Section 10 of the Chit Funds Act, 1982: Copies of Chit Agreement to Be Given to Subscribers

Section 10 of the Chit Funds Act, 1982 places two connected compliance duties on the foreman after commencement of a chit. First, every subscriber must receive a certified true copy of the chit agreement within the statutory time. Second, the foreman must file a certificate with the Registrar confirming compliance.

Text of Section 10 - Copies of chit agreement to be given to subscribers

(1) A foreman shall, as soon as may be after he has obtained the certificate of commencement under sub-section (2) of section 9, but not later than the date of the first draw of the chit, furnish to every subscriber, a copy of the chit agreement certified to be a true copy.

(2) A foreman shall, within fifteen days after the close of the month in which the draw for the first instalment of the chit is held, file with the Registrar, a certificate to the effect that the provisions of sub-section (1) have been complied with.

Official source: Chit Funds Act, 1982 on India Code

What Section 10 requires

The provision protects subscribers by ensuring that they possess the governing chit agreement before or by the first draw. The agreement is important because it records the contractual and statutory terms governing the chit, including matters required by Section 6.

Section 10(1) operates after the foreman has obtained the certificate of commencement contemplated by Section 9(2). The outer time limit is the date of the first draw. Therefore, the certified true copy should not be postponed beyond that date.

Section 10(2) creates a separate filing obligation. Within fifteen days after the close of the month in which the first instalment draw is held, the foreman must file with the Registrar a certificate stating that the copies required by sub-section (1) have been furnished.

Important definitions under the Chit Funds Act

Chit agreement: Under Section 2, this means the document containing the articles of agreement between the foreman and the subscribers relating to the chit.
Foreman: Broadly, the person responsible under the chit agreement for conducting the chit, including a person discharging the foreman's functions under Section 39.
Subscriber: A person who subscribes to a chit and includes a person who holds a fraction of a ticket.
Registrar: The Registrar of Chits appointed under Section 61, including the specified additional or subordinate Registrars appointed under that section.
Draw: The manner specified in the chit agreement for ascertaining the prized subscriber at an instalment of the chit.

For the complete statutory definitions, see Section 2 of the Chit Funds Act - Definitions.

Section 10 compliance timeline

1. Certificate of commencement

The foreman first obtains the certificate of commencement under Section 9(2).

2. Certified copy for every subscriber

As soon as may be after obtaining that certificate, and in all cases not later than the first draw, the foreman must furnish each subscriber with a copy of the chit agreement certified as a true copy.

3. Certificate filed with the Registrar

Within fifteen days after the close of the month in which the first instalment draw takes place, the foreman must certify to the Registrar that Section 10(1) has been complied with.

Relationship with Sections 6, 7 and 9

Section 10 is part of the statutory sequence governing the creation and commencement of a chit. Section 6 prescribes matters to be contained in the chit agreement, Section 7 deals with filing of the chit agreement, and Section 9 regulates commencement. Section 10 then ensures that subscribers receive the agreement and that the Registrar receives confirmation of that compliance.

Current legal position

The Chit Funds Act, 1982 is Act No. 40 of 1982 and is administered by the Ministry of Finance, Department of Financial Services. The Act was amended by the Chit Funds (Amendment) Act, 2019. The 2019 amendments changed several provisions and definitions, but did not substitute or amend Section 10. The text of Section 10 reproduced above therefore continues to govern the duty to provide copies of the chit agreement and file the compliance certificate.

Practical point: A subscriber should retain the certified copy of the chit agreement because it records the terms governing the chit. A foreman should also preserve proof of delivery and the certificate filed with the Registrar as part of the compliance record.

Legal information page. Verify applicable State rules, notifications and local procedural requirements where relevant.