Legal

Rules & Acts

The chit funds act, 1982 Act. No. 40 of 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:-

1. 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 except the State of Jammu and Kashmir.
  • 3. It shall come into force on such date as the Central Government may, by notification in the Official Gazette, appoint, and different dates may be appointed for different States.

2. DEFINATIONS –

In this Act, unless the context otherwise requires –

(a) “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;

(b) “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.

3. EXPLANATIONS- A transaction is not a chit within the meaning of this clause. if in such transaction,

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

(b) all the subscribers get the chit amount by turns with a liability 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;

(d) ‘chit amount’ means sum-total of the subscriptions payable by all the subscribers for any installment of a chit without any deduction of discount or otherwise;

(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 grain which a prized subscriber is under the terms of the chit agreement, required to foregos 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;

(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 installment of the chit;

(i) “draw” means the manner specified in the chit agreement for the purpose of ascertaining the prized subscriber at any installment 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;

(k) ‘non-prized subscriber’ does not include a defaulting subscriber;

(l) “prescribed” means prescribed by rules made under this Act;

(m) “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;

(n) “prized subscriber” means a subscriber who has either received or is entitled to receive the prize amount;

(o) ‘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;

(p) “Reserve Bank’ means the Reserve Bank of India constituted under the Reserve Bank of India Act, 1934;

(q) “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;

(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.

4. ACT TO OVERRIDE OTHER LAWS, MEMORANDUM, ARTICLES, ETC. – Save as otherwise expressly provided 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 he 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.

5. RIGHTS AND DUTIES OF NON-PRIZED SUBSCRIBERS –

Non-prized subscribers to pay subscriptions and obtain receipts

Every non-prized subscriber shall pay his subscription due in respect of every installment 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.

Removal of defaulting subscribers:-

1. A non-prized subscriber who defaults in paying his subscription in accordance with the terms of the chit agreement shall be liable to have his name removed from the list of subscribers and a written notice of such removal shall be given by the foreman to the defaulting subscriber within fourteen days of the date of such removal:Provided that if the defaulter pays the defaulted installment 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 within the date thereof by 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.

Substitution of subscribers:-

1. 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.

2. 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.

Amounts due to defaulting subscribers:-

1. A foreman shall, out of the amounts payable by and realized from the substituted subscriber towards the installments repeatable to the period before the date of substitution (including the arrears due from the defaulting subscriber), deposit before the date of the next succeeding installment 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.

2. 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.

3. 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.

7. RIGHTS AND DUTIES OF PRIZED SUBSCRIBERS –

Prized subscriber to furnish security

Every prized subscriber shall, if he has not offered, to deduct the amount of all future subscriptions from the prize amount due to him, furnish, and a foreman shall take, sufficient security for the due payment of all future subscriptions and, if the foreman is a prized subscriber, he shall give security for the due payment of all the future subscriptions to the satisfaction of the Registrar.

Prized subscriber to pay subscriptions regularly

Every prized subscriber shall pay his subscriptions regularly on the dates and times and at the place mentioned in the chit agreement and, on his failure to do so, he shall be liable to make a consolidated payment of all the future subscriptions forthwith.

Foreman to demand future subscriptions by written notice

1. A foreman shall not be entitled to claim a consolidated payment from a defaulting prized subscriber under section 32 unless he makes a demand to that effect in writing.

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, not withstanding 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:
Provided that if any such dispute is on a promissory note, no order shall be passed under this sub-section unless such promissory note expressly states that the amount due under the promissory note is towards the payment of subscriptions to the chit.

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).

4. All consolidated payments of future subscriptions realised by a foreman shall be deposited by him in an approved bank mentioned in the chit agreement before the date of the succeeding installment and the amount so deposited shall not be withdrawn except for payment of future subscriptions.

5. Where any property is obtained as security is lieu of the consolidated payment of future subscriptions, it shall remain as security for the due payment of future subscriptions.

