LexOFFICIAL LIQUIDATOR OF HIGH COURT OF KARNATAKA versus SMT. V. LAKSHMIKUTTY
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1 • ' • 349 OFFICIAL LIQUIDATOR OF HIGH COURT OF KARNATAKA A v. SMT. V.LAKSHMIKUTTY December 12, 1980 [P. N. BHAGWATI AND A. P. SEN. JJ.] Co1npanies Act, 1956-Sections 529 and 530-Scope of-Party having mutual dealings with a Company in liquidation-If endtled to set off debts B against credits. C The respondent claimed that since there were mutual dealings between her and the company in liquidation an account should be taken in respect of such mutual dealings and only that amount should be payable or receivable by her which is due at the foot of such account. She claimed that she was entitled to the benefit of the rule enacted in section 46 of the Provincial Insolvency ~ D The High Court upheld her contention. Dismissing the special leave petition by the Official Liquidator HEID: (1) In view of the provisions of section 529 of the Companies Act, 1956 the rule enacted in section 46 of the Provincial Insolvency Act 'vith regard to debts provable by a creditor against the insolvent must equally apply in regard to debts provable against a company in winding up. [350 F] (2) Although section 530 provides for preferential payments, that provi- E sion cannot in any way detract from full effect being given to section 529 which enacts that in the winding up of an insolvent company, the same rules shall prevail and be observed with regard to provable debts as are in force for the F time being under the law of insolvency with respect to the estate of persons adjudged insolvent. The only way in which sections 529 and 530 can be re- conciled is by reading them together so as to provide that whenever any cre- ditor seeks to prove his debt against the company in liquidation, the rule enact- ed 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 G 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 preferen- tial claims provided under section 530. [350 HJ Gore Brown on Companies, 43rd Ed. at page 34-14. National JVesttninster Bank Ltd. v. Halesowen Presswork and Assen1blies Ltd. [1972] 1 All E. R. 641 at 659 and Re City Life Assurance Co. Lid. (1925] All E. R. 453 at 457 referred to. B A B 350 SUPREME COURT REPORTS (1981] 2 S.C.R. CIVIL Ai>PELEATE JURISDICTION : Petition for Special Leave to Appeal No. 5844 of 1980. From the Judgment and Order dated 1-2-1979 of the Karnataka High Court in O.S.A. No. 5 of 1975. Y. S. Chitale and P. R. Ramuses for the Petitioner. NEMO for the Respondent. The Order of the Court was delivered by BHAGWATI, J.-We think tlmt the view taken by the High Court is the correct view on the interpretation of sections 529 and 530 of J C the Companies Act, 1956. Section 529 provides that in the winding up of an insolvent company, the same rules shall prevail and be obser- ved with regard to the provable debts as are in force to the time being • under the law of insolvency with respect to the estate of persons ad- , judged insolvent. Tills provision brings in the applicability of section 46 of the Provincial Insolvency Act which reads : D "Where there have been mutual dealings between an insolvent and a creditor proving or claiming to prove a debt under this Act, an acconnt 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." Tills 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 com- F pany in winding up. Consequently, when the respondent in the pre- sent 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 mutual dealings between her and the company in liquidation, an account should be taken in respect of snch mutual G dealings and only that amount should be payable or receivable by her which is due at the foot of
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