JUDGMENT Doddakale Gowda, J.—Divergent view expressed in Navjeevan Enterprises (Mysore) P. Ltd. (In Liquidation) Vs. T.N. Ramalingaiah and Another, (1985) 58 CompCas 217 (Kar) and Economic Chit Funds Pvt. Ltd. V. P. S. Krishnoji Rao (C. R. P. 3750 of 1981 and other connected cases, disposed of on February 16, 1984 58 Comp Cas 838 (Kar) regarding the scope and ambit of the definition of "debt" as defined in the Karnataka Debt Relief Act and their applicability to chit transactions, has led to this reference. 2. Both the Karnataka Debt Relief Act,1976 (Act No. 25 of 1976) ("the 1976 Act "for short) and the Karnataka Debt Relief Act, 1980 (Act No. 29 of 1980) ("the 1980 Act" for short), are in operation in the State of Karnataka. 3. "Debt", "debtor" and "exemption" clause in the said two Acts read thus; K.D.R. Act,1976 K.D.R. Act, 1980 3(b) 'Debt' means any liability in cash or in kind, whether decreed or not, and includes any amount which is in substance a debt; but does not include arrears of taxes due to the  Central or the State Government or a local authority. 2.(b) 'Debt' means any liability in cash or in kind whether secured or unsecured and whether decreed or not and includes any interest due on such debt; 3© 'Debtor' means,- (i) a small farmer; or (ii) a landless agricultural  labourer ; or (iii) a person belonging to 2 (6) 'Debtor' means a person who is, (i) a landless agricultural labourer ; (ii) a person belonging to the weaker sections of the weaker sections of the people; (iii) a small farmer, and from whom a debt is due; 4. Relief from indebtedness;- Notwithstanding anything in any law for the time being in force or in any contract or instrument having force by virtue of any such law and save as otherwise expressly provided in this Act, with effect from the date of commencement of this section,- effect on and from the date of commencement of this Act, 3. Relief from indebtedness;- Notwithstanding anything in any law for the time being in force or in any contract or instrument having force by virtue of any such law and save as otherwise expressly provided in this Act, with effect from the date of commencement of this section,- effect on and from the date of commencement of this Act, 3. Relief from indebtedness;- Notwithstanding anything contained in any law for the time being in force or in any contract or instrument having force by virtue of any law or otherwise and save as otherwise expressly provided in this Act, with a) every debt advance before the commencement of this section including the amount of interest, if any, payable by the debtor to the creditor shall be deemed to be wholly discharged; B) Certain debts and liabilities not to be affected. be affected,- ...... (1) Any liability incurred or arising under any chit the bye-laws of which have been registered; (a) every debt incurred by a debtor before the date of commencement of this Act and   payable by him to his creditor on such date shall be deemed to be wholly discharged; 10. Certain debts and liabilities not to 4. The question for consideration is; Whether the amount paid to a successful bidder (in the chit transaction) would amount to a "debt" within the definition is exempted from the provision? 5. In order to answer this issue, it is relevant to note the origin of chit fund business and the mechanism of the chit transactions. 6. There is no necessity to write a treatise on chit funds as it has been elucidated fairly in a good number of cases and, in addition, Parliament has enacted a law regarding the conduct of chits, chit funds and persons involved, except to recapitulate its origin for branding it as "chit" and the incidents there of relevant for deciding the issue. 7. As per the Raj Committee Report, it is the oldest indigenous financial institution in India more predominant in the rural parts of Southern India. At the inception, it started with periodical deposit (contribution) of foodgrains in fixed measures with a trustee and received back when a sufficiently large quantity was collected. Amongst subscribers, the need was determined by casting lots; names drawn on chit as in the case of a lottery. That is how it is branded as "chit". At the inception, it started with periodical deposit (contribution) of foodgrains in fixed measures with a trustee and received back when a sufficiently large quantity was collected. Amongst subscribers, the need was determined by casting lots; names drawn on chit as in the case of a lottery. That is how it is branded as "chit". It was mainly founded on mutual help (co-operative basis) and as a sort of savings by making contributions in instalments and advancing the pooled savings to the members with facilities of repayment in instalments. Gradually it shifted to financial assistance with growing importance of commerce and industries. Under the later device/scheme, every subscriber has to pay a fixed subscription in regular instalments. The