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TMI Blog1942 (8) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... esaid sole agency business of sugar, the second party keeps as security deposit with the first party for a period of four years a sum of Rs. 10,500 carrying interest at the rate of 3 per cent. per annum. The first party shall pay to the second party, to his satisfaction, the aforesaid deposit money of Rs. 10,500 with interest within a month after the adjustment of the accounts of the sale of the sugar on the expiry of the term of four years mentioned in this Deed of Agreement". "16. The first party shall pay to the second party at the end of each year the amount of interest on the sum of Rs. 10,500 deposited by the second party at the rate of three per cent. per annum". "17. If the aforesaid agency is cancelled for any reason, then the first party shall remain bound to pay to the second party the aforesaid amount of security deposit together with the unpaid amount of interest within one month from the date of adjustment." "6. The second party will remove for sale from the Godown of the Mill of the first party, according to the terms of this agreement twice a week, i.e., at intervals of three days; in default, the second party shall be liable for damages to the first party. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his money. If it is trust money or is so held, the right of the depositor would not be affected simply because it has not been kept by the company as an earmarked fund but has been mixed up with other funds of the company and on the liquidation of the company, the depositor would be entitled to get it back from the assets before any creditor, secured or unsecured, of the company, can participate in the assets. These consequences would, in our judgment, follow from the principles laid down in In re Hallet's Estate; Knatchbull v. Hallet [1880] L.R. 13 Ch. D. 696 and our view accords with what has been expressed by this Court in In re Alliance Bank of Simla, Ltd. [1924] 28 C.W.N. 721 , where the case of In re Hallet Co. ; Ex parte Blane [1804] 2 Q.B. 237 was discussed and distinguished. If, however, the security deposit money cannot be regarded as being trust money or held by the depositee in a fiduciary capacity, the relation between the depositor and the depositee would be that of creditor and debtor, and the former would have no preference over the creditors of the company in liquidation but must share the assets pro rata with them. Whether the security deposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opatlal Mulji [1936] I.L.R. 60 Bom 954 and Ram Chand v. Mohd. Akram Khan Sahib [1937] A.I R. 1937 Lah. 444 . Some of the leading cases in which the other view has been taken, namely, that the company held the deposit money in a fiduciary character, are, In the matter of Hindustan Commercial Bank (India ) , Ltd., Madras [1938] 8 Comp. Cas. 101 and In the matter of Travancore National and Quilon Bank, Ltd. [1939] 9 Comp. Cas. 60 . In the last-mentioned case, all the important cases have been reviewed and though the judgment is that of a single Bench Judge, it contains a clear exhaustive and valuable exposition of the law. The cases of Alliance Bank of Simla Ltd. [1924] 28 C.W.N. 721 and Re: Fazalbhai Mills Ltd. ( in liquidation ) [1936] 6 Comp. Cas. 351 , though relating to deposits in provident funds, contain observations relevant on the point. The Lahore High Court in Ram Chand's case ( supra ) refers with approval to the decision of the Bombay High Court in In re Manekji Petit Manufacturing Co., Ltd.1 without discussion, and gives an additional reason, namely that there was "no object of the trust and the so-called trustee, Gurudas Mal, (the emplo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... necessary or the only implication. A trustee, when authorised, can use the trust fund and can be required by express terms to pay interest. That is what has been laid down in Gee v. Liddell [1866] 33 Beav. 629 . The decision of the Judicial Committee of the Privy Council in Official Assignee, Madras v. Krishnaji Bhat [1933] L. R. 60 I. A. 203 shows that a stipulation for payment of interest on money deposited would not necessarily militate against the case that a trust was created. Before the Judicial Committee it was no doubt admitted by the learned Counsel for the appellant that a trust had been created, but that admission was made after the Madras High Court had in that case overruled the contention of the Official Assignee, to the effect that the stipulation by Messrs. T.R. Tawker Sons (with whom the money had been deposited), to pay interest was destructive of the case of trust as that stipulation indicated that that firm was to utilise the money. The judgment of the original Court is reported in Krishnajee Bhat v. Sadasiva Tawkers [1927] A.I.R. 1927 Mad. 249 and that of the Appellate Court in Official Assignee, Madras v. Krishnaji Bhat [1930] A.I.R. 193 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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