024-NLR-NLR-V-22-ELANGAMANIPILLAI-et-al.-v.-KANDASAMY.pdf
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Present: De Sampayo J.
ELANGAMANIPILLAI et al. v. K AND AS AMY.
298—0. R: Colombo 63.923.
Auction “ che.etu ” club—Lotteries Ordinance, No. 8 of 1844—Is itillegal ?
The plaintiffs, who were managers of an ‘-auction • cheotu 'club,” sued to recover from the defendant (amember) the amountof the subscription due from him.
Held, that the action was maintainable, as the contract was not■ repugnant to the Lotteries Ordinance (No. 8 of 1844).
n^HE plaint in this case was as follows :—
In, the month of November, 1916, the plaintiffs, the defendant,and various others entered into an agreement to collect a sum of Rs. 700among them each month for a period of twenty-eight months, com-mencing from the said month of November, 1916, and also to pay theamount monthly to each individual in rotation, and the order inwhich they were' to receive the said sum of Rs. 700 was to be decidedpublicly by a competitive auction sale of the right of each individualfor the said sum of Rs. 700.
In the month of November. 1916, it was further arranged andagreed upon- among the plaintiffs, the defendant, and the others whojoined them in the aforesaid arrangement that the plaintiffs should bet heir agents for collecting the money from the various persons who hadentered into the aforesaid agreement for making payments, and for
1 (1905) 8 N. L. R 372.
1919.
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1919. recovering by action, if ascenery, the amounts due from those who had entered into the aforesaid agreement.
4 The defendant paid his monthly contribution of Rs. 25 up to theKa^mtt'rny of December, 1917, but he has failed and neglected to pay the con-tribution due for the months of January, February, March, April, May,and June, 1918, amounting to Rs. 150, although requested thereto.
The defendant was paid a sum of Rs. 700 by the plaintiffs onApril 10, 1917, in terms of the aforesaid agreement.
A cause of action has now accrued to the plaintiffs to sue for andrecover from the defendant the aforesaid sum of Rs. 150.
Wherefore the plaintiffs pray for judgment for the said sum of Rs. ] 50,together with a sum of Rs. 25 per month from the 10th day of eachmonth, beginning from July 10, 1918, up to date of decree, legal interestfrom date hereof up to date of payment in full, for casts against, arid forsuch other and further relief as to this Court shall seem meet andproper.
The defendant took the preliminary objection that the actionwas not maintainable, as the contract was repugnant to theprovisions of the Lotteries Ordinance.i
For the purposes of the argument of the point of law the partiesfiled statement showing how the club was worked :—
Statement.
The plaintiffs, the defendant, and several others formed themselves
to what is commonly known as an Ela “ Cheetu ’* Club. The club wasiovmed on November 10, 1916, and had twenty members. It wasagreed that the club should continue till February 10, 1919.
Each member has to contribute Rs. 25 a month. The total amountpaid by the contributors once a month is Rs. 700. and the auction salesare held monthly.
The first auction sale was held on November 10, 1916. At this saletho total amount collected (Rs. 700) was put up for sale by auctionamong the members. Various bids were offered, the highest bid beingRs. 693 offered by Elang&m^ipillai. Elangamanipillai was thengiven Rs. 700, and he refunded Rs. 7, the difference between his bid' and the total amount collected, to be divided equally am ong the remain-ing twenty-seven members. Similarly, at the second auction saleheld on December 10, 1916, S. Mahadeva, another member, became thehighest bidder with an offer of Rs. 615. Mahadeva was then givenRs, 700, and refunded Rs, 85, the difference between his bid and thetotal amount contributed, to be divided equally among the remainingtwenty-soven contributors. At each auction sale tho same procedureis gone through. A member who has been declared the highest bidderat any particular auction sale, and has been given tho total contribution. made for the month as the result of such auction sale, cannot bid at asubsequent sale. Thus, each member becomes the highest bidder, andis entitled to draw the total monthly contribution at one, and only one.auction sale held during the existence of tho club.
Each member has to contribute Rs. 25 a month during the existenceof the club.
The bids are made and accepted at an auction sale held among themembers as given in detail above. No lots whatever are used in deter-mining who should be declared the highest bidder for any particularmonth. The highest bid offered by any member at an auction sale is
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determined by what that member tiL&dafiir the present value to him of1919.
the Bs. 700, which he has to contribute meatkafter month at Ro. iS !
a month for twenty-eight months. Thus, USangamanipilfaife bM Elangamani.of Rs. 693 means that he thinks that Rs. 69.3 is the present value toidSai *’•
him on November 10, 1916, of his contributions of Rs. 25 a month fromandaaamy
November 10, 1916, to February 10, 1919. S. Mahadeva offeredRs, 615, as he thought that Rs. 615 was the present value to him onDecember 10, 1916, of his various monthly contributions of Rs. 25from November 10, 1916, to February 10, 1919.
