Trust over surplus sale proceeds justified interest on retained auction money until deposit into court.

Surplus sale proceeds realised on auction of secured property were treated as money held in trust for the person entitled to them. Where the respondent undertook to deposit the surplus into court but retained it without justification, the undertaking was also regarded as a concluded contract. On that basis, and on equitable principles under section 34 of the Code of Civil Procedure, 1908, interest could be charged on the retained amount. The absence of any attempt to invest or preserve the surplus for better return further supported the claim for interest. The respondent was therefore liable to pay interest from receipt of the sale proceeds until deposit into court.

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Issues: Whether the respondent was liable to pay interest on the surplus sale proceeds retained after auction of the secured property.

Analysis: The respondent had undertaken to deposit the surplus amount into court, but failed to do so and retained the amount without any valid justification. Section 29 of the State Financial Corporations Act, 1951 treats the surplus realised on sale as money to be held in trust for the person entitled thereto, and the provision is akin to section 69 of the Transfer of Property Act, 1882. The Court held that the undertaking also amounted to a concluded contract and that the retained amount could attract interest on equitable grounds under section 34 of the Code of Civil Procedure, 1908. The absence of any steps to invest or preserve the surplus for better yield further supported the claim for interest.

Conclusion: The respondent was liable to pay interest on the surplus amount from the date of receipt of the sale proceeds until the date of deposit into court, and the petitioner succeeded.

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