Section 21 of The Chit Funds Act, 1982
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 1[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 chit amount in a 1[gross chit amount] discount;
- (b)to such amount not exceeding 2[seven per cent.] of the 1[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 prize amounts 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 of 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; 3*** 4[(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.
Summary
- The foreman is entitled to get the full gross chit amount at the first instalment without any discount deduction, provided they subscribe to at least one ticket, though they can only claim this discount-free benefit for a single ticket.
- The foreman is entitled to receive a commission or remuneration for running the chit, which cannot exceed seven percent of the gross chit amount.
- The foreman has the right to collect subscriptions, distribute prize amounts, substitute new subscribers, and exercise a lien against a subscriber's credit balance in other non-prized chits.
- The foreman can demand sufficient security from prized subscribers for future payments, which must exceed the due amount by one-third (or by one-half if it consists of immovable property).
- Any dispute regarding the value of security offered by a prized subscriber must be referred to the Registrar for arbitration under Section 64.
Practical examples
FAQ
1. Can a foreman get more than one commission or discount-free draw if they own multiple tickets?
No, even if a foreman owns multiple tickets, they can only get one gross chit amount without discount at the first instalment.
2. What is the maximum commission a foreman can charge for running a chit?
The commission or remuneration cannot exceed seven percent of the gross chit amount, as fixed in the chit agreement.
3. How is the sufficiency of security offered by a prized subscriber calculated?
For general security, the value must exceed the due amount by one-third. For immovable property (like land or a house), the value must exceed the due amount by one-half.
4. What happens if the foreman and subscriber disagree on the value of the security offered?
The dispute must be referred to the Registrar for arbitration under Section 64 of the Act, and civil courts have no jurisdiction over it.
Test yourself
1.Under Section 21 of The Chit Funds Act, 1982, what is the maximum commission or remuneration a foreman can charge for running a chit?
2.Under Section 21 of The Chit Funds Act, 1982, what is the rule regarding the foreman obtaining the gross chit amount at the first instalment?
3.Under Section 21 of The Chit Funds Act, 1982, if a prized subscriber offers immovable property as security for future subscriptions, by how much must the value of that property exceed the amount due to be deemed sufficient?
4.Under Section 21 of The Chit Funds Act, 1982, if a prized subscriber offers general security (other than immovable property) for future subscriptions, by how much must the value of that security exceed the amount due to be deemed sufficient?
5.Under Section 21 of The Chit Funds Act, 1982, if there is a dispute regarding the value of the security offered by a prized subscriber, how must it be resolved?