1. The applicant is a creditor of the company which is being wound up. The Official Liquidator refused to place him in the list of preferential creditors and the object of this application is to obtain an order that he should be treated as such preferential creditor.
2. The ground upon which preference is claimed is that a sum of Rs. 140 was paid by the applicant to the company in circumstances which created a trust, the company being the trustee and the applicant the cestui que trust.
3. The applicant was the assignee of a policy of insurance issued by the company in respect of which about two years premia were in arrears and the policy had lapsed. After correspondence passing between the applicant and the company, Exs. P. 1 to P. 5, in which the company stated that upon payment of the amount of the premia in arrear amounting to Rs. 140 and a medical certificate being supplied in respect of the person insured by the policy, this would be revived. On the 20th June, 1940, the applicant sent a cheque for Rs. 140 to the company to meet the amount of the premia unpaid. The company acknowledged payment on the 16th July, 1940, stating that the medical certificate had not been forthcoming, but upon its receipt, it would consider revival of the policy and meanwhile, the sum of Rs. 140 was placed in the suspense account involving no risk to the company. In fact, the company did not place it in any account named 'suspense', but in an account called 'advance premium receipt account'. Within a few days of payment, the liquidation of the company commenced and no further step was taken in regard to the policy or its revival.
4. Learned Counsel for the applicant contends that this sum of Rs. 140 was paid for a specific purpose, namely, in order to obtain a revival of the policy and this purpose not having been fulfilled, the company then must have occupied a fiduciary position and it was their duty to return the money in full to the applicant, a trust having been created of which the company was the trustee and the applicant cestui que trust. In support of this argument, a number of authorities decided both in England and in India were cited: Edwards v. Glyn (1859) 2 E.L. & E.L. 29: 121 E.R. 12 Farley v. Turner (1857) 26 L.J. Ch. 710 Official Assignee of Madras v. Natesam Pillai : AIR1940Mad441 , and Gopalakrishna v. The Official Liquidators, T. N. & Q. Bank : (1939)1MLJ209 . In these four cases, it was held that a trust existed, the circumstances in each being either money was paid to the payee, usually a banker, with instructions for the money to be paid to a specified third party or money was received by the payee upon the terms that it was to be repaid by the payee subject to certain conditions, the latter case being the amount of the security deposit paid by an employee to an employer in respect of his services and to be returned at the termination of the employment subject to any claim which the employer might have against the employee.
5. Whenever money is paid by one person to another it can be said that it is remitted for a specific purpose. The buyer pays to a seller of goods or a hirer for the hire of an article but because money is so paid that does not ipso facto make the recipient the trustee. If the goods are not delivered or the article hired is not supplied, as the case may be, there is failure of consideration and the one making the payment is entitled to recover the amount from the payee on an implied contract for the return of money, the consideration for which has wholly failed. In the Official Assignee of Madras v. G. Smith I.L.R.(1908) Mad. 68 it was held that a trust would exist when a banker is to collect and remit but not when he is to use and repay. In the four authorities to which learned Counsel for the applicant referred, it was contemplated at the time of payment that the payee received the money in a fiduciary capacity. The payment to the Insurance company of a sum of Rs. 140 was for a specific purpose which did not involve any payment by the company to any third person nor was it agreed that the money should be returned to the applicant upon the happening of any specified event. The object for which the payment was made and which was the consideration for the payment has failed inasmuch as the policy has not been revived since liquidation of the company took place before it could be effected. I cannot find that when the applicant paid to the company Rs. 140 the company received this money in any fiduciary capacity. That being so, no question of trust arose.
6. The sole basis upon which the claim is made for the applicant to be treated as a preferential creditor is that he was the cestui que trust and the company was the trustee of the sum of Rs. 140. In my view, that is not the position. Consequently, this application fails and is dismissed. No order as to costs.