 the prize chits and money circulation schemes (banning) bill, 1978 l-to be/as ill troduced in ipk sabbaj1 page 6, in the marginal heading to clause 12,-t2r "transi tiona" read "trans1 tional" 2 page 6, line 37,-~ "of" ~ "or" 3 page 7, line 8,-!ql: "thousand" ~ "one thousand" 4 page 7, in the marginal heading to clause 14,-l2l: "repe al " ~ "rape al s " new delhi; may 12, 1978 vaisakha 22, 1900 ( saka)  bill no 90 of ,\978 the prize chits and money circulation schemes (banning) bill, 1978 a billto ban the promotion or conduct of prize chits and money circulation schemes and for matters connected therewith or incidental thereto be it enacted by parliament in the twenty-ninth year of the republic of india,s,foll0w8:  1 (1) this act may be calied the j;>rize chits epd money circulation schemes (~g) act, 19'78 s (2) it ~ to the whole of india enept the state of jammu and short title, and extent kashmir 2 in this act unless the context otherwise requires - : definitions 10 (a) "conventional ahit" means a transaction whetbet- called chit chit fiind ku1i or 'by any other iwjle by or udder' which a person responsible tor the coilduct of the dlit ~ into an apeemedt with a speclfted number of persons that every one of 'them shall subsc(ribe a certain sum ofi money (or eert6in quantity of gram instead) by way of periodical ins~u18dts for - definite period ad that each such subscriber shall, in his tura, 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 en,tttied 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 5 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 10 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 re- 15 ceipt 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 en~rance money of the members of such scheme or periodical subscriptions; 2c (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 25 or by sale of units, cert:iftcates or other instruments or in any other manner or as membership fees or admission fees or service chargjes 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 30 investment or other use of such monies for au or any o~ the following purposes, namely: -' ";, (i) giving or awarding periodically or otherwije'toia-:apedfte4 number of subscri~ as d~j~rmine~ by lot, draw 0;1:' ~,my other manner, pr'izes'or lifts tii-c~h or iil' ':idnd~ whether', or not 1;11e 35 recipient of the prize or gift is under a liability 'to make any 'fur-, ~ paym,etlt in respect al such scheide'w arrangement; ,-j (ii) refunding to the subscrihers or such of them as have not won any, prize or gift, the· whole or pari of the' subsetiptmns, contributions or other monies collected, with or without any bonus, 40 ,~~;, premium,' 1n~ m- et~; ad~gw~byjw~~~n~~: callt:d, , n',' " on the termindondl the lieheme ot artan~~,nt, 6r' ~~ ,or: ~r ,,: ,;, the exptry cofuthe 'pertm ;m!iptfl8ted theftljl;:' , ;,r<, , ,(, , ' , ,: j  j,~, ") :~~r  ~)  ,r\i,~; bui:~,;not iilcl~~ , cc?nved1ij~'~~'" :,,' i: ~ , , rlir" ' ' : (f); "beierve obldk" meatm tnie ,reserve' :blliilt o(indt~ ~9l~t1t~ted under}tbe' rete"" beak of ,it1dia 'a jet, 1994:" :',';\'" ,;'c' '-45 3 no person shall promote or ccmduct 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 banning of prize chits and money circulation schemes or enrolment as members or participation therein 5 4 whoever contravenes the proviaions of section 3 shall be punishable with imprisonment for a tenn which may extend to three years, or with fine which ~ extend to five thousand rupees, or with both: provided that in the absence of special and adequate reasons tc the penalty for contravening the provisions of section 3 j 0 contrary to be mentioned in the judgment of the court, the imprisonment shall not be j,ess than one year and the fine shall not be less than one thousand rupees 5 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 r:yr scheme promoted or conducted as 15 aforesaid,-(a) prints or publishes any ticket, coupon or other document for use in the prize chit or money cir~tion 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 20 any ticket, coupon or other document for use in the prize chit or money circulation scheme; or penalty for other offences in connection with prize chits or money circulation schemes (c) prints, publishes or distributes, or has in his possession for the purpose of publication or distiibution-(i) any advertisement of the prize chit or money circulation scheme; or (ii) any list, whether, complete or ,not, of members in the prize chit or money circulation scheme; or 30 (iii) any such,' matter descriptive of, or otherwise relating to the prize chit or money circulation scheme, as is calculated 10 aet;' as an tndueement to persons to participate in that prize chit or money circulation scheme or any other prize chit or money circulation scheme; or (d) brillgs, or inviteg any -person to send, for ·the purpose of sale or distrib1ol:tioll, any ticket, coupqjl, or otber doc'uix)entfor use in a prize chlt or, money c,irculatiod ,reheme  or any advertiswnent ,of such prize chit -or money cifcluation scheme; or, "; " ' '(f!) 'uses any premfl(l~s: o~ ca~ses '~r ki{b,-;ly'permtt~ any pre· mises t~ be used, 'fbr purposes' conriact~d ~th the ~mo~on or conduct of the prize chit or money circulation scheme;' or' ,"' , (1) causes or procures or attempts to, prqcure any perlon to do any of the above-mentioned acts" shall be punishable with imprisonment for a term wbich 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 offences 6 (1) where an offence under this act has been committed by a 10 by company, every person who, at the time the offence was committed, companies was in eharge 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: 15 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) notwithstanding anything contained in sub-section (1), where 20 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 ot, any director, manager, secretary or other officer of the company, such ciirector, manager, secretary or other officer shall also be deemed to be guilty 25 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 30 (b) '(director", in relation to a firm, means a partner in the finn 7 (1) it shall be lawful for any police officer not below the rank of an officer in charge of a police station,-power to enter, search and lleize (a) to enter, f,f necessary, by force, whether by day or nigat 35 with such assistance as he considers necessary, any premises which  he has reason to suspect, are being used for purposes connected with the pro1ll0tion or conduet of any prize chit or money circulation scheme in contravention of the provisions of tbis act; (b) to search the sam p;re~ and ~he persons whom he may 40 find therein; (e) to take into custody and produce before anr jtid~cial magistr~te all such persons as are concer!1ed or against whom a complafnt has· been made or cr~tble" ~forn'lation has wen reeefved or a 1'ie'8sonab1e suspicion exists of tbe!r' hbvtng been concenied with the 45 uae of the said pr~1 for purposes connected with or ~th the prom~oil or ,conduct of any sllch prue chtt or money clroul,a,tion scheme as aforesaid; -(d) to seize au 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; 5 (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 ud for the purposes connected with, or conduct of, any prize chit or money circulation scheme in contravention of the provisions of this act; 10 (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 15 employed in connection with any such prize chit or money circulation scheme; and (d) inspect and seize any register, books of accounts, documents or any other literature found in the said premises (3) all searches under this section shall be made in accordance with 20 the provisions of the code of criminal procedure, 1973 2 of 1974 8 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 notl-25 ftcation 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 forfeiture of news paper and publication containing prize chit or money circulation scheme power to try offences, 9 no court inferior to that of a chief metropolitan magistrate, or as the case may be, chief judicial magistrate, shall try any offence 30 punishable under this act 10 all offences punishable under this act shall be cognizable 11 nothing contained in this act shall apply to any prize 'chit or offences under this act to be cognizable act not to money circulation scheme promoted byapply to certain (a) a state government or any officer or authority on its behalf; prize or 35 | chits       ||-------------|| money       || circulation || schemes    |:  (b), a company w,holly p~f!d by a stllte governmt!nt whlch does ,not cjrry on any busiriess other than the conducting of a prize chit or money circulation scheme whether it is tn the nature of a collven~pnal chit or otherwise; or  , ~ 'a bankfdl eomp8jty as deflri~"tn 'clause (c) of section 5 10 of 1949 o~ the b,anmttg' re~atlo!t act, 1949,' or 'a barilting insfltution notffled  by the  cei1trar gov~meftt r ud8i!r section m' of tliat aet or the state bank of rridla :eoitstftuted under secflon3 of the' state bank of india act, 1955, or a subsidiary bank collitituted under sec-23 of 1955 tion 3 of the state bank of india (subsidiary banks) act, 1959 or a 38 of 1959 corresponding new bank constituted under section 3 of the banking companies (acquisition and trans1er of undertakings) act, 1970, or 5 of 1970 a regional rural bank established under section 3 of the regional s 21 of 1976 rural banks act, 1976, or a co-operative bank as defined in clause (bii) of section 2 of the reserve bank of india act, 1934; or 2 of 198 • (d) any charitable or educational institution notified in this behalf by the state government, in consultation with the reserve bank 10 transitiona provisions 12 (1) notwithstanding anything contained in this act, a person ronducting a prize chit or money circulation scheme at the commencement of thi6 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 15 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 20 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 25 c'irculation 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 a!l may be 30 considered necessary having re,:tard to the circumstances of the case and the interests of the memben; of the said chit or scheme (2) the state governmf'nt mav in consultation with the reserve bank approve the windins:~ up plan fnrnished under sub-section (1) with or without modifications or reie~t the same and may grant or 35  efuse to grant permission to continue to conduct that chit or scheme: provided that no such windin~ up plan !ilhall be modified of 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 40 chit or scheme alon~ with it~ windinq up plan in the fonn md within the period prescribed, ne shall forfeit hf!!ri~ht to _ continue tht!! business rejating to the sa,id chit or scheme on the expiry of such period (4) notwithstanding anyt'hin:g to the contrary' eontainea in any agreement, or document etered ·into between any' penon 1londuct1ng 4s any· such  chit or seheme and the  subscriber i· the'person coildueth\g the chit or 'scheme shall refund ·the mqni 'oi" the subseriptions ~~eted tlu:~he  date ~f default refen!ed to u1au'b4eetion ·(3};  - :' (5) if any person fails to comply with the provisions ot 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: 5 provided that in the absence of special and adequate reasons to the contrary to be mentioned in lhe judgment of the court, the imprisonment shall 110t be less than one year and the fine shall not be less than thousand rupees 13 (1) the state government may, by notification in the oftlcial power 10 gazette and in consultation with the reserve bank, make rules for the to make purpose of carrying out the provis~,ons of this act rules (2) in particular and without prejudice' to the generality of the foregoing power, such rules may provide for-15 (a) the office of the reserve' bank tg whom full infbrmation regarding any prize chit or money circulation scheme may be furnished under the first proviso to sub-section (1) of section 12, and the form in which and the period within which such information may be furnished; (b) the particulars relating to the winding up plan of the business relating to prize chits or money circulation schemes, 20 14 (1) the andhra pradesh money circulation scheme (prohibi-repeal tion) act, 1965, as in force in the state of andhra pradesh, and in the and saving andhra pradesh act 30 of 1965 union territory of chandigarh and the madhya pradesh dhan parichalan skeem (pratishedh) adhiniyam, 1975, are hereby repealed madhya pradesh act 19 of 1975 25 (2) notwitbstanding the  repeal of· any act referred to in subsection (1), anything done or any action taken under the p~oviliods of any such act shall, in so far as such thing or action is not inconsistent with the provisions of this act, be dee!med to have been done or taken under the provisions of this act as if the said provisions were in force 30 when such thing'was'done or such action was taken and shall continue in force: accordingly until superseded by' anything done or any action taken under this act;  statement of objects and reasonsin june 1974, the reserve barut of india had constituted a study group under the chairmanship of shri james s raj, the then chairman, unit trwit of india, for examining in depth the provisions of chapter iii b of the reserve bank of india act, 1934, and the directions issued thereunder to non-banking companies in order to assess their adequacy in the context of ensuring the efficacy of the' monetary and credit policies of the country and affording a degree of protection to the interests of the depositors who place their savings with such companies in its report submitted to the reserve bjmk in july 1975, the group observed that the prize chit/benefit/savings schemes benefit primarily the promoters and do not serve any social purpose on the contrary, the group has stated that they are prejudicial to the public interest and a'ffect the efficacy of the fiscal and monetary policies of the country 2, prize chits would cover any kind of arrangement under which moneys are collected by way of 8ubecriptionl!l, contributions, etc and prizes, gifts, etc are awarded the prize chit is really a form of lottery its basic feature is that the foreman or pr1>moter who ostensioly charges no commission collects regular subscriptions from the members once a member gets the prize, he is very often not required to pay further instalments and his name is dropped from further lots the institutions conducting prize chits are private limited companies with a very low capital base contributed by the promoters, directors or their close relatives such schemes confer monetary benefit only on a few members and on the promoter companies the group had, therefore, recommended that prize chits or money circulation schemes, by whatever name called, should be totally banned in the larger interests of the public and suitable legislative measures should be undertaken for the purpose 3 the bill proposes to implement the above recommendation of the group by providing for the banning of the promotion or conduct of any prize chit or molley circulation scheme, by whatever name called, and of the participation of any perlon in such chit or schejne the bill provides for a period of two years within which the existing units carrying on the business of prize chits or money circulation schemes may be wound up and provides for penalties and other incidental matters the repeal of the existing state legislations on the subject has also been provided for in the b1ll new delhi; h m patel the 19th april, 1978 sub-clause (1) of clause 13 of the bill confers on the state governments the power to make rules for carrying out the provisions of the bill, in consultation with the reserve bank of india sub-clause (2) of that clause specifies the matters in respect of which rules may be made under this clause these include the particulars relating to the winding up plan of the business relating to prize chits or money circulation schemes and the form in which and the period within which full 1nformation regarding such chits or schemes may be furnished to the state government or the ofticer authorised by it in this behalf 2 the matters with respect to which rules may be made under this clause are matters of procedure or detail the delegation of legislative power is thus normal in character :':'l  :  l:  ' ,~  , " ,,:: i i"" "  a billto ban the promotion or conduct of prize chits and money circulation schemes and for matters connected therewith or incidental thereto (shri h m patel, minister of finance) 