Chit Funds Act, 1982- Sections 20 to 43

Chapter III

RIGHTS AND DUTIES OF FOREMAN

20. Security to be given by foreman.

20. Security to be given by foreman.—(1) For the proper conduct of the chit, every foreman shall, before applying for a previous sanction under Section 4,—

[i][(a) deposit in the name of the Registrar, an amount equal to,—

(i) fifty per cent of the [ii][gross chit amount] in cash in an approved bank; and

(ii) fifty per cent of the [iii][gross chit amount] in the form of bank guarantee from an approved bank; or]

(b) transfer Government securities of the face value or market value (whichever is less) of not less than one and a half times the [iv][gross chit amount] in favour of the Registrar; or

(c) transfer in favour of the Registrar such other securities, being securities in which a trustee may invest money under Section 20 of the Indian Trusts Act, 1882 (2 of 1882), of such value, as may be prescribed by the State Government from time to time :

Provided that the value of the securities referred to in clause (c) shall not, in any case, be less than one and a half times the value of the [v][gross chit amount].

(2) Where a foreman conducts more than one chit, he shall furnish security in accordance with the provisions of sub-section (1) in respect of each chit.

(3) The Registrar may, at any time during the currency of the chit, permit the substitution of the security :

Provided that the face value or market value (whichever is less) of the substituted security shall not be less than the value of the security given by the foreman under sub-section (1).

(4) The security given by the foreman under sub-section (1), or any security substituted under sub-section (3), shall not be liable to be attached in execution of a decree or otherwise until the chit is terminated and the claims of all the subscribers are fully satisfied.

(5) Where the chit is terminated and the Registrar has satisfied himself that the claims of all the subscribers have been fully satisfied, he shall order the release of the security furnished by the foreman under sub-section (1), or the security substituted under sub-section (3), as the case may be, and in doing so, he shall follow such procedure as may be prescribed.

(6) Notwithstanding anything to the contrary contained in any other law for the time being in force, the security furnished under this section shall not be dealt with by the foreman during the currency of the chit to which it relates and any dealing by the foreman with respect thereto by way of transfer or other encumbrances shall be null and void.

Other Contents of Chit Funds Act, 1982​
Sections 1 to 19 Sections 20 to 43 Sections 44 to 90 Schedule

21. Rights of foreman.

21. Rights of foreman.—(1) The foreman shall be entitled,—

(a) in the absence of any provision in the chit agreement to the contrary, to obtain the [vi][gross chit amount] at the first instalment without deduction of the discount specified in the chit agreement, subject to the condition that he shall subscribe to a ticket in the chit;

Provided that in a case where the foreman has subscribed to more than one ticket, he shall not be eligible to obtain more than one [vii][gross chit amount] in a chit without discount;

(b) to such amount not exceeding [viii][seven per cent] of the [ix][gross chit amount] as may be fixed in the chit agreement, by way of commission, remuneration or for meeting the expenses of running the chit;

(c) to interest and penalty, if any, payable on any default in the payment of instalments and to such other amounts as may be payable to him under the provisions of the chit agreement;

(d) to receive and realise all subscriptions from the subscribers and to distribute the [x][net chit amount]s to the prized subscribers;

(e) to demand sufficient security from any prized subscriber for the due payment of future subscriptions payable by him.

Explanation.—A security shall be deemed to be sufficient for the purposes of this clause if its value exceeds by one-third, or if it consists of immovable properties, the value of which exceeds by one-half, of the amount due from the prized subscriber;

(f) to substitute subscribers in place of defaulting subscribers; [xi][* * *]

[xii][(fa) to exercise his right to lien against the credit balance in other non-prized chits; and]

(g) to do all other acts that may be necessary for the due and proper conduct of the chit.

(2) Where any dispute arises with regard to the value of the property offered as security under clause (e) of sub-section (1), it shall be referred to the Registrar for arbitration under Section 64.

