Chapter II Chapter II

Constitution and Registration

1. (1) Save as otherwise provided in this Act, no person shall start or conduct any chit unless he has registered with the Registrar the proposed bye-laws of the chit.
2. (2) Save with the permission of the Government. no chit shall extend in duration for a period of more than five years.
3. (3) For the purpose of registration. there shall be filed with the Registrar the bye- laws of the chit in duplicate signed by the foreman and attested by at least two witnesses.
4. (4) The Registrar. on being satisfied that the bye-laws are not contrary to this Act or to the rules made thereunder, shall issue to the foreman a certificate of registration and such certificate shall be conclusive evidence that the bye-"laws of the chit therein mentioned are registered.
5. (5) The Registrar shall retain the bye-laws of the chit and return the duplicate of the bye-laws to the foreman with an endorsement that the bye-laws have been registered.

No person shall issue or publish any notice. circular, prospectus or other document containing the terms and conditions of any chit or inviting the public to subscribe for tickets in any chit unless such notice, circular, prospectus or other document relates to a chit. the bye-laws of which have been registered.

Every chit agreement shall be in duplicate and shall be signed by each subscriber or by a person authorized in that behalf in writing by the subscriber and the foreman and attested by at least two witnesses, and it shall contain the following particulars namely:-

1. (1) the full name and the permanent residential address of every subscriber:
2. (2) the tickets held by each subscriber:
3. (3) the number of instalments and the amount payable in respect of each ticket for each instalment: 4-
4. (4) the dates of commencement and termination of the chit:
5. (5) the mode of ascertaining the prized subscriber:
6. (6) the amount of discount which the prized subscriber at any instalment has to forego:
7. (7) the mode and proportion in which the discount is distributable by way of dividend. foreman's commission and other expenses. if’ any:
8. (8) the date, time and place at which the chit is to be drawn:
9. (9) if under the chit agreement the foreman is entitled to the chit amount. the instalment at which the foreman is to get the chit amount:
10. (10) the approved bank or banks in which chit moneys shall be deposited by the foreman under the provisions of this Act:
11. (11) the manner in which a chit shall be continued where a foreman who is an individual dies or becomes of unsound mind: and
12. (12) any other particulars which may be prescribed. Explanation.— It is sufficient to get the signature of each subscriber on separate copies of the agreement.

1. (1) Every chit fund agreement with its duplicate shall be filed with the Registrar.
2. (2) The Registrar shall retain the chit agreement and return the duplicate chit agreement to the foreman with an endorsement that the chit agreement is filed.

1. (1) No person shall commence any auction or drawing of hi unless he has obtained a certificate of commencement from the Registrar, 41 ¢ it
2. (2) The Registrar shall. on being satisfied that the bye-laws of the chit have been registered and the chit agreement has been filed and the security required under section 12 has been furnished by the foreman.

1. (1) The foreman shall, as soon as may be after he has obtained the certificate of commencement referred to in section 7, but not later than the date of the first drawing of the chit. furnish to every subscriber a copy of the bye-laws of the chit and the chit agreement certified by him to be a true copy.
2. (2) The foreman shall. within the fifteenth day of the month succeeding the month in which the first instalment of the chit is drawn. file with the Registrar a certificate to the effect that he has complied with the provisions of sub-section (1).

to or cancelled except with the consent in writing of the foreman and all the subscribers to the chit:

5- Provided that such alterations, additions or cancellation shall be subject to the provisions of this Act and the Rules made thereunder.

1. (2) Every chit agreement as altered or added to or an agreement to cancel chit agreement as provided for in sub-section (1) shall he filed by the foreman with the Registrar with its duplicate and thereafter provisions of sub-section (2) of section 6 shall apply as in the case of original agreement filed in accordance with sub-section (1) of the said section.

