Trust property in liquidation retains beneficiary priority, with interest payable until actual payment and limited enhancement for delay.

Property or money deposited for a specific protective purpose, with only a limited right of recourse, remains trust property until that purpose is fulfilled. In liquidation, such trust property is not part of the general assets available to ordinary creditors, so the beneficiary retains priority over unsecured claims. Where the claim concerns trust property rather than an ordinary debt, interest may run until actual payment. A modest enhancement may also be justified on cross-objection to reflect delay and changed market conditions, but only to the extent supported by the circumstances.

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Issues: (i) Whether the promissory notes deposited as security were held by the bank as trust property and whether the respondent was entitled to priority over ordinary creditors in liquidation; (ii) whether the respondent was entitled to interest up to the date of payment; (iii) whether the amount awarded should be increased and the time for payment shortened on the cross-objection.

Issue (i): Whether the promissory notes deposited as security were held by the bank as trust property and whether the respondent was entitled to priority over ordinary creditors in liquidation.

Analysis: The deposit was made for a specific purpose, namely as security for the cashier, with the bank having only a limited right to realise upon the notes in the event of default. The trust was not extinguished merely because the respondent demanded return of the notes, since that demand was not an express revocation within the governing trust law and the purpose of the trust had not been fulfilled. The notes were untraceable, but the bank could not deny responsibility merely because their later disposition was within its special knowledge. Trust money did not form part of the general assets divisible among creditors, and the respondent's claim was therefore not that of an ordinary unsecured creditor.

Conclusion: The respondent was entitled to priority as beneficiary of trust property, and the claim was not confined to an ordinary creditor's dividend.

Issue (ii): Whether the respondent was entitled to interest up to the date of payment.

Analysis: The claim arose from money held under trust, not from an ordinary debt governed by winding-up rules applicable to interest on creditor claims. Since the bank had previously paid interest on the promissory notes and the respondent was entitled to the return or equivalent value of the trust property, interest could run until actual payment of the amount due.

Conclusion: The respondent was entitled to interest up to the date of payment.

Issue (iii): Whether the amount awarded should be increased and the time for payment shortened on the cross-objection.

Analysis: The respondent was entitled to be placed, as nearly as possible, in the position she would have occupied had the notes been returned, and delay caused by the appeal had resulted in loss. The court accepted that a modest additional sum was justified to reflect the changed market position, but no larger enhancement was warranted.

Conclusion: The cross-objection succeeded only to the extent of an additional Rs. 300, with payment directed within 10 days.

Final Conclusion: The appeal failed, the respondent retained priority as a trust beneficiary, and the award in her favour was marginally enhanced to compensate for delay.

Ratio Decidendi: Property or money deposited for a specific protective purpose and subject to a limited right of recourse remains trust property until the trust purpose is fulfilled, and it is not distributable as part of the general assets of a liquidation.

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