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1
THE CHIT FUNDS ACT, 1982
(Last Updated on 1st January, 2020).
________
ARRANGEMENT OF SECTIONS
________
CHAPTER I
PRELIMINARY
SECTIONS
1. Short title, extent and commencement.
2. Definitions.
3. Act to override other laws, memorandum, articles, etc.
CHAPTER II
REGISTRATION OF CHITS, COMMENCEMENT AND CONDUCT OF CHIT BUSINESS
4. Prohibition of chits not sanctioned or registered under the Act.
5. Prohibition of invitation for subscriptions except under certain conditions.
6. Form of chit agreement.
7. Filing of chit agreement.
8. Minimum capital requirements for the commencement, etc., of a chit, and creation of a reserve
fund, by a company.
9. Commencement of chit.
10. Copies of chit agreement to be given to subscribers.
11. Use of words “chit”, “chit fund”, “chitty”, “kuri”, “fraternity fund”, or “Rotating Savings and
Credit Institution”.
12. Prohibition of transacting business other than chit business by a company.
13. Aggregate amount of chits.
14. Utilisation of funds.
15. Alteration of chit agreement.
16. Date, time and place of conducting chits.
17. Minutes of proceedings.
18. Copies of minutes to be filed with Registrar.
19. Restriction on opening of new place of business.
CHAPTER III
RIGHTS AND DUTIES OF FOREMAN
20. Security to be given by foreman.
21. Rights of foreman.
22. Duties of foreman.
23. Books, records, etc., to be kept by foreman.
24. Balance sheet.
2
SECTIONS
25. Liability of foreman to subscribers.
26. Withdrawal of foreman.
CHAPTER IV
RIGHTS AND DUTIES OF NON-PRIZED SUBSCRIBERS
27. Non-prized subscribers to pay subscriptions and obtain receipts.
28. Removal of defaulting subscribers.
29. Substitution of subscribers.
30. Amounts due to defaulting subscribers.
CHAPER V
RIGHTS AND DUTIES OF PRIZED SUBSCRIBERS
31. Prized subscriber to furnish security.
32. Prized subscriber to pay subscriptions regularly.
33. Foreman to demand future subscriptions by written notice.
CHAPTER VI
TRANSFERS
34. Restrictions on transfer of rights of foreman.
35. Transfer of non-prized subscriber’s rights to be in writing.
36. Recognition of transfer by foreman.
37. Entry of transferee’s name in the books.
CHAPTET VII
MEETINGS OF GENERAL BODY OF SUBSCRIBERS
38. Meetings of general body of subscribers.
CHAPTER VIII
TERMINATION OF CHITS
39. Provision for continuation of chits in certain cases.
40. Termination of chits.
41. Copy of assent or consent to be filed with Registrar.
42. Refund of non-prized subscribers’ subscriptions.
43. Subscribers’ dues to be first charge on chit assets.
CHAPTER IX
INSPECTION OF DOCUMENTS
44. Foreman to allow certain subscribers to inspect chit records.
45. Preservation of chit records by foreman.
46. Inspection of chit books and records by Registrar.
47. Power of Reserve Bank to inspect chit books and records.
3
CHAPTER X
WINDING UP OF CHITS
SECTIONS
48. Circumstances under which chits may be wound up.
49. Application for winding up.
50. Bar to winding up proceedings.
51. Commencement and effect of winding up order.
52. Injunction order.
53. Powers of Registrar.
54. Vesting of chit assets in Registrar or other persons.
55. Suits, etc., to be stayed on winding up order.
56. Notification of winding up order.
57. Cessation of winding up proceedings on insolvency of foreman, etc., or the winding up of the
company and transfer of such proceedings.
58. Award of compensation to foreman.
59. Right to appeal.
60. Limitation.
CHAPTER XI
APPOINTMENT OF OFFICERS AND LEVY OF FEES
61. Appointment of Registrar and other officers.
62. Inspection of documents in Registrar’s office.
63. Levy of fees.
CHAPTER XII
DISPUTES AND ARBITRATION
64. Disputes relating to chit business.
65. Period of limitation.
66. Settlement of disputes.
67. Procedure for settlement of disputes and powers of Registrar or nominee.
68. Attachment before judgment and other interlocutory orders.
69. Decision of Registrar or nominee.
70. Appeal against decision of Registrar or nominee.
71. Money how recovered.
72. Private transfer of property made after issue of certificate void against foreman.
CHAPTER XIII
MISCELLANEOUS
73. Advisory role of Reserve Bank.
74. Appeals.
75. Powers of Registrar to give extension of time for filing documents.
4
SECTIONS
76. Penalties.
77. Penalty for second and subsequent convictions.
78. Application of fine.
79. Offences by companies.
80. Cognizance of offences.
81. Power to compound offences.
82. Power to enter and search any place and to seize any documents.
83. Officers to be public servants.
84. Power to delegate.
85. Act not to apply to certain chits.
86. Banks not to conduct chit business.
87. Power to exempt.
88. Protection of action taken under the Act.
89. Power to make rules.
90. Repeal and saving.
THE SCHEDULE.
5
THE CHIT FUNDS ACT, 1982
ACT NO. 40 OF 1982
[19th August, 1982.]
An Act to provide for the regulation of chit funds and for matters connected therewith.
BE it enacted by Parliament in the Thirty-third Year of the Republic of India as follows:—
CHAPTER I
PRELIMINARY
1. Short title, extent and commencement.—(1) This Act may be called the Chit Funds Act, 1982.
(2) It extends to the whole of India
1
***.
(3) It shall come into force on such date
2
as the Central Government may, by notification in the
Official Gazette, appoint, and different dates may be appointed for different States.
2. Definitions.—In this Act, unless the context otherwise requires,—
(a) “approved bank” means the State Bank of India constituted under section 3 of the State Bank
of India Act, 1955 (23 of 1955), or a subsidiary bank constituted under section 3 of the State
Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), or a corresponding new bank
constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings)
Act, 1970 (5 of 1970), or a Regional Rural Bank established under section 3 of the Regional Rural
1. The words “except the State of Jammu and Kashmir” omitted by Act 34 of 2019, s. 95 and the Fifth Schedule (w.e.f. 31-10- 2019).
2. The provisions of this Act shall come into force in—
the State of West Bengal on 2nd April, 1984, vide notification No. S.O. 143(E), dated 1st March, 1984, see Gazette of India, Extraordinary,
Part II, sec. 3(ii).
the State of Tamil Nadu on 13th April, 1984, vide notification No. S.O. 281(E), dated 12th April, 1984, see Gazette of India, Extraordinary,
Part II, sec. 3(ii).
the State of Himachal Pradesh on 1st November, 1984, vide notification No. S.O. 808(E), dated 29th October, 1984, see Gazette of India,
Extraordinary, Part II, sec. 3(ii).
the State of Sikkim on 6th November, 1984, vide notification No. S.O. 837(E), dated 14th November, 1984, see Gazette of India, Extraordinary,
Part II, sec. 3(ii).
the Union territory of Andaman and Nicobar Islands on 1st July, 1985, vide notification No. S.O. 493(E), dated 27th June, 1985, see Gazette of
India, Extraordinary, Part II, sec. 3(ii).
the Union territory of Pondicherry on 1st November, 1986 vide notification No. S.O. 771(E), dated 28th October, 1986 see Gazette of India,
Extraordinary, Part II, sec. 3(ii).
the State of Rajasthan on 1st July, 1989 vide notification No. S.O. 481(E), dated 26th June, 1989, see Gazette of India, Extraordinary, Part II,
sec. 3(ii).
the State of Assam on 1st March, 1990, vide notification No. S.O. 166(E), dated 22nd February, 1992, see Gazette of India, Extraordinary,
Part II, sec. 3(ii).
the State of Manipur on 1st November, 1994, vide notification No. S.O. 779(E), dated 28th October, 1994, see Gazette of India, Extraordinary,
Part II, sec. 3(ii).
the State of Tripura on 1st March, 1995, vide notification No. S.O. 131(E), dated 1st March, 1995 see Gazette of India, Extraordinary, Part II,
sec. 3(ii).
the State of Bihar on 2nd October,1987, vide notification No. S.O. 864(E), dated 28th September, 1987, see Gazette of India, Extraordinary,
Part II, sec. 3(ii).
the State of Punjab on 1st April, 1999, vide notification No. S.O. 204(E), dated 31st March, 1999, see Gazette of India, Extraordinary, Part II,
sec. 3(ii).
the State of Karnataka on 2nd January, 1984 vide notification No. S.O. 946(E), dated 30th December, 1983, see Gazette of India, Extraordinary,
Part II, sec. 3(ii).
the Union territory of Chandigarh on 1st May, 1984, vide notification No. S.O. 322(E), dated 27th April, 1984, see Gazette of India,
Extraordinary, Part II, sec. 3(ii).
the Union territory of Dadra and Nagar Haveli on 3rd September, 1984, vide notification No. S.O. 660(E), dated 30th August, 1984, see Gazette
of India, Extraordinary, Part II, sec. 3(ii).
the State of Orissa on 1st September, 1985, vide notification No. S.O. 629(E), dated 26th August, 1985, see Gazette of India, Extraordinary,
Part II, sec. 3(ii).
the Union territory of Goa, Daman & Diu on 1st January, 1986, vide notification No. S.O. 910(E), dated 24th December, 1985, see Gazette of
India, Extraordinary, Part II, sec. 3(ii).
the State of Madhya Pradesh on 1st July 1986, vide notification No. S.O. 381(E), dated 27th June, 1986, see Gazette of India, Extraordinary, Part
II, sec. 3(ii).
the State of Meghalaya on 2nd January, 1988, vide notification No. S.O. 1135(E), dated 30th December, 1987, see Gazette of India,
Extraordinary, Part II, sec. 3(ii).
the State of Uttar Pradesh on 1st February, 1988, vide notification No. S.O. 133(E), dated 29th January, 1988, see Gazette of India, Extraordinary,
Part II, sec. 3(ii).
6
Banks Act, 1976 (21 of 1976), or a corresponding new bank constituted under section 3 of the
Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or a banking
company as defined under clause (e) of section 5 of the Banking Regulation Act, 1949 (10 of 1949),
or a banking institution notified by the Central Government under section 51 of that Act or such other
banking institution as the State Government may, in consultation with the Reserve Bank, approve for
the purposes of this Act;
(b) “chit” means a transaction whether called chit, chit fund, chitty, kuri
1
[, fraternity fund,
Rotating Savings and Credit Institution] or by any other name by or under which a person enters into
an agreement with a specified number of persons that every one of them shall subscribe a certain sum
of money (or a certain quantity of grain instead) by way of periodical instalments over a definite
period and that each such subscriber shall, in his turn, as determined by lot or by auction of by tender
or in such other manner as may be specified in the chit agreement, be entitled to the
2
[net chit
amount].
