DISPUTES AND ARBITRATIONCentral

Section 72 of The Chit Funds Act, 1982

Any private transfer of delivery of, or encumbrance or charge on, property made or created after the issue of the certificate by the Registrar under section 71 shall be null and void against the foreman on whose application the said certificate was issued.

Summary

Any private transfer, delivery, encumbrance, or charge created on the property after the Registrar issues the certificate is affected.
Such transfers or charges are declared completely null and void.
This nullity is specifically against the foreman on whose application the Section 71 recovery certificate was issued.

Practical examples

1Hari, a foreman, obtains a Section 71 certificate from the Registrar to recover 80,000 rupees from Rajesh on June 1, 2026. On June 5, 2026, Rajesh tries to privately sell his car to his brother to keep it away from Hari. Under Section 72, this private sale is null and void against Hari, and Hari can still have the car seized to recover his money.

2Lakshmi is a defaulting subscriber against whom a foreman, Mohan, has obtained a recovery certificate. Lakshmi tries to mortgage her house privately to a friend to raise a loan after the certificate is issued. This private mortgage or charge is null and void against Mohan, meaning Mohan's claim to recover the chit money has priority.

FAQ

1. What is a private transfer of property under Section 72?

It is any sale, gift, delivery, mortgage, or charge on property made directly between private individuals rather than through a public or court-ordered auction.

2. When does a private transfer of property become void against the foreman?

It becomes void if it is made after the Registrar has issued a recovery certificate under Section 71 for that dispute.

3. Does Section 72 make the transfer void against everyone?

The law states that the transfer or charge is null and void specifically against the foreman on whose application the recovery certificate was issued.

4. Does this rule apply if I create a mortgage (encumbrance) instead of selling the property?

Yes, the rule covers any private transfer, delivery, encumbrance (like a mortgage), or charge created on the property.

Test yourself

Q1.Under Section 72 of The Chit Funds Act, 1982, a private transfer of property is null and void against the foreman only if it is made after which event under Section 71?

Q2.Under Section 72 of The Chit Funds Act, 1982, what is the legal status of a private property transfer made by a debtor after the Registrar issues a recovery certificate under Section 71?

Q3.Under Section 72 of The Chit Funds Act, 1982, what event triggers the rule that makes private transfers of property null and void?

Q4.Under Section 72 of The Chit Funds Act, 1982, if a debtor privately sells their property after a recovery certificate is issued, against whom is that sale legally void?

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