No Charity in Lok Ayukta

(By  S.A. Karim, Advocate, Vanchiyoor, Thiruvananthapuram)

A society registered under the Travancore Cochin Literary, Scientific and Charitable Societies Registration Act, 1955 is a legal person. Such a person represents before any authority on the basis of it’s bye-law. Most of the public interest litigants are the office bearers of the societies registered under the Registration Act. S. 5 of the Registration Act requires registration of charitable societies. Once a society is registered under the Registration Act, it is hundred percent a legal person. A good number of public interest matters are brought by these legal persons. It is going on.

Under S. 2(D) of the Kerala Lok Ayukta Act, 1999, a society registered under the Registration Act can petition and be petitioned. The section reads:-

(D) a society registered or deemed to have been registered under the Travancore Cochin Literary, Scientific and Charitable Societies Registration Act, 1955 (XII of 1955) or the Societies Registration Act, 1860 (Central Act 21 of 1860), which is subject to the control of the Government of Kerala and which is notified, in this behalf, in the gazette.

The Registration Act does not require gazette notification for the validity of it’s certificate. The Ayukta Act requires gazette notification on the certificate issued under the Registration Act. If gazette notification survives in the Ayukta Act, a society registered under the Registration Act can’t present it’s grievance before the Lok Ayukta. In effect such societies are eliminated from appearing before Lok Ayukta. If so, it is a severe blow to the public interest matters.

2005 (3) KLT 568 -- A verdict with wilder impacts 

(By  Ajith N., Advocate, Irinjalakuda)

The accused, happy with the dictum in Raj v. Rajan (1997 (1) KLT 302) from N.I. Act for “cheque amount, notice amount issue” were not a few, till Division Bench (Justice B.M.Thulasidas and Justice D.Sreedevi) clarified it in 1997 (2) KLT 59. Krishnankutty v. State of Kerala (2005 (3) KLT 568) is worthy for a debate on social issues rather its impacts. Sociological theory says, “law is for maximum benefit for the maximum number of people”. Very much true that theories and definitions are good to have them in print alone. 

Representative sample was the villain who made the accused to win over the “always miserably failing prosecution” in Krishnankutty’s case. Para 8 and 9 of the reported judgment says, “ the question is of daily importance having wide implications on investigation, and warrants an elaborate hearing”. So heard in detail and two like minded judgments were also referred, but one from NDPS Act. Folly from the prosecution side was absence of proof of individual sampling. The verdict was concluded with an observation, “ ...... it is necessary for the prosecution to establish as per law that the accused was in possession of IMFL in excess of the permissible limit, by subjecting the contraband seized from the accused or samples taken therefrom to chemical analysis and obtaining a report from an expert”.

Abkari Act is emphatically silent for sampling. Hon. Supreme Court in Chand Batra’s case gave an answer for the question, “who is an expert in abkari offences and whether chemical analysis and its report is unerringly indispensable in abkari cases? “An officer who has put in long years of service, tasted lakhs of samples, engaged in searches, seizures and the like, is capable of identifying the liquid as contraband liquor or otherwise”. Chemical analysis report assumes weightage when the strength of any particular ingredient turns the story, like in the case of Toddy, or in the case of defilement with noxious substances etc.

Krishnankutty’s case, if taken in toto, both the prosecution and to a certain extent, defence admits possession of 8 bottles of IMFL. His grievance is taking of “representative sample” alone. Being “representative” ie., one among the same kind representing the remaining others, insisting for an ‘individual sample’ is only to negative a positive fact. State deputes excise officials to key posts in each and every distillery, who are supposed to be vigilant from the stage of blending till dispatching to KSBC outlets. Again a cross check is visualized by the State through Excise Officers like those in Ss.32, 34 etc. of the Act. Usually labels will be affixed showing the contents in it, KSBC safety wrapper, State’s sticker, hologram, serial number, batch number and so on. Here in this case, bottles had the KSBC stickers etc. If the IMFL bottles are sealed and having caps in tact, the amber, brownish, or colorless liquid will be liquor as so blended and supplied by the State for its thirsty subjects. If the State is doubtless with the contents, is it necessary for the Court to doubt its own mechanism, in the absence of a specific contention to that effect. Official acts enjoy the same footage in criminal cases, as to its regularity. KSBC will never take the risk of selling colored drinking water in bottles styled as “brandy” or the like. Think that the patrol party seizes a truck full of 375ml bottles containing IMFL illegally transporting or possessing for the purpose of sale. Will they be dare enough to try for a second patrol during their remaining service period?

The Hon. Supreme Court in Vijendrajit Ayodhya Prasad Goel v. State of Bombay (AIR 1953 SC 247) (3 Bench), considered the impact of non-sending of all the bottles seized, for chemical analysis. Para 5 of the judgment reads thus:

“Mr. Umrigar next contended that only one bottle out of the articles recovered at the raid was sent for analysis and that it was not proved that all the bottles and the drums that were recovered from the godown contained rectified spirit. He said these might well have contained “phenyle” the manufacture of which the company admittedly was carrying on in that godown. This argument cannot be seriously considered. It was wholly unnecessary to send all the bottles recovered by the police in the presence of “panchas” and which contained the same stuff for the purpose of analysis. This argument is therefore rejected.”

AIR 1953 SC 247 though, still holds good, what has become the plight of “always miserable prosecutions” in like situations after 2005 (3) KLT 568?. Honored acquittals alarms louder since this one. Accused are more loyal and thankful to Krishnankutty. Definitely the backlogs of our trial courts will come down for lesser chances of State appeals. What is the result? Ultimately State is the sufferer but who cares?

Let the helpless prosecutors wait for a verdict from a superior bench, which will please to consider (Goel’s case. Long live Krishnankutty, but not Krishnankutty v. State of Kerala. 

Right of a chitty foreman to realize future chitty instalments from a prized

subscriber who is a  defaulter -- An attempt in clearing the haze

(By Boby George Kurian, Advocate, Kottayam)

The decision of Madras High Court in C.Dhanam v. A.M. Sreenivasan (AIR 2006 Mad .210 = 2006 (3) KLT SN 30) brought into perspective the continuing haze over the legal position regarding the right of a chitty foreman to realize future instalments from the defaulter who has executed an agreement agreeing the recall of the entire future instalments on default of any one instalment. In the above case the actual issue in dispute was as to the starting point of limitation for recovery of dues under a chitty transaction. But in finding that the limitation starts from the date of termination of the chit period the court observed in paragraph 28 of the judgment that on entering a chit agreement, no debt is incurred by the subscriber for the amount of all future instalments and in respect of such amount there is no debtor creditor relationship. The above observation was based on the decision of Supreme Court in M/s. Sriram Chits and Investments (P) Ltd. v. Union of India (AIR 1993 SC  2063). In M/s. Sriram Chits the Supreme Court was trying to find out whether a chitty transaction is money lending or a special contract. This was to enable the court to find out whether the Parliament was competent to enact Chit Funds Act 1982. The Supreme Court after referring to various decisions of the High Courts and the Supreme Court came to the conclusion that chits are forms of contract and are not money lending business and would fall in Entry 17 of List III of 3rd Schedule and is within the legislative competence of the Parliament. In the M/s. Sriram Chits case there is a clear finding by the 3 member Bench of Supreme Court to the effect that the chit agreement is not a money lending transaction and that there is no relationship of debtor and creditor for the purpose of it being treated as a money lending transaction.

