Employee security deposits as trust money excluded from the bank's asset pool and payable with interest on winding up

Employee cash security deposits taken under service rules for faithful performance of service were treated as trust moneys, not ordinary bank deposits forming part of the bank's assets. Their separate receipt and maintenance in a distinct account supported the trust character of the arrangement, and the fact that interest was payable did not by itself convert the relationship into one of debtor and creditor. The deposits were therefore excluded from distribution among general creditors on winding up, and the employees were entitled to payment of their deposits with interest up to the date of winding up.

---

---

Issues: Whether employee cash security deposits held by the bank for faithful performance of service were trust moneys or merely ordinary deposits forming part of the bank's assets.

Analysis: The deposits were required by service rules, taken as security for good conduct, acknowledged by a special staff security deposit receipt, and kept in a separate account. They were not ordinary bank deposits made for investment or current account purposes. The stipulation for interest did not, by itself, destroy the character of the arrangement as a trust, because a trustee may be authorised to use trust money and pay interest without converting the relationship into that of debtor and creditor. The later statutory policy reflected in section 282-B(1) of the Indian Companies Act supported this view, though it was not directly applicable on the facts.

Conclusion: The security deposits were held in trust for the employees and did not form part of the assets distributable among the bank's general creditors; the applicants were entitled to payment of their respective deposits with interest up to the date of winding up.

---