Section 53: Adjustment of debts

1) Where there has been any other transaction between a company which has become insolvent and any creditor who makes a debt claim against the company, the debt or such debt claim or transaction shall be adjusted as follows:

(a) To determine the amount due to be paid by one party to the other party;

(b) To deduct the amount payable by one party to the other party from the amount determined pursuant to Clause (a);

(c) To fix only the amount that remains after making a deduction pursuant to Clause (b) as the claim of debt payable by the company.

2) Notwithstanding anything contained in sub-section (1), any person who has supplied to or obtained a debt from the company when that person has knowledge or had a reasonable reason to have knowledge that the company has become insolvent shall not be entitled to make a claim to have the amount due to be paid to that person by the company deducted from the amount payable by that person to the company.

Explanation: For the purposes of this Section, the expression “company which has become insolvent” shall mean a company in relation to which an application has been filed in the Court for the restructuring or liquidation of that company.