Explanation.—A transaction is not a chit within the meaning of this clause, if in such
transaction,—
(i) some alone, but not all, of the subscribers get the
2
[net chit amount] without any liability to
pay future subscriptions; or
(ii) all the subscribers get the
3
[gross chit amount] by turns with a liability to pay future
subscriptions;
(c) “chit agreement” means the document containing the articles of agreement between the
foreman and the subscribers relating to the chit;
4
* * * * *;
(e) “chit business” means the business of conducting a chit;
(f) “defaulting subscriber” means a subscriber who has defaulted in the payment of subscriptions
due in accordance with the terms of the chit agreement;
(g) “discount” means the sum of money or the quantity of grain which a prized subscriber is,
under the terms of the chit agreement, required to forego and which is set apart under the said
agreement to meet the expenses of running the chit or for distribution among the subscribers or for
both;
5
* * * * *;
(i) “draw” means the manner specified in the chit agreement for the purpose of ascertaining the
prized subscriber at any instalment of the chit;
(j) “foreman” means the person who under the chit agreement is responsible for the conduct of
the chit and includes any person discharging the functions of the foreman under section 39;
6
[(ja) “gross chit amount” means the sum-total of the subscriptions payable by all the subscribers
for any installment of a chit without any deduction of discount or otherwise;
(jb) “net chit amount” means the difference between the gross chit amount and the discount, and
in the case of a fraction of a ticket means the difference between the gross chit amount and the
discount proportionate to the fraction of the ticket, and when the net chit amount is payable otherwise
than in cash, the value of the net
chit amount shall be the value at the time when it becomes payable;]
1. Ins. by Act 41 of 2019, s. 2 (w.e.f. 1-1-2020).
2. Subs. by s. 3, ibid., for “prize amount” (w.e.f. 1-1-2020).
3. Subs. by s. 3, ibid., for “chit amount” (w.e.f. 1-1-2020).
4. Clause (d) omitted by s. 2, ibid. (w.e.f. 1-1-2020).
5. Clause (h) omitted by s. 2, ibid. (w.e.f. 1-1-2020).
6. Ins. by s. 2, ibid., (w.e.f. 1-1-2020).
7
(k) “non-prized subscriber” does not include a defaulting subscriber;
(l) “prescribed” means prescribed by rules made under this Act;
1
* * * * *
(n) “prized subscriber” means a subscriber who has either received or is entitled to receive the
2
[net chit amount];
(o) “Registrar” means the Registrar of Chits appointed under section 61, and includes an
Additional, a Joint, Deputy or an Assistant Registrar appointed under that section;
(p) “Reserve Bank” means the Reserve Bank of India constituted under the Reserve Bank of India
Act, 1934 (2 of 1934);
3
[(pa) “share of discount” means the share of the subscriber in the amount of discount available
under the chit agreement for rateable distribution among the subscribers at each instalment of the
chit.]
(q) “State Government”, in relation to a Union territory, means the administrator of that Union
territory appointed by the President under article 239 of the Constitution;
(r) “subscriber” includes a person who holds a fraction of a ticket and also a transferee of a ticket
or fraction thereof by assignment in writing or by operation of law;
(s) “ticket” means the share of a subscriber in a chit.
3. Act to override other laws, memorandum, articles, etc.—Save as otherwise expressly provided
in this Act,—
(a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained
in any other law for the time being in force or in the memorandum or articles of association or
bye-laws or in any agreement or resolution whether the same be registered, executed or passed, as the
case may be, before or after the commencement of this Act; and
(b) any provision contained in the memorandum, articles, bye-laws, agreement or resolution
aforesaid, shall, to the extent to which it is repugnant to the provisions of this Act, become or be void,
as the case may be.
CHAPTER II
REGISTRATION OF CHITS, COMMENCEMENT AND CONDUCT OF CHIT BUSINESS
4. Prohibition of chits not sanctioned or registered under the Act.—(1) No chit shall be
commenced or conducted without obtaining the previous sanction of the State Government within whose
jurisdiction the chit is to be commenced or conducted or of such officer as may be empowered by that
Government in this behalf, and unless the chit is registered in that State in accordance with the provisions
of this Act:
Provided that a sanction obtained under this sub-section shall lapse if the chit is not registered within
twelve months from the date of such sanction or within such further period or periods not exceeding six
months in the aggregate as the State Government may, on application made to it in this behalf, allow.
(2) An application for the purpose of obtaining a sanction under sub-section (1) shall be made by the
foreman in such form and in such manner as may be prescribed.
(3) The previous sanction referred to in sub-section (1) may be refused, if the foreman,—
(a) had been convicted of any offence under this Act or under any other Act regulating chit
business and sentenced to imprisonment for any such offence; or
1. Clause (m) omitted by Act 41 of 2019, s. 2 (w.e.f. 1-1-2020).
2. Subs. by s. 3, ibid., for “prize amount” (w.e.f. 1-1-2020).
3. Ins. by s. 2, ibid. (w.e.f. 1-1-2020).
8
(b) had defaulted in the payment of fees or the filing of any statement or record required to be
paid or filed under this Act or had violated any of the provisions of this Act or the rules made
thereunder; or
(c) had been convicted of any offence involving moral turpitude and sentenced to imprisonment
for any such offence unless a period of five years has elapsed since his release:
Provided that before refusing any such sanction, the foreman shall be given a reasonable opportunity
of being heard.
(4) The order of the State Government, and, subject to the provisions of sub-section (5), the order of
the officer empowered under sub-section (1), issuing or refusing previous sanction under this section shall
be final.
(5) Any person aggrieved by the refusal to issue previous sanction by an officer empowered under
sub-section (1) may appeal to the State Government within thirty days of the date of communication to
him of such refusal and the decision of that Government on such appeal shall be final.
5. Prohibition of invitation for subscriptions except under certain conditions.—No person shall
issue or cause to be issued any notice, circular, prospectus, proposal or other document inviting the public
to subscribe for tickets in any chit unless such notice, circular, prospectus, proposal or document contains
a statement that the previous sanction required under section 4 has been obtained and the particulars of
such sanction.
6. Form of chit agreement.—(1) Every chit agreement shall be in duplicate and shall be signed by
each of the subscribers or by any person authorised by him in writing and the foreman and attested by at
least two witnesses and it shall contain the following particulars, namely:—
(a) full name and residential address of every subscriber;
(b) the number of tickets including the fraction of a ticket held by each subscriber;
(c) the number of instalments, the amount payable for each ticket at every instalment and the
interest or penalty, if any, payable on any default in the payment of such instalments;
(d) the probable date of commencement and the duration of the chit;
(e) the manner of ascertaining the prized subscriber at each instalment;
(f) the maximum amount of discount which the prized subscriber has to forego at any instalment;
(g) the mode and proportion in which the discount is distributable by way of
1
[share of discount],
foreman’s commission or remuneration of expenses for running the chit, as the case may be;
(h) the date, time and place at which the chit is to be drawn;
(i) the instalment at which the foreman is to get the
2
[gross chit amount];
(j) the name of the approved bank in which chit moneys shall be deposited by the foreman under
the provisions of this Act;
(k) where the foreman is an individual, the manner in which a chit shall be continued when such
individual dies or becomes of unsound mind or is otherwise incapacitated;
(l) the consequences to which a non-prized or prized subscriber or the foreman shall be liable in
case of violation of any of the provisions of the chit agreement;
(m) the conditions under which a subscriber shall be treated as a defaulting subscriber;
(n) the nature and particulars of the security to be offered by the foreman;
1. Subs. by Act 41of 2019, s. 3, for “dividend” (w.e.f. 1-1-2020).
2. Subs. by s. 3, ibid., for “chit amount” (w.e.f. 1-1-2020).
9
(o) the dates on which and time during which the foreman shall, subject to the provisions
contained in section 44, allow inspection of chit records to non-prized and unpaid prized subscribers;
(p) the names of the nominees of each subscriber, that is to say, the names of the persons to
whom the benefits accruing to the subscriber under the chit may be paid in the case of the death of the
subscriber or when he is otherwise incapable of making an agreement;
(q) any other particulars that may, from time to time, be prescribed.
Explanation.—For the purposes of this sub-section, it shall be sufficient if the signature of each
subscriber is obtained in separate copies of the agreement.
(2) The duration of a chit shall not extend beyond a period of five years from the date of its
commencement:
Provided that the State Government may permit the duration of a chit up to a period of ten years if it
is satisfied that it is necessary so to do, having regard to,—
(a) the financial condition of the foreman;
(b) his methods of operation;
(c) the interests of prospective subscribers;
(d) the requirements as to security; and
(e) such other factors as the circumstances of the case may require.
(3) The amount of discount referred to in clause (f) of sub-section (1) shall not exceed
1
[thirty per
cent.] of the
2
[gross chit amount].
(4) Where the prized subscriber at any instalment of the chit is required to be determined by auction
and more than one person offer the maximum discount, the prized subscriber shall be determined by lot.
7. Filing of chit agreement.—(1) Every chit agreement shall be filed in duplicate by the foreman
with the Registrar.
(2) The Registrar shall retain one copy of the chit agreement and return the duplicate to the foreman
with an endorsement that the chit agreement has been registered:
Provided that the Registrar may refuse to register the chit agreement on any one or more of the
following grounds, namely:—
(a) that the security offered by the foreman under section 20 is insufficient;
(b) that the foreman had been convicted of any offence under this Act or under any other Act
regulating chit business and sentenced to imprisonment for any such offence;
(c) that the foreman had defaulted in the payment of fees or the filing of any statement or record
required to be paid or filed under this Act or had violated any of the provisions of this Act or the rules
made thereunder;
(d) that the foreman had been convicted of any offence involving moral turpitude and sentenced
to imprisonment for any such offence unless a period of five years has elapsed since his release:
Provided further that before refusing to register a chit under the first proviso, the foreman shall be
given a reasonable opportunity of being heard.
(3) Every endorsement made under sub-section (2) shall be conclusive evidence that the chit is duly
registered under this Act and the registration of a chit shall lapse if the declaration by the foreman under
sub-section (1) of section 9 is not filed within three months from the date of such endorsement or within
such further period or periods not exceeding three months in the aggregate as the Registrar may, on
application made to him in this behalf, allow.
8. Minimum capital requirements for the commencement, etc., of a chit, and creation of a
reserve fund, by a company.—(1) Notwithstanding anything contained in the Companies
1. Subs. by Act 10 of 2001, s. 2, for “forty per cent.” (w.e.f. 01-10-2001).
2. Subs. by Act 41 of 2019, s. 3, for “chit amount” (w.e.f. 1-1-2020).
10
Act, 1956 (1 of 1956), but subject to the provisions of this Act, a company shall not commence or carry
on chit business unless it has a paid-up capital of not less than rupees one lakh.
(2) Every company having a paid-up capital of less than rupees one lakh and carrying on chit business
on the commencement of this Act, shall, before the expiry of a period of three years from such
commencement, increase its paid-up capital of not less than rupees one lakh:
Provided that the State Government may, if it considers it necessary in the public interest or for
avoiding any hardship, extend the said period of three years in respect of any company by such further
period or periods not exceeding two years in the aggregate:
Provided further that no such company shall commence any new chit the duration of which would
extend beyond the said period of three years or such extended period or periods under the first proviso
unless it increases its paid-up capital to not less than rupees one lakh.
(3) Every company carrying on chit business shall create and maintain a reserve fund and shall, out of
the balance of profit of each year as disclosed in its profit and loss account and before any
1
[share of
discount] on its shares is declared, transfer to such reserve fund, a sum equal to not less than ten per cent.
of such profit.
