Section 26 of the Chit Funds Act, 1982 - Withdrawal of Foreman

Section 26 of the Chit Funds Act, 1982 regulates when a foreman may withdraw from an ongoing chit. The provision protects subscribers by requiring written consent before withdrawal and by preserving the security already furnished by a withdrawing foreman.

What does Section 26 provide?

Section 26 - Withdrawal of foreman

(1) No foreman, or where there are more than one foreman in a chit, none of them shall withdraw from the chit until its termination unless such withdrawal is assented to in writing by all the non-prized and unpaid prized subscribers and a copy of such assent has been filed with the Registrar under section 41.

(2) The withdrawal from a chit of any one of the foreman shall not affect the security given by him under section 20 or section 31.

Meaning and effect of Section 26

The general rule is that a foreman cannot leave the chit before the chit terminates. Where a chit has more than one foreman, the same restriction applies to each foreman.

An early withdrawal is permitted only when all non-prized subscribers and all unpaid prized subscribers assent to the withdrawal in writing. A copy of that written assent must also be filed with the Registrar in accordance with Section 41.

Who is a foreman?

Under the Chit Funds Act, the foreman is the person responsible for conducting the chit in accordance with the chit agreement and the Act. Section 26 is therefore intended to prevent the person conducting the chit from withdrawing unilaterally while obligations to subscribers remain outstanding.

Conditions for withdrawal before termination

The chit must ordinarily continue with the foreman until termination.
All non-prized subscribers must assent to the proposed withdrawal in writing.
All unpaid prized subscribers must also assent in writing.
A copy of the written assent must be filed with the Registrar under Section 41.
Withdrawal does not release or extinguish the security referred to in Sections 20 or 31.

Effect on security furnished by the foreman

Sub-section (2) expressly provides that withdrawal by a foreman does not affect the security furnished by that foreman under Section 20 or Section 31. The statutory protection therefore continues despite the withdrawal.

Related provisions

Section 26 should be read with the provisions governing the rights, duties, records, accounts and liabilities of the foreman, particularly Section 21, Section 22, Section 23, Section 24 and Section 25.

Legal update: The Chit Funds Act, 1982 was amended by the Chit Funds (Amendment) Act, 2019. The 2019 Amendment introduced changes to several provisions of the principal Act. The text of Section 26 reproduced above remains the operative wording reflected in current legal references. For compliance or litigation, the applicable State rules, notifications and Registrar requirements should also be checked.

Official legal resources

Last reviewed: September 15, 2026.