1941 (12) TMI 19 - HC - Companies Law

Payments of certain debts out of assets subject to floating charge in priority to claims under the charge and Winding up Overriding preferential payments

Summary

Issues:
- Validity of the charge on machinery and goods under Section 109 for non-registration
- Nature of the money deposited by the appellants as trust money and preferential claim

Validity of Charge on Machinery:
The appellants claimed a charge on the machinery and goods of the company under an agreement, but the learned Company Judge found the charge to be invalid as a floating charge due to lack of registration. The charge was considered void under Section 109 for non-registration, following the tests laid down by the Privy Council in a previous case. The charge was deemed to be a floating one, leading to its invalidity.

Nature of Deposited Money as Trust Money:
The appellants argued that the money they deposited with the company was trust money and should be returned to them as preferential creditors. However, the court found that the money was not intended to be held in trust, as it was deposited in the company's general accounts with provisions for interest and a charge on company assets. Previous cases were cited to support this finding, emphasizing that there was no explicit intention to create a trust relationship. The court concluded that the deposited money was not trust money, and the appellants did not have a preferential claim.

Judgment:
The appeal was dismissed, and costs were awarded against the appellants. The court upheld the decision of the learned Company Judge regarding the invalidity of the charge on machinery and the nature of the deposited money, determining that the appellants did not have a preferential claim. The judgment highlighted the importance of examining the specific circumstances of each case to determine the nature of deposited funds and the existence of trust relationships.