Kerala act 023 of 1975 : The Kerala Chitties Act, 1975 (No. 23 of 1975)

119

THE KERALA

CHIT'I'IES

ACT,

1975

(Act ^23of

1975)

CONTENTS

Preamble. Sections

PART ^I

Preliminary

1. Short

title,

extent and

commencement.

2. Definitions.

PART II

0f Constitution and

Registration

3.

Prohibition

of

chitty

not

sanctioned

or

registered under this Act.

4. Prohibition of

invitation ^for

subscription except

under certain conditions.

5.

Savmgs ^ofsome

chitties.

6. Varlola

7. Particulars of variola.

8.

Registration

9 Effect of

registration

10

Copies

of variola to be

given

to subscribers and acknowledgments ^tobe

filed.

11. Alteration of variola.

12. Time and

place

of

conducting chitty.

13 Minutes of

proceedings

of

drawing

of

chitty.

14

Copy

of minutes ^tobe filed with

Registrar.

PART ^III

0f

the

Foreman

15.

Security ^tobe

given by

foreman.

16.

Rights

of foreman. ' ^'

1'7. Duties of

foreman. ^{-. ,}

18.

19

20

21

22

23

24.

25.

26

2'7.

28.

29.

30

31

32

33

34.

120

Books to^be

kept

by

foreman. Punishment for'farlixre ^to

keep

books. Balance sheet Llabrlity ^offoreman ^tosubscnbers Wlthdrawal ^offoreman.

PART IV

0f Non-Prized

Sub'scribers Non—pnzed

subscnbers ^topaysubscnptlons ^{and get} recelpts

Removal of

defaultmg

subscnbers. Amount due ^to

defaulting

subscriber

how dealt

thh.

PART ^V

0f Prized Subscribers Prized subscrrber ^to

51gn

mmutes^of

proceedmgs. Pnzed subscrlber ^to

gwe securlty Consequences ^of

prlzed

subscnber

defaultmg to

pay subscnptlons. Foreman to

gwe

nouce^m

wntmg

before

demandmg payment ^ofall

future

subscnptions.

PART ^VI

0f Transfer Transfer ^of

rrghts ^6f

foreman ^whenvoxdable Transfer

'to ^be

1n writing Recogmtron ^oftransfer

by

foreman Entry ^oftransferee's ^{name mthe}

books. '1'

PART VII

0f

Meetings

of the General

Body

of

Subseribers How

meetings ^tobe held

2

35.

36

37.

38.

39

40

41.

42.

43.

44

45

46

47.

48

49.

50.

Si.

52

53

54

55.

121

PART ^VIII

Of Termination ^of

Chitties PrOViSion

for

continuation^ofchitties in certain cases. Termination of

chitty Copy ^of

resolution, ^{etc, tobe}filed^withthe

Registrar. Refund of

non-prized

subscriber's

subscription. Preference ^of

subscribers

over

chitty

assets

PART IX

OI

InspeCtion

of

Ducuments Foreman to allow subscriber to examine

chitty

records Preservation ^of

chitty

records

by

foreman Inspection ^of

chitty

books ^and

records

PART X

0f

Winding

up of

Chilties Chitty ^whentobewound up. Winding up application Insolvency ^or

liquidation ^abarto

Winding up

pro— ceedings Commencement ^andeffect^of

winding

up

order Injunction

order Powers of court ^on

hearing

the

petition. Vesting ^of

chitty aésets ⁱⁿ

receiver Suits

stayed ^on

Winding

up order copy ^of

Winding^uporder^tobefiled. Stay ^of

Winding^upproceedings ^on

insolvency ^of foreman and transfer ^of

insolvency

proceedings Award ^of

compensation ^to

foreman Right ^of

appeal. Limitation

3

~

1??

PART XI

Registration

Office^and

Fees 56'

Registration

Ofi'ice.

57.

Appointment

of

Registrars, inspecting

officers and chitty

auditors.

58.

