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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 ..... ent Financiers ( P.) Ltd. ( in liquidation) [1976] 46 Comp. Cas. 411 (Kar.). In the course of the winding-up proceedings, the official liquidator applied to the court, on behalf of the company, for the issue of a direction to the respondent to pay the balance due by him under a chit fund account. The respondent contended that he was entitled to claim set off to the extent of the sum paid by him to the company under another chit fund account. The question arose whether the respondent was entitled to a set-off. The learned judge answered the question in the affirmative, the legality of which is called in question in this appeal. The primary contention urged on behalf of the appellant is that the sums involved in the dealings of the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity in claiming his ordinary debt contrary to the scheme provided by section 530 of the Companies Act. It may be relevant to state that that section sets out a scheme of priority or preferential payment of debts and the claim of the respondent admittedly does not fall thereunder. The question, therefore, narrows down to this: whether the respondent having regard to the mutual dealings he had with the company is entitled to the benefit of section 46 of the Insolvency Act ? We may now turn to the decision of the Supreme Court in India Fisheries' case [1965] 35 Comp. Cas. 669 , 672; 57 ITR 331 (SC) on which strong reliance was placed by the learned counsel for the appellant. In that case, the right of the ITO to set off the amount to be refu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicable to liquidation proceedings for the proof of debts and also to determine the rights of secured and unsecured creditors. Section 46 of the Insolvency Act is, therefore, automatically attracted if there is mutual dealings between the company and the respondent. In such a case an account shall be taken from what is due from the respondent and the balance of the account, and no more, shall be claimed or paid on either side. Similar view was taken by a Division Bench of the Kerala High Court in Gokul Chit Funds v. Kochu. Ouseph Vareed [1977] 47 Comp. Cas. 264; [1976] KLT 747. It may be relevant to state that our Companies Act is, generally speaking, a copy of the English Companies Act, 1948. It has been well established under the Eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. In the result, the appeal fails and is dismissed; but, in the circumstances of the case, we make no order as to costs. JUDGMENT OF SUPREME COURT Bhagwati, J.-We think that the view taken by the High Court is the correct view on the interpretation of sections 529 and 530 of the Companies Act, 1956. Section 529 provides that in the winding-up of an insolvent company, the same rules shall prevail and be observed with regard to the provable debts as are in force for the time being under the law of insolvency with respect to the estate of persons adjudged insolvent. This provision brings in the applicability of section 46 of the Provincial Insolvency Act, 1920 which reads: "Where there have been mutual dealings between an insolvent and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial 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, particularly when that view appears to be fair and just. We may po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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