Section 60 of the Chit Funds Act, 1982 - Limitation

Section 60 of the Chit Funds Act, 1982 deals with limitation and the legal consequences of an order refusing to wind up a chit. It protects certain non-prized subscribers during the period for which the winding-up application remains pending and provides for exclusion of specified periods when limitation is calculated.

Text of Section 60 - Limitation

Meaning and Effect of Section 60

Section 60 forms part of the provisions governing the winding up of chits. It primarily deals with the effect that a winding-up application has on subscribers and on the computation of limitation when the application to wind up the chit is ultimately refused.

1. Protection of Non-Prized Subscribers

Under Section 60(1), when an application for winding up a chit is made but the winding up is subsequently refused, the chit is treated as having been under suspension, in relation to non-prized subscribers, during the period beginning with presentation of the application and ending with the order refusing winding up.

A non-prized subscriber who was not a defaulter when the winding-up petition was presented cannot be treated as a defaulter on the date of the order merely because of the intervening period. This protection operates notwithstanding anything contrary in the chit agreement.

2. Exclusion of Time for Limitation

Section 60(2) addresses proceedings that could have been brought or instituted but for the presentation of the winding-up application. When the winding-up request is refused, the period between presentation of that application and the order refusing winding up is excluded while computing the applicable limitation period, subject to the exception stated in the provision.

The practical effect is that the time consumed by the unsuccessful winding-up proceedings does not, in the circumstances covered by the section, reduce the period otherwise available for instituting the relevant suit or legal proceeding.

3. Subscriber's Personal Remedy Against the Foreman

Section 60(3) preserves a subscriber's right to proceed personally against the foreman for any balance remaining due after declaration of the final share of discount in the winding-up proceedings.

For computing limitation for such proceedings, the period beginning with presentation of the winding-up application and ending with declaration of the final share of discount is excluded.

Important Terms Used in Section 60

Non-prized subscriber

Under the Chit Funds Act, the expression refers to a subscriber who has not become a prized subscriber and does not include a defaulting subscriber.

Subscriber

The statutory definition includes a person holding a fraction of a ticket and a transferee of a ticket or fraction thereof by assignment in writing or by operation of law.

Foreman

The foreman is the person who, under the chit agreement, is responsible for conducting the chit and is subject to the statutory duties and obligations imposed by the Chit Funds Act.

Share of discount

The Act defines "share of discount" as the subscriber's share in the amount of discount available under the chit agreement for rateable distribution among subscribers at each instalment of the chit.

Key Points of Section 60

• The provision applies where an order refusing to wind up a chit has been made.
• The relevant chit is deemed to have been under suspension in respect of non-prized subscribers during the specified period.
• A protected non-prized subscriber cannot be treated as a defaulter merely because of the period during which the winding-up application was pending.
• The period during which the unsuccessful winding-up application was pending is excluded when limitation is computed for proceedings falling within Section 60(2).
• A subscriber's personal right to recover an outstanding balance from the foreman is preserved by Section 60(3).
• Section 60(3) separately provides for exclusion of the specified winding-up period when computing limitation for such proceedings against the foreman.

Relationship With the Winding-Up Provisions

Section 60 should be read in the context of the preceding provisions of the Chit Funds Act dealing with winding up. These provisions address, among other matters, commencement and effect of a winding-up order, injunctions, powers of the Registrar, vesting of chit assets, stay of proceedings, notification of winding-up orders, cessation of proceedings, compensation and appeals.

Readers examining Section 60 may therefore also refer to Section 51 - Commencement and effect of winding-up order, Section 55 - Suits, etc., to be stayed on winding-up order and Section 59 - Right to appeal.