Inspection

of

documents

in

Registrar's

office.

59.

Levy

of

fees

PART XII

Miscellaneous

60

Penalty

if the

foreman is a

company.

61

Application

of

fine

62.

Compounding

of offences

63.

Penalty

for false statement

64

Power to enter and search any

place

and to seize documents, ^etc

65. Interest at

more

than

9

per

cent not to be allowed

on grain

66. Power of courts to

grant relief

in certain cases.

67

Protection

of action

taken under this Act

68 Power to make rules

69

Recovery

of amounts

due

from foreman.

70

Application

of Act to certain

existing

chimes

71

Power to

remove

dlfi'lculties

72

Repeal.

THE KERALA CHITTIES

ACT,

1975' (Act ^23of

1975)

An Act to

define,

amend and

consolidate the law

relating ^to chilties in the State ^ofKerala Preamble—WHEREAS it IS

expedient

to

define,

amend and consolidate

the law

relating ^tochitties

in the

State

of Kerala , 'Recewed ^theassent^of

the President ^on

the 18th

day ^of

July, ¹⁹⁷⁵ and

published ⁱⁿthe Gazette

Extraordinary ^{No. 397}

dated 25th

July. ¹⁹⁷⁵

123

BE it enacted ^inthe

Twenty-Sixth

Year of

the

Republic

of India as follows ^——

PART ^I

Preliminary

1 Short

title,

extent

and

commencement—(1)

This

Act may be

called

the Kerala

Chitties

Act,

1975

(2) ^Itextends^tothe

whole^oftheState^of

Kerala.

(3) ^Itshall^{come into}force ^{on such dateasthe} Government may, by

notification

in

the

Gazette,

appoint.

2

Definitions—In this

Act,

unless

the context 0therw15e requires,—-—

(1)

"approved

bank" means^{a bank}

approved

by ^the Government, ^fromtimeto

time, ^{for the}purposes^{of this}

Act.

(2)

"chxtty"

means ^a

transaction,

whether

called

chitty or

Run,

by

which

one or

more

persons, hereinafter called the

"foreman" or

"foremen",

enter into an

agreement

With ^a number of

persons that every

one of the

contracting parties shall

subscribe^a

certain amount of money ^or

quantity ^of

grain or other

commodity

by

periodical

instalments for a certain definite

period ^andthat^eachmhis

turn, ^as

determined

by lot ^or

by

auction ^or

by

both,

shall

be entitled^to the

prize

amount whether

payable ⁱⁿ

cash,

kind^or

any other article of value ^orm

such

other manner^as

may

be provided ^formthe

agreement;

(3)

"chitty

amount" means^thesumtotal ^ofthesub- scriptions payable ^{by allthe}

subscribers^foranyinstalment Without any deduction ^for

discount;

(4)

"discount" means^the

amount^ofmoney ^or

quantity of gram ^orother

commodity.

Wthh ^a

prize

wmner

has,

under the terms of the

variola, ^to

forego

[or ^the

payment

of

veetha— pahsa,

ioreman's

COmmlSSlOn^orsuchother expenses ^{as maybe} prescribed ^,

(5)

"drawmg"

includes ^{themode of}

ascertaining ^the prize

Winner^{at any}instalment^ofthe

chitty

by ^{lot or}

by ^auc- tion ^orm

such

other

manner ^as

may be

provided

for^mthe variola;

1&4

(6)

"foreman" means^theperson who,

under ^the varlola, ^rs

responslble ^fortheconduct^ofthe

chltty, ^and 1ncludes ^allpersons

takmg

his

place

under sectlon

35,

(7)

"non—pnzed

subscrxber"^doesnotInclude^adefaulter subscrrber,

(8)

"prescrrbed"

means

prescrxbed by

rules ^made

under this

Act;

(9)

