Alfred Henry Lionel Leach, C.J.
1. The appellant and the respondent are limited liability companies and both of them are now in liquidation under orders for compulsory winding up. For the sake of brevity I will refer to the appellant as 'the company' and the respondent as 'the bank'. The company was formed by the bank for the purpose of organising chit-funds, which was considered to be a profitable business. The bank held all the shares in the company, except two, and it is common ground that it controlled the company through one of its officers. The chit-funds which the company organised were for periods of 25 months with four classes of subscribers. The subscriber who was successful at the monthly auction could not withdraw the amount subscribed that month unless he furnished security to the company for its repayment. If he furnished security, of course, he was allowed to withdraw the money and dispose of it as he pleased. If security was not furnished, the company either retained the amount or paid it into the bank. In the latter event the subscriber was required to open a savings bank account with the bank and the money was paid into it. One of the conditions of the keeping of this account was that the amount deposited in it should not be available for withdrawal for purposes other than payment of the instalments for which the subscriber was liable in respect of the chit-fund until the subscriber had paid all his instalments. When he opened the account the subscriber was required to sign a letter addressed to the bank and couched in the following terms:
I beg to inform you that I am holding...No...in your Chit Fund No...which was prized at the auction conducted on the...for the instalment.
I have acknowledged receipt of the bid amount for which I have given a separate receipt and I confirm my agreement that as security for the due payment of all the future subscriptions towards my above ticket...in Chit No...you will hold as much amount as would cover up the future liability of this in chitty savings bank account with you.
I also confirm my agreement with you that you will appropriate towards future instalments as they fall due the necessary amount from my deposit in your chitty savings bank account.
2. This letter is not very appropriately worded as the chit-fund did not nominally belong to the bank, but there can be no doubt as to its effect. The bank was to hold what was deposited in the account as security for the due payment of what the subscriber owed to the company. The company and the bank carried on business in the same premises in Madras and the arrangement was completed by an officer of the bank acting on behalf of the company and the bank.
3. The Court is informed that the bank kept a considerable number of these accounts. The company and the bank having gone into liquidation, the question arose whether the company was entitled to have the amounts standing in these various savings bank accounts treated as moneys over which the liquidator of the company had a preferential claim. In order to have the question settled he took out a summons under Section 183 of the Indian Companies Act. The matter was heard by Venkataramana Rao, J., who held that the liquidator of the company was not entitled to any preferential payment from the liquidators of the bank, but that he was entitled to rank as an ordinary creditor in respect of these various amounts. The appeal is from this decision.
4. The claim for preferential payment was based on an allegation that the bank held these moneys as a trustee for the company. This claim was rejected by the learned Judge who held that the letter which the subscriber addressed to the bank on the opening of the savings bank account operated as an assignment to the company of the moneys standing to the credit of the account. The learned Advocate who appears on behalf of the appellant concedes that if there is no trust the learned Judge's decision cannot be challenged. He does not dispute that the letter signed by the subscriber on the opening of the account can be read as an assignment of the money to the bank for the benefit of the company. The learned advocate for the bank denies that there is any trust and accepts the learned Judge's decision as being correct.
5. We are in entire agreement with the learned Judge when he says that there is no basis on which the bank can be regarded as a trustee for the company. Before there can be a trust of movable property the author of the trust must indicate with reasonable certainty by words or acts (a) an intention on his part to create a trust, (b) the purpose of the trust, (c) the beneficiary, and (d) the trust property, and (unless the trust is declared by will or the author of the trust is himself to be the trustee) transfer the trust property to the trustee. These are the provisions of Section 6 of the Indian Trusts Act, 1882. In this case it is impossible in our opinion to say that there was an intention on the part of the subscriber to create a trust. What the subscriber agreed to do and did was to open a savings bank account with the bank which was to be kept on certain conditions. The payment into the account of the money by the company was a payment in on behalf of the subscriber and the intention was that this money should be used in discharging the subscriber's financial obligations to the company. It is accepted that the letter which the subscribers signed effected an assignment of the amount to the company, but there was no trust in contemplation. Moreover the whole arrangement was really brought about by the bank for its own benefit. It owned the company which it had formed for the purpose of making profit out of chit-funds and the conditions which it imposed upon the subscribers to the chit-funds were conditions which were merely intended to safeguard itself.
6. The learned advocate for the appellant has quoted to us Farley v. Turner (1857) 26 L.J. Ch. 710, but the facts in that case are so far apart from the facts in this case that it has no application. From whatever point of view this matter is looked at, the argument cannot be accepted that there is here a trust which entitles the liquidator of the company to claim preferential payment from the bank. The liquidator must prove as an ordinary creditor in the bank's liquidation. In order that there may be no misunderstanding it may be added that the subscribers have not been made parties to this appeal and have not appeared.
7. The liquidators of the bank are entitled to the costs of the appeal. The liquidator of the company will obtain his costs out of the assets of the company.