The Chit Funds Act, 1982

(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 date2as the Central Government may, by notification in theOfficial Gazette, appoint, and different dates may be appointed for different States.

In this Act, unless the context otherwise requires,-- (a) "approved bank" means the State Bank of India constituted under section 3 of the State Bankof India Act, 1955 (23 of 1955), or a subsidiary bank constituted under section 3 of the StateBank of India (Subsidiary Banks) Act, 1959 (38 of 1959), or a corresponding new bankconstituted 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 Banks Act, 1976 (21 of 1976), or a corresponding new bank constituted under section 3 of theBanking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or a bankingcompany 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 otherbanking institution as the State Government may, in consultation with the Reserve Bank, approve forthe 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 intoan agreement with a specified number of persons that every one of them shall subscribe a certain sumof money (or a certain quantity of grain instead) by way of periodical instalments over a definiteperiod and that each such subscriber shall, in his turn, as determined by lot or by auction of by tenderor in such other manner as may be specified in the chit agreement, be entitled to the 2[net chitamount]. Explanation.-- A transaction is not a chit within the meaning of this clause, if in suchtransaction,-- (i) some alone, but not all, of the subscribers get the 2[ net chit amount] without any liability to payfuture 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 theforeman 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 subscriptionsdue 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 saidagreement to meet the expenses of running the chit or for distribution among the subscribers or forboth; 5***** (i) "draw" means the manner specified in the chit agreement for the purpose of ascertaining theprized subscriber at any instalment of the chit; (j) "foreman" means the person who under the chit agreement is responsible for the conduct ofthe 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 subscribersfor 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, andin the case of a fraction of a ticket means the difference between the gross chit amount and thediscount proportionate to the fraction of the ticket, and when the net chit amount is payable otherwisethan in cash, the value of the net chit amount shall be the value at the time when it becomes payable;] (k) "non-prized subscriber" does not include a defaulting subscriber; (l) "prescribed" means prescribed by rules made under this Act; 7*****; (n) "prized subscriber" means a subscriber who has either received or is entitled to receive the2[net chit amount]; (o) "Registrar" means the Registrar of Chits appointed under section 61, and includes anAdditional, 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 IndiaAct, 1934 (2 of 1934); 8[(pa) “share of discount” means the share of the subscriber in the amount of discount availableunder the chit agreement for rateable distribution among the subscribers at each instalment of thechit.] (q) "State Government", in relation to a Union territory, means the administrator of that Unionterritory 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 ticketor fraction thereof by assignment in writing or by operation of law; (s) "ticket" means the share of a subscriber in a chit.

Save as otherwise expressly providedin this Act,-- (a) the provisions of this Act shall have effect notwithstanding anything to the contrary containedin any other law for the time being in force or in the memorandum or articles of association orbye-laws or in any agreement or resolution whether the same be registered, executed or passed, as thecase may be, before or after the commencement of this Act; and (b) any provision contained in the memorandum, articles, bye-laws, agreement or resolutionaforesaid, shall, to the extent to which it is repugnant to the provisions of this Act, become or be void,as the case may be.

(1) No chit shall becommenced or conducted without obtaining the previous sanction of the State Government within whosejurisdiction the chit is to be commenced or conducted or of such officer as may be empowered by thatGovernment in this behalf, and unless the chit is registered in that State in accordance with the provisionsof this Act: Provided that a sanction obtained under this sub-section shall lapse if the chit is not registered withintwelve months from the date of such sanction or within such further period or periods not exceeding sixmonths 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 theforeman 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 chitbusiness and sentenced to imprisonment for any such offence; or (b) had defaulted in the payment of fees or the filing of any statement or record required to bepaid or filed under this Act or had violated any of the provisions of this Act or the rules madethereunder; or (c) had been convicted of any offence involving moral turpitude and sentenced to imprisonmentfor 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 opportunityof being heard. (4) The order of the State Government, and, subject to the provisions of sub-section (5), the order ofthe officer empowered under sub-section (1), issuing or refusing previous sanction under this section shallbe final. (5) Any person aggrieved by the refusal to issue previous sanction by an officer empowered undersub-section (1) may appeal to the State Government within thirty days of the date of communication tohim of such refusal and the decision of that Government on such appeal shall be final.

No person shallissue or cause to be issued any notice, circular, prospectus, proposal or other document inviting the publicto subscribe for tickets in any chit unless such notice, circular, prospectus, proposal or document containsa statement that the previous sanction required under section 4 has been obtained and the particulars ofsuch sanction.