NOTE: Please refer to amended/latest Chit Fund Act before entering in chit schemes.

REFUND POLICY 

* NON-PRIZED SUBSCRIBER if a non-prized subscriber fails to deposit his monthly/ weekly subscription before the due date penalty will be charged at the rate of 3 paise per rupee or part thereof. If the default is continued, a second month/week penalty will be charged at the rate of 6 paise per rupees or part thereof per month/week if the default continues for more than two months/ weekly subscriber will not be entitled to dividends in addition to the aforesaid penalty charges. A subscriber who has not made up-to-date payments of all installments dues from him, will not be permitted to bid in the auction, if he does his bid will be cancelled and he will be required to make good the loss incurred for transferring the bid to   another subscriber or for conducting the re auction, if the non prized subscriber fails to pay subscription for three consecutive instalments he shall be liable to be removed from the list of subscribers and liable to pay the foreman commission 5%-7% of chit value also deposited amount in the chit group will be released after the tenure completion of chit group, foreman at his option, shall be entitled to substitute a new subscriber in place of defaulting subscriber or may himself subscribe for the ticket and the defaulted ticket of the chit will be dealt with subject to the Bye-Laws and the relevant provisions of the Chit Fund Act. The Foreman at his discretion can waive the penalties partly or fully and can also postpone the removal in suitable and deserving cases. An expelled member may be re-admitted OR such as the Foreman deems proper.

* Reg. Fees are non – refundable and non-transferable.

Rules and Regulation

1.    Date of Commencement and termination of chit

Date of Commencement :……………………. Date of Termination N. S. The date

of              termination may be postponed due to reasons beyond the control of the Foreman.

  1.       Mode of ascertaining the Successful Bidder (Prized Subscriber) and Discount:

The duration of the auction shall be 5 minutes in respect of all types of groups. Auction in all months/weeks, will start with a minimum of 5% of the chit value. (Less Foreman commission) A Non Prized subscriber who cannot personally participate in the auction may send his authorized agent to forward to the Foreman a bid offer starting the maximum amount of discount he is willing to offer, which must be received by the Foreman at least one day before the date of auction. Generally defaulted subscribers will not be allowed to participate, in the auction. No outsiders shall be permitted to participate in the auction, in case there are more than one bidder for the same discount, the auction will be decided by lot among such bidders Only, the subscribers or their authorized agents will be allowed to take part in auction

The Auction will be conducted under the following pattern marked :

Maximum ceilings Auctions : In this type-of auction the amount shall start from an amount over and above the foreman’s commission of 5% and the bidders may in auction raise, the bid count to a maximum of 30%- 40%(Depending on Chit Group) of the chit value. Each time the bid shall be raised by Rupees Hundred or multiples of Rupees Hundred. They non-prized subscriber who bids at the highest discount not exceeding the above specified Limit will be declared as prized subscriber.

  1. Open Auction by Tender: in this open auction system in all months the bid will start with a minimum discount of 5% of the chit value by tenders in writing with no restriction on the maximum discount, subject to the conditions specified in clause ‘a’ above.
    1.     Open Auction by Bidding : In this open auction system in all months/weeks the bid will start with a minimum discount of 5% of the Chit value The bidders may in auction, raise the discount with no restriction in maximum. Each time the bid shall be raised by Rupees Hundred or multiple of Rupees Hundred. In 5 minutes duration whoever bids highest discount will be declared as prized subscriber.

c.  Alternate months/weeks auctions:

  1.     In alternate month auction will be by oral bidding or by tenders in writing with no restrictions on maxi-mum discount

ii  In other month auction will also be by oral bidding or by tenders in writing by the subscriber in person but with a maximum discount limited to 30% – 40% (Depending on Chit Group) of the chit value.

Payment may be made in Cash Money Order, Bank Draft or ,by Cheque in favour of Ciro Chit Fund Pvt. Ltd. and will be accepted on all working days of the Company.

