Chapter IX Chapter IX

Winding up of Chits

A chit may be wound up by the District Court:—

1. (a) if the chit has terminated under clause (¢) of section 32, or
2. (b) if the foreman fails to give the security specified in section 12 or if he commits any such act in respect thereto as is calculated to impair materially the nature of the security or the value thereof, or
3. (c) if the foreman fails to deposit the chit moneys in accordance with the provision of this Act. or
4. (d) if it is proved to the satisfaction of the court that the foreman is unable to pay the amounts due to the subscribers. or
5. (e) if execution or other process issued on a decree or order of any court in favour of any subscriber in respect of amount due to him from the chit is returned unsatisfied in whole or in part. or
6. (f) if it is proved that there has been fraud or collusion on the part of the foreman in the matter of taking securities from prized subscribers, or
7. (g) if the foreman has appropriated the prize amount in his capacity as a subscriber without furnishing sufficient security for future subscriptions, or (hy if it is just and equitable that the chit should be wound up. Explanation.— For the purposes of clause (d) . in determining whether the foreman is unable to pay the amount. due to the subscribers. the court shall take into account his contingent and prospective liabilities in respect of the chit: Provided that a chit conducted by a company within the meaning of the Companies Act. 1956 (Central Act | of 1956) shall be wound up only by the court having jurisdiction under that Act.

The application to the court for the winding up of a chit shall be by a petition presented by any non-prized subscriber or unpaid prized subscriber or by the Registrar. signed and verified in the manner prescribed by the Code of Civil Procedure. 1908 (Central Act 5 of 1908) and shall contain such particulars as may be prescribed:

Provided that no application for the winding up of a chit under clauses (d) and (h) of section 39 shall lie unless such petition is presented

1. (a) by those non-prized subscribers and those unpaid prized subscribers whose subscriptions to the chit amount in the aggregate is atleast twenty-five per cent of the amounts contributed by all the non-prized subscribers and unpaid prized subscribers. or
2. (b) with the previous sanction of the Government.

Notwithstanding anything contained in sections 39 and 40 no petition for the winding up of a chit shall be entertained by a court if proceedings under the law relating to insolvency for the time being in force are pending against the foreman for adjudicating him an insolvent or when, the foreman is a company if proceedings for winding up the company are pending against such company in a court.

An order for the winding up of a chit shall operate in favour of all the subscribers to whom amounts are due from the chit and it shall be deemed to have commenced from the time of the presentation of the application for the winding up.

The court may. upon the application of the foreman or of any subscriber to whom amounts are due in respect of the chit at any time after the presentation of the application for the winding up of a chit under this Act and before making of an order for the appointment of an interim Receiver or for winding up the chit. restrain further proceeding in any suit or proceeding instituted against the foreman for the realisation of amounts due from the chit upon such terms as the court thinks fit.

On hearing the application, the court may dismiss it with or without cost or adjourn the hearing conditionally or unconditionally or make an interim order or any other order that it deems fit.

winding up of a chit, the entire chit assets shall vest in the court for distribution amongst the subscribers to whom amounts are due in respect of the chit and the court shall pass such orders in the matter, including the appointment of a Receiver. as it deems fit.

When a winding up order has been made by a court, no suit or other legal proceedings shall be continued or commenced against the foreman by a subscriber for the realization of amounts due to him in respect of the chit except with the leave of the court and on such terms as the court may impose.

1. (1) On the making of a winding up order, it shall be the duty of the petitioner in the winding up proceedings and of the Receiver to file with the Registrar a copy of the order. within one month from the date of the making of the order: Provided that the Registrar, may, upon application in writing by the petitioner or Receiver. allow. in his discretion, further time not exceeding fifteen days for the filing of any such copy.
2. (2) On the filing of a copy of the winding up order. the Registrar, shall make an entry thereof in his books relating to the chit and shall notify in the Official Gazette that such an order has been made.

When during the pendency of the proceedings for the winding up of a chit, the foreman is adjudicated as insolvent or when the foreman is a company. the company has been ordered to be wound up by the court. the winding up proceedings under this Act shall cease and the distribution of the chit assets shall, subject to the provisions contained in sections 35 and 43. be made by the insolvency court or the court winding up the company. as the case may be.

1. (1) When an application presented for winding up a chit is dismissed and the court is satisfied that the application is frivolous or vexatious. the court may award against the applicant such amount not exceeding five hundred rupees. as it deems reasonable as compensation to the foreman for the expense or injury occasioned to him by the application and the proceedings thereon and such amount may be realised as if the award were a decree.
2. (2) The award of any amount under sub-section (1) shall bar any suit for compensation.

The foreman. any subscriber. the Receiver or any other person aggrieved by a decision or order of the court in proceeding for winding up a chit may. within two months from the date of such decision or order appeal to the Judicial Commissioner's Court.

1. (1) Where an order refusing to wound up a chit has been made under the Act. the chit shall be deemed to have been under suspension from the date of the presentation of the application to the date of such order in respect of non-prized subscriber, and notwithstanding anything contained in the chit agreement. no non-prized subscriber who was not a defaulter on the date of the presentation of the application for winding up shall be deemed to be defaulter on the date of its dismissal.
2. (2) Where an order refusing to wind up a chit has been made under this Act, in computing the period of limitation prescribed for any suit or other legal proceedings (other than a suit or an application in respect of which the leave of the court has been obtained) which might have been brought or instituted, the period from the date of the presentation of the application to the date of the order refusing to wind up the chit shall be excluded.
3. (3) Nothing contained in this Act shall affect the right of the subscriber to proceed by suit or application against the foreman personally for the balance. if any. of the amount due to him after the declaration of the final dividend in the proceedings for winding up the chit and in computing the period of limitation prescribed for any such suit or application, the period from the date of the presentation of the application for winding up the chit to the date of declaration of the final dividend shall be excluded.