M/S. DHARTHI CHITS PRIVATE LIMITED vs GAYATHRI N J
- Court
- Karnataka High Court
®
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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
TH
DATED THIS THE 30 DAY OF OCTOBER, 2026
BEFORE
THE HON'BLE SMT. JUSTICE LALITHA KANNEGANTI
CIVIL REVISION PETITION NO. 535 OF 2025 (IO)
BETWEEN:
1. M/S. DHARTHI CHITS PRIVATE LIMITED
NO. 121, MEZZANINE,
PRITHVI BUILDING,
TH
5 MAIN, CHAMARAJPET,
BENGALURU-560 018.
REPRESENTED BY ITS DIRECTORS,
MR. SUNKU PADMANABHA KIRAN AND
MR. SUNKU PADMANABH
2. MR. SUNKU PADMANABHA KIRAN
S/O. SUNKU PADMANABHA,
DIRECTOR,
M/S. DHARTHI CHITS PRIVATE LIMITED,
AGED ABOUT 47 YEARS,
RESIDING AT NO. B 203,
TH
17 CROSS, 2ND A MAIN ROAD,
BANASHANKARI,
BENGALURU-560 070
3. SUNKU PADMANABHA
S/O. LATE GUNADHAIAH SHETY,
AGED ABOUT 69 YEARS,
DIRECTOR,
M/S. DHARTHI CHITS PRIVATE LIMITED,
AGED ABOUT 47 YEARS,
RESIDING AT NO. B 203,
17TH CROSS, 2ND A MAIN ROAD,
BANASHANKARI,
BENGALURU-560 070
Digitally
signed by
SUVARNA T
Location:
HIGH COURT
OF
KARNATAKA
…PETITIONERS
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(BY SRI. RANGANATH REDDY R., ADVOCATE)
AND:
GAYATHRI N.J.,
D/O. N.A.JAYRAM,
AGED ABOUT 30 YEARS,
RESIDING AT NO. 50,
TH TH
6 MAIN, 7 BLOCK,
BANASHANKARI III STAGE,
BENGALURU-560 085.
…RESPONDENT
(BY SRI. CHANDRASHEKAR L., ADVOCATE)
THIS CRP FILED UNDER SEC.115 OF CPC., AGAINST THE
ORDER DATED 09.09.2024 PASSED ON IA NO.4 IN OS
NO.6884/2019 ON THE FILE OF LVI ADDITIONAL CITY CIVIL
AND SESSIONS JUDGE, BENGALURU, DISMISSING THE IA
NO.4 FILED UNDER ORDER 7 RULE 11 OF CPC., FOR
REJECTION OF PLAINT.
THIS PETITION HAVING BEEN HEARD AND RESERVED ON
08.10.2026, COMING ON FOR PRONOUNCEMENT OF ORDER
THIS DAY, THE COURT PRONOUNCED THE FOLLOWING:
CORAM: HON'BLE SMT. JUSTICE LALITHA KANNEGANTI
CAV ORDER
The present Civil Revision Petition is filed aggrieved by
the order dated 09.09.2024 passed on IA No.4 in OS
No.6884/2019 by the LVI Addl. City Civil & Sessions Judge,
Bengaluru (CCH-57).
2. The facts of the case are that the respondents
herein had filed a suit seeking recovery of sum of
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Rs.48,36,855/- from the defendants together with interest at
the rate of 18% per annum from the date of suit till the date of
realization. The specific case of the plaintiff is that, the plaintiff
and the defendants are friends and as such the defendants are
very well known to the plaintiff. In fact, the defendants are
carrying out the Agarbatti business in the name and style of
Sri. Durga Perfumery Works and also the chit fund business in
the name and style of Dharthi Chits Private Limited. The case of
the plaintiff is that the defendants approached the plaintiff and
represented that they are engaged in the business of chit funds
and requested the plaintiff to become a member of the chit
group having 25 members with a chit value of Rs.25,00,000/-.
