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TMI Blog1936 (2) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of the amount standing to the credit of the employees, who were members of the provident fund, or at any rate occupied a fiduciary relationship towards them. It is common ground that fiduciary relationship may be established without the use of the word "trust" and that a person may become a trustee by his acts and conduct so as to deprive himself of all beneficial ownership of a property and declare that he will hold the same in trust for another. Section 3, Trusts Act, defines "trust" as follows : 'Trust is an obligation annexed to the ownership of property arising out of confidence reposed in and accepted by the owner or declared and accepted by him for the benefit of another or of another and the owner.' This definition clearly shows that because the owner retains a certain interest in the property it would not necessarily go against the foundation of a trust. This question must be considered with reference to the provident fund rules of the company read as a whole. The rules were framed when the fund was started. After the fund was so started, a subsidiary ledger, as provided by rule 10, was opened in which the amount standing to the credit of each member, consisting o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgment proceeded). After this resolution was so entered in the rough and fair minute books the agents paid seven instalments and the receipts signed by some members are put in. There is also a specimen entry showing the payments of interest to some members. On 4th September 1983, the directors passed a resolution whereby instead of paying the balance to each of the members by 34 instalments, as provided in the first resolution, they resolved that the balance should be paid by 60 instalments. It is common ground that this was not done at the suggestion or application of any member. The evidence further shows that even before the resolution was passed on 4th September 1933, payment at the reduced instalment was made to some members at the end of August 1933. The liquidator has considered the first contention of the members as to whether the fund was held by the company in a fiduciary relationship. The learned counsel for the liquidator contended that by reason of rule 21, the company has the first and paramount charge upon the amount from time to time standing to the credit of each member. From that it was sought to be argued that the amount standing to the credit of the member w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in In re Maneckji Petit Manufacturing Co. The question in that case was about the deposit made by the selling agents of a mill as security for the due discharge of the terms of the agency agreement. The company bound itself to pay interest on the amount deposited, and agreed to invest the amount in Government securities and keep the securities earmarked to the satisfaction of the agents, if the company issued debentures or mortgaged its immovable properties. The latter contingencies did not happen. The company then went into liquidation, and in the liquidation proceeding the selling agents claimed that there was a fiduciary relationship between the parties in respect of the deposit and, therefore, claimed to rank as preferential creditors. The Court negatived the contention. In the course of his judgment B.J. Wadia, J., observed that the fact that the company was entitled to use the money for its own purpose and pay interest in the mean time were incidents which tended to show that there was a deposit and there was no fiduciary relationship. It appears from the report that the attention of the learned Judge was not drawn to the decision in Gee v. Liddell (No. 1), In that ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount is a trust account. On that footing it will be on the liquidator to establish that the relationship between the parties was altered by an agreement, express or implied. The first step relied upon by the liquidator in this connexion is that a petition was sent to the directors in which each signatory individually asked the directors to hold the amount standing to his credit as a deposit made by him with the company and on which the company was asked to pay interest at six per cent. It is, therefore, contended that the signing members themselves suggested an alteration of the relationship. In this connexion it should be first noted that claimants Nos. 6, 17, 46, 57, 58, 60 and 63 have not signed the petition. The evidence further shows that the signatures of claimants Nos. 32, 3, 51, 70, 49, 23, 75, 18, 42, 67, 35, 30, 15, 40, 41, 33, 37, 44, 74, 14, 38, 29, 69, 31, 1 and 43 are not proved. It is important also to note at this stage that the signatures of these claimants on the alleged receipts of instalments or interest are equally not proved. Under the circumstances, in respect of these parties, there being no other express agreement, no question of implied agreement by co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any doubt as to the correctness of this view, the ultimate result is the same. The directors passed a resolution which contained the proposal that the amount standing to the credit of each member should be allowed to remain a deposit with the company by the member carrying interest at six per cent and be paid off as specified therein. The evidence of conduct of both the company and the members, stands thus: since the fund was started the company had maintained a subsidiary ledger as I have indicated above. The same ledger continued to be maintained without any interruption and without indicating that any alteration in the relations of the parties had taken place. The statement in the balance-sheets continued to be in same terms. It was admitted by the accountant called on behalf of the liquidator that when loans were given against the provident fund to members before 1932, receipts were taken, and in respect of the loans advanced subsequently, receipts in the same terms were similarly taken. It was further admitted that in respect of the deposits made with the company by individuals the company issued fixed deposit receipts. After the resolution was passed in December 1932, admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies as it originally existed. In respect of the signing members also therefore there being no agreement to alter the relations, the original footing on which the provident fund existed must stand and the members are entitled to rank as preferential creditors. The evidence of Kale, the Superintendent in the Court Liquidator's Office, shows that sufficient liquid assets were in existence on the date of liquidation, from which the fund could be paid in full with interest up to the date of liquidation. In the winding up of the company, rules prevailing in insolvency govern the rights of the parties according to section 229, Companies Act, and having regard to the decision in Official Assignee v. Bhatt no question of making a tracing order remains. The liquidator should therefore allow the claims of claimants Nos. 1 to 80, 189, 190 and 191 as preferential creditors, and in the certificate to be issued they should be shown as such. The costs of the claimants appearing before me on the footing of a long cause, except their costs of and in connexion with the allegations of undue influence, coercion and threats of dismissal, be added to their respective claims and be paid by the offic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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