1952 (3) TMI 46 - HC - Indian Laws

Summary

Issues Involved:
1. Dispute regarding the interest rate applicable to the overdraft account.
2. Truth and validity of the alleged adjustment of fixed deposits against the overdraft account.
3. Entitlement to a set-off for the amounts payable under the fixed deposit receipts.

Detailed Analysis:

1. Dispute Regarding the Interest Rate Applicable to the Overdraft Account:
The defendant contended that the interest should have been calculated at 7.5% instead of 9% as claimed in the plaint. The defendant relied on a letter (Ext. A) dated 18-9-45 from the Secretary of the Bank, which stated that the interest on the fixed deposit would be 7% and on the overdraft account would be 7.5%. The plaintiff-liquidator accepted the genuineness of this letter and agreed to recalculate the interest based on its terms. Therefore, the court directed that the interest be recalculated accordingly before passing a decree.

2. Truth and Validity of the Alleged Adjustment of Fixed Deposits Against the Overdraft Account:
The defendant claimed that the fixed deposits (Exts. B and B-1) had been adjusted against his overdraft account. However, the plaintiff-liquidator disputed this adjustment, arguing that it was not true and not valid for two reasons: (a) The fixed deposits had not matured by the date of the alleged adjustment, and the Secretary lacked the authority to adjust them without the Managing Director's orders; (b) The application for winding up was made on 24-7-47, and the alleged adjustment was on 25-7-47, making it invalid without court sanction.

The court found that the defendant failed to produce the pass-book and the fixed deposit receipts did not bear any endorsements of discharge. The defendant's explanation for the absence of these documents was not convincing. The court concluded that the plea of adjustment was not true.

Even if the adjustment were true, the court held that it was not valid and binding because the Secretary lacked the authority to adjust the fixed deposits before maturity without the Managing Director's sanction. Additionally, the adjustment made after the application for winding up required court sanction, which was not obtained. The court refused to sanction the adjustment, suspecting it to be a hasty and collusive attempt to prefer the defendant over other creditors.

3. Entitlement to a Set-off for the Amounts Payable Under the Fixed Deposit Receipts:
The defendant argued for a set-off under Section 229 of the Companies Act, read with Section 46 of the Provincial Insolvency Act, which allows for mutual dealings to be set off in insolvency proceedings. The court agreed that the dealings between the defendant and the bank constituted mutual dealings, as there were reciprocal demands that would terminate in a debt.

The court considered whether the fact that the fixed deposits had not matured by the date of the winding-up application affected the set-off. It concluded that the fixed deposits, though future debts at the relevant date, were still debts and available for set-off. The court cited cases supporting the principle that future but ascertained debts could be set off.

Conclusion:
The court decreed that the plaintiff was entitled to recover the recalculated amount based on the findings regarding the interest rate and set-off. The defendant was entitled to a set-off for the fixed deposit amounts, despite the adjustment plea being unsubstantiated. However, the defendant was ordered to pay the plaintiff's costs due to setting up an unsubstantiated plea of adjustment.