It was further represented by the defendants to the plaintiff
that the premium of the chit is Rs.1,00,000/- per month and
the said premium amount will vary depending upon the bidding
of the chit. It was promised by the defendants that there will be
a huge profit and that they are going to get and the same will
be shared to its members. As represented by the defendants,
the plaintiff accepted and became the member of the said chit
business amounting to Rs.25,00,000/-. The plaintiff submitted
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that the said chit transaction started on 01.04.2011 and ended
on 02.07.2013. As per the chit ledger maintained by the
defendants, the plaintiff has paid the premium right from
01.04.2011 to 02.07.2013, totally amounting to Rs.22,00,000/-
Though the defendants are duty bound to clear the chit amount
in favour of the plaintiff, for one or the other reasons the
defendants started evading to pay the same. In fact, the
plaintiff started demanding the defendants to pay and to clear
the same. Finally, on 03.03.2017 a cheque was issued by the
defendants for a sum of Rs.21,91,348/-. The plaintiff presented
the same on 07.03.2017 and the same was dishonoured. It is
stated that the defendants with an intention to create wrongful
loss to the plaintiff issued the said cheque and he has initiated
the proceedings under Section 138 of the NI Act before the XII
Addl. Chief Metropolitan Magistrate, Bengaluru and that the
Magistrate passed a judgment convicting the accused for the
offence punishable under Section 138 of the NI Act and also
imposed a fine of Rs.22,92,348/- and further directed the
defendants to pay a sum of Rs.22,81,348/- as compensation to
the plaintiff.
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3. Against that, an appeal has been filed, and the
order has been stayed. It is the case of the plaintiff that certain
properties of the defendant were the subject matter of the
pending suits. Also, if the criminal prosecution is delayed, he
would not be able to recover the amount. Hence, he has come
before the court seeking recovery of Rs.48,36,855/-. It is
stated that, as per the cheque amount, it is Rs.22,92,348/-,
and interest on the chit amount from 02.07.2013 till date at the
rate of 18% comes to Rs.25,44,507/-. In the said suit, an
application was filed under Order VII Rule 11 of CPC seeking
rejection of the plaint. According to them, the suit is not
maintainable. The same would create an abuse of process of
law, as the very focal point of the suit is the cheque, which was
subjected to adjudication after the alleged dishonour by the
defendant, i.e., the defendant was prosecuted by the plaintiff
under Section 138 of N.I Act before the Court. The complaint
was allowed and the defendant preferred an appeal, and in the
appeal, the judgment and sentence dated 15.07.2019 have
been stayed and are inoperative at this juncture. It is stated
that, if they are successful, the civil suit will become
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infructuous. The plaintiff has disregarded the provisions of
Section 421 of the Code of Criminal Procedure, which is an
envisaged provision for recovery of the sentenced amount. The
plaintiff has instituted an abortive suit based on a claim that is
uncertain, and the defendant cannot be prosecuted for a suit
that is based on changeable circumstances. Hence, it is prayed
that the suit is liable to be rejected.
4. The trial Court, by order impugned, had dismissed
the application. While dismissing the application, the Court had
observed that on perusal of the records. The plaintiff has filed
the suit for recovery on the basis of the cheque. As such, the
suit is filed for recovery of the amount due under the cheque.
Section 64(3) of the Chit Funds Act,1982 states that the Civil
Court has no jurisdiction to entertain any suit or other
proceedings in respect of any dispute referred to under Section
64, and that any dispute touching the management of the chit
business shall be referred by any of the parties to the dispute,
to the Registrar for Arbitration. Explanation (I) states that a
claim by or against a foreman for any debt or demand due to
him from a subscriber, or due from him to a subscriber shall be
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a dispute touching the management of the chit business. In this
case, though the suit is filed with respect to the cheque issued
in connection with the chit amount, the suit does not fall under
Chit Funds Act as the dispute is not related to the management
of the chit business as provided in the said section. The suit is
filed on the basis of the dishonour of the cheque for recovery of
the amount due under the cheque. As such, there is no bar to
file the suit and there are no grounds to reject the plaint.
Accordingly, the court had dismissed the application.
5. The learned counsel appearing for the petitioner
submitted that the trial court failed to appreciate that the entire
suit claim is based on a cheque that has already been
adjudicated in the criminal court. No fresh cause of action
survives to file the suit. It is submitted that, in view of the bar
under the Chit Funds Act, the present suit is not maintainable.
The trial Court failed to consider all the aspects and the
reasoning by the trial Court is not valid.
