GOKUL CHIT FUNDS AND TRADES PRIVATE Vs. THOUNDASSERI KOCHU OUSEPH VAREED

JUDGEMENT

(1.) THESE are claims brought by the Official Liquidator under Section 446 read with Section 458-A of the Companies Act, 1956 (hereinafter referred to as the act ). The Companies in liquidation in all these oases were engaged in the business of conducting chit funds. The respondents who had joined as subscribers in some of the kuries conducted by these Companies had been allowed to draw the amounts due on prized tickets in some of the chit fund series against promissory notes or mortgage bonds executed by them to secure due payment of the future instalments. Before all the instalments in these kuries had become due or were paid the Companies went into liquidation. In the course of the winding-up proceedings the Official Liquidator has preferred these claims against the respondents for recovery of the balances due from them under the prized chit accounts. The main contention put forward by the respondents is that they are entitled to a set-off in respect of amounts paid by them to the concerned Companies either by way of term deposits or by way of subscriptions (instalments) to other chits in which also they had joined and which had not been prized. In view of the importance of the common question of law relating to the right of set-off involved in these cases the learned single judge, before whom the matter came up in the first instance, considered it desirable that the said question should be decided by a Division Bench. Accordingly these cases have come up before us.

(2.) THE course that we propose to adopt is to consider and decide only the question of law arising out of the plea for set-off put forward by the respondents and to leave the remaining questions to be dealt with by the learned single Judge. Hence it is unnecessary for us to set out in detail the facts pertaining to each of these cases and it would suffice to say that in relation to the plea for set off these cases can be classified into three different categories. The first category consists of cases where the claim made against the concerned respondents is for recovery of the instalments outstanding as due in respect of a prized ticket and the respondent seeks to set-off the amounts paid by him to the concerned Company by way of subscription in an unprized chit which he has joined in the same chit fund series. The second category consists of cases where in defence to the claim for recovery of the amount due by way of instalments on a prized ticket belonging to one particular chit fund series, the respondent seeks to set-off amounts paid by him to the Company by way of subscriptions in the account of an unprized chit of a different series, In the third category fall a few cases where a prized subscriber from whom the amount of unpaid instalments is claimed by the liquidator seeks a set-off in respect of amounts which he had deposited with the Company under liquidation by way of term deposits.

(3.) SECTION 529 of the Act provides that 'in the winding-up of an insolvent company, the same rules shall prevail and be observed with regard to (a) debts provable; (b) the valuation of annuities and future and contingent liabilities; and (c) the respective rights of secured and unsecured creditors; as are in force for the time being under the law of insolvency with respect to the estates of persons adjudged insolvent', The law of insolvency in force in this State is the insolvency Act, 1955 (Act 2 of 1956) as amended by (Act 18 of 1957 ). Section 47 of that Act, which is identical in terms with Section 46 of the Provincial insolvency Act, 1920, (Act 5 of 1920) reads: