Tag Archives: Chit Funds Act

Relationship Between Foreman & Subscribers – In a Chit Fund Transaction

The relationship between the foreman and the subscribers in a chit fund transaction is of such a nature that there is a necessity and justification for making stringent provisions to safeguard the interest of other subscribers, and the foreman. If a prized subscriber defaults in payment of his subscriptions, the foreman will be obliged to obtain the equivalent amount from other sources, to meet the obligations for payment of the chit amount to the other members, who prize the chit on subsequent draws. For raising such an amount, the foreman may be required to pay high rates of interest.

        The stipulation of empowering the foreman to recover the entire balance amount in a lump sum, in the event of default being committed by a prized subscriber, is to ensure punctual payment by each of the individual subscribers of the chit fund. Without punctual payments, the system would become unworkable and the foreman would not be in a position to discharge his obligations to the other members of the chit fund. M/s Oriental Kuries Ltd. V. LISSA, 2020 (138) ALR 220.

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