Prohibition of chits not sanctioned or registered under the Act
Section 4 of the Chit Funds Act, 1982 deals with prohibition of chits not sanctioned or registered under the Act. No chit shall be commenced or conducted without obtaining the previous sanction of the State Government within whose jurisdiction the chit is to be commenced or conducted or of such officer as may be empowered by that Government in this behalf, and unless the chit is registered in that State in acco The Act came into force on 02 Apr 1984.
(1) No chit shall be commenced or conducted without obtaining the previous sanction of the State Government within whose jurisdiction the chit is to be commenced or conducted or of such officer as may be empowered by that Government in this behalf, and unless the chit is registered in that State in accordance with the provisions of this Act:
Provided that a sanction obtained under this sub-section shall lapse if the chit is not registered within twelve months from the date of such sanction or within such further period or periods not exceeding six months in the aggregate as the State Government may, on application made to it in this behalf, allow.
(2) An application for the purpose of obtaining a sanction under sub-section (1) shall be made by the foreman in such form and in such manner as may be prescribed.
(3) The previous sanction referred to in sub-section (1) may be refused, if the foreman,--
(a) had been convicted of any offence under this Act or under any other Act regulating chit business and sentenced to imprisonment for any such offence; or
(b) had defaulted in the payment of fees or the filing of any statement or record required to be paid or filed under this Act or had violated any of the provisions of this Act or the rules made thereunder; or
(c) had been convicted of any offence involving moral turpitude and sentenced to imprisonment for any such offence unless a period of five years has elapsed since his release:
Provided that before refusing any such sanction, the foreman shall be given a reasonable opportunity of being heard.
(4) The order of the State Government, and, subject to the provisions of sub-section (5), the order of the officer empowered under sub-section (1), issuing or refusing previous sanction under this section shall be final.
(5) Any person aggrieved by the refusal to issue previous sanction by an officer empowered under sub-section (1) may appeal to the State Government within thirty days of the date of communication to him of such refusal and the decision of that Government on such appeal shall be final.
Section 4, The Chit Funds Act, 1982 (Act 40 of 1982).
Cross-references
Extracted from the operative text of the enactments themselves. Every destination below exists in our corpus.
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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State of Kerala v. M/s. Mar Appraem Kuri Co. Ltd.
Court's Decision & Legal Precedent
On enactment of the Central Chit Funds Act, 1982 (19.08.1982), covering the entire “chits” field under Entry 7 List III, the Kerala Chitties Act, 1975 became void/impliedly repealed under Art.254(1); a later State Finance Act insertion into the repealed State Act without Presidential assent is void. The Central Act is a “law made” even before State notification under s.1(3).
On this section: s.4’s prohibition on unsanctioned/unregistered chits is part of the Central Act’s occupation of the chits field that displaces conflicting State chitty legislation.
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Questions about Section 4
What have the courts held on Section 4 of the Chit Funds Act?
State of Kerala v. M/s. Mar Appraem Kuri Co. Ltd. (08 May 2012) is the leading judgment on this section among those set out below: s.4’s prohibition on unsanctioned/unregistered chits is part of the Central Act’s occupation of the chits field that displaces conflicting State chitty legislation.
How do I find court cases under Section 4 of the Chit Funds Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Chit Funds Act 1982 4, section 4 Chit Funds Act 1982, section 4 of the Chit Funds Act. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 1 reported judgment on this section is set out on this page, beginning with State of Kerala v. M/s. Mar Appraem Kuri Co. Ltd. (08 May 2012).
What should I read with Section 4 of the Chit Funds Act, and has it changed?
5 other provisions in this corpus refer back to it.
When did Section 4 of the Chit Funds Act come into force?
Section 4 of the Chit Funds Act, cited as Chit Funds Act 1982 4, came into force on 02 Apr 1984, having been enacted on 19 Aug 1982. It is in force as at the date shown on this page.
Other sections of this Act
- 2. Definitions795 words
- 6. Form of chit agreement577 words
- 22. Duties of foreman483 words
- 89. Power to make rules471 words
- 20. Security to be given by foreman428 words
- 67. Procedure for settlement of disputes and powers of Registrar or nominee419 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 15 Oct 2026. This page is not a substitute for legal advice.