Section 19 of the Chit Funds Act, 1982: Restriction on Opening of New Place of Business

Last reviewed: 15 September 2026

Section 19 of the Chit Funds Act, 1982 regulates the opening of a new place of business by a person carrying on chit business. Its central requirement is prior approval from the competent Registrar before a new branch, sub-office or other place where chit business is conducted is opened.

What Section 19 requires

The provision creates a regulatory check before a chit business expands to a new business location. The Registrar at the place of the registered office, principal place of business or other relevant existing place of business must grant prior approval. Where the proposed new place is in another State, the law also requires consultation with the Registrar of that State.

Text and meaning of Section 19

Section 19(1): No person carrying on chit business shall open a new place of business without obtaining the prior approval of the Registrar within whose territorial jurisdiction his registered office or, as the case may be, the place or the principal place of business is situated.

Section 19(2): Before granting approval under sub-section (1), the Registrar shall consult the Registrar of the State within whose territorial jurisdiction the new place of business is proposed to be opened and shall also keep in view the financial condition and methods of operation of the foreman, the extent to which public interest will be served by the opening of the new place of business and such other matters as may be prescribed.

Section 19(3): Where a person carrying on chit business opens a new place of business in a State other than the State (referred to as the State of origin) in which his registered office or the place or the principal place of his business is situated, the Registrar of the State in which the new place of business is opened may also exercise and perform the powers and functions which the Registrar of the State of origin may exercise and perform in respect of the chit business carried on at that new place of business.

Section 19(4): For this section, "place of business" includes any branch office, sub-office or any place of business where the chit business may be conducted by that person.

Explanation of the legal requirements

1. Prior approval is mandatory

A chit business should not first open a branch and seek approval later. The wording of sub-section (1) requires approval before the new place of business is opened.

2. Which Registrar grants approval?

The application is tied to the Registrar having territorial jurisdiction over the registered office or, as applicable, the place or principal place of business of the person carrying on the chit business.

3. Inter-State consultation

Before approval is granted, sub-section (2) requires consultation with the Registrar of the State where the proposed new place of business will be situated. This enables regulatory coordination where a chit operator expands beyond its State of origin.

4. Matters considered before approval

The Registrar must consider the financial condition and methods of operation of the foreman, the extent to which opening the new place will serve public interest, and any other matters prescribed under the applicable rules.

5. Regulatory power in the new State

When a new place of business is opened in another State, sub-section (3) allows the Registrar of that State to exercise relevant powers and functions in relation to the chit business carried on at the new location. This operates in addition to the role of the Registrar of the State of origin.

6. Meaning of "place of business"

The expression is deliberately broad. Under sub-section (4), it includes a branch office, sub-office or any other place at which the chit business may be conducted. The substance of the activity, rather than merely the label given to the premises, is therefore important.

Practical compliance points

  • Identify the Registrar having jurisdiction over the existing registered or principal place of business.
  • Obtain prior approval before opening or commencing chit business at the proposed new location.
  • For an inter-State location, account for consultation between the Registrar of the State of origin and the Registrar of the proposed State.
  • Be prepared to provide material relevant to financial condition, operating methods, public interest and requirements prescribed by the applicable State rules.
  • Check the rules, forms, fees and procedural requirements applicable in the relevant State or Union Territory before filing an application.

Current legal position

The Chit Funds Act, 1982 remains the central legislation regulating chit funds. The Chit Funds (Amendment) Act, 2019 amended several provisions of the principal Act. For the authoritative and updated statutory text, readers should verify the Act and applicable State rules through official government sources before acting on a compliance matter.

Note: This page is a general explanation of Section 19. Chit fund administration is implemented through Registrars and applicable rules, and procedural requirements can vary by State or Union Territory.

Official legal sources

See the Chit Funds Act, 1982 on India Code and the Chit Funds (Amendment) Act, 2019. These official sources should be preferred for verification of the statutory text.