Chunked file upload with angular-js and jquery-file-uplad, nginx and rails

Question

I am trying to do chunked file upload with angular-js and jquery-file-uplad (form github/blueimp). Backend is rails application running on nginx.

Jquery file upload is sending only first chunk and then stops on receiving 201 from nginx server.

Document here specifies that nginx should return 201 Created and not 200. Can't seem to figure out what is wrong here.

Following are relevant code sections

JS

 (function () {
    'use strict';
        var url = 'jquploadhandle';

    blueshiftApp.config([
            '$httpProvider', 'fileUploadProvider',
            function ($httpProvider, fileUploadProvider) {
                delete $httpProvider.defaults.headers.common['X-Requested-With'];
                fileUploadProvider.defaults.redirect = window.location.href.replace(
                    /\/[^\/]*$/,
                    '/cors/result.html?%s'
                );
            }
        ])

        .controller('DemoFileUploadController', [
            '$scope', '$http', '$filter', '$window',
            function ($scope, $http) {
                $scope.options = {
                    url: url,
                    dataTtype: 'text',
                    multipart: false,
                    maxChunkSize: 4000000, //Bytes
                    sequentialUploads: true,
                };

                $scope.loadingFiles = false;
                $('#fileupload').bind('fileuploadadd', function(e, data){
                    if (data.headers === undefined) {
                        data.headers = {};
                    }
                    data.headers['Session-Id'] = "0000000277"
                   });
            }
        ])

        .controller('FileDestroyController', [
            '$scope', '$http',
            function ($scope, $http) {
                var file = $scope.file,
                    state;
                if (file.url) {
                    file.$state = function () {
                        return state;
                    };
                    file.$destroy = function () {
                        state = 'pending';
                        return $http({
                            url: file.deleteUrl,
                            method: file.deleteType
                        }).then(
                            function () {
                                state = 'resolved';
                                $scope.clear(file);
                            },
                            function () {
                                state = 'rejected';
                            }
                        );
                    };
                } else if (!file.$cancel && !file._index) {
                    file.$cancel = function () {
                        $scope.clear(file);
                    };
                }
            }
        ]);
    }());

HTML Markup

 <form id="fileupload" method="POST" enctype="multipart/form-data" data-ng-controller="DemoFileUploadController" data-file-upload="options" data-ng-class="{'fileupload-processing': processing() || loadingFiles}">
<!-- Redirect browsers with JavaScript disabled to the origin page -->
<!-- The fileupload-buttonbar contains buttons to add/delete files and start/cancel the upload -->
<!-- The fileinput-button span is used to style the file input field as button -->
<div class="form-group col-md-offset-4">
  <label class="form-inline control-label col-md-3">
    Upload File
    <span class="required">* </span>
  </label>
  <input type="file" name="file" accept="text/csv, application/json" ng-required="true" ng-disabled="disabled">
  <label> Download Sample 
    <a href='/crm_feeds.csv'> CSV <i class='fa fa-share-square-o'></i> </a>
  </label>
  <p ng-show="invalid_file" class="help-block">CRM data file is required.</p>
</div>
<div class="form-group">
  <div class="form-inline col-md-5" > 
    <button type="button" class="btn btn-default cancel" data-ng-click="cancel()">
      <i class="glyphicon glyphicon-ban-circle"></i>
      <span>Cancel</span>
    </button>
    <button type="button" class="form-inline btn btn-primary start" data-ng-click="submit()">
      <i class="glyphicon glyphicon-upload"></i>
      <span>Validate</span>
    </button>
  </div>
</div>
<div>
  <!-- The global file processing state -->
  <span class="fileupload-process"></span>
</div>
<!-- The global progress state -->
<div class="col-lg-5 fade" data-ng-class="{in: active()}" style="margin-top:7px">
  <!-- The global progress bar -->
  <div class="progress progress-striped active" data-file-upload-progress="progress()"><div class="progress-bar progress-bar-success" data-ng-style="{width: num + '%'}"></div></div>
  <!-- The extended global progress state -->
  <div class="progress-extended">&nbsp;</div>
</div>

Nginx Config

user  nobody;
worker_processes  1;

error_log  logs/error.log;
error_log  logs/error.log  notice;
error_log  logs/error.log  info;

#pid        logs/nginx.pid;


events {
worker_connections  20;
}


http {
include       mime.types;
default_type  application/octet-stream;
upstream localapp {
  server 127.0.0.1:3000;
}

#access_log  logs/access.log  main;

sendfile        on;
#tcp_nopush     on;

#keepalive_timeout  0;
keepalive_timeout  65;

#gzip  on;

server {
    client_max_body_size 4G;
    client_body_buffer_size 1024k;
    listen       80;
    server_name  localhost:3000;


    #charset koi8-r;

    #access_log  logs/host.access.log  main;
    location /jquploadhandle {
      upload_max_file_size 0;
      upload_pass /post_jquploadhandle.json;
      upload_store /store;
      upload_state_store /store/states;
      upload_store_access user:rw group:rw all:r;
      upload_resumable on;

      upload_set_form_field file[name] "$upload_file_name";
      upload_set_form_field file[content_type] "$upload_content_type";
      upload_set_form_field file[filepath] "$upload_tmp_path";

      upload_pass_form_field "^theme_id$|^blog_id$|^authenticity_token$|^format$";
      upload_cleanup 400 404 499 500-505;
    }

    location / {
        root   html;
        index  index.html index.htm @app;
        proxy_pass  http://localapp;  
    }

    location @upload {
      proxy_pass  http://localapp;
    }

    #error_page  404              /404.html;

    # redirect server error pages to the static page /50x.html
    #
    error_page   500 502 503 504  /50x.html;
    location = /50x.html {
        root   html;
    }
}
}