Chit Funds Act 2016
Chit Funds Act 2016
CONTENTS
Section. Section.
Section.
CHAPTER IV
CHAPTER V
CHAPTER VI
Transfers
Received the assent of the Governor on 23rd July, 2016 and published in
the Government Gazette dated 23rd July, 2016.
An Act to provide for the regulation of chit funds in the State and for matter
connected therewith.
CHAPTER I
Preliminary
1. Short title and commencement. ––(1) This Act may be called the Jammu
and Kashmir Chit Funds Act, 2016.
(2) It shall come into force on such date as the Government may, by notification
in the Government Gazette appoint.
(a) “approved bank” means the State Bank of India constituted under
section 3 of the State Bank of India Act, 1955 (Central Act No. 23 of
1955), or a subsidiary bank constituted under section 3 of the State
Bank of India (Subsidiary Banks) Act, 1959 (Central Act No.38 of 1959),
or a corresponding new bank constituted under Sec.3 of the Banking
Companies (Acquisition and Transfer of Undertakings) Act, 1970
(Central Act No.5 of 1970), or a Regional Rural Bank established under
Section 3 of the Regional Rural Banks Act, 1976 (Central Act No.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 35 of the Banking Regulation Act, 1949 (10 of 1949) or such
other banking institution as the Government may in consultation with
the Reserve Bank, approve for the purposes of this Act ;
40 CHIT FUNDS ACT, 2016
(b) “chit” means a transaction whether called chit, chit fund, chitty, kuri 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 or
by tender or in such other manner as may be specified in the chit
agreement, be entitled to the prize amount ;
(i) some alone, but not all, of the subscribers get the prize amount
without any liability to pay future subscriptions ; or
(ii) all the subscribers get the chit amount by turns with a liability to
pay future subscriptions ;
(d) “chit amount” means the sum total of the subscriptions payable by all
the subscribers for any instalments of a chit without any deduction of
discount or otherwise ;
(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 ;
CHIT FUNDS ACT, 2016 41
(h) “dividend” 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 ;
(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 ;
(n) “prize amount” means the difference between the chit amount and the
discount, and in the case of a fraction of a ticket means the difference
between the chit amount and the discount proportionate to the fraction
of the ticket, and when the prize amount is payable otherwise than in
cash, the value of the prize amount shall be the value at the time when
it becomes payable ;
(p) “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 ;
(q) “Reserve Bank” means the Reserve Bank of India constituted under
the Reserve Bank of India Act, 1934 (2 of 1934) ;
(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
CHAPTER II
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
Government may, on application made to it in this behalf, allow.
(3) The previous sanction referred to in sub-section (1) may be refused, if the
foreman, ––
CHIT FUNDS ACT, 2016 43
(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
(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 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 any
officer empowered under sub-section (1) may appeal to the Government within
thirty days of the date of communication to him of such refusal and the decision of
Government on such appeal shall be final.
(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 ;
(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 dividend, foreman’s commission or remuneration or 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 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 ;
(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
name of 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.
(2) The duration of a chit shall not extend beyond a period of five years from
the date of its commencement :
(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 thirty percent of the 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.
46 CHIT FUNDS ACT, 2016
(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:––
(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 his 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.
shall not commence or carry on chit business unless it has a paid-up capital of not
less than rupees ten lakhs.
(2) Every company having a paid-up capital of less than rupees ten lakhs
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 to not less than rupees one lakh :
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 dividend on its shares is declared, transfer
to such reserve fund, a sum equal to not less than ten percent 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 from to the Registrar
explaining the circumstances relating to such appropriation.
(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.
48 CHIT FUNDS ACT, 2016
(3)No foreman shall commence any auction or, the draw of any chit or
appropriate any chit amount unless a certificate of commencement referred to in
sub-section (2) is obtained by him.
(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.
11. Use of the words “chit fund”, “chitty’ or “kuri”.––(1) No person shall
carry on chit business unless he uses as part of his name any of the words “chit”,
“chit fund “, “chitty” or “kuri” and no person other than a person carrying on chit
business shall use as part of his name any such word.
(a) any person 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 words from his name :
(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 :
(a) where the number of partners of the firm or the individuals constituting
the association is not less than four, a sum of rupees ten lakhs ;
(b) in any other case, a sum calculated on the basis of one lakh rupees
with respect to each such partner or individual.
(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 :
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
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.
(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.
CHIT FUNDS ACT, 2016 51
(a) the date and hour when proceedings began and ended and the place
where the draw was held ;
(b) the number of the instalments of the chit to which the proceedings
relate ;
(d) the person or persons who become entitled to the prize amount in the
instalment ;
(f) full particulars regarding the disposal of the unpaid prize amount, if
any, in respect of any previous instalments ; and
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.
(2) Before granting approval under sub-section (1), the Registrar shall consult
the Registrar 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.
(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
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,––
(a) deposit in an approved bank an amount equal to the chit amount in the
name 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 Trusts
Act, (Samvat 1977) of such value, as may be prescribed by the State
Government from time of time :
CHIT FUNDS ACT, 2016 53
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 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 one and a half times the value of the chit
amounts.
