Section 38 of the Chit Funds Act, 1982 - Meetings of General Body of Subscribers
Section 38 regulates special meetings of the general body of subscribers of a chit. It sets out who may initiate a meeting, when the foreman must convene one, the role of the Registrar if the foreman does not act, the minimum notice period, and the voting and representation requirements for a special resolution.
Statutory text of Section 38
38. Meetings of general body of subscribers.
(1) The foreman may, on his own motion, convene a special meeting of the general body of subscribers for considering any proposal to pass a special resolution.
(2) The foreman shall convene such a meeting on the requisition in writing of not less than twenty-five per cent. of the number of non-prized and unpaid prized subscribers, and the meeting so convened shall be held within thirty days of the date of receipt of the requisition and if the foreman refuses or fails to call such a meeting within fourteen days of the date of receipt of such requisition, not less than twenty-five per cent. of the number of non-prized and unpaid prized subscribers may give notice of the fact to the Registrar.
(3) The Registrar shall, within twenty-one days of the receipt of the notice under sub-section (2), convene or direct the convening of a special meeting of the general body of the subscribers and on receipt of such a direction, it shall be the duty of the foreman to comply with such direction.
(4) Notice of not less than fourteen days shall be given to all the subscribers of a meeting under this section specifying the object, date, hour and place of meeting and a copy of the special resolution shall also be sent along with the notice of the meeting.
Explanation. For the purposes of this section and section 39, "special resolution" means a resolution which is passed at a meeting of the general body of the subscribers specially convened for the purpose, by a majority of not less than two-thirds of the subscribers to the chit present at the meeting in person or by proxy and representing not less than three-fourths of the amount or, as the case may be, the value of the grain, subscribed by all the non-prized and unpaid prized subscribers, if any.
What Section 38 means
The provision creates a formal procedure for obtaining subscriber approval through a special resolution. The foreman can initiate the process, but qualifying subscribers also have a statutory right to require a special meeting. If the foreman does not act within the prescribed period, the subscribers may approach the Registrar, who must then act within the period stated in sub-section (3).
Key requirements and statutory timelines
| Requirement | Section 38 rule |
|---|---|
| Subscriber requisition | Must be in writing and supported by not less than 25% of the number of non-prized and unpaid prized subscribers. |
| Meeting after requisition | The meeting must be held within 30 days from receipt of the requisition. |
| Failure of foreman to call meeting | If the foreman refuses or fails to call the meeting within 14 days from receipt of the requisition, the qualifying subscribers may notify the Registrar. |
| Registrar's action | Within 21 days after receiving the notice, the Registrar must convene or direct the convening of the special meeting. |
| Notice to subscribers | At least 14 days' notice must be given to all subscribers, stating the object, date, hour and place of the meeting. |
| Proposed resolution | A copy of the special resolution must accompany the meeting notice. |
Meaning of "special resolution"
For Section 38 and Section 39, a special resolution is not an ordinary majority decision. The meeting must be specially convened for that purpose, and the resolution must satisfy both the voting-majority requirement and the prescribed representation of the subscribed amount or value.
In practical terms, the resolution must be supported by not less than two-thirds of the subscribers present in person or by proxy, and those subscribers must represent not less than three-fourths of the amount, or where applicable the value of grain, subscribed by all non-prized and unpaid prized subscribers.
How the procedure works
- The foreman may propose a special meeting on his own initiative.
- Alternatively, the required 25% group of eligible subscribers may submit a written requisition.
- The foreman must call the meeting and ensure that it is held within 30 days from receipt of the requisition.
- If the foreman refuses or fails to call it within 14 days, the required group may notify the Registrar.
- The Registrar must act within 21 days after receiving that notice.
- Every subscriber must receive at least 14 days' notice containing the meeting particulars and a copy of the proposed special resolution.
- The resolution must satisfy the special majority and representation requirements stated in the Explanation.
Relationship with Section 39
The Explanation to Section 38 expressly applies the definition of "special resolution" to both Section 38 and Section 39 of the Chit Funds Act, 1982. Section 39 concerns continuation of chits in specified circumstances, making the special-resolution procedure relevant where that provision requires subscriber consent.
Current legal context
The Chit Funds Act, 1982 is Central Act No. 40 of 1982. The Chit Funds (Amendment) Act, 2019 amended several provisions and terminology in the principal Act. The 2019 Amendment Act did not substitute or amend Section 38 itself, so the meeting procedure reproduced above continues to be the text of Section 38.
Important note
This page provides the statutory provision and a general explanation for legal information. Chit regulation can also involve applicable rules, notifications and State-level administrative requirements. For a specific dispute or compliance issue, the current law and applicable local rules should be checked.