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Judgment
Gentle, J.—In this matter the Royal Talkies, Trichinopoly, have been admitted by the liquidator as creditors of the company in the sum of
Rs. 250. It is contended on behalf of these creditors that they are in a different category to the ordinary unsecured creditor. The indebtedness
arose in this way.
The company was in the habit of letting out films upon hire to renters and on the 10th September, 1935, the company wrote to these creditors
setting out the terms upon which they were prepared to hire out a film and the letter concludes, ""If you agree to the above conditions, send us a
deposit of Rs. 1,000 immediately."" Instead of Rs. 1,000, only a sum of Rs. 250 was sent and on the 19th September, 1935, the company by letter
intimated to these creditors that it was unable to conclude an agreement for hiring the film. This Rs. 250, it appears from the correspondence and
from the books of the company, was entered into a suspense account to the credit of the Royal Talkies. Applications for payment were made on
many occasions but the company failed to re-pay this sum. At the date of the winding up order of the company, there was in the credit of the
company''s account at the bank a sum of approximately Rs. 1,100 and there is no evidence before me that it was ever less than that amount
between the time of the payment by the creditor to the company of the Rs. 250, I have mentioned, and the date of the winding up order. The
creditor''s contention is that this sum of Rs. 250 is not divisible amongst the general body of creditors. I have been referred first of all to Section
229 of the Indian Companies Act, 1913, which provides that in the winding up of an insolvent company, the same rules apply that will be observed
and will prevail in regard to the respective rights of secured and unsecured creditors as are in force for the time being under the Law of Insolvency.
By Section 52(i) of the Presidency Towns Insolvency Act, 1919, it is provided that the property of the insolvent divisible amongst his creditors
shall not comprise amongst others the property held by the insolvent on trust for any other person. Section 94 of the Trusts Act provides that in
any case not coming within the scope of any of the preceding sections of the Act where there is no trust, but the person having possession of
property has not the whole beneficial interest in such property, he holds it for the benefit of the persons having such interest. The learned Counsel
on behalf of the liquidator has quite properly informed me that under those circumstances the position of the trust arises. When the sum of Rs. 250
was paid this money was sent by way of an anticipated earnest payment in respect of the contract which was contemplated, would come into
existence between the parties. There was never any contract and therefore the monies paid remained the monies of the creditors. I have been
referred to Official Assignee of Bombay v. Moulvi Abdul Hayee ILR (1933) 58 Bom. 67 a case in which a sum of Rs. 1,000 was paid to a firm
subsequently becoming insolvent by way of deposit in contemplation of the payer entering into a service agreement with the payee, the sum paid
being the contemplated sum by way of fidelity guarantee. No agreement was ever concluded and in that case it was held by Mr. Justice Wadia that
the payees were the trustees of the payers in respect of that money. His decision went to appeal and whilst approving of his view it was reversed
upon another point which was not argued before the learned Judge in the first instance. When the company intimated to the creditors that there
would be no concluded contract between them, in other words, when the company withdrew its offer to make a contract upon the terms contained
in an earlier letter (which they were entitled to do) the position of mere negotiation which had then existed terminated and upon the letters which I
have seen it is quite clear that the company were holding this sum of Rs. 250 for the benefit of the creditors. I have been referred to several
decisions, both Indian and English, In re Hallett''s Estate: Knatchbull v. Hallett (1880) 13 Ch. D. 696, In re Hallett & Co.: Ex parte Blane (1894) 2
Q.B. 237 and James Roscoe (Bolton), Ltd. v. Winder (1915) 1 Ch. 62. The tenor of all those decisions is that a fiduciary position having been
established, it must be shown that the monies received can be identified as still in the hands of the recipient. That does not mean that the actual
monies paid over to a recipient and paid into his own banking account are traceable but an equivalent sum. Subsequent withdrawals from that
banking account, it is presumed, are first of all in respect of his own monies and not as against the monies which he was holding for the benefit of
another person. As long as there is in his possession at material times monies of the total value of the sum held by him to the benefit of another, that
other is entitled to take up the position that he has traced those monies paid over by him. If the balance is less than the monies paid, then the
principles set out by Mr. Justice Sargent in James Roscoe (Bolton), Ltd. v. Winder (1915) 1 Ch. 62 cited above apply, that is, the payer is entitled
to look to the recipient up to the amount of the money remaining in his hands. The claim by these creditors is the only one of its nature, as far as I
have been informed, and the sum which they paid into the hands of the company, namely, Rs. 250 apparently being still in the hands of the
company at the date of the winding up order, in my view, they are entitled to be brought within the benefits which Section 229 of the Companies
Act coupled with the provisions of Section 52(i)(a) of the Presidency Towns Insolvency Act afford them. I therefore hold that the sum of Rs. 250
out of the sum of Rs. 1,100 is, in the words of Section 52(1), property not divisible amongst the general body of creditors, in other words they are
not entitled to that amount. Whether questions arise in regard to other secured creditors I do not know. It may be a matter for subsequent
application to the Court. So far as this matter is concerned, these creditors'' claim is allowed with costs.