Prize Chits and Money Circulation (Banning) Act, 1978

THE PRIZE CHITS AND MONEY CIRCULATION SCHEMES (BANNING) ACT, 1978 (ACT NO. 43 OF 1978)

              AN ACT TO BAN THE PROMOTION   OR CONDUCT OF PRIZE CHITS AND MONEYCIRCULATION [12th

December, 1978.]

BE it enacted by Parliament in the Twenty-ninth Year of the Republic of India as follows:-

1. Short title and extent.

1. Prize Chits and Money Circulation Schemes (Banning) Act, 1978. (2) and Kashmir.

2. Definitions.

In this Act, unless the context otherwise requires,-

(a) "conventional  chit" means a transaction whether called chit, chit fund, kuri or by any other  name by or under  which a person  responsible  for the conduct  of the chit enters  into an agreement with a specified  number  of persons  that  every one  of them  shall subscribe  a certain  sum of money  (or certain quantity of grain instead) by way of periodical instalments for a definite period and that each such sub- scriber shall, in his turn, as determined by lot or by auction  or by tender or in such other manner  as may be provided for in the chit agreement, be entitled  to a prize amount. Explanation.-In this clause "prize amount" shall mean the amount, by whatever name called, arrived at by deducting from out of the total amount paid or payable at each instalment by all the subscribers,

(i) the commission charged as service charges as a promoter or a foreman  or an agent; and

(ii) any  sum  which  a  subscriber  agrees  to  forego,  from  out  of  the  total  subscriptions   of  each instalment, in consideration of the balance being paid to him;

(b) "money" includes a cheque, postal order, demand draft, telegraphic transfer  or money order;

(c) "money  circulation  scheme"  means  any scheme,  by whatever name  called, for the  making of quick or easy money,  or for the  receipt  of any money  or valuable thing as the  consideration for a promise  to  pay money,  on  any  event  or  contingency  relative  or  applicable  to  the  enrolment of members into the scheme, whether or not such money or thing is derived from the entrance money of the members of such scheme or periodical subscriptions;

(d) "prescribed" means prescribed  by rules made under this Act;

(e) "prize chit" includes  any transaction or arrangement by whatever name  called under  which a person collects whether as a promoter, foreman,  agent or in any other  capacity, monies in one lump sum or in instalments by way of contributions or subscriptions  or by sale of units,  certificates  or other  instruments or  in any other  manner  or  as  membership fees  or  admission  fees  or  service charges to or in respect  of any savings, mutual  benefit,  thrift, or any other  scheme  or arrangement by whatever name  called, and  utilises the  monies  so collected  or any part  thereof or the  income accruing  from  investment or other  use  of such  monies  for all or any of the  following purposes, namely :-

(i)         specified number  of subscribers  as determined by lot, draw or in any other  manner,

prizes or gifts in cash or in kind, whether or not the recipient  of the  prize or gift is under   a  liability to  make  any  further   payment   in  respect   of  such  scheme   or arrangement;

(ii)        not  won any prize or gift, the  whole  or part  of the  subscriptions,  contributions or other  monies  collected,  with  or  without  any  bonus,  premium,  interest or  other advantage  by  whatever  name   called,  on  the   termination  of  the   scheme   or arrangement, or on or after the expiry of the period stipulated therein,  but does not include  a conventional  chit; (f) "Reserve  Bank" means  the  Reserve  Bank of India constituted under the Reserve Bank of India Act, 1934. (2 of 1934.)

3. Banning of prize chit and money  circulation schemes  or enrolment as members or participation therein.

3. Banning of prize chit and money  circulation schemes  or enrolment as members or participation therein.  No person  shall promote or conduct  any prize chit or money circulation scheme,  or enrol as a member to any such chit or scheme,  or participate in it otherwise, or receive or remit any money in pursuance of such chit or scheme. 4. Penalty for contravening the provisions of section 3.

4. Penalty for contravening the provisions of section 3.

Whoever contravenes the provisions of section  3 shall be punishable  with imprisonment for a term which may extend  to three  years, or with fine which may extend  to five thousand rupees,  or with both: Provided that  in the absence  of special and adequate reasons  to the contrary to be mentioned in the judgment  of the court, the imprisonment shall not be less than one year and the fine shall not be less than one thousand rupees.