  1.     Local Cheque should reach the Company’s Office at least 7 days before 10 clear working days prior to the date of auction in order to enable in party to become eligible to participate in the auction after realization of the Cheque, In case of out station cheques, the appropriate Bank charges and also a fee or Rs. 11- (Ru-pees Eleven only) for presentation and messenger charges must be included in the remittance Drafts and Cheques should be duly crossed. For all cheques, if returned the Bank Charges shall be debited to the subscriber’s account in addition to Rs. 100- for service charges, in respect of cases where the cheque given is dishonored future subscriptions will be accepted only in cash/DD.
  2.    The subscriber shall obtain receipt for Cash/Cheque/DD. paid at once and check the entries in the pass book, The subscribers shall not make any entries in the passbook.
  3.     Similarly non-receipt in intimation card shall not be an excuse for failure or delayed remittance of subscriptions whatsoever. Every subscriber shall arrange to remit them on the due dates.
  4.     If the chit is in the joint names of two or more persons anyone of them can bid and the same will be binding on the others also, except where the others have intimated to the Foreman in writing contrary before the chit auction date and obtained an acknowledgment.

Mode and proportion in which the discount is distributable by way of dividend Foreman’s commission or remuneration.

  1. The Foreman shall also be entitled to subscribe for one or more chits.
    1.     The Foreman be entitled to commission or remuneration of 5% of the chit amount.
    1.     The Foreman be entitled to receive and realize all contribution from the subscribers and to distribute the prize amount to prized subscriber and the dividend amount to the subscribers.
    1.     The Foreman shall be entitled to demand sufficient security from any prized subscriber for the payment of future subscriptions.
    1.     The Foreman shall be entitled to substitute subscriber in the place of defaulters.
    1.     The Foreman shall be entitled, to cancel the auction confirmed in favour of the subscriber and of the Foreman with 21 days from the date confirming the auction and as a result the dividend will be modified accordingly which shall be met by all subscribers,

g  The Foreman will have a right to adjust any amount available held in the name of the subscriber under any account chit or other wise us offices/ branches against the out-standing dues of the prized chit without notice to the subscriber.

Time and Place at which any period with in which every prized or non-prized subscriber shall pay his subscription according to working hours: All the subscribers both prized and non-prized shall pay their monthly/weekly subscription at the Foreman’s office at………………….on all the working days on or before the specified date and time between 10.00 am to 2.00 pm and 2.30 p.m. to 6.00 pm unless otherwise agreed to by the Foreman in writing to any other agreement

  1. Determination of the Prized Subscriber when there are no bids or tenders : When there are no bids or tenders at the auction a lot will be drawn from amount the non-prized subscribers who have paid subscription up-to-date, at the ixed minimum discount of 5 % ( Foreman’ s Commission)
  2.     Period within which subscription for each installment is payable and the fine and penalty for be lated payements

NON-PRIZED SUBSCRIBER if a non-prized subscriber fails to deposit his monthly/ weekly subscription before the due date penalty will, be charged at the rate of 3 paise per rupee or part there of. if the default is continued second month/week penalty will be charged at the rate of 6 paise per rupees or part there of per month/week if the default continues for more than two months/ weekly subscriber will not be entitled to dividends in addition to the aforesaid penalty charges. A subscriber who has not made up-to-date pay- ments of all installments dues from him, will not be permitted to bid in the auction, if he does his bid will be cancelled and he will be required to make good the loss incurred for transferring the bid to another subscriber or for conducting the re auction, if the non prized subscriber fails to pay subscription for three consecutive instalments he shall be liable to be removed from the list of subscribers and liable to pay the foreman commission 5%-7% of chit value also deposited amount in the chit group will be released after the tenure completion of chit group, foreman at his option, shall be entitled to substitute a new subscriber in place of defaulting subscriber or may himself subscribe for the ticket and the defaulted ticket of the chit will be dealt with subject to the Bye-Laws and the relevant provisions of the Chit Fund Act.