(4) No company shall appropriate any sum or sums from the reserve fund except with the prior
approval of the Registrar and, for the purpose of obtaining such approval, it shall make an application in
the prescribed form to the Registrar explaining the circumstances relating to such appropriation.
9. Commencement of chit.—(1) Every foreman shall, after all the tickets specified in the chit
agreement are fully subscribed, file a declaration to that effect with the Registrar.
(2) As soon as may be after a declaration is filed under sub-section (1), the Registrar shall, after
satisfying himself that all the requirements relating to sanction, registration of chit and other matters have
been duly complied with, grant a certificate of commencement to the foreman.
(3) No foreman shall commence any auction or the draw of any chit or appropriate any
2
[gross chit
amount] unless a certificate of commencement referred to in sub-section (2) is obtained by him.
10. Copies of chit agreement to be given to subscribers.—(1) A foreman shall, as soon as may be
after he has obtained the certificate of commencement under sub-section (2) of section 9, but not later
than the date of the first draw of the chit, furnish to every subscriber, a copy of the chit agreement
certified to be a true copy.
(2) A foreman shall, within fifteen days after the close of the month in which the draw for the first
instalment of the chit is held, file with the Registrar, a certificate to the effect that the provisions of
sub-section (1) have been complied with.
3
[11. Use of words “chit”, “chit fund”, “chitty”, “kuri”, “fraternity fund” or “Rotating Savings
and Credit Institution”.—(1) No person shall carry on chit business unless he uses as part of his name
any of the words "chit", "chit fund", "chitty", "kuri", "fraternity fund" or "Rotating Savings and Credit
Institution" and no person other than a person carrying on chit business shall use as part of his name any
such word.
(2) Where at the commencement of this Act,—
(a) any person is carrying on chit business without using as part of his name any of the words
specified in sub-section (1); or
(b) any person not carrying on chit business is using any such word as part of his name,
he shall, within a period of one year from such commencement, add as part of his name any such word or,
as the case may be, delete such word from his name:
Provided that the State Government may, if it considers necessary in the public interest or for
avoiding any hardship, extend the said period of one year by such further period or periods not exceeding
one year in the aggregate.]
1. Subs. by Act 41of 2019, s. 3, for “dividend” (w.e.f. 1-1-2020).
2. Subs. by s. 3, ibid., for “chit amount” (w.e.f. 1-1-2020).
3. Subs. by s. 4, ibid., for section 11 (w.e.f. 1-1-2020).
11
12. Prohibition of transacting business other than chit business by a company.—(1) Except with
the general or special permission of the State Government, no company carrying on chit business shall
conduct any other business.
(2) Where at the commencement of this Act, any company is carrying on any business in addition to
chit business, it shall wind up such other business before the expiry of a period of three years from such
commencement:
Provided that the State Government may, if it considers it necessary in the public interest or for
avoiding any hardship, extend the said period of three years by such further period or periods not
exceeding two years in the aggregate.
13. Aggregate amount of chits.—(1) No foreman, other than a firm or other association of
individuals or a company or co-operative society, shall commence or conduct chits, the aggregate
1
[gross
chit amount] of which at any time exceeds
2
[ rupees three lakh].
(2) Where the foreman is a firm or other association of individuals, the aggregate
1
[gross chit amout]
of the chits conducted by the firm or other association shall not at any time exceed,—
(a) where the number of partners of the firm or the individuals constituting the association is not
less than four, a sum of rupees
3
[rupees eighteen lakhs];
(b) in any other case, a sum calculated on the basis of
2
[rupees three lakh] with respect to each
such partner or individual.
(3) Where the foreman is a company or co-operative society, the aggregate
1
[gross chit amount] of the
chits conducted by it shall not at any time exceed ten times the net owned funds of the company or the
co-operative society, as the case may be.
Explanation.—For the purposes of this sub-section, “net owned funds” shall mean the aggregate of
the paid-up capital and free reserves as disclosed in the last audited balance sheet of the company or co-
operative society, as reduced by the amount of accumulated balance of loss, deferred revenue,
expenditure and other intangible assets, if any, as disclosed in the said balance-sheet.
14. Utilisation of funds.—(1) No person carrying on chit business shall utilise the moneys collected
in respect of such business (other than commission or remuneration payable to such person or interest or
penalty, if any, received from a defaulting subscriber), except for—
(a) carrying on chit business; or
(b) giving loans and advances to non-prized subscribers on the security of subscriptions paid by
them; or
(c) investing in trustee securities within the meaning of section 20 of the Indian Trusts
Act, 1882 (2 of 1882); or
(d) making deposits with approved banks mentioned in the chit agreement.
(2) Where any person carrying on chit business has utilised the moneys collected in respect of such
business before the commencement of this Act, otherwise than for the purposes specified in
sub-section (1), he shall secure that so much of such moneys as have not been realised before such
commencement are realised before the expiry of a period of three years from such commencement:
Provided that the State Government may, if it considers it necessary in the public interest or for
avoiding any hardship, extend the said period of three years by such further period or periods not
exceeding one year in the aggregate.
15. Alteration of chit agreement.—A chit agreement shall not be altered, added to or cancelled
except with the consent in writing of the foreman and all the subscribers to the chit.
1. Subs. by Act 41 of 2019, s. 3, for “chit amount” (w.e.f. 1-1-2020).
2. Subs. by s. 5, ibid., “rupees one lakh” (w.e.f. 01-10-2020).
3. Subs. by s. 5, ibid., for, “rupees six lakhs” (w.e.f. 01-01-2020).
12
16. Date, time and place of conducting chits.—(1) Every draw in a chit shall be held on the date, at
the time and place mentioned in the chit agreement and a notice therefor in such form and in such manner
as may be prescribed shall be issued by the foreman to all the subscribers.
(2) Every such draw shall be conducted in accordance with the provisions of the chit agreement and
in the presence of not less than two subscribers
1
[present in person or through video conferencing duly
recorded by the foreman.]
(3) Where any draw was not conducted on the ground that two subscribers required to be present at a
draw under sub-section (2) were not present or on any other ground, the Registrar may, on his own
motion or on an application made by the foreman or any of the subscribers, direct that the draw shall be
conducted in his presence or in the presence of any person deputed by him.
17. Minutes of proceedings.—(1) The minutes of the proceedings of every draw shall be prepared
and entered in a book to be kept for that purpose immediately after the closure of the draw and shall be
signed by the foreman, the prized subscribers, if present, or their authorised agents, and at least two other
subscribers who are present
2
[in person or through video conferencing], and where a direction has been
made under sub-section (3) of section 16, also by the Registrar or the person deputed by him under that
sub-section.
2[Provided that where two subscribers required to be present under sub-section (2) of section 16 are
present through video conferencing, the foreman shall have the minutes of the proceedings signed by such
subscribers within a period of two days of the date of the draw.]
(2) The minutes referred to in sub-section (1) shall state clearly—
(a) the date and hour when proceedings began and ended and the place where the draw was held;
(b) the number of the instalment of the chit to which the proceedings relate;
(c) the names of the subscribers present;
(d) the person or persons who become entitled to the
3
[net chit amount] in the instalment;
(e) the amount of discount;
(f) full particulars regarding the disposal of the unpaid
3
[net chit amount], if any, in respect of any
previous instalment; and
(g) any other particulars that may be prescribed.
18. Copies of minutes to be filed with Registrar.—A true copy of the minutes of the proceedings of
every draw certified as such by the foreman shall be filed by the foreman with the Registrar within
twenty-one days from the date of the draw to which it relates.
19. Restriction on opening of new place of business.—(1) No person carrying on chit business shall
open a new place of business without obtaining the prior approval of the Registrar within whose territorial
jurisdiction his registered office or, as the case may be, the place or the principal place of business is
situated.
(2) Before granting approval under sub-section (1), the Registrar shall consult the Registrar of the
State within whose territorial jurisdiction the new place of business is proposed to be opened and shall
also keep in view the financial condition and methods of operation of the foreman, the extent to which
public interest will be served by the opening of the new place of business and such other matters as may
be prescribed.
(3) Where a person carrying on chit business opens a new place of business in a State other than the
State (hereinafter referred to as the State of origin) in which his registered office or the place or the
principal place of his business is situated, the Registrar of the State in which such new place of business is
opened may also exercise and perform any of the powers and functions which the Registrar of the State of
origin may exercise and perform in respect of the chit business carried on at such new place of business.
1. Ins. by Act 41 of 2019, s. 6 (w.e.f. 1-1-2020).
2. Ins. by s. 7, ibid. (w.e.f. 1-1-2020).
3. Subs. by s. 3, for “prize amount” (w.e.f. 1-1-2020).
13
(4) For the purposes of this section, “place of business” shall include any branch office, sub-office, or
any place of business where the chit business may be conducted by such person.
CHAPTER III
RIGHTS AND DUTIES OF FOREMAN
20. Security to be given by foreman.—(1) For the proper conduct of the chit, every foreman shall,
before applying for a previous sanction under section 4,—
1
[(a) deposit in the name of the Registrar, an amount equal to,—
(i) fifty per cent. of the
2
[gross chit amount] in cash in an approved bank; and
(ii) fifty per cent. of the
2
[gross chit amount] in the form of bank guarantee from an approved
bank; or]
(b) transfer Government securities of the face value or market value (whichever is less) of not less
than one and a half times the
2
[gross chit amount] in favour of the Registrar; or
(c) transfer in favour of the Registrar such other securities, being securities in which a trustee may
invest money under section 20 of the Indian Trusts Act, 1882 (2 of 1882), of such value, as may be
prescribed by the State Government from time to time:
Provided that the value of the securities referred to in clause (c) shall not, in any case, be less than
one and a half times the value of the
2
[gross 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 chit.
(3) The Registrar may, at any time during the currency of the chit, permit the substitution of the
security:
Provided that the face value or market value (whichever is less) of the substituted security shall not be
less than the value of the security given by the foreman under sub-section (1).
(4) The security given by the foreman under sub-section (1), or any security substituted under
sub-section (3), shall not be liable to be attached in execution of a decree or otherwise until the chit is
terminated and the claims of all the subscribers are fully satisfied.
(5) Where the chit is terminated and the Registrar has satisfied himself that the claims of all the
subscribers have been fully satisfied, he shall order the release of the security furnished by the foreman
under sub-section (1), or the security substituted under sub-section (3), as the case may be, and in doing
so, he shall follow such procedure as may be prescribed.
(6) Notwithstanding anything to the contrary contained in any other law for the time being in force,
the security furnished under this section shall not be dealt with by the foreman during the currency of the
chit to which it relates and any dealing by the foreman with respect thereto by way of transfer or other
encumbrances shall be null and void.
21. Rights of foreman.—(1) The foreman shall be entitled,—
(a) in the absence of any provision in the chit agreement to the contrary, to obtain the
2
[gross chit
amount] at the first instalment without deduction of the discount specified in the chit agreement,
subject to the condition that he shall subscribe to a ticket in the chit:
Provided that in a case where the foreman has subscribed to more than one ticket, he shall not be
eligible to obtain more than one
2
[gross chit amount] in a chit without discount;
1. Subs.by Act 10 of 2001, s. 4, for clause (a) (w.e.f. 01-10-2001).
2. Subs. by Act 41 of 2019, s. 3, for “chit amount” (w.e.f. 1-1-2020).
14
(b) to such amount not exceeding
1
[seven per cent.] of the
2
[gross chit amount] as may be fixed in
the chit agreement, by way of commission, remuneration or for meeting the expenses of running the
chit;
(c) to interest and penalty, if any, payable on any default in the payment of instalments and to
such other amounts as may be payable to him under the provisions of the chit agreement;
(d) to receive and realise all subscriptions from the subscribers and to distribute the prize amounts
to the prized subscribers;
(e) to demand sufficient security from any prized subscriber for the due payment of future
subscriptions payable by him.
