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 -

"approved bank" means the State Bank of India constituted under section 3 of the State Bank of India Act, 1955, or a subsidiary bank constituted under section 3 of the State Bank of India (Subsidiary Banks) Act, 1959, or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, or a Regional Rural Bank established under section 3 of the Regional Rural Banks Act, 1976, or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, or a banking company as defined under clause (c) of section 5 of the Banking Regulation Act 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;

"chit' means a transaction whether called chit, chit fund, chitty, kury or by any other name 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 installments 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.

some alone, but not all, of the subscribers get the prize amount without any liability to pay future subscription; or

'chit agreement ' means the document containing the articles of agreement between the foreman and the subscribers relating to the chit;

'chit amount' means sum-total of the subscriptions payable by all the subscribers for any instalment of a chit without any deduction of discount or otherwise;

'defaulting subscriber' means a subscriber who has defaulted in the payment of subscriptions due in accordance with the terms of the chit agreement;

'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;

"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;

"draw" means the manner specified in the chit agreement for the purpose of ascertaining the prized subscriber at any instalment of the chit;

"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;

'non-prized subscriber' does not include a defaulting subscriber;

"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;

"prized subscriber" means a subscriber who has either received or is entitled to receive the prize amount;

'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;

"Reserve Bank' means the Reserve Bank of India constituted under the Reserve Bank of India Act, 1934;

"State Government", in relation to a Union territory, means the administrator of the Union territory appointed by the President under article 239 of the Constitution;

"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;

3. Act to override other laws, memorandum, articles, etc. - Save as otherwise expressly provided in this Act, -

Non-prized subscribers to pay subscriptions and obtain receipts
Every non-prized subscriber shall pay his subscription due in respect of every instalment on the dates and times and at the places mentioned in the chit agreement and shall, on such payment, be entitled to obtain a receipt from the foreman.

A foreman may substitute in the list of subscribers any person (hereafter in this Chapter referred to as the substituted subscriber) in place of the defaulting subscriber whose name has been removed under sub-section (1) of section 28.

Every substitution referred to in sub-section (1) shall, with the date therefor, 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.

A foreman shall, out of the amounts payable by and realized from the substituted subscriber towards the instalments relatable to the period before the date of substitution (including the arrears due from the defaulting subscriber), deposit before the date of the next succeeding instalment in a separate identifiable account in an approved bank mentioned in the chit agreement, an amount equal to the contributions made by the defaulting subscriber less such deductions as may be provided for in the chit agreement, and shall inform the defaulting subscriber as well as the Registrar of the fact of such deposit and shall not withdraw the amount so deposited except for payment to the defaulting subscriber.

The amount so deposited under sub-section (1) shall be paid to the defaulting subscribers 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.

The contributions of any defaulting subscriber who has 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 deductions as may be provided for in the chit agreement.