OFFICIAL ASSIGNEE OF MADRAS Vs. T KRISHNAJI BHAT

JUDGEMENT

(1.) On 5 October 1919 one T. Sivasankar Bhat, the father of the respondent, instructed his uncle Sadasiva Tawker by letter to invest in his firm, T. R. Tawker and Sons, a sum of Rs. 10,000 lying with the firm, such investment to be made in the name of the respondent, who was then a minor, the money to be handed over to him on attaining 21, and the interest in the meanwhile to be paid to the father. On 22 October, following the firm gave him a receipt in the following terms: "Received from Mr. T. Sivasankar Bhat, the sum of rupees ten thousand only through Mr. T. Sadasiva Tawker, as fixed deposit in the name of his minor son T. Krishnaji Bhat as per instructions contained in Mr. Sivasankar Bhat's letter, dated 5 instant, carrying interest at 9 per cent per annum. "Rs. 10,000. T.R. Tawker and Sons. The interest was duly paid to the end of 1923, when apparently the firm, which carried on business as jewellers in Madras, got into difficulties.

(2.) On 22 November, 1923 a suit was instituted in the name of the minor against the members of the firm, alleging that they were trustees of the fund and claiming their removal from the trust and the appointment of new trustees in their place, with a direction to hand over to the latter the Rs. 10,000. The defendants put in a written statement by which in effect the trust was admitted, but the suit was charged as premature inasmuch as the plaintiff was still a minor and no breach of trust had been committed. In January 1925, while the suit, which was filed on the original side of the Madras High Court, was still pending, the defendants were adjudicated insolvents, and the present appellant as the Official Assignee in whom their estate and effects were vested was brought on the record. He filed a written statement putting the plaintiff to the proof of the factum and validity of the trust and denying that the plaintiff was entitled to any preferential claim over other creditors. The suit came to trial in August 1926. The insolvents did not appear, and the principal question debated was as to the plaintiff's right to preferential payment out of a sum of about Rs. 22,000 which had been realized by the appellant by sale of a portion of the stock in trade. The trial Judge affirmed the plaintiff's claim and made a decree declaring his right to be paid out of the Rs. 22,000 in the hands of the appellant with Rs. 1,949 for interest, and ordering the appellant to bring these sums into Court to be held to the credit of the plaintiff. The Official Assignee appealed and the decree was confirmed. A further appeal is now brought to His Majesty in Council on a certificate that a substantial question of law is involved. The respondent is now of full age and is personally represented before the Board.

(3.) It was suggested before their Lordships that the transaction of October 1919 did not constitute a trust at all but a mere deposit in respect of which the respondent would only be entitled to rank with the other creditors. Their Lordships are however unable to accept this contention. No issue on this question was raised at the trial and it is clear that the trust was admitted by the defendants both before the original Court and in the Court of appeal, and apparently also in the printed case of the appellant. In their Lordships' opinion therefore the appeal must be dealt with on this basis and the only possible question is whether the trust fund can be found in the assets of the trustee firm which have come to the appellant. The trial Judge held on the evidence that the trust fund could be traced into the stock from the sale of which the Rs. 22,000 was realized. The learned Judges of the appeal Court were not satisfied that this was established, but they thought that the investment of the trust money in the general assets of the business was sufficient to give the respondent a charge upon the sale proceeds in the hands of the appellant, and in their Lordships' opinion the conclusion to which they came was right.