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HIGH COURT OF CALCUTTA
CHAKRABARTI, LAHIRI
GANESH EXPORT AND IMPORT CO. - Appellant
Versus
MAHADEOLAL NATHMAL - Respondent
A. F. O. D. 55 Of 1954
Decided On : JANUARY 27, 1956
CHAKRAVARTTI, C. J. ( 1 ) THE judgment of the Court will be delivered by my learned brother. I only desire to make a few general observations on the point of law involved in the appeal and two of the cases.
Fact of the Case:
The insolvent in the present case is a company. Upon an order for the winding up of a company being made, the liquidator is to collect and distribute its assets among the creditors and thereafter if there be a surplus, among the contribute ries, subject to the rights of the secured creditors and the claim, if any, of some of the creditors to be paid in priority.
Finding of the Court:
The deposit in the present case was impressed with a species of trust, but a further question arises which was not argued at the Bar. It was perhapes not argued because of a consent order recorded by the trial Court on 31-3-1954 and appearing at page 23 of the Paper-book. But I am unable to see how, if the question was to be left to further proceedings as stated then, there could be an unqualified declaration that the entire sum of Rs. 3,01,397-4-3- was held in trust for the respondents alone and an unqualified order for the payment of the whole sum out of the entire assets of the company, as made by the trial Court.
Issues: Whether the deposit in the present case was impressed with a species of trust, but a further question arises which was not argued at the Bar.
Ratio Decidendi: The money was paid by the respondents to be held by a company for a specific purpose and it was therefore clothed with, what has been called "a species of trust". The specification of a particular purpose for which the money was to be held and kept available, prevented it from becoming the property of the company and invested it with the character of a trust fund, standing outside the vicissitudes of the funds belonging to the company itself.
Final Decision: The appeal is allowed in part and the order made by Bachawat J. modified. In lieu of the declaration made by him, it is declared that the sum of Rs. 3,01,397-4-3 is held by the company for a specific purpose in the nature of a trust for the benefit of the applicant firm and itself and in lieu of the order for payment made by the learned Judge it is ordered that the applicant firm will be entitled to repayment of the aforesaid sum out of the entire assets of the company, less such sum, if any, as" may be found due from it to the company on account of transactions had under the agreement.
( 1 ) THE judgment of the Court will be delivered by my learned brother. I only desire to make a few general observations on the point of law involved in the appeal and two of the cases.
( 2 ) THE actual question to be decided in the case is whether, in the liquidation of the Sisir Oil Industries Ltd. , the respondents can claim to be paid a sum of Rs. 3,01,397-4-3 in priority over all creditors of the company. Of that amount, a sum of Rs. 3,00,000/- is claimed by way of refund of a security deposit made for the due performance of an agreement and the balance is claimed as interest on that sum, both under the terms of the agreement itself.
( 3 ) THE insolvent in the present case is a company. Upon an order for the winding up of a company being made, the liquidator is to collect and distribute its assets among the creditors and thereafter if there be a surplus, among the contribute ries, subject to the rights of the secured creditors and the claim, if any, of some of the creditors to be paid in priority. What the general body of creditors can claim to be distributed among them are the assets of the company. The answer to the question in the present case, therefore, depends on whether the amount claimed by the respondents came to belong to the company and is held by it as a part of its assets.
( 4 ) WHAT then are the assets of a company? It does not require a statutory provision to establish that no property in which the company has not a beneficial interest can be one of its assets, even though it be a property held in its hands. Unlike the Insolvency Acts, the Companies Act has not undertaken to say what properties shall not be regarded as the properties of a company in liquidation and seems to have left the matter to principle. Section 62 (1) (a), Presidency Towns Insolvency Act says specifically that the property of the insolvent divisible among his creditors shall not comprise "property held by the insolvent on trust for any other person. " Similarly, Section 28 (5), Provincial Insolvency Act provides that the property of the insolvent, vesting in the Official Receiver and "divisible among his creditors, shall not include "any property. . . . which is exempted by the Civil Procedure Code or by any other enactment for the time being in force from liability to attachment and sale in execution of a decree"; and Order 21, Rule 61, Civil P. C, provides that the Court shall disallow a claim to property under attachment if it is satisfied that the property was "in the possession of the judgments debtor as his own property and not on account of any other person", implying thereby that where the judgment-debtor is in possession on account of another person, the Court shall allow the claim. Property held by a judgment-debtor in trust for another person is held on account of that person. The Companies Act does not contain any provisions like Sections 52 (1) (a) and 28 (5) of the Insolvency Acts, nor does Section 229 which provides that in respect of certain matters, the same rules shall be observed in the winding up of an insolvent company as are in force under the law of insolvency with respect to the estates of persons adjudged insolvents, attract those provisions. But no specific provision was necessary. The Act has said that it is the assets of the Insolvent company that shall be distributed among the creditors. In a property held by an Insolvent, wholly in trust for another person, he has no beneficial interest and therefore such property cannot be one of his assets liable to distribution upon his own insolvency. It is thus implied in the Companies Act that the assets of a company in liquidation which are liable to be distributed among its creditors cannot include properties held by it wholly in trust for a third party.
( 5 ) ON the other hand, there can be no doubt that conformably to ordinary notions and the general law, the Companies Act does not regard monies lent to a company as monies paid to it on
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