Chit fund act
Jitesh Mehta
(Querist) 20 September 2014
This query is : Resolved
One of the chapters in the Chit Fund Act Says that if there is a dispute between A foreman and a Subscriber, the dispute has to be settled by the Nominee of the Assistant Registrar of the Chits.It further says that no civil court has any right to settle any dispute between the foreman and the subscriber. I had a dispute with a chit fund company. I had given a security cheque to the company for future instalments.The amount due to the company was Rs. 90000/= but the cheque amount was Rs. 1,20,000/=. The company presented the cheque which was returned and later filed a complaint under sec 138 for recovery of Rs. 1,20,000/=.Now my query is is the company right. The act says that NO CIVIL COURT HAS ANY RIGHT TO SETTLE ANY DISPUTE BETWEEN THE FOREMAN AND THE SUBSCRIBER.
P. Venu
(Expert) 21 September 2014
Action under Section 138 NI Act is a criminal remedy and tried in a criminal court.
Anirudh
(Expert) 21 September 2014
When the Company gave you legal notice u/s. 138, what did you reply?
Rajendra K Goyal
(Expert) 21 September 2014
The cheque was returned and the co. has moved with a criminal case u/s 138 NI Act and not civil case.
Advocate. Arunagiri
(Expert) 21 September 2014
Civil dispute and Registrar.
It is true that no civil court is having jurisdiction to deal with the chitfund recovery cases. The registrar of Chits will hear the case and will pass orders. Based on this order (like arbitration order) chit fund company will apply for EP in Civil court.
Cheque bounce and Chit fund case
If any dishonour of cheque issued to the chit fund company, will attract S.138 NI Act.
Legaly enforceable liability
In your case, you say that the liability is Rs.90,000/- but the cheque is for Rs.120,000/-. As the cheque is exceeding the liability, the company cannot succeed in the case. You can approach the high court for quashing it or you can file a discharge petition in the same magistrate court.
ajay sethi
(Expert) 21 September 2014
criminal complaint is maintainable on dishonour of cheque .fight case on merits
ABDUL RAZIQUE
(Expert) 21 September 2014
WELL Explain by Ld.Anuragi Ji.
Anand Bali Adv.
(Expert) 22 September 2014
Dear Client,
I disagree with the my Ld Adv. Arunagiri.
The Sec 138 NIA are case specific with a criminal intent in that for only liability cheques.
Any cheque which is given as a Security/ Surety Cheque do not come under it's ambit whether it is given to a Chitfund Co.or to any other legal entity.
The amount difference is a secondary issue here, as primary issue is whether this case is a fit case to be submitted and accepted under Sec 138 provisions or not?
NO it is not being a security cheque it do not attract any criminal intent which is mans ria.
Advocate. Arunagiri
(Expert) 22 September 2014
Whether the cheque issued is a security cheque or issued for a liability
In every chit, one of the member will bid the chit and will get the amount. For example for a Rs.5000 x 20 months = Rs.100,000/- group, there will be 20 members. Assuming one member bids the chit in the 5th month itself, he may get Rs.70,000/- as prize money (it is actually a loan). He has to repay his prize money in the remaining 15 installments. For this the company will demand 15 cheques. This cheque is issued for the future installments, but for the amount already received. The amount already received is a legally enforceable debt.
So, in this case, the cheque bounce, will attract S.138 NI Act.
Jitesh Mehta
(Querist) 22 September 2014
Thanks for all the advices from learned experts. But my point is that when the amount due was Rs.90,000/= and cheque value was 1,20,000/=. I had issued a stop payment order. The chit fund company never wrote to me to give another cheque for Rs. 90,000/= does not amount to cheating ?. supossing I had passed the cheque, it would have been impossible for me, to recover my amount of Rs. 30,000/= from him. That was the reason for stop Payment.
Advocate. Arunagiri
(Expert) 22 September 2014
Chit fund companies will ask for PDCs for the future installments only, not for the whole amount.
You have to give more details of your chit fund group installments and months, in which month you took it in auction, what is that amount, how many cheques you have issued etc any other relevant information.
Jitesh Mehta
(Querist) 22 September 2014
The value of the chit was Rs.3,00,000/= with monthly subscription of Rs.15,000/= I bid for the chit in the 12th month and gave only one cheuqe for Rs.1,20,000/= being the balance value of eight instalments @ Rs.15,000 X 8 After that I paid two more instalments and the balance due war only Rs.90,000/=. I had one more chit in the same group which i had not withdrawn. I learnt from some group members that the operator is having financial problems and therefore I stopped my instalments in both the chits. However, since the company was due to me on account of the other chit, I asked him to deduct the amount due from the first chit and give back the balance to me.
Advocate. Arunagiri
(Expert) 23 September 2014
As per the Chit fund Act, if you withdraw from any chit group, the company has every rights to retain your paid up money, till another member replaces you.
You will understand the scheme of the Chit fund. If there are 20 members in Rs.3 lakh group, if all the members pay the installment, one among them will bid the chit and the installment paid all the 20 members go to that successful bidder. By this system, the company will not have any surplus money except that of his 5% foreman commission.
On the other hand, your future installments may be Rs.120,000/- but, the actual amount payable will be Rs.100,000 or so after deducting the dividend. Being so, I do not understand how you have paid or how that chit fund company had accepted a cheque for Rs.120,000/-.
Even in your case you say that you have paid 15,000/- x 14 months = Rs.210,000/- x two chits = Rs.420,000/-.
Even if assuming that you have stopped paying the future installments in the 14th month. Your paid amount in another chit is Rs.210,000. By that time your liability to the company is only Rs.90,000/- as per your own words.
Even if you bid in the another chit in the 14th month you will get Rs.210,000 atleast, as prize money. With this you can very will clear the future installments of two chits. Rs.90k x 2 = Rs. 180k. You will have surplus money.
I smell this query is a imaginary query.
What so ever it may be the case, the cheque is issued for a legally enforceable liability, the question raised by you is only the quantum of liability? You have to face the trial and disprove their claim, or you can opt for quashing it in the High Court.
Anand Bali Adv.
(Expert) 23 September 2014
Thanks Adv Arunagiri for the healthy discussions.
Jitesh Mehta
(Querist) 26 September 2014
Thanks Mr. Arunagiri. As my internet was not working for the past two days, I could not read your reply. In my case, since the foreman had filed a case u/s 138 for recovery of Rs. 1,20,000/= and I am contesting the same. Regarding my amount due from the company, after one year and after several attempts to settle the issue, I had no other option and had to file case with the registrar of chits, bangalore. The cunning foreman now says that he will pay only the amount paid after deducting the dividends earned for the 14 months. As per my account I have paid Rs. 2,10,000/= but he says that the amount payable is only Rs. 1,69,000/= saying that I am not eligible for the dividend. Please suggest who is right.
T. Kalaiselvan, Advocate
(Expert) 29 September 2014
The cheque dishonor case is different from the recovery proceedings initiated through Assistant Registrar of Chits. The disputes about the liability and other issues to be sorted out during trial of the case u/s 138NI Act.
Jitesh Mehta
(Querist) 29 September 2014
I have paid all my instalments by way of account payee cheques only. The amount paid was after deducting the dividend receivable in respect of the previous month chit. Therefore, the total amount paid by cheque is only Rs. 1,69.000/- whereas the the total amount to the credit of my account is Rs.2,10,000/=. The receipts issued by the company clearly gives the details that the amount of the chit is Rs.15,000=. the next line shows the dividend of the previous months chit and the net amount payable is the balance after deducting the dividend. I had to issue a cheque for the net amount payable. Therefore, the net paid comes to Rs. 1,69,000/=