Explanation.—A security shall be deemed to be sufficient for the purposes of this clause if its
value exceeds by one-third, or of it consists of immovable properties, the value of which exceeds by
one-half, of the amount due from the prized subscriber;
(f) to substitute subscribers in place of defaulting subscribers;
3
***
4
[(fa) to exercise his right to lien against the credit balance in other non-prized chits; and.]
(g) to do all other acts that may be necessary for the due and proper conduct of the chit.
(2) Where any dispute arises with regard to the value of the property offered as security under
clause (e) of sub-section (1), it shall be referred to the Registrar for arbitration under section 64.
22. Duties of foreman.—(1) The foreman shall, on the prized subscriber furnishing sufficient
security for the due payment of future subscriptions, be bound to pay him the
5
[net chit amount]:
Provided that the prized subscriber shall be entitled to the payment of the
5
[net chit amount] without
any security whatsoever if he agrees to the deduction therefrom of the amount of all future subscriptions
and in such a case, the foreman shall pay the
5
[net chit amount] to the prized subscriber within seven days
after the date of the draw or before the date of the next succeeding instalment, whichever is earlier:
Provided further that where the
5
[net chit amount] has been paid to the prized subscriber under the
first proviso, the amount deducted shall be deposited by the foreman in an approved bank mentioned in
the chit agreement and he shall not withdraw the amount so deposited except for the payment of future
subscriptions.
(2) If, owing to the default of the prized subscriber, the
5
[net chit amount] due in respect of any draw
remains unpaid until the date of the next succeeding instalment, the foreman shall deposit the
5
[net chit
amount] forthwith in a separate account in an approved bank mentioned in the chit agreement and
intimate in writing the fact of such deposit and the reasons therefor to the prized subscriber and the
Registrar:
Provided that where any prized subscriber does not collect the
5
[net chit amount] in respect of any
instalment of a chit within a period of two months from the date of the draw, it shall be open to the
foreman to hold another draw in respect of such instalment.
(3) Every payment of the
5
[net chit amount] or the amount of future subscriptions under sub-section
(1), and the deposit of the
5
[net chit amount] under sub-section (2), shall be intimated to the subscribers at
the next succeeding draw and the particulars of such payment or deposit shall be entered in the minutes of
the proceedings of that draw.
(4) The foreman shall not appropriate to himself any amount in excess of what he is entitled to under
clause (b) or clause (c) of sub-section (1) of section 21:
1. Subs. by Act 41 of 2019, s. 8, for “five per cent.” (w.e.f. 1-1-2020).
2. Subs. by s. 3, ibid., for “chit amount” (w.e.f. 1-1-2020).
3. The word “and” omitted by s. 8, ibid. (w.e.f. 1-1-2020).
4. Ins. by s. 8, ibid. (w.e.f. 1-1-2020).
5. Subs. by s. 3, ibid., for “prize amount” (w.e.f. 1-1-2020).
15
Provided that where the foreman is himself a prized subscriber, he shall be entitled to appropriate to
himself the
1
[net chit amount] subject to his complying with the provisions of section 31:
Provided further that the foreman may appropriate to himself the interest accruing on the amount
deposited under the second proviso to sub-section (1).
(5) The foreman shall not admit any person as a subscriber to a chit, if, by such admission, the total
number of tickets mentioned in the chit agreement is increased.
(6) The foreman shall distribute among the subscribers, in accordance with the chit agreement, the
2
[share of discount] either in cash, grain or by way of adjustment towards the subscriptions payable for
the next instalment, if any.
23. Books, records, etc., to be kept by foreman.—The foreman shall maintain in his registered
office, or, as the case may be, in the place or the principal place of his business, or, where the foreman has
any branch office, sub-office or any place of business for the conduct of chit business in a State other than
the State in which his registered office or the principal place of his business is situated, in such branch
office, sub-office or place of business in respect of the business conducted in that State—
(a) a register containing—
(i) the names and full particulars of the subscribers in each chit together with the number of
tickets held by each subscriber;
(ii) the dates on which the subscribers signed the chit agreement; and
(iii) in the case of an assignment of a ticket by a subscriber, the name and full address of the
assignee with the date of assignment and the date on which the assignment had been recognised
by the foreman;
(b) a book containing the minutes of the proceedings of each draw;
(c) a ledger containing—
(i) the amounts paid by the subscribers in each chit and the dates of such payments;
(ii) the amounts paid to the prized subscribers and the dates of such payments; and
(iii) in the case of any deposit in an approved bank mentioned in the chit agreement, the date
and the amount of such deposit;
(d) a register in the prescribed form showing the amounts deposited in approved banks as
required under the provisions of this Act in respect of all chits conducted by the foreman at his office;
and
(e) such other registers and books in such form as may be prescribed by the State Government
within whose jurisdiction the chit is conducted.
24. Balance sheet.—Without prejudice to the provisions of the Companies Act, 1956 (1 of 1956),
every foreman shall prepare and file with the Registrar within such time as may be prescribed, a
balance sheet as on the last date of each calendar year, or, as the case may be, the financial year of the
foreman, and a profit and loss account relating to the year of account, in the forms set out in Parts I and II
of the Schedule, or as near thereto as circumstances admit, in respect of the chit business and audited by
auditors qualified to act as auditors under the Companies Act, 1956, or by a chit auditor appointed under
section 61:
Provided that where a balance sheet is audited by an auditor qualified to act as auditor under the
Companies Act, 1956 (1 of 1956), a chit auditor appointed under section 61 shall have the right to audit
the balance sheet at any time if so authorised by the Registrar in this behalf.
1. Subs. by Act 41 of 2019, s. 3, for “prize amount” (w.e.f. 1-1-2020).
2. Subs. by s. 3, ibid., for “dividend” (w.e.f. 1-1-2020).
16
25. Liability of foreman to subscribers.—(1) Every foreman shall be liable to account to the
subscribers for the amounts due to them.
(2) Where there are more than one foreman in a chit, each one of them jointly and severally and, if the
foreman is a firm or other association of individuals, each one of the partners or individuals thereof jointly
and severally and, if the foreman is a company, the company as such, shall be liable to the subscribers in
respect of the obligations arising out of the chit.
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.
CHAPTER IV
RIGHTS AND DUTIES OF NON-PRIZED SUBSCRIBERS
27. Non-prized subscribers to pay subscriptions and obtain receipts.—Every non-prized
subscriber shall pay his subscription due in respect of every instalment on the dates and times and at the
places mentioned in the chit agreement and shall, on such payment, be entitled to obtain a receipt from the
foreman.
28. Removal of defaulting subscribers.—(1) A non-prized subscriber who defaults in paying his
subscription in accordance with the terms of the chit agreement shall be liable to have his name removed
from the list of subscribers and a written notice of such removal shall be given by the foreman to the
defaulting subscriber within fourteen days of the date of such removal:
Provided that if the defaulter pays the defaulted instalment with interest at such rate as may be
prescribed within seven days of the date of receipt of such notice, his name shall be re-entered in the list
of such subscribers.
(2) Every such removal under sub-section (1) shall with the date thereof be entered in the relevant
book maintained by the foreman.
(3) A true copy of the entry referred to in sub-section (2) shall be filed by the foreman with the
Registrar within fourteen days from the date of removal.
(4) Any defaulting subscriber aggrieved by the removal of his name from the list of subscribers may,
within seven days of the date of receipt of the notice of removal refer the matter to the Registrar for
arbitration under section 64.
29. Substitution of subscribers.—(1) A foreman may substitute in the list of subscribers any person
(thereafter in this Chapter referred to as the substituted subscriber) in place of the defaulting subscriber
whose name has been removed under sub-section (1) of section 28.
(2) Every substitution referred to in sub-section (1) shall, with the date thereof, be entered in the
relevant book maintained by the foreman and a true copy of every such entry shall be filed by the foreman
with the Registrar within fourteen days from the date of substitution.
30. Amounts due to defaulting subscribers.—(1) A foreman shall, out of the amounts payable by
and realized from the substituted subscriber towards the instalments relatable to the period before the date
of the substitution (including the arrears due from the defaulting subscriber), deposit, before the date of
the next succeeding instalment, in a separate identifiable account in an approved bank mentioned in the
chit agreement, an amount equal to the contributions made by the defaulting subscriber less such
deductions as may be provided for in the chit agreement, and shall inform the defaulting subscriber as
well as the Registrar of the fact of such deposit and shall not withdraw the amount so deposited except for
payment to the defaulting subscriber.
17
(2) The amount so deposited under sub-section (1) shall be paid to the defaulting subscriber as and
when he claims the amount and the amount so deposited shall not be withdrawn by the foreman for any
purpose other than for such payment.
(3) The contributions of any defaulting subscriber who has not been substituted till the termination of
the chit shall be paid to him within fifteen days from the date of termination of the chit subject to such
deductions as may be provided for in the chit agreement.
CHAPER V
RIGHTS AND DUTIES OF PRIZED SUBSCRIBERS
31. Prized subscriber to furnish security.—Every prized subscriber shall, if he has not offered to
deduct the amount of all future subscriptions from the
1
[net chit amount] due to him, furnish, and a
foreman shall take, sufficient security for the due payment of all future subscriptions and, if the foreman
is a prized subscriber, he shall give security for the due payment of all the future subscriptions to the
satisfaction of the Registrar.
32. Prized subscriber to pay subscriptions regularly.—Every prized subscriber shall pay his
subscriptions regularly on the dates and times and at the place mentioned in the chit agreement and, on his
failure to do so, he shall be liable to make a consolidated payment of all the future subscriptions
forthwith.
33. Foreman to demand future subscriptions by written notice.—A foreman shall not be entitled
to claim a consolidated payment from a defaulting prized subscriber under section 32 unless he makes a
demand to that effect in writing.
(2) Where a dispute is raised under this Act by a foreman for a consolidated payment of future
subscriptions from a defaulting prized subscriber and if the subscriber pays to the foreman on or before
the date to which the dispute is posted for hearing the arrears of subscriptions till that date together with
the interest thereon at the rate provided for in the chit agreement and the cost of adjudication of the
dispute, the Registrar or his nominee hearing the dispute shall, notwithstanding any contract to the
contrary, make an order directing the subscriber to pay to the foreman the future subscriptions on or
before the dates on which they fall due, and that, in case of any default of such payments by the
subscriber, the foreman shall be at liberty to realise, in execution of that order, all future subscriptions and
interest together with the costs, if any, less the amount, if any, already paid by the subscriber in respect
thereof:
Provided that if any such dispute is on a promissory note, no order shall be passed under this
sub-section unless such promissory note expressly states that the amount due under the promissory note is
towards the payment of subscriptions to the chit.
(3) Any person who holds any interest in the property furnished as security or part thereof, shall be
entitled to make the payment under sub-section (2).