pooled money is auctioned after defraying the expenses, if any, and the person prepared to offer the highest discount will be declared as the prized subscriber; the discount would be distributed would be equal to the number of instalments, so that every member is assured of an opportunity of getting the pooled money. The prized subscriber is required to furnish security or execute bonds for prompt payment of the remaining instalments till the last man gets his chance of getting the pooled money, so that the stakeholder may be in a position to pay the pooled money to the successful bidder in succeeding instalments. "Chit" is thus described as a mutual recurring deposit scheme under which every member is entitled to receive the prized amount as loan from the chit-fund except for the last prized winner. These are the essential features of the business of "chit scheme" although there are any number of variants. 8. From the scheme of operation of chit funds, every subscriber will get the pooled money in turn by drawing lots and the subscriber who secures the pooled money earlier is required to execute a deed/bond to discharge his contractual obligation of repayment of subsequent subscription. 9. It is the nature of liability of the prized subscriber that has given rise to a conflict of views, viz., whether the amount drawn by him tantamounts to a "debt" (money advanced) or undertaking to discharge the existing contractual obligation of making periodical subscriptions (instalments)? 10. This court in Navjeevan Enterprises (Mysore) P. Ltd. (In Liquidation) Vs. 9. It is the nature of liability of the prized subscriber that has given rise to a conflict of views, viz., whether the amount drawn by him tantamounts to a "debt" (money advanced) or undertaking to discharge the existing contractual obligation of making periodical subscriptions (instalments)? 10. This court in Navjeevan Enterprises (Mysore) P. Ltd. (In Liquidation) Vs. T.N. Ramalingaiah and Another, (1985) 58 CompCas 217 (Kar) after referring to clause (1) of section 10 of the 1980 Act, observed that the intendment of the Legislature is not clear as particulars regarding the nature of the bye-laws and before whom it should be registered are lacking. It also noticed the non-existence of law governing the conduct of chit funds in the State. However, giving a wide interpretation so as to achieve the intention of Legislature, it held that chit fund transactions are exempted from the provision of the 1980 Act. In addition, this court preferred to follow the views of the Andhra Pradesh High Court and the Kerala High Court to sustain the plea that the chit transaction is not a "debt" within the meaning of the 1980 Act. Same view is reiterated in N. Shivakumar deceased by L.R. Vs. Sudarshan Trading Co. Ltd. and Another, ILR (1984) KAR 914 . However a different view was struck in C. R. P. No. 3750 of 1981 and other connected cases, decided on February 16, 1984 (See [1985] 58 Comp Cas 838 (Kar), holding that the chit transactions fall within the ambit of the definition of "debt" and the "debtor" who has availed of the benefit of "chit fund" is entitled to redressal under the Act. 11. One other redeeming feature to be noticed is that after the decision of this court in Navjeevan Enterprises (Mysore) P. Ltd. (In Liquidation) Vs. T.N. Ramalingaiah and Another, (1985) 58 CompCas 217 (Kar) , the Chit Funds Act. 1982 (Central Act 40 of 1982), has come into force regulating the conduct of chit funds. 12. Salient features of the Act are; 13. "Chit" is defined to mean a transaction where a group of persons agree to subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical instalments over a definite, period and that each such subscriber shall, in his turn, as determined lots, be entitled to the prize amount. 14. "Chit" is defined to mean a transaction where a group of persons agree to subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical instalments over a definite, period and that each such subscriber shall, in his turn, as determined lots, be entitled to the prize amount. 14. "Chit amount" means the difference between the chit amount and the discount. 15. "Discount" is defined to mean the sum of money or the quantity of grain which a prized subscriber is, under the terms of the chit agreement, required to forgo and which is set apart under the said agreement to meet the expenses of running the chit or for distribution among the subscribers or for both. 16. "Dividend" means the share of the subscriber in the amount of the count available under the chit agreement for rateable distribution among the subscribers at each instalment of the chit. 17. The non-prized subscribers will have an opportunity of offering their bids to get the pooled money in succeeding instalments as every one of the subscriber is entitled to get the pooled money in turn. The foreman conducting the chit transaction is required to register before the Registrar with full particulars of names of subscribers, amount, furnished, etc., as contemplated in Chapter II 18. A duty is cast on the foreman, be it a firm, company or association of individuals by whatever name known, to respect the obligation owed towards a subscriber flowing from the chit agreement, vide section 25. 