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1967 (1) TMI 56 - SC - Companies LawWhether the amount of ₹ 50,000 deposited as security for due performance of the contract of sole selling agency was in the nature of a trust which was entitled to preference or was an ordinary debt? Held that:- The facts of the present case show that there was no segregation in this case and the mills could mix the security deposit with its own money and use it for its own purpose. Further, because the mills could use the money for its own purpose, it had to pay interest. In addition to these two circumstances, which would incline one to the view that the relationship was that of a debtor and creditor, there is the further fact that clause (9) of the agreement provides that even though the period fixed in the agreement comes to an end, the agreement would continue if the security deposit is not refunded and the commission due is not paid. We agree with the learned company judge that the last words in clause (9) make the security deposit and the commission due on a par. The commission due can be nothing other than a debt; the security deposit is put on a par with that. That is a further indication that the relationship in the present case was that of a debtor and creditor. In the circumstances, we are of opinion that the High Court was right in its view as to the nature of the security deposit in the present case. Appeal dismissed.
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