(4) All consolidated payments of future subscriptions realised by a foreman shall be deposited by him
in an approved bank mentioned in the chit agreement before the date of the succeeding instalment and the
amount so deposited shall not be withdrawn except for payment of future subscriptions.
(5) Where any property is obtained as security in lieu of the consolidated payment of future
subscriptions, it shall remain as security for the due payment of future subscriptions.
CHAPTER VI
TRANSFERS
34. Restrictions on transfer of rights of foreman.—(1) No transfer of the rights of a foreman to
receive subscriptions from the prized subscribers shall be made without the previous sanction in writing
of the Registrar.
1. Subs. by Act 41 of 2019, s. 3, for “prize amount” (w.e.f. 1-1-2020).
18
(2) Any transfer of the rights of a foreman to receive subscriptions from the prized subscribers shall,
if it is likely to defeat or delay the interests of a non-prized or unpaid prized subscriber, be voidable at the
instance of such subscriber.
(3) When under sub-section (2), a transfer is disputed by a subscriber, the burden of proving that the
foreman was in solvent in circumstances at the time of the transfer and that the transfer does not defeat or
delay the interests of such subscriber is on the transferee.
35. Transfer of non-prized subscriber’s rights to be in writing.—Every transfer by a non-prized
subscriber of his rights in the chit shall be in writing duly attested by at least two witnesses and shall be
filed with the foreman.
36. Recognition of transfer by foreman.—Every transfer under section 35 shall, within a period of
fourteen days from the date of receipt of the proposal for transfer by the foreman, be recognised by him
unless the transferee is not solvent or the transfer was effected with a view to defeating the provisions of
any law including this Act and the decision of the foreman to recognise the transfer or not shall forthwith
be communicated to the parties concerned.
37. Entry of transferee’s name in the books.—Every transfer under section 34 or section 35 shall
be entered by the foreman in the books of the chit forthwith and a true copy of such entry shall be filed by
the foreman with the Registrar within fourteen days from the date of making such entry.
CHAPTET VII
MEETINGS OF GENERAL BODY OF SUBSCRIBERS
38. Meetings of general body of subscribers.—(1) The foreman may, on his own motion, convene a
special meeting of the general body of subscribers for considering any proposal to pass a special
resolution.
(2) The foreman shall convene such a meeting on the requisition in writing of not less than
twenty-five per cent. of the number of non-prized and unpaid prized subscribers, and the meeting so
convened shall be held within thirty days of the date of receipt of the requisition and if the foreman
refused or fails to call such a meeting within fourteen days of the date of receipt of such requisition, not
less than twenty-five per cent. of the number of non-prized and unpaid prized subscribers may give notice
of the fact to the Registrar.
(3) The Registrar shall, within twenty-one days of the receipt of the notice under sub-section (2),
convene or direct the convening of a special meeting of the general body of the subscribers and on receipt
of such a direction, it shall be the duty of the foreman to comply with such direction.
(4) Notice of not less than fourteen days shall be given to all the subscribers of a meeting under this
section specifying the object, date, hour and place of meeting and a copy of the special resolution shall
also be sent along with the notice of the meeting.
Explanation.—For the purposes of this section and section 39, “special resolution” means a resolution
which is passed at a meeting of the general body of the subscribers specially convened for the purpose, by
a majority of not less than two-thirds of the subscribers to the chit present at the meeting in person or by
proxy and representing not less than three-fourths of the amount or, as the case may be, the value of the
grain, subscribed by all the non-prized and unpaid prized subscribers, if any.
CHAPTER VIII
TERMINATION OF CHITS
39. Provision for continuation of chits in certain cases.—(1) Where a foreman dies or becomes of
unsound mind or is otherwise incapacitated, the chit may continue in accordance with the provisions of
the chit agreement.
(2) Where a foreman is adjudicated an insolvent, or withdraws from the chit under section 26, or fails
to conduct the chit at any instalment or on any other date before the next succeeding instalment as may
have been agreed upon by a special resolution, any one or more of such subscribers authorised by such
resolution may, in the absence of any provision in the chit agreement for the future conduct of the chit,
19
take the place of the foreman and continue the chit or make other arrangements for the further conduct of
the chit.
40. Termination of chits.—A chit shall be deemed to have terminated,—
(a) when the period specified therefor in the chit agreement has expired provided the payment of
dues to all the subscribers has been completed; or
(b) when all the non-prized and unpaid prized subscribers and the foreman consent in writing to
the termination of the chit and a copy of such consent is filed with the Registrar as required under
section 41; or
(c) where a foreman dies or becomes of unsound mind or is otherwise incapacitated and the chit
is not continued in accordance with the provisions of the chit agreement:
Provided that, in a case where the foreman is a firm, if a partner thereof dies or becomes of unsound
mind or is otherwise incapacitated, the chit shall not be deemed to have terminated and the surviving
partner or partners shall conduct the chit in the absence of any provision to the contrary in the chit
agreement.
41. Copy of assent or consent to be filed with Registrar.—A true copy of every assent referred to
in section 26 and of every consent referred to in clause (b) of section 40 with their dates shall be filed by
the foreman or by the surviving partner or partners, as the case may be, with the Registrar within fourteen
days from the date of such assent or consent.
42. Refund of non-prized subscribers’ subscriptions.—Except in the cases referred to in
clauses (a) and (b) of section 40,—
(a) every non-prized subscriber shall, unless otherwise provided for in this Act or in the chit
agreement, be entitled to get back his subscriptions at the termination of the chit without any
deduction for
1
[share of discount], if any, earned by him:
Provided that, any person to whom the rights of a non-prized subscriber are transferred in
accordance with the provisions of section 35, shall, in addition to his own subscriptions, be entitled to
get back the subscriptions paid by such non-prized subscriber, subject to the conditions specified in
this section;
(b) if a chit terminates on a date earlier than the date originally fixed in the chit agreement, the
non-prized subscriber’s claim shall be deemed to have arisen on the date on which he has notice
thereof.
43. Subscribers’ dues to be first charge on chit assets.—Any amount due to the subscriber from a
foreman in relation to the chit business shall be a first charge on the chit assets.
CHAPTER IX
INSPECTION OF DOCUMENTS
44. Foreman to allow certain subscribers to inspect chit records.—Every foreman shall, on
payment of such fee not exceeding five rupees as may be specified in the chit agreement, allow the
non-prized subscribers and unpaid prized subscribers reasonable facilities on all the dates of draw or on
such other dates and within such hours as may be provided for in the chit agreement, for the inspection of
security bonds and documents, receipts and other records taken from the prized subscribers or furnished
by the foreman as a subscriber and all chit records, including books of account, pass books, balance sheet
and profit and loss accounts and such other records as may show the actual financial position of the chit.
45. Preservation of chit records by foreman.—All the records pertaining to a chit shall be kept by
the foreman for a period of eight years from the date of termination of the chit.
46. Inspection of chit books and records by Registrar.—(1) Without prejudice to the provisions of
sections 209 and 209A of the Companies Act, 1956 (1 of 1956), the Registrar or an officer authorised by
the State Government in this behalf may inspect chit books and all the records of a chit during working
hours on any working day at the premises of the foreman with or without giving notice and it shall be the
duty of every foreman to produce to the Registrar or the officer so authorised, all such books and records
1. Subs. by Act 41 of 2019, s. 3, for “dividend” (w.e.f. 1-1-2020).
20
as are in his custody or power and to furnish him with any statement or information relating to the chits as
he may require from the foreman within such time as he may specify.
(2) The Registrar or an officer authorised by the State Government in this behalf may, after giving
seven days’ notice in writing to the foreman, direct him to produce before him for inspection such chit
books and records as he may require at the time and place mentioned in the notice.
(3) If on an inspection made under sub-section (1) or sub-section (2), any defects are found, the
Registrar may bring such defects to the notice of the foreman and may also make an order directing the
foreman to take such action as may be specified in the order to remedy the defects within the time
specified therein.
(4) Every foreman shall be bound to comply with the directions contained in an order made under
sub-section (3).
47. Power of Reserve Bank to inspect chit books and records.—(1) Nothing in section 46 shall be
deemed to affect the power of the Reserve Bank to inspect the books and records of any foreman under
the provisions of section 45N of the Reserve Bank of India Act, 1934 (2 of 1934).
(2) The Reserve Bank may, if it considers necessary, forward a copy of its report or of any part of its
report on the inspection of the books and records of a foreman to the foreman for taking necessary action.
(3) Every foreman shall, on receipt of the report or part thereof under sub-section (2), be bound to
comply with the directions, if any, given by the Reserve Bank in this behalf and shall, if so required,
submit periodical reports in regard to the action taken by him.
(4) The Reserve Bank may also forward a copy of the report on the inspection of the books and
records of a foreman to the State Government within whose jurisdiction the registered office of the
company, if the foreman is a company, or the place or the principal place of business of the foreman in
any other case, is situated for such action as may be considered necessary.
CHAPTER X
WINDING UP OF CHITS
48. Circumstances under which chits may be wound up.—A chit may be wound up by the
Registrar within whose territorial jurisdiction the chit has been registered, either on his own motion or on
an application made by any non-prized or unpaid prized subscriber,—
(a) if the chit has terminated under clause (c) of section 40; or
(b) if the foreman commits any such act in respect of the security specified in section 20 as is
calculated to impair materially the nature of the security or the value thereof; or
(c) if he fails to deposit any amount required to be deposited under any of the provisions of this
Act; or
(d) if it is proved to the satisfaction of the Registrar that the foreman is unable to pay the amounts
due to the subscribers; or
(e) if the execution or other process issued on an order passed by the Registrar in favour of any
subscriber in respect of amounts due to him from the foreman in relation to the chit business is
returned unsatisfied in whole or in part; or
(f) if it is proved that there has been a fraud or collusion on the part of the foreman in the matter
of taking securities from any prized subscriber; or
(g) if the foreman has appropriated the
1
[net chit amount] in his capacity as a subscriber without
furnishing sufficient security for future subscriptions; or
(h) if the Registrar is satisfied that the affairs of the chit are being conducted in a manner
prejudicial to the interests of the subscribers; or
1. Subs. by Act 41 of 2019, s. 3, for “prize amount” (w.e.f. 1-1-2020).
21
(i) if it is just and equitable that the chit should be wound up.
Explanation.—For the purposes of clause (d), in determining whether the foreman is unable to pay the
amounts due to the subscribers, the Registrar shall take into account his contingent and future liabilities in
respect of the chit.
49. Application for winding up.—An application for the winding up of a chit shall be made by a
petition presented by any non-prized or unpaid prized subscriber to the Registrar signed and verified in
the manner laid down by the Code of Civil Procedure, 1908 (5 of 1908), and shall contain such particulars
as may be prescribed:
Provided that no application for the winding up of a chit under clause (d) or clause (i) of section 48
shall lie unless such application is presented,—
(a) by non-prized and unpaid prized subscribers representing not less than twenty-five per cent. of
the amount or, as the case may be, the value of the grain subscribed by all the non-prized and unpaid
prized subscribers, if any; or
(b) with the previous sanction of the State Government within whose jurisdiction the chit is
commenced or conducted.
Explanation.—For the purposes of clause (a), of the proviso, a subscriber of a fraction of a ticket
shall be deemed to be a subscriber only to the extent of such fraction.