22. Duties of foreman.

22. Duties of foreman.—(1) The foreman shall, on the prized subscriber furnishing sufficient security for the due payment of future subscriptions, be bound to pay him the [xiii][net chit amount] :

Provided that the prized subscriber shall be entitled to the payment of the [xiv][net chit amount] without any security whatsoever if he agrees to the deduction therefrom of the amount of all future subscriptions and in such a case, the foreman shall pay the [xv][net chit amount] to the prized subscriber within seven days after the date of the draw or before the date of the next succeeding instalment, whichever is earlier :

Provided further that where the [xvi][net chit amount] has been paid to the prized subscriber under the first proviso, the amount deducted shall be deposited by the foreman in an approved bank mentioned in the chit agreement and he shall not withdraw the amount so deposited except for the payment of future subscriptions.

(2) If, owing to the default of the prized subscriber, the [xvii][net chit amount] due in respect of any draw remains unpaid until the date of the next succeeding instalment, the foreman shall deposit the [xviii][net chit amount] forthwith in a separate account in an approved bank mentioned in the chit agreement and intimate in writing the fact of such deposit and the reasons therefor to the prized subscriber and the Registrar.

Provided that where any prized subscriber does not collect the [xix][net chit amount] in respect of any instalment of a chit within a period of two months from the date of the draw, it shall be open to the foreman to hold another draw in respect of such instalment.

(3) Every payment of the [xx][net chit amount] or the amount of future subscriptions under sub-section (1), and the deposit of the [xxi][net chit amount] under sub-section (2), shall be intimated to the subscribers at the next succeeding draw and the particulars of such payment or deposit shall be entered in the minutes of the proceedings of that draw.

(4) The foreman shall not appropriate to himself any amount in excess of what he is entitled to under clause (b) or clause (c) of sub-section (1) of Section 21 :

Provided that where the foreman is himself a prized subscriber, he shall be entitled to appropriate to himself the [xxii][net chit amount] subject to his complying with the provisions of Section 31 :

Provided further that the foreman may appropriate to himself the interest accruing on the amount deposited under the second proviso to sub-section (1).

(5) The foreman shall not admit any person as a subscriber to a chit if, by such admission, the total number of tickets mentioned in the chit agreement is increased.

(6) The foreman shall distribute among the subscribers, in accordance with the chit agreement, the [xxiii][share of discount] either in cash, grain or by way of adjustment towards the subscriptions payable for the next instalment, if any.

23. Books, records, etc., to be kept by foreman.

23. Books, records, etc., to be kept by foreman.—The foreman shall maintain in his registered office, or, as the case may be, in the place or the principal place of his business, or, where the foreman has any branch office, sub-office or any place of business for the conduct of chit business in a State other than the State in which his registered office or the principal place of his business is situated, in such branch office, sub-office or place of business in respect of the business conducted in that State—

(a) a register containing—

(i) the names and full particulars of the subscribers in each chit together with the number of tickets held by each subscriber;

(ii) the dates on which the subscribers signed the chit agreement; and

(iii) in the case of an assignment of a ticket by a subscriber, the name and full address of the assignee with the date of assignment and the date on which the assignment had been recognised by the foreman;

(b) a book containing the minutes of the proceedings of each draw;

(c) a ledger containing—

(i) the amounts paid by the subscribers in each chit and the dates of such payments;

(ii) the amounts paid to the prized subscribers and the dates of such payments; and

(iii) in the case of any deposit in an approved bank mentioned in the chit agreement, the date and the amount of such deposit;

(d) a register in the prescribed form showing the amounts deposited in approved banks as required under the provisions of this Act in respect of all chits conducted by the foreman at his office; and

(e) such other registers and books in such form as may be prescribed by the State Government within whose jurisdiction the chit is conducted.

24. Balance sheet.

24. Balance sheet.—Without prejudice to the provisions of the Companies Act, 1956 (1 of 1956), every foreman shall prepare and file with the Registrar within such time as may be prescribed, a balance sheet as on the last date of each calendar year, or, as the case may be, the financial year of the foreman, and a profit and loss account relating to the year of account, in the forms set out in Parts I and II of the Schedule, or as near thereto as circumstances admit, in respect of the chit business and audited by auditors qualified to act as auditors under the Companies Act, 1956, or by a chit auditor appointed under Section 61 :

Provided that where a balance sheet is audited by an auditor qualified to act as auditor under the Companies Act, 1956 (1 of 1956), a chit auditor appointed under Section 61 shall have the right to audit the balance sheet at any time if so authorised by the Registrar in this behalf.

