Section 27 of the Chit Funds Act, 1982: Non-Prized Subscribers to Pay Subscriptions and Obtain Receipts

Section 27 lays down a simple but important obligation in a registered chit: a non-prized subscriber must pay each subscription according to the chit agreement and, on payment, is entitled to obtain a receipt from the foreman.

Text and Meaning of Section 27

Every non-prized subscriber shall pay the subscription due for each instalment on the dates, at the times and at the places stated in the chit agreement. On making the payment, the subscriber is entitled to obtain a receipt from the foreman.

The provision therefore links the subscriber's payment obligation directly to the terms recorded in the chit agreement. It also creates a corresponding statutory entitlement to a receipt when the subscription is paid. The receipt is an important record of payment and should be preserved by the subscriber.

Key Definitions Relevant to Section 27

Non-prized subscriber

Section 2(k) provides that a "non-prized subscriber" does not include a defaulting subscriber. Section 2(f) defines a "defaulting subscriber" as a subscriber who has defaulted in paying subscriptions due in accordance with the chit agreement.

Foreman

Under Section 2(j), the "foreman" is the person who, under the chit agreement, is responsible for conducting the chit. The definition also includes a person discharging the functions of the foreman under Section 39.

Chit agreement

Section 2(c) defines the "chit agreement" as the document containing the articles of agreement between the foreman and the subscribers relating to the chit. For Section 27, this document is especially important because it determines when, where and in what manner the instalment subscriptions become payable.

What Section 27 Requires in Practice

The non-prized subscriber must pay every subscription that falls due.
Payment must follow the dates, times and places specified in the chit agreement.
After payment, the subscriber has a right to obtain a receipt from the foreman.
The subscriber should retain receipts and other payment records as evidence that instalments were paid.
Failure to pay in accordance with the chit agreement may bring the provisions concerning defaulting subscribers, including Section 28, into relevance.

Relationship with Section 28

Section 27 deals with timely payment by non-prized subscribers. The next provision, Section 28 of the Chit Funds Act, 1982, addresses removal of defaulting subscribers subject to the statutory conditions. Reading Sections 27 and 28 together helps explain the distinction between compliance with the subscription obligation and the consequences that may follow a default.

Current Legal Position

The Chit Funds Act, 1982 is Act No. 40 of 1982 and regulates chit funds and connected matters. The Chit Funds (Amendment) Act, 2019 made important changes to several provisions and terminology in the principal Act. The consolidated official text continues to set out Section 27 as the provision governing payment of subscriptions and the right of a non-prized subscriber to obtain a receipt.

Legal note: The Chit Funds Act operates together with applicable State or Union Territory rules and administrative requirements. For registration, forms, procedure or local compliance, the relevant Registrar of Chits and applicable rules should also be checked.

Related Provisions

For the surrounding statutory scheme, see Section 26 - Withdrawal of foreman, Section 28 - Removal of defaulting subscribers, Section 29 - Substitution of subscribers, and Section 30 - Amounts due to defaulting subscribers.