Section 22 of the Chit Funds Act, 1982 - Duties of Foreman
Section 22 sets out important statutory duties of the foreman after a subscriber becomes entitled to the chit. It regulates payment of the net chit amount, treatment of future subscriptions, deposits where payment remains unclaimed or unpaid, disclosure at the next draw, limits on appropriation by the foreman, admission of subscribers and distribution of the share of discount.
Current terminology: The Chit Funds (Amendment) Act, 2019 substituted the expression "net chit amount" for "prize amount" and "share of discount" for "dividend", with effect from 1 January 2020.
Meaning of important terms
Foreman: Broadly, the person who is responsible for conducting the chit under the Act and the chit agreement.
Net chit amount: Under Section 2(jb), this means the difference between the gross chit amount and the discount, with corresponding treatment for a fraction of a ticket and for payment otherwise than in cash.
Share of discount: Under Section 2(pa), this is the subscriber's share in the discount available under the chit agreement for rateable distribution among subscribers at each instalment.
Prized subscriber: A subscriber entitled to the net chit amount at an instalment in accordance with the chit agreement and the Act.
Section 22 - statutory duties of the 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 net chit amount.
Provided that the prized subscriber shall be entitled to payment of the net chit amount without security if he agrees to deduction of all future subscriptions. In that event, the foreman shall pay the net chit amount within seven days after the date of the draw or before the next succeeding instalment, whichever is earlier.
Provided further that the amount deducted towards future subscriptions shall be deposited by the foreman in an approved bank mentioned in the chit agreement and shall not be withdrawn except for payment of future subscriptions.
(2) If, owing to the default of the prized subscriber, the net chit amount due in respect of a draw remains unpaid until the date of the next succeeding instalment, the foreman shall forthwith deposit the amount in a separate account in an approved bank mentioned in the chit agreement and intimate in writing the fact of the deposit and the reasons for it to the prized subscriber and the Registrar.
Provided that where a prized subscriber does not collect the net chit amount within two months from the date of the draw, the foreman may hold another draw in respect of that instalment.
(3) Every payment of the net chit amount or future subscriptions under sub-section (1), and every deposit under sub-section (2), shall be intimated to subscribers at the next succeeding draw. The particulars shall also be entered in the minutes of that draw.
(4) The foreman shall not appropriate to himself any amount in excess of what he is entitled to under Section 21(1)(b) or Section 21(1)(c). Where the foreman is himself a prized subscriber, he may appropriate the net chit amount subject to compliance with Section 31. The foreman may also appropriate the interest accruing on an amount deposited under the second proviso to sub-section (1).
(5) The foreman shall not admit a person as a subscriber if that admission would increase the total number of tickets stated in the chit agreement.
(6) The foreman shall distribute among subscribers, in accordance with the chit agreement, the share of discount, whether in cash, grain or by adjustment towards subscriptions payable for the next instalment, if any.
Section 22 explained in practical terms
| Requirement | What the foreman must do |
|---|---|
| Security furnished | Pay the net chit amount to the prized subscriber. |
| Future subscriptions deducted | Pay within seven days of the draw or before the next instalment, whichever is earlier, and keep the deducted sum in the approved bank for future subscriptions. |
| Amount remains unpaid because of subscriber default | Deposit it in a separate approved-bank account and give written intimation to the subscriber and Registrar. |
| Payment or deposit made | Disclose it at the next draw and record particulars in the minutes. |
| Foreman's appropriation | Do not take more than the amounts permitted by Section 21(1)(b) and (c), subject to the statutory exceptions. |
| New subscriber | Do not increase the number of tickets beyond the number in the chit agreement. |
| Discount | Distribute the share of discount according to the chit agreement. |
Related provisions
Section 22 should be read with Section 21, which deals with the rights of the foreman, Section 23 on books and records, and Section 31 concerning payment of future subscriptions by a prized subscriber.
Legal compliance point
The time limits, banking requirements, written intimation and minute-book entries in Section 22 are statutory safeguards. A foreman should also comply with the chit agreement, the applicable State rules and directions of the competent Registrar. For an authoritative and updated statutory text, refer to the official India Code source linked in the sidebar.