1. (1) The minutes of the proceedings of every drawing shall be drawn up and entered in a book to be kept for that purpose and shall be signed by the foreman and all the subscribers present and shall also be signed by the prized subscriber or his authorised agent.
2. (2) Such minutes shall state clearly —
   • (i) the date and hour when the proceedings began and ended and the place where the drawing was held:
   • (ii) the number of the particular instalment of the chit of which proceedings, are recorded:
   • (iii) the names of the subscribers present:
   • (iv) the person or persons who become entitled to the prize amount in the particular instalment:
   • (v) the amount of discount:
   • (vi) full particulars regarding the disposal of the prize amount in respect of the preceding instalment and disposal of unpaid prize amount, if any. in respect of any previous instalment: and
   • (vii) any other particulars which may be prescribed.

fifteenth day of the month succeeding the month in which one or more instalments of the same chit or one or more instalments of any other chit are drawn. file with the Registrar a copy of the minutes referred to in section 10 in respect of the drawings at all such instalments and certified by the foreman to be a true copy.

CHAPTER - IIT Foreman

foreman shall. before applying for the certificate of commencement under section 7.-

1. (a) execute an indenture of mortgage and trust in favour of the Registrar as trustee charging by way of security property sufficient for the realisation of the chit amount: or
2. (b) (i) deposit in any approved bank an amount of cash not less than half of the chit amount. or
   • (ii) invest in Government securities of the face value or market value whichever is. less. of not less than half of the chit amount and transfer the amount so deposited or the Government securities in favour of the Registrar to be held in trust by him as security: Provided that. where movable property is charged by way of security. only such kind of movable property as may be prescribed shall be so charged and such movable property shall be deposited in such manner and with such person or officer as may be prescribed. Explanation:— For the purpose of clause (a), security for realisation of the chit amount is said to be sufficient if the market value of the property assessed in the manner prescribed is equal to the chit amount.

1. (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 such chit.
2. (3) Subject to the provisions of section 520 of the Companies Act. 1956 (Central Act | of 1956) the security given by the foreman under sub-section (1) shall not be liable to be attached in execution of a decree or otherwise—
   • (i) until the chit is terminated and the claims of all the subscribers are fully satisfied:
   • (ii) until all dues payable by the foreman under this Act to the Registrar or any other officers have been paid:
   • (iii) where owing to the default of the prized subscriber the prize amount due remains unpaid even after the termination of a chit until the foreman deposits such amount in an approved bank mentioned in the chit agreement and intimates in writing the fact of such deposit to the prized subscriber.
3. (4) No foreman shall be entitled to conduct at a time chits the aggregate amount of which exceeds fifty percent of the total assets of the foreman or twenty five thousand rupees whichever is lower: Provided that the maximum limit of the chit amount specified in this sub-section shall be rupees one lakh in the case of chits of which the foreman is a banking company as defined in the Banking Regulation Act. 1949 (Central Act 10 of 1949). Explanation.— In determining the total assets of a foreman for the purposes of this sub-section, the amount of the security furnished by him under sub-section (1) shall be excluded if such amount is the amount of subscription received in advance from the subscribers.
4. (5) In calculating the aggregate amount of chits conducted at a time by a foreman. the chits conducted by all the members of the family of the foreman shall be taken into account. Explanation. for the purpose of this sub-section, the expression “members of the family of the foreman” means father, mother, husband, wife and children of the foreman, wholly dependent, on him and who have no independent assets sufficient to entitle for them to conduct any chit. 7- wholly dependent. on him and who have no independent assets sufficient to entitle for them to conduct any chit.
5. (6) The Registrar shall. after the termination of a chit and after satisfying himself that the requirements under clauses (i) to (iii) of sub-section (3) have been complied with. release the property charged by way of security or order the release of the cash security or the Government securities referred to in sub-section (1) and in so doing, he shall follow such procedure as may be prescribed.
6. (7) (a) The Registrar may. on an application made in this behalf by any foreman. instead of releasing the security under sub-section (6). accept the same as security in respect of any other chit or chits conducted by the same foreman:
   • (b) The Registrar shall.—
     • (i) where the value or amount of the security accepted is less than the value or amount specified in sub-section (1). require the foreman to furnish additional security to make up the deficit:
     • (ii) where the value or amount of the security is in excess of the amount of value required, release the excess thereof.
7. (8) Notwithstanding anything to the contrary contained in any other law the security furnished under this section shall not be dealt with by the foreman during the currency of the chit and any dealing by the foreman with respect thereto by way of transfer. charge. mortgage or other encumbrances shall be void.

