1975 (3) TMI 61 - HC - Companies Law

Summary

Issues Involved:
1. Right to claim set-off under Section 529(1)(c) of the Companies Act, 1956 read with Section 46 of the Provincial Insolvency Act, 1920.
2. Applicability of mutual dealings and set-off in the context of liquidation.
3. Interpretation of relevant legal provisions and case laws.

Issue-wise Detailed Analysis:

1. Right to Claim Set-off under Section 529(1)(c) of the Companies Act, 1956 read with Section 46 of the Provincial Insolvency Act, 1920:

The official liquidator and the additional liquidator filed applications under Section 446(2) of the Companies Act, 1956, to direct the respondents to pay the sums owed with interest. The respondents contended that they were entitled to claim a set-off under Section 529(1)(c) of the Companies Act, 1956, read with Section 46 of the Provincial Insolvency Act, 1920, due to mutual dealings. The court examined the relevant legal provisions and concluded that Section 46 of the Provincial Insolvency Act allows for set-off where there have been mutual dealings, and the balance of the account, and no more, shall be claimed or paid on either side respectively. The court held that the respondents were entitled to claim a set-off for the amounts due to them from the company under other chit fund accounts or fixed deposits.

2. Applicability of Mutual Dealings and Set-off in the Context of Liquidation:

The court considered whether the claims arising under different and independent accounts, such as chit fund accounts and fixed deposit accounts, could be considered mutual dealings. The court referred to several case laws, including Naoroji v. Chartered Bank of India [1868] LR 3 CP 444, Sovereign Life Insurance Company v. Dodd [1891-4] All ER 246, and Cox v. Rolls Razor Ltd. [1891-4] All ER 246 [1967] 1 QB 552, 569 (CA), to interpret the concept of mutual dealings. The court observed that mutual dealings imply reciprocal demands which must naturally terminate in a debt. The court held that the respondents were entitled to set-off the sums due to them from the company under other accounts against the amounts they owed to the company.

3. Interpretation of Relevant Legal Provisions and Case Laws:

The court examined the relevant provisions of the Companies Act, 1956, including Sections 528, 529, and 530, and Section 46 of the Provincial Insolvency Act, 1920. The court also referred to various case laws, including Paschal Nazareth v. Denis Lobo AIR 1953 Mys. 126, In re Travancore National Bank Subsidiary Co. Ltd. (In liquidation) [1940] 10 Comp Cas 87, 91 (Mad.), and decisions of the Kerala High Court in In re Free India Bank Ltd. (In liquidation) [1962] 32 Comp Cas 113 (Ker.) and State of Kerala v. Kerala Water Transport Corporation Ltd. (In liquidation) AIR 1967 Ker. 150. The court concluded that under ordinary law, the respondents could have pleaded the sums due to them by way of set-off if suits had been filed before liquidation. The court found no provision in the Companies Act that takes away this right upon the company's liquidation.

Conclusion:

The court held that the respondents were entitled to plead by way of set-off the amounts they were entitled to recover from the company under other chit fund accounts or fixed deposits. They were liable to pay only the balances remaining after giving credit to the sums in respect of which set-off was pleaded. The objections raised by the official liquidator and the additional liquidator were overruled.