Section 33 of The Chit Funds Act, 1982
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mentioned in the chit agreement before the date of the succeeding instalment and the amount so deposited shall not be withdrawn except for payment of future subscriptions.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.
Summary
- The foreman (the person running the chit fund) cannot demand a consolidated payment (paying all future subscriptions in a single lump sum immediately) from a defaulting prized subscriber unless the foreman first makes a demand to that effect in writing.
- If a dispute is raised for a consolidated payment and the prized subscriber pays the arrears (overdue payments) along with interest and adjudication costs (the legal expenses of solving the dispute) before or on the hearing date, the Registrar (the government officer overseeing chit funds) or his nominee must order the subscriber to pay subscriptions on their normal due dates as they fall due instead of a lump sum.
- If the dispute is based on a promissory note (a signed promise to pay), the Registrar cannot pass a recovery order unless the note explicitly states that the amount due is for chit subscriptions.
- Anyone who holds any interest in the property given as security is allowed to pay the arrears, interest, and costs to stop the lump-sum claim.
- All consolidated future payments collected by the foreman must be deposited in the approved bank mentioned in the chit agreement before the next installment date, and can only be withdrawn to pay future subscriptions.
- Any property obtained as security instead of a consolidated payment will continue to serve as security for regular future payments.
Practical examples
FAQ
1. What happens if a defaulting prized subscriber pays their arrears, interest, and adjudication costs on or before the dispute's hearing date?
The Registrar or nominee must order the subscriber to pay future subscriptions on their normal due dates, rather than demanding a lump sum.
2. Who is allowed to make the payment of arrears and costs to avoid a consolidated payment order?
The defaulting prized subscriber, or any person who holds any interest in the property furnished as security, is entitled to make this payment.
3. What must a foreman do with any consolidated payments of future subscriptions they collect?
The foreman must deposit the entire amount in the approved bank named in the chit agreement before the next installment date, and cannot use it for anything other than future subscriptions.
4. Can a foreman file a dispute for consolidated payment using a general promissory note?
No, if the dispute is based on a promissory note, the note must explicitly state that the amount due under it is towards the payment of chit subscriptions.
Test yourself
Q1.Under Section 33 of The Chit Funds Act, 1982, what must a foreman do before they are legally entitled to claim a consolidated payment of future subscriptions from a defaulting prized subscriber?
Q2.Under Section 33 of The Chit Funds Act, 1982, what happens if a defaulting prized subscriber pays all arrears, interest, and adjudication costs on or before the date of the arbitration hearing?
Q3.Under Section 33 of The Chit Funds Act, 1982, what is the rule regarding a dispute for consolidated payment that is based on a promissory note?
Q4.Under Section 33 of The Chit Funds Act, 1982, what must the foreman do with consolidated payments of future subscriptions after realizing them?
Q5.Under Section 33 of The Chit Funds Act, 1982, who besides the defaulting prized subscriber is explicitly entitled to pay off the arrears, interest, and costs on or before the hearing date?