19. Chapters IV and V deal with the rights and liabilities of a non-prized subscriber and a prized subscriber. 20. As per section 31 of the Act, every prized subscriber shall, unless offered to deduct the amount of all future subscriptions from the prize amount due to him, furnish, and a foreman shall take sufficient security for the due payment of all future subscriptions. Section 32 enjoin on every prized subscriber to pay his subscriptions regularly on the dates and the time and place mentioned in the chit agreement and on his failure to do so, he shall be liable to make a consolidated payment of all the future subscription forthwith. Section 33 provides a machinery for adjudication of disputes, if any, between the prized subscriber and the foreman. Section 33 provides a machinery for adjudication of disputes, if any, between the prized subscriber and the foreman. One of the modes of termination, as provided under section 40 of the Act, is the expiry of the period specified in the chit agreement provided payment of dues to all the subscribers has been completed. Under section 42, every non-prized subscriber, unless otherwise provided for in the Act or in the chit agreement, is entitled to get back his subscription at the termination of the chit without any deduction for dividend, if any, earned by him. 21. So, the nature of liability of a prized subscriber will have to be considered in the light of the enunciation by various High Courts and the rights and liabilities of subscribers vis-a-vis the foreman as enjoined under the Chit Funds Act. 22. The consistent view of the Kerala High Court starting from Bhagawati Ammal Lekshmi Ammal v. M. Vencatasubba Iyen (15 Trav LR 133) till pronouncement in P.K. Achuthan and Anr. Vs. State Bank of Travancore, Calicut, AIR 1975 Ker 47 is that it is not a "loan advanced" but only an undertaking to discharge the pre-existing contractual obligation of making prompt payment of instalments that arise subsequent there to. In Narayana Prabhu and Others Vs. Janardhana Mallan and Others, AIR 1974 Ker 108 ; "Even when he is a prized subscriber he has the same obligation to pay future subscriptions arising. not by any reason of the fact that he has prized the kuri, but because of the contract entered into by him with the foreman to pay such subscription whether the kuri is prized or not. Subscription paid by the prized subscribers are not in discharge of the liability for the prized amount because the prized amount is received by the subscriber as of right and not as a loan. The liability to pay future subscriptions in terms of the kuri variyola is only reinforced by the execution of the security bond..... Quite often the amount of the security bond may bear no relation to the prize amount. The security bond is only for securing future subscription. It is more appropriate to treat the obligation to pay the future instalments as an obligation arising under the contract or kuri.... Quite often the amount of the security bond may bear no relation to the prize amount. The security bond is only for securing future subscription. It is more appropriate to treat the obligation to pay the future instalments as an obligation arising under the contract or kuri.... In this view, it cannot be said that there is a debt owing from the subscriber to the foreman because of the execution of the security bond. It cannot be said that the prize amount received by him is a debt due from him to the foreman. The debt would arise only as and when the instalment falls due and remains unpaid." 23. In P.K. Achuthan and Anr. Vs. State Bank of Travancore, Calicut, AIR 1975 Ker 47 , the full Bench of the Kerala High Court, after observing thus (at page 51). "In this context it is necessary to remember that in the case of a stakeholder (foreman) of a chit, his relation to the subscribers is of such a special nature that a special necessity exists justifying stringent provisions being incorporated in the agreement for the protection of his interest Without punctual payments by the individual subscribers, the foreman will not be in a position to discharge his obligation to those who prize the kuri from time to time and hence it is necessary that he should reserve to him-self powers to enforce such payments, It is in furtherance of this objective of ensuring prompt payments that a stipulation is incorporated in the bond empowering the foreman to recover in a lump sum the entirety of the balance amount due in respect of the future instalments on default being committed by a prized subscriber in prompt payment of any of