Section 31 of the Chit Funds Act, 1982: Prized Subscriber to Furnish Security
Section 31 protects the payment stream of a chit after a subscriber receives the prize. It generally requires a prized subscriber to provide sufficient security for future subscriptions unless the subscriber chooses to have all future subscriptions deducted from the net chit amount due.
What Section 31 provides
Where a prized subscriber does not offer to deduct all future subscriptions from the net chit amount payable to that subscriber, the prized subscriber must furnish sufficient security and the foreman must take that security for due payment of all future subscriptions.
If the foreman is itself a prized subscriber, the foreman must give security for payment of all future subscriptions to the satisfaction of the Registrar.
Meaning and practical effect
A prized subscriber is a subscriber who has become entitled to the net chit amount at an instalment in accordance with the chit agreement. Section 31 addresses the risk that remains after the prize is received but future instalments are still payable.
The provision therefore gives the prized subscriber two practical routes: future subscriptions may be deducted from the net chit amount, or sufficient security may be furnished for their due payment. Where security is used, the foreman has a corresponding statutory duty to take sufficient security.
What is the "net chit amount"?
The Chit Funds (Amendment) Act, 2019 introduced the expression net chit amount. Under Section 2(jb), it means the difference between the gross chit amount and the discount. The amendment also replaced the earlier expression "prize amount" in Section 31 with "net chit amount" with effect from 1 January 2020.
Key requirements under Section 31
| Situation | Requirement |
|---|---|
| Future subscriptions are deducted from the net chit amount | The statutory security requirement in Section 31 is avoided to that extent because the future subscriptions are retained from the amount due. |
| Future subscriptions are not deducted | The prized subscriber must furnish, and the foreman must take, sufficient security for due payment of all future subscriptions. |
| Foreman is a prized subscriber | The foreman must give security for all future subscriptions to the satisfaction of the Registrar. |
Why Section 31 matters
A chit normally continues for several instalments. A subscriber who receives the prize before the chit ends may still owe later subscriptions. Section 31 is intended to secure those future payments and thereby protect the orderly continuation of the chit and the interests of the other subscribers.
Important legal note
The Chit Funds Act, 1982 is a Central Act, while administration and detailed procedural rules involve the appropriate State Government and Registrar. Applicable State rules, notifications and the chit agreement should therefore also be checked for procedural requirements concerning the form, valuation, acceptance or release of security.
Official legal sources
For the current consolidated statutory text, see the Chit Funds Act, 1982 on India Code. The official Act PDF is also available from India Code. State-specific rules and Registrar procedures should be verified on the relevant State Government portal.
Related provisions
Section 31 should be read with the definitions in Section 2 and with the neighbouring provisions governing prized subscribers, including Section 32 - Prized subscriber to pay subscriptions regularly and Section 33 - Foreman to demand future subscriptions by written notice.
Updated: 15 September 2026. This page is a general legal information resource and should be read with the current statutory text, applicable State rules and the relevant chit agreement.