Unregistered chits at house

Kiran (Querist) 14 March 2023 This query is : Resolved
Hi sir/madam my name is Kiran, In the year 2017, my mom maintained 3 chits , a well know woman to our family, joined in 2 chits one is 1 lakhs chit and other is 2 lakhs chit. she is the highest bidder. She took the money but not paid every month, so my mom and few members pressured her to pay the monthly pending payments, she ignored it, then my mom called to her husband and told everything, but unexpectedly on the next day they went to police station and filed a complaint stating that “my mom not paid bidded amount” , police filed FIR under the section chit fund act 420 … all the other chit members are supporting my mom and they gave positive testimonies on my mother “ all the chit members said - the bidder already took the total amount infront of us,but she intentionally filed a complaint to escape from the payment “ their testimonies are also mentioned in FIR .
So the case trail will be in 2 weeks.my lawyer saying that “ even the witnesses are favours to you, your mom maintained illegal chits, so illegal chit is a crime so your mother will go to jail. And asking us to compromise with the complainant. When i tried to compromise with them, they are asking us to pay huge amount in lakhs to withdraw the case.
What i do now ? Can any one please suggest me to get out of this hell.. pls pls

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Quick Summary

A user is seeking advice after their mother was charged under the Chit Fund Act and IPC Section 420 for running unregistered chits. Despite witnesses supporting the mother, the lawyer advises a compromise due to the illegal nature of the chits. The user is frustrated by the demand for a large sum to withdraw the case and questions the justice system when the complainant appears to be the cheater.

Sudhir Kumar, Advocate (Expert) 14 March 2023
the views of your lawyer seem to be correct. playing with fire leaves scars (if not burn deep).

to be more blunt what your lawyer says is that forget the money given to her, pay some compromise money and get out of the complaint.

Kiran (Querist) 14 March 2023
Thanks for your reply sir .
Sir .. my mother not did any mistake except maintained chits without licence. She never cheated any one ,in this case
complainant is the cheater. Still court gives judgement in favour of cheaters ? In this total issue we already lost money and we paid her dues to the other members only because they trusted us. Complainants still demanding money without any conscience…where is the justice sir ? Can’t honourable court dismiss the case (based on witness testimony) ?

kavksatyanarayana (Expert) 14 March 2023
When your mother unauthorizedly maintained the chit, you are asking where is justice, sir? Yours is a criminal case, still asking for justice, what a thing! Your lawyer correctly said. Try to amicable settlement with the complainant.

Kiran (Querist) 14 March 2023
Ok sir ….i’ll try to negotiate.. Thank you sir.
But my pain is…. Cheaters are escaping easily.. i’ll also join in some others chits and bid the amount , after few days i’ll also complaint against chit manger’s after collecting the money.

Sudhir Kumar, Advocate (Expert) 15 March 2023
no doubt that the complainant may be a cheater. You may be able to prove that she is cheater. On the same time your mother did a crime. If not willing to go to jail along with her then compromise is to be struck.

Kiran (Querist) 15 March 2023
Ok sir …. Thanks for your suggestion. I’ll do compromise with them. Thanks once again sir

P. Venu (Expert) 15 March 2023
It appears that you have posted the query without having complete knowledge of the facts and understanding of the issues.

It is impossible that "police filed FIR under the section chit fund act 420"

What is the case No.? Which Court?

Kiran (Querist) 15 March 2023
Sir Case Number is 3/2021
1-Prl. Senior Civil Judge, Guntur
State : Andhra Pradesh

P. Venu (Expert) 15 March 2023
Is it the following case -

In the court of :II Addl. Senior Civil Judge FTC, Guntur

Case Number :OS/3/2021
Alapati Srinivasa Rao versus Alapati Seshamma and 2 other

If not furnish the case type and all the related information.