"prlze

amount" means ^the

chltty

amount,

whether payable ¹ⁿ

cash, ^{kmd or}

any other artrcle ^of

value, ^lessthed15- count, ^1t

Includes, ^{1n thecaseofa}

fractlon^ofa

ticket, ^the dxfierence between the

prOportxonate

chltty

amount

and the dlscount on the

partrcular

fractlon of the

tlcket,

when^the prize ¹⁵

payable ¹ⁿmovables^Itmeans the

value thereof^atthe time It

becomes

payable,

(10) "Regrstrar"

means ^a

Reglstrar

appomted by ^the Government under sectlon 57 , (ll)

"spec1al

resolutlon" means ^a

resolutton ^Wthh15 passed ^ata

meetmg spemally

convened ^{for the}purpose ^{of the} general

body ^of

subscrrbers, by ^a

maJonty ^{ofnotlessthantwo-} thtrds

of

the

subscrrbers

present

at the

meeting

in person

or by proxy,^such

majorlty bemg ^alsoof

subscnbers

representmg not less than three-fourths 111 value of the amount

subscrlbed by ^the

general body ^of

non-prrzed ^and

unpard

prrzed

subscrlbers, 1f any,

(12)

"subscrlber" 1ncludes^a

person^whoholds^afrac- tmn of a txcket

and also a transferee

by a551gnment

1n

wrxtmg or

by operatron

of

law,

(13)

"ticket" means^theshare^{of a}

subscriber^ina

chitty whlch entrtles the holder thereof to

the

chltty

amount at any one mstalment w1th or

wrthout any deduction

by way of dtscount,

(14)

"\zarlola" means^the

document

contammg ^the artlcles of

agreement

between

the foreman and the

subscnbers relatmg ^tothe

chltty, ^andmcludes valmpu^and

kunppattlka ^or other srmrlar mstrument ,

(15)

"veethapahsa"

means ^theshare^ofa

subscnberⁱⁿ the drscount avanlable under

the

varxola for rateable drstrrbu- tron

among the

subscrlbers at

each

mstalment of the

chrtty r

A

125

PART II ^-. of Constitution and

Registration

3. Prohibition ^of

chitty ^notsanctioned^or

registered

under this

Act—(1)

No

chitty

shall,

after the commencement of this Act, ^be

Started^andconducted unless ^thepreVious

sanction^of the

Government or of such officer

as

may be

empowered by the Government in^thisbehalf is obtained therefor ^andunless the

chitty

is

registered

in

accordance With the

provmons

of this Act:

'

Prov1ded ^that

the

previous

sanction under this sub-section shall

lapse

unless the

chitty

is

registered

before the

expiry

of six

months

from

the date of such sanction :

Prov1ded further that such

previous

sanction shall

not be necessary ^for

starting ^and

conducting any

chitty by—

(i) ^a

company

owned

by ^theGovernment^ofKerala ; ^or

(ii) ^a

co-operative

society

registered ^ordeemed^tobe registered

under^the

Co-operative

Soc1eties^{Actforthetime} being ⁱⁿ

force, ^or

(iii) ^ascheduled^bankas

defined ^inthe

Reserve^Bank of India

Act,

1934; ^or

(iv) ^a

corresponding ^newbankconstituted

under^the Banking Companies (Acquisition ^and

Transfer ^of

Undertakings) Act, ¹⁹⁷⁰

(Central ^Act5of

1970)

(2) ^The

previous

sanction referred^toin

sub—sectmn ⁽¹⁾ shall not be

granted ^if—

(i) ^theforeman^{has been}convicted^ofanyoffence under

this Act ^orunder any of the Acts

repealed by

this

Act; or

(ii) ^the

foreman^hasdefaulted^inthe

payment ^offees or the

filing

of statements

or

records,

required

to be

paid

or filed

under this

Act, ^orhas Violated any ^ofthe

provisions of this Act ^orthe rules made

thereunder; ^or

(iii) ^the

foreman^{has been}convicted ^ofanyoffence involving misappropriation,

forgery, counterfeiting,

falsifica— tion of

accounts ^or

any other offence

involving

breach

of

trust and sentenced ^to

imprisonment

for any term,

unless ^a

period of five years has

elapsed ^smcehisrelease:

126

Provided that

before

refusing previous sanction,

the foreman

shall

be

given

an

opportunity

of

being

heard.

