Section 81 of the Chit Funds Act, 1982 - Power to Compound Offences

Section 81 of the Chit Funds Act, 1982 empowers an officer authorised by the State Government to accept a prescribed sum for compounding an offence under the Act, subject to prescribed conditions. The provision permits compounding either before or after criminal proceedings have been instituted.

Text of Section 81 - Power to compound offences

81. Power to compound offences. - (1) Subject to such conditions as may be prescribed, any officer empowered by the State Government in this behalf may, either before or after the institution of criminal proceedings under this Act, accept from the person who has committed or is reasonably suspected to have committed an offence under this Act, by way of composition of such offence, a sum of money not exceeding such amount as may be prescribed.

(2) Where an offence has been compounded under sub-section (1), the offender, if in custody, shall be discharged and no further proceedings shall be taken against him in respect of such offence.

Official text: Chit Funds Act, 1982 - India Code

Meaning and scope of Section 81

In legal usage, compounding an offence means resolving the offence through the statutory composition mechanism instead of continuing the prosecution for that offence. Section 81 itself specifies who may accept composition, when it may occur and the consequence after composition.

Authorised officer: The power is exercisable by an officer empowered by the State Government for this purpose.
Prescribed conditions: The power is expressly subject to conditions prescribed under the applicable rules.
Before or after proceedings: Composition may be accepted before criminal proceedings are instituted or after their institution.
Composition amount: The amount accepted cannot exceed the amount prescribed for the purpose.
Effect of composition: Once the offence is compounded, a person in custody is to be discharged and no further proceedings may be taken against that person in respect of that offence.

Who can compound an offence under Section 81?

Section 81 does not confer the power on every authority administering the Act. It requires an officer to be specifically empowered by the State Government. The applicable State rules and notifications should therefore be checked to identify the competent officer and the conditions or amount prescribed for composition in the relevant State.

When can compounding take place?

The provision expressly allows composition either before or after the institution of criminal proceedings. This makes the statutory mechanism available at more than one procedural stage, subject always to the requirements of Section 81 and the applicable rules.

Legal effect after an offence is compounded

Sub-section (2) states the consequence directly. If the offender is in custody, the offender is to be discharged. Further proceedings cannot thereafter be taken against that person in respect of the offence that has been compounded.

Practical note: Section 81 uses the expressions "such conditions as may be prescribed" and "such amount as may be prescribed." Because these details can depend on rules and State-level authorisation, the relevant State rules and current notification should be verified before relying on a particular compounding procedure or amount.

Related provisions

Section 81 appears in the group of provisions dealing with offences and enforcement under the Chit Funds Act, 1982. For context, see Section 82 - Power to enter and search any place and seize documents and the succeeding administrative provisions of the Act.

Last reviewed: 16 September 2026. The central statutory text of Section 81 was checked against India Code.