1. The applicant is a debtor of the company in liquidation. On 17th February 1938, he borrowed from this banking company a sum of Rs. 1000, and as security for his loan he deposited 450 shares of two other companies. On 30th May 1938, repayment of this loan was demanded by the company. The applicant wrote a letter to the agent of the company on 4th June 1938. This letter is not available, but the contents are set out in the applicant's affidavit in support of his application in para. 4, and it is not controverted that his recollection in regard to the contents is accurate. The letter was to the effect that the applicant was the holder in due course of a fixed deposit receipt with the Bank for a sum of Rs. 1000 standing in the name of Sri Bageerathi Ammal maturing on 28th July 1939, and he requested an adjustment of this debt from the company against the amount due from the applicant. An interview took place on the day of, or shortly after, the letter I mentioned, between the applicant and the agent. The substance of this interview is set out in para. 3 of the counter-affidavit and is not challenged by the applicant in his reply. At this interview, the applicant informed the agent that the depositor of Rs. 1000, the subject of the fixed deposit receipt, had attempted to obtain payment from the company for the amount covered by the receipt but was unsuccessful, and the applicant requested that he should be allowed to set off against his debt to the company the debt which was maturing in favour of the depositor. The recollections of the applicant and the agent are now at issue in regard to what subsequently transpired. The applicant says in his affidavit that the agent promised to allow a set off; on the other hand, the Official Liquidator in his affidavit says that he was informed by the agent that he promised, on being given the fixed deposit receipt signed by the depositor, to place the matter before the management and ascertain their views. Whatever may have been said, in my view, it is quite clear from the letter of the applicant dated 18th June 1938 what was the position he accepted. Two days previously, he had been told by the company that an adjustment could not be allowed against his debt before the date of maturity of the fixed deposit receipt but that this was being held as collateral security for the loan. The applicant's reply in his letter of 18th June 1938 was that ho had paid the depositor the purchase consideration and he requested that the fixed deposit should be transferred to his name if it were not possible for the company to reconsider his original request to be allowed to set off. He also asked for return of the share certificates deposited as security. It is quite clear that, whatever may have been stated, he accepted the position that on that day there was no set off and the debt due from him was still outstanding to the company.
2. It is urged on behalf of the applicant) that no matter what may have transpired in June 1938, he is now entitled to set off against moneys due from him the moneys which ordinarily would have become due on the maturity of the fixed deposit receipt. In the light of the admissions and concessions which Mr. Krishnaswami Ayyar has made on behalf of the Official Liquidators, it is not necessary for me to go into the question of the right to set off. It is conceded that a debt, although not presently payable, can be set off against moneys owing to a company in liquidation. The application of the applicant was opposed on these grounds : (1) that there was no valid assignment; and (2) if there was, to allow a set off would amount to a fraudulent preference. It is now conceded that if the assignment in favour of the applicant is binding and established, then the applicant is entitled to set off. What is disputed is whether there was a valid assignment in law.
3. There was a loan made to the applicant which he was requested to repay. At about the date when repayment was demanded, the depositor of the Rs. 1000 endeavoured to obtain repayment of the money, the subject of the receipt from the bank. It was then that the applicant commenced his negotiations to set off against his debt the moneys deposited with the company by the depositor. The only documents supporting an assignment are, (a) the deposit receipt which on the back bears the signature of the depositor which signature is merely one evidencing discharge of the moneys due from the bank; (b) a letter dated 16th June 1938 signed by the depositor and addressed to the company in which it is stated that the depositor had assigned her rights in the fixed deposit receipt to the applicant and authorized the company to apply the amount towards the applicant's loan account. In the affidavit supporting this application the applicant contents himself with saying that he was the holder of this fixed deposit receipt in due course. In the counter affidavit, in para. 10, it is stated that the Official Liquidators do not admit and put the applicant to strict proof that he is a bona fide assignee for value of the amount covered by the fixed deposit. In his reply the applicant merely says that he is a bona fide assignee for value. Seeing that it is contested that he is a bona fide assignee of this deposit receipt, one would have thought in his reply he would have set out the consideration which he paid. There is not a word about that. Learned Counsel on behalf of the applicant has referred me to Section 130, Sub-section (1), T.P. Act 1882, which provides that
a transfer of an actionable claim whether with or without consideration shall be effected only by the execution of an instrument in writing signed by the transferor or his duly authorized agent.
4. There is no such document, although counsel informed me that the assignment was effected by means of a written document. The letter written by the depositor dated 16th June 1938 to the bank to which I have referred is not an assignment. It is merely a notice to the bank that an assignment has been made. The fixed deposit receipt is not a negotiable instrument and an endorsement on the back does not have the same effect as an endorsement of a bill of exchange or promissory note. It has been argued on behalf of the applicant that the company before the winding up, accepted him as the assignee inasmuch as, having been given the fixed deposit receipt with the signature of the depositor upon the back it retained this document as a collateral security. In my view, one cannot infer from this that an assignment had been recognized. It is not infrequent that third parties' property or documents are held as security against a loan. On the one hand, the depositor was trying to obtain the amount of the deposit from the bank, upon which there was a run at the time; on the other hand, the applicant had borrowed money I from the bank which he was being asked to 1 repay. The company did not repay its debt upon the unmatured fixed deposit receipt nor did the applicant return to the bank the money he borrowed. When the Official Liquidators stepped in, having been appointed provisionally in the first instance, negotiations took place between the applicant and the liquidators, as set out in para. 7 of the counter-affidavit, which is not disputed. On 25th July the applicant wrote to the provisional liquidators asking them to make necessary adjustments in the loan account and to return to him the share certificates held by the bank as collateral security. The liquidator replied on the same day regretting that they were unable to comply with his request; on the 30th, the applicant wrote that the depositor was willing to give another fixed deposit receipt in substitution for the earlier one, the other fixed deposit receipt maturing on 28th July 1938. It seems strange that if there had been an absolute assignment of the fixed deposit receipt, which is being questioned in this application, why this lady was willing to exchange it for another maturing at an earlier date. It seems to me that what had happened was that there had been an understanding between the depositor and the applicant for their mutual benefit. It is significant that no reference has been made by the applicant to the consideration which had passed. I can only assume that there was none. There is no assignment in writing as required by Section 130, T.P. Act, and quite apart from that, the applicant has been put to strict proof and, it is insufficient for him to say 'I am a bona fide assignee,' and nothing more. Bearing all these circumstances in mind, in my view, the applicant has not satisfied me that he is or ever was an assignee at all. The result is that this application fails.
5. There has been addressed to me on behalf of the Official Liquidators an argument that if a set off were allowed, it would amount to a fraudulent preference. In my view that argument is unsound. In support of it there was cited to me In re Washington Diamond Mining Co. (1893) 3 Ch. 95. In my view, that case is not in point in the present instance. In the case cited, a shareholder, holding shares in respect of which calls upon unpaid share moneys were due, purported to have liquidated this by means of a transaction which in effect was setting off against the calls moneys due to him. Since there is no set off in respect of unpaid calls upon shares due from contributories, the transaction was held to be a fraudulent preference. No question of calls upon shares arises in the present case, and in my view, if the assignment had been established, a set off should have been allowed in respect of the applicant's debt. However, the result is that this application is dismissed with costs. Certified for counsel.