50. Bar to winding up proceedings.—Notwithstanding anything contained in sections 48 and 49, no
petition for the winding up of a chit shall be entertained by the Registrar,—
(a) if proceedings relating to insolvency are pending against the foreman; or
(b) where the foreman is a firm, if proceedings relating to insolvency are pending against all the
partners or all the partners except one thereof, or proceedings for the dissolution of the firm are
pending; or
(c) where the foreman is a company or co-operative society, if proceedings for the winding up of
such company or co-operative society are pending.
51. Commencement and effect of winding up order.—An order for the winding up of a chit shall
operate in favour of all the subscribers to whom amounts are due from the foreman and it shall be deemed
to have commenced from the date of the presentation of the application for the winding up.
52. Injunction order.—The Registrar may, on the application of the foreman or of any subscriber to
whom amounts are due in respect of a chit, at any time after the presentation of the application for the
winding up of the chit under this Act and before the making of an order for the appointment of an interim
receiver or for the winding up of the chit, restrain any other proceedings instituted against the foreman for
the realisation of amounts due from him on such terms as the Registrar thinks fit.
53. Powers of Registrar.—The Registrar may, after hearing an application under this Chapter,
dismiss it with or without costs, or adjourn the hearing conditionally or unconditionally or make an
interim or any other order that he deems fit.
54. Vesting of chit assets in Registrar or other persons.—On the making of an order for the
winding up of a chit, all the chit assets pertaining to such chit shall vest in the Registrar or in any person
appointed by him for distribution amongst the subscribers to whom amounts are due in respect of the chit.
55. Suits, etc., to be stayed on winding up order.—When a winding up order has been made or a
receiver has been appointed, no suit or other legal proceedings shall be continued or commenced against
the foreman by a subscriber for the realisation of amounts due to him in respect of the chit except with the
leave of the Registrar winding up the chit and on such terms as he may impose.
56. Notification of winding up order.—On the making of a winding up order, the Registrar shall
make an entry in his book relating to the chit and shall notify in the Official Gazette that the order has
been made.
22
57. Cessation of winding up proceedings on insolvency of foreman, etc., or the winding up of the
company and transfer of such proceedings.—Where during the pendency of the proceedings for the
winding up of a chit, the foreman is adjudicated an insolvent, or where the foreman is a firm, all the
partners or all the partners except one thereof are adjudicated insolvents, or where the foreman is a
company, the company has been ordered to be wound up by the Court, the winding up proceedings under
this Chapter shall cease and the distribution of the chit assets shall, subject to the provisions of
sections 43 and 52, be made by the insolvency court or the court winding up the company, as the case
may be.
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.
59. Right to appeal.—The foreman or any subscriber or any other person aggrieved by a decision or
order of the Registrar in any proceedings for the winding up of a chit may, within sixty days from the date
of such decision or order, appeal to the State Government.
60. Limitation.—(1) Where an order refusing to wind up a chit has been made under this Act, the
chit shall be deemed to have been under suspension from the date of presentation of the application to the
date of such order in respect of non-prized subscribers; and, notwithstanding anything contained in the
chit agreement, no non-prized subscriber who was not a defaulter on the date of the presentation of the
petition for winding up, shall be deemed to be a defaulter on the date of such order.
(2) Where an order refusing to wind up a chit has been made under this Act, in computing the period
of limitation prescribed for any suit or other legal proceedings (other than a suit or application in respect
of which the leave of the court has been obtained) which might have been brought or instituted, but for
the presentation of the application for the winding up of the chit, the period from the date of the
presentation of the application to the date of the order refusing to wind up a chit shall be excluded.
(3) Nothing contained in this Chapter shall affect the rights of a subscriber to proceed against the
foreman personally for the balance, if any, of the amount due to him after the declaration of the final
1
[share of discount] in the proceedings for the winding up of the chit and in computing the period of
limitation prescribed for any such proceedings, the period from the date of the presentation of the
application for the winding up of the chit to the date of the declaration of the final
1
[share of discount]
shall be excluded.
CHAPTER XI
APPOINTMENT OF OFFICERS AND LEVY OF FEES
61. Appointment of Registrar and other officers.—(1) The State Government may, by notification
in the Official Gazette, appoint a Registrar of Chits and as many Additional, Joint, Deputy and Assistant
Registrars as may be necessary for the purpose of discharging the duties imposed upon the Registrar by or
under this Act.
(2) The Registrar may appoint as many inspectors of chits and chit auditors as may be necessary for
the purpose of discharging the duties imposed on the inspectors of chits or chit auditors by or under this
Act.
(3) All inspectors of chits and chit auditors shall discharge the duties imposed upon them by or under
this Act under the general superintendence and control of the Registrar.
(4) If the Registrar is of the opinion that the accounts of any chit are not properly maintained and that
such accounts should be audited, it shall be lawful for him to have such accounts audited by a chit auditor.
1. Subs. by Act 41 of 2019, s. 3, for “dividend” (w.e.f. 1-1-2020).
23
(5) It shall be the duty of the foreman of the chit whose accounts are to be audited by a chit auditor
under sub-section (4) to produce before the chit auditor, all accounts, books and other records relating to
the chit, to furnish him with such information as may be required and afford him all such assistance and
facilities as may be necessary and reasonable in regard to the audit of the accounts of the chit.
(6) The foreman shall pay to the chit auditor such fees as may be prescribed for the audit of the
accounts of the chit under sub-section (4):
Provided that different scales of fees may be prescribed for different chits depending on the quantum
of the
1
[gross chit amount].
62. Inspection of documents in Registrar’s office.—The foreman of a chit or any subscriber in a
chit or the heirs or legal representatives of any foreman or subscriber may, on payment of such fees as
may be prescribed,—
(a) inspect the documents of the concerned chit kept by the Registrar; or
(b) obtain a certified copy or on extract of any such document or record.
63. Levy of fees.—(1) There shall be paid to the Registrar such fees as the State Government may,
from time to time, prescribe for,—
(a) the issue of previous sanction under section 4;
(b) the filing of the chit agreement with the Registrar and the registration of the chit under
section 7;
(c) the filing of a declaration with the Registrar and the grant of a certificate of commencement
under section 9;
(d) the filing of copies of documents under any of the provisions of this Act;
(e) the audit of the accounts of the foreman under section 61;
(f) the inspection of documents under section 62;
(g) the obtaining of certified copies or extracts of documents and records under section 62; and
(h) such other matters as may appear necessary to the State Government.
(2) A table of fees prescribed under sub-section (1) shall be exhibited on a notice board in the office
of the Registrar.
CHAPTER XII
DISPUTES AND ARBITRATION
64. Disputes relating to chit business.—(1) Notwithstanding anything contained in any other law for
the time being in force, any dispute touching the management of a chit business shall be referred by any
of the parties to the dispute, to the Registrar for arbitration if each party thereto is one or the other of the
following, namely:—
(a) a foreman, a prized subscriber or a non-prized subscriber, including a defaulting subscriber,
past subscriber or a person claiming through a subscriber, or a deceased subscriber to a chit;
(b) a surety of a subscriber, past subscriber, or a deceased subscriber.
Explanation.—For the purposes of this sub-section, a dispute touching the management of a chit
business shall include—
(i) a claim by or against a foreman for any debt or demand due to him from a subscriber, or due
from him to a subscriber, past subscriber or the nominee, heir or legal representative of a deceased
subscriber whether such debt or demand is admitted or not;
(ii) a claim by a surety for any sum or demand due to him from the principal borrower in respect
of a loan by a foreman and recovered from the surety owing to the default of the principal borrower,
whether such sum or demand is admitted or not; and
1. Subs. by Act 41 of 2019, s. 3, for “chit amount” (w.e.f. 1-1-2020).
24
(iii) a refusal or failure by a subscriber, past subscriber or the nominee, heir or legal
representative of a deceased subscriber to deliver possession to a foreman of land or any other asset
resumed by him for breach of conditions of the assignment.
(2) Where any question arises as to whether any matter referred to for the award of the Registrar is a
dispute or not for the purposes of sub-section (1), the same shall be decided by the Registrar whose
decision thereon shall be final.
(3) No Civil Court shall have jurisdiction to entertain any suit or other proceedings in respect of any
dispute referred to in sub-section (1).
65. Period of limitation.—(1) Notwithstanding anything contained in the Limitation
Act, 1963 (36 of 1963), but subject to the specific provisions contained in this Act, the period of
limitation in the case of a dispute referred to the Registrar under section 64, shall—
(a) if the dispute relates to the recovery of any sum, including interest thereon, due to a foreman
from a deceased subscriber, be three years, computed from the date on which such subscriber dies or
ceases to be a subscriber; or
(b) if the dispute is between a foreman and a subscriber or a past subscriber, or the nominee, heir
or legal representative of a deceased subscriber, and the dispute relates to any act or omission on the
part of either party to the dispute, be three years from the date on which the act or omission with
reference to which the dispute arose, took place.
(2) The period of limitation in the case of any dispute other than those referred to in sub-section (1)
which are required to be referred to the Registrar under section 64 shall be regulated by the provisions of
the Limitation Act, 1963 (36 of 1963), as if the dispute were a suit, and the Registrar, a Civil Court.
(3) Notwithstanding anything contained in sub-sections (1) and (2), the Registrar may admit a dispute
after the expiry of the period of limitation specified therein, if the applicant satisfies the Registrar that he
had sufficient cause for not referring the dispute within such period.
66. Settlement of disputes.—(1) If the Registrar is satisfied that any matter referred to him or
brought to his notice is a dispute within the meaning of section 64, he shall, subject to such rules as may
be prescribed, settle the dispute himself, or refer it for disposal to a person appointed by him (hereafter in
this Chapter referred to as the nominee).
(2) Where any dispute is referred under sub-section (1) for settlement to the nominee, the Registrar
may, at any time for reasons to be recorded in writing, withdraw such dispute from the nominee and may
settle the dispute himself, or refer it again for settlement to any other nominee appointed by him.
67. Procedure for settlement of disputes and powers of Registrar or nominee.—(1) The Registrar
or the nominee hearing a dispute under section 66, shall, in addition to the powers conferred on him under
that section, have the same powers as are vested in a Civil Court while trying a suit under the Code of
Civil Procedure, 1908 (5 of 1908), in respect of the following matters, namely:—
(a) summoning and enforcing the attendance of persons and examining them on oath;
(b) requiring the discovery and inspection of documents;
(c) receiving evidence on affidavits;
(d) requisitioning any public record or copies thereof from any court or office;
(e) issuing commissions for the examination of witnesses or documents; and
(f) any other matter which may be prescribed.
(2) Except with the permission of the Registrar or the nominee, no party shall be represented at the
hearing of a dispute by a legal practitioner.
(3) (a) If the Registrar or the nominee is satisfied that any person, whether he is a subscriber or not,
has acquired any interest in the property of a person who is a party to a dispute, he may order that the
person who has acquired the interest in the property may be joined as a party to the dispute, and any
25
decision that may be given by the Registrar or the nominee on the dispute shall be binding on the party so
joined, in the same manner as if he were an original party to the dispute.
