1. This is an appeal from a judgment of Stone, J., who had an application before him made in the insolvency of a firm known as the A. R. A. R. S. M. Firm. The application was by one M. R. R. M. M. R. Veerappa Chettiar to be admitted to proof in the insolvency in the sum of Rs. 34,244-15-6 as the Vicharanaidar or the managing treasurer under the Eangoon Nagarathars or trustees of a Chatram known as the Kasi Nagara Chatram. The application was rejected. Hence this appeal. The chatram in question had been established by the Calcutta Nagarathars, these persons being - it is alleged by the applicant who is the appellant here - Nattukottai Chetty firms carrying on business in Calcutta. The funds for the chatram were derived in part from mahimai which is a collection made by the firms from all constituents who go to them for cashing bills. The rest of the funds are supplied by strangers to the Nattukottai Chetty firms and mostly take the shape of hundies. These hundies are given to the Vicharanaidar and sent elsewhere to be cashed. The proceeds of these hundies are supposed in due course to be paid to those who are responsible for the control and management of the chatram. The money claimed in this application was the proceeds of hundies cashed in Madras by. the Madras branch of the insolvent firm. The money so collected was credited to. the Kasi Nagar Chatram, the chatram in question, in the account books of the. Madras firm, interest on the amounts received being also credited. At times the-money was remitted to the Calcutta branch of the insolvent firm by debit and credit entries so far as the Madras firm is concerned. The present claim relates to the principal and the interest-thereon of the cash proceeds of hundies collected for the charity by the Madras, firm.
2. In Calcutta there is an association of persons who are called Nagarathars,. business people in Calcutta, and it is-the Nattukottai Chetty case that these-Nagarathars are all the Nattukottai Chetty firms doing business in Calcutta, though this is disputed by the respondent. There is certainly very strong evidence in support of the appellant's contention and it would appear that the learned trial Judge finds this also as a fact. The evidence is - and this is common ground - that the Nagarathars in Calcutta meet together and select from out of the Nattukottai Chetty firms in Calcutta who constitute theNagarathars, a Vicharanaidar whose business it is to look after the management of the chatram at the request of the Nagarathars. The appellant's case is that the insolvent firm at Calcutta were at all material times, down to the insolvency, the selected Vicharanaidar. It is clear from the documentary evidence that the insolvent firm in Calcutta was directing the Madras branch to cash hundies and remit the money so collected from time to time and was keeping books in Calcutta similar to those kept by the Madras branch. The firm became insolvent and the appellant seeks to recover the amount shown in the Madras firm's books as belonging to the chatram, his case being that the money formed part of a trust fund and that it is not only traceable to the insolvent firm but in fact and in law can be traced and the Official Assignee as representing the estate of the insolvent made to disgorge that sum.
3. Our learned brother has not decided the question whether there was a trust here or not, though he says that it is common ground that there was. That question he feels it unnecessary to decide in view of his decision that this is not a case to which the doctrine of tracing trust funds is applicable. He does not decide, either the question whether the appellant is the right person to make the application. There were only two witnesses called. One was K. Section Swaminatha Chetty, who was the agent in Calcutta of the insolvent firm from 1901 to 1925. He was examined on commission. The other witness was Thamburaju Pillai whose oral evidence was taken at the hearing and who is a clerk in the Kasi Nagara Chatram at Calcutta and who keeps the accounts of the chatram. The latter witness our learned brother regards as one who knows only about keeping the books. Nevertheless he accepts answers given by him upon another point, namely whether he understood Swaminathan to be the same as the firm. The questions-were put by the learned trial Judge himself and they with the answers areas follows:
Q. Do you know what the agent of Nattukottai Chetty is?
Q . What is it?
