TMI Blog1938 (11) TMI 14X X X X Extracts X X X X X X X X Extracts X X X X ..... "The Bank has constituted a provident fund for its staff and the question arises whether the members of the provident fund are entitled to preferential payment under section 230 of the Indian Companies Act, of the amount standing to the credit of the employees in this fund and due and payable to them. I state that section 230(1)( e ) of the Indian Companies Act as amended in 1936 is a new section making such sums preferential debts and that under the new section 282B(2) of the Indian Companies Act as amended in 1936 all moneys contributed to a provident fund constituted by a Company should in accordance with the provisions of the said section after the 15th January 1937 be invested only in trust securities under section 20 of the Indian Trusts Act. There are no similar provisions in the Travancore Companies Regulation and neither the fund itself nor any part of it is invested in any trust securities though the Bank was a scheduled Bank. It is doubtful therefore whether the new provisions will apply and the liquidators therefore pray for directions." The contention of Mr. Parthasarathy on behalf of his client, which contention would apply to all employees who have got similar c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Travancore Companies Regulation I of 1902. Section 271(1) provides thus: "Subject to the provisions of this part, any unregistered Company may be wound up under this Act, and all the provisions of this Act with respect to winding up shall apply to an unregistered Company. "I have already held in Application No. 1610 of 1938 that the Company in question is an unregistered Company within the meaning of this Act and this section. Section 271(1) will prima facie apply to the Company in question and once an order for winding up is made, the Company is deemed to be a Company under the Act. In a case where a foreign Company is wound up in more jurisdictions than one, the law is that the Court of each jurisdiction will be governed by the forensic rules which govern the conduct of its own liquidation vide the observations of Vaughan Williams, J., in In re English, Scottish Australian Chartered Bank. Section 230(1)( e ) is a forensic rule within the meaning of the expression used by Vaughan Williams, J. I have therefore no hesitation in holding that section 230(1)( e ) is one of the provisions which ought to be applied in the matter of the winding up of this Company and it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loyee and the same shall show contribution from the employee, interest added and contribution from the Bank 36. On opening his account in the fund, each subscriber shall furnish the secretary with a certificate under his signature giving the names and addresses of one or more persons to whom he desire? that in the event of his death the whole or any portion of the amount due to him from the fund shall be paid and may at any time revise the certificate and all such certificates in force shall be duly recorded in the Secretary's office in the special register to be kept by the Secretary. If the nominee is a minor, a guardian will have to be named. This will be considered his will so far as this amount is concerned. Printed forms of certificates will be furnished by the Secretary to every subscriber of the fund. 37. The Bank will not be bound by, or be bound to, recognise any assignment or encumbrance executed or attempted with out its approval which effects the disposal of the accumulations of a subscriber who dies while in service. Except as is expressly provided by these rules, no member or any member or persons claiming under or through him shall be entitled to claim any payme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of the Bank may wish to sever his connections with the Bank for domestic or other reasons and in such cases the following rules will apply:(1) Every subscriber, shall be entitled to the whole of his subscription with interest no matter under what circumstances he leaves the Bank's service subject to rule 44. (2). But no subscriber can have any claim to the Bank's contribution in his name unless he has faithfully and diligently served the Bank for a period of 15 years when the Directors if they are satisfied as to the reason of his resignation may in their discretion allow him to draw the whole of the Bank's contribution or any portion thereof. (3). An employee quitting service before completing five years shall receive only his contributions to the fund with interest calculated as per rule 34; ( b ) An employee who has put in more than 5 years but less than 10 years shall receive his contributions and 33 ⅔ of the contributions of the Bank; ( c ). An employee who has put in more than 10 years service but less than 15 years shall receive his contributions and 66 ⅔ % of the contributions of the Bank; ( d ). An employee who has put in a service of 15 years or more shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mployer and the interest provided by the Bank. In the course of the judgment Sanderson, C.J., observed as follows. "The contributions were, in the first place, credited to the fund in the general ledger. The amounts, to which each member was entitled were then credited to the accounts of the individual members. The Bank could not operate upon or alter the accounts of the individual members except in the manner and under the conditions specified in the rules and regulations and when the contingencies therein mentioned arose." Richardson, J., observed thus: "Nor am I impressed by the argument founded on the duty imposed on the Bank of paying interest on the capital amount at the credit of each member at a rate which might be less than the rate at which interest was earned by the Bank on their investments. The Bank or its Directors were substantial contributors to the fund and it was open to them to fix the conditions on which their contributions should be made. The fact, if it be a fact, that the directors derived a profit for the Bank by investing the fund does not alter the nature of the fund or convert it into a loan made to the Bank by the members. The rule would not have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir Lordships think that the effect of this procedure was to create a trust in their favour which each of them could enforce upon fulfilment of the conditions by which his interests were bound, and it is not disputed that the respondent was so entitled." This expression of opinion is almost decisive as to the nature of the fund in question, I have therefore no hesitation in holding that the relation between the Bank and the employees in respect of the amount standing to the credit of the latter is in the nature of a trust and it is not one of debtor and creditor and the Bank held the money of the fund in a fiduciary character. Therefore by the combined operation of section 229 of the Indian Companies Act and section 52 of the Presidency Towns Insolvency Act the said fund does not form part of the assets of the Bank, and in the administration of the assets of the said fund they could not be taken into account. Therefore, in this view, the employees are entitled to be paid in full the amounts standing to their credit in the provident fund account irrespective of the applicability of section 230(1)( e ) of the Companies Act. It is considered that rule 42( b ) of the rules applies to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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