(3) ^The

order^{of the}

Government

and,

subject

to

the provisions ^ofsub-section

(4), ^the

order^ofthe

officer

empowered under

sub-section

(1)I

either

granting

sanction

or

refusing sanction,

shall^befinal

(4)

Any person aggrieved

by ^the

refusal^to

grant pre' vious sanction

by

an officer

empowered

under

sub—section

(1)

may appeal ^tothe

Government

Within such^{timeandinsuch} manner as

may be

prescribed,

and the

decision of the

Govern- ment on the

appeal

shall

be final

(5) ^No

foreman shall^be

entitled ^to

conduct^{at atime} chitties, ^the

aggregate

amount^ofwhich exceeds— (a)

where

foreman^isa

banking company ^asdefined in

the

Banking Regulations

Act,

1949

(Central

Act

10 of

1949)

or ^a

corresponding

new bank constituted under

the

Banking Companies (AcquiSition ^andTransfer ^of

Undertakings) ^Act,

1970

(Central

Act

5 of

1970),

60

per

cent of

the net assets of

the foreman;

(b) ⁱⁿ

other cases,⁵⁰

per ^centofthenetassets^ofthe foreman:

Provided ^that

the

chitty

amount ⁱⁿ

the ^caseofanyone chitty

conducted

by ^a

foreman shall ^notexceed

twenty—five thousand rupees Provided further that the maXImum limit

specified ⁱⁿ the

foregoing

prowso shall be two lakhs rupees in the case of any

chitty

of which the foreman^isa

banking company ^asde- fined in the

Banking Regulations

Act,

1949

(Central

Act ¹⁰

of 1949) ^ora

corresponding ^{new bank}

constituted under^theBank- ing Companies (Acquisition ^andTransfer ^of

Undertakings) ^Act,

1970

(Central

Act

5 of

1970)

Provided ^alsothat

nothing

contained^inthissub—section shall

apply

in the ^caseofany chitty ^ofwhich^theforeman^isa company owned

by

the Government of Kerala Explanation.—In

determining ^{the net}assets^ofafore- man

'for

the purposes of this

sub-section,

the amount of the security

furnished

by ^him

under section¹⁵

shall^beexcluded if ^suchamount ^istheamount

of

subscription

received ⁱⁿ advance from ^thesubscribers.

,.

{a

)1.

127

(6)

Whoever contravenes^the

provisions ^of

.sub-section

(1)

shall^be

punishable ^with

imprisonment ^foratermwhich shall not

be less than three

months

but

which may extend to two

years and with

fine

which shall not be less than five hund- recl' rupees but which may extend

to two thousand rupees

4 Prohibition of invitation for

subscription except

under certain

conditions—(1)

Where

previous

sanction is

required by section 3 for

starting

and

conducting

a

chitty,

no

person shall issue or

publish any notice,

circular,

prospectus,

proposal

or other document

inViting

the

public

to

subscribe for

tickets in any such

chitty ^or

containing

the terms and conditions^ofany such

chitty

unless such

notice,

circular, prospectus,

proposal or

other document

contains

a statement that the prev1ous

sanc- tion

required by

section

3 has been

obtained, together

with the

particulars

of such sanction

(2)

Whoever contravenes^theprovxsmns^ofsub-section

(1)

shall^be

punishable ^with

imprisonment ^foraterm

which may extend ^tosix

months, ^or

With ^fine

which may extend^to three

hundred rupees,

or With

both.

