3. Prohibition of chits unless sanctioned and registered and restrictions thereon.
(1)No chit shall, after the commencement of this Act, be started, conducted or continued except with the previous sanction of the State Government, and unless the chit is registered in accordance with the provisions of this Act.(2)Save with the permission of the State Government, no chit shall extend in duration for a period exceeding five years.(3)No Foreman shall be entitled to conduct at a time a chit the aggregate amount of which exceeds fifty per cent, of the total assets of the Foreman or ten thousand rupees, whichever is lower :Provided that, the maximum limit of the chit amount specified in this sub-section may be rupees one lakh if the Foreman is a banking company as defined in the Banking Regulation Act, 1949.Explanation. - In determining the total chit assets of a Foreman for the purposes of this sub-section, the amount of the security furnished by him under section 13 shall be excluded if such amount is the amount of subscription received in advance from the subscribers.(4)In calculating the aggregate amount of chit conducted at a time by a Foreman, the chit conducted by all the members of the family of the Foreman shall be taken into account.Explanation. - For the purposes of this sub-section, the expression "members of the family of a Foreman" means father, mother, husband, wife and children of the Foreman wholly dependent on him and who have no independent assets sufficient to entitle them to conduct any chit.
