Section 28 of the Chit Funds Act, 1982: Removal of Defaulting Subscribers
Section 28 regulates when a non-prized subscriber who defaults in paying a chit subscription may be removed from the list of subscribers. It also provides safeguards concerning written notice, restoration after payment, record keeping, filing with the Registrar and arbitration.
Text and meaning of Section 28
Section 28(1): A non-prized subscriber who defaults in paying the subscription in accordance with the terms of the chit agreement is liable to have his name removed from the list of subscribers. The foreman must give written notice of the removal to the defaulting subscriber within fourteen days from the date of removal.
Proviso to Section 28(1): If the defaulter pays the defaulted instalment together with interest at the prescribed rate within seven days from receipt of the notice, the subscriber's name must be re-entered in the list of subscribers.
Section 28(2): The removal and its date must be entered in the relevant book maintained by the foreman.
Section 28(3): The foreman must file a true copy of that entry with the Registrar within fourteen days from the date of removal.
Section 28(4): A defaulting subscriber aggrieved by the removal may, within seven days from receipt of the removal notice, refer the matter to the Registrar for arbitration under Section 64 of the Chit Funds Act, 1982.
Who is a defaulting subscriber?
For Section 28, the relevant default is failure by a non-prized subscriber to pay the subscription in accordance with the chit agreement. The chit agreement is therefore important in determining the instalment amount, due date, payment conditions and the circumstances in which a subscriber is treated as being in default.
Procedure for removal under Section 28
The statutory sequence is important. There must first be a payment default under the chit agreement. If the subscriber's name is removed, the foreman must issue written notice within fourteen days. The removal must also be recorded in the relevant book and a true copy of the entry must be filed with the Registrar within fourteen days from removal.
Right to restoration after payment
The proviso gives the defaulting subscriber an opportunity to restore membership. Payment of the defaulted instalment together with interest at the prescribed rate must be made within seven days from receipt of the removal notice. On compliance, the name is to be re-entered in the list of subscribers.
Right to arbitration under Section 64
A subscriber who disputes the removal may refer the matter to the Registrar for arbitration under Section 64. Section 28(4) fixes a seven-day period calculated from receipt of the removal notice. Because the statutory period is short, the date on which notice is received can be significant.
Related provisions
Section 27 deals with payment of subscriptions by non-prized subscribers. Section 29 deals with substitution of another subscriber after removal under Section 28, while Section 30 addresses amounts due to defaulting subscribers. These provisions should be read together when considering the consequences of default and removal.
Official legal source
For the authoritative Central Act and its current text, refer to India Code, the Government of India legislative database. State rules made under the Act may prescribe matters such as the applicable rate of interest and should also be checked where relevant.
Legal note: This article explains the statutory provision for general information. Applicable State rules, notifications, the chit agreement and the facts of a particular dispute may affect the legal position.