Skip to content


In Re: Travancore National and Quilon Bank Ltd. (In Liquidation) - Court Judgment

LegalCrystal Citation
SubjectCivil ;Company
CourtChennai
Decided On
Reported inAIR1940Mad184
AppellantIn Re: Travancore National and Quilon Bank Ltd. (In Liquidation);sir T. Desikachari and anr., Truste
Respondent;james Voce Pirrie and Cyril Gill
Cases ReferredGray v. Lewis
Excerpt:
- .....the bank. the ground on which the application is made is that the said amount is the provident fund moneys of the employees of the corporation standing to the credit of the savings bank account no. 489-8 in the trichinopoly branch of the bank and therefore trust money and that the bank was aware of this fact. the contention is thus put in para. 5 of the affidavit in support of the application:i am also advised that under section 282-b(2), companies act, 1913, all moneys contributed to the provident fund shall be invested only in securities mentioned in clause (a) to (e) of section 20, trusts act, 1882. i say therefore that this amount of rs. 500 is trust property which has come into the hands of the travancore national and quilon bank ltd., with notice of the trust and inconsistently.....
Judgment:
ORDER

Venkataramana Rao, J.

1. This is an application on behalf of East Tanjore Electric Supply Corporation Ltd., Employees' Provident Fund Institution, Trichinopoly, hereinafter called the Corporation, for the payment of a sum of Rs. 500 in preference to the ordinary creditors of the Travancore National and Quilon Bank, hereinafter called the Bank. The ground on which the application is made is that the said amount is the provident fund moneys of the employees of the Corporation standing to the credit of the Savings Bank Account No. 489-8 in the Trichinopoly branch of the Bank and therefore trust money and that the Bank was aware of this fact. The contention is thus put in para. 5 of the affidavit in support of the application:

I am also advised that under Section 282-B(2), Companies Act, 1913, all moneys contributed to the Provident Fund shall be invested only in securities mentioned in Clause (a) to (e) of Section 20, Trusts Act, 1882. I say therefore that this amount of Rs. 500 is trust property which has come into the hands of the Travancore National and Quilon Bank Ltd., with notice of the trust and inconsistently with the trust. I say therefore that the bank having received the money wrongfully and in breach of trust is itself a trustee for the amount and the amount still continues to be trust money in its hands.

2. The Official Liquidator of the Bank in his reply states that the Bank did not receive the sum of Rs. 500 wrongfully of knowingly in breach of any trust. He further submits as follows in para. 4 of his affidavit:

In any event, a reference to the said Section 282-B(2) will show that the trustees were entitled to deposit the said funds in Bank to accumulate the same for the purpose of investing such accumulations annually in the securities referred to in Section 20, Trusts Act, 1882.

3. The rules in regard to the investment of Provident Fund moneys which the Bank may be said to be aware of in so far as they are material to this application are Rules 10 and 11, which run thus:

10. All moneys paid to the trustees or otherwise coming into their hands in connexion with the Fund shall be forthwith paid into an account or accounts to be opened in the names of the Trustees with a Bank or Banks approved by the committee.

11. All moneys of the Fund not immediately required for the purpose thereof shall be invested in the name of the trustees in such securities as are specified in Section 282-B, Indian Companies Act, 1913, as determined by the Committee from time to time.

4. It will be seen from these rules that there is no prohibition to investing the said moneys in any Bank or Banks approved by the committee of the Provident Fund Institution and that the Provisions of Section 282-B, Indian Companies Act should be conformed to. As pointed out by me in my decision in In re Travanoore National and Quilon Bank Ltd Reported in A.I.R. (1940) Mad. 178 the, fact that the Bank is given notice that the, money deposited is trust money does not make the Bank a trustee in respect thereof. The legal consequence of such a notice is only that the Bank should not participate in a breach of trust by the trustee. Under Section 282-B, Indian Companies Act, the obligation imposed on the corporation is that all provident fund money should be invested in securities mentioned or referred to in Clauses (a) to (e), Trusts Act, and all such moneys belonging to the Fund at the commencement of the said Act which, are not so invested shall be invested in such securities by annual instalments not exceeding ten in number and not less in amount in any year than one-tenth of the whole amount of such moneys. This provision came into operation on 1st January 1937. On that date, as the said moneys were not invested in any securities mentioned in Section 20, Trusts Act, the obligation of the corporation was to invest a tenth of the said moneys in that year and in every succeeding year in the authorized securities, and the balance of the moneys could be invested in any authorized Bank or Banks, according to the rules of the institutions. When the said sum was deposited on 18th January 1938, they should have deposited Rs. 100 being the two annual instalments of Rs. 50 each for the years 1937 and 1938. In so far as the corporation had not invested the said sum in any authorized security, they were guilty of a breach of trust and the Bank must be held to have participated in the breach of trust. As observed by 'Vice-Chancellor Malins in Gray v. Lewis (1869) 8 Eq. 526 at p. 543:

All persons who obtain possession of trust funds with a knowledge that their title is derived from a breach of trust will be compelled to restore such trust funds.

5. The Corporation is therefore entitled to a sum of Rs. 100 as and by way of preferential payment and in regard to the balance, it can only prove as an ordinary creditor. I award Rs. 5 for Judges summons and Rs. 35 for counsel's fee and Rs. 35 for the Official Liquidators, the costs to come out of the assets of the Bank. I direct that the name of the corporation be included in the list of claims already settled by me.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //