I ran a tournament this past Saturday and this situation occurred. Player A was on the button and he only had 8 chips left. Player B was the small blind and his only chip covered the small blind. Player C was the big blind and a massive chip leader. Player A was first to act and he folded. Player B was all in so he couldn't act. Player C pulled back his 2nd chip used to complete the big blind and now Player B & Player C each had just one chip in play. Before the flop, Player C mucked his cards. Player A was outraged. No one at the table asked me to rule on the incident. So, the dealer took Player C's one chip and gave it to Player B, since Player B was the only one left with a live hand. On the very next hand, Player B was knocked out of the tournament. Then, on the hand after that Player A was knocked out. Afterwards, Player C asked me why his fold created such a stir. I told him that it could have been construed as collusion against Player A. In essence, he gave Player B a free chip with no risk of losing the hand, which benefitted Player B. This could have caused Player A to get knocked out in 3rd place by giving Player B the free ride. He said that he folded because he had 2-3 off-suit and was embarrased to even be in the hand. His defense was that the hand before this one he won a really big pot and he wasn't thinking clearly during that hand.
I told him that if I had been called on to rule on his muck, I probably would've let the fold stand and awarded the one extra chip to Player B with a strong warning to Player C to not do that again.
What would have been the correct call?