The contract shall also contain that each contributor shall get in return in total or by public sale or tender or as specifically provided in the contract, be given the prize amount. The provisions of the act shall be implemented despite the sections of any other legal principles or memorandum, bye laws, articles of association prior or subsequent to the enforcement of the Act. Any laws already prevalent in India shall be invalid to the extent of its inconsistency with the present legislation. The chits shall be conducted only with the prior permission of the State Government where the chit is functioning or by the officer entrusted with such function and obtain registration.
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Power to compound offences. Power to enter and search any place and to seize any documents. Officers to be public servants.
Power to delegate. Act not to apply to certain chits. Banks not to conduct chit business. Power to exempt. Protection of action taken under the Act. Power to make rules. Repeal and saving. An Act to provide for the regulation of chit funds and for matters connected therewith.
Short title, extent and commencement. Statement of Objects and Reasons. A "conventional chit" is an old indigenous financial institution involving regular periodical subscriptions by a group of persons.
It is, in law, a contract between the subscribers and the foreman which provides that the subscribers shall subscribe a certain sum by periodical instalments for a definite period.
Each subscriber shall, in his turn, as determined by lot or by auction or in such other agreed manner be entitled to the prize amount. There will be as many periodical instalments as there are members. As there is a mutuality of interest among the small number of subscriber to each chit fund, it constitutes a convenient instrument combining savings and borrowings. In the wider context of examining in depth the activities of the non-banking financial intermediaries which term also includes institutions conducting chit fund or kuries , the Banking Commission had recommended inter alia, that it is essential to have a uniform chit fund legislation applicable to the whole country and as such either an all India Chit Funds Act may be enacted or a model law may be prepared for adoption by all the states.
The Commission also observed that it would be desirable to provide in the legislation that only public limited companies can run chit funds. The recommendations of the Banking Commission were examined by Government. The Reserve Bank, at the instance of the Government, drafted a model Bill to regulate the conduct of chit funds for adoption by all the State Governments. Raj, the then Chairman of the Unit Trust of India.
The Study Group was unanimously of the view that the Bill should be enacted as a Central legislation, as such a step. Besides ensuring uniformity in the provisions applicable to chit fund institutions throughout the country, would also prevent such institutions from taking advantage either of the absence of any law governing chit funds in any State or exploit the benefit of any lacuna or relaxation in any State Government concerned which in turn could seek the advice and assistance of the Reserve Bank on policy matters.
Further, there should be according to the Group no objection to chits being conducted by private limited companies also and on a limited scale even by unincorporated bodies, such as, individuals, sole proprietorships and partnership firms. The Bill has been finalized after taking into account the views of all the State Governments to whom a Draft Bill was sent for comments.
The scheme of the Bill and the provisions made therein largely follow the pattern of chit fund legislations in force in some of the States and includes certain new provisions, such as, minimum capital requirements for companies conducting chit business, prohibiting chit fund companies from doing any other business, placing a ceiling on the aggregate chit amounts of chits that are being conducted by chit fund institutions, providing for a self-contained machinery for the settlement of disputes between a foreman and the subscribers by means of arbitration, etc.
The repeal of the existing State legislations on the subject has also been provided for in the Bill. The "Notes on Clauses" appended to the Bill explain in detail the provisions of the Bill.
Statement of Objects and Reasons - Act 10 of Sub-section 3 of section 1 of the Act, inter alia, confers powers upon the Central Government to appoint different dates for commencement of the said Act for different States.
The Act has so far been brought into force in sixteen States and six Union territories. The provisions contained in sub-section 3 of section 6 of the Act, provide that the maximum amount of discount, which the prized subscriber has to forgo at any installment to any chit, shall not exceed thirty percent.
Clause j of section 2 of the Chit Funds Act, defines "foreman" which 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 of the Act. Under the existing provisions contained in section 13 of the Act, no foreman other than a firm or other association of individuals or a company can commence or conduct chits, the aggregate amount of which at any time exceeds twenty-five thousand rupees.
Where the foreman is a firm or other association of individuals, the aggregate chit amount shall not exceed twenty-five thousand rupees for every partner or individual, or as the case may be, subject to a maximum of one lakh rupees. Where the fore-man is a company, the aggregate chit amount of the chits conducted by it, shall not, at any time, exceed ten times the net owned funds of the company defined in the Explanation to that section. The Court held that the restriction in sub-section 3 of section 6 was neither arbitrary nor unreasonable and also upheld the constitutional validity of the Act and dismissed Civil Appeal No.
The Supreme Court, did not find that the limits put in section 13 of the Act were violative of article 19 1 g of the Constitution. They further observed that in any case, such limits were in the interests of the subscribers and in view of the inflation in the country, the appropriate authorities, in case a demand was so raised, from time to time increase the limits.
However, they did not find it necessary to give any direction in this behalf. In the light of the judgment of the Supreme Court in the aforesaid case, the Central Government invited suggestions from the concerned State Governments and Union territories and from the All India Association of Chit Funds on the proposal, inter alia, to amend sections 6 and 13 of the Chit Funds Act.
After having considered the suggestions and in consultation with the Reserve Bank of India, it is proposed to a enhance the ceiling of discount to be foregoing by a prized subscriber from thirty per cent, specified in sub-section 3 of section 6 of the Act to forty per cent.
Section 20 of the Chit Funds Act, provides for security to be given by a foreman. Clause a of sub-section 1 of the said Act, provides that every foreman shall, for proper conduct of the chit, deposit in an approved bank an amount equal to the chit amount in the name of the Registrar. It is proposed to substitute said clause a of sub-section 1 of section 20 so as to provide that the said deposit in the name of the Registrar shall be an amount equal to fifty per cent.
The Bill seeks to achieve the above objects. Act to override other laws, memorandum, articles, etc. Prohibition of chits not sanctioned or registered under the Act.
Prohibition of invitation for subscriptions except under certain conditions. Form of chit agreement. Filing of chit agreement. Minimum capital requirements for the commencement, etc.
THE CHITS FUNDS ACT, 1982
Free for one month and pay only if you like it. Short title, extent and commencement. The chit funds act, 2. The chit funds act, 3.
Chit Funds Act, 1982