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Bank of Maharashtra Versus Official Liquidator, Navjivan Trading Finance (P.) Ltd.

1998 (12) TMI 477 - HIGH COURT OF GUJARAT

Winding up – Fraudulent preference, Avoidance of transfer, etc., after commencement of - O.J. APPEAL NO. 17, 18 AND 19 OF 1996 AND COMPANY APPLICATION NO. 36 OF 1978, 185 OF 1995 AND 205 OF 1995 AND CIVIL APPLICATION NO. 28 TO 30 OF 1996 - Dated:- 2-12-1998 - RAJESH BALIA AND A.R. DAVE, JJ. H.V. Chhatrapati for the Appellant. Rajni H. Mehta for the Respondent. JUDGMENT As will be presently noticed all the three appeals are interconnected relating to the same transaction between the company in li .....

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creditors of the company. The Bank of Maharashtra is the company's banker with whom the company has multiple dealings. It had four different accounts with Girgaon branch numbered as 1, 2, 3 and 4. In account No. 3 of the Girgaon branch, the company has availed of facilities of overdraft. The company had taken out as many as 50 FDRs in the period between March, 1975, and July, 1976, all prior to the date of the order of winding up. Apart from these FDRs, the company in various other accounts .....

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had been moved. In the first instance, in response to that petition, the bank has claimed that it has adjusted the amounts payable under FDRs against outstandings of the company under the overdraft account which exceeded the amount payable under the FDRs on August 25, 1977. On an issue having been raised that most of the FDRs were pledged after the commencement of winding up proceedings, that is to say, with effect from the presentation of the winding up petition as envisaged under section 441 o .....

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lso prayed that in any case the bank is entitled to set off the amount payable by the bank under the FDRs to the company as its debtor against amounts due to it as creditor of the company under the overdraft account. Company Application No. 146 of 1977 was decided on May 8, 1979. The application was disposed of with a direction that the entries of adjustment shall be treated as rescinded and in respect of amounts payable under the FDRs for one year bearing the date of winding up order shall be i .....

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lien which is the subject-matter of Company Application No. 36 of 1978. We are told that all these FDRs renewed in pursuance of the aforesaid order are in the custody of the Registrar of this court on behalf of the receiver. Company Application No. 185 of 1995 was moved by the official liquidator seeking a direction to the bank to renew the FDRs which have been issued in terms of the order made in Company Application No. 146 of 1977 and are lying in the custody of the Registrar of the High Cour .....

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ny further. In the wake of this application, Bank of Maharashtra too filed another Company Application No. 205 of 1995 praying for declaration that the official liquidator is not entitled to claim renewal of the FDRs as claimed in its Application No. 185 of 1995 and also urged that renewal/encashment in respect of the said FDRs from time to time is irrelevant and unnecessary at this stage until Company Application No. 36 of 1978 is decided. All the three aforesaid applications were decided by th .....

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ers made in Company Application No. 185 of 1995. O.J. Appeal No. 19 of 1995 arises out of orders made in Company Application No. 205 of 1995. O.J. Appeal No. 17 of 1996: This appeal is by Bank of Maharashtra against the rejection of Company Application No. 36 of 1978 filed by the appellant in Company Petition No. 59 of 1975 in the matter of Navjivan Trading Finance Pvt. Ltd. (in liquidation) by order dated May 8, 1996, passed by the learned company judge. As noted above, in view of the contentio .....

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to be void, the bank is entitled to adjust the amount payable by it as the company's debtor under the FDRs or other accounts to the company against the debt recoverable from the company as its creditor under the overdraft account in view of section 529 of the Act of 1956, read with section 46 of the Provincial Insolvency Act of 1920, which governs the insolvency law in the State of Gujarat (hereinafter called the Act of 1920). While deciding Company Application No. 146 of 1977, the court is .....

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respect of account No. 3 for the first time an overdraft facility was sanctioned in June, 1975, and overdraft facility was availed of from June, 1975, onwards. From the other three accounts Nos. 1, 2 and 4, the total amount standing in credit of the company in liquidation was transferred to account No. 3 on or about August 18, 1997, and those other three accounts were closed. Apart from the aforesaid dealings with the Girgaon branch of the bank the company in liquidation had a current account a .....

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77; 5,000 and ₹ 1,500, respectively, for a period of one year each. The company has availed of overdraft facility against the security of fixed deposit receipts for which necessary letters of pledge had been given to the bank by the company (in liquidation). The progressive dealing with the bank by the company (in liquidation) in connection with overdraft account has been noticed in the order under appeal as under: Sl. No. Month Deposits Overdraft Rs. Debit balance Rs. Credit balance Rs. 1 .....

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is prior to the filing of winding up petition, and the company started operation of the overdraft account prior to the order of the winding up petition, the same being a continuous account, having come into existence prior to the commencement of winding up proceedings, is not covered under section 536 and even if it is covered under section 536, the same having been result of transactions in the ordinary course of business, be validated by the court. Considering this contention, the learned comp .....

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he Registrar of Companies on July 8, 1975." Another important fact which was noticed by the learned company judge was that learned counsel for the bank had urged that all the overdraft money has been paid to various members of the company and, therefore, it can be said that the overdraft facility was obtained and the amounts were received with a view to discharge the liability qua certain members of the company. This fact was not found to be erroneous. However, it is observed that: "Me .....

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th of the company to say that they were not aware of the commencement of the winding up proceedings before the necessary sanction was given. There was a show-cause notice given to the company on August 1, 1973. The company, therefore, knew well as to what was in the offing and they should have known and probably, they were knowing that there has been the commencement of the winding up proceedings against them before the competent court. But, this all has been done with a view to see that the ove .....

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ever giving the bank a right to set off in other account, vis-a-vis by different deposit receipts. With all these precincts, the learned company judge was of the view that the transaction was not with a view to get the company going. The plea for validating the transaction creating a charge in favour of the bank in respect of the FDRs was rejected. The plea on behalf of the bank that it has a lien under section 171 of the Indian Contract Act was rejected on the ground that the general provisions .....

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rdraft account, the two being separate accounts between the same parties one resulting in a debt payable to the company and another being debt payable by the company, in respect of the same person, namely, the bank, the same are liable to be set off under section 529 of the Act of 1956, read with section 46 of the Act of 1920, is not entitled to recover the same without set off of the two accounts also did not find favour with the learned company judge, because of the provisions of sections 531 .....

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the date of presentation of winding up petition on July 7, 1975, that is to say, the pledging of fixed deposit receipts as a security resulting in disposition of property in the FDRs in favour of the bank took place prior to the commencement of the winding up proceedings and cannot be affected by the provisions of section 536(2) which reads as under: "536. (2) In the case of a winding up by or subject to the supervision of the court, any disposition of the property (including actionable cl .....

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the inhibition of section 536(2). The fact that the overdraft account is continued and amounts have been withdrawn by the company at a later stage would itself not affect a transaction of creating a charge on FDRs as a whole prior to the commencement of winding up proceedings. According to the facts disclosed in the order under appeal FDRs amounting to ₹ 3,75,000 were pledged as security with the bank for any outstanding which the bank may have against the company as on that date or which .....

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ter on would not result in creation of a fresh charge but would only amount to an acknowledgment of existing charge. That also in our opinion cannot be the subject-matter of inhibition under section 536(2). Even if it is so, in the facts and circumstances of the case, one cannot find any ground not to validate the same. Coming to the question of the effect of winding up proceedings in respect of any charge or security created since July, 1975, the creation of a security or charge by pledging the .....

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l not be entitled to exercise its right of enforcing a charge or realising its security remaining outside winding up proceedings. However, in losing that status as a security, the amount payable in respect of FDRs by the bank to the company would not lose its character as a debt payable by the bank to the company. If, it is a debt payable by the bank to the company, the question which immediately calls for consideration is whether the same is liable to be set off under section 46 of the Act of 1 .....

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itors. At the same time, it is also to be kept in view that mere presentation of a winding up petition notwithstanding the combined reading of section 441, which dates the commencement of winding up proceedings with effect from the date of presentation of the petition for winding up and section 536(2) which declares the disposition by the company after the commencement of winding up proceeding's to be void does not stop the company from functioning and continuing with its ordinary business i .....

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ion must be exercised in favour of protecting the transaction. At the same time, merely because the party enters into transactions bona fide by itself may not be sufficient to validate such transaction. If that were so, like section 531, the Legislature would have provided differently, by declaring only such transactions to be void which are not bona fide. While bona fide requirement of the transaction is relevant consideration, it cannot be the sole consideration. It should be coupled with ensu .....

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819 (CA): "It is a basic concept of our law governing the liquidation of insolvent estates, whether in bankruptcy or under the Companies Act, that the free assets of the insolvent at the commencement of the liquidation shall be distributed rateably amongst the insolvent's unsecured creditors as at that date. In bankruptcy this is achieved by the relation of the trustee's title to the bankrupt's assets back to the commencement of the bankruptcy. In a company's compulsory wind .....