5

Saving

of some

chitties.—(1) NotWithstanding any- thing

containedⁱⁿsection ^{3. the}

pmVisions ^{of thisAct}

shall not

apply

to ^a

chitty

if

the

chitty

amount or the value thereof is less

than one hundred rupees- PrOVided that no

person shall conduct such a

chitty except

under^a

permit

issued

by ^such

authority ^andin

accord— ance with

such terms and

conditions

as

may

be

prescribed by the Government:

Prowded

further that no

person shall be

entitled

to start a new

chitty

of the class

speCified

in this sub-section till the expiry of the term of

such a

chitty already

started

(2)

Whoever conducts^a

chltty ^oftheclass

specified ⁱⁿ sub-section

(1)

Without

taking

a

permit

as

prov1ded

therein or violates any of the terms and

conditions

prescribed

thereunder or of the conditions

of the

permit

shall be

punishable

With imprisonment ^foraterm

which may extend^to

three

months, or

with

fine

which may extend to

fifty rupees,

or with both.

6 Variola.—In every chitty

there shall be a variola ⁱⁿ duplicate signed by ^eachofthe

subscribers ^or

by ^a

person authorised' in

writing by

the subscriber ⁱⁿ

that behalf and

such signature

shall^beattested ^{by at}least^onewitness.

128

7.

Particulars

of

variola.—(l)

The

vari01a

shall

contain the

followmg

particulars

and shall not contain any other

parti— culars inconSistent With the pl'OVlSlOnS of this Act—

(i) ^{thefullname and}

residence ^of

every subscriber;

(ii) ^the

number ^oftickets^{or the}fraction thereof^held by ^each

subscriber;

(iii) ^thenumber^of

instalments^{and the}amount

pay- able ^for

each ticket at

every instalment,

(iv) ^{the date on}which^the

chitty ^15tobe

begin ^and the date ^on

which it is to

terminate;

(v) ^{the modeof}

ascertaining ^theprize

Winner^{at the} successive

instalments, (v1) ^theamount^ofdiscount

which ^a

prize

Winner^at any

instalment^hasto

forego,

(vii) ^{themode and}

proportion ⁱⁿwhich^thediscount is distributable

by way of

veethapalisa,

foreman's commissmn and other expenses ^ifany;

(viii) ^{the timeand}

place ^atwhich ^the

chitty ^{is to be} conducted; ^.

(ix) ^theinstalment^atwhich ^theforeman^{is to}

get the prize;

(x) ^the

approved ^{bank or}banksⁱⁿwhich

chitty moneys shall be invested

by

the

foreman

under

the prOViSions of this

Act, (in) ^theconsequences ^towhich^a

non-prized ^or

prized subscriber ^orthe

foreman Will^be

liable

if ^heViolates any of the

prowsions of

the

variola, (x11) ^theconditions under which^a

subscriber ^{Will be} treated ^{as a}

defaulting

subscriber, (:x1ii) ^the

nature^and

particulars ^ofthe

security

offered by ^theforeman under section ^15,

(xiv) ^{the nameofthe}

nominee^{of the}

subscriber^to whom benefits accruing ^to

the subscriber

under the

chitty may be

paid' ⁱⁿ

case^ofdeath of the

subscriber,

and

(xv) any

other

particulars ^{thatmay,fromtimeto} time, ^be

prescribed

by ^theGovernment.

129

(2)

Provision

shall^{also be madein the}

variola ^that veethapalisa

shall ^be

distributed among^boththe

prized ^and non-prized

subscribers,

other^than

prized

defaulter subscribers in

respect

of

defaulted instalments

of

subscription Explanation—For ^the

avmdance^of

doubts, ^itis

hereby declared that no

prowsmn shall

be made in the variola ^for forfeiture

by

a

non-prized

defaulter subscriber of his

right

to obtain

veethapalisa.

(3)

Where ^the

prize

wmner ^{is tobe}

determined

by auction and more than^one

person bids for the same

amount, the prize

Winner shall be

determined

by

lots

among

them

(4) ^The

amount^of

discount ^ina

chitty

shall^not

exceed thirty per ^centofthe

chitty

amount.

8

Registration—(1) Every

variola

With its

duplicate shall

be filed

by

the foreman with

the

Registrar along

With the order

sanctioning

the

starting ^ofthe

chitty

(where

such sanction lS

necessary under section

3),

and

the

Registrar

shall register ^and

return ^the

variola ^{with an}

endorsement^thatthe chitty ^is

registered:

Provided that the

Registrar may refuse to

register

the chitty ^on

any^ofthe

followmg grounds,

namely —

(i) ^thatthe

security

offered

by ^theforeman under section 15 is

insuffiCient, ^or

(ii) ^thattheforeman ^{has been}conVicted ^ofany offence under this

Act ^orunder any ^of

the Acts

repealed by this

Act,

or (in) ^thattheforeman^hasdefaulted ^{in the}

payment of fees or the

filing ^of

statements ^or

records,

required ^tohe paid ^or

filed

under^{thisAct orhas}Violated^anyoftheprom- Sions of this Act

or the

rules made

thereunder,

or

(IV) ^{that the}foreman ^hasbeenconvicted ^ofany offence

involvmg misappropriation, forgery, counterfeiting, falsification of

accounts ^or

any other

ofience

involvmg

breach of trust and

sentenced ^to

imprisonment

for

any term,

unless a

period

of five years has

elapsed

Since his

release Prowded further that before

refusing ^to

register ^a chitty, ^the

foreman shall ^be

130

(2)

Any

person

aggrieved by ^an

order^ofthe

Registrar under

sub—section

(1) may appeal ^to

such

authority,

Within such

time,

and in such manner,

as

may be

prescribed

and its deCiSion

thereon

shall be final.

(3) ^{On the}

registration ^ofthe

variola, ^the

Registrar

shall endorse on the

duplicate

a certificate that the

chitty

is

regis- tered ^andshall retainⁱⁿ

his

office

the

duplicate

so

endorsed along ^withtheorder

sanctioning ^the

starting ^ofthe

chitty.

9. Effect of

registration—Every

endorsement

under sub- section

(1)

of section ⁸

shall ^be

concluswe evidence that

the 'chitty ^{is duly}registered

under^thisAct.

10.

Copies

of

variola^tobe

given ^to

subscribers and ack- nowledgments ^tobe

filed.——(1)

After ^thevariole^is

signed by ^a subscriber ^or

by ^a

person authorisedⁱⁿ

writing by ^thesubscri- ber in

this

behalf,

the foreman shall

supply

a^true

copy

of the variola certified ^assuch

by

him^tosuch

subscriber ^or

person authorised

by ^the

subscriberV ^who

shall

acknowledge receipt of

the same, and the foreman shall

file the

acknowledgments with the

Registrar

within fourteen

days ^ofthe

first drawing of

the

chitty

(2) ^Iftheforeman makes defaultⁱⁿ

complying ^{with the} requirements ^ofthis

section, ^heshall^be

punishable ^{with fine} which may extend ^to

fifty

rupees.

11 Alteration

of

variola.—(l)

Subject ^tothe

proviSions

of this Act^andto^theconditions contained ⁱⁿ

the

variola,

the^sub- scribers ^toa

chitty may, by ^a

special

resolution,— (a)

alter ^{or addtothe}articles ^inthevariola ⁱⁿ respect ^{ofallor anyofthe}

following

matters,

namely——

(i) ^{the timeat}which ^{or the}

place

where^the

chitty is to be

conducted,

(ii) ^thereduction ^{of the}

chitty

amount;

(iii) ^thecontinuance^ofthe

chitty ⁱⁿaccordance With the

pmViSions

of section

35,

(iv) ^the

suspension ^or

prolongation ^{of the}

chitty; ^or

(v) ^thetermination^{of the}

chitty;

(b) ^{omitthenameof}any

approved ^bank

specified in the variola ^oradd

the ^nameof

any

approved

bank ⁱⁿthe variola; ^.

T.

"'3

4

-..u~;_ .M._

.

Kn— u."

.u. _.__.A.i ~.___.,_......

..

i. '.A