Section 3 of the Chit Funds Act, 1982: Act to Override Other Laws, Memorandum, Articles, etc.
Section 3 gives the Chit Funds Act, 1982 an overriding effect where another law, a company's constitutional document, bye-law, agreement or resolution is inconsistent with the Act. In practical terms, parties cannot use a conflicting private arrangement or organizational rule to defeat a requirement imposed by the Chit Funds Act.
Legal reference: Chit Funds Act, 1982 (Act No. 40 of 1982). Section 3 remains the provision dealing with the overriding effect of the Act.
Text of Section 3 - Act to override other laws, memorandum, articles, etc.
Section 3. Save as otherwise expressly provided in this Act,--
(a) the provisions of this Act shall have effect notwithstanding anything to the contrary contained in any other law for the time being in force or in the memorandum or articles of association or bye-laws or in any agreement or resolution whether the same be registered, executed or passed, as the case may be, before or after the commencement of this Act; and
(b) any provision contained in the memorandum, articles, bye-laws, agreement or resolution aforesaid, shall, to the extent to which it is repugnant to the provisions of this Act, become or be void, as the case may be.
What Section 3 means
The opening words, "Save as otherwise expressly provided in this Act", make the overriding rule subject to any specific exception that the Chit Funds Act itself expressly creates. Subject to such an exception, clause (a) states that the Act prevails over contrary provisions found in other laws and in specified organizational or contractual documents.
The phrase "notwithstanding anything to the contrary" is a non-obstante formulation. Its function in Section 3 is to give the provisions of the Chit Funds Act priority when there is an inconsistency of the kind covered by the section.
Effect of clause (a)
Clause (a) covers a conflict between the Chit Funds Act and another law for the time being in force. It also expressly covers a memorandum or articles of association, bye-laws, an agreement, or a resolution. The clause applies whether the relevant document or resolution was registered, executed or passed before or after commencement of the Act.
Effect of clause (b)
Clause (b) addresses the consequence of inconsistency in a memorandum, articles, bye-laws, agreement or resolution. The inconsistent provision becomes or is void only to the extent of its repugnancy with the Chit Funds Act. Therefore, Section 3 does not necessarily invalidate the entire document; it targets the conflicting provision to the extent of the conflict.
Why Section 3 is important in chit fund regulation
- It prevents inconsistent private agreements from overriding statutory safeguards under the Chit Funds Act.
- It gives statutory requirements priority over contrary provisions in a company's memorandum, articles or bye-laws.
- It applies to covered agreements and resolutions made both before and after commencement of the Act.
- It renders a conflicting provision void only to the extent that it is repugnant to the Act.
Related provisions
Section 3 should be read with the definitions in Section 2 of the Chit Funds Act and the regulatory requirements beginning with Section 4, dealing with chits not sanctioned or registered under the Act.
The Chit Funds (Amendment) Act, 2019 amended several provisions of the principal Act, including provisions concerning terminology and the conduct of chit business. For the current statutory text and amendment history, readers should verify the consolidated legislation on the official India Code portal.