Section 25 of the Chit Funds Act, 1982: Liability of Foreman to Subscribers
Section 25 of the Chit Funds Act, 1982 protects subscribers by fixing responsibility on the foreman for amounts due to them. It also makes the liability joint and several where a chit has more than one foreman or where the foreman carries on the chit through a firm, association of individuals or company.
Text of Section 25 - Liability of foreman to subscribers
(1) Every foreman shall be liable to account to the subscribers for the amounts due to them.
(2) Where there are more than one foreman in a chit, each one of them jointly and severally and, if the foreman is a firm or other association of individuals, each one of the partners or individuals thereof jointly and severally and, if the foreman is a company, the company as such, shall be liable to the subscribers in respect of the obligations arising out of the chit.
Meaning and scope of Section 25
The provision has two connected parts. Sub-section (1) creates the basic accounting liability of every foreman towards the subscribers. In practical terms, the foreman must properly account for money or other amounts that become due to subscribers under the chit arrangement and the applicable law.
Sub-section (2) addresses chits in which responsibility is shared by more than one person or is carried through a business entity. Its use of the expression jointly and severally means that the statutory responsibility is not necessarily divided into separate shares between the persons made liable. Subject to the facts and applicable legal proceedings, the obligation may be enforced against persons on whom Section 25 places that liability.
Who is a foreman under the Chit Funds Act?
For purposes of the Act, the term foreman is defined in Section 2. Broadly, it refers to the person who, under the chit agreement, is responsible for conducting the chit. The precise statutory definition and its inclusive parts should be read from the current text of the Act when determining liability in a particular case.
How liability operates under Section 25
| Situation | Liability indicated by Section 25 |
|---|---|
| Single foreman | The foreman is liable to account to subscribers for amounts due to them. |
| More than one foreman | Each foreman is jointly and severally liable in respect of obligations arising out of the chit. |
| Firm or association of individuals | The partners or individuals are made jointly and severally liable by the provision. |
| Company as foreman | The company as such is liable to subscribers for obligations arising out of the chit. |
Why Section 25 is important for subscribers
Section 25 identifies who bears responsibility to subscribers for obligations arising from the chit. This is particularly significant where the chit is operated by several persons or through an entity, because the section expressly states the form of liability rather than leaving responsibility uncertain merely because more than one person is involved.
Read Section 25 with the surrounding provisions
Section 25 forms part of the statutory framework governing the foreman and should be read with related provisions dealing with the foreman's rights, duties, records, accounts and withdrawal. For context, see Section 21 - Rights of foreman, Section 22 - Duties of foreman, Section 23 - Books and records and Section 24 - Balance sheet.
Official legal resources
For the authoritative Central legislation and subsequent legislative changes, consult India Code. Information concerning administration of financial-sector legislation, including the Chit Funds Act, is available from the Department of Financial Services, Ministry of Finance. State-specific rules, notifications and Registrar requirements should also be checked for the State or Union Territory concerned.
Legal note: This page provides general statutory information. Application of Section 25 can depend on the chit agreement, applicable State rules, regulatory records and the facts of the dispute.