Trust property in winding up: advance payment remained traceable and was excluded from distribution among unsecured creditors.

Advance money paid in anticipation of a film-hiring contract, before any concluded agreement existed, was treated as trust property rather than part of the company's general assets. The payment remained identifiable in the company's hands, and the insolvency rules applied on winding up excluded property held on trust from distribution among creditors. The reasoning relied on the statutory position that insolvency principles govern winding up and that property held without the full beneficial interest is held for the person entitled to it. The amount was therefore recoverable by the payer in priority to unsecured creditors.

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Issues: Whether an advance payment of Rs. 250 made in contemplation of a film-hiring contract, but before any concluded contract came into existence, remained trust property and was excluded from distribution among the general body of creditors in the company's winding up.

Analysis: The payment was made only as an anticipated earnest deposit during negotiations. No binding contract was ever concluded, and when the company withdrew from the proposed arrangement the money remained the property of the payer. In a winding up, Section 229 of the Companies Act, 1913 applies the insolvency rules, and Section 52(1) of the Presidency Towns Insolvency Act, 1909 excludes from divisible assets property held on trust. Section 94 of the Trust Act recognizes that where a person has possession of property without the whole beneficial interest, he holds it for the person entitled to that interest. On the facts, the sum was sufficiently identifiable in the company's hands at the material time and could therefore be traced as money held for the creditor's benefit.

Conclusion: The Rs. 250 was not divisible among the general body of creditors and was recoverable by the creditor in priority to the unsecured body.

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