(b) Where a dispute has been referred in the name of a wrong person, or where all the necessary
parties have not been included, the Registrar or the nominee may, if he is satisfied that it was due to a
genuine mistake, order any other person to be substituted or added as parties to the dispute at any stage of
hearing of the dispute on such terms as he thinks just.
(c) The Registrar or the nominee may, at any stage of the proceedings, either upon or without the
application of either party and on such terms as may appear to the Registrar or the nominee to be just,
order that the name of any party improperly joined be struck off.
(d) Any person who is a party to the dispute and entitled to more than one relief in respect of the same
cause of action may claim all or any such reliefs, but if he omits to claim any such relief, he shall not be
entitled to claim that relief, except with the leave of the Registrar or the nominee.
68. Attachment before judgment and other interlocutory orders.—(1) Where a dispute has been
referred under section 64 and the Registrar or the nominee hearing the dispute is satisfied on enquiry or
otherwise that a party to such dispute, with intent to defeat or obstruct the execution of any award or the
carrying out of any order that may be made,—
(a) is about to dispose of the whole or any part of his property; or
(b) is about to remove the whole or any part of the property from the jurisdiction of the Registrar,
he may, unless adequate security is furnished, direct conditional attachment of the said property, and such
attachment shall have the same effect as if it is made by a competent Civil Court.
(2) Where the Registrar or the nominee directs the attachment of any property under sub-section (1),
he shall issue a notice calling upon the person whose property is so attached to furnish such security as he
thinks adequate within a specified period, and if the person fails to provide such security, the Registrar or
the nominee may confirm the order, and may, after the decision in the dispute, direct the disposal of the
property so attached towards the claim, if awarded.
(3) Any attachment made under this section shall not affect the rights, subsisting prior to the
attachment of the property, of persons who are not parties to the dispute, or bar any person holding a
decree against the person whose property is so attached from applying for the sale of the property under
the attachment of such decree.
(4) The Registrar or the nominee may, in order to prevent the ends of justice being defeated, make
such interlocutory orders pending the award in a dispute referred to in sub-section (1) as may appear to be
just and convenient.
69. Decision of Registrar or nominee.—When a dispute is referred to arbitration under this Chapter,
the Registrar or the nominee, may, after giving a reasonable opportunity to the parties to the dispute to be
heard, make an award on the dispute, on the expenses incurred by the parties to the dispute in connection
with the proceedings and the fees and expenses payable to the Registrar or the nominee, and such an
award shall not be invalid merely on the ground that it was made after the expiry of the period, if any,
fixed for deciding the dispute by the Registrar, and shall, subject to appeal under section 70, be final and
binding on the parties to the dispute.
70. Appeal against decision of Registrar or nominee.—Any party aggrieved by any order passed
by the Registrar or the nominee or the award of the Registrar or the nominee under section 69, may,
within two months from the date of the order or award, appeal to the State Government.
STATE AMENDMENTS
[Karnataka
Amendment of section 70.—In the Chit Funds Act, 1982 (Central Act 40 of 1982) (hereinafter
referred to as the principal Act),—
26
(i) section 70 shall be renumbered as sub-section (1) thereof and in sub-section (1) as so renumbered,
after the words “State Government”, the words “or to such officer or authority, as may be empowered by
notification by the State Government, in that behalf” shall be inserted;
(ii) after sub-section(1) as so renumbered, the following shall be inserted, namely:—
“(2) The State Government or such officer or authority aforesaid may, after giving the appellant
an opportunity of making his representation, pass such orders on the appeals as it or he thinks fit and
such order shall be final.
(3) All appeals pending before the State Government, on such date of notification empowering
such officer or authority, shall be transferred to such officer or authority and shall be disposed off as
if it has been filed before such authority.”
[Vide Karnataka Act 2 of 2008, s. 2.]
71. Money how recovered.—Every order passed by the Registrar or the nominee under section 68 or
section 69 and every order passed by the State Government in appeal under section 70 for payment of any
money shall, if not carried out,—
(a) on a certificate issued by the Registrar, be deemed to be a decree of a Civil Court, and shall be
executed in the same manner as a decree of such Court, or
(b) be executed in accordance with the provisions of any law for the time being in force for the
recovery of amounts as arrears of land revenue:
Provided that no application for execution under clause (b) shall be made after the expiry of three
years from the date fixed in the order, and if no such date is fixed, from the date of the order.
72. Private transfer of property made after issue of certificate void against foreman.—Any
private transfer of delivery of, or encumbrance or charge on, property made or created after the issue of
the certificate by the Registrar under section 71 shall be null and void against the foreman on whose
application the said certificate was issued.
CHAPTER XIII
MISCELLANEOUS
73. Advisory role of Reserve Bank.—The Reserve Bank may tender to any State Government such
advice on questions of policy with respect to this Act as it thinks fit either on its own motion or on a
request made by the State Government.
74. Appeals.—(1) Any foreman aggrieved by the decision of the Registrar,—
(a) refusing to register the chit agreement under section 7;
(b) refusing to grant a certificate of commencement under sub-section (2) of section 9;
(c) refusing to accept any security under sub-section (1) of section 20 or under section 31; or
(d) refusing to release the security charged under section 20 or section 31,
may, within thirty days of the communication to him of such decision, appeal to the State Government or
to such officer or authority as may be empowered by notification in the Official Gazette by the State
Government in that behalf.
(2) Any foreman or other person aggrieved by the order of the Registrar under sub-section (1) of
section 34 may, within thirty days of the communication to him of such decision, appeal to the State
Government or to such officer or authority as may be empowered by notification in the Official Gazette
by the State Government in that behalf.
(3) The State Government or such officer or authority aforesaid may, after giving the appellant an
opportunity of making his representation, pass such order on the appeal as it or he thinks fit and such
order shall be final.
75. Powers of Registrar to give extension of time for filing documents.—The Registrar may, in his
discretion and upon an application in writing by a foreman made within the period specified for the filing
27
of documents, under sub-section (3) of section 28, sub-section (2) of section 29, section 37 or section 41,
allow the foreman further time not exceeding fifteen days to file copies of such documents.
76. Penalties.—(1) Whoever contravenes or abets the contravention of any of the provisions of
sections 4, 5, 8, 9, 11, 12, 13, 14, 19, 20, 22, 24, 30, 31, sub-section (4) of section 33, sections 46, 47 or
sub-section (5) of section 61 shall, on conviction, be punishable with imprisonment for a term which may
extend to two years or with fine which may extend to five thousand rupees or with both.
(2) Any foreman,—
(a) who fails to file any document required to be fied under this Act within the period specified
therefor or within such further time as may be allowed; or
(b) who fails to comply with the requirements of the chit agreement regarding the date, time and
place at which the chit is to be drawn or who fails to comply with the requirements of any direction
given under sub-section (3) of section 38; or
(c) who contravenes or fails to comply with any other requirement under this Act,
shall, on conviction, be punishable with fine which may extend to three thousand rupees.
(3) Whoever wilfully makes a statement in any document required to be filed under this Act which is
false in any material particular shall, on conviction, be punishable with imprisonment for a term which
may extend to two years or with fine which may extend to five thousand rupees or with both.
77. Penalty for second and subsequent convictions.—If any person convicted of an offence under
sub-section (1) or sub-section (3) of section 76 is again convicted of an offence under any of the said
sub-sections he shall be punishable for the second and for every subsequent offence with imprisonment
for a term which may extend to two years and shall also be liable to fine.
78. Application of fine.—A court imposing any fine under this Act may direct that the whole or any
part thereof shall be applied in, or towards payment of, the cost of the proceedings.
79. Offences by companies.—(1) Where an offence under this Act has been committed by a
company, every person who at the time the offence was committed was in charge of, and was responsible
to, the company for the conduct of the business of the company, as well as the company, shall be deemed
to be guilty of the offence and shall be liable to be proceeded against and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable to any
punishment provided in this Act, if he proves that the offence was committed without his knowledge or
that he exercised all due diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1), where an offence under this Act has been
committed by a company and it is proved that the offence has been committed with the consent or
connivance of, or is attributable to, any neglect on the part of, any director, manager, secretary or other
officer for the company, such director, manager, secretary or other officer shall also be deemed to be
guilty of that offence and shall be liable to be proceeded against and punished accordingly.
Explanation.—For the purposes of this section,—
(a) “company” means any body corporate and includes a firm or other association of
individuals; and
(b) “director” in relation to a firm means a partner in the firm.
80. Cognizance of offences.—(1) All offences under section 11 shall be cognizable.
(2) No court inferior to that of a Metropolitan Magistrate or a Judicial Magistrate of the first class
shall try an offence punishable under this Act.
81. Power to compound offences.—(1) Subject to such conditions as may be prescribed, any officer
empowered by the State Government in this behalf may, either before or after the institution of criminal
proceedings under this Act, accept from the person who has committed or is reasonably suspected to have
28
committed an offence under this Act, by way of composition of such offence, a sum of money not
exceeding such amount as may be prescribed.
(2) Where an offence has been compounded under sub-section (1), the offender, if in custody, shall be
discharged and no further proceedings shall be taken against him in respect of such offence.
82. Power to enter and search any place and to seize any documents.—(1) If the Registrar or any
other officer authorised by him in this behalf, has reason to suspect that any person conducts, or is
responsible for the conduct of, a chit in any place in contravention of the provisions of this Act, he may,
for reasons to be recorded in writing and at any reasonable time, enter into and search such place, and
may seize such books, registers, accounts or documents as may be necessary.
(2) The Registrar or officer authorised by him in this behalf, may apply for assistance to an officer in
charge of a police station and take police officers to accompany and assist him in discharging his duties
under sub-section (1).
(3) All searches under sub-section (1) shall be made in accordance with the provisions of the Code of
Criminal Procedure, 1973 (2 of 1974).
83. Officers to be public servants.—The Registrar and all officers appointed by the State
Government to perform any functions under this Act shall be deemed to be public servants within the
meaning of section 21 of the Indian Penal Code (45 of 1860).
84. Power to delegate.—The State Government may, by notification in the Official Gazette, direct
that any power (other than the power to hear appeals or to make rules) exercisable by it under this Act or
the rules made thereunder may be exercised also by any officer of the State Government subject to such
terms and conditions, if any, as may be specified therein.
STATE AMENDMENTS
[Karnataka
Amendment of section 84.—In section 84 of the principal Act, the words “to hear appeals or” shall
be omitted.
[Vide Karnataka Act 2 of 2008, s. 3.]
85. Act not to apply to certain chits.—Nothing in this Act shall apply in respect of—
(a) any chit started before the commencement of this Act; or
(b) any chit the amount of which, or where two or more chits were started or conducted
simultaneously by the same foreman, the aggregate amount of which does not exceed
1
[such amount
as may be specified, by notification in the Official Gazette, by the State Government].
86. Banks not to conduct chit business.—(1) Notwithstanding anything contained in this Act, no
bank shall commence or carry on chit business after the commencement of this Act.
(2) Where a chit had been started by any bank before such commencement, such chit may be
continued after such commencement until it is completed, and the provisions of the chit agreement and
such laws, if any, as were applicable to it immediately before the commencement of this Act shall apply
to such chit.
Explanation.—For the purposes of this section “bank” means an approved bank or a co-operative
bank as defined in clause (bii) of section 2 of the Reserve Bank of India Act, 1934 (2 of 1934).
