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Section 89 of the Chit Funds Act, 1982 - Power to Make Rules

Section 89 of the Chit Funds Act, 1982 deals with the power of the State Government to make rules for implementing the Act. The provision requires the State Government to consult the Reserve Bank before making such rules and requires the rules to be notified in the Official Gazette.

In brief: Section 89 is the rule-making provision of the Chit Funds Act, 1982. It identifies matters on which detailed rules may be framed, including previous sanction, chit agreements, records, accounts, winding up, disputes, appeals, notices, fees and composition of offences.

Meaning and Scope of Section 89

An Act of the legislature normally lays down the principal statutory framework, while detailed procedural and administrative requirements may be prescribed through subordinate legislation. Section 89 provides the statutory authority for making such rules under the Chit Funds Act, 1982.

Under subsection (1), the rule-making authority is the State Government. The State Government is required to act in consultation with the Reserve Bank, and the rules must be made by notification in the Official Gazette.

Subsection (2) specifies a number of matters for which rules may be framed. The list is not intended to restrict the general power contained in subsection (1), because the subsection expressly operates without prejudice to the generality of that power.

Subsection (3) provides legislative oversight by requiring every rule made under Section 89 to be laid before the appropriate House or Houses of the State Legislature.

Section 89 - Power to Make Rules

(1) The State Government may, in consultation with the Reserve Bank, by notification in the Official Gazette, make rules for giving effect to the provisions of this Act.

(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely:

  1. the form and manner in which an application for obtaining the previous sanction may be made under sub-section (2) of section 4;
  2. the additional particulars that a chit agreement may contain under clause (q) of sub-section (1) of section 6;
  3. the particulars that may be included in the minutes of the proceedings of a draw under section 17;
  4. the method of valuation by the Registrar in a grain chit for the purpose of furnishing security under section 20;
  5. the procedure that may be followed by the Registrar in releasing the security furnished by the foreman under section 20;
  6. the registers and books and the form in which such registers and books may be maintained by the foreman under section 23;
  7. the time within which the balance sheet and the profit and loss account in respect of a chit business shall be filed under section 24;
  8. the rate at which interest shall be payable on the defaulted instalments by a defaulted subscriber under section 28;
  9. the particulars that may be included in an application for the winding up of chits under section 49;
  10. the procedure to be followed for the winding up of chits under Chapter X;
  11. the fees payable under section 63;
  12. the auditing of balance sheets and the profit and loss accounts of chit business and the issue of audit certificates;
  13. the form and manner in which a dispute shall be referred to the Registrar under section 64;
  14. the procedure to be followed by the Registrar or his nominee for settling the disputes referred to him under section 64;
  15. the matters referred to in clause (f) of sub-section (1) of section 67;
  16. the conditions subject to which and the amount on the payment of which composition of offences may be made under section 81;
  17. the form and manner in which an appeal may be preferred under this Act and the fees payable for such appeal;
  18. the issue and service of notices or other process under this Act;
  19. the procedure for, and the manner of, receiving any sum payable under this Act;
  20. any other matter which is required to be or may be prescribed.

(3) Every rule made under this section shall be laid, as soon as may be after it is made before each House of the State Legislature where it consists of two Houses, or, where such Legislature consists of one House before that House.

Who Can Make Rules Under Section 89?

The power under Section 89 is conferred on the State Government. The provision also expressly requires consultation with the Reserve Bank. Rules are made through notification in the Official Gazette and operate within the statutory framework created by the Chit Funds Act, 1982.

Important Matters Covered by the Rule-Making Power

Section 89 permits detailed rules to be made for the administration and implementation of the Act. Important subjects specifically identified by the section include:

  • Applications for previous sanction under Section 4.
  • Additional particulars in chit agreements under Section 6.
  • Minutes of proceedings of draws under Section 17.
  • Security furnished by a foreman under Section 20.
  • Registers and books maintained under Section 23.
  • Balance sheets and profit and loss accounts under Section 24.
  • Interest on defaulted instalments under Section 28.
  • Applications and procedure for winding up chits.
  • Fees payable under Section 63.
  • Reference and settlement of disputes under Section 64.
  • Composition of offences under Section 81.
  • Appeals, notices, processes and receipt of statutory payments.

Consultation with the Reserve Bank

Section 89(1) specifically states that the State Government may make rules in consultation with the Reserve Bank. This consultation requirement forms part of the statutory procedure for the exercise of the rule-making power under the section.

Publication in the Official Gazette

Rules under Section 89 are to be made by notification in the Official Gazette. Gazette notification provides the formal means through which rules made under the statutory authority are published.

Rules to Be Laid Before the State Legislature

Section 89(3) requires every rule made under the section to be laid before the State Legislature as soon as may be after it is made. Where the State Legislature consists of two Houses, the rule is to be laid before each House. Where the Legislature consists of only one House, it is to be laid before that House.

Practical point: Section 89 supplies the statutory rule-making authority. For a particular procedural requirement, fee, form or other prescribed matter, the applicable rules and notifications of the relevant State should also be checked.

Official Chit Funds Act, 1982

The current Central Act can be checked on the official India Code portal maintained by the Government of India.

India Code - Chit Funds Act, 1982

Related Provisions

Section 89 should be read with the provisions referred to in the section itself and with other relevant provisions of the Chit Funds Act, 1982. For the immediately preceding provision, see Section 88 - Protection of action taken under the Act. The following provision is Section 90 - Repeal and saving.