(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 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 finished 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
54 CHIT FUNDS ACT, 2016
(a) in the absence of any provision in the chit agreement to the contrary,
to obtain the 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 chit amount in a
chit without discount ;
(b) to such amount not exceeding five percent of the 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.
(g) to do all other acts that may be necessary for the due and proper
conduct of the chit.
CHIT FUNDS ACT, 2016 55
(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.
Provided that the prized subscriber shall be entitled to the payment of the
prize 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 prize amount to the prized subscriber within seven days after the date of the
draw or before the date of the next succeeding instalments, whichever is earlier :
Provided further that where the prize 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 prize amount due in
respect of any draw remains unpaid until the date of the next succeeding instalments,
the foreman shall deposit the prize 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 prize amount
in respect of any instalments 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
instalments.
(3) Every payment of the prize amount or the amount of future subscriptions
under sub-section (1), and the deposit of the prize 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 :
56 CHIT FUNDS ACT, 2016
Provided that where the foreman is himself a prized subscriber, he shall be
entitled to appropriate to himself the prize amount subject to his complying with
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 dividend either in cash, grain or by way of adjustment
towards the subscriptions payable for the next instalments, if any.
(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
(i) the amounts paid by the prized 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
CHIT FUNDS ACT, 2016 57
(e) such other registers and books in such form as may be prescribed by
the State Government within whose jurisdiction the chit is conducted.
(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.
CHAPTER IV
Provided that if the defaulter pays the defaulted instalments 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.
(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.
CHIT FUNDS ACT, 2016 59
(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 deduction as may be
provided for in the chit agreement.
CHAPTER V
(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 :
(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).
CHAPTER VI
Transfers
(2) Any transfer of the rights of a foreman to receive subscriptions form 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.
CHAPTER VII
(2) The foreman shall convene such a meeting on the requisition in writing of
not less than twenty-five percent 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 refuses or fails to call such a
62 CHIT FUNDS ACT, 2016
meeting within fourteen days of the date of receipt of such requisition, not less
than twenty-five percent 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 purpose 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
non-prized and unpaid prized subscribers, if any.
CHAPTER VIII
Termination of Chits
(a) when the period specified there for 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
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.
CHAPTER IX
Inspection of Documents
(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 45-N of the
Reserve Bank of India Act, 1934 (Central Act No. 2 of 1934).
(2) The Reserve Bank may, if it considers necessary, forward a copy of its
repost 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,––
(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
(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 prize 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
(i) if it is just and equitable that the chit should be wound up.
Explanation: — For the purpose of clause (d), in determining whether the foreman
is unable to pay the amount due to the subscribers, the Registrar
shall take into account his contingent and future liabilities in
respect of the chit.
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, ––
(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.
CHIT FUNDS ACT, 2016 69
(2) Where an order refusing to wind up a chit has been made under this Act,
in computing a 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 had 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 effect 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 dividend 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 the chit to the date of the declaration of the final dividend shall
be excluded.
CHAPTER XI
(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 opinion that the accounts of any chit are not properly
maintained and that such accounts should be audited, by a chit auditor.
(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 with 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 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 chit amount.
63. Levy of fees.––(1) There shall be paid to the Registrar such fees as the
Government may, from time to time, prescribe for––
(b) the filing of the chit agreement of the Registrar and the registration of
the chit under section 7 ;
CHIT FUNDS ACT, 2016 71
(c) the filling 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 ;
CHAPTER XII
(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 ;
72 CHIT FUNDS ACT, 2016
(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
(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 purpose 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).
(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
(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, (Samvat)
1995, as if the dispute were a suit, and the Registrar, a Civil Court.
CHIT FUNDS ACT, 2016 73
(2) Where any dispute is referred under sub-section (1) for settlement of 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.
(d) requisitioning any public record or copies thereof from any Court or
Office ;
(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.
74 CHIT FUNDS ACT, 2016
(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 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 relief, 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.
(b) is about to remove the whole or any part of the property form the
jurisdiction of the Registrar,
(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 effect 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 order pending the award in a dispute
referred to in sub-section (1) as may appear to be just and convenient.
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 or 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 the
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 Government.
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 Government Gazette by the 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
CHIT FUNDS ACT, 2016 77
(3) The 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.
(a) who fails to file any document required to be filed 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.
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.
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) No Court inferior to that of a Judicial Magistrate of the 1st Class shall try
an offence punishable under this Act.
CHIT FUNDS ACT, 2016 79
(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, Samvat, 1989.
85. Act not to apply to certain chits.––Nothing in this Act shall apply in
respect of ––
(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 ten thousand
rupees.
80 CHIT FUNDS ACT, 2016
(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.
(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 ;
CHIT FUNDS ACT, 2016 81
(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 ;
(l) the auditing of balance sheet 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 ;
(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 ;
82 CHIT FUNDS ACT, 2016
(s) the procedure for, and the manner of, receiving any sum payable under
this Act ;
(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.
–––––
CHIT FUNDS ACT, 2016 83
THE SCHEDULE
Liabilities Assets
1. Capital Rs. 1. Cash Rs.
Expenditure Income
8. By loss Rs.
9. To depreciation and Rs.
repairs