A. To attend to the business of the firm, to-attend to the accounts and to carry on the business of the money dealings.
Q. What is your idea?
A. That is how it has been going on among: Nattukottai Chetties.
Q. Is he same as the firm in your view?
A. The firm is different and the agent who-carries on the business is different from the firm;
4. From these answers Stone, J. finds as-a fact that Swaminathan was not a member of the firm or the same as the firm but was an agent of the firm. With this finding of fact which is indeed perfectly obvious I entirely agree. Swaminathan was not a member of the firm nor was he the same as the firm. He was its agent, that is to say, he represented the firm in Calcutta in the same way as every agent of a Nattukottai Chetty firm represents the firm in the place where the firm has branches. There is nothing strange or unusual in this. That is a matter of common knowledge. It is impossible for the principals of Nattukottai Chetty firms to be-in several places at the same time; and the practice is for agents to represent-them, e. g., in such places as Calcutta, Rangoon and Colombo and for periods of three years at a time at the end of which period the accounts of the agency are usually closed and a fresh agency commences. In no sense does the agent make himself individually responsible toothers for what he does in the course of the firm's business, and I am quite unable to' understand why this question should have presented, as it apparently did, some difficulty to the learned trial Judge. As I understand it, the learned trial Judge, finds as a fact that when Swaminathan acted as Vicharanaidar he was doing so as representing the Ar. Ar. Sm. firm and acting on their behalf. This, I think, is clear from a passage in the judgment which reads as follows:
I also think it is reasonably plain from-Ex. 3-a that in 1915 there was more than on& Vicharanaidar - there were several - and those Vicharanaidars were identified with the firm of Ar. Ar. Sm. and from Ex. B that that firm was looking after the management of the chatram. at the request of the Nagarathars.
Exhibit 3-a reads as follows:
The accounts were entrusted to the next Vicharanaidars (Managers) Ar. Ar. Sm. with the request that they should look after them. They are doing so. I request that, in future, correspondence to this place may be had with Swaminathan of the said firm.
5. It is perfectly clear to me that the Ar. Ar. Sm. firm was the Vicharanaidar, but that since the firm in Calcutta itselt could not perform the functions of the Vicharanaidar it did so in the same way as it transacted all its business, namely through its agent. I thoroughly agree with Stone, J's. view that it was the firm that was looking after the management of the chatram at the request of the Nagarathars, but it was at first contended by Mr. K. V. Krishnaswami Ayyar, that the position was - and that the learned trial Judge had so found - that the appointment of Vicharanaidar was a personal one, namely Swaminathan, in his personal capacity and not the firm through Swaminathan as its agent. It was pointed out to him that not only was this opposed to the bulk of the oral evidence although there are one or two answers the other way, but was flatly contradictory to the case as pleaded by the Official Assignee in his written statement. In para. 3 of the written statement it is stated:
The respondent admits that the local Calcutta Ar. Ar. Sm. firm occasionally prior to 1915, but continuously since then, was the Vicharanaidar. The term Vicharanaidar does not however involve any idea of trusteeship, but only of a person who looks after the internal management as manager, the Calcutta Nagarathars alone being the trustees thereof.
6. The case now sought to be argued and suggested in the trial Court is that Swaminathan in his personal capacity was the Vicharanaidar and not the firm. This case is put forward in consequence of some answers given by Swaminathan in his evidence on commission, Swaminathan being a witness called on behalf of the Official Assignee. As I have already stated, there are some stray and confused answers to that effect. A very large majority of the answers of this witness clearly negative any such contention. Mr. K. V. Krishnaswami Ayyar now concedes that Stone, J's. finding on this point must be understood to be opposed to the position now taken up by the Official Assignee. In my view it must be so understood. It is in accordance with the case raised by the Official Assignee and it is in accordance with the bulk of the evidence and also with one's knowledge of how Nattukottai Chetties carry on branch businesses. Indeed I cannot understand how a contrary finding could have been given by Stone, J. in view of the fact that no application was ever made to amend the written statement at any stage. Although Swaminathan's examination on commission concluded on 27th September 1931, and the application was heard by Stone, J. on 6th December 1932, no application for amendment was made even at the trial, and, if the learned trial Judge is to be understood as having decided that it was not the firm that was appointed Vicharanaidar through Swaminathan, but Swaminathan individually, then that was a case which was' not pleaded. Had such an amendment been asked for, I think that the learned Judge would have been quite right in refusing to grant it. It is a case flatly contradicting that already pleaded. In my view, the position is perfectly clear, namely that Swaminathan as representing the Ar. Ar. Sm. firm and on that firm's behalf was the Vicharanaidar and that it was because of the high reputation which that firm enjoyed that the appointment was made. That is abundantly clear on the evidence, but Mr. K.V. Krishnaswami Ayyar contends that the learned Judge has reached a conclusion of fact elsewhere in his judgment contradicting himself upon this point and refers us to a later passage in his judgment where he says as follows:
The trustees are the Nagarathars and they appoint an agent for the purpose of the investment, call him Vicharanaidar and that agent in this case is Swaminathan Chettiar; and Swaminathan Chettiar charged with the duty of investing those funds has invested them not with himself, not with his firm, but with another firm of a class to which the Nagarathars restricted their investments.
