TMI Blog1931 (9) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... rther interest from May 16, 1931, at the rate of six per cent per annum with six monthly rests. The claim to rank as a preferential creditor was disputed by the liquidator, and by an order dated August 17, 1931, the claim was ordered to be proved before me in chambers. The said company owned three mills for spinning and manufacturing yarn and cloth, called the Maneckjee Petit Mills, the Bomanjee Petit Mills, and the Dinshaw Petit Mills. It had appointed Messrs. Devidas Madhowji Thakersey Co. as selling agents on the terms and conditions contained in an agreement dated November 10, 1925. On July 7, 1930, the company appointed Messrs. Shantidas Vithaldas Co. the present claimants, as their selling agents in place of the previous selling ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l other respects the original clause 31 applied without modification in the case of the present claimants. A new term was added as clause No. 28( a ) to the agreement between the parties. The clause provided in substance that in the event of the company resolving to raise and raising any loan secured any one or more debentures of the company or by the mortgage of the company's immoveable property, the company was to forthwith "invest the moneys deposited by the firm with the company under clause 31 of the agreement" in Government of India Securities, and upon such investment the Securities were to remain with the company, but were to be earmarked in some manner satisfactory to the new selling agents and were to be held by the company as sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bers on August 31. The said sum of Rs. 3,00,000 has evidently been mixed up by the company with its other funds, but counsel for the claimants contends that those moneys were paid to the company and were to be held by them on trust, and that the claimants are entitled to follow the trust funds in the hands of the company and to receive the sum as a preferential payment. It is only if this fiduciary relationship is established that the question of preference can arise. In support of his contention counsel for the claimants relied on clause 31 and the new clause No. 28( a ), and he argued that because the sum of Rs. 3,00,000 was to be deposited in cash and to be held as security for the due discharge by the claimants of the terms of the agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plication, and he particularly relied on a passage in the judgment of Scott, C.J., at p. 737 [16 Bom. L.R.] which runs as follows: "If the money has, with the consent of the giver of the security, been received by the Bank and mixed with its funds in consideration of an agreement to pay interest on it, the Bank is only a debtor and not a trustee." Counsel argued that a company in liquidation would be in the position of a debtor and not that of a trustee, only if, with the consent of the giver of the security, the money had both been received by the company and also mixed with its funds in consideration of an agreement to pay interest upon it. In other words, the company is not a trustee, only when the giver is a consenting party to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he company for the due discharge by the claimants of the terms of their agreement does not create a trust. On the other hand, the fact that interest was agreed to be paid upon the sum shows that the money was to be used by the company for its general purposes. Clause 28( a ) in fact proceeds on the assumption that the moneys were to be mixed up, because it is only in the event of the company resolving to raise any loan secured by any one or more debentures of the company or by the mortgage of the company's immoveable property, that the company was to forthwith invest the moneys deposited by the claimants in Government securities, and the said securities were to be earmarked in the manner indicated in the clause. It was only on that continge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er cent per annum. In my opinion that makes no difference. There was an agreement under clause 31 for payment of interest, and it is by reason of that agreement that the claimants have put forward a preferential claim not merely in respect of the principal sum of Rs. 3,00,000, but also the interest due thereon. If the claimants merely relied on the receipt irrespective of that agreement, they could not put forward a preferential claim both in respect of the principal and the interest. I, therefore, hold that the claimants are not entitled to preferential payment. It is common ground that the claimants are not entitled to preferential treatment under s. 230 of the Indian Companies Act. They are, therefore, as much in the position of ft cre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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