Mutual dealings in winding up permit set-off of cross-demands, leaving only the net balance payable.

In winding-up proceedings, a creditor or debtor may set off mutual monetary claims against the company where the demands arise from reciprocal dealings, including separate chit fund accounts or fixed deposits. Section 529 of the Companies Act, 1956 imports the insolvency rule on mutual dealings and set-off, so pre-existing ordinary-law rights of adjustment are preserved. Section 530 does not bar such set-off because only the net balance remains payable after adjustment. The operative principle is that cross-demands between the company and the creditor may be mutually extinguished to the extent of the overlap, leaving only the balance provable or payable.

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Issues: Whether, in winding-up proceedings, a debtor of the company can claim set-off of amounts payable to him under other chit fund accounts or fixed deposits against the sums claimed by the official liquidator under the same or different dealings with the company.

Analysis: Section 529 of the Companies Act, 1956 applies the insolvency rules to the winding up of an insolvent company, including the rule in section 46 of the Provincial Insolvency Act, 1920 concerning mutual dealings and set-off. The decisive question was whether the claims between the company and the respondent were mutual in character. The Court held that reciprocal monetary demands arising out of dealings with the company, though under separate chit fund accounts or fixed deposits, were capable of amounting to mutual dealings. The winding up provisions did not destroy the pre-existing right of set-off available under ordinary law, and section 530 did not prohibit such adjustment because only the balance after set-off remains payable.

Conclusion: The respondents were entitled to plead set-off of the amounts due to them from the company under other chit fund accounts and fixed deposits, and were liable only for the balance remaining after such adjustment.

Ratio Decidendi: In the winding up of an insolvent company, where there are mutual monetary dealings between the company and a creditor, the creditor may set off cross-demands under the insolvency rule incorporated by section 529 of the Companies Act, 1956, and only the balance is provable or payable.

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