Set-off in winding up permits reciprocal cross-demands against overdraft liability, but an unauthorised adjustment is not binding on the liquidator.

In winding-up proceedings, an alleged prior adjustment of fixed deposits against an overdraft was not proved: the deposit receipts showed no discharge, the overdraft pass-book was not produced, and no authority or court sanction was established for a post-petition adjustment. That alleged adjustment was therefore not valid or binding on the liquidator. However, reciprocal and ascertained cross-demands between the company and the creditor could be set off despite the deposits not having matured when the winding-up application was filed. The creditor was entitled to set-off the fixed deposit amounts against the overdraft liability, and the overdraft decree was to be recalculated after giving that adjustment effect.

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Issues: (i) Whether the alleged adjustment of the fixed deposits against the overdraft account was proved and, if proved, whether it was valid and binding on the liquidator; (ii) Whether the defendant was entitled to a set-off of the fixed deposit amounts against the overdraft liability in the winding-up proceedings.

Issue (i): Whether the alleged adjustment of the fixed deposits against the overdraft account was proved and, if proved, whether it was valid and binding on the liquidator.

Analysis: The evidence did not support the defendant's version of an actual adjustment. The fixed deposit receipts bore no endorsement of discharge, the overdraft pass-book was not produced by the defendant, and the explanation for its absence was not established. Independently of proof, the alleged adjustment was said to have been made before maturity of the deposits and after the winding-up application, so authority of the Managing Director and, in any event, sanction of the Court were required. No such authority or sanction was made out.

Conclusion: The alleged adjustment was not proved and was not valid or binding on the liquidator.

Issue (ii): Whether the defendant was entitled to a set-off of the fixed deposit amounts against the overdraft liability in the winding-up proceedings.

Analysis: Under the provisions governing winding up and insolvency, reciprocal demands amounting to mutual dealings may be taken into account by way of set-off. The fixed deposits and the overdraft created cross-demands between the same parties in the same capacity. The fact that the deposits had not matured on the date of the winding-up application did not destroy their character as debts capable of being set off. The court treated the deposits as future but ascertained debts available for set-off.

Conclusion: The defendant was entitled to set-off the fixed deposit amounts against the overdraft debt.

Final Conclusion: The plaintiff was entitled to a decree on the overdraft claim after recalculation of interest and adjustment for set-off, while the defendant succeeded only on the legal right to set-off and not on the plea of actual prior adjustment.

Ratio Decidendi: In winding up, reciprocal and ascertained cross-demands between the company and a creditor may be set off even if the creditor's claim had not yet matured on the date of the winding-up application, but an alleged post-petition adjustment without authority or court sanction is not binding on the liquidator.

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