LexThe chit funds act, 1982
Haryana · state statute
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THE CHIT FUNDS ACT, 1982
(Last Updated on 1st January, 2020).
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ARRANGEMENT OF SECTIONS
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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.
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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.
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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.
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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.
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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 s ection 3 of the State Bank
of India Act, 1955 (23 of 1955), or a sub sidiary bank constituted under s ection 3 of the Stat e
Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), or a correspond ing new bank
constituted under s ection 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 N ovember, 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 terri tory 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, 19 89, 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 terr itory 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 Ori ssa on 1st September, 1985, vide notification No. S.O. 629(E), dated 26th August, 1985, see Gazette of India, Extrao rdinary,
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 Dec ember, 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).
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Banks Act, 1976 (21 of 1976), or a correspond ing new bank constituted under s ection 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 wheth er 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 defin ite
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 c lause, 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 liabil ity 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 grai n 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 am ong 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).
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(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 Regi strar of Chits appointed under s ection 61, a nd 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 prov ided
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 exceed ing 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).
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(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 offen ce 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 noti ce, circular, prospectus, proposal or document contains
a statement that the pr evious sanction required under s ection 4 has been obtained and the particulars of
such sanction.
6. Form of chit agreement .—(1) Every chit agreement shall be in duplicate and sh all 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 distributa ble 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).
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(o) the dates on whic h 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 p ersons 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 conc lusive 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 cr eation of a
reserve fund, by a c ompany.—(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).
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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 c ompany 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 appropri ate 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 co mmencement under sub -section (2) of s ection 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).
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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 a ggregate 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 n et 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 ca rrying 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 se curities within the meaning of s ection 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 speci fied 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).
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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 chi t agreement and
in the presence of not less than two subscribers 1[present in person or through video confe rencing 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 s ection 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 fin ancial 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 p lace 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).
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(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 s ection 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 t he 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 t he contrary contained in any other law f or 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).
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(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 futur e
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 ban k 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 d raw
remains unpaid unti l the dat e 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 doe s not co llect 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).
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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 t he 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 onExcerpt shown. Open the full act in Lexace.