25. Liability of foreman to subscribers.

25. Liability of foreman to subscribers.—(1) Every foreman shall be liable to account to the subscribers for the amounts due to them.

(2) Where there are more than one foreman in a chit, each one of them jointly and severally and, if the foreman is a firm or other association of individuals, each one of the partners or individuals thereof jointly and severally and, if the foreman is a company, the company as such, shall be liable to the subscribers in respect of the obligations arising out of the chit.

26. Withdrawal of foreman.

26. Withdrawal of foreman.—(1) No foreman, or where there are more than one foreman in a chit, none of them shall withdraw from the chit until its termination unless such withdrawal is assented to in writing by all the non-prized and unpaid prized subscribers and a copy of such assent has been filed with the Registrar under Section 41.

(2) The withdrawal from a chit of any one of the foreman shall not affect the security given by him under Section 20 or Section 31.

Chapter IV

RIGHTS AND DUTIES OF NON-PRIZED SUBSCRIBERS

27. Non-prized subscribers to pay subscriptions and obtain receipts.

27. Non-prized subscribers to pay subscriptions and obtain receipts.— Every non-prized subscriber shall pay his subscription due in respect of every instalment on the dates and times and at the places mentioned in the chit agreement and shall, on such payment, be entitled to obtain a receipt from the foreman.

28. Removal of defaulting subscribers.

28. Removal of defaulting subscribers.—(1) A non-prized subscriber who defaults in paying his subscription in accordance with the terms of the chit agreement shall be liable to have his name removed from the list of subscribers and a written notice of such removal shall be given by the foreman to the defaulting subscriber within fourteen days of the date of such removal :

Provided that if the defaulter pays the defaulted instalment with interest at such rate as may be prescribed within seven days of the date of receipt of such notice, his name shall be re-entered in the list of such subscribers.

(2) Every such removal under sub-section (1) shall with the date thereof be entered in the relevant book maintained by the foreman.

(3) A true copy of the entry referred to in sub-section (2) shall be filed by the foreman with the Registrar within fourteen days from the date of removal.

(4) Any defaulting subscriber aggrieved by the removal of his name from the list of subscribers may, within seven days of the date of receipt of the notice of removal refer the matter to the Registrar for arbitration under Section 64.

29. Substitution of subscribers.

29. Substitution of subscribers.—(1) A foreman may substitute in the list of subscribers any person (hereafter in this Chapter referred to as the substituted subscriber) in place of the defaulting subscriber whose name has been removed under sub-section (1) of Section 28.

(2) Every substitution referred to in sub-section (1) shall, with the date thereof, be entered in the relevant book maintained by the foreman and a true copy of every such entry shall be filed by the foreman with the Registrar within fourteen days from the date of substitution.

30. Amounts due to defaulting subscribers.

30. Amounts due to defaulting subscribers.—(1) A foreman shall, out of the amounts payable by and realized from the substituted subscriber towards the instalments relatable to the period before the date of the substitution (including the arrears due from the defaulting subscriber), deposit, before the date of the next succeeding instalment, in a separate identifiable account in an approved bank mentioned in the chit agreement, an amount equal to the contributions made by the defaulting subscriber less such deductions as may be provided for in the chit agreement, and shall inform the defaulting subscriber as well as the Registrar of the fact of such deposit and shall not withdraw the amount so deposited except for payment to the defaulting subscriber.

(2) The amount so deposited under sub-section (1) shall be paid to the defaulting subscriber as and when he claims the amount and the amount so deposited shall not be withdrawn by the foreman for any purpose other than for such payment.

(3) The contributions of any defaulting subscriber who has not been substituted till the termination of the chit shall be paid to him within fifteen days from the date of termination of the chit subject to such deductions as may be provided for in the chit agreement.

