(1) For the proper conduct of the chit, every foreman shall, before applying for the certificate of commencement under section 7,-
(a) execute an indenture of mortgage and trust in favour of the Registrar as trustee charging by way of security property sufficient for the realisation of the chit amount;
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(b) (i) deposit in any approved bank an amount of cash not less than half of the chit amount, or
(ii) invest in Government securities of the face value or market value whichever is, less, of not less than half of the chit amount and transfer the amount so deposited or the Government securities in favour of the Registrar to be held in trust by him as security:
Provided that, where movable property is charged by way of security, only such kind of movable property as may be prescribed shall be so charged and such movable property shall be deposited in such manner and with such person or officer as may be prescribed.
Explanation:— For the purpose of clause (a), security for realisation of the chit amount is said to be sufficient if the market value of the property assessed in the manner prescribed is equal to the chit amount.
(2) Where a foreman conducts more than one chit, he shall furnish security in accordance with the provisions of sub-section (1) in respect of each such chit.
(3) Subject to the provisions of section 520 of the Companies Act, 1956 (Central Act 1 of 1956) the security given by the foreman under sub-section (1) shall not be liable to be attached in execution of a decree or otherwise–
(i) until the chit is terminated and the claims of all the subscribers are fully satisfied;
(ii) until all dues payable by the foreman under this Act to the Registrar or any other officers have been paid;
(iii) where owing to the default of the prized subscriber the prize amount due remains unpaid even after the termination of a chit until the foreman deposits such amount in an approved bank mentioned in the chit agreement and intimates in writing the fact of such deposit to the prized subscriber.
(4) No foreman shall be entitled to conduct at a time chits the aggregate amount of which exceeds fifty percent of the total assets of the foreman or twenty five thousand rupees whichever is lower:
Provided that the maximum limit of the chit amount specified in this sub-section shall be rupees one lakh in the case of chits of which the foreman is a banking company as defined in the Banking Regulation Act, 1949 (Central Act 10 of 1949).
Explanation.— In determining the total assets of a foreman for the purposes of this sub-section, the amount of the security furnished by him under sub-section (1) shall be excluded if such amount is the amount of subscription received in advance from the subscribers.
(5) In calculating the aggregate amount of chits conducted at a time by a foreman, the chits conducted by all the members of the family of the foreman shall be taken into account.
Explanation.— For the purpose of this sub-section, the expression "members of the family of the foreman" means father, mother, husband, wife and children of the foreman, Manual of Goa Laws (Vol. I) – 682 – Chit Funds Act wholly dependent, on him and who have no independent assets sufficient to entitle for them to conduct any chit.
(6) The Registrar shall, after the termination of a chit and after satisfying himself that the requirements under clauses (i) to (iii) of sub-section (3) have been complied with, release the property charged by way of security or order the release of the cash security or the Government securities referred to in sub-section (1) and in so doing, he shall follow such procedure as may be prescribed.
(7) (a) The Registrar may, on an application made in this behalf by any foreman, instead of releasing the security under sub-section (6), accept the same as security in respect of any other chit or chits conducted by the same foreman;
(b) The Registrar shall,—
(i) where the value or amount of the security accepted is less than the value or amount specified in sub-section (1), require the foreman to furnish additional security to make up the deficit;
(ii) where the value or amount of the security is in excess of the amount of value required, release the excess thereof.
(8) Notwithstanding anything to the contrary contained in any other law the security furnished under this section shall not be dealt with by the foreman during the currency of the chit and any dealing by the foreman with respect thereto by way of transfer, charge, mortgage or other encumbrances shall be void.