TaxTMI Login
Just a moment...
Press 'Enter' to add multiple search terms. Rules for Better Search
Use comma for multiple locations.
---------------- For section wise search only -----------------
Accuracy Level ~ 90%
of 
Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
No Folders have been created
Are you sure you want to delete "My most important" ?
NOTE:
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
of Press 'Enter' after typing page number.
of Press 'Enter' after typing page number.
All Case Laws
Join Channel
Note
Bookmark
Share
Don't have an account? Register Here
of Press 'Enter' after typing page number.
Issues: Whether, in the absence of leave under section 231 of the Companies Act, 1948, a defendant in an action by a company in liquidation may maintain a counterclaim for an amount exceeding the company's claim and obtain a declaration enabling proof in the winding-up, or whether the cross-demand can operate only as a set-off against the company's claim.
Analysis: The statutory purpose of section 231 is to prevent proceedings against a company in liquidation without leave so that its assets are administered in an orderly manner for the benefit of all creditors. The counterclaim, although pleaded in the form of a claim for account and declaration, was in substance an attempt to obtain a determination of the excess of the defendant's cross-demand and thereby a right to prove in the liquidation. The authorities on bankruptcy and winding-up recognise the effect of mutual dealings and the taking of an account for the purpose of set-off, but they do not support enforcement of a counterclaim as an independent affirmative claim against the company. The older decisions show that such cross-demands may be used defensively to reduce or extinguish the plaintiff company's claim, but not as a sword to obtain judgment for the balance. Any exceptional need for fuller adjudication should be pursued by an application for leave to the Companies Court.
Conclusion: The counterclaim could not proceed without leave under section 231 and could operate only as a set-off against the company's claim; the applications for leave to appeal were refused.
Ratio Decidendi: In a winding-up, a defendant's cross-demand may be invoked defensively as a set-off against the company's claim, but it cannot be maintained as an affirmative counterclaim for the excess without leave of the court.
TaxTMI 