the instalments. We are clearly of the opinion that in the context of the special features and incidents of the chit fund transactions, such a stipulation in a kuri vari or chitty hypothecation bond cannot be regarded as unconscionable or penal. declared that the principles enunciated in K.S. Raghavan and Others Vs. Iswara Pattar Gramom Parameswara Sastrigal's son Subbarama Sastrigal and Anr., AIR 1972 Ker 21 , was not correct. declared that the principles enunciated in K.S. Raghavan and Others Vs. Iswara Pattar Gramom Parameswara Sastrigal's son Subbarama Sastrigal and Anr., AIR 1972 Ker 21 , was not correct. The Andhra pradesh High Court in Margadarsi Chit Fund (P.) Ltd. v. Jogi Krishna Murthy [1981] 51 Comp Cas 399, has held thus (head-note): "The function of the foreman or stake-holder, by whatever name he is called under the chit fund scheme is only to organise the chit fund transaction. The money lent to the subscriber in the course of the transaction is not the foreman's money. The relationship that exists between the foreman and the subscriber is not that of creditor and debtor; consequently, the provision of the Andhra Pradesh Agricultural Indebtedness (Relief) Act (which provides for abatement of certain debts due from small farmers, agricultural labourers and rural artisans) do not apply to the amounts due from the subscribers to the chit fund organisation." The Madras High Court in P.N. Raghavan Pattar and Others Vs. Minor S. Arumugham by his mother and guardian Singarammal and Anr., AIR 1935 Mad 385 , held thus (at page 386); "In our opinion, it is not a case of borrowing at all at the auction, the person bidding the highest discount is regarded as a purchaser of the subject - matter of the auction.... The highest bidder purchases the chit by offering (i) the highest discount, (2) a bond for the future payments of instalments and these two things together constitute the consideration that he gives for the right which he buys immediately, the subject matter of the chit.... The auction purchaser of a chit fund executed a bond whereby the undertook to pay the future instalments as they became due and also provided that if he failed to pay any instalment on the due date he would pay the same within 15 days from the date of default with interest.... In Periyatan Katanhipalli Kannan Nambiar Vs. The auction purchaser of a chit fund executed a bond whereby the undertook to pay the future instalments as they became due and also provided that if he failed to pay any instalment on the due date he would pay the same within 15 days from the date of default with interest.... In Periyatan Katanhipalli Kannan Nambiar Vs. Ullannur Madhathil Subramania Pattar and Others, AIR 1941 Mad 231 , the court after referring to the contention of the decree-holder that the security bond executed by the prized subscriber only affirmed the pre-existing liability of the judgment debtor as the subscribers to the kuri/chit to pay his or their subscriptions according to the instalments fixed in the chit and did not change the character of such liability to make payment of future instalments of subscription and the contention of the judgment debtor that the liability under the security bond was a debt, leaned in favour of the judgment debtor hold the security bond was a debt, leaned in favour of the judgment debtor holding it to be the debt as on the date of the bond itself, applying the principles "debited in praesenti solvendum in futuro". The reason for the differing views is expressed thus; "The question is one of some difficulty not the least part of which arises from the somewhat conflicting decisions dealing with these peculiar kuri transactions which are so common in some parts of this presidency." It further held that the observation of Mr. Varadachariar J. in Maruda Konar Vs. Veerammal AIR 1936 Mad 985 , which reads thus (at page 987); "It seems to me only reasonable to hold that in cases like the present the security bond must be interpreted in the light of the rules, and the obligation undertaken by it is not repayment of the benefit already received as if it were a debt-but the payment of future subscriptions whether the continuance of the chit was a condition precedent or not will not depend merely on the terms of the bond but must be decided with reference to the surrounding circumstances, including the rules of the chit fund." Cannot be taken as an enunciation of law as it cannot be said that the learned judge was making a definite pronouncement on the question whether or not such obligation was "debited in praesenti solvendum in futuro." 24. The object of the Debt Relief Act is to relieve a debtor from indebtedness. It necessarily implies the existence of relationship of a creditor and debtor and debt. The definition of "debt". connotes return of money advanced. The purpose of a chit fund is based on mutual help/co-operative basis. Every subscriber will be a creditor to the other and every subscriber will be a debtor of the other in the conventional sense. The conduct of a chit fund does not involve exploitation by dominant persons of a vulnerable class. Members get together by consent. The discount offered by a prized subscriber for receipt of the pooled money in turn. From the scheme of operation of a chit fund, it is very difficult to spell out the existence of relationship of a creditor and a debtor, except that there is an undertaking by the prized subscriber by execution of a bond/deed to pay future instalment and in case of default, the entire amount would be recovered. The nature of the liability of a debtor to his creditor has no resemblance to the nature of liability of a non-prized subscriber for his default to pay subscription and the liability of a prized subscriber in case of default to pay future instalments. Further, no security bond is obtained from the person to whom the pooled money is paid in the last. The pooled money advanced to a prized subscriber. Pooled money paid to the subscriber is neither gratis nor money advanced, but money to which he is entitled under the terms of the contract. It is, having regard to this peculiar feature, that Varadachariyar J. stated that the liability will not be decided merely on the terms of the bond but must be decided with reference to the surrounding circumstances including the rules of the chit fund. There is no reference to these distinguishing features in Periyatan Katanhipalli Kannan Nambiar Vs. Ullannur Madhathil Subramania Pattar and Others, AIR 1941 Mad 231 . Hence, with utmost respect to their Lordships, we are unable to subscribe our views to the ratio enunciated therein. The principles enunciated in all the above cases except Periyatan Katanhipalli Kannan Nambiar Vs. There is no reference to these distinguishing features in Periyatan Katanhipalli Kannan Nambiar Vs. Ullannur Madhathil Subramania Pattar and Others, AIR 1941 Mad 231 . Hence, with utmost respect to their Lordships, we are unable to subscribe our views to the ratio enunciated therein. The principles enunciated in all the above cases except Periyatan Katanhipalli Kannan Nambiar Vs. Ullannur Madhathil Subramania Pattar and Others, AIR 1941 Mad 231 , that it is not a "debt", but only an undertaking to discharge the pre-existing contractual liability has received the sanction of parliament in incorporating sections 31 and 32 describing the nature of the liability of the prized subscriber. It is having regard to the same principles that the State Legislature also extended the exemption under clause (1) of section 10 of the 1980 Act. The prized subscriber, instead of drawing the pooled money and offering security for due payment of all future subscriptions, can offer for deduction of future subscriptions in the prize amount, vide section 31 of the Act. In case the prized subscriber so offers, the prize amount can, by no stretch of the Act. In case the prized subscriber so offers, the prize amount can, by no stretch of imagination, be treated as a "debt". Further till the prized subscriber commits default in payment of future subscription, the question of his liability will not arise and cannot be treated as a "debt" within the meaning of "debt" as defined in these Acts. 25. The decision in C. R. P. No 3750 of 1981 (Economic Chit Funds P. Ltd. v. P. S. Krishnoji [1985] 58 Comp Cas 838 (Kar) proceeds on the premises that the principles enunciated in Narayana Prabhu and Others Vs. Janardhana Mallan and Others, AIR 1974 Ker 108 , extracted above, have been overruled by the Kerala High Court in P.K. Achuthan and Anr. Vs. State Bank of Travancore, Calicut, AIR 1975 Ker 47 when, in fact, the decision of the same court in K. S. Raghavan v. Iswara Pattar Gramom viz., that such a clause was penal in nature, was overruled and the enunciation in Narayana Prabhu and Others Vs. Janardhana Mallan and Others, AIR 1974 Ker 108 , remained unaltered. Vs. State Bank of Travancore, Calicut, AIR 1975 Ker 47 when, in fact, the decision of the same court in K. S. Raghavan v. Iswara Pattar Gramom viz., that such a clause was penal in nature, was overruled and the enunciation in Narayana Prabhu and Others Vs. Janardhana Mallan and Others, AIR 1974 Ker 108 , remained unaltered. The decision in C. R. P. No. 3750 of 1981 (Economic Chit Funds P. Ltd. v. P. S. Krishnoji [1985] 58 Comp Cas (Kar) and other connected cases, rendered without reference to the incidents of chit transactions as recognised by the Legislature, in our considered view, does not lay down the correct legal proposition. 26. For the reasons stated above, we hold that pooled money paid to the prized subscribers of a chit fund does not constitute a "debt" within the meaning of the Act and the judgment-debtor cannot claim the benefit of the Debt Relief Act in respect of such transactions. Consequently, this civil revision petition is dismissed.