The Chit Funds Act, 1982

The Chit Funds Act, 1982

The Chit Funds Act, 1982, is an Indian law that regulates chit funds and provides for their conduct. The Act aims to protect subscribers from unscrupulous foremen who may engage in unfair practices.

Key Provisions:

1. Registration of Chits: No chit can be commenced or conducted without obtaining the previous sanction of the State Government.


2. Minimum Capital Requirements: A company must have a paid-up capital of not less than ₹1 lakh to commence or carry on chit business.


3. Reserve Fund: Every company carrying on chit business must create and maintain a reserve fund, which should be transferred out of the balance of profit before declaring any share of discount on its shares.


4. Chit Agreement: A chit agreement must be in duplicate, signed by each subscriber or their nominee, and filed with the Registrar.


5. Prohibition of Unfair Practices: No person shall carry on chit business unless they use certain words as part of their name, such as "chit", "chit fund", "chitty", etc.

Objectives:

1. To regulate chit funds and protect subscribers from unscrupulous foremen.


2. To prevent unfair practices in the conduct of chit business.


3. To ensure that companies carrying on chit business maintain a reserve fund and comply with minimum capital requirements.

Enforcement:

The Act provides for the following enforcement mechanisms:

1. The State Government can refuse to sanction the commencement or conduct of a chit if it is not registered in accordance with the provisions of the Act.


2. The Registrar can impose penalties on companies that fail to comply with the provisions of the Act.


3. The Reserve Bank can also take action against companies that engage in unfair practices.

Repeal and Saving:

The Act repeals certain laws and saves other provisions from being affected by the repeal of those laws.