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s available for free distribution. The borrowings which have been made are liabilities to be discharged by the company for discharge of which its assets are available as per the provisions of the Companies Act. In this connection, we find that the learned company judge has started with the assumption that all overdrafts came to be granted and the debits came to be made only after July, 1975. These are the transactions which would fall within the purview of section 536(2) of the Companies Act, 19 .....

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of encumbering the company's assets by holding the company's assets as security for its repayment may amount to disposition of the company's assets. The question has never been raised or even agitated that the company is not liable to pay the amounts due under overdraft account to the bank or that the company has not in fact received the overdrafts. The bank's status as a creditor of the company is not at all at issue whose validity was required to be gone into. The question tha .....

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e or not. In this connection, we may also refer to one distinct feature. The company is a chit fund company which collects money from its subscribers continuously for different schemes that is to say it is having a cash inflow regularly. It also declares under its scheme certain amounts payable to its subscribers which a subscriber becomes entitled to on fulfilling the conditions thereof. The cash receipts have to be dealt with in the ordinary course of business through the bank by depositing th .....

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bers of the company. Instead of directly operating a current account the amounts received were deposited in FDR to earn interest over it for the unutilised period and monies were withdrawn from time to time under the overdraft account by paying interest on such withdrawals to keep the accounts separate. It has been observed in the judgment under appeal that merely because this amount had gone to some selected persons of the company, it cannot be said only on that basis that the entire transactio .....

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nts in question were utilised for giving loans to directors or their relatives. The finding in the order of winding up has been based on accounts prior to the commencement of winding up proceedings whereas the overdrafts which fell for consideration were after the commencement of the winding up proceedings. We are concerned here with the transactions of deposits with the bank and withdrawals from the bank from March, 1975, to January, 1976, a period much after the period which was taken into con .....

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to be distributed among subscribers under the chit fund schemes. We do not see how the observations about the previous conduct of the company with reference to dealing with its funds for disbursing loans to its directors can by itself embellish these transactions to be not bona fide in the ordinary course of business. This is the prima facie conclusion to be reached from the perusal of the order under appeal. But as we will see presently the question whether the transactions are to be transactio .....

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quidation resulted in a debt payable by the company to the bank. The amount due under the fixed deposit receipts which were made with the bank as a result of subscription receipts by the company (in liquidation) is receivable by the company as a debt due from the bank to the company. Such debt as an asset free from encumbrances is a company's asset ordinarily available for distribution amongst its creditors. However, the situation where a creditor of the company also stands as a debtor of th .....

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ts of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent. This provision clearly brings into operation the provisions of the relevant insolvency law governing the individuals in the State in which the company is registered regarding debts provable and the rights of secured and unsecured creditors under such insolvency law. In the State of Gujarat with which we are concerned, the Provincial Inso .....

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t case is August 17, 1977. The amount of overdraft to which extent the bank is creditor of the company upto January, 1976, has been found to be ₹ 10,04,458.96. This is a date prior to that on which company was adjudged insolvent to be wound up. Learned counsel for the respondent-company (in liquidation) has urged that as the overdrafts have been taken after the commencement of proceedings, the same cannot be taken into account. Obviously, it cannot be sustained in view of the clear languag .....

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cted to before his discharge, by reason of any obligation incurred before the date of such adjudication. Thus, it must be assumed that the amounts payable by the company to the appellant bank are the debts provable under the Act, for the purposes of section 529. Section 45 of the Provincial Insolvency Act confers a right on a creditor to prove a debt which was not payable when the debtor was adjudged as insolvent but if it were payable presently at the time of distribution of dividends can parti .....

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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." Section 46 obviously casts an obligation on the creditor as well as on the insolvent to set off one claim against another claim existing between them on the date of adjudication. The statutory provision has emanated from the equitable doctrine of right to set off not only with the object to avoid cross actions but .....

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or Ltd. v. Cox [1967] 1 QB 552 (CA) the parties cannot contract out of the statute. Where there are mutual dealings, the statute says that "the balance of the account, and no more shall be claimed or paid on either side. That is an absolute statutory rule which must be observed". A Division Bench of the Lahore High Court explained the principle in Radha Kishen v. Ganga Ram Radha Kishen, AIR 1914 Lahore 317. A right of set off is a doctrine of equitable jurisdiction and its object is no .....

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Comp. Cas. 462, 465; AIR 1935 Cal 225, while considering section 46 of the Provincial Insolvency Act and corresponding section 47 of the Presidency Towns Insolvency Act, held: "Long before the making of statutory provisions on the subject it was the practice in bankruptcy, where there was a debtor and creditor account between the bankrupt and another person, to take the account between them and to adjust the balance, provided that the debts were connected, with each other. . . .The statutor .....

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ecover the full amount due to the insolvent leaving the other person to take a pro rata dividend only. Section 46, Provincial Insolvency Act, and section 47, Presidency Towns Insolvency Act, deal with this matter in the way indicated above." About its effect on the claims in the winding up, the court said (page 465): "We do not also consider that the winding up of the respondent-company has any effect on the claim of the appellant and that if he is otherwise entitled to have credit for .....

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o in addition to being a creditor simpliciter has obtained a surety was held to have right of set off and a contention to the contrary that because of the surety agreement, the claim of set off cannot be entertained was negated, The court said (headnote): "The privileges and rights which are given in section 46, Provincial Insolvency Act, which applies to proceedings under section 229 of the Companies Act, are based upon equity and fair dealing. It is recognised that it would be very harsh .....

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ue to him (page 91 of 10 Comp. Cas.). "The provisions of the above rule are in no way referable to matters arising in insolvency or liquidation and in my view no help is obtained from that rule. . . . .In my view that cannot be. There being moneys which can be set off, this right is not lost when a surety is obtained in respect of the debtor's debt to the company." The principle was succinctly stated in H. Naik v. Panchanon Das [1953] 23 Comp. Cas. 369 ; AIR 1954 Orissa 7. The cour .....

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dation and the question arose whether in a suit filed by the official liquidator, the depositor could claim set off, a situation arose quite in the reverse role as has been presented in the present case. Here the depositor has gone in liquidation and the bank is the claimant in respect of its overdraft. The court said (headnote of AIR): "Mutual credit or mutual dealings simply mean reciprocal demands which must be naturally terminated in a debt. Where there are reciprocal demands available .....

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eedings by virtue of section 229 of the Companies Act." A Full Bench of the Kerala High Court in Issac v. Palai Central Bank Ltd. [1963] 33 Comp. Cas. 799 ; AIR 1964 Ker 1, took the same view of the matter under section 47 of the Kerala Insolvency Act which corresponds to section 46 of the Provincial Insolvency Act, 1920. The facts in which the question arose were that A had a fixed deposit with the bank. He took certain loan from the bank on a promissory note. Along with the promissory not .....

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secured loan, because of the hypothecation, it was not eligible for set off. The court said (headnote of AIR): "The fact that A handed over to the bank the FDR with an endorsement of discharge thereon, a delivery letter and an instruction letter, amounted to no more than the creation of a charge on the amount covered by the fixed deposit or a hypothecation of that fund. A debt which would have been unsecured, if the promissory note alone was in existence, became a secured debt as a result .....

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o the company (in liquidation) to anything else, or the overdraft facility enjoyed by the company (in liquidation) resulting in a debt owed by the company (in liquidation) to the bank. The company stood as a debtor of the bank in respect of the overdraft account and it stood as a creditor in respect of the FDRs, unembellished by the creation of a charge. Section 46 which is a statutory provision governing the case where there are mutual dealings between the insolvent or the company (in liquidati .....

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was refused on the ground that it would amount to a preferential treatment to one of the creditors in applying the company's assets and the official liquidator is entitled to recover the balance due from the respondent under the chit fund accounts in which they have drawn the amount and in so far as the sums due to them from the company (in liquidation) is concerned from other chit accounts and fixed deposit receipts are concerned they have to prove their claims and claim payment like any ot .....

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nder 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 question is whether that right is destroyed by the companies going into liquidation? I do not think so, as there is no provision in the Act which takes away that right." Law in England too has been alike. Section 31 of the Bankruptcy Act, 1914, in England is a provision similar to section 46 which we have under the Act of 1920. Considering that provisio .....

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nly is to be claimed in bankruptcy." What has been stated with reference to bankruptcy law in England which we have referred to above has been approved by the Supreme Court in Official Liquidator v. Smt. V. Lakshmikutty [1981] 51 Comp. Cas. 566 ; AIR 1981 SC 1483 while affirming the decision of the Karnataka High Court [1981] 51 Comp. Cas. 567. The court quoted with approval, the opinion of Pollock M. R. referred to above in City Life Assurance Company Limited., In re [1925] 1 All ER 453 (C .....

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ately 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." To sum up, in the winding up of a company, the law of insolvency would apply as regards the rights of the secured and unsecured creditors and debts provable. Where, therefore, w .....

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es Act declaring certain transactions to be void. Ordinarily, this plea is not available when the apex court has pronounced upon the mandatory character of any provision of law to argue that some aspect of the same was not considered by it, when the controversy was the same and there is nothing to suggest that the context was different. However, as will presently notice, we do not find any merit in this distinction either. The contention is raised in the light of the claim of the respondent offi .....

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tion 536, we have noticed above that so far as incurring liability or securing loans are concerned that by itself does not amount to disposition of the company's assets. If that were so, the contention would be that the loan transaction being void, no amount is payable. This result on the face of it cannot be accepted. Even that is not the suggestion that no amount is payable by the company to the bank. The fact that the request is to stand in the queue, is acceptance of the liability to pay .....

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y the company (in liquidation) to the person from whom such consideration has flown becoming a debt payable by it. This is not to say that section 536(2) applies to the loans procured or liabilities incurred by the company between the date of commencement of proceedings and the date of adjudication. To accept this part of the consequence would amount to saying that with effect from the date of presentation of a winding up petition, the company is precluded from carrying on its regular activities .....

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money against the bank as its debtor. In the process the company becomes the creditor of the bank to the extent of the amount payable under the FDR to it. The primary effect of the transaction is not withered away by the fact that the FDR has been utilised by the company (in liquidation) as a valuable asset for providing security by creating a charge for getting a loan facility from the very same bank. The creation of the charge, which results in disposing of the property in FDR may be hit by s .....

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oncerned. It was vehemently urged by Mr. Mehta, learned counsel for the official liquidator that such set off will amount to fraudulent preference of a creditor under section 531 of the Act. Section 531 speaks about fraudulent preference. It reads as under: "531. (1) Any transfer of property, movable or immovable, delivery of goods, payment, execution or other act relating to property made, taken or done by or against a company within six months before the commencement of its winding up whi .....

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itution, for the reference to six months, of a reference to three months. (2) For the purposes of sub-section (1), the presentation of a petition for winding up in the case of a winding up by or subject to the supervision of the court, and the passing of a resolution for winding up in the case of a voluntary winding up, shall be deemed to correspond to the act of insolvency in the case of an individual". Without anything more a fraudulent preference means discharge of an existing liability .....

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f its creditors under the Companies Act also. Section 54 of the Act of 1920, provides what is to be considered fraudulent preference. Section 54 of the Provincial Insolvency Act reads as under: "54. Avoidance of preference in certain cases.-(1) Every transfer of property, every payment made, every obligation incurred, and every judicial proceeding taken or suffered by any person unable to pay his debts as they become due from his own money in favour of any creditor, with a view to giving th .....

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discharge of a debt by the company (in liquidation) within the period prescribed by itself is not deemed to be fraudulent. The fraudulent preference emanates from the intention of the insolvent of giving a preference over the other creditors. That is to say, the element of intention on the part of insolvent at the time of discharging debt is the question which determines whether the discharge of debt within the period of six months before the presentation of winding up petition in the case of c .....

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charge of a debt within the stipulated period, namely six months before the presentation of the petition for winding up is to be considered and what is to be considered is not the incurring of the debt, but the payments made to discharge that debt. Mere discharge of debt resulting in preference will not make it fraudulent. Such discharge of debt must be coupled with intent to give such creditor a preferential treatment. We have already assumed the transactions of pledging the FDRs for the presen .....

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t of debt. In fact this intention on the part of the company (in liquidation) to make a preferential payment was neither raised nor argued at any stage of the proceedings. What really has been contended is that if the set off under section 46 of the Act 1920, is allowed, it would result in fraudulent preference. This contention in our opinion, must fail on the ground that the provision for set off is a statutory provision and it has been enacted with the object which we have already discussed ab .....

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quidation) or the insolvent never comes into play. We may refer in this connection to a decision of the Madras High Court in K. Anantaraman v. Official Liquidators, Travancore National and Quilon Bank Ltd. [1939] 9 Comp. Cas. 285 ; AIR 1940 Mad 157. The question had arisen in the circumstances that there was no dispute between the parties that though a debt not presently payable can be set off against moneys owed to the company (in liquidation) and there was also no dispute that if there was a v .....

