Debts not to be scaled down in case of collusion.

If the Board making an award under section 36 is at any stage of the proceeding satisfied-

(1) that the debtor had in collusion with any creditor furnished in such proceeding incorrect information in respect of the debt due by him to such creditor with a view to defeat the lawful claims of any other creditor, the Board may refuse to scale down any of the debts of such debtor in the manner provided in section 35 and may make an award for the full amount of the debts due from such debtor;

(2) that any claim by a creditor in such proceeding had been put forward in collusion between the debtor and such creditor with a view to defeat the lawful claims of any other creditor, the Board shall order that the debt due by the debtor to such creditor shall be extinguished and such debt shall not be recoverable.