Section 55 of the Chit Funds Act, 1982: Suits to Be Stayed on Winding Up Order
Section 55 regulates suits and other legal proceedings by a subscriber against the foreman after a chit has entered the statutory winding-up process. Its purpose is to place claims relating to amounts due under the chit under the control of the Registrar conducting the winding up.
Text and effect of Section 55
Section 55 - Suits, etc., to be stayed on winding up order.
Where a winding up order has been made, or a receiver has been appointed, a subscriber cannot commence or continue a suit or other legal proceeding against the foreman for recovery of an amount due in respect of the chit unless leave is obtained from the Registrar winding up the chit. The Registrar may grant leave subject to terms considered appropriate.
The operative statutory text can be checked in the official Chit Funds Act, 1982 on India Code.
When does Section 55 apply?
The restriction under Section 55 is triggered when either of two statutory events has occurred: a winding up order has been made in relation to the chit, or a receiver has been appointed. It applies to proceedings brought by a subscriber against the foreman for realisation of amounts due to that subscriber in respect of the chit.
- Winding up order: an order placing the chit into the winding-up process under Chapter X of the Act.
- Receiver: a person appointed in connection with the winding-up process to deal with matters entrusted under the Act or the relevant order.
- Subscriber: the Act defines a subscriber as a person who subscribes to a chit and includes a person who holds the rights of a subscriber by assignment or otherwise.
- Foreman: broadly, the person responsible for conducting the chit, as defined in Section 2 of the Act.
- Registrar: the Registrar of Chits appointed under Section 61, including an Additional, Joint, Deputy or Assistant Registrar exercising the relevant functions under the Act.
Leave of the Registrar is required
Section 55 does not create an absolute extinction of the subscriber's claim. Instead, it requires prior leave of the Registrar before the covered suit or legal proceeding is commenced or continued. The Registrar may also impose terms while granting such leave. This mechanism helps coordinate individual recovery proceedings with the statutory administration and distribution of chit assets during winding up.
Connection with Sections 51 to 56
Section 55 forms part of the winding-up framework in Chapter X. Section 51 deals with the commencement and effect of a winding-up order; Section 52 empowers the Registrar to restrain certain proceedings before a winding-up order; Section 53 states the Registrar's powers on a winding-up application; and Section 54 provides for vesting of chit assets for distribution among subscribers to whom amounts are due.
After the winding-up order, Section 56 requires the Registrar to record and notify the order in the Official Gazette. These provisions should therefore be read together when determining the legal consequences of winding up.
Practical meaning of Section 55
A subscriber who has a monetary claim connected with the chit should first determine whether a winding-up order has been made or a receiver has been appointed. If Section 55 is attracted, the subscriber should not proceed independently against the foreman for recovery of the chit amount without obtaining the required leave from the Registrar. The precise procedure and any terms imposed will depend on the applicable proceedings and orders.
Important: Section 55 is limited by its statutory wording. It concerns proceedings by a subscriber against the foreman for realisation of amounts due in respect of the chit after the specified winding-up event. Whether a particular proceeding falls within the section depends on its parties, relief and factual context.
Related provisions of the Chit Funds Act, 1982
Last reviewed: 16 September 2026. Statutory text should always be checked against the latest official version and applicable State rules or notifications.