There are no provisions in the Companies Act, 1956 or 2013 relating to Chit Funds or ‘Chit Fund Companies’. Provisions to this effect are contained in the Chit Funds Act, 1982 which is a Central Act administered by the Ministry of Finance (Department of Financial Services) but its implementation vests in the State Governments concerned who register entities running Chit Funds and regulate their affairs and proceed against violators including by companies running chit funds without such registrations. Central Government has, however, interalia investigated affairs of 14 companies falling in the category of the so called ‘Chit Fund Companies’ for violation of the Companies Act. It has been decided to prosecute such companies under various provisions of Companies Act and to also share the findings of investigations with the CBI which is also investigating various alleged criminal activities of such companies.

This was stated by Shri Arun Jaitley, Minister of Corporate Affairs in written reply to a question in the Lok Sabha today.

Chit fund regulation: central probe prompts prosecution under Companies Act and referral of findings to criminal investigators. No provision in the Companies Act governs chit funds; regulation and registration of chit funds are governed by the Chit Funds Act and implemented by State Governments. States register chit fund entities and enforce compliance, while the Central Government investigated multiple companies for alleged Companies Act violations and decided to prosecute them under the Companies Act and to share findings with the criminal investigative agency.