BENGAL TEXTILES ASSOCIATION IN LIQUIDATION Vs. STATE

JUDGEMENT

(1.) This is an application for an order that the Official Liquidator of the Bengal Textiles Association (In Liquidation) be directed to pay the sums of Rs. 2,591/12/6 and Rs. 6,287/10/6 or the dividends already declared on two shares and may in future be declared thereon to the petitioners under scrip No. 0143/4. In 1948, an order for winding up of the Bengal Textiles Association was made by this Court. A partnership firm known as "Shyamlal Sriniwas" was the holder of four shares in the Association under scrip No. 0143/4. Sriniwas Ladia and Rangla! Ladia were the partners of the firm. Sriniwas owed a sum of Rs. 2591/12/6 to the petitioner Mohanlal Thalia and a sum of Rs. 6,287/10/6 to the petitioner Dhaliram Thalia. On January 14, 1954 Sriniwas executed a document in favour of the petitioners Clause (c) whereof runs thus:

(2.) On the 3rd December, 1954, a petition for adjudication of Sriniwas Ladia as an insolvent was presented. The adjudication order being Order No. 25 of 1954 was made on the 29th March, 1955. Under this Order Sriniwas and his family became insolvent. Apparently certain dividends on the shares held by Sriniwas and Ranglal were declared by the Official Liquidator and Ranglal received those dividends. On the 15th April, 1957 the petitioners wrote to the Official Liquidator that Ranglal had not paid any portions of these dividends to them. There was further correspondence between the Official Liquidator and the petitioners and at one stage the Liquidator told the petitioners to collect moneys from the Official Assignee. The present application was1 made on the 24th June, 1961.

(3.) Mr. Sankar Ghose, learned counsel for the petitioners contends that by virtue of Clause (c) of the document dated the 14th January, 1954 an equitable assignment of the moneys payable on the shares was created by Sriniwas in favour of the petitioners. An appropriation of a debt, fund or goods, may amount to an equitable assignment so as to entitle the assignee on the insolvency of the assignor, to have his claim satisfied out of the subject-matter of the assignment. A person may assign his beneficial or equitable interest in a property owned by him. The assignment of such an interest is called an equitable assignment, and the assignor is deemed to be a trustee for the assignee. An agreement between a debtor and a creditor that the debt owing shall be paid out of a specific fund or out of specific goods will operate as an equitable assignment of the fund or goods. Thus where a person indebted to a bank agrees with the Bank Manager to assign to the bank his interest in certain goods, then deposited with a third party for sale, there is a complete equitable assignment of the goods to the bank: vide Mulla on the Law of Insolvency, 2nd Edition, Article 492, page 453 and 454. Property held by an insolvent on trust for others does not pass to the Official Assignee or Receiver and is not divisible among his creditors. This Rule applies not only to property held by the insolvent as a trustee in the strict sense of the term, but also to property held by him in any fiduciary capacity; Mulla's Law of Insolvency, Second Edition, page 449, Articles 487 and 448.