The Prize Chits and Money Circulation Schemes (Banning) Act, 1978

(1) This Act may be called the Prize Chits and Money CirculationSchemes (Banning) Act, 1978. (2) It extends to the whole of India 1***

In this Act, unless the context otherwise requires,-- (a) "conventional chit" means a transaction whether called chit, chit fund, kuri or by any othername by or under which a person responsible for the conduct of the chit enters into an agreement witha specified number of persons that every one of them shall subscribe a certain sum of money (orcertain quantity of grain instead) by way of periodical instalments for a definite period and that eachsuch subscriber shall, in his turn, as determined by lot or by auction or by tender or in such othermanner as may be provided for in the chit agreement, be entitled to a prize amount. Explanation.--In this clause "prize amount" shall mean the amount, by whatever name called,arrived at by deducting from out of the total amount paid or payable at each instalment by all thesubscribers, (i) the commission charged as service charges as a promoter or foreman or an agent; and (ii) any sum which a subscriber agrees to forego, from out of the total subscriptions of eachinstalment, in consideration of the balance being paid to him; (b) "money" includes a cheque, postal order, demand draft, telegraphic transfer or money order; (c) "money circulation scheme" means any scheme, by whatever name called, for the making ofquick or easy money, or for the receipt of any money or valuable thing as the consideration for apromise to pay money, on any event or contingency relative or applicable to the enrolment ofmembers into the scheme, whether or not such money or thing is derived from the entrance money ofthe members of such scheme or periodical subscriptions; (d) "prescribed" means prescribed by rules made under this Act; (e) "prize chit" includes any transaction or arrangement by whatever name called under which aperson collects whether as a promoter, foreman, agent or in any other capacity, monies in one lumpsum or in instalments by way of contributions or subscriptions or by sale of units, certificates or otherinstruments or in any other manner or as membership fees or admission fees or service charges to orin respect of any savings, mutual benefit, thrift, or any other scheme or arrangement by whatevername called, and utilises the monies so collected or any part thereof or the income accruing frominvestment or other use of such monies for all or any of the following purposes, namely:-- (i) giving or awarding periodically or otherwise to a specified number of subscribers asdetermined by lot, draw or in any other manner, prizes or gifts in cash or in kind, whether or notthe recipient of the prize or gift is under a liability to make any further payment in respect of suchscheme or arrangement; (ii) refunding to the subscribers or such of them as have not won any prize or gift, the wholeor part of the subscriptions, contributions or other monies collected, with or without any bonus,premium, interest or other advantage by whatever name called, on the termination of the schemeor arrangement, or on or after the expiry of the period stipulated therein, but does not include a conventional chit; (f) "Reserve Bank" means the Reserve Bank of India constituted under the Reserve Bank of IndiaAct, 1934 (2 of 1934).

No person shall promote or conduct any prize chit or money circulation scheme,or enroll as a member to any such chit or scheme, or participate in it otherwise, or receive or remit anymoney in pursuance of such chit or scheme.

Whoever contravenes the provisions ofsection 3 shall be punishable with imprisonment for a term which may extend to three years, or with finewhich may extend to five thousand rupees, or with both: Provided that in the absence of special and adequate reasons to the contrary to be mentioned in thejudgment of the court, the imprisonment shall not be less than one year and the fine shall not be less thanone thousand rupees.

Whoever, with a view to the promotion or conduct of any prize chit or money circulation scheme incontravention of the provisions of this Act or in connection with any chit or scheme promoted orconducted as aforesaid,-- (a) prints or publishes any ticket, coupon or other document for use in the prize chit or moneycirculation scheme; or (b) sells or distributes or offers or advertises for sale or distribution, or has in his possession forthe purpose of sale or distribution any ticket, coupon or other document for use in the prize chit ormoney circulation scheme; or (c) prints, publishes or distributes, or has in his possession for the purpose of publication ordistribution-- (i) any advertisement of the prize chit or money circulation scheme; or (ii) any list, whether complete or not, of members in the prize chit or money circulationscheme; or (iii) any such matter descriptive of, or otherwise relating to the prize chit or moneycirculation scheme, as is calculated to act as an inducement to persons to participate in that prizechit or money circulation scheme or any other prize chit or money circulation scheme; or (d) brings, or invites any person to send, for the purpose of sale or distribution, any ticket, couponor other document for use in a prize chit or money circulation scheme or any advertisement of suchprize chit or money circulation scheme; or (e) uses any premises, or causes or knowingly permits any premises to be used, for purposesconnected with the promotion or conduct of the prize chit or money circulation scheme; or (f) causes or procures or attempts to procure any person to do any of the above-mentioned acts, shall be punishable with imprisonment for a term which may extend to two years, or with fine which mayextend to three thousand rupees, or with both: Provided that in the absence of special and adequate reasons to the contrary to be mentioned in thejudgment of the court, the imprisonment shall not be less than one year and the fine shall not be less thanone thousand rupees.