The Foreman at his discretion can waive the penalties partly or fully and can also postpone the removal in suitable and deserving cases. An expelled member may be re-admitted OR such as the Foreman deems proper,

PRIZED SUBSCRIBER : When a prized subscriber defaults in payment, a penalty 6 paise per rupees or part there of will be charged for the first month/weekly default continues over a month/weekly member will not be entitled to dividends also in addition to the aforesaid penalty charges of 6 Paise per Rupee or part there of per month/weekly if the default continued consecutively for a period of three months/weekly the prized subscriber and the executants of the security bonds or sureties lose the future dividends and the benefit of paying the future subscription in installment. They shall become liable to make consolidated payment of all the future subscriptions inclusive of defaulted installment with interest at the rate of 18% per annum from the date of default. In the event, Legal recourse is taken against the defaulted P. S. the cost and charges of the same have to be borne by him. The Foreman at his discretion, can condone such defaults and receive any amount from the chit holder or any of the executants of the Security bond of sureties after entering into an agreement with any or all of them and to continue as subscriber, Such condonation will not any way discharge the liability of all or any of the executants of security documents or the nominees of legal heirs. The death of a subscriber will also not discharge the liability of the nominee or his legal heirs of the sureties,

  1. Payments should be made only at counters in Foreman’s office or to the authorized collections staff against printed official receipt only. The Foreman shall not be responsible for payments, made without authentic official receipts.
    1. Lien over amounts: If the chit subscriber are indebted to the Foreman for any amount either personally or as surely the Foreman will have in respect of such liabilities first charge over any amount that may be due to them from the Foreman and other assets lying with the Foreman. The Foreman has the right to adjust amount towards his liabilities without prior notice. Only the balance if any, will be paid to the subscribers.
    1. If the subscribers has any non-prized chit amount or F. D.s with the Foreman, the Foreman has the right to foreclose the chits & F. D.s he has and adjust the amount towards his liabilities prized arrears

If the subscriber is surely to any prized subscriber, who becomes default subsequently, the amount paid by such subscribers either for non-prized chits or deposits will be foreclosed by the Foreman and the amount will be adjusted towards the defaulted subscriptions as he Is jointly and severally liable to the debits.

  • Security/ Surety to be furnished by the subscribers for the due payment of future subscription. Prized subscribers before drawing chit amount must furnish suitable/sufficient, necessary security or sure-ties to the satisfaction of the Foreman for payment of future installments. If the subscriber does not have unencumbered net pay equal to the net salary fixed for the surety in this agreement of not able to produce documentary evidence for his income i.e., proof of income to the satisfaction of the foreman or whose net salary is less than the surety’s salary and is not able, to Produce the documentary proof in income to the extent of balance or if the subscriber did not pay monthly Subscriptions payable to the chit every month/ week on or before the Auction date the securities under the clauses (d) (e) (g) only will be accepted. If the subscriber has the net salary/income as stated above and the payment pattern is regular the sureties mentioned under the clause (a) shall normally be accepted.
    • Three permanent Government/ Quasi Government/ Public sector under taking employees whose

        income Should be twice of liability but not less than 75000 (Seventy five thousand only) per annum.

  • Acceptance of the sureties at the discretion of the foreman. Permanent employees in reputed Public Limited Companies who have put in at least 5 year service with Provident Fund, Gratuity and other benefits drawing the same salaries above as Net pay may also be accepted as Sureties at the discretion of the Foreman.
  • Businessman/Professional with the above noted average income having secured and established business/ Practice for at least seven years with documentary proof of income (e.g. income tax assessment records are acceptable)
  • Assignment of Life Insurance policy to the extent of the surrender value of the policy is acceptable,
  • Deposits with the company in chits to the extent of net paid amount of which after deducting the Company’s commission are acceptable.
  • Mortgage of local Urban house property of either the prized subscriber or the third guarantor

(s) as security together with the personal guarantee of person (s) acceptable to the Foreman the value of property should exceed by two times of the amount due from prized subscriber.

