C. Varamani David vs The Bank of Madurai Limited and Another

V. Balasubrahmanyan, J.—This revision petition arises out of an application filed by a defendant in a suit before the trial Court to try a

particular issue as a preliminary issue. The application was filed in the following circumstances. The petitioner was sued on a liability which he had

incurred in a chit transaction conducted by the plaintiff which is a banking company. The petitioner resisted the suit on various grounds, chief

amongst which was that he was a debtor entitled to the benefits of Act XVI of 1976. The trial Court, however, rejected that claim. In the course of

its order, the Court made an observation that since the debt in question was due to a banking company such as the plain tiff Bank, here, the

petitioner was not entitled to a decision in his favour even if the issue were tried.

Inevitably, the learned Counsel for the petitioner in this revision has had to canvass before me the merits of the contention that the debt which

was sought to be enforced by the plaintiff Bank in this suit was of a kind which would not be enforced in a Court of law having regard to the

provisions of Act XVI of 1976. Learned Counsel for the Bank, however, referred to the saving provision contained in Section 3(h)(B) of the Act.

Under this provision, ''nothing in the Act would affect a debt or liability of an indebted person in respect of any sum due to any banking company

to which the Banking Regulations Act, 1949 applies.'' Learned Counsel for the plaintiff bank urged that this provision saved the present suit from

Act XVI of 1976.

I think the reliance placed by the learned Counsel for the plaintiff Bank on Section 3(h)(B) of the Act is a complete answer to the contention put

forward by the petitioner''s learned Counsel in this revision. There is no dispute that the plaintiff is a banking company to which the provisions of

the (sic) Banking Regulations Act, 1949, applies. What the petitioner''s learned Counsel urges is, that this chit fund transaction was undertaken by

this banking company through a separate department annexed to its main office, called Chit Fund department, and that department was governed

in particular by the provisions of the Tamil Nadu Chit Funds Act, 1961 and hence the liability sought to be enforced against the petitioner in this

suit cannot strictly fall within the ambit of the saving clause in Section 3 of the Act. This argument cannot be accepted, because, in the first place,

the provisions of Section 3(h)(B) of the Act XVI of 1976, do not require that the liability should have arisen in a banking transaction properly so

called. ''All that it says is, that the debt sued on should be a liability in respect of any sum due to a banking company and that banking company

must be a company to which the Banking Regulations Act, 1949 must apply. It may be that this banking company has a separate department and

that department is, in addition to being governed by the'' Banking Regulations Act, 1949, also subjected to the Chit Funds Act. But the bank''s;

chit fund transaction, being subjected to the Chit Funds Act, does not derogate from the bank being a banking company to which the Banking

Regulations Act, 1949 applies. Furthermore, it is difficult for me to accept the position, that a liability in a chit fund transaction cannot be a banking

transaction. While the Banking Regulations Act, 1949 defines banking to consist of accepting the deposit of moneys from the public for the

purpose of lending or investing, which are repayable on demand or otherwise and withdrawals by cheque, draft or otherwise, section 6 of that Act

provides elaborately for a wide variety of business which a banking company may engage itself in. A fair consideration of this section as well as the

definition of ''banking'' in the Banking Regulations Act, 1949, would leave no doubt in any one''s mind that chit fund transactions indulged in by a

banking company at any rate partakes the character of a banking activity. Indeed, a chit or kuri reflects the genius of the southern peoples of this

country. A chit combines in itself two economic urges commonly appearing in people, namely, the urge to save and the urge to borrow. The

mechanism of chit funds combines and taps both the urges in an individual with a commendable economy of costs in the process. I am satisfied that

the chit fund transaction is, in its essence a transaction of a kind which a banking company can legitimately undertake within the governing

provisions of the Banking Regulations Act, 1949. The petitioner, cannot, therefore, seek to take his liability in the chit fund transaction out of the

saving provisions of Section 3(h)(B) of Act XVI of 1976. For the reasons stated above the order of the Court below is confirmed and this civil

revision petition is dismissed.

In a way the dismissal of this revision in this manner really forecloses the determination of the issues which have been raised by the petitioner in

his, written statement in the suit, to such an extent that the trial of the suit is going to be a very tame affair. But, this kind of disposal of this

application has been fairly invited by the petitioner himself. He alone is to be blamed for it. With this observation, the civil revision petition is

dismissed. There will be no order as to costs.