In Brief
A chit fund company sought recovery of unpaid installments and future subscriptions from defaulting subscribers. The High Court Division Bench had held that future installments could not be recovered as they represented only a promise to pay a contractual obligation, not a pre-existing debt. The Supreme Court reversed this, holding that a chit subscriber incurs a debt on subscription (payable in installments), and on default, the foreman may recover all future subscriptions as a lump sum. This is necessary to protect other subscribers' interests and ensure the chit fund's functioning. The provision is not penal but essential to the system.
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