  • Guarantee of a Schedule Bank for the amount of the future liability.

In case where the future liability is over Rs. 1,00,000/- no personal security will normally be accepted. Only immovable urban property the value of which is at least 2 times the liability will be accepted as security. In exceptional cases and entirely at the discretion of the Foreman, personal securities may be accepted or anyone or more of the securities started under (h), (d) to (g). Normally sureties and securities are accepted only from such places or towns where the Foreman’s offices are situated.

However, the Foreman may at his discretion accept sureties and securities from any other place. Surety once offered and accepted will not be entertained again as surety for another chit holder till the liability of the previous chit holder is cleared. Any member who has no monthly/weekly or regular income or whose monthly/weekly income does not exceed the amount as specified for subscribers may be called to furnish securities mentioned under (d) (e) (g) The Prized subscriber and the sureties must show proof that their of service is at least one year longer than the Future liability. The expenses for verification and inspections of the Surety offered, Stamp value, typing, registration, Stationary legal and all other expenses shall be borne by the successful bidder.

I. DOCUMENTS The Prized subscriber and his sureties Shall execute such documents in such manner as may be prescribed by the Foreman.

  •     Recovery of Loss : If the prized subscriber fails to collect the Prize Money on production of surety/security within 60 days from the date of the auction, it is open to the Foreman to appropriate prize money towards future installment and collect the balance ,if any from the prized subscriber or cancel The auction and conduct re-auction at the cost and risk of the prized subscriber,

Provisions of the Bye-Laws of the chit registered by the Foreman shall have application on points that are not expressly covered above. The registered Bye Laws, a certified copy of which is given to subscriber shall be part of this Agreement.

24.  Declaration :

  1. Chit Fund Group’s first month number will be that of the company. Therefore, there will be no auction of the number of the first month. The auction will start from this number.
    1.     Subscription amount has to be deposited by 15th of every month.
    1.     One cannot participate in the auction (losing bid) unless the full amount of the installment is deposited.
    1.     The auction will be negotiated from 5% to 30%- 40%. Suppose more than one member is willing to pick up 30%-40% chit then draw will be done.
    1.     The prize money cheque will be issued within 20 to 25 office working days from the day on which all required documents are submitted to the member after receipt of chit.
    1.     The prize money check will not be received unless the documents are completed.
    1.     If the account holder is from outside the village then they should pay the cheque on 5th of every month and if they are local then on 10th.
    1.     The Company shall not be liable if payment is made to anyone other than the Company’s employees.
    1.     If the payment is given to the employee of the company, the responsibility of taking the receipt will remain with the payer.

In case of late payment of chit member’s installment, 6% to 18% monthly interest will be charged on the outstanding amount. Or whichever amount is higher will be recovered from the chit member.

  1.     A fine of Rs.500/- shall be payable if the check issued by the chit member is returned due to any reason.
  2.     If closed in the chit itself, the accumulated amount after the expiry of the full period of the chit. 5%-7% amount will be deducted from that group.
  3.     If the passbook of the company is lost, the member will get a new passbook by paying Rs.60/-.
  4.     In case of sudden death of the chit member after withdrawing the chit, the account will not be closed for this reason. The surviving surety and the heirs shall be jointly or severally liable to pay the said amount. Or they will be legally liable to pay the tax amount and all the terms and conditions of the chit will be applicable.
  5.     Every chit member shall be deemed to have read and accepted the rules of the company in this regard.
  6.     The company reserves the right to remove a chit member if he does not pay his installments for three consecutive months.
  7.     It is mandatory for the member who has drawn the BHISI to pay the Subscription only by 15th of every month, otherwise a penalty of Rs.500/- per Subscription will be levied.
  8. Reg. Fees is non – refundable and non-transferable.