7. I understand Stone, J. to mean that Swaminathan Chettiar was acting not on behalf of the Ar. Ar. Sm. firm, but in his own individual capacity and that he was the agent of the Nagarathars for the purpose of investing these funds and did not invest them in the firm of which he was the proprietor, viz., K. Section Firm, but with another firm (the Ar. Ar. Sm. Firm), I am unable to reconcile this finding with the earlier finding already referred to and I must agree with Mr. K. V. Krishnaswami Apyar that it is inconsistent unless what is meant is that for the purpose of collecting the funds and managing the funds Swaminathan was acting as Vicharanaidar on behalf of the firm, but when it came to making the investments ha did not represent the firm, at all but was a stranger i to it. In my view, such a position as that is wholly impossible. A Vicharanaidar is a Vicharanaidar for all purposes. He cannot be said when exercising some of those functions to be doing so on behalf of his firm and when exercising others of them to be doing so in an entirely different capacity. In my view it is beyond doubt that Swaminathan, when he invested the money, did so on behalf of the A. R. A. R. S. M. Firm, ha being the sole representative and agent in Calcutta. The money was not invested in the sense that it was money put in by the Nagarathars, but it was money collected on behalf of the trust and allowed with the approval of the Nagarathars to remain in the A. E. A. E. Section M. Firm to be utilised by them in their business and earning interest. I mention this although as a matter of fact this, in my view, cannot alter the position. This case, therefore, has to be dealt with on the following footing, namely that the A. R. A. R. S. M. Firm was one of the Calcutta Nagarathars which was appointed Vicharanaidar and acted through its agent Swaminathan.
8. It was looking after the management of the chatram at the request of the trustees, Nagarathars. Funds were received by the firm on behalf of the trust, placed to the credit of the trust in the firm's account books and credited with interest, the money being clearly utilised by the firm in its own business with the approval of the directors of the trust namely the Nagarathars. No question can possibly arise with regard to the absence of knowledge by the members of the firm that this money was trust money as it is quite clear that they knew: Mr. K. V. Krishnaswami Ayyar, however, contends that he should be given a further opportunity of calling evidence to show that Swaminathan was appointed Vicharanaidar in his personal capacity and not on behalf of the firm. He says that he had a witness in Court and desired to call him in support of his case on this point and that he had further authorities to which he desired to refer not only upon this question but upon many others arising in the case but that the learned trial Judge, however, having come to a conclusion upon the matter, said that he did not desire to hear these witnesses or any further legal argument. We are invited, therefore, to remand the case for further evidence to be taken with regard to this question. Mr. Doraiswami Ayyar on the other hand argues that he has now got the benefit of a finding upon this question and that, if it is allowed to be re-opened, it will be a greater hardship to his client than to the Official Assignee. I am satisfied that this is so. We are told that the respondent desires to call only one witness, the insolvent.
9. I consider that this witness would be an interested witness and that his evidence cannot usefully be set against the evidence of Swaminathan or the unamended written statement of the respondent raising an entirely opposite contention. I see no reason for depriving the appellant of this finding of fact in his favour and therefore, in my view, this case cannot be remanded for further evidence upon this point. That being so, what is the position in law? It is contended by the appellant that this case is exactly covered by the decision in Official Assignee of Madras v. Krishnaji Bhat 1930 Mad 693, a decision of an appellate Bench of this High Court subsequently affirmed on appeal by the Privy Council in Official Assignee Madras v. Krishnaji Bhat 1933 PC 148. In this case the well-known case of In Re Hallett's Estate Knathchbull v. Hallett (1880) 13 Ch D 696 was referred to and applied and also Pennell v. Deffel (1850) 4 DeG M and G 372. No reference is made to this case in the judgment of the trial Court and we must take it that it was not referred to although we are told that Mr. T.R. Venkatarama Sastriar who appeared for the present appellant wished to rely on it, nor is there any reference to Nagappa Chettiar v. Official Assignee, Madras 1931 Mad 251 which does not follow it and is overruled by the Privy Council case.
