The Prize Chits and Money Circulation Schemes (Banning) Act, 1978 was enacted on 12th December, 1978. The act aims to ban the promotion and circulation of prize chits and money circulation.
The act classifies chits into conventional chits and prize chits. Conventional Chits are defined under section 2 sub clause (a) and defines it as a transaction whether called chit, chit fund, regionally as kuri or any other name carried on by a person by entering into an agreement with a definite number of persons who shall invest a certain some of money whether in lump sum or in instalments, the subscribers shall be bound by chit agreement and be entitled to a prize amount. Incase of prize chits as defined under sub clause (e) of section 2 it shall be a transaction with a number of person by a person who shall act either personally or through his agents, the transaction shall be in respect of money, wherein such money shall be invested and the benefits shall be distributed to all the persons contributing in the chit. Money Circulation scheme shall mean a scheme which promises quick and easy money to the subscriber by making enrolment of such person into the scheme on payment of an entrance amount.
Section 3 of the Act imposes a ban on chit fund schemes of any nature and money circulation scheme where in money is promised to investor. It specifically holds that no person shall encourage or organise or enrol as a member, participate in any of such schemes which are banned under the Act. Any person who breaches the provision under section 3 of the Act shall be punished under section 4 with an imprisonment extending to three years or with fine extending to five thousand rupees or with both.
Section 5 of the Act lays penalty for any other offence in relation to prize chits or money circulation schemes. It lays that apart from person who organizes or publicize prize or money circulation schemes, persons who prints and publishes tickets or coupons in relation to chit fund schemes or money circulation schemes, sells, distributes or advertises sales of such tickets or coupons, brings or invites persons to chit fund and money circulation schemes, uses premises or rents premises for conducting money circulation and chit find schemes, procures business for chit funds and money circulation schemes shall be punished with imprisonment which may extend to two years, or fine of rupees three thousand, or both. Sentence passed shall not be less than one year and fine imposed shall not be less than one thousand rupees for judge shall have to record reasons in writing for imposing lesser sentence and fine.
The Act shall also lie against companies and against all its members who are responsible for conducting, promoting and advertising chit fund schemes and money circulation. An officer not below officer in charge of police station shall have power to conduct search and seize premises where he suspects activities in connection with publicising or organizing of any prize chit or money circulation scheme in contravention to provisions of this act is being done. The officer shall have power to take in custody all persons against whom complaint is made or credible information is received or a reasonable suspicion exists in connection with the use of the said premises for purposes connected chit fund and money circulation scheme, such persons shall be produced before Judicial Magistrate at the earliest. The officer shall have power to order search, seize, take into its custody and demand production of any documents, books or records in the possession or power of any person in connection with money circulation schemes. Search under section 7 shall be made in accordance with provisions of the Code of Criminal Procedure (Cr.P.C.), 1973. Newspapers and publications containing prize chits or money circulation scheme shall also be forfeited under section 8 of the Act. Offences under the Act are cognizable and triable by Judicial Magistrate or Chief Metropolitan Magistrate.
The provisions of the Act shall not apply to prize chits or money circulation schemes conducted and promoted by State government, an authorised authority, state owned company, certain banking institutions, charitable or educational institution notified by the State Government. The act grants power to State government to make rules in furtherance of provisions of the Act which shall come into force after notification in official gazette.
Thus the Act enables the State government to keep a control on easy money making schemes which lures a lot of innocents who are willing to make money by investing into chit fund or money circulation schemes.
by Vibhuti Nakta.