Set-off in winding-up mutual dealings survives preferential payment rules where insolvency accounting leaves only the balance payable.

In winding-up proceedings, mutual dealings between a company in liquidation and a creditor are subject to set-off under the insolvency rules incorporated by section 529 of the Companies Act, 1956. That incorporation brings in section 46 of the Provincial Insolvency Act, 1920, requiring the mutual account to be taken and only the balance to be proved or recovered. The preferential payment scheme under section 530 does not displace this position in relation to mutual dealings, and both provisions must be read harmoniously. The creditor was therefore entitled to set off the reciprocal amounts, and the section 530 objection failed.

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Issues: Whether, in winding-up proceedings, a creditor with mutual dealings with the company is entitled to have the respective amounts set off under the insolvency rules applied by section 529 of the Companies Act, 1956, notwithstanding the preferential payment scheme under section 530.

Analysis: Section 529 of the Companies Act, 1956 brings into winding-up proceedings the insolvency rules governing provable debts and the rights of creditors. By virtue of that incorporation, section 46 of the Provincial Insolvency Act, 1920 applies where there are mutual dealings between the company in liquidation and the creditor, requiring the account to be taken and only the balance to be recoverable. The preferential payment provisions in section 530 cannot override the effect of section 529 in relation to mutual dealings, and the two provisions must be read harmoniously so that a creditor proving a debt in liquidation is subject only to the balance found due on the mutual account.

Conclusion: The creditor was entitled to set-off, and the objection based on section 530 failed.

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