CHIT FUNDS (AMENDMENT) ACT,
2019 THE
CHIT FUNDS (AMENDMENT) ACT, 2019 [Act
No. 41 of 2019] [05th
December, 2019] An Act further to amend the Chit Funds
Act, 1982. Be it enacted by Parliament in the Seventieth
Year of the Republic of India as follows:-- (1) This Act may be
called the Chit Funds (Amendment) Act, 2019. (2) It shall come into
force on such date[1] as
the Central Government may, by notification in the Official Gazette, appoint. In the Chit Funds Act, 1982 (40 of
1982) (hereinafter referred to as the principal Act), in -- (i) in clause (b), after
the word "kuri", the words, ", fraternity fund, Rotating Savings
and Credit Institution" shall be inserted; (ii) clause (d) shall be
omitted; (iii) clause (h) shall be
omitted; (iv) after clause (j), the
following clauses shall be inserted, namely:-- '(ja) "gross
chit amount" means the sum-total of the subscriptions payable by all the
subscribers for any installment of a chit without any deduction of discount or
otherwise; (jb) ?"net chit amount" means the
difference between the gross chit amount and the discount, and in the case of a
fraction of a ticket means the difference between the gross chit amount and the
discount proportionate to the fraction of the ticket, and when the net chit
amount is payable otherwise than in cash, the value of the net chit amount
shall be the value at the time when it becomes payable;'; (v) clause (m) shall be
omitted; (vi) after clause (p), the
following clause shall be inserted, namely:-- '(pa) "share of discount"
means the share of the subscriber in the amount of discount available under the
chit agreement for rate able distribution among the subscribers at each installment
of the chit;'. Throughout the principal Act,-- (i) for the words
"chit amount", the words "gross chit amount" shall be
substituted; (ii) for the word
"dividend", the words "share of discount" shall be
substituted; and (iii) for the words
"prize amount", the words "net chit amount" shall be
substituted. For of the principal Act,
the following section shall be substituted, namely:-- "11. Use of words
"chit", "chit fund", "chitty", "kuri",
"fraternity fund" or "Rotating Savings and Credit
Institution". (1) No person shall carry
on chit business unless he uses as part of his name any of the words
"chit", "chit fund", "chitty", "kuri",
"fraternity fund" or "Rotating Savings and Credit
Institution" and no person other than a person carrying on chit business
shall use as part of his name any such word. (2) Where at the
commencement of this Act,-- (a) any person is
carrying on chit business without using as part of his name any of the words
specified in sub-section (1); or (b) any person not
carrying on chit business is using any such word as part of his name, he
shall, within a period of one year from such commencement, add as part of his
name any such word or, as the case may be, delete such word from his name: Provided that the State Government may,
if it considers necessary in the public interest or for avoiding any hardship,
extend the said period of one year by such further period or periods not
exceeding one year in the aggregate.". In of the principal Act,-- (i) ???in sub-section (1), for the words
"rupees one lakh", the words "rupees three lakhs" shall be
substituted; (ii) ??in sub-section (2),-- (a) in clause (a), for
the words "rupees six lakhs", the words "rupees eighteen
lakhs" shall be substituted; (b) in clause (b), for
the words "rupees one lakh", the words " rupees three
lakhs" shall be substituted. In of the principal Act, in
sub-section (2), after the words "two subscribers", the words
"present in person or through video conferencing duly recorded by the
foreman" shall be inserted. In of the principal Act, in sub-section
(1),-- (a) after the words
"at least two other subscribers who are present", the words "in
person or through video conferencing" shall be inserted; (b) the following proviso
shall be inserted, namely:-- "Provided that where two
subscribers required to be present under sub-section (2) of section 16 are
present through video conferencing, the foreman shall have the minutes of the
proceedings signed by such subscribers within a period of two days of the date
of the draw.". In of the principal Act, in
sub-section (1),-- (i) ???in clause (b), for the words "five per
cent.", the words "seven per cent." shall be substituted; (ii) ??in clause (f), the word "and" shall
be omitted; (iii)
??after clause (f), the following clause
shall be inserted, namely:-- "(fa) to exercise his right to
lien against the credit balance in other non-prized chits; and". In of the principal Act, in clause
(b), for the words "one hundred rupees", the words "such amount
as may be specified, by notification in the Official Gazette, by the State
Government" shall be substituted. Statement of Objects
and Reasons - CHIT FUNDS (AMENDMENT) ACT, 2019 STATEMENT
OF OBJECTS AND REASONS 1.
The
Chit Funds Act, 1982 was enacted to provide for the regulation of chit funds
which are indigenous business in India and have conventionally satisfied the
financial needs of the low-income households. The chit is a mechanism which
combines credit and savings in a scheme, in which a group of individuals come
together for a pre-determined duration and subscribe a certain sum of money by
way of periodical installments and each such subscriber, in his turn as
determined by lot or by auction or by tender or any other specified manner, gets
the collected sum. In this way, people who are in need of funds and those who
want to save are able to meet their requirements simultaneously. 2.
In
past, concerns had been expressed by various stakeholders regarding challenges
being faced by the chit business. Therefore, the Central Government constituted
a Key Advisory Group on Chit Funds to review the existing legal, regulatory and
institutional framework for Chit Funds and its efficacy and to suggest legal
and regulatory initiatives required for orderly growth of the said sector. The
Key Advisory Group submitted its recommendations relating to improvements in
the institutional and legal structure to further develop the chit business in
order to reduce the regulatory burden of the chit business and to protect the
interest of the subscribers of the chits. 3.
The
Parliamentary Standing Committee on Finance (Sixteenth Lok Sabha), in its
twenty-first Report on Efficacy of Regulation of Collective Investment Schemes
(CIS), Chit Funds, etc., had also recommended to finalise the legislative and
administrative proposals for strengthening and streamlining of the registered
Chit Fund sector. Further, the said Committee, in its thirty-fifth Report on
the Action Taken by the Government on the Recommendations contained in the
twenty-first Report, had recommended the need to quickly firm up the
legislative and administrative proposals for the Chit Funds sector. ? 4.
In
view of the above, it has been decided to amend the Chit Funds Act, 1982.
Accordingly, the Chit Funds (Amendment) Bill, 2018, inter alia, proposes- (a) the use of
"fraternity fund" also for chits by amending sections 2(b) and 11; (b) to allow the
mandatory presence of two subscribers, as required under section 16(2), either
in person or through video conferencing duly recorded by the foreman; (c) that where the
presence of the mandatory two subscribers was through videoconferencing, the
minutes of proceedings should be signed by them within two days; (d) the increase of
ceiling of foreman's commission from five per cent. to seven per cent. under
section 21; (e) to enable the foreman
to have a right to lien for the dues from subscribers, so that set-off is
allowed by the chit fund for subscribers who have already drawn funds, so as to
discourage default by them; (f) to amend section
85(b), so as to confer power upon the State Government to specify the amount,
by notification, upto which any chit fund shall be exempted under the said
section. 5.
The
Bill seeks to achieve the above objects.
Preamble - CHIT FUNDS (AMENDMENT) ACT, 2019PREAMBLE