10. The learned trial Judge being of the opinion that the doctrine of tracing could not apply to the case before him, a reference to that decision could not be made. The learned trial Judge then pronounced judgment. 1 think that it would have proved the shorter course in the end if the learned Judge had decided all the points raised in the case. He has rejected the application upon one point only. Should his view be erroneous, obviously a remand to the trial Court becomes necessary in order that the other points left undecided both on the facts and on the law should be considered. The learned trial Judge does not decide whether the appellant is the proper person to make the application and he says that he has considerable doubt whether this really is a public charitable trust although earlier in his judgment he says that it is common ground that it is a trust.
11. If the learned trial Judge has found the facts as I understand him to have found them, namely that it was the firm in Calcutta that was appointed 'Vicharanaidar to control and manage the affairs of the chatram, Swaminathan being merely its agent, clearly the applicability of the case of Official Assignne Madras v. Krishnaji Bhat 1933 PC 148 needs very serious consideration. This question however is dealt with by the learned trial Judge in his judgment as follows:
The question, therefore, in my opinion, in a case like this, where one is dealing with tracing and not with breach of trust, is whether in fact this money was (rightly or wrongly) invested as distinct from entrusted. If it was invested, the wrong, if any, was the investing. If it was entrusted, the wrong would be the turning of that which was held on trust into that which was held as a loss. Once you have shown that a person, whether an express or implied trustee, has received as such into his hands trust property then it is for him to disgorge that trust property; but if he can show that the trust property came into his hands as an investment then he has discharged himself when he shows that he has invested it. If he has invested it in his own firm it is necessary for him to show that was done with the approval of the person who on behalf of the trust had the duty of investing. If that person has wrongly invested, that person is liable for breach of trust, but if he has invested and the money in question is an investment, the resulting liability is the liability of debtor to creditor and tracing does not apply.
12. It must be observed that on the date when this judgment was delivered, Official Assignee of Madras v. Krishnaji Bhat had already been decided by Reilly & Cornish, JJ. on 6th December 1929 and was reported in Official Assignee of Madras v. Krishnaji Bhat 1930 Mad 693; and In re Hallett's Estate Knatchbull v. Hallett (1880) 13 Ch D 696 had been decided long before. These cases I take it, as already stated, were probably not brought to the attention of the learned trial Judge as he-was clearly of the view that there could be no question of tracing, but these, cases should have been put before him. A reference to Official Assignee of Madras v. Krishna Bhat 1930 Mad 693 will at once make it clear that it is of serious-importance as bearing upon this case. A full examination of the facts of that case and of the judgment of Reilly and-Cornish, JJ., in the appellate Court and of their Lordships of the Privy Council makes that case in my opinion indistinguishable from this.
13. In that case, Messrs. Tawker & Sons-of this City were the defendants. They were a firm of Jewellers and collected certain moneys on behalf of the plaintiff's father. The latter subsequently directed them to hold a portion of that amount on trust, the terms being that Tawker & Sons should invest the same at a certain rate of interest in their own. firm or in any other firm as they might deem fit, the amount itself being payable to the plaintiff on his attaining 21 years. In pursuance of this, Tawker & Sons gave a receipt to the plaintiff's father for the money as fixed deposit in. the name of his minor son. A few years later, the plaintiff instituted a suit against Tawker & Sons alleging that they were in financial difficulties, that they were guilty of a breach of trust in regard to the investment of the trust fund-and claimed a preferential right over the assets of the firm. Tawker & Sons having been adjudged insolvents subsequent to the filing of the plaint the Official Assignee was impleaded as party-defendant and the plaintiff's claim was gone into. It was held that the plaintiff was entitled, in respect of the trust fund, to a charge on the sale proceeds of the stock belonging to the firm in the hands of the Official Assignee; that the right of the beneficiary to follow trust money does not depend upon the act of the trustee being a wrongful one,, and that trust money invested in a business can be traced within the meaning of Section 63, Trusts Act, to the eventual assets-of the business.
