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THE CHIT FUNDS ACT, 1982

Title : THE CHIT FUNDS ACT, 1982

Year : 1982



A true copy of every assent referred to in section 26 and of every consent referred to in clause (b) of section 40 with their dates shall be filed by the foreman or by the surviving partner or partners, as the case may be, with the Registrar within fourteen days from the date of such assent or consent.



Except in the cases referred to in clauses (a) and (b) of section 40,-

(a) Every non-prized subscriber shall, unless otherwise provided for in this Act or in the chit agreement, be entitled to get back his subscriptions at the termination of the chit without any deduction for dividend, if any, earned by him:

Provided
that, any person to whom the rights of a non-prized subscriber are transferred in accordance with the provisions of section 35, shall, in addition to his own subscriptions, be entitled to get back the subscriptions paid by such non-prized subscriber, subject to the conditions specified in this section;

(b) If a chit terminates on a date earlier than the date originally fixed in the chit agreement, the non-prized subscriber's claim shall be deemed to have arisen on the date on which he has notice thereof.



Any amount due to the subscriber from a foreman in relation to the chit business shall be a first charge on the chit assets.



Every foreman shall, on payment of such fee not exceeding five rupees as may be specified in the chit agreement, allow the non-prized subscribers and unpaid prized subscribers reasonable facilities on all the dates of draw or on such other dates and within such hours as may be provided for in the chit agreement, for the inspection of security bonds and documents, receipts and other records taken from the prized subscribers, or furnished by the foreman as a subscriber and all chit records, including books of accounts, pass-books, balance-sheet and profit and loss accounts and such other records as may show the actual financial position of the chit.



All the records pertaining to a chit shall be kept by the foreman for a period of eight years from the date of termination of the chit.



(1) Without prejudice to the provisions of sections 209 and 209A of the Companies Act, 1956 (1 of 1956), the Registrar or an officer authorised by the State Government in this behalf may inspect chit books and all the records of a chit during working hours on any working day at the premises of the foreman with or without giving notice and it shall be the duty of every foreman to produce to the Registrar or the officer so authorised, all such books and records as are in his custody or power and to furnish him with any statement or information relating to the chits as he may require from the foreman within such time as he may specify.

(2) The Registrar or an officer authorised by the State Government in this behalf may, after giving seven days' notice in writing to the foreman, direct him to produce before him for inspection such chit books and records as he may require at the time and place mentioned in the notice.

(3) If on an inspection made under sub-section (1) or sub-section (2), any defects are found, the Registrar may bring such defects to the notice of the foreman and may also make an order directing the foreman to take such action as may be specified in the order to remedy the defects within the time specified therein.

(4) Every foreman shall be bound to comply with the directions contained in an order made under sub-section (3).



(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 45N of the Reserve Bank of India Act, 1934 (2 of 1934).

(2) The Reserve Bank may, if it considers necessary, forward a copy of its report 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.



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,-

(a) If the chit has terminated under clause (c) of section 40; or

(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

(c) If he fails to deposit any amount required to be deposited under any of the provisions of this Act; or

(d) If it is proved to the satisfaction of the Registrar that the foreman is unable to pay the amounts due to the subscribers; or

(e) If the execution or other process issued on an order passed by the Registrar in favour of any subscriber in respect of amounts due to him from the foreman in relation to the chit business is returned unsatisfied in whole or in part; 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.



An application for the winding up of a chit shall be made by a petition presented by any non-prized or unpaid prized subscriber to the Registrar signed and verified in the manner laid down by the Code of Civil Procedure, 1908 (5 of 1908), and shall contain such particulars as may be prescribed:

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,-

(a) By non-prized and unpaid prized subscribers representing not less than twenty-five per cent, of the amount or, as the case may be, the value of the grain subscribed by all the non-prized and unpaid prized subscribers, if any; or

(b) With the previous sanction of the State Government within whose jurisdiction the chit is commenced or conducted.

Explanation.-For the purposes of clause (a) of the proviso, a subscriber of a fraction of a ticket shall be deemed to be a subscriber only to the extent of such fraction.



Notwithstanding anything contained in sections 48 and 49, no petition for the winding up of a chit shall be entertained by the Registrar,-

(a) If proceedings relating to insolvency are pending against the foreman; or

(b) Where the foreman is a firm, if proceedings relating to insolvency are pending against all the partners or all the partners except one thereof, or proceedings for the dissolution of the firm are pending; or

(c) Where the foreman is a company or co-operative society, if proceedings for the winding-up of such company or co-operative society are pending.



An order for the winding-up of a chit shall operate in favour of all the subscribers to whom amounts are due from the foreman and it shall be deemed to have commenced from the date of the presentation of the application for the winding up.



The Registrar may, on the application of the foreman or of any subscriber to whom amounts are due in respect of a chit, at any time after the presentation of the application for the winding up of the chit under this Act and before the making of an order for the appointment of an interim receiver or for the winding up of the chit, restrain any other proceedings instituted against the foreman for the realisation of amounts due from him on such terms as the Registrar thinks fit.



The Registrar may, after hearing an application under this Chapter, dismiss it with or without costs, or adjourn the hearing conditionally or unconditionally or make an interim or any other order that he deems fit.



On the making of an order for the winding up of a chit, all the chit assets pertaining to such chit shall vest in the Registrar or in any person appointed by him for distribution amongst the subscribers to whom amounts are due in respect of the chit.



When a winding up order has been made or a receiver has been appointed, no suit or other legal proceedings shall be continued or commenced against the foreman by a subscriber for the realisation of amounts due to him in respect of the chit except with the leave of the Registrar winding up the chit and on such terms as he may impose.

Last updated on August, 2016

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