1. This is a reference under Section 69 of Act XV of 1882 and Rule 428 of the Rules of Procedure of the Small Cause Court on a case stated by the learned Chief Judge of that Court.
2. The suit is brought by the Liquidators of a Nidhi under voluntary liquidation to recover Rs. 1,653-4-10 the principal and interest on a loan made by the Nidhi to the defendant on the 14th December 1900 under Exhibit A.
3. The defendant had, at one time, been a shareholder in the Nidhi. After he had ceased to be a member on the 16th July 1900 he placed on deposit with the Nidhi the sum of Rs. 1,750 for 12 months. Before the termination of the 12 months he wanted his money back as he learnt that the affairs of the Nidhi were in an unsound condition but not being able to get it back he took a loan of Rs. 790 on the security of his deposit repayable on demand with interest at 12 per cent. under Exhibit A dated the 14th December 1900 which contained the following words: 'If perchance I fail to pay the principal and interest due in respect of the amount borrowed by me I shall according to the rules of the fund receive out of the total amount of my deposit in your fund, the balance, if any, left after you had taken the principal and interest due to the fund.'
4. In June 1901, the Nidhi went into voluntary liquidation and the plaintiffs were appointed the liquidators.
5. On the 20th September 1901, a temporary injunction was issued by the High Court restraining all creditors from suing the Nidhi (Exhibit E) and this was made perpetual on the 9th October 1901 (Exhibit F.)
6. On the 9th November 1903, the liquidators brought this action against the defendant to recover the amount of the loan with interest advanced to the defendant under Exhibit A on, the 14th December 1900. The defendant pleaded a set off of the amount due to him from the Nidhi under his deposit for twelve months made on the 10th July 1900.
7. On the hearing, the learned Chief Judge of the Small cause Court held that he was not entitled to set off that sum as it was not repayable at the date of the Nidhi going into liquidation and gave judgment for the plaintiffs with costs subject to the opinion of this Court upon the question 'whether on the facts stated and under the circumstances of the case the defendant was entitled to set off the sum of Rs. 1,750 (the amount of his deposit) against the sum claimed by the liquidators of the fund under Exhibit A.'
8. We are of opinion that the answer to this question must be in the affirmative that the defendant was entitled to set off the amount of his deposit against the sum claimed. By Section 177 of the Indian Companies Act (Act VI of 1882) 'the assets of the company shall be applied in satisfaction of its liabilities pari passu as they exist at the commencement of the winding up ' &c.; At the commencement of the winding up one of the liabilities of the company was to repay the defendant the amount of his deposit at the termination of the 12 months for which it had been deposited, viz., on the 16th July 1901. Owing to the orders of this Court of September and October 1901 and Section 136 of the Act (VI of 1882) the defendant was precluded from suing the Nidhi for that money. The money was none the loss due and payable to him as and from the 16th July 1901 and there is nothing either in the order or in the Act which precludes him from setting it off against any debt due by him. It was an ascertained sum legally recoverable at the time the action was brought and the parties filled the same character as in the suit. It was, therefore, a matter which could be set off in the plaintiff's suit inasmuch as that suit was not commenced until the 9th November 1903.
9. The law is practically the same as in England so far as it affects this case and the case is concluded by the decision in Anderson's Case L.R. 3 Eq. 337 and Sovereign Life Assurance Co. v. Dodd.  2 Q.B. 573.
10. In this case Exhibit A itself provides that the loan if not repaid shall be deducted from the amount of the deposit.
11. We must, therefore, hold that the defendant was entitled to set off the amount of his deposit against the sum claimed.