One of the earlier important decisions of our High Court relating to the question in hand was in P.K.Achuthan v. State Bank of Travancore (1974 KLT 806) wherein it was held that a subscriber truly and really becomes a debtor for the prize amount paid by him, and the facility of the repayment in instalment is only a concessional facility and the stipulation enabling the foreman to withdraw the concessional facility in default of punctual payment of instalments will not be penal or unconscionable. But the above Full Bench decision in P.K. Achuthan’s case was over-ruled by a Full Bench of five Judges of our High Court in Janardhana Mallan v. Gangadharan (1983 KLT 197). The Full Bench in Janardhana Mallan after considering a catena of decisions, starting from 1937 came to a conclusion that a chit fund transaction was not a case of borrowing at all and it was entirely different from a loan transaction. But the Supreme Court in a subsequent decision in K.P.Subbaramma Sastri v. K.S.Raghavan (1987 (1) KLT 753) approved the earlier decision of our High Court in P.K.Achuthan and came to a conclusion that the subscriber truly and really becomes a debtor for the prized amount paid to him. But interestingly the subsequent Full Bench decision in Janardhana Mallan’s case was not brought to the notice of the Supreme Court while hearing Subbarama Sastri. But the Supreme Court in M/s. Sriram’s Chits case referred to all the above decisions and observed that except in the over ruled decision in P.K.Achuthan’s case all High Courts have taken the consistent view that chitty transaction is not a money lending transaction. The Supreme Court also approved the said view in para.18 of the said judgment. By doing so the three Judge Bench of the Supreme Court has over ruled by implication, its earlier decision of the two judge bench in Subbarama Sastri’s case which was based on an over ruled decision in P.K.Achuthan’s case.

Our High Court in Mar Apparem Co. Ltd. v. Narendranath (1990 (1) KLT 866) after going through the decisions in Achuthan’s, Janardhana Mallan’s and Subbarama Sastri’s cases correctly came to a conclusion that, since Supreme Court in Subbarama Sastri has approved of the decision in P.K.Achuthan, it is the correct law inspite of it being overruled in Janardhana Mallan and that the foreman can realize entire future instalments on default.

The decision of Supreme Court in M/s.Sriram Chits which approved Janardhana Mallan’s came subsequent to Mar Apparem. From 1993, the year in which M/s. Sriram Chit’s decision was delivered, it can be assumed that the settled law regarding a chitty transaction is that it is a special contract and is not money lending and any condition enabling the realisation of the entire future instalments on default of a single instalment is penal in nature and cannot be enforced. That means the foreman cannot realize entire future instalments on default. But in the decision in John v. Oriental Kuries Ltd. (1994 (2) KLT 353) our High Court relying on the decision in Mar Apparem found that foreman can realize entire future instalments on default. Unfortunately the binding decision of the Supreme Court in Sriram Chits was not brought to the notice of the court. Hence the decision rendered in Oriental Kuries can only be said to have been delivered per incuriam of the binding precedent in Sriram Chits. Nevertheless in lots of cases the proposition of law laid down in Oriental Kuries is still sought to be canvassed by the plaintiffs counsels and in few cases is still being accepted by the courts in Kerala.

What emerges from the haze after the above discussion can be summarized as follows:-

No debt is incurred by a prized subscriber when he prizes the chit and receives the prized amount. This is because the chitty agreement only embodies a promise to pay on future dates, which is not a promise to pay existing debt, but to pay in discharge of a contractual obligation. The prize amount is not received as loan but as of right by virtue of the terms of the contract between the parties. Therefore the stipulation that on default being made in the payment of any instalment the whole of the balance should become due and payable would be in the nature of penalty and cannot be enforced. That means no suit can be filed by the foreman to realise the entire future instalments on default of instalments by the prized subscriber.

Another offshoot of the above discussion is that if the decision in C.Dhanam v. A.M.Sreenivasan (AIR 2006 Mad. 210 - 2006 (3) KLT SN 30) is followed the foreman will be disentitled even from recovering the defaulted instalments before the termination of the chit period because as per the said decision the cause of action will start only from the date of termination of the chit period. That is an issue, which will need further discussion.