6. The learned counsel appearing for the respondent
submitted that the pending criminal proceedings cannot be a
bar for the petitioner to file the suit and the court has rightly
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considered and passed an order refusing to reject the plaint
and there are no grounds to interfere. He relied on the
judgment of the Apex Court in D Purushotama Reddy & Anr Vs. K
1
Sateesh . He relied on paragraph Nos.13, 16, 17 and 18, which
read as under:
“13. Evidently, a duty has been cast upon the
civil courts to take into account the sum paid or
recovered as compensation in terms of Section
357 of the Code. It is futile to urge that on the
date on which the civil court passed the decree
the appellants were not convicted. As noticed
hereinbefore, the appeal is a continuation of the
suit and in that view of the matter as the
appellants had in total deposited a sum of Rs.
4,00,000/-, i.e., Rs. 2,10,000/- in the criminal
proceeding and Rs. 1,90,000/- in the civil
proceedings, out of which a sum of Rs.
3,09,000/- has been withdrawn by the
respondent, the High Court was obligated to
take the same into consideration. In other
words, having regard to the provisions of Sub-
section (5) of Section 357 of the Code, a duty
was cast upon the High Court to take into
account the fact that a sum of Rs. 2,00,000/-
had already been paid by the appellants to the
respondent. Concededly, both the proceedings
were maintainable. Law recognizes the same.
The Parliament must have the situation of this
nature in mind while enacting Clause (b) of Sub-
section (1) of Section 357 of the Code and Sub-
section (5) thereof.
xxx
16. Submission of the learned counsel for the
respondent that the said question was not raised
before the learned Trial Judge or before the High
Court is of no moment. Sub-section (5) of
Section 357 of the Code casts a duty upon the
1
AIR 2008 SUPREME COURT 3202
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court. It was for the Trial Court/High Court to
take the same into consideration. Such
consideration was required to be bestowed
despite the fact that the said provision was not
brought to its notice.
17. Actus curiae neminem gravabit (no person
shall be prejudiced by an act of court) is a well-
known maxim. In any event, this Court in
exercise of its jurisdiction under Article 136 as
also under Article 142 of the Constitution of
India can direct rectification of a mistake
committed by the courts below.
18. We, therefore, are of the opinion that the
impugned judgment should be modified and is
directed to be modified accordingly. The matter
is remitted to the learned Trial Judge. The
learned Trial Judge is directed to take into
consideration the amount of compensation
deposited by the appellants in the criminal case
and for the said purpose, the learned Trial Judge
should draw up a fresh decree while correcting
the decree in terms of the order of this Court.
The learned Trial Judge shall, while preparing a
fresh decree, take into consideration the various
dates on which the diverse amounts had been
deposited by the appellants and calculate the
interest payable thereupon.”
Relying on this judgment, it is submitted that the CRP has to be
dismissed.
7. Having heard the learned counsel on either side,
perused the material on record. The scope of Order VII Rule 11
of the CPC is well settled when considering an application to
reject the plaint. The Court must examine the averments in the
plaint as a whole and determine whether the suit is barred by
law. The defendant's defence is ordinarily irrelevant for this
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purpose. However, where the statutory bar is apparent from
the plaintiff's own pleading, the Court is not inclined to permit
the parties to undergo trial merely to arrive at a conclusion that
flows from the plaint itself. The plaintiff has categorically
pleaded that the defendant was carrying on chit fund business.
He became a member of the chit at the defendant's request,
and the amount sought to be recovered was pursuant to that
arrangement. The plaint does not disclose the original
transaction as an independent loan advanced by one friend to
another. Friendship is stated to be the circumstance under
which the plaintiff came to participate in the business. The
nature of the transaction assumes importance in view of
Section 64 of the Chit Funds Act, 1982. Subsection 1 provides
that disputes touching the management of the chit business
between persons falling within the specified categories,
including foreman and subscribers, shall be referred to the
Registrar for Arbitration. Explanation (I) expressly includes a
claim by a subscriber against the foreman for any debt or
demand due from the foreman, whether such liability is
admitted or disputed. Subsection 3 excludes the jurisdiction of
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the Civil Court in respect of the disputes covered by subsection
1. The provision is significant because it does not confine the
statutory remedy to disputes concerning the internal
administration of a chit. By expressly including monetary
demands between the foreman and subscriber, the legislature
has brought within the statutory mechanism claims for recovery
of money arising from chit business where the transaction is
governed by the Act. A subscriber seeking repayment cannot
avoid that mechanism merely by presenting the claim as an
ordinary money suit. In Dinesh Jaya Poojary Vs.