(1)The foreman shall be entitled

1. (a) in the absence of any provision in the chit agreement to the contrary to obtain the chit amount at the instalment specified in the chit agreement: Provided that a foreman shall not be eligible to obtain more than one chit amount in a chit:
2. (b) to such commission or remuneration. not exceeding five per cent, of the chit amount, as may be fixed in the chit agreement: (¢) to receive and realise all contributions from the subscriber: and to distribute the prize amounts to prized subscribers and the dividend among the subscribers;
3. (d) to demand sufficient security from any prized subscribers for the due payment of future subscriptions: Explanation. A security is said to be sufficient for the purposes of this clause. if its value exceeds by one third. or if it consists of immovable property. the value exceeds by one half, the amount due from the prized subscriber:
4. (e) to substitute subscribers in the place of defaulters: and:
5. (f) to do all other acts that may be necessary for the due and proper conduct of the chit.

1. (2) (a) In case of any dispute in regard to the value of the property offered as security under clause (d) of sub-section (1), the matter shall be referred by the subscriber to the Registrar, who shall, after giving the parties an opportunity of being heard, pass such order as he thinks fit.
   • (b) Any person aggrieved by the decision of the Registrar may, within seven days of the communication to him of such order, appeal to the Director of Chits. whose decision thereon shall be final.

1. (1) The foreman shall. on prized subscriber furnishing sufficient security for the due payment of future subscription be bound to pay him the prize amount: Provided that the prized subscriber shall be entitled to demand immediate payment of the prize amount after, deducting all future subscriptions without any security whatsoever. and in such case the foreman shall. before the date of the next succeeding instalment. deposit in an approved bank mentioned in the chit agreement the amount of future subscriptions deducted as aforesaid and he shall not withdraw the amount so deposited except for payment of future subscriptions.
2. (2) If. owing to the default of the prized subscriber. the prize amount due in respect of any drawing remains unpaid before the date of the next succeeding drawing. the foreman. shall deposit the same forthwith in an approved bank mentioned in the chit agreement and intimate in writing the fact of such deposit to the prized subscriber.
3. (3) Every payment of the prize amount, the deposit of the amount of future subscriptions under sub-section (1) and the deposit of the prize amount under sub-section
4. (2) shall be intimated to the subscribers at the next succeeding drawing, and particulars of such payment or deposit entered in the minutes of the proceedings of that drawing.
5. (4) The foreman shall not appropriate himself any amount in excess of what he is entitled to under clauses (a) and (b) of sub-section (1) of section 13: Provided that the foreman may appropriate for himself the interest accruing on the amount deposited under the proviso to sub-section (1).

The foreman shall keep such registers and books of account, and in such form, as may be prescribed.

1. (1) Every foreman, shall prepare and file with the Registrar in such manner and within such time as, may be prescribed: a balance sheet relating to the period of account duly audited cither by auditors duly qualified to act as auditors of companies under the Companies Act. 1956 (Central Act 1 of 1956) or by a Chit Auditor appointed under sub-section (2) of section 52.
2. (2) The balance sheet referred to in sub-section (1) shall —
   • (a) contain a summary of the assets and liabilities of the chit; and
   • (b) give such particulars as will disclose the nature of the assets and liabilities and how the value of the assets has been arrived at. 9.

(1) Every foreman shall be liable to account to the subscribers for the amounts due to them. (2) Where there are more than one foreman. each one of them jointly and severally or if the foreman is a firm. each one of the partners thereof jointly and severally and if the foreman is a Statutory Corporation or a Company registered under the Companies Act, 1956 (Central Act I of 1956). the Corporation or the Company as such shall be liable to the subscribers in respect of the obligations arising out of the chit.

1. (2) Where there are more than one foreman. each one of them jointly and severally or if the foreman is a firm. each one of the partners thereof jointly and severally and if the foreman is a Statutory Corporation or a Company registered under the Companies Act, 1956 (Central Act I of 1956). the Corporation or the Company as such shall be liable to the subscribers in respect of the obligations arising out of the chit.

Where there are more than one person as foreman in a chit, none of them shall withdraw from it until the termination of the chit unless such withdrawal is assented to by all the non-prized subscribers and unpaid prized subscribers and a copy of such assent has been filed as required by section 33. Such withdrawal shall not. however, affect the security given under section 12.