87. Power to exempt.—The State Government may, in consultation with the Reserve Bank, by
notification in the Official Gazette, and subject to such conditions as may be specified in the notification,
exempt any person or class of persons or any chit or class of chits from all or any of the provisions of this
Act.
1. Subs. by Act 41 of 2019, s. 9, for “one hundred rupees” (w.e.f. 1-1-2020).
29
88. Protection of action taken under the Act.—No suit, prosecution or other legal proceeding shall
lie against the State Government, the Registrar or other officers of the State Government or of the Reserve
Bank or any of its officers exercising any powers or discharging any functions under this Act in respect of
anything which is in good faith done or intended to be done in pursuance of this Act or the rules made
thereunder.
89. Power to make rules.—(1) The State Government may, in consultation with the Reserve Bank,
by notification in the Official Gazette, make rules for giving effect to the provisions of this Act.
(2) In particular, and without prejudice to the generality of the foregoing power, such rules may
provide for all or any of the following matters, namely:—
(a) the form and manner in which an application for obtaining the previous sanction may be made
under sub-section (2) of section 4;
(b) the additional particulars that a chit agreement may contain under clause (q) of sub-section (1)
of section 6;
(c) the particulars that may be included in the minutes of the proceedings of a draw under
section 17;
(d) the method of valuation by the Registrar in a grain chit for the purpose of furnishing security
under section 20;
(e) the procedure that may be followed by the Registrar in releasing the security furnished by the
foreman under section 20;
(f) the registers and books and the form in which such registers and books may be maintained by
the foreman under section 23;
(g) the time within which the balance sheet and the profit and loss account in respect of a chit
business shall be filed under section 24;
(h) the rate at which interest shall be payable on the defaulted instalments by a defaulted
subscriber under section 28;
(i) the particulars that may be included in an application for the winding up of chits under
section 49;
(j) the procedure to be followed for the winding up of chits under Chapter X;
(k) the fees payable under section 63;
(l) the auditing of balance sheets and the profit and loss accounts of chit business and the issue of
audit certificates;
(m) the form and manner in which a dispute shall be referred to the Registrar under section 64;
(n) the procedure to be followed by the Registrar or his nominee for settling the disputes referred
to him under section 64;
(o) the matters referred to in clause (f) of sub-section (1) of section 67;
(p) the conditions subject to which and the amount on the payment of which composition of
offences may be made under section 81;
(q) the form and manner in which an appeal may be preferred under this Act and the fees payable
for such appeal;
(r) the issue and service of notices or other process under this Act;
(s) the procedure for, and the manner of, receiving any sum payable under this Act;
(t) any other matter which is required to be or may be prescribed.
30
(3) Every rule made under this section shall be laid, as soon as may be after it is made before each
House of the State Legislature where it consists of two Houses, or, where such Legislature consists of one
House before that House.
90. Repeal and saving.—(1) The Andhra Pradesh Chit Funds Act, 1971 (Andhra Pradesh
Act 9 of 1971), the Kerala Chitties Act, 1975 (Kerala Act 23 of 1975), the Maharashtra Chit Funds
Act, 1974 (Maharashtra Act LV of 1974), the Tamil Nadu Chit Funds Act, 1961 (Tamil Nadu
Act 24 of 1961), as in force in the State of Tamil Nadu and in the Union territories of Chandigarh and
Delhi, the Uttar Pradesh Chit Funds Act, 1975 (Uttar Pradesh Act 53 of 1975), the Goa, Daman and Diu
Chit Funds Act, 1973 (Goa, Daman and Diu Act 16 of 1973) and the Pondicherry Chit Funds
Act, 1966 (Pondicherry Act 18 of 1966), are hereby repealed and the provisions of section 6 of the
General Clauses Act, 1897 (10 of 1897), shall apply to such repeal as if each such Act so repealed were a
Central Act.
(2) Notwithstanding such repeal, the Acts mentioned in sub-section (1) shall continue to apply to chits
in operation on the commencement of this Act, in the same manner as they applied to such chits before
such commencement.
31
THE SCHEDULE
[See section 24]
PART I.—FORM OF BALANCE SHEET
Liabilities Assets
1. Capital 1. Cash Rs.
Authorised . . . . . Rs. 2. Balances with banks:
Issued . . . . . . Rs. (a) Current account . . . Rs.
Paid-up . . . . . . Rs. Rs. (b) Deposit account . . . Rs. Rs.
3. Investments:
2. Reserve Fund . . . . . Rs. (a) In chits . . . . Rs.
3. Deposits . . . . . Rs. (b) In government securities . Rs.
4. Borrowings . . . . . Rs. (c) Others . . . . Rs. Rs.
5. Foreman’s liability in tickets prized Rs. 4. Share amount due from prized
subscribers:
6.
1
[net chit amount] payable . . .
.
Rs. (a) Secured . . . . Rs.
7. Defaulted subscribers’ amount
payable . . . . .
Rs. (b) Unsecured . . . . Rs. Rs.
8. Advance subscription received . Rs. 5. Arrears due from prized
subscribers:
9. Liability to non-prized subscribers Rs. (a) Secured . . . . . Rs.
(Arrears from non-prized subscribers
to be indicated) . . . .
(b) Unsecured . . . . Rs. Rs.
10. Amount payable in terminated chits . Rs. 6. Amount due in terminated
chits:
11. Auction profit payable to non-prized Rs. (a) Secured . . . . . . Rs.
Subscribers . . . . . (b) Unsecured . . . . . Rs. Rs.
12. Other liabilities . . . . Rs. 7. Chit prize amount paid earlier Rs.
13. Profit and loss account . . . Rs. 8. Loans and advances to
subscribers . . . . . .
Rs.
9. Litigation expenses . . . Rs.
10. Premises . . . . . . Rs.
11. Furniture and fixture . . . Rs.
12. Stamps in stock . . . . . Rs.
13. Other assets . . . . . . Rs.
14. Profit and loss account . . . Rs.
TOTAL Rs. TOTAL Rs.
Particulars to be specified in respect of amounts
shown against 4, 5 and 6.
Total chit amounts of the chits in fore, i.e., running
chits.
(i) Amounts due from directors or officers of the
company or any of them either jointly or
severally with any other person.
(ii) Amounts due by companies or firms in which
the directors of the company are interested as
directors, partners or in the case of private
companies, as members.
1. Subs. by Act 41 of 2019, s. 3, for “chit amount” (w.e.f. 1-1-2020).
32
PART II.—FORM OF PROFIT AND LOSS ACCOUNT
Expenditure Income
1. To interest paid on deposits, borrowings, 1. By foreman’s commission . . . Rs.
etc. . . . . . . . Rs. 2. By bonus . . . . . . Rs.
2. To salaries, allowances, bonus and 3. By interest . . . . . . Rs.
provident fund . . . . Rs. 4. By indivisible income in auction profit . Rs.
3. To directors’ sitting fees . . . Rs. 5. By rent . . . . . . Rs.
4. To rent, taxes, insurance, lighting . Rs. 6. By net profit on sale of investments . . Rs.
5. To law charges . . . . . Rs. 7. By other receipts . . . . . Rs.
6. To postages, telegrams and stamps . Rs. 8. By loss . . . . . . Rs.
7. To auditors’ fees . . . . . Rs.
8. To filing fees . . . . . Rs.
9. Ro depreciation and repairs . . . Rs.
10. To stationery, printing and
advertisement . . . . . .
Rs.
11. To other expenditure . . . . Rs.
12. To balance of profit . . . . Rs.
TOTAL Rs. TOTAL Rs.
About this act
- Jurisdiction
- Central
- Enactment date
- 1982-08-19
- Sections available
- 90
Commencement information from the source
02-04-1984
Read the sections
1Short title, extent and commencement.→2Definitions.→3Act to override other laws, memorandum, articles, etc.→4Prohibition of chits not sanctioned or registered under the Act.→5Prohibition of invitation for subscriptions except under certain conditions.→6Form of chit agreement.→7Filing of chit agreement.→8Minimum capital requirements for the commencement, etc., of a chit, and creation of a reserve fund, by a company.→9Commencement of chit.→10Copies of chit agreement to be given to subscribers.→11Use of words "chit", "chit fund", "chitty", "kuri", "fraternity fund", or "Rotating Savings and Credit Institution".→12Prohibition of transacting business other than chit business by a company.→13Aggregate amount of chits.→14Utilisation of funds.→15Alteration of chit agreement.→16Date, time and place of conducting chits.→17Minutes of proceedings.→18Copies of minutes to be filed with Registrar.→19Restriction on opening of new place of business.→20Security to be given by foreman.→21Rights of foreman.→22Duties of foreman.→23Books, records, etc., to be kept by foreman.→24Balance sheet.→25Liability of foreman to subscribers.→26Withdrawal of foreman.→27Non-prized subscribers to pay subscriptions and obtain receipts.→28Removal of defaulting subscribers.→29Substitution of subscribers.→30Amounts due to defaulting subscribers.→31Prized subscriber to furnish security.→32Prized subscriber to pay subscriptions regularly.→33Foreman to demand future subscriptions by written notice.→34Restrictions on transfer of rights of foreman.→35Transfer of non-prized subscriber's rights to be in writing.→36Recognition of transfer by foreman.→37Entry of transferee's name in the books.→38Meetings of general body of subscribers.→39Provision for continuation of chits in certain cases.→40Termination of chits.→41Copy of assent or consent to be filed with Registrar.→42Refund of non-prized subscribers' subscriptions.→43Subscribers' dues to be first charge on chit assets.→44Foreman to allow certain subscribers to inspect chit records.→45Preservation of chit records by foreman.→46Inspection of chit books and records by Registrar.→47Power of Reserve Bank to inspect chit books and records.→48Circumstances under which chits may be wound up.→49Application for winding up.→50Bar to winding up proceedings.→51Commencement and effect of winding up order.→52Injunction order.→53Powers of Registrar.→54Vesting of chit assets in Registrar or other persons.→55Suits, etc., to be stayed on winding up order.→56Notification of winding up order.→57Cessation of winding up proceedings on insolvency of foreman, etc., or the winding up of the company and transfer of such proceedings.→58Award of compensation to foreman.→59Right to appeal.→60Limitation.→61Appointment of Registrar and other officers.→62Inspection of documents in Registrar's office.→63Levy of fees.→64Disputes relating to chit business.→65Period of limitation.→66Settlement of disputes.→67Procedure for settlement of disputes and powers of Registrar or nominee.→68Attachment before judgment and other interlocutory orders.→69Decision of Registrar or nominee.→70Appeal against decision of Registrar or nominee.→71Money how recovered.→72Private transfer of property made after issue of certificate void against foreman.→73Advisory role of Reserve Bank.→74Appeals.→75Powers of Registrar to give extension of time for filing documents.→76Penalties.→77Penalty for second and subsequent convictions.→78Application of fine.→79Offences by companies.→80Cognizance of offences.→81Power to compound offences.→82Power to enter and search any place and to seize any documents.→83Officers to be public servants.→84Power to delegate.→85Act not to apply to certain chits.→86Banks not to conduct chit business.→87Power to exempt.→88Protection of action taken under the Act.→89Power to make rules.→90Repeal and saving.→
Schedules
India Code, Government of India. Text fetched 19 Oct 2026. Check the linked official text and subsequent notifications when applying a provision.