14. It was further held that in order that the doctrine of tracing might apply it is not necessary to show that money actually passed between the settlor and the trustee and that it is sufficient to prove that as a result of the transaction between the parties the assets of the trustee were augmented and that there is nothing illegal in a settlor authorizing, by the instrument of trust, the trustee to invest the trust money in a business, whether the trustee's own business or some other business, and providing that interest shall be paid for the use of the money so invested and that the only effect of such an authority is to save the trustee from what would otherwise be a breach of trust. The defendants there contended that their liability was only the liability of debtor to creditor and that the doctrine of tracing did not apply. This contention was directly negatived by the appellate Court. If this money was invested in the insolvent firm in the name of the trust the firm held the money as trustees and Lord Blanesburgh in Official Assignne, Madras v. Krishnji Bhat 1933 PC 148, whilst the appellant's case was being argued, intervened with the following observation:
As the Rs. 10,000 was invested with the firm in the name of the respondent, the firm held as trustee for him,
and it is quite clear that the question as to whether there has been a right or wrong investment in such a case is quite immaterial, it being stated by Sir George Jessell in In re Hallett's Estate Knatchbull v. Hallett (1880) 13 Ch D 696 as follows:
There is no distinction therefore between a rightful and a wrongful disposition of the property, so far as regards the right of the beneficial owner to follow the proceeds;
and the approval of the person investing of the investment of the money in the insolvent firm does not as the learned trial Judge thought it did, make any difference. The insolvent firm's position therefore was that they collected money on behalf of the chatram of which they were one of the trustees, the money (being regarded as trust money and being allowed with the approval of the Nagarathars, the trustees, to remain with the insolvents in the name of the trust to be utilized by the insolvents in their own business. The whole of the assets of the insolvent firm has come into the, hands of the Official Assignee. Of these assets the money in question is earmarked in the account books as belonging to the trust and the appellant asks that the Official Assignee should be made to give up that sum because by Section 52, Sub-section 1(a), Presidency Towns Insolvency Act, it has to be excluded from the divisible assets vested in the Official Assignee under Section 17 of the same Act. Again, on further argument we expressed our opinion that Assignne, Madras v. Krishnji Bhat 1933 PC 148 was indistinguishable from the present case but Mr. K. V. Krishnaswami Ayyar contended that there were distinguishing features.
15. He argued that upon the facts the Nagarathars were the trustees of the chatram, that the insolvent firm was merely the Vicharanaidar and that the insolvents were therefore not trustees of the fund in the same way that Tawkers were in Assignne, Madras v. Krishnji Bhat 1933 PC 148. This argument is not well-founded on the facts however, because, in my view, the insolvent firm was a trustee of the fund. The Nagarathars are the Nattukottai Ohetty firms including the insolvent firm in Calcutta. They are the trustees of the chatram. They meet together and select one of the firms comprising the Nagarathars to manage the trust. This obviously is done for the sake of convenience. The firm so selected is the Vicharanaidar and the insolvent firm was the chosen one. K. Section Swaminatha Chettiar who was at the material times the agent of the Calcutta branch of the insolvent firm was a witness at the hearing. He stated that by Calcutta Nagarathars was meant all the Nattukottai Chetties carrying on business at Calcutta. He stated as1 well that all the Calcutta Nagarathars at a meeting would appoint a Nagarathar as Vicharanaidar to manage the 'chatram. He stated also that moneys would be given to the Vicharanaidar in his capacity as representing the firm. Further he said:
By trustees I meant the Calcutta Nagarathars carrying on business at Calcutta Nobody other than the Calcutta Nagarathars can be Vicharanaidar. It is only the firm in Calcutta that is appointed by the Nagarathars as Vicharanaidar. It is only the agents of the respective firms that are called Nagarathars. The agent in his capacity as 'representing the firm is a trustee along with others and is Vicharanaidar if appointed. I mean all the Nagarathars. The agent only is the trustee and not the owner,
when I said that the agent was the trustee I meant the Calcutta branch to be the trustee.
16. This evidence clearly shows that all the Nattukottai Chetty firms by their branches in Calcutta were the Nagarathars who were the trustees and that one of the trustees was selected by the other trustees to be the Vicharanaidar; and indeed it seems to me that this must obviously be so. In the face of these facts, it is useless for Mr. K.V. Krishnaswami Ayyar to contend that the insolvent firm was not a trustee for the fund and did not as trustee for the fund receive the trust moneys. When received, that money was separately entered in a chatram book kept by the insolvent firm in Calcutta and when collected by the Madras and other branches of the insolvent firm it was entered in the firm's books in those places as money belonging to the trust. As in Assignne, Madras v. Krishnji Bhat 1933 PC 148 the insolvent firm, like Tawker's were trustees and were, like Tawker's allowed to use the trust money in their business and as Tawkers did, they invested the money in their business and, as their Lordships of the Privy Council say on p. 210 (of 60 I.A.), it must be taken to have remained a part of the assets of their business and to have been there at the date of their insolvency and the beneficiary was entitled at all times to a charge upon such assets in the hands of the firm. 'Upon the insolvency,' their Lordships say 'the assets passed to the appellant (i.e., the Official Assignee) but passed subject to the charge.' The only distinction so far I can see between the present case and Assignne, Madras v. Krishnji Bhat 1933 PC 148, is that in the latter case stock in the shape of jewels was purchased with the trust money and on that stock being sold more jewels were purchased with the proceeds of the same. On the insolvency of Tawkers, the Official Assignee took possession of the stock in trade of the insolvents and having sold a por-tion of the stock-in-trade a sum of Rs. 22,000 was realised. On p. 208 (of 60 I.A.) their Lordships say:
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 realised. The learned Judges of the appellate 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. Under Section 52, Sub-section 1(a), Presidency Towns Insolvency Act, 1909, property held by an insolvent on trust for any other person is excluded from the assets divisible among the creditors. The Ks. 10,000 was received by the insolvent firm for investment in their business, and there is no suggestion that it was not so invested in fact. Nor is it suggested that there were any assets of the business which were not taken over by the appellant. If it was there when the Official Assignee came in, what he took was mixed fund only part of which was divisible among the creditors, the Ks. 10,COO being in his hands as much the property of the respondent as it was before the insolvency. There was no allegation that it had been lost or ceased' to exist before the insolvency. If this had been proved the case might possibly have been different.
16. In the present case the money remained in its original form, namely, cash and was not converted into anything else and it is not disputed by Mr. K. V. Krishnaswami Ayyar, that trust money in the shape of money can be traced and got if it can be identified as trust money. It is clearly traceable' if it can be identified. In In re Hallett's Estate Knatchbull v. Hallett (1880) 13 Ch D 696, Jessel, M.R. at p. 710 says:
If the bailee sells the goods bailed, the bailor can in equity follow the proceeds, and can follow the proceeds wherever they can be distinguished, either being actually kept separate, or being mixed up with other moneys. I have only to advert to one other point, and that is this: supposing, instead of being invested in the par-chase of land or goods, the moneys were simply mixed with other moneys of the trustee, using the term again in its full sense as including every person in a fiduciary relation, does it make any difference according fo the modern doctrine of equity? I say none. It would be very remarkable if it were to do so. Supposing the trust money was 1,000 sovereigns, and the trustee put them into a bag, and by mistake, or accident or otherwise, dropped a sovereign of his own into the bag. Gould anybody suppose that a Judge in equity would find any difficulty in saying that the cestuique trust has a right to take 1000 sovereigns out of that bag? I do not like to call it a charge of 1000 sovereigns on the 1001 sovereigns, but that is the effect of it. I have no doubt of it. It would make no difference if, instead of one sovereign, it was another 1000 sovereigns.
17. We have been asked by Mr. K.V. Krishnaswami Ayyar to allow the question of identification of the trust money here to be considered by the trial Judge on a remand of this case, it being agreed that two points left undecided by Stone, J., must now be decided by the trial Judge. These points are : (1) Whether this is a public charitable trust, and (2) whether the applicant has any locus standi to present the application. In my opinion, the question of identification of the trust money may also be disposed of by the trial Judge who will do so having in view the observations of Lordships of the Privy Council in Assignne, Madras v. Krishnji Bhat 1933 PC 148 on pp. 208 and 209.
18. The case is therefore remanded for writer consideration of these points, Taxed costs on the Original Side to the Appellant. Costs of future hearing in trial Court are to be in the discretion of the trial Court.