Banker-customer relationship remains ordinary despite notice of trust monies, defeating any preferential claim in liquidation.

A bank does not become a trustee merely because it receives employees' security monies with notice that they are trust funds; the ordinary banker-customer relationship remains unless the deposit is made with the bank for a special purpose creating a trust as against the bank. Notice of the trust only prevents the bank from participating in any breach of trust. The company therefore had no preferential claim in the bank's liquidation, and the bank's liability remained that of an ordinary debtor to its customer.

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Issues: Whether monies deposited in a scheduled bank by a company, under a statutory obligation to hold employees' security deposits in a special account, entitled the company to rank in the bank's liquidation in priority to ordinary creditors.

Analysis: The statutory obligation under Section 282-B(1) of the Indian Companies Act required the company to deposit the employees' security monies in a scheduled bank, and the bank had notice that the funds were trust monies. However, the bank did not itself become a trustee, and the mere notice of the trust did not alter the ordinary legal relation between banker and customer. The funds were not deposited with the bank for any special purpose as between the bank and the depositor, and the bank's position therefore remained that of a debtor holding a customer's account. Notice of the trust only prevented the bank from participating in any breach of trust; it did not create a preferential claim in liquidation.

Conclusion: The company had no priority claim in the bank's liquidation, and the bank's liability remained that of an ordinary debtor to its customer.

Ratio Decidendi: A bank does not acquire trustee status merely because it receives trust monies with notice of their character; unless the deposit is made with the bank for a special purpose creating a trust as against the bank, the relationship remains that of debtor and creditor, and no preferential right arises in liquidation.

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