The principle of following trust property applies when a trustee wrongfully mingles trust funds with his own, entitling the beneficiary to a charge on the whole fund under Section 66 of the Indian Trusts Act.

Anantakrishna Aiyar, J.

1. M.A.R.N. Ramanathan Chettiar, a Nattukottai Chetty, who was carrying on money-lending transaction under the firms name of M.A.R.N. Ramanathan Chettiar, was a member of the Committee of the Naga-rathar Sri Meenakshi Vidyasala Paripalana Sangam and also the treasurer of the Sangam. The Sangam is compendiously called "The Nagarathar School, Devakottah." In his capacity as treasurer, Ramanathan Chettiar collected various sums subscribed for the school which the Sangam was maintaining. He paid these sums into his own business, and in 1925 the firm was adjudicated insolvent. At that time there stood to the credit of the trust in his firms books a sum of over Rs. 40,000. The committee of the Nagarathar School, Devakottah, claimed that the said amount should be paid in full by the Official Assignee in preference to the other debts due to other ordinary creditors of the firm. The Official Assignee passed an order on 25th May, 1927 to the effect that the relationship between the Nagarathar School, Devakottah, and the insolvent was that of a debtor and creditor and no more. The Official Assignee went further and held that even assuming for the purpose that the insolvent was in a fiduciary relationship and that he acted improperly in investing the moneys of the school in his firm, the same could not he identified or earmarked. When the firm was adjudicated insolvent there was no cash and no part of the assets could be followed by the beneficiary.

2. The Official Assignee accordingly held that the School authorities were in no better position than the other unsecured creditors of the insolvent and that they could not claim any preferential payment.

3. The School authorities appealed to the learned judge sitting in Insolvency against the order of the Official Assignee. The learned Judge (Mr. Justice Waller) allowed the appeal and gave the School authorities a first charge, for the full amount of their claim, on the realisation of the debts due to the linn of the insolvent.

4. The Official Assignee has preferred this appeal against the order of the learned Judge and contends that the School authorities are not entitled to rank higher than the ordinary unsecured creditors of the insolvent.

5. Before discussing the question of law raised by Mr. S. Duraiswami Aiyar, the earned Counsel for the appellant, I think it is better just to refer to the finding of fact arrived at by the learned Judge. In the course of the judgment the learned Judge has recorded the following admission made before him by the counsel who appeared for the Official Assignee Air. S. Duraiswami Aiyar for the Official Assignee concedes that he is unable to support the view that the relation between the insolvent and the trust was one of debtor and creditor. He admits that Ramanathan Chetty was a trustee and received the trust funds as a trustee and mixed it with the funds of his own business.

6. As a trustee of the Nagarathar School the insolvent was entirely in the wrong in utilising the trust funds in connection with his own business. As the learned Judge remarks there can be no question as to the wrongful nature of Ramanathan Chettys action, for the mingling itself was wrongful.

7. The question then is whether beneficiary (the school) is entitled to a first charge on the trade assets of Ramanathan Chettys firm. Section 66 of the Indian Trusts Act (II of 1882) enacts as follows:

Where the trustee wrongfully mingles the trust property with his own, the beneficiary is entitled to a charge on the whole fund for the amount due to him.

8. The earned Counsel for the appellant contends that the beneficiary is entitled to a charge for the trust money only if he can trace it to a specific fund. The trust funds have been admittedly utilised by the insolvent in connection with his money-lending business. It is not now possible to say which particular asset due to the firm represents the trust moneys. In these circumstances it is argued for the Official Assigne