Winding up of a chit does not preserve dividend rights; the subscriber remains liable for the balance amount.

On the winding up of a chit company, the chit was treated as terminated under the Chit Funds Act, 1982 because monthly auctions could no longer continue. In that situation, the statutory scheme was said to negate any claim by the prized subscriber to dividends once the chit had ceased to run. The subscriber's obligation to pay the balance amount therefore survived, and the Official Liquidator could recover that balance. The subscriber's plea to set off the claim by asserting entitlement to dividend was rejected, and recovery was allowed without interest.

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Issues: Whether, on the winding up and deemed termination of the chit, the prized subscriber was entitled to claim dividends and avoid payment of the balance amount claimed by the Official Liquidator.

Analysis: The chit was treated as terminated under the provisions governing continuation and termination of chits, because the company had gone into winding up and the monthly auctions could no longer be conducted. On that footing, the statutory scheme under the Chit Funds Act, 1982 negatived any claim to dividend where the chit had ceased to run and there was no continuing auction activity. The balance liability of the subscriber therefore remained payable, and the plea that dividend was still due could not be accepted.

Conclusion: The first respondent was not entitled to dividends, and the applicant was entitled to recover the balance amount without interest.

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