Chapter V

RIGHTS AND DUTIES OF PRIZED SUBSCRIBERS

31. Prized subscriber to furnish security.

31. Prized subscriber to furnish security.—Every prized subscriber shall, if he has not offered to deduct the amount of all future subscriptions from the [xxiv][net chit amount] due to him, furnish, and a foreman shall take, sufficient security for the due payment of all future subscriptions and, if the foreman is a prized subscriber, he shall give security for the due payment of all the future subscriptions to the satisfaction of the Registrar.

32. Prized subscriber to pay subscriptions regularly.

32. Prized subscriber to pay subscriptions regularly.—Every prized subscriber shall pay his subscriptions regularly on the dates and times and at the 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 subscriptions forthwith.

33. Foreman to demand future subscriptions by written notice.

33. Foreman to demand future subscriptions by written notice.—(1) A foreman shall not be entitled to claim a consolidated payment from a defaulting prized subscriber under Section 32 unless he makes a demand to that effect in writing.

(2) Where a dispute is raised under this Act by a foreman for a consolidated payment of future subscriptions from a defaulting prized subscriber and if the subscriber pays to the foreman on or before the date to which the dispute is posted for hearing the arrears of subscriptions till that date together with the interest thereon at the rate provided for in the chit agreement and the cost of adjudication of the dispute, the Registrar or his nominee hearing the dispute shall, notwithstanding any contract to the contrary, make an order directing the subscriber to pay to the foreman the future subscriptions on or before the dates on which they fall due, and that, in case of any default of such payments by the subscriber, the foreman shall be at liberty to realise, in execution of that order, all future subscriptions and interest together with the costs, if any, less the amount, if any, already paid by the subscriber in respect thereof:

Provided that if any such dispute is on a promissory note, no order shall be passed under this sub-section unless such promissory note expressly states that the amount due under the promissory note is towards the payment of subscriptions to the chit.

(3) Any person who holds any interest in the property furnished as security or part thereof, shall be entitled to make the payment under sub-section (2).

(4) All consolidated payments of future subscriptions realised by a foreman shall be deposited by him in an approved bank mentioned in the chit agreement before the date of the succeeding instalment and the amount so deposited shall not be withdrawn except for payment of future subscriptions.

(5) Where any property is obtained as security in lieu of the consolidated payment of future subscriptions, it shall remain as security for the due payment of future subscriptions.

Chapter VI

TRANSFERS

34. Restrictions on transfer of rights of foreman.

34. Restrictions on transfer of rights of foreman.—(1) No transfer of the rights of a foreman to receive subscriptions from the prized subscribers shall be made without the previous sanction in writing of the Registrar.

(2) Any transfer of the rights of a foreman to receive subscriptions from the prized subscribers shall, if it is likely to defeat or delay the interest of a non-prized or unpaid prized subscriber, be voidable at the instance of such subscriber.

(3) When under sub-section (2), a transfer is disputed by a subscriber, the burden of proving that the foreman was in solvent circumstances at the time of the transfer and that the transfer does not defeat or delay the interests of such subscriber is on the transferee.

35. Transfer of non-prized subscriber's rights to be in writing.

35. Transfer of non-prized subscriber's rights to be in writing.—Every transfer by a non-prized subscriber of his rights in the chit shall be in writing duly attested by at least two witnesses and shall be filed with the foreman.

36. Recognition of transfer by foreman.

36. Recognition of transfer by foreman.—Every transfer under Section 35 shall, within a period of fourteen days from the date of receipt of the proposal for transfer by the foreman, be recognized by him unless the transferee is not solvent or the transfer was effected with a view to defeating the provisions of any law including this Act and the decision of the foreman to recognise the transfer or not shall forthwith be communicated to the parties concerned.

37. Entry of transfer.

37. Entry of transfer.—Every transfer under Section 34 or Section 35 shall be entered by the foreman in the books of the chit forthwith and a true copy of such entry shall be filed by the foreman with the Registrar within fourteen days from the date of making such entry.

Chapter VII

MEETINGS OF GENERAL BODY OF SUBSCRIBERS

38. Meetings of general body of subscribers.

38. Meetings of general body of subscribers.—(1) The foreman may, on his own motion, convene a special meeting of the general body of subscribers for considering any proposal to pass a special resolution.