If Elangamani or S. Mahadeva was pressed for money at the time ofsuch auction, he would have bought the monthly contributions of Rs. 700for Rs. 100, or even less.
[In this statement the term “ lowest ” would more correctly, describethe working of the club.]
Arulanandan, for tlie appellant.—There is no element of chancein this “auction olub.” Every month the members bid against eachother for the collections. The decision in 4 Leader Law Reports 69,which the Commissioner has followed, gives no reason for holdingthat an auction club is illegal besides the fact that it is a “ cheetu ”club.
Balasingham, for the respondent, referred to Stroud,, vol. II.,
2>. 1128 ; C. R. Colombo, 38,519. In England missing word com-petition was held to be a lottery. There is an element of chance,inasmuch as there is no certainty that any member will get thecollections for any specified month.
Our. adv. wit.
MarchG, 1919. De Sampayo J.—
The question of the legality of what is called a “cheetu” club hasonce morearisen for consideration. A “ cheetu ” club usually under-stood is an arrangement by which a number of persons'join togetherand contribute money weekly or monthly to a fund, which is distributedamong the members in a certain manner. At the end of the weekor month, when all the subscriptions for that period have been paidin, there is a drawing among the members by lot, and the whole sumis paid to the member who has drawn the winning ticket. Thisgoes on until each of the members has in his turn got the amount ofthe weekly or monthly subscriptions, those who have already drawnthe money being obliged to continue to pay the agreed subscriptionuntil the list of members is exhausted. A “ cheetu ” club of the abovedescription is illegal, as it contravenes the provisions of OrdinanceNo. 8 of 1844 for the suppression of lotteries, and a member, cannoteither sue for the prize he may have won or be sued for the amount,of the contribution. See Vanderstraaten's Reports 180 and 181, andfSinnaturai o. Chinniah.1 The principle is that, although eachmember gets back what he has contributed, the time of his so gettingback is determined by the drawing of lots, and the whole arrange-ment, therefore, constitutes a lottery. The present case, however,
1 (1006) 10 N. L. B. 5.
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1919.
De Sahpayo
J.
Bfangamani-
piUa{v.
Kandmamy
has a special feature, which requires consideration. In the “ oheetu * ’club to which the parties belonged there is no drawing of lots, or anyother method of ohance by which a member becomes entitled toreceive the money, but an auction is held at the end of the period ofdistribution, which in this case is a month, and the money is paidover to the member who makes the highest bid above the amountof the fund. The highest bidder no doubt has the benefit of themoney before the others, but- he obtains that advantage, not bychance, but by open competition, and the premium he pays for it isdetermined at his own free will. Mr. Balasingham, however, arguesthat there is still an element of chance, because the highest bidder’sV^ill may be influenced by the impecunious condition in which hemay happen to be at the time. But the chance must be involved in-the nature of the transaction itself, and has no reference to themotive which actuates the bidder. The Commissioner of Bequestswas himself inclined to the view that the “cheetu” club in questionwas, for the reason I have indicated, distinguishable from those whichhave been previously condemned, but he felt himself bound tofollow the decision reported in 4 Leader Law Reports 69, whichalso was a case of auction c‘ cheetu.” But itappears to me that in thatcase the judgment of Grenier J. proceeded upon the mere fact thatit was a “cheetu” club, and without any special reference to tin-particular method of distributing the fund, and I think I am free t< *considerthe point myself. To call an association of menu “cheev. ‘club does not help to elucidate its legal character. Each ur edepends on its own circumstances. In my opinion an arrange mentsuch as the one adopted by the “ cheetu ” club in this case does notconstitute a lottery. Nor is it a wagering contract. The essenceof a wager is the uncertainty of the event, but there is no suchuncertainty here. No wager is involved in the competition amongthe contributors any more than in the ca&e, for instance, of a sale byauction of shares in a company. In both cases there is a certaindegree of speculation, but that does make them unlawful. I thinkthat this is not an illegal association, nor the transaction oneincapable of being enforced by action.
• The case has been decided by the Commissioner on the pure ques-tion of law, and no evidence has been heard. The plaintiffs allegethat by common consent they were appointed managers or trusteesto collect the contributions, and they sue to recover from the defend-ant, who has already drawn some money as the highest bidder atan auction, the amount of subscription alleged to have since becomedue from him. The defendant has raised certain questions of fact,which haverktill to be determined. The decree of dispiissal is setaside, and the case sent back ioi further proceedings. The plaintiffsare entitled to the costs of the day in the Court below and of thisappeal.
Sent back.