Judgement

Consolidated Cross-appeals from an order of the High Court in its appellate jurisdiction (August 30, 1933) varying an order of the High Court in its original insolvency jurisdiction (May 9, 1932).

The main questions in this appeal and cross-appeal were whether certain moneys which were transferred in 1900 by the grandfather of the appellants Murugappa Chetti and Ramaswami Chetti (since deceased and now represented by his widow) to a firm known as Ar. Ar. Sm., who were adjudicated insolvent on July 15, 1925, were held by that firm as trustees or as bankers, and whether, if such moneys or part of them were held by the firm as trustees, the appellants, who by a partition decree made in 1915 had been allotted a three-sixteenths share of the moneys in question, were entitled to recover that share in full out of the assets of the insolvent firm in priority to the unsecured creditors. By their petition the appellants had claimed against the Official Assignee, the present respondent, Rs.60,000, or such other sum as might be found due to them on the taking of accounts; a declaration that the money which they claimed was property held in trust for them by the insolvent firm ; and other consequential relief.

The facts appear from the judgment of the Judicial Committee.

Stone J., who heard the petition, gave judgment for the appellants (petitioners), and ordered the Official Assignee to pay to them Rs.44,503, with further interest, and costs.

On appeal by the Official Assignee the High Court (Reilly and Burns JJ.) held that the appellants were only entitled as preferential creditors to a portion of the money and must prove in the insolvency for the balance along faith the other unsecured creditors, and they varied the order of Stone J. by directing {he Official Assignee to pay to the appellants Rs. 14,050.

1937. June 7, 8, 10, 14. Sir Herbert Cunliffe K.C., Sidney Smith and Mrs. M. J. Clark for the appellants. There are three points (1.) What was the contract in 1900? Was it agency for investment or mere loan? (2.) What was the effect of the partition decree in 1915 assuming that the contract of 1900 was agency, did the partition decree alter it ? It is submitted that the agency continued. (3.) The moneys from the partition were held by the insolvents with knowledge that they belonged to minors, and they were fixed with a trust. The insolvents used the money in their own business, and the appellants are entitled to a charge on the whole of the assets for the money as trust money. The deposit by the appellants grandfather was a contract with agents to invest. From the partition the moneys were held by the insolvents in a fiduciary capacity. The insolvents were also trustees for the minors from the date of the death of their grandfather. [Reference was made to Lewin on the Law of Trusts, 13th ed., p. 932.3 The insolvents mixed trust money with their own, and their assets represent the heap into which they put the trust money. There was an original agreement that the insolvents were agents for investment; and the question is whether a variation in terms can be inferred from the subsequent dealings. It is submitted that a new contract cannot be found from the course of the dealings the insolvents charged commission on loans to themselves, a course inconsistent with their being merely debtors. If they were employed to invest, it was a breach of trust to use the money in their own business ; if an investment could not be found, the money could not be kept for an indefinite or unreasonable period ; the principal should be communicated with. [Reference was made to British America Elevator Co. v. Bank of British North America. ([ 1919] A. C. 658.)] It is not open to the respondent to raise the question of tracing; it was not raised in the "Counts below

Law. Rep. 64 Ind. App. 343 ( 1936- 1937)

M. P. M. Murugappa C hetti V. Official Assignee of Madras 158

Secretary of State for India v. Raja Jyoti Prashad Singh (( 1926) L. R. 53 I. A. 100,