5. Penalty for other offences in connection with prize chits or money circulation schemes.

5. Penalty for other  offences in connection with prize chits or money circulation schemes.  Whoever, with  a  view  to  the  promotion  or  conduct   of  any  prize  chit  or  money  circulation  scheme   in contravention of the  provisions of this Act or in connection with any chit or scheme  promoted or conducted as aforesaid,-

(a) prints  or publishes  any ticket,  coupon  or other  document for use  in the  prize chit or money circulation scheme; or

(b) sells or distributes or offers or advertises  for sale or distribution,  or has in his possession  for the purpose  of sale or distribution  any ticket,  coupon  or other  document for use  in the  prize chit or money circulation scheme; or

(c) prints,  publishes  or  distributes,  or  has  in  his  possession   for  the  purpose   of  publication  or distribution-

(i) circulation scheme; or

(ii) the prize chit or money circulation scheme; or

(iii) relating to the prize chit or money circulation scheme. as is calculated to act as an inducement to persons  to  participate in that  prize chit or  money  circulation  scheme  or  any  other  prize chit or money circulation scheme; or

(d) brings, or invites any person to send, for the purpose  of sale or distribution,  any ticket, coupon or other  document for use in a prize chit or money  circulation scheme  or any advertisement of such prize chit or money circulation scheme; or

(e) uses  any  premises,  or  causes  or  knowingly permits  any  premises  to  be  used,  for  purposes connected with the promotion or conduct of the prize chit or money circulation scheme; or

(f) causes  or procures  or attempts to procure  any person  to do any of the  above-mentioned acts, shall be punishable  with imprisonment for a term which may extend to two years, or with fine which may extend  to three  thousand rupees,  or with both:  Provided that  in the  absence  of special and adequate reasons  to the contrary  to be mentioned in the judgment  of the court, the imprisonment shall not be less than one year and the fine shall not be less than one thousand rupees.

6. Offences by companies.

6. has been  committed by a company,  every person  who, at the  time the  offence  was committed, was  in charge  of, and  was  responsible  to,  the  company  for  the  conduct  of the  business  of the company, as well as the company, shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished  accordingly: Provided that  nothing contained in this sub-section shall render  any such person  liable to any punishment provided  in this Act, if he proves  that  the offence was committed without  his knowledge or that  he exercised all due diligence to prevent  the commission of such offence.

(2) an offence under this Act has been committed by a company and it is proved that the offence has been committed with the consent  or connivance of, or is attributable to, any neglect on the part of, any director,  manager,  secretary  or other  officer of the company, such director,  manager,  secretary or other  officer shall also be deemed to be guilty of that  offence and shall be liable to be proceeded against and punished accordingly. Explanation-For the purposes of this section-

(a) "company" means any body corporate and includes a firm or other association of individuals; and

(b) "director", in relation to a firm, means a partner in the firm.

7. Power to enter  search and seize.

7. Power to enter  search and seize.

(1) It shall be  lawful for any police officer not  below  the  rank of an officer-in-charge  of a police station,-

(a) to enter,  if necessary  by force,  whether by day or night with such assistance  as he  considers necessary,  any premises  which he  has reason  to suspect,  are  being used  for purposes connected with the promotion or conduct of any prize chit or money circulation scheme in contravention of the provisions of this Act;

(b) to search the said premises and the persons whom he may find therein;

(c) to take into custody and produce  before any Judicial Magistrate  all such persons  as are concerned or  against  whom  a  complaint  has  been  made  or  credible  information   has  been  received  or  a reasonable suspicion exists of their  having been  concerned with the  use  of the  said premises  for purposes connected with,  or  with  the  promotion or  conduct  of, any  such  prize  chit  or  money circulation scheme as aforesaid;

(d) to  seize  all things  found  in the  said premises  which are  intended to  be  used,  or  reasonably suspected to have been used, in connection with any such prize chit or money circulation scheme  as aforesaid.

(2) Any officer authorised by the State Government in this behalf may-

(a) at all reasonable times, enter  into and search  any premises  which he has reason  to suspect,  are being  used  for the  purposes connected with,  or conduct  of, any prize chit or money  circulation scheme in contravention of the provisions of this Act;

(b) examine any person having the control of, or employed in connection with, any such prize chit or money circulation scheme;

(c) order  the  production of any documents, books  or records  in the  possession  or power  of any person   having  the  control  of,  or  employed  in  connection  with,  any  such  prize  chit  or  money circulation scheme; and

(d) inspect and seize any register,  books of account,  documents or any other  literature found in the said premises.

(3) All searches  under  this section  shall be made  in accordance with the  provisions of the  Code of

Criminal Procedure, 1973 (2 of 1974.) 1158

8. Forfeiture of newspaper and publication containing prize chit or money circulation scheme.

8.  Forfeiture  of  newspaper and  publication  containing  prize  chit  or  money  circulation  scheme. Where  any newspaper or other  publication  contains  any material  connected with any prize chit or money circulation scheme  promoted or conducted in contravention of the  provisions of this Act or any advertisement  in relation  thereto, the  State  Government may, by notification  in the  Official

Gazette,  declare  every copy of the  newspaper and  every copy of the  publication  containing  such material or the advertisement to be forfeited to the State Government.