2
M/s.Malvika Chits India Pvt. Ltd., the Bombay High Court
considered the scope of Section 64 of the Chit Funds Act, 1982
and held that disputes falling within the provisions must be
referred to the Registrar. The Court recognised that the
statutory forum cannot be displaced merely by relying upon the
subsequent agreement concerning liability arising from the chit
transaction. The plaintiff relies upon the cheques issued in
2017. However, the issuance of a cheque does not necessarily
alter the nature of the liability for which it was issued. The
plaintiff itself connects the cheque with the money paid towards
2
AIRONLINE 2019 BOM 497
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the chit. There is no pleaded case of an independent advance
or a separate transaction giving rise to an unrelated liability.
The cheque is relied upon as an acknowledgment or means of
discharging the amount alleged to be due.
8. If the liability arises from a dispute governed by
Section 64 of the Chit Funds Act, 1982, the addition of interest
does not confer jurisdiction upon a civil court from which
jurisdiction has been excluded. The proceedings under Section
138 of the N.I Act stands on a different footing. Dishonour of a
cheque may constitute a statutory offence, and a Criminal
Court is competent to award compensation in accordance with
law. A civil remedy for recovery of an outstanding debt is not
ordinarily barred merely because criminal proceedings
concerned the dishonour of the cheques have been instituted.
Therefore, the defendant's contention that the civil suit is
barred solely because the criminal Court has already convicted
cannot be accepted. The conviction is under challenge in
appeal, and an order directing compensation does not
necessarily establish that the monetary liability has been
satisfied. The plaintiff cannot obtain double recovery. However,
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the pursuit of a criminal proceeding does not by itself
extinguish an otherwise available civil remedy.
9. The real impediment to the plaintiff in this case is
the statutory exclusion of civil jurisdiction under the Chit Funds
Act. Insofar as the transaction falls within that enactment, the
subsequent cheque and the prosecution arising from its
dishonour do not change the forum prescribed for determining
the underlying chit liability. The distinction between a suit
barred by a special statute and a suit in which the defendant
merely disputes liability must be maintained. The former
concerns the competence of the court to entertain the
proceedings. The latter concerns the merits of the claim. Where
the plaint itself establishes the relationship of foreman as
subscribers and a monetary demand arising from a chit
governed by the Act, the bar contained in Section 64(3) of the
Chit Funds Act, 1982 operates independently of the correctness
of the amount claimed. The trial court ought to have examined
the effect of Section 64(3) of the Chit Funds Act, 1982 upon the
transaction disclosed in the plaint. Rather than treating the
claim as an ordinary suit for recovery founded upon a
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dishonoured cheque, the statutory bar cannot be avoided by
changing the forum of the proceeding.
10. The learned judge failed to understand the scope of
Section 64(3) and 64(1) of the Chit Funds Act, 1982. In the
considered opinion of this Court, as it is a chit transaction,
Section 64(3) of the Chit Funds Act, 1982 applies to the
present case. In light of the same, the suit before the Civil
Court is not maintainable and must be rejected. The rejection
of the plaint shall not amount to an adjudication of the plaint's
entitlement to recover the amount claimed. The plaintiff is at
liberty to pursue such remedies as may be available through
the competent statutory authority, subject to limitations and
other requirements of law. Accordingly, this Court is passing
the following:
ORDER
i. The order dated 09.09.2024 passed on
IA No.4 in OS No.6884/2019 by the LVI
Addl. City Civil & Sessions Judge,
Bengaluru (CCH-57) is set aside .
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ii. The Civil Revision Petition is allowed
and consequently the plaint is
rejected .
iii. All I.As. in this petition shall stand
closed.
SD/-
(LALITHA KANNEGANTI)
JUDGE
PKN
List No.: 1 Sl No.: 2
MR