Judgement

WANCHOO, J. : This is an appeal by special leave against the judgment and decree of the Allahabad High Court. The appellant is a registered partnership carrying on business at Kanpur. It entered into an agreement in December 1948 with the Vijai Lakshmi Sugar Mills Limited, Doiwala, District Dehra Dun (hereinafter referred to as the Mills) and was appointed sole selling agent of the Mills. According to the terms of the agreement, the appellant deposited a sum of Rs. 50,000 as security for due performance of the contract, and this amount was to carry interest at the rate of Rs. 6 per cent per annum to be paid by the Mills. In November 1949 an order was passed winding-up the Mills and this happened before the period of agency came to an end. Consequent on the winding-up of the Mills, the appellant made an application in September 1950 by which it prayed for refund of security deposit along with interest. It was also prayed that the Mills held the deposit as trustee and in consequence the appellant was entitled to priority, with respect to the amount of Rs. 50,000. In addition there was a claim of Rs. 24,500 with respect to commission. That claim was given up and we are now not concerned with it.

2. The liquidators admitted that there had been an agreement as alleged by the appellant and that a sum of Rs. 50,000 had been deposited with the Mills. But their case was that this amount was an ordinary debt with respect to which the appellant could not claim any preference and that the appellant s contention that the amount deposited was a kind of trust with the Mills was not correct. The only question that had to be decided, therefore, was whether the amount of Rs. 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.

3. The learned Company Judge held on a construction of the agreement that the amount was an ordinary debt. He referred in this connection to the apparent conflict between the decisions of the Calcutta and Madras High Courts on one side and the Allahabad and Bombay High Courts on the other but was of opinion that this conflict was largely illusory as the question whether the deposit in a particular case was in the nature of a trust or was an ordinary debt depended on the facts and circumstances of each case. He finally held that the deposit in question was not in the nature of a trust and was not entitled to any preference on that ground.

4. The appellant then went appeal to a Division Bench. The Division Bench upheld the view taken by the learned Company Judge and dismissed the appeal. The High Court having refused to grant a certificate the appellant applied for and obtained special leave from this Court, and that is how the matter has come before us.

5. The two main terms of the agreement, viz., Nos 8 and 9, between the appellant and the Mills which call for consideration in the present case are these :

"8. That the firm has deposited sum of Rs. 50,000 with the said Mill as a security for the due performance of the contract on their part, on which amount the Mill shall pay interest to the said firm at the rate of 6 per cent per annum.

9. That the Mill shall refund the said security deposit of Rs.50,000 with interest thereon at the rate on termination of the agency. In case the said amount is not refunded with interest thereon the firm shall be entitled to commission at the rates mentioned above as if agency has not terminated. In other words as long as security with interest is not refunded and commission due is not paid this agreement will not be terminated.

It may be mentioned that the agreement was for a period of one year which as already indicated, had not expired before the winding-up order was passed on November 8, 1949.

6. It will be seen from the terms of the agreement already set out that there was no stipulation that the amount of Rs. 50,000 deposited as security would be kept as a separa