9. Power to try offences.

9. Power to try offences. No court inferior to that  of a Chief Metropolitan Magistrate,  or as the case may be, Chief Judicial Magistrate,  shall try any offence punishable  under this Act.

10. Offences under this Act to be cognizable.

10.  Offences  under  this  Act  to  be  cognizable.  All  offences  punishable   under  this  Act  shall  be cognizable. 11. Act not to apply to certain prize chits or money circulation schemes.

11. Act not to apply to certain  prize chits or money  circulation schemes.  Nothing contained in this

Act shall apply to any prize chit or money circulation scheme promoted by- (a) a State Government or any officer or authority  on its behalf; or

(b) a company  wholly owned  by a State  Government which does  not  carry on any business  other than  the  conducting  of a prize chit or money  circulation  scheme  whether it is in the  nature of a conventional  chit or otherwise; or

(c) a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949, (2 of

1949.) or a banking institution  notified  by the  Central Government under  section  51 of that  Act or the State Bank of India constituted under section 3 of the State Bank of India Act, 1955, (23 of 1955.) or a subsidiary bank constituted under  section  3 of the  State  Bank of India (Subsidiary Banks) Act,

1959,  ( 38  of 1959.)  or  a  corresponding new  bank  constituted under  section  3 of the  Banking Companies  (Acquisition  and  Transfer  of Undertakings)  Act,  1970, (5 of 1970.) or a Regional Rural Bank established under  section  3 of the  Regional Rural Banks Act, 1976,  ( 21 of 1976.) or a co- operative bank as defined  in clause (bii) of section  2 of the  Reserve Bank of India Act, 1934; (2 of

1934); or 1159

(d) any charitable  or  educational institution  notified  in this  behalf  by the  State  Government, in consultation with the Reserve Bank.

12. Transitional provisions.

12. Transitional provisions.

(1) Notwithstanding anything  contained in this  Act, a  person  conducting  a  prize  chit  or  money circulation scheme  at the commencement of this Act may continue  to conduct  such chit or scheme for such  period  as may be  necessary  for the  winding up of the  business  relating  to  such  chit or scheme, so however that such period shall not in any case extend beyond a period of two years from such commencement: Provided  that  the  said person  shall furnish  to  the  State  Government or to such officer as may be authorised by it in this behalf and to such office of the Reserve Bank as may be prescribed  in such form and within such period as may be prescribed, full information  regarding the chit or scheme  along with a winding up plan prepared in accordance with the provisions of any rules that  may be made by the State Government in this behalf under this Act: Provided further  that if the State Government is satisfied, on an application made by the person  conducting the prize chit or money circulation scheme, that the chit or scheme cannot  be wound up within the period fixed in the  winding up plan  furnished  to  the  State  Government under  the  foregoing  proviso,  it may, in consultation with the Reserve Bank, permit such person to continue  to conduct  the business relating to the said chit or scheme  for such further  period as may be considered necessary  having regard to the circumstances of the case and the interests of the members of the said chit or scheme.

(2) The State Government may, in consultation with the Reserve Bank, approve  the winding up plan furnished  under  sub-section  (1) with or without  modifications  or reject  the same  and may grant or refuse  to  grant  permission  to  continue  to  conduct  that  chit  or  scheme:  Provided  that  no  such winding up plan shall be modified or rejected without  giving an opportunity of being heard  to the person who conducts such prize chit or money circulation scheme.

(3) If any person  fails to furnish full information  regarding  the  said chit or scheme  along with its winding up plan in the  form and within the  period  prescribed, he shall forfeit his right to continue the business relating to the said chit or scheme on the expiry of such period.

(4) Notwithstanding anything to the  contrary  contained in any agreement or arrangement entered into between any person  conducting  1160 any such chit or scheme  and the subscriber,  the  person conducting  the chit or scheme  shall, within such period as may be prescribed, refund the monies or the subscriptions  collected till the date of default referred to in sub-section  (3).

(5) If any person  fails to comply with the provisions of sub- section  (4), he shall be punishable  with imprisonment for a term  which may extend  to two years, or with fine which may extend  to three thousand rupees,  or with both: Provided that  in the absence  of special and adequate reasons  to the contrary to be mentioned in the judgment  of the court, the imprisonment shall not be less than one year and the fine shall not be less than one thousand rupees.

13. Power to make rules.

13. Power to make rules.

(1) The State  Government may, by notification  in the  Official Gazette  and in consultation with the

Reserve Bank, make rules for the purpose  of carrying out the provisions of this Act.

(2) In particular  and  without  prejudice  to  the  generality  of the  foregoing  power,  such  rules  may provide for-

(a) the  office of the  Reserve  Bank to  whom  full information  regarding  any  prize  chit  or  money circulation scheme  may be furnished  under  the first proviso to subsection (1) of section 12, and the form in which and the period within which such information may be furnished;