(1.) The appellant company carries on business at Nagercoil in the State of Travancore and at Bombay. The Nagercoil office had a current account with the Travancore National and Quilon Bank, Limited, which suspended business on the 20 June, 1938 and is in the process of liquidation under an order for its compulsory winding up passed by this Court. It will be convenient to refer to the appellant company as the Company and to the Travancore National and Quilon Bank, Limited, as the Bank . The Bank had a branch at Bombay, but the Company had no account there. On the 14 June, 1938, the Company instructed the Bombay branch of the Bank to collect Rs. 5,000, the amount of a cheque drawn in its favour on the Indian Bank at Bombay, and to remit the proceeds to the Nagercoil branch of the Bank to the credit of the Company's account. The cost of collection and remittance was Rs. 4-11-0, which the Company paid. The Bombay branch of the Bank collected the amount of the cheque the next day, but did not carry out its instructions to remit the money to Nagercoil. When the Bank went into liquidation the money remained with its Bombay branch and was never sent to Nagercoil. In these circumstances the Company applied to this Court in the liquidation proceedings for an order directing the Official Liquidators to pay to it the Rs. 5,000 on the ground that it represented money held by the Bank in trust. The application was heard by Venkataramana Rao, J., who was of the opinion that the entrustment of the money to the Bombay branch of the Bank for the purpose of transmission to its Nagercoil branch could not be considered to be money received by the Bank for a special purpose. He regards the position as being one merely between creditor and debtor. The Company has appealed from this order.
(2.) Section 229 of the Indian Companies Act makes the insolvency rules applicable in the winding up of an insolvent company. Section 52 of the Presidency Towns Insolvency Act states that the property of the insolvent divisible amongst his creditors shall not comprise, inter alia, property held by the insolvent on trust for any other person. This corresponds to Section 38 of the English Act. It is pointed out in Williams on Bankruptcy (Fourteenth Edition, page 244) that trusts, for the purposes of this section, include: (a) Express Trusts and Trusts virtute officii; (b) Trusts created by the Bankrupt on what was his own absolute property; and (c) Trusts of agency in the subject-matter of which the Bankrupt had not the general, but only a special property. It is common ground that if the Bank had paid the Rs. 5,000 into the Company's account at Nagercoil, the Official Liquidators would be entitled to it, but as it never reached that account the appellant says that the case falls within the category (c).
(3.) In deciding this question great assistance is to be obtained from certain English decisions, which we will proceed to examine. The first is that in Toovey V/s. Milne (1819) 106 E.R. 514 : 2 B. & Ald. 683. There a person advanced to a bankrupt money for the purpose of settling with his creditors. The purpose failed and a part of the money was repaid to the lender. It was held that this re-payment was protected. Abbott, C.J., said that the fair inference from the facts proved was that the money was advanced for a special purpose, and being so clothed with a specific trust, no property in it passed to the Bankrupt.