Statutory set-off in insolvency allows a fixed deposit to be adjusted against debt, even when held as security.

The statutory rule of set-off in insolvency applied to mutual dealings between the depositor and the bank in liquidation, so the fixed deposit and the promissory note liability had to be brought into one account. Handing over the deposit receipt with discharge and instruction letters created only security and did not extinguish the depositor's underlying claim. That security did not prevent set-off, because the statute permits only the balance to be claimed or paid. The fact that the fixed deposit had not matured when winding up commenced was immaterial, since an unmatured debt may still be taken into account and insolvency accelerates the mutual account. The set-off claim was therefore valid and admitted.

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Issues: Whether the appellant was entitled to set off the amount standing to his fixed deposit account with the bank in liquidation against his liability on the promissory note, notwithstanding that the deposit receipt had been handed over as security with discharge and instruction letters.

Analysis: The governing principle was the statutory rule of set-off applicable to mutual dealings between an insolvent and a creditor. The transaction between the parties was treated as creating only security over the deposit amount and not as extinguishing the depositor's underlying claim. The existence of security was held not to alter the operation of set-off, because the statute directs mutual deductions and permits only the balance to be claimed or paid. The fact that the fixed deposit had not matured when winding up commenced was held to be immaterial, since a debt not yet payable can still be brought into account for set-off in insolvency, and the bank's insolvency accelerated the time for working out the mutual account.

Conclusion: The appellant's claim to set-off was valid and was entitled to be admitted.

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