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TMI Blog1980 (12) TMI 125X X X X Extracts X X X X X X X X Extracts X X X X ..... iquidation, the rule enacted in section 46 of the Provincial Insolvency Act should apply and only that amount which is ultimately found due from him at the foot of the account in respect of mutual dealings should be recoverable from him and not that the amount due from him should be recovered fully while the amount due to him from the company in liquidation should rank in payment after the preferential claims provided under section 530. We find that the same view has been taken by the English courts on the interpretation of the corresponding provisions of the English Companies Act, 1948, and since our Companies Act is modelled largely on the English Companies Act, 1948, we do not see any reason why we should take a different view, particula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC). It is, however, not disputed that the dealings between the company and the respondent were in the nature of mutual dealings. Before we consider the decision of the Supreme Court, it will be necessary to have regard to the relevant provisions of the Companies Act and the Provincial Insolvency Act. Section 529 of the Companies Act introduces into the winding-up proceedings, the insolvency rules as regards debts and liabilities provable and the respective rights of secured and unsecured creditors. Section 46 of the Insolvency Act which incorporates some of these rules is in the following terms : "Where there have been mutual dealings between an insolvent and a creditor proving or claiming to prove a debt under this Act, an account s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of these statutory provisions is, inter alia , that an unsecured creditor must prove his debts and all unsecured debts are to be paid pari passu . Therefore, once the claim of the department has to be proved and is proved in the liquidation proceedings, the department cannot by exercising the right under section 49E of the Income-tax Act get priority over the other unsecured creditors. If we were to read section 49E in the way suggested by the learned Additional Solicitor-General, it would be defeating the very object underlying sections 228 and 229 of the Companies Act, 1913. If there is an apparent conflict between two independent provisions of law, the special provision must prevail: Section 49E is a general provision applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntroduces into the winding-up proceedings of the companies, the Bankruptcy Rules provided under section 31 of the Bankruptcy Act, which provides for a set-off of the sums where there is a mutual credit, mutual debt or other mutual dealings. Sir Ernest Pollock M. R. in In re City Life Assurance Co. Ltd. [1926] Ch 191, 203 (CA). while dealing with the scope of section 31 of the Bankruptcy Act, 1914, observed: "It is to be observed that section 31 of the Bankruptcy Act, 1914, is definite in its terms that where there is a mutual credit, mutual debt or other mutual dealings, the sums are to be set off and the balance of the account and no more shall be claimed or paid on either side respectively. It is not merely permissive, but it is a dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther in respect of such mutual dealings, and the sum due from the one party shall be set off against any sum due from the other party, and the balance of the account and no more, shall be claimed or paid on either side respectively". This rule enacted in section 46 of the Provincial Insolvency Act, with regard to the debts provable by a creditor against the insolvent must, therefore likewise apply in regard to debts provable against a company in winding-up. Consequently, when the respondent in the present case claimed to prove her debt against the company in liquidation, she was entitled to the benefit of the rule enacted in section 46 of the Provincial Insolvency Act, and she could legitimately claim that since there were admittedly mutu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provable in the winding-up may be the subject of set-off, provided that there is mutuality;.....". Moreover, we find that the observations of the House of Lords in National Westminster Bank Ltd. v. Halesowen Presswork Assemblies Ltd. [1972] 1 All ER 641 at 659, are also to the same effect. We may also usefully refer to the observations of Sir Ernest Pollock M. R. in In re City Life Assurance Co. Ltd. [1926] Ch 191, 203 (CA), where the learned Master of the Rolls, after referring to section 207 of the (English) Companies Act, 1908 (section 317 of the (English) Companies Act, 1948), which corresponds to section 529 of (Indian) Companies Act, 1956, and section 31 of the (English) Bankruptcy Act, 1914, which corresponds to section 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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