(2) The foreman shall convene such a meeting on the requisition in writing of not less than twenty-five per cent of the number of non-prized and unpaid prized subscribers, and the meeting so convened shall be held within thirty days of the date of receipt of the requisition and if the foreman refuses or fails to call such a meeting within fourteen days of the date of receipt of such requisition, not less than twenty-five per cent of the number of non-prized and unpaid prized subscribers may give notice of the fact to the Registrar.

(3) The Registrar shall, within twenty-one days of the receipt of the notice under sub-section (2) convene or direct the convening of a special meeting of the general body of the subscribers and on receipt of such a direction, it shall be the duty of the foreman to comply with such direction.

(4) Notice of not less than fourteen days shall be given to all the subscribers of a meeting under this section specifying the object, date, hour and place of meeting and a copy of the special resolution shall also be sent along with the notice of the meeting.

Explanation.—For the purposes of this section and Section 39, “special resolution” means a resolution which is passed at a meeting of the general body of the subscribers specially convened for the purpose by a majority of not less than two-thirds of the subscribers to the chit present at the meeting in person or by proxy and representing not less than three-fourths of the amount or, as the case may be, the value of the grain, subscribed by all the non-prized and unpaid prized subscribers, if any.

Chapter VIII

TERMINATION OF CHITS

39. Provision for continuation of chits in certain cases.

39. Provision for continuation of chits in certain cases.—(1) Where a foreman dies or becomes of unsound mind or is otherwise incapacitated, the chit may continue in accordance with the provisions of the chit agreement.

(2) Where a foreman is adjudicated an insolvent, or withdraws from the chit under Section 26, or fails to conduct the chit at any instalment or on any other date before the next succeeding instalment as may have been agreed upon by a special resolution, any one or more of such subscribers authorised by such resolution may, in the absence of any provision in the chit agreement for the future conduct of the chit, take the place of the foreman and continue the chit or make other arrangements for the further conduct of the chit.

40. Termination of chits.

40. Termination of chits.—A chit shall be deemed to have terminated,—

(a) when the period specified therefor in the chit agreement has expired provided the payment of dues to all the subscribers has been completed; or

(b) when all the non-prized and unpaid prized subscribers and the foreman consent in writing to the termination of the chit and a copy of such consent is filed with the Registrar as required under Section 41; or

(c) where a foreman dies or becomes of unsound mind or is otherwise incapacitated and the chit is not continued in accordance with the provisions of the chit agreement :

Provided that, in a case where the foreman is a firm, if a partner thereof dies or becomes of unsound mind or is otherwise incapacitated, the chit shall not be deemed to have terminated and the surviving partner or partners shall conduct the chit in the absence of any provision to the contrary in the chit agreement.

41. Copy of assent or consent to be filed with Registrar.

41. Copy of assent or consent to be filed with Registrar.—A true copy of every assent referred to in Section 26 and of every consent referred to in clause (b) of Section 40 with their dates shall be filed by the foreman or by the surviving partner or partners, as the case may be, with the Registrar within fourteen days from the date of such assent or consent.

42. Refund of non-prized subscribers' subscriptions.

42. Refund of non-prized subscribers' subscriptions.—Except in the cases referred to in clauses (a) and (b) of Section 40,—

(a) every non-prized subscriber shall, unless otherwise provided for in this Act or in the chit agreement, be entitled to get back his subscriptions at the termination of the chit without any deduction for [xxv][share of discount], if any, earned by him :

Provided that, any person to whom the rights of a non-prized subscriber are transferred in accordance with the provisions of Section 35, shall, in addition to his own subscriptions, be entitled to get back the subscriptions paid by such non-prized subscriber, subject to the conditions specified in this section;

(b) if a chit terminates on a date earlier than the date originally fixed in the chit agreement, the non-prized subscriber's claim shall be deemed to have arisen on the date on which he has notice thereof.

43. Subscribers' dues to be first charge on chit assets.

43. Subscribers' dues to be first charge on chit assets.—Any amount due to the subscriber from a foreman in relation to the chit business shall be a first charge on the chit assets.

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