member, they had no right to recover the money from the guarantor. Moreover, before deducting money from his chit fund, the petitioners were required to issue notice to him, but the same was not done. The orders passed by the consumer fora below were, therefore, in accordance with law.

I have examined the entire material on record and given a thoughtful consideration to the arguments advanced before me.

The main issue for consideration in the present matter is whether the action of the petitioners in deducting an amount of Rs. 55,865/- from the account of the complainant in order to satisfy the default committed by A. Surya Prakash, for which the complainant had stood guarantor was in accordance with law or not. It is established from record that the complainant had stood guarantor for the said A. Surya Prakash and he had admitted this fact in the written statement filed before the Civil Court as well. The petitioners have taken the stand that when the proceedings were pending before the Civil Court, they recovered the amount of Rs. 55,865/- from the complainant as per his own statement and accordingly, the Civil Suit was withdrawn. The State Commission in their order, have simply stated that the act of OPs in unilaterally deducting Rs. 55,865/- from the account of the complainant amounts to deficiency in service, because the defaulted amount has to be Rs. 46,308/- only. In order to arrive at a correct conclusion in the matter and for a proper settlement of the issue, it was the duty of the State Commission to have gone into the depth of the matter and determine whether and on what basis, the said amount of Rs. 55,865/- was deducted from the account of the complainant. When the complainant has stood guarantor for another person, the OPs were well within their rights to claim the defaulted amount from him, otherwise there is no purpose behind making him a guarantor for loan account of A. Surya Prakash.

In view of the discussion above, this Revision Petition is allowed and the orders, passed by the consumer fora below are set aside. The matter is remitted back to the State Commission with the direction that they should allow the parties to file evidence in support of their respective claim and then determine afresh whether the action of the OPs in deducting the amount from the account of the complainant was justified or not. The amount payable to the complainant should then be worked out and ordered to be returned to the complainant after observing due formalities. The parties have been directed to appear before the State Commission on 28.09.2016 for further proceedings.