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e being an intention on the part of the insolvent of the company (in liquidation) at the time of making payment or discharging the debt to prefer a creditor over others, the question of fraudulent preference would not arise by operation of section 46 which gives the right to an unsecured creditor of the company as well as the company (in liquidation) to set off outstandings against each other and to act according to the balance remaining outstanding whether resulting in the company becoming ulti .....

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act relating to property" under section 531 of the Companies Act, it must have reference to discharge of a debt and not with reference to right of the parties to claim set off in respect of existing claims against each other. Mere exercise of that right cannot amount to fraudulent preference within the meaning of section 531 or section 531A read with section 54 of the Act of 1920. The question of fraudulent preference also cannot depend on the fact whether the demand is made by the creditor .....

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rge of the debts due. If that could be done, we see no reason, why the bank could not claim the set off because the company (in liquidation) has taken the initiative to call upon the bank to pay the amount due under the FDRs. Buckley on the Companies Acts (13th edition) says at page 635: "Where a company is being wound up, whether an action is brought by the company or a proof is carried in by a creditor of the company in the winding-up, a set off of a liquidated sum was always admissible.& .....

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uidator or in any other proceedings that may be taken in that regard as to the actual amount, due under both the transactions and on set off against each other how much amount remains payable by the company (in liquidation) or to the company (in liquidation) as the case may be. That of course will have to be determined subject to directions already made in Company Application No. 146 of 1997. We, therefore, hold that the appellant-bank is entitled to claim set off of the amount recoverable by it .....

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We do not further pursue the enquiry whether in the facts and circumstances of the present case, the transactions of creating security since July, 1975, in favour of the bank need be validated. The question becomes academic. The contention of learned counsel for the appellant that it is otherwise entitled to realise from the FDRs available with it because of the lien it holds in respect of section 171 is only stated to be rejected. A plain reading of section 171 of the Indian Contract Act goes .....

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e appellant-bank to the company (in liquidation) on various accounts including under various FDRs referred to above which is a debt owed by it to the company (in liquidation) has to be set off towards repayment of monies due by the company (in liquidation) to the bank under the overdraft account which is a debt owed by the company (in liquidation) to the bank as on the date of winding-up order, which is a debt provable under section 529 of the Act of 1956, read with section 34 of the Act of 1920 .....

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der: "46. Mutual dealings and set off.-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." A reading of this sect .....

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option either to plead set off in defence, or to lodge a counter-claim in those very proceedings or independent of those proceedings prosecute his own remedy in respect of his own claim. But, when the situation arises about making a claim, where one of the claimants has been adjudged insolvent or is a company which has been ordered to be wound up, the setting off of each other claim is not a matter of choice, but is subject to statutory mandate. Section 46 requires as a matter of law that mutual .....

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er of debts provable in winding-up proceedings as per section 529 of the Companies Act. Section 34 reads as under: "34. Debts provable under the Act.-(1) Debts which have been excluded from the schedule on the ground that their value is incapable of being fairly estimated and demands in the nature of unliquidated damages arising otherwise than by reason of a contract or a breach of trust shall not be provable under this Act. (2) Save as provided by sub-section (1), all debts and liabilities .....

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n the case of a company. "All debts to which the debtor is subject when he is adjudged an insolvent" are key words as to the date with reference to which the debt is to be proved. The fact that the liability may be present or future only goes to show that notwithstanding that the debt is not payable in presenti, if an obligation in that respect has arisen prior to the date of adjudication, the existing liability against such claim as on the date of adjudication, is a debt provable unde .....

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tion. The final sum payable by the company on the date of winding-up order is subject to statutory provision as to rate of future interest with effect from the date of winding-up order. The amount on which such interest is to be calculated must be ex hypothesis determined as on the date of adjudication or the date of winding-up order, as the case may be. In the conclusion to which we have reached we find support in a decision of the Calcutta High Court in the matter of Pioneer Bank Ltd. and B.N. .....

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he same dividing line should be taken for the purpose of ascertainment of the date of set off (page 521): "Prima facie it would seem that the line which is drawn for defining what debts are to be provable in the bankruptcy must be also the line for defining what cross claims are to be set off in the case of a creditor whose set off is not stopped at an earlier date by notice of an act of bankruptcy. If the line were to be drawn at different times for the two purposes of proof and set off th .....

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he company in liquidation by the bank or vice versa, and it shall be confined to such balance only. That being the position, and it being nobody's case that as on the date of winding-up any of the claims were barred by time, the contention raised on behalf of the bank that the debt payable by it under FDRs has become barred by time subsequently is wholly irrelevant and does not arise for consideration at all. The question would only be that in case on such set off anything is found payable b .....

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