Set-off claims barred by operative composition scheme; assignees acquiring creditor interest after notice cannot offset against debt.

A composition scheme sanctioned under section 153 became operative from the creditors' meeting date and exclusively governed creditors' recoveries; consequently, assignees who acquired an assignable creditor's interest after notice and immediately before the meeting, with knowledge of the proposed scheme, could not assert an independent set-off that would frustrate the sanctioned scheme. The assignment did not create a separate class nor exempt the assignees from the scheme's operation, and therefore the defendants' claim for set-off was precluded and dismissed.

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Issues: Whether defendants who acquired an assignable creditor's interest immediately prior to a creditors' meeting and after notice could claim a set off against their debt notwithstanding a composition scheme sanctioned under section 153 of the Indian Companies Act that became operative from the date of the meeting.

Analysis: The scheme, once operative from the meeting date, governed recovery by creditors and prevented independent recovery except in accordance with its terms. The assigned interest arose after notice of the meeting to the original creditor and immediately before the meeting; the assignees were previously debtors and acquired the interest with knowledge of the proposed scheme. Permitting the assignees to claim a set off would frustrate the purpose of the creditors' meeting and the sanctioned composition. The assignment, though for consideration, did not place the assignees in a different class excluded from the operation of the scheme, and no separate class meeting had been held for them.

Conclusion: The defendants are not entitled to claim a set off; the scheme sanctioned under section 153 of the Indian Companies Act precludes the claimed set off and the appeal is dismissed (result in favour of the respondent).

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