Trust deposit retained its fiduciary character, giving the depositor preferential creditor status in liquidation.

Money deposited under an agreement requiring it to be kept separate and held by a bank as trustee retains its trust character and does not become an ordinary debtor-creditor deposit, even if the bank uses the funds in its business. On that basis, the depositor was treated as a preferential creditor in the liquidation because the arrangement created a fiduciary relationship rather than a simple loan or deposit. The contractual promise of separation and trusteeship, together with interest payable for deprivation of use, supported the conclusion that the security money remained distinct from the bank's general assets.

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Issues: Whether the petitioner, who had deposited security money with the bank under an agreement that the money would be kept separate and held by the bank as trustee, was entitled to be treated as a preferential creditor in the company liquidation.

Analysis: The terms of the agreement showed that the security deposit was to be held distinct and separate from other deposits, that the bank's position was that of trustee and not debtor and creditor, and that interest was payable for the petitioner's deprivation of use of the money. The use of the deposit in the bank's business did not alter the contractual character of the fund or convert it into an ordinary loan or deposit.

Conclusion: The petitioner was entitled to be treated as a preferential creditor, as the security deposit was held on trust and a fiduciary relationship existed in respect of it.

Ratio Decidendi: Where money is deposited on express terms that it shall be kept separate and held by the bank as trustee, the deposit retains its trust character even if the bank uses it in business, and it does not become a debtor-creditor relationship.

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