Kiran (Querist) 15 March 2023
Sir no sir …
Here are the details

Case Type : CC
Filing Number :3/2021
Filing Date :07-04-2021
Registration Number :3/2021
Registration Date :07-04-2021
Court number and judge : 1-Prl. Senior Civil Judge, Guntur

T. Kalaiselvan, Advocate (Expert) 15 March 2023
Section 4 of AP chit fund Act?
(1) No chit shall be commenced or conducted without obtaining the previous sanction of the State Government within whose jurisdiction the chit is to be commenced or conducted or of such officer as may be empowered by that Government in this behalf, and unless the chit is registered in that State in accordance with the provisions of this Act:
In India, chit fund companies come under the Chit Fund Act, 1982 and hence are legal, registered, and safe. They are different from unregulated deposits and Ponzi schemes. Unregistered chit funds are not legally bound to pay the amount deposited to its members. Hence, they pose a maximum risk of fraud.
Therefore if the police have already registered a case, then it becomes your duty to challenge the same as per law or to avoid serious legal complications you can better arrange for a negotiated compromise settlement.

Kiran (Querist) 15 March 2023
Kalaiselvan sir … thank you very much for your suggestion sir.

P. Venu (Expert) 16 March 2023
It is seen that the accused in the case (Meesala Jhansi Rani @ Jhansi) has been charged under Sections 4 & 5 of the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 and 420 IPC. The crucial issue is whether the Chit 'maintained' by your mother amounted to a "prized chit fund" or a "conventional chit fund". These two chit funds are defined under the 1978 Act as follows -
(a) “conventional chit” means a transaction whether called chit, chit fund, kuri or by any other
name by or under which a person responsible for the conduct of the chit enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or certain quantity of grain instead) by way of periodical instalments for a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be provided for in the chit agreement, be entitled to a prize amount
Explanation.—In this clause “prize amount” shall mean the amount, by whatever name called,
arrived at by deducting from out of the total amount paid or payable at each instalment by all the subscribers,
(i) the commission charged as service charges as a promoter or foreman or an agent; and
(ii) any sum which a subscriber agrees to forego, from out of the total subscriptions of each
instalment, in consideration of the balance being paid to him;

(e) “prize chit” includes any transaction or arrangement by whatever name called under which a person collects whether as a promoter, foreman, agent or in any other capacity, monies in one lump sum or in instalments by way of contributions or subscriptions or by sale of units, certificates or other instruments or in any other manner or as membership fees or admission fees or service charges to or in respect of any savings, mutual benefit, thrift, or any other scheme or arrangement by whatever name called, and utilises the monies so collected or any part thereof 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 kind, 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
or 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;

Please examine the above aspects. If a "conventional chit fund", the ongoing proceedings can be proved to be unsustainable on facts as well the law.

May be, the querist can post the details how his mother had been conducting or maintaining the chit fund so that the experts in this platform offer their valuable suggestions.

Kiran (Querist) 16 March 2023
Venu Sir …. Thanks for your valuable reply sir.

Previously my mom conducted a 1 lakh chit.
20 members are subscribers
In that 1 - 20 auctions
My mother is a default 2nd dibber , every subscriber pay full equated money ( no one bids for 2nd chit ) so my mom will get 5000 from all the subscribers ( so she’ll get profit approx 20k to 25k on it, )
And for remaining 3-20 auctions , subscribers bids as per their needs.
Here my mom will get profit in every chit as a 2nd bidder.
For example
A - bids 1st action for 25k ( 1 lakh chit )
Bidder A will get 75k ( 75000 / 20
members = 3750 per subscriber
( including my mother )
B- is my mother
This 2nd auction is to the manager’s(default)
No auction , every subscriber has to pay
5,000 , so then mom get profit in it .
My mom is a chit manager and a member
also

Remaining all subscribers are like subscriber A.

Try to understand my explanation sir … I don’t know about this auctions or chits, and i think i’m not explained it properly .

In my area 100 of chit managers are there sir ( without license),they all follow the same procedure sir.

T. Kalaiselvan, Advocate (Expert) 16 March 2023
The problem is faced by you now and not the other 100 chit managers.
You have to look for the ways to protect and defend your interest alone

Kiran (Querist) 16 March 2023
Kalaiselvan sir ..... thanks for your reply

i'm trying to compromise with them sir. i hope my issue will close.

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