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TMI Blog1957 (11) TMI 29X X X X Extracts X X X X X X X X Extracts X X X X ..... which will be hereinafter called the Fund . The defendant was a member of the said Fund . He executed a demand promissory note on 28-1-1952 in favour of the Fund for a sum of ₹ 500/- security for the due payment of the future instalments of the chit purchased by him. The practice of this 'Fund' seems to have been that whenever a member was a successful bidder in any of the chit auctions, he will have to execute a pro-note as security for the payment of future instalments of the chits purchased by him. 3. The proprietor of the said 'Fund' seems to have disappeared and the transactions of the Fund came to a sudden end sometime in 1953. On the application of the creditors, insolvency proceedings started an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the facts of the case. According to him the said section relates only to insolvency proceedings and its benefit cannot be availed of in proceedings other than insolvency proceedings. It is further contended that the suit is based on a negotiable instrument; the plaintiff is a holder in due course without notice of the defendant's claim, hence the plea of set off is not open to the defendant. 5. The argument of the petitioner proceeds thus: Section 46 of the Provincial Insolvency Act is in part III of the Act which relates to the administration of the property of the insolvent. The provisions of Part III are intended to provide for the proof of debts etc. According to him on analysis of the sections grouped under that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y some due from the other party and the balance of such account, and no more, shall be claimed or paid on either side respectively .............. Section 46 of the Provincial Insolvency Act reads as follows : Where there have been mutual dealings between an insolvent and a creditor proving or claiming to prove a debt under this Act, an account shall be taken of what is due from the one party to the other 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. From a perusal of these two sections it is clear that Section 46 of the' Provin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as been recognised in a series of decisions. The legislature must be taken to have been aware of the effect of those decisions when it passed the Bankruptcy Act, 1869, and not to have intended to alter the law. We are therefore bound to hold that the defendant was entitled to have the benefit of the set off. The same was the opinion of Brett L. J. and Cotton L. J. The Indian Legislature when it enacted the Provincial Insolvency Act of 1920, more or less bodily lifted this section from the English Act and introduced it in the Indian Statute. The Legislature must have been familiar with the practice prevailing in the English Courts and the import of Section 39 of the English Act as interpreted by the English Courts. Hence i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same view as that of the British Courts. I am reluctant to depart from the literal meaning of the words of the Section. But in the instant case I am convinced that I shall be carrying into effect the true intention of the legislature by following the English decisions. 7. Next contention urged before me is that the plaintiff in this case has sued on the basis of a negotiable instrument. He has taken the assignment for valuable consideration Without noticing any defect in the instrument. He is a holder in due course and hence his rights cannot be prejudiced. This contention has been countered by the learned Counsel for the respondent on two grounds: (1) the petitioner is not a holder in due course and (2) that the mutual dealings be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on the basis of which the suit instrument had been executed, and he had no duty to enquire into all the dealings between the insolvent and his creditor. I am unable to accept this contention. As stated by Lord Blackburn in Jones v. Gordon, (1877) 2 AC 616 (D): that in order to make such a defence ..... .......... it is necessary to show that the person..... was affected with notice that there was something wrong about it when he took it. I do not think it is necessary that he should have notice of what the particular wrong was. 9. In this case the plaintiff knew at the time he got the assignment that the insolvent was running the 'Fund' and the defendant was having dealings with the insolvent. He also knew th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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