Section 58 of the Chit Funds Act, 1982 - Award of Compensation to Foreman
Section 58 forms part of Chapter X of the Chit Funds Act, 1982, which deals with winding up of chits. It gives the Registrar a limited power to award compensation to the foreman when an application for winding up is dismissed and the Registrar is satisfied that the application was frivolous or vexatious.
The Chit Funds Act, 1982 is Act No. 40 of 1982 and provides for the regulation of chit funds and matters connected with them. The official consolidated text is available on India Code.
Text of Section 58 - Award of compensation to foreman
(1) Where an application for the winding up of a chit is dismissed and the Registrar is satisfied that the petition is frivolous or vexatious, he may, on the application of the foreman, award against the petitioner such amount, not exceeding one thousand rupees, as he deems reasonable as compensation to the foreman for the expenses or injury caused to him by the presentation of the application and the proceedings thereon, and such amount may be realised as if the award were a decree of a Civil Court.
(2) On the making of an award under sub-section (1), no suit for compensation in respect of an application for any winding up of the chit shall be entertained.
Meaning and scope of Section 58
Section 58 is intended to deal with the consequences of an unsuccessful winding-up application that the Registrar considers frivolous or vexatious. Dismissal of the winding-up application by itself is not enough. The Registrar must also be satisfied as to its frivolous or vexatious character, and compensation is awarded on an application made by the foreman.
Essential requirements
- An application for winding up of a chit must have been dismissed.
- The Registrar must be satisfied that the petition was frivolous or vexatious.
- The foreman must apply for compensation.
- The Registrar may award a reasonable amount, subject to the statutory ceiling of Rs. 1,000.
- The compensation is for expenses or injury caused by presentation of the winding-up application and the proceedings on it.
- The amount awarded may be realised as if the award were a decree of a Civil Court.
Who is a foreman?
Section 2 of the Chit Funds Act, 1982 contains the statutory definitions used in the Act. In substance, the foreman is the person who, under the chit agreement, is responsible for conducting the chit. For the complete statutory definition and its qualifications, the current text of Section 2 should be read from the official Act.
What is the role of the Registrar?
For Section 58, the relevant authority is the Registrar exercising powers under the Act. The compensation power is discretionary: the provision states that the Registrar "may" make an award when its statutory conditions are fulfilled. The Registrar also determines what amount is reasonable, but cannot exceed the ceiling expressly stated in Section 58(1).
Effect of an award under Section 58(1)
The Act gives the award an enforcement mechanism by providing that the amount may be realised as if the award were a decree of a Civil Court. This enables recovery of the amount awarded without treating it merely as an informal direction.
Bar on a separate compensation suit
Section 58(2) prevents a separate suit for compensation in respect of the winding-up application once an award under Section 58(1) has been made. The provision therefore links the statutory compensation remedy with a bar against pursuing another compensation suit for the same winding-up application.
Section 58 in the winding-up scheme
Section 58 appears in Chapter X of the Act. The surrounding provisions deal with winding-up orders and their consequences. For related provisions, see Section 57, Section 59, and Section 60.
Official legal source
For the authoritative Central Act, amendments, rules, notifications, and related material, refer to the Chit Funds Act, 1982 on India Code.
Last reviewed: 16 September 2026.