Trust property in winding up: identifiable advance money paid for a failed contract was excluded from the divisible estate.

Money paid in contemplation of a proposed contract, which was never concluded, was treated as trust property rather than part of the company's divisible estate in winding up. Applying insolvency rules through section 229 of the Companies Act, 1913, and excluding property held on trust under section 52(1)(a) of the Presidency Towns Insolvency Act, 1919, the court noted that the company held the identifiable sum for the payer's benefit. Section 94 of the Trusts Act supported that position because possession without the whole beneficial interest creates a duty in favour of the entitled person. The creditor's claim was therefore allowed in priority to general creditors.

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Issues: Whether the sum of Rs. 250 paid by the creditor before the contemplated contract came into existence was held on trust and therefore not divisible among the general body of creditors in the winding up.

Analysis: The payment was made as an anticipated deposit in contemplation of a contract which was never concluded. Once the company withdrew from the proposed arrangement, the money remained the creditor's money and the company held it for the creditor's benefit. In winding up, Section 229 of the Companies Act, 1913 applies insolvency rules, and Section 52(1)(a) of the Presidency Towns Insolvency Act, 1919 excludes property held on trust from the divisible estate. The facts also attracted the principle in Section 94 of the Trusts Act that where a person has possession without the whole beneficial interest, he holds for the person entitled to that interest. Since the amount was identifiable in the company's hands at the material time, the tracing principle supported the creditor's claim.

Conclusion: The Rs. 250 was not divisible among the general body of creditors and the creditor's claim was allowed.

Final Conclusion: The payment was treated as trust property outside the insolvent estate, and the creditor received priority over the ordinary unsecured creditors for that amount.

Ratio Decidendi: Money paid in contemplation of a proposed contract, which is never concluded and remains identifiable in the recipient's hands, may be treated as held on trust and excluded from the divisible assets in winding up.

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