THE PRIZE CHITS AND MONEY CIRCULATION SCHEMES [BANNING] ACT, 1978
Prize chit means any transaction under which a person collects monies in one lump sum or in installments by way of contributions or subscriptions in respect of any savings, mutual benefit, thrift, or any other scheme or arrangement or the income accruing from investment or other use of such monies for all or any of the following purposes, namely:-
(i) giving or awarding periodically or otherwise to a specified number of subscribers as determined by lot, draw or in any other manner, prizes or gifts in cash or in hand, 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) refunding to the subscribers or such of them as have not won any prize or gift, the whole 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.
The act bans prize chits and money circulation schemes or enrolment as members or participation therein. If any body indulges in such activities they 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.
If an offence under this Act is 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 conduct of business of company as well as the company shall be liable for prosecution. The offences punishable under this act shall not be tried by a court inferior to that of a Chief Metropolitan Magistrate. All offences punishable under this act are cognizable offences
A police officer not below the rank of an officer in charge of a Police Station has the power to enter any premises connected with the promotion / conduct of any price chit or money circulation scheme, in contravention of provisions of this act. The Police Officer has also the power to search the said premises and the persons present there. He has the power to take into custody persons found in such premises and produce them before judicial magistrate. The Police Officer has also power to seize things used for such price chits or money circulation schemes.
If a newspaper contains any material connected with any price chit or money circulation scheme, the State Government has the power to forfeit the same.
Nothing contained in this act applies to price chits or money circulation schemes promoted by the Central Government, Company owned by a State Government, Banking